________________________________________________________________________________
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
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-12104
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IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 61-1009366
(State of incorporation) (I.R.S. Employer Identification No.)
300 American Road, Morris Plains, New Jersey 07950
(Address of principal executive offices) (Zip Code)
The Company's telephone number, including area code: (973) 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
Preferred Share Purchase Rights
(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____
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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 Company'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 October 7, 1999, 38,082,084 shares of the Company's common stock
were outstanding, and the aggregate market value of voting and non-voting common
equity held by non-affiliates of the registrant, computed by reference to the
last reported sale price for the Company's common equity on the Nasdaq National
Market at that date, was $44,493,202.
Documents Incorporated by Reference:
Portions of the Company's definitive Proxy Statement to be mailed to
stockholders in connection with the Annual Meeting of Stockholders of the
registrant to be held on December 1, 1999 (the "1999 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 other diseases. Integral to these products are highly specific
monoclonal antibodies designed to deliver radioisotopes, chemotherapeutic
agents, toxins, dyes or other substances to a specific disease site or organ
system.
The Company is developing a line of in vivo imaging products for the
detection of various cancers and other diseases. In April, 1991, the Company
filed a Product License Application, now called a Biologics License Application
("BLA"), to which an amendment 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). On June 28, 1996, the FDA licensed CEA-Scan for use with
other standard diagnostic modalities for the detection of recurrent and/or
metastatic colorectal cancer. In March, 1992, the Company filed with the
Committee for Proprietary Medicinal Products ("CPMP") to market the product in
Europe. On October 4, 1996, the Company was granted marketing authorization by
the European Commission for use of CEA-Scan in the 15 countries comprising the
European Union for the same indication as approved in the United States. Phase
III clinical trials of CEA-Scan for the detection of lung cancer are continuing,
and the Company is in discussion with both the FDA and CPMP to evaluate Phase II
clinical trial data for the detection of breast cancer. However, no assurance
can be given as to if, or when, final regulatory approvals for any of these
additional indications for CEA-Scan may be forthcoming. In February, 1992, the
Company filed with the Health Protection Branch ("HPB") to market CEA-Scan in
Canada. On September 16, 1997, the Company received a notice of compliance from
the HPB permitting it to market CEA-Scan in Canada for recurrent and metastatic
colorectal cancer.
On February 14, 1997, the Company was granted regulatory approval by
the European Commission to market LeukoScan(R), an in vivo infectious disease
diagnostic imaging product, in all 15 countries which are members of the
European Union, for the detection and diagnosis of osteomyelitis (bone
infection) in long bones and in diabetic foot ulcer patients. On December 19,
1996, the Company filed a BLA for LeukoScan with the FDA for the same indication
approved in Europe, plus an additional indication for the diagnosis of acute,
atypical appendicitis. A New Drug Submission for LeukoScan for the same
indications as in the U.S. was filed with the HPB in Canada on March 24, 1998.
The Company also has decided not to continue pursuing the broadening of its
approval for LeukoScan in Europe to include the acute, atypical appendicitis
indication, but has instead published its Phase III efficacy data. The Company
is examining other applications for the product.
The Company has developed and filed an Investigational New Drug
application ("IND") for two other in vivo cancer imaging products: AFP-Scan(R)
for the detection and diagnosis of liver and germ cell cancers, currently in
Phase II clinical trials, and LymphoScan(TM) for diagnosis and staging of
non-Hodgkin's lymphomas, currently in Phase III clinical trials (see "Products
and Projects in Development").
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The Company also is applying its expertise in antibody selection,
modification and chemistry to develop therapeutic products for cancer using
humanized monoclonal antibodies labeled with radioisotopes or conjugated with
drugs or unlabeled monoclonal antibodies. The Company has been conducting a
multicenter Phase I/II clinical trial with LymphoCide(TM) (formerly
ImmuRAIT-LL2), a non-Hodgkin's B-cell lymphoma therapeutic product. This trial
was designed to obtain knowledge about targeting and dosing with the murine form
of the monoclonal antibody. The Company has now advanced the humanized form of
LymphoCide into Phase I/II clinical trials, evaluating the agent as an unlabeled
(non-isotopic) therapeutic product and as a yttrium-90 labeled therapeutic
product, and has discontinued trials with the murine form (see "In Vivo"
Therapeutic Products"). A Phase II clinical trial has been completed in Germany
for solid tumor therapy with CEA-Cide(R), labeled with iodine-131, for treatment
of patients with small volume, inoperable, metastatic colorectal cancer. The
Company also is evaluating CEA-Cide, labeled with yttrium-90, in a Phase I/II
clinical trial, in patients with colorectal and pancreatic cancers. CEA-Cide
targets receptor sites on CEA-expressing solid tumors of the breast, lung,
digestive and other organ systems.
The Company is directly responsible for sales and marketing of CEA-Scan
worldwide and has employed its own sales and marketing organizations in the U.S.
and Europe and negotiated local distribution agreements in certain markets
outside the U.S. (see "Marketing, Sales and Distribution" for the current status
of these agreements). On September 9, 1998, the Company announced that Syncor
International agreed to make CEA-Scan available to its hospital and clinic
accounts across the U.S., supported by Immunomedics' sales and technical support
specialists. The Company has entered into an agreement with the ICS Division of
Bergen Brunswig Specialty Corporation to provide product support services in the
U.S., including distribution, order management and customer service for CEA-Scan
and other products from time to time.
The Company has entered into a Distribution Agreement with Eli Lilly
Deutschland GmbH ("Lilly") pursuant to which Lilly packages and distributes
CEA-Scan and LeukoScan within the countries comprising the European Union and
certain other countries subject to receipt of certain regulatory approvals.
The Company, through its 80% owned subsidiary, IMG Technology, LLC
("IMG"), has formed a joint venture with Coulter Corporation ("Coulter") for the
purpose of developing targeted cancer therapeutics. The joint venture, known as
IBC Pharmaceuticals, LLC ("IBC"), was organized as a Delaware limited liability
company. On March 5, 1999 the Company contributed to IBC, on behalf of IMG,
certain rights to its proprietary humanized antibodies against the cancer marker
carcinoembryonic antigen (which had a financial reporting carrying value of
zero), which is used in its CEA-Cide therapeutic, and Coulter contributed to IBC
certain rights to its bispecific targeting technology called the "Affinity
Enhancement System" or AES. The Company assigned its rights pursuant to the
terms of a license agreement with IBC dated March 5, 1999 in exchange for the
grant to IMG of its interest in IBC ("Immunomedics License Agreement"). Coulter
received its interest in IBC in exchange for its contribution. The license
granted to IBC is a worldwide, royalty free, exclusive license which is limited
to the "IBC Field" with respect to the "Immunomedics Patent Property" and the
"Immunomedics Biotechnology Assets," as those terms are defined in the
Immunomedics License Agreement. Additionally on March 5, 1999, several investors
contributed $3,000,000 to IBC in exchange for a 7% interest in the venture.
IMG's and Coulter's interests in IBC are 49.55% and 43.45% respectively.
Coulter, IMG and the investors entered into an operating agreement (the "IBC
Operating Agreement") which establishes the rights and obligations of the
respective members. Under the terms of the IBC Operating Agreement, neither IMG
nor Coulter may sell any portion of its interest in IBC without first providing
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the other with a right of first refusal with respect to such sale, provided that
after a public offering of IBC securities, IMG and Coulter will be permitted to
sell up to 20% of their respective interests in IBC free of such right of first
refusal. IMG is a Delaware limited liability company owned 80% by the Company
and 20% by Dr. David Goldenberg. Dr. Goldenberg received his interest pursuant
to the terms of his employment agreement with the Company. IMG is intended to be
a single purpose entity, its sole asset being its interest in IBC. Dr.
Goldenberg and IMG have entered into an operating agreement (the "IMG Operating
Agreement") which establishes their relative rights and obligations (see Note 11
to Consolidated Financial Statements).
The Company 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 (973) 605-8200. The Company also has a
subsidiary, Immunomedics B.V., with offices located in Hillegom, The
Netherlands, to assist the Company in managing sales and marketing efforts and
coordinate clinical trials in Europe.
Products and Projects in Development
In Vivo Imaging Products
The Company's in vivo imaging products utilize radioimmunodetection,
which involves injecting a patient with a radioisotope linked, or 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 that 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 detect and 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. Finally,
technetium-99m labeled antibody fragments not taken up by tumors are quickly
excreted via the kidneys, enhancing tumor-to-background ratios in other regions.
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
in a saline solution, the product is ready for injection in approximately five
minutes.
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On June 28, 1996, the FDA licensed CEA-Scan for use in conjunction with
other standard diagnostic modalities for the detection of the presence, location
and extent of recurrent and/or metastatic colorectal cancer. On October 4, 1996,
this product also was approved by the European Commission for the same
indication. On September 16, 1997, the Company received a notice of compliance
from the HPB permitting it to market CEA-Scan in Canada for recurrent and
metastatic colorectal cancer. In addition, the Company has six other in vivo
imaging products or indications in various stages of clinical testing and
regulatory review by the FDA -- five for cancer imaging (CEA-Scan for lung and
breast cancer, AFP-Scan for liver and germ cell cancer and LymphoScan for
non-Hodgkin's lymphoma) and one for imaging infectious diseases (LeukoScan).
The antibody in CEA-Scan is directed at carcinoembryonic antigen
("CEA"), which is abundant at the site of virtually all cancers of the colon or
rectum (both primary tumors and metastases). CEA is also associated with many
other cancers, and the Company estimates that three quarters of all human cancer
patients have elevated CEA levels in their tumors. As part of receiving FDA
approval for CEA-Scan, the Company has agreed to conduct Phase IV clinical
studies to evaluate the product following re-administration. The Company also is
performing Phase III clinical trials, using CEA-Scan, for imaging lung cancer.
In addition, Phase II clinical trials for breast cancer imaging have been
completed, results of which are currently being discussed with FDA and CPMP
officials to determine whether such data will support the submission of
applications for this additional indication in the U.S.
and Europe, respectively.
LeukoScan is a monoclonal antibody fragment which seeks out and binds
to granulocytes (white blood cells) associated with a potentially wide range of
infectious and inflammatory diseases. On February 14, 1997, the Company received
European regulatory approval to market the product for detecting and diagnosing
osteomyelitis (bone infection) in long bones and in diabetic foot ulcer
patients. On December 19, 1996, the Company filed a BLA with the FDA, seeking
approval to market LeukoScan in the U.S. for the same indication approved in
Europe, plus an additional indication for diagnosis of acute, atypical
appendicitis. A New Drug Submission for the same indications as in the U.S. is
under review with the HPB in Canada, (filed on March 24, 1998), and in
Switzerland, (filed in September,1998).
Two other imaging products are being studied pursuant to IND's
submitted to the FDA. The Company also has ongoing clinical trials for these
agents:
-- LymphoScan, employing an antibody capable of targeting an
antigen on non-Hodgkin's B-cell lymphomas (Phase III
clinical trials are underway).
-- AFP-Scan, employing an antibody capable of targeting
alpha-fetoprotein, a marker on liver cancer and germ-cell
tumors of the ovaries and testes (Phase II clinical trials
are underway).
In Vivo Therapeutic Products
The Company is applying its expertise in antibody selection,
modification and chemistry to cancer therapeutics, using monoclonal antibodies
labeled with therapeutic radioisotopes or conjugated with drugs. The Company is
engaged in developing anti-cancer products, principally with a technique called
radioimmunotherapy. This technique may deliver radiolabeled therapeutic agents
to tumor sites more selectively than current radiation therapy technologies,
while minimizing debilitating side effects. The Company completed a Phase I
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clinical trial with the murine form of its non-Hodgkin's B-cell lymphoma
proposed therapeutic product, LymphoCide. 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 LymphoCide,
several patients, all of whom were late-stage and were unresponsive to other
therapies, experienced varying degrees of tumor regression. Reversible bone
marrow toxicity also was observed. By conducting this trial, the Company
increased its knowledge of antibody targeting and dosage. The Company has now
advanced its humanized antibody program into Phase I/II clinical trials and has
discontinued its trials with the murine antibody form of LymphoCide. The Company
is currently evaluating LymphoCide in Phase I/II studies at several sites in the
U.S. and Europe. The product is being evaluated as an unlabeled antibody or
conjugated with the therapeutic isotope, yttrium-90. These initial studies have
indicated that both forms of the product show clinical responses (partial or
complete remissions), even when patients failed chemotherapy or prior antibody
therapy. In February, 1999, the Company entered into a Cooperative Research and
Development Agreement ("CRADA") with the National Cancer Institute ("NCI")
covering the development and use of its humanized lymphoma antibody conjugated
to recombinant ribonucleases as a potential new anticancer agent. The Company
contributed its humanized lymphoma antibody and the NCI contributed the
recombinant ribonucleases. The antibody delivers the conjugated ribonuclease to
the cancer cell where it destroys the cell's ribonucleic acid (RNA), which is
essential for cell division. A Phase II clinical trial has been completed with
the Company's colorectal cancer therapeutic, CEA-Cide. This trial was conducted
in Europe in patients with metastatic colorectal cancer who failed chemotherapy.
The Company has begun to enter patients into a Phase I/II clinical trial with
its humanized CEA antibody, labeled with yttrium-90. This trial will evaluate
the safety of the product in patients with colorectal or pancreatic cancer. The
Company is currently conducting, in collaboration with The Center for Molecular
Medicine and Immunology ("CMMI") (also known as the Garden State Cancer Center),
and other academic or research centers, research on murine and humanized forms
of targeting antibodies, alternative radioisotopes and new conjugation methods
(see "Research Programs").
Research Programs
The Company incurred approximately $10,100,000, $11,738,000 and
$13,114,000, in total research and development expense during its fiscal years
ended June 30, 1999, 1998 and 1997, 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 has made significant progress in
humanizing certain mouse antibodies (i.e., replacing certain components of a
mouse antibody with human antibody components), and with respect thereto the
Company has licensed certain technology from a third party. 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 the past five fiscal years, the Company, in collaboration with
CMMI and other investigators, continued to demonstrate successful targeting in
patients with the Company's humanized monoclonal antibodies (hMN-14 and hLL2)
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against the CEA cancer marker and non-Hodgkin's B-cell lymphoma, respectively,
as compared to the murine counterparts. The anticancer humanized antibodies are
about 95% human and have shown very good uptake in the patients' tumors. The
Company is now focusing on the study of these humanized monoclonal antibodies
unlabeled (non-isotopic) and labeled with a pure beta-emitting isotope,
yttrium-90, in patients with the appropriate target tumors (discussed below).
Alternative Radioisotopes
The Company has used iodine-131 to label its anti-lymphoma antibody
(LL2), which has been evaluated in a phase I clinical trial against
non-Hodgkin's lymphoma. This disease has previously been found to respond well
to radioimmunotherapy using iodine-131-labeled, murine-based anti-lymphoma
antibodies by investigators at several institutions. 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 this one particular disease. 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 have developed yttrium-90-LL2 as a second-generation product. The
Company has developed a proprietary technology using a compound called "DOTA" to
tightly bind yttrium-90 to antibodies, assuring that the isotope will stay
attached during circulation, and thus minimally impact the bone marrow and other
organ systems. The labeling procedure has been developed by the Company as a
15-minute, simple labeling method resulting in over 90% incorporation of the
yttrium onto the antibody. The Company has begun Phase I/II clinical trials with
yttrium-90-labeled humanized antibodies, and early reports are promising, with
some evidence of tumor regression. The Company is not alone in substituting
yttrium-90 for iodine-131 as an antibody-delivered isotope therapeutic. At least
one other competitor is labeling an antibody with yttrium-90 for similar
indications.
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 that is known not to interfere with antigen binding. The Company
also is continuing to investigate "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 or therapeutic drug, such that the radionuclide or
drug 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.
Peptides
During fiscal year 1999, the Company continued to improve its
proprietary methods for technetium-99m radiolabeling of peptides, which were
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developed in fiscal year 1996, up to clinical-scale levels using single-vial
kits. These automated synthetic methods will be generally applicable to the
preparation of radioconjugates of other diverse chelate-peptides, and will
enable rapid evaluation of different peptide-receptor systems directly with
peptide analogs labeled with technetium-99m, the optimum imaging radionuclide.
This technology has been applied to the preparation of analogs of somatostatin
and has demonstrated reagent utility in pre-clinical in vivo models. In related
work, similar novel synthetic methods have also been used to prepare
chelate-peptide conjugates which can be radiolabeled with indium-111 and
yttrium-90.
Intraoperative Cancer Detection
The Company has been developing intraoperative cancer detection
applications with CEA-Scan, utilizing hand-held, radiation-detecting probes. The
Company has learned that surgeons have successfully used CEA-Scan in this way,
within 48 hours of its injection and external imaging. The Company has remained
in contact with these surgeons, one of whom reported to the Society of Surgical
Oncology on a prospective study of CEA-Scan imaging and probe-guided surgery in
twenty (20) patients. That study concluded that the probe and CEA-Scan provided
useful new information in 7 of 20 patients, encouraging more aggressive
operative intervention and postoperative care, including chemotherapy. A U.S.
patent was issued in 1990 to the Company for this and endoscopic applications.
The Company has discussed with the FDA the use of CEA-Scan with gamma probes,
and is planning clinical trials along lines proposed by the FDA, with the
objectives of gaining regulatory approval for this new intraoperative use of
CEA-Scan.
Government Grants
During fiscal year 1999, the Company was awarded two phase I SBIR
grants from the NCI, for $100,000 each. The first grant will support the
development of a bacterial expression system for producing a ribonuclease
(RNase). Once incorporated into the cancer cells, the RNase destroys their
capability to reproduce, bringing them to rapid cell death. The second grant
will support the development of bispecific antibodies that will be used in a
two-injection protocol, optimizing the delivery of radionuclides to cancers.
This method is expected to dramatically reduce background radionuclide uptake
levels in all non-cancerous tissues, thereby leading to greater contrast with
diagnostic agents and improved therapeutic ratios with radioimmunotherapy.
In September, 1999, the Company was awarded a phase II SBIR grant from
the NCI for $750,000. The grant will support the development of a therapeutic
product for metastatic breast cancer. This project includes the use of a new
humanized antibody specific for breast, ovarian, lung and prostate cancers. This
new antibody has a unique feature of internalizing into cancer cells very
rapidly. The Company anticipates delivering higher cancer killing doses of
isotopes or drugs to tumor sites without affecting normal cells.
Relationship with The Center for Molecular Medicine and Immunology
The Company's product development has involved, to varying degrees,
CMMI, a not-for-profit specialized cancer research center, for the performance
of certain basic research and patient evaluations, the results of which are made
available to the Company pursuant to a collaborative research and license
agreement. CMMI is funded primarily by grants from the NCI. CMMI is located in
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Belleville, New Jersey. Dr. David M. Goldenberg, Chairman of the Board and Chief
Executive Officer of the Company, is the founder, current President and a member
of the Board of Trustees of CMMI. Dr. Goldenberg devotes more of his time
working for CMMI than for the Company. Certain consultants to the Company have
employment relationships with CMMI, and Dr. Hans Hansen, an officer of the
Company, is an adjunct member 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 (see "Certain Relationships and
Related Transactions").
Under the terms of its license agreement with CMMI, 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 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 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 has reimbursed CMMI for expenses incurred on behalf of the
Company, including amounts incurred pursuant to research contracts, in the
amount of approximately $45,000, $98,000 and $69,000 during the years ended June
30, 1999, 1998 and 1997, respectively. The Company also provides, at no cost to
CMMI, laboratory materials and supplies in connection with research conducted in
areas of potential interest to the Company.
During each of the years ending June 30, 1999, 1998 and 1997 the Board
of Directors of the Company made grants to CMMI of $200,000, 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. Pursuant to a
collaborative research and license agreement, dated as of January 21, 1997,
between the Company and CMMI, the Company has paid CMMI an annual license fee of
$200,000 in fiscal years 1999, 1998 and 1997.
Marketing, Sales and Distribution
In Vivo Products
The Company's marketing strategy initially consisted of forming
corporate alliances with pharmaceutical companies for the sale and distribution
of its in vivo imaging and therapeutic products, whereby the partner's
established marketing, sales and distribution networks would minimize the
Company's need to expend funds to develop these areas of expertise. However, the
Company now believes that development of its own sales force, complementary to
those of its partners, will be necessary to increase the likelihood of
maximizing market penetration for its imaging products.
In April, 1997, the Company launched LeukoScan in Europe. All
marketing, selling and distribution rights to the product have been retained by
the Company and the Company continues to build a sales and marketing
organization to support this effort. The Company has entered into a Distribution
Agreement with Eli Lilly Deutschland GmbH ("Lilly") pursuant to which Lilly
currently packages and distributes LeukoScan and CEA-Scan within the countries
comprising the European Union and certain other countries subject to the receipt
of regulatory approval. The Company has established sales representation and/or
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local distributors in major markets. The Company's European operations are
located in Hillegom, The Netherlands.
The Company has entered into an agreement with Integrated
Commercialization Solutions, Inc. ("ICS"), a subsidiary of Bergen Brunswig
Corporation. Under the agreement, ICS serves as an agent of the Company
providing product support services for CEA-Scan in the United States including
customer service, order management, distribution, invoicing and collection.
On September 9, 1998, the Company entered into an agreement with Syncor
International, the world's leading provider of radiopharmacy services, under
which Syncor will make CEA-Scan available to its hospitals and clinic accounts
throughout the U.S., supported by the Company's sales and technical support
specialists. Syncor is supporting the Company's efforts with their own team of
field specialists as well as the licensed radiopharmacists who manage their 118
U.S. facilities. The Company continues to have discussions with other
radiopharmacy chains regarding arrangements which will make CEA-Scan more widely
available to hospitals and clinics, but as of the date of this report no other
agreements have been consummated, and there can be no assurance that any
additional agreements will be entered into.
On April 5, 1999, the Company announced the implementation of a
cost-reduction and restructuring plan which included company-wide staff
reductions and the redeployment of the sales force. The U.S. sales force for
CEA-Scan became focused on new customers in major medical centers that will
become colorectal cancer "Centers of Excellence." The Company intends to assess
this strategy for future products, including LeukoScan. The Company believes
this new focus would improve the productivity of its sales force and marketing
efforts, as well as enhance its ability to in-license imaging and therapy
products from other companies desiring a highly skilled sales force.
Manufacturing
To date, the Company has manufactured all investigational agents used
in its clinical trial programs and currently manufactures CEA-Scan and LeukoScan
for commercial use. The Company performs antibody processing and purification of
its clinical products at its Morris Plains, New Jersey facility (see
"Properties").
The Company has entered into a manufacturing agreement with SP
Pharmaceuticals, formerly the Oncology Division of Pharmacia & Upjohn, pursuant
to which SP Pharmaceuticals performs certain end-stage portions of the
manufacturing process. Under the terms of such agreement, the Company pays
according to an established price structure for these services.
The Company's Morris Plains headquarters also houses regulatory,
medical, research and development, finance, marketing and executive offices (see
"Properties"). The Company has now scaled-up to commercial levels its antibody
purification and fragmentation manufacturing processes. The manufacturing
facility consists of four independent antibody-manufacturing suites, several
support areas, and a quality control ("QC") laboratory. Start-up validation and
inspection of the facility were completed in December , 1998. The manufacturing
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facility and product manufacturing processes were approved by the Committee on
Proprietary Medicinal Products (CPMP) of the European Commission in May, 1998.
The facility and processes were approved by the FDA for CEA-Scan in December,
1998.
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 for its products, currently consisting of
59 issued United States patents and 200 issued foreign patents, with 51 United
States patent applications pending, of which 5 have been allowed, and 134
foreign patent applications pending, of which 18 have been allowed. Included in
the foregoing are 8 United States patents and their foreign counterparts, to
which the Company has rights pursuant to an exclusive license granted by Dr.
Goldenberg. The Company also has certain rights with respect to patents and
patent applications owned by CMMI, by virtue of a license agreement between the
Company and CMMI.
The Company owns or has licensed patents that 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.
In July, 1998, two U.S. patents were issued to the Company covering
nuclear imaging and MRI (Magnetic Resonance Imaging) methods to reveal
anatomically displaced cells or tissues by using very special detector molecules
to locate abnormal cells or tissues by external scanning of the patient.
Management of endometriosis, a painful and debilitating disease occurring in
about 10-15% of women ages 20-40, may be improved as a result of this new
targeting method.
Also in July, 1998, the Company was issued another U.S. patent which
provides a method of protecting non-cancerous tissues and cells from the
toxicities of treating cancer with radiation or chemotherapy by selectively
targeting protective drugs to such tissues. Therapeutic doses of radiation or
drugs can then be given to the patient killing cancer cells while normal tissues
and cells, such as in bone marrow, are protected by the drug.
In August, 1998, two U.S. patents were issued to the Company. The first
covers humanized antibodies that target lymphoma and leukemia cells and are
useful for imaging and therapy, in conjunction with drugs and radioactive
agents. The second patent has broad claims to a new type of vaccine that
operates in stages and is able to induce a more complete immune response against
antigens found on tumors and infectious agents.
In September, 1998, a Japanese patent was issued to the Company which
covers a new product and technology for diagnosing (by gamma, positron, or
magnetic resonance imaging) sites of infection, as well as treating these sites
by combining an isotope or antimicrobial drug to the new targeting agent.
In December, 1998, the Company announced the issuance of two U.S.
patents, the first involving methods to counteract the complications of organ
graft rejection. The method involves overcoming the toxicity to normal blood
cells that can occur after immunosuppressive treatment of patients having organ
transplantation. The patent covers the administration of certain cytokines with
immunosuppressive drugs and in combination with antibodies specific for
T-lymphocytes. The second patent covers a new process to treat cancers with
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selectively-directed neutron irradiation. The method involves targeting boron
atoms to cancer cells by means of a two-step, "pretargeting" procedure that
allows for high, selective uptake of boron atoms at the tumor site. When
irradiated, the boron atoms convert to radioisotopes that emit highly potent
alpha-particles, which are lethal to cells at the site.
In January, 1999, the Company announced the issuance of a U.S. patent
comprising a method for antibody targeting of therapeutic drugs. The patent
involves a universal method which permits the therapeutic drug to be activated
preferentially at the site of disease. This method is applicable to diseases
such as cancers, infections, clots, myocardial infarctions and atherosclerotic
plaques.
In February, 1999, a U.S. patent was issued to the Company, claiming a
humanized monoclonal antibody against carcinoembryonic antigen (CEA).
Furthermore, the patent covers conjugates of the antibody, including imaging and
therapeutic agents. The Company is evaluating this antibody in therapeutic
clinical trials in diverse cancers.
In June, 1999, a U.S. patent was issued to the Company, claiming
another "pre-targeting" method for bringing radioisotopes to a target site using
conjugates of naturally-occurring metal ion chelating proteins.
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,
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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 Royalty Payments
("Annual Minimum Payment") and the License Agreement (discussed above).
Dr. Goldenberg also will receive a percent, not less than 20%, to be
determined by the Board, of net consideration (including license fees) which the
Company receives for any disposition, by sale, license or otherwise (discussions
directed to which commence during the term of his employment plus two years) of
any defined Undeveloped Assets of the Company which are not budgeted as part of
the Company's strategic plan. Pursuant thereto, Dr. Goldenberg received a 20%
interest in IBC Pharmaceuticals, LLC (see "Introduction").
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, 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. 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.
The Company has extended Dr. Goldenberg's employment agreement for a
five-year period, expiring on October 31, 2003. Dr. Goldenberg voluntarily
reduced his annual base salary effective June 1999 from $265,000 to $225,000.
Further, the Company acknowledged and approved Dr. Goldenberg's continuing
involvement with CMMI and IBC Pharmaceuticals, LLC.
Pursuant to a License Agreement dated July 7, 1983, the Company pays
a royalty 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.
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 that
may be developing or marketing products that 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.
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In November, 1996, the Company brought suit in The Netherlands against
F. Hoffmann-LaRoche and its Roche Diagnostics subsidiary and European affiliates
for infringement of the Company's European patent covering specific anti-CEA
antibodies, which Roche is using in its CEA immunoassay. Roche denied
infringement and countered with nullity actions in The Netherlands and Germany,
seeking to invalidate the Company's Dutch and German patents. A trial was held
on the infringement claim before the Patent Court in The Hague on August 8,
1997, resulting in dismissal of the action. The dismissal was based in part on
the trial judge's inability to resolve validity issues without a full trial of
the nullity action. The Company has appealed.
A trial on the Dutch nullity action was held before the Patent Court in
The Hague on June 5, 1998, resulting in dismissal of that action and maintenance
of all claims of the Company's patent. Affirmation of the validity of this
patent is important because its claims also protect the antibody used in the
Company's in vivo CEA-Scan cancer imaging product and CEA-Cide cancer therapy
product, as well as the use of highly specific CEA antibodies for a number of
other uses. In December, 1998, the German Patent Court upheld the patent for the
Company's CEA antibodies. Additionally, an anonymous Opposition challenging the
validity of a corresponding Japanese patent was also defeated.
In July, 1998, a license agreement was signed between the Company and
Dako A/B under the Company's worldwide patents for specific anti-CEA monoclonal
antibodies, which Dako markets for in vitro use. The Company is engaged in
active discussions with other companies that may be using its patented
technology without the Company's approval in current products or products now in
development of clinical testing.
The mark "IMMUNOMEDICS" is registered in the United States and 19
foreign countries and a European Community Trademark has been granted. 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 8 foreign countries,
an application is pending in 1 foreign country, and a European Community
Trademark has been granted. The mark "LEUKOSCAN" is registered in the United
States and 10 foreign countries, and a European Community Trademark has been
granted. The mark "LYMPHOSCAN" is registered in the United States and 9 foreign
countries, and a European Community Trademark has been granted. The mark
"CEA-CIDE" is registered in the United States, and a European Community
Trademark has been granted. The mark "LYMPHOCIDE" is registered in the United
States, and a European Community Trademark has been granted. In addition, the
Company has applied for registration in the United States for several 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 that
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,
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refusal of the FDA to approve product license applications or to allow the
Company to enter into supply contracts, and criminal prosecution. The FDA also
has the authority to revoke previously granted product licenses and
establishment licenses.
Generally, there is a substantial period of time between technological
conception of a proposed product and its availability for commercial sale. The
period between technological conception and 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.
The amount of time taken for this approval process is a function of a
number of variables, including the quality of the submission and studies
presented, the potential contribution that the compound will make in improving
the 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 pre-clinical
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
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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, LymphoScan and LymphoCide, the
Company's liver and germ-cell imaging, lymphoma imaging and lymphoma therapeutic
products, respectively, CEA-Scan for the diagnosis of medullary thyroid cancer
and for CEA-Cide for therapy of pancreatic, ovarian and lung cancers. 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 claim for the product. 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, storage and distribution of both
biological and nonbiological drugs must be in compliance with Good Manufacturing
Practices ("GMP"). Manufacturers must continue to expend time, money and effort
in the area of production and quality control to ensure full technical
compliance with those requirements. The labeling, advertising and promotion of
drug or biological product must be in compliance with FDA regulatory
requirements. Failure to comply with applicable requirements relating to
manufacture, distribution or promotion can lead to FDA demands that production
and shipment cease, and, in some cases, that products be recalled, or to
enforcement actions that can include seizures, injunctions and criminal
prosecution. Such failures, or new information reflecting on the safety and
effectiveness of the drug that comes to light after approval, can also lead to
FDA withdrawal of approval to market the product.
The drug approval process is similar in other countries and is also
regulated by specific agencies in each geographic area. Approval by the FDA does
not ensure approval in other countries. Generally, however, products that are
approved by the FDA in the U.S. will ultimately gain marketing approval in other
countries, but may require considerable additional time to do so.
The Company's ability to commercialize its products successfully may
also depend in part on the extent to which reimbursement for the cost of such
products and related treatment will be available from government health
administration authorities, private health insurers and other organizations.
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
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foreign regulations. The Company believes its operations comply, in all material
respects, with applicable environmental laws and regulations, and the Company is
continuing its efforts to ensure its full compliance with such laws and
regulations.
Competition
The biotechnology industry is highly competitive, particularly in the
area of cancer diagnostic, imaging and therapeutic products. The Company is
likely to encounter significant competition with respect to its proposed
products currently under development. A number of companies which are engaged in
the biotechnology field, and in particular the development of cancer diagnostic
and therapeutic products, have financial, technical and marketing resources
significantly greater than those of the Company. Some 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 expects
to face increasing competition from universities and other non-profit research
institutions. These institutions carry out a significant amount of research and
antibody-based technology, 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'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.
The Company is pursuing an area of product development in which there
is the potential for extensive technological innovation in relatively short
periods of time. The Company's competitors may succeed in developing products
that are safer or more effective than those of the Company's potential products.
Rapid technological change or developments by others may result in the Company's
present products and potential products becoming obsolete or non-competitive.
The Company believes that the technological attributes of its proposed
diagnostic imaging products, including the ease of use (e.g., single vial, rapid
imaging), employment of technetium-99m (the most widely available radioisotope)
and its use of an antibody fragment (better liver imaging, decreased HAMA
response) will enable the Company to compete effectively in the marketplace.
Employees
As of October 7, 1999, the Company employed 80 persons on a full-time
basis, 20 of whom are in research and development departments, 10 of whom are
engaged in clinical research and regulatory affairs, 15 of whom are engaged in
operations and manufacturing, and 35 of whom are engaged in finance,
administration, sales and marketing. Of these employees, 23 hold M.D., Ph.D. or
other advanced degrees (see "Marketing, Sales and Distribution"). The Company
believes that it has been successful in attracting skilled and experienced
scientific personnel; however, competition for such personnel continues to be
intense. The Company's employees are not covered by a collective bargaining
agreement, and the Company believes that its relationship with its employees is
excellent.
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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 regulatory agencies such as
the FDA (with the exception of CEA-Scan and LeukoScan, which have been licensed
as discussed above), and no assurance can be given as to if or when such
approvals could be forthcoming. Product discovery and development activities
require substantial cash outlays. At least until CEA-Scan and/or LeukoScan are
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 is relying upon its
own internal sales and marketing organization (see "Marketing, Sales and
Distribution"). No assurance can be given that the Company's manufacturing costs
will be economically viable, or that the Company can develop an effective sales
and marketing strategy to effectively 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, obtaining
future financing. The Company also faces numerous risks stemming from the nature
of the biopharmaceutical industry, including the risk of competition and
competing patents, the risk of regulatory change, including potential changes in
health care coverage, and uncertainties associated with obtaining and enforcing
patents and proprietary technology, among others.
All products in development face a high degree of uncertainty,
including the following: (i) the Company may not receive regulatory approval to
perform human clinical trials for the products the Company currently has planned
or it may be unable to successfully complete ongoing clinical trials; (ii) the
results from preclinical studies and clinical trials may not be indicative of
results that will be obtained in later-stage testing; (iii) the Company may be
unable to timely recruit a sufficient number of patients for its clinical
trials, which may result in increased costs and delays; (iv) the Company may be
unable to obtain approval from the FDA and comparable foreign authorities
because it is unable to demonstrate that the product is safe and effective for
the intended use, or obtaining regulatory approval may take significantly more
time and cost significantly more money than the Company currently anticipates;
(v) the Company may discover that the product has undesirable or unintended side
effects or other characteristics that make it impossible or impracticable for it
to continue development or which may limit the product's commercial use or may
even result in de-registration for use; (vi) the Company does not expect that
any new product which is currently in research and development will be
commercially available for at least several years; (vii) the Company may be
unable to produce the product in commercial quantities at reasonable cost;
(viii) the Company may be unable to successfully market the product or to find
an appropriate corporate partner, if necessary, to assist us in the marketing of
the product; (ix) the product may not gain satisfactory market acceptance; and
(x) the product may be superceded by another product commercialized for the same
indication or use. If the Company is unable to continue to develop products that
it can successfully market, its business, financial condition and results of
operations will be significantly and adversely affected.
There can be no assurance CMMI will be successful in its research
activities or that it will develop any potential products which can be licensed
by the Company. In addition, if CMMI were no longer to conduct such research and
patient evaluations, the Company would have to make arrangements with third
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parties for the performance of this aspect of our clinical research, which may
prolong and increase expenses associated with pre-clinical testing and initial
clinical trials.
The potential for conflicts of interest may exist 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. Similarly, the decision by the Company
as to whether or not to exercise its right of first negotiation or release of
any potential product offered by CMMI is determined by a majority vote of the
Board of Directors (or a subcommittee thereof), and Dr.
Goldenberg has agreed not to participate in the determination of any such issue.
The Company currently does not have the resources to internally develop
and maintain the operating procedures required by the FDA and comparable foreign
regulatory authorities to oversee distribution of its products. As a result, it
has entered into arrangements with Lilly and ICS to perform such function for
the foreseeable future. If these agreements are terminated, the Company will be
required to enter into arrangements with other government approved third parties
in order to be able to distribute its products. The Company will be unable to
continue to distribute its products until an acceptable alternative is
identified. If the Company were even only temporarily unable to distribute its
products, its business could be significantly and adversely effected.
CEA-Scan and certain of the Company's other imaging agents are derived
from ascites fluid produced in mice, which are provided by a third-party
supplier. Regulatory authorities, particularly in Europe, have expressed
concerns about the use of mice fluid for the production of monoclonal
antibodies. While the Company believes that its current quality control
procedures ensure the purity of the fluid it uses, there can be no assurance
that regulatory authorities will agree that these procedures will be adequate
for future products. While the Company is continuing its development efforts to
produce certain monoclonal antibodies using cell culture methods, this process
constitutes a substantial production change, which will require additional
manufacturing equipment and new regulatory approval. There can be no assurance
that the Company will have the resources to acquire the additional manufacturing
equipment and resources or that it will receive the required regulatory approval
on a timely basis, if at all. The Company also has contracted with a third party
for the development and production of certain humanized antibodies; however,
there can be no assurance that such efforts will be successful.
The Company's commercial success is highly dependent upon its patents
and other proprietary rights that it owns or licenses. While it actively seeks
patent protection both in the United States and abroad for its proprietary
technology, there can be no assurance that its key patents will not be
invalidated or will provide the Company protection that has commercial
significance. Litigation may be necessary to protect its patent positions, which
could be costly and time consuming. If any of the key patents that the Company
owns or licenses are invalidated, its business may be significantly and
adversely affected. 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
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or use of the Company's trade secrets and know-how. In addition, other companies
may independently develop similar trade secrets or know-how or obtain access to
the Company's trade secrets, know-how or proprietary technology, which could
significantly and adversely affect its business. Other companies may have filed
applications for or have been issued patents and obtained other proprietary
rights to technology which may be potentially useful to the Company. If the
Company determines that the inventions covered by such patents are necessary or
useful for it, it may attempt to license such rights. There can be no assurance
you that such rights will be available at all or even upon terms the Company
considers acceptable. If the Company is unable to obtain such rights, its
business could be significantly and adversely affected.
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 significantly and adversely affect the Company's ability to market
its products profitably. Similar risks are present in foreign markets.
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. On May 29,
1998, the Company exercised its right to renew the lease for an additional term
of three years expiring in May, 2002 at a base annual rental of $441,000. The
lease provides for a second renewal period of five years expiring on May, 2007.
The lease provides for an option to purchase the facility, subject to certain
terms and conditions as specified in the lease. The Company's manufacturing,
regulatory, medical, research and development laboratories, finance, marketing
and executive offices are currently located in this facility, occupying
approximately 60,000 square feet. The Company has also completed the
construction and equipping of a 7,500 square-foot commercial-scale manufacturing
facility within the Morris Plains headquarters, which consists of four
independent antibody manufacturing suites, several support areas, and a QC
laboratory (see "Manufacturing"). In addition, the Company's European
Subsidiary, Immunomedics Europe, leases executive office space in Hillegom, The
Netherlands.
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 1999.
19
<PAGE>
Executive Officers of the Registrant
The Executive Officers of the Company and their positions with the
Company are as follows:
Name Age Position with the Company
David M. Goldenberg 61 Chairman & Chief Executive
Officer
Cynthia L. Sullivan 44 Executive Vice President & Chief
Operating Officer
Hans J. Hansen 66 Vice President, Research and
Development
Joseph E. Presslitz 57 Vice President, Regulatory
Affairs
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
is employed 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 served
as Chief Executive Officer from July, 1982, through July, 1992; from February,
1994 through May 1998 and resumed his responsibilities as Chief Executive
Officer effective July, 1999. 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 950 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. Goldenberg also serves as Chairman of the Board of IBC.
Cynthia L. Sullivan has been employed by the Company since October,
1985, and has served as Executive Vice President and Chief Operating Officer
since June, 1999. Prior thereto, she held positions of increasing
responsibilities in the Company, including Executive Director, Operations from
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<PAGE>
April, 1994 to June, 1999. Prior to joining the Company, Ms. Sullivan was
employed by Ortho Diagnostic Systems, Inc., a subsidiary of Johnson and Johnson.
Ms. Sullivan's educational background includes: a BS from Merrimack College,
North Andover, MA, followed by a year of clinical internship with the school of
Medical Technology at Muhlenberg Hospital, Plainfield, NJ, resulting in a MT
(ASCP) certification in 1979. Ms. Sullivan completed a M.S. degree in 1986 from
Fairleigh Dickinson University, where she also received her M.B.A. in December
1991.
Dr. Hans J. Hansen has been Vice President, Research and Development,
since March 1987. Effective July, 1999, Dr. Hansen reduced his employment with
the Company to a part-time basis. 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 38
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. Joseph E. Presslitz has been employed by the Company since
February, 1992, and has served as Vice President, Regulatory Affairs since
September, 1997, and prior thereto as Executive Director, Regulatory Affairs.
From 1985 until 1992, he held the position of Director, International Regulatory
Affairs at the Lederle Division of American Cyanamid. From 1980 until 1985, he
was Director of Laboratories at Masti-Kure, Inc., a veterinary pharmaceutical
company. Prior thereto, Dr. Presslitz spent nine years in research and
development in the areas of infectious disease and rheumatology at Pfizer, Inc.
He received his Ph.D. in biochemistry from St. Louis University, and
post-doctoral training in molecular biology at the Massachusetts Institute of
Technology.
There are no family relationships between directors and executive
officers except that Dr. Goldenberg and Ms. Sullivan are husband and wife.
21
<PAGE>
PART II
Item 5 -- Market For Registrant's Common Stock and Related Stockholder 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 October 7, 1999, there were approximately 1,011
holders of record of the Company's Common Stock.
Fiscal Quarter Ended High Low
September 30, 1997..................................... 5 1/2 3 15/16
December 31, 1997...................................... 5 1/2 3 1/8
March 31, 1998......................................... 5 1/8 2 3/4
June 30, 1998.......................................... 6 5/8 3 3/4
September 30, 1998..................................... 4 15/16 2 5/8
December 31, 1998...................................... 4 3/8 2 5/8
March 31, 1999......................................... 4 3/16 2 1/16
June 30, 1999.......................................... 2 7/8 1 1/8
Item 6 -- Selected Financial Data (fiscal year ended June 30)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
(In thousands, except per share amounts)
Total revenues................................. $ 7,559 $ 7,595 $ 3,841 $ 1,700 $ 3,189
Total operating expenses....................... 18,838 19,406 17,775 15,000 14,593
Net loss....................................... (11,279) (11,811) (13,934) (13,300) (11,404)
Dividends on preferred stock................... 409 -- 13 -- --
Net loss allocable to common shareholders (11,688) (11,811) (13,947) (13,300) (11,404)
Net loss per common share...................... $ (0.31) $ (0.32) $ (0.39) $ (0.40) $ (0.38)
Weighted average shares outstanding............ 37,782 36,643 35,445 32,904 30,098
Cash, cash equivalents and marketable
securities................................... $ 9,422 $ 7,583 $ 15,024 $ 28,691 $ 22,814
Total assets................................... 16,959 14,942 22,635 35,720 28,224
Long-term debt................................. 228 -- -- -- --
Stockholders' equity(1)........................ 12,455 10,526 17,446 31,153 23,629
(1) The Company has not paid cash dividends on its Common Stock since its
inception.
</TABLE>
22
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Statements made in this Form 10-K, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
on management's belief as well as assumptions made by, and information currently
available to, management pursuant to the 'safe harbor' provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements as a result of a variety of factors, including those identified in
"Business" and elsewhere in this Annual Report on Form 10-K for the fiscal year
ended June 30, 1999.
Since its inception, the Company has been engaged primarily in the
research and development and, more recently, the commercialization of
proprietary products relating to the detection, diagnosis and treatment of
cancer and infectious diseases. The Company has incurred significant operating
losses since its formation in 1982 and has not earned a profit since its
inception. These operating losses and failure to be profitable have been due
mainly to the significant amount of money that the Company has had to spend on
research and development. As of June 30, 1999, the Company had an accumulated
deficit of approximately $99,000,000. The Company expects to 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), LeukoScan(R) and its
other potential products.
On June 28, 1996, the U.S. Food and Drug Administration ("FDA")
licensed CEA-Scan for use with other standard diagnostic modalities for the
detection of recurrent and/or metastatic colorectal cancer. On October 4, 1996,
the European Commission granted marketing authorization for use of the product
in the 15 countries comprising the European Union for the same indication. On
September 16, 1997, the Company received a notice of compliance from the Health
Protection Branch permitting it to market CEA-Scan in Canada for colorectal
cancer for recurrent and metastatic colorectal cancer.
On February 14, 1997, the Company was granted regulatory approval by
the European Commission to market LeukoScan, an in vivo infectious disease
diagnostic imaging product, in all 15 countries which are members of the
European Union, for the detection and diagnosis of osteomyelitis (bone
infection) in long bones and in diabetic foot ulcer patients. On December 19,
1996, the Company filed a Biologics License Application for LeukoScan with the
FDA for the same indication approved in Europe, plus an additional indication
for the diagnosis of acute, atypical appendicitis. As part of the review
process, the Company is in discussions with the FDA to address their comments
regarding the adequacy of the Company's data to support final approval for these
indications. The Company is confident that it can bring these discussions with
the FDA to successful and timely closure. In the meantime, the Company is
continuing to implement its plans for market introduction, and is working
diligently on preparation to bring this new product to the U.S. marketplace.
CEA-Scan and LeukoScan are the only products which the Company is
currently licensed to market and sell. To date, the Company has received only
limited revenues from the sale of these products. There can be no assurance that
these products will achieve market acceptance or generate significant sales.
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<PAGE>
Unless the Company receives substantial revenues from these products, future
revenues will be dependent in large part upon its receiving payments from
corporate partners under licensing and research agreements or from government
grants. However, there can be no assurance that the Company will receive such
payments in a timely manner, or at all.
While the Company expects to receive approval from the FDA to market
and sell LeukoScan in the United States, there can be no assurance that such
approval will be received in a timely manner, if at all.
The Company is also engaged in developing other biopharmaceutical
products, which are in various stages of development and clinical testing.
Results of Operations
Fiscal Year 1999 compared to Fiscal Year 1998
Revenues for fiscal year 1999 were $7,559,000 as compared to $7,595,000
in fiscal year 1998, representing a decrease of $36,000. The product sales for
fiscal year 1999 were $6,097,000 as compared to $4,049,000 in fiscal year 1998,
representing an increase of $2,048,000. The increase in product sales is mainly
due to increased market acceptance of CEA-Scan and LeukoScan. Research and
development revenue for fiscal year 1999 decreased by $484,000 as compared to
fiscal 1998, primarily due to the recognition in fiscal year 1998, of previously
deferred revenue received from Pharmacia Inc.("Pharmacia") in fiscal year 1997
and a decrease in grant revenue of $176,000. Interest and other income for
fiscal year 1999 decreased by $1,585,000. Interest income decreased by $86,000
due to less cash available for investments. Other income decreased by $1,499,000
primarily due to the receipt, in November 1997, of an arbitration award of
$1,800,000 including interest from its dispute with Pharmacia. The decrease in
other income was offset in part by the receipt and recognition in fiscal year
1999 of $300,000 in final settlement of all claims between the Company and
Mallinckrodt, Inc. and its affiliate under the prior distribution agreements,
which were terminated in April 1998.
(see "Liquidity and Capital Resources").
Total operating expenses for fiscal year 1999 were $18,838,000 as
compared to $19,406,000 in fiscal year 1998, representing a decrease of
$568,000. Research and development costs decreased by $1,638,000 as compared to
fiscal year 1998, primarily due to a decrease in the level of expenditures
required to obtain validation of the Company's manufacturing facility and lower
cost associated with reduced patient enrollment for clinical trials. Cost of
goods sold for fiscal year 1999 increased by $87,000 as compared to fiscal year
1998, mainly due to increased product sales. However, the decrease in cost of
goods sold as a percentage of product sales reflects the benefit of product
sales from inventory which was previously expensed by the Company prior to
receiving product approval. Sales and marketing expenses for fiscal year 1999
were $6,524,000 as compared to $5,380,000 in fiscal year 1998, representing an
increase of $1,144,000, primarily due to an increase in personnel associated
with the Company's full-time oncology sales force in U.S. and increased
operating expenses for Immunomedics Europe which increased by $288,000 as
compared to fiscal year 1998. General and administrative costs for fiscal year
1999 decreased by $161,000 as compared to fiscal year 1998, primarily due to
reduced legal costs as a result of the conclusion of the Pharmacia arbitration,
which was settled in November 1997.
Net loss allocable to common shareholders for fiscal year 1999 was
$11,688,000, or $0.31 per share, as compared to a net loss of $11,811,000, or
$0.32 per share, in fiscal year 1998. The lower net loss of $123,000 in 1999 as
24
<PAGE>
compared to 1998 primarily resulted from lower operating expenses, partially
offset by slightly lower revenues, as discussed above and the accretion of
preferred stock dividends on the Series F Preferred Stock issued in December
1998 (see "Liquidity and Capital Resources"). In addition, the net loss per
share for fiscal 1999 was positively impacted by the higher weighted average
number of shares outstanding during such period as compared to fiscal 1998,
which increase was principally due to the conversion of the Company's Series D
Preferred Stock (which was fully converted as of June 30, 1998) and the issuance
of common stock pursuant to the Company's Structured Equity Line Flexible
Financing Agreement (see Note 7 to Consolidated Financial Statements).
Fiscal Year 1998 compared to Fiscal Year 1997
Revenues for fiscal year 1998 were $7,595,000 as compared to $3,841,000
in fiscal year 1997, representing an increase of $3,754,000. The product sales
for fiscal year 1998 were $4,049,000 as compared to $1,387,000 in fiscal year
1997, representing an increase of $2,662,000. The increase in product sales was
attributable to increased market acceptance of CEA-Scan and the launch of
LeukoScan in April 1997. Royalties and license fees for fiscal year 1998
decreased by $554,000, primarily due to the receipt of a nonrecurring $500,000
license fee from a corporate partner in fiscal year 1997. Research and
development revenue for fiscal year 1998 increased by $550,000 as compared to
fiscal year 1997, due to the recognition of previously deferred revenue received
from Pharmacia. Interest and other income for fiscal year 1998 increased by
$1,096,000, primarily due to the receipt of an arbitration award of $1,800,000,
including interest, in its dispute with Pharmacia offset by a decrease in
interest income of $721,000 due to reduced levels of cash available for
investments.
Total operating expenses for fiscal year 1998 were $19,406,000 as
compared to $17,775,000 in fiscal year 1997, representing an increase of
$1,631,000. Research and development costs decreased by $1,376,000 as compared
to fiscal year 1997, primarily due to a decrease in the level of expenditures
required to obtain validation of the Company's manufacturing facility and lower
cost associated with reduced patient enrollment for clinical trials. Cost of
goods sold for fiscal year 1998 increased by $177,000 as compared to fiscal year
1997, mainly due to increased product sales. Cost of goods sold as a percentage
of product sales reflects the benefit of product sales from inventory which was
previously expensed by the Company prior to receiving product approval. Sales
and marketing expenses for fiscal year 1998 were $5,380,000 as compared to
$1,792,000 in fiscal year 1997, representing an increase of $3,588,000,
primarily due to expenses of $1,753,000 associated with the Company's then newly
hired full-time oncology sales force and operating expenses for Immunomedics
Europe which increased by $1,632,000 as compared to the same period of 1997.
General and administrative costs for fiscal year 1998 decreased by $758,000 as
compared to the same period of 1997, primarily due to reduced legal costs as a
result of the conclusion of the Pharmacia arbitration, which was settled in
November 1997.
Net loss allocable to common shareholders for the fiscal year 1998 was
$11,811,000, or $0.32 per share, as compared to a net loss of $13,947,000, or
$0.39 per share, in fiscal year 1997. The lower net loss of $2,136,000 in 1998
as compared to 1997 primarily resulted from higher revenues, partially offset by
higher operating expenses, as discussed above. In addition, the net loss per
share for fiscal year 1998 was impacted by the higher weighted average number of
shares outstanding during such period as compared to fiscal year 1997, which
increase was principally due to the conversion of the Company's Series D
Preferred Stock (see Note 7 to Consolidated Financial Statements).
25
<PAGE>
Liquidity and Capital Resources
At June 30, 1999, the Company had working capital of $7,823,000,
representing an increase of $2,357,000 from June 30, 1998. The Company has long
term obligations of $228,000 and certain other lease obligations (see Note 11 of
Notes to Consolidated Financial Statements). The net increase in working capital
resulted principally from the Company's December 1998 private placement
partially offset by the net loss allocable to common shareholders during fiscal
year 1999 of $11,688,000 and capital expenditures.
On December 23, 1997, the Company entered into a Structured Equity Line
Flexible Financing Agreement (the "Equity Line") with an investor (the
"Investor"), pursuant to which, subject to the satisfaction of certain
conditions, the Company could have received up to an aggregate of $30,000,000
over a 36-month period. The Company terminated the Equity Line as of December 9,
1998. As of the termination date, the Company had received a total of $5,350,000
for which the Company issued 1,358,838 shares of common stock. In connection
with the Equity Line, the Company issued to the Investor a four-year warrant to
purchase 50,000 shares of the common stock at an exercise price of $7.5375 per
share (180% of closing sales price of common stock at the time of issuance). In
addition, the Company issued to the Investor an additional four-year warrant to
purchase 54,000 shares of common stock (representing 5,000 shares for each
$500,000 of common stock purchased by the Investor under the Equity Line during
calendar 1998). The exercise price of such additional warrant is $7.087 per
share (180% of the weighted average purchase price of the common stock purchased
by the Investor during the year).
On December 9, 1998, the Company completed a private placement of 1,250
shares of Series F Convertible Preferred Stock (the "Series F Stock") to several
investors and received net proceeds of $12,349,800. Each share of Series F Stock
has an initial stated value of $10,000, which increases at the rate of 4% per
annum. The increase in stated value of the Series F Stock totaled $281,944 at
June 30, 1999. The Series F Stock became convertible at the option of the
investors, in whole or in part, on June 8, 1999. The number of shares of common
stock issuable upon conversion of each share of Series F Stock will be
determined by dividing the stated value of $10,000 plus an accretion of 4% per
annum, by the conversion price then in effect. In accordance with the terms of
the Series F Preferred Stock, the Company was required to recognize an assumed
incremental yield of $127,500 (calculated at the date of issuance and based on a
beneficial conversion feature). Such amount was amortized as a preferred stock
dividend over a six month period beginning with the date of issuance.
The conversion price is equal to:
(a) the Variable Price, if such Variable Price is less than $2.50;
except that prior to December 9, 1999, subject to acceleration
in certain instances, if the Variable Price is greater than
$2.25 and less than $2.50, the conversion price will equal
$2.50;
(b) $2.50, if the Variable Price is equal to or greater than $2.50
and less $3.75; and
(c) $2.50 plus one-half of the amount, if any, by which the
Variable Price exceeds $3.75, if the Variable Price is greater
that $3.75.
26
<PAGE>
The $2.50 conversion price was set based on 125% of the "Initial Fixed
Price" of $2.00, which was set as the average closing bid price of the Common
Stock during the 20 trading days ended June 6, 1999. The "Variable Price" will
be equal to the average of the 15 lowest closing bid prices for the Common Stock
during the 45 trading days immediately preceding a conversion date.
If all the Series F Stock had been converted as of September 24, 1999,
the Company would have been required to issue approximately 10,974,000 shares of
Common Stock.
Under certain circumstances and at certain prices, the Company may
elect to redeem any shares of Series F Stock. Under certain circumstances, the
Company may require the investors to convert their Series F Stock. The Company
has granted the investors certain participation rights if the Company issues any
future floating rate convertible securities. The holders of the Series F Stock
generally do not have the right to vote for the election of directors or on
other matters, except to the extent their rights would be adversely affected.
Upon the occurrence of certain events, the Company may be required to
redeem the Series F Stock, pay certain penalties and/or adjust the conversion
price. These events include the following:
(a) If the Company consolidates, merges or otherwise combines with
another entity and as a result the stockholders of the Company immediately prior
to such transaction do not retain sufficient voting power to elect a majority of
the board of directors of the new or combined entity, then the holders of the
Series F Stock may require the Company to redeem their shares at a price per
share equal to the greater of (1) 125% of the stated value of $10,000 per share
plus the accretion of 4% per annum, and (2) the value of the Common Stock that
would be issuable upon conversion of the Series F Stock. However, if the
consolidation, merger or other business combination occurs as a result of a
proxy solicitation which was not approved or recommended by the Company's Board
of Directors, then, if the holders exercise their redemption rights, the Company
may, in lieu of redemption, either (y) readjust the Initial Fixed Price to 80%
of the lower of (A) the lowest Variable Price during the period beginning on the
date such solicitation is announced and ending on the date such solicitation is
consummated, abandoned or terminated or (B) the Initial Fixed Price then in
effect, or (z) pay a penalty of 1% per day of the stated value of $10,000 per
share plus the accretion of 4% per annum for a maximum of 10 days in any 365-day
period.
(b) If at least a specified percentage of the holders of the Common
Stock accept a purchase, tender or exchange offer, then the holders of the
Series F Stock may require the Company to redeem their shares at a price per
share equal to the greater of (1) 125% of the stated value of $10,000 per share
plus the accretion of 4% per annum, and (2) the value of the Common Stock that
would be issuable upon conversion of the Series F Stock. However, if such
purchase, tender or exchange offer was not approved or recommended by the
Company's Board of Directors; then, if the holders exercise their redemption
rights, the Company may, in lieu of redemption, either (y) readjust the Initial
Fixed Price to 80% of the lower of (A) the lowest Variable Price during the
period beginning on the date such offer is announced and ending on the date such
offer is consummated, abandoned or terminated or (B) the Initial Fixed Price
then in effect, or (z) pay a penalty of 1% per day of the stated value of
$10,000 per share plus the accretion of 4% per annum for a maximum of 10 days in
any 365-day period.
(c) If the Company completes a sale of all or substantially all of its
assets, then the holders of the Series F Stock may require the Company to redeem
their shares at a price per share equal to the greater of (1) 125% of the stated
27
<PAGE>
value of $10,000 per share plus the accretion of 4% per annum, and (2) the value
of the Common Stock that would be issuable upon conversion of the Series F
Stock.
(d) If the registration statement under the Securities Act of 1933
covering the resale by the investors of the Common Stock issuable upon
conversion of the Series F Stock ceases to be available to the investors for the
resale of their shares for more than 10 consecutive days, then the holders of
the Series F Stock may require the Company to redeem their shares at a price per
share equal to the greater of (1) 125% of the stated value of $10,000 per share
plus the accretion of 4% per annum, and (2) the value of the Common Stock that
would be issuable upon conversion of the Series F Stock. However, if the
unavailability of the registration statement is not the result of the Company's
failure to use its best efforts, then, if the holders exercise their redemption
rights, the Company may, in lieu of redemption, (y) pay a penalty of 1% per day
of the stated value of $10,000 per share plus the accretion of 4% per annum for
a maximum of 15 days in any 365-day period, and (z) readjust the Initial Fixed
Price to 80% of the lowest Variable Price during the period commencing on the
day the registration statement became unavailable and ending on the day the
registration statement is again available for use.
(e) If the Common Stock is delisted or suspended from the Nasdaq
National Market for a period of more than five consecutive days, then the
holders of the Series F Stock may require the Company to redeem their shares at
a price per share equal to the greater of (1) 125% of the stated value of
$10,000 per share plus the accretion of 4% per annum, and (2) the value of the
Common Stock that would be issuable upon conversion of the Series F Stock.
However, if the Common Stock is delisted from the Nasdaq National Market then,
if the holders exercise their redemption rights, the Company may, in lieu of
redemption, (y) readjust the Initial Fixed Price to 68.5% of the lowest Variable
Price during the period commencing on the date of delisting and continuing for
45 days thereafter, or (z) pay a penalty of 1% per day of the stated value of
$10,000 per share plus the accretion of 4% per annum for a maximum of 15 days in
any 365-day period.
Pursuant to its agreement with the investors, the Company called a
Special Meeting of Stockholders on March 19, 1999, at which meeting stockholders
approved the issuance of any shares upon conversion of the Series F Stock in
excess of 20% of the number of shares of common stock the Company had
outstanding on December 9, 1998 (i.e., 7,577,617) in accordance with the rules
and regulations of The Nasdaq Stock Market, Inc.
Each investor has agreed that if it engages in short sales transactions
or other hedging activities during the 45 trading days immediately preceding a
conversion date which involve, among other things, sales of shares of the Common
Stock, the investor will place its sale orders for common stock in the course of
such activities so as not to complete or effect any such sale on any trading day
during such period at a price which is lower than the lowest sale effected on
such day by persons other than such investor or its affiliates.
Because the market price of the Common Stock is subject to fluctuation,
the Company agreed, pursuant to the terms of a registration rights agreement, to
register for resale by the investors at least 200% of the number of shares of
common stock that would be issuable if all the Series F Stock were converted as
of the date of the filing of the registration statement and, thereafter,
maintain the registration of at least 150% of the number of shares of common
stock that would be issuable if all the Series F Stock were then converted. The
registration statement currently in effect covers 10,000,000 shares of common
stock. If the registration statement is insufficient to permit the resale by the
28
<PAGE>
investors of all the common shares issuable upon conversion of the Series F
Stock, the investors, in addition to any other remedies, have the right to
require the Company to redeem all or any portion of the remaining outstanding
shares of Series F Stock (at a price equal to the greater of 125% of the stated
value of $10,000 per share plus the accretion of 4% per annum and the value of
the Common Stock which would have been issued upon conversion) as well as pay to
them a penalty of $5 per share of Series F Stock for each day that sales cannot
be made. The registration statement would not cover a sufficient number of
shares to permit the investors to resell all the shares they could acquire upon
conversion if the Variable Price is less than approximately $1.29 (which
threshold will increase over time due to the 4% accretion to the stated value).
The Common Stock in the recent past has traded below this price.
The Company has received a waiver, dated October 11, 1999, from the
holders of the Series F Stock with respect to the rights discussed above either
to require redemption or to receive penalties conditioned upon the Company (a)
filing a registration statement, on or before November 11, 1999, covering at
least 200% of the number of shares of common stock that would be issuable if all
the Series F Stock were converted as of the date of the filing of the
registration statement and (b) having such registration statement declared
effective on or before December 11, 1999. However, if failure of the
registration statement to be declared effective by December 11, 1999 is not the
result of the Company's failure to use its best efforts, then, if the holders
exercise their redemption rights, the Company may, in lieu of redemption, (y)
pay a penalty of 1% per day of the stated value of $10,000 per share plus the
accretion of 4% per annum for a maximum of 15 days in any 365-day period, and
(z) readjust the Initial Fixed Price to 80% of the lowest Variable Price during
the period commencing on the day the registration statement became unavailable
for sale of all the shares and ending on the day the registration statement is
again available for use for sale of all the shares. In addition, notwithstanding
whether or not the Company has used its best efforts, if the registration
statement is not filed by November 11, 1999 and declared effective by December
11, 1999, the investors also will be entitled to the $5 per day penalty
(discussed above) accruing from the first day that the Company was in breach of
such registration obligation, which penalties would be significant. The Company
intends to file the registration statement on or before November 11, 1999 and to
use its best efforts to have it declared effective on or before December 11,
1999. While the new registration statement will cover a significant number of
additional shares, the Company would not be required to issue any shares which
are the subject of this additional registration statement unless the Variable
Price at the time of conversion is below $1.29 (increased over time due to the
4% accretion to the stated value).
The Company will also continue its discussions with the investors
concerning a possible restructuring of certain other terms of the Series F
Stock. However, there can be no assurance that any restructuring can be obtained
upon terms acceptable to the Company, if at all.
If the Company were required to redeem the Series F Stock or make any
of the penalty payments, it may not have the financial ability to make such
payments. Even if the Company did have the financial ability to redeem the
Series F Stock or pay the required penalties, such payment could significantly
and adversely affect its financial condition and deplete its cash resources.
As of October 7, 1999, 22 shares of the Series F Stock had been
converted into 193,994 shares of Common Stock. If all the remaining outstanding
shares of Series F Stock had been converted as of October 7, 1999, the Company
would have been required to issue approximately 10,836,000 additional shares of
Common Stock.
29
<PAGE>
On October 28, 1998, the Company entered into an Equipment Financing
Agreement with the New England Capital Corporation, pursuant to which the
Company has received $450,000, to be repaid over a 36-month period. The proceeds
of such financing were used to exercise the early purchase options for equipment
previously leased through a master lease agreement. The financing is secured by
various used equipment and an irrevocable letter of credit in the amount of
$225,000. The letter of credit is collateralized by a cash deposit of an
equivalent amount.
The Company's liquid asset position, as measured by its cash, cash
equivalents and marketable securities, was $9,422,000 at June 30, 1999,
representing an increase of $1,839,000 from June 30, 1998. It is anticipated
that working capital and cash, cash equivalents, and marketable securities will
decrease during fiscal year 2000 as a result of planned operating expenses and
capital expenditures, offset in part by projected revenues from product sales in
the U. S. and Europe. However, there can be no assurance, as to the amount of
revenues, if any, these products will provide. In April 1999, the Company
implemented a cost reduction program which the Company anticipates saving
approximately $3.5 million during the next 12 months. As part of such program,
the workforce was reduced by twelve employees, for which the Company incurred
severance expense of approximately $20,000.
To date, the Company has not generated positive cash flow from
operations. The Company believes that its existing working capital should be
sufficient to meet its capital and liquidity requirements through fiscal year
2000 based on reduced spending levels, if necessary. However, the Company's
working capital and working capital requirements are affected by numerous
factors and there is no assurance that such factors will not have a negative
impact on the Company's liquidity. Principal among these are the success of its
product commercialization and selling products, the technological advantages and
pricing of the Company's products, and access to capital markets that can
provide the Company with the resources when necessary to fund its strategic
priorities. Without a significant increase in product revenues or other infusion
of capital, the Company will be required to significantly reduce its operating
expenses, including the amount of resources devoted to marketing and sales,
product development and clinical trials, which could have a significant and
adverse effect on the Company. The Company believes that it will require
additional financial resources by the beginning of fiscal year 2001 in order for
it to continue its projected levels of research and development and clinical
trials of its proposed products and regulatory filings for new indications of
existing products. There can no assurance that any additional financing will be
available to the Company at all or on terms it finds acceptable or that the
terms of such financing will not cause substantial dilution to existing
stockholders.
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. 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 future activities will
be successful and, if so, the terms and timing of any definitive agreements.
Impact of Year 2000
The Company has completed a review of its business systems, including
its computer systems and manufacturing equipment, and has sent written inquiries
to its customers, distributors and vendors as to their progress in identifying
30
<PAGE>
and addressing problems that their systems may face in correctly interpreting
and processing date information as the year 2000 approaches and is reached.
Based on this review, the Company is implementing a plan to achieve year 2000
compliance which the Company expects to complete by October, 1999. The Company
believes that it will achieve year 2000 compliance in a manner which will be
non-disruptive to its operations. In addition, the Company has commenced work on
various types of contingency planning to address potential problem areas with
internal systems, suppliers and other third parties which the Company expects to
complete by October, 1999. Year 2000 compliance should not have a material
adverse effect on the Company, including the Company's financial condition,
results of operations or cash flow. The Company has incurred approximately
$120,000 of costs to date related to year 2000. The Company estimates the
additional cost of its year 2000 efforts to be approximately $130,000 based on
management's current assessment and is subject to change. This additional cost
will mainly consist of replacing its current telecommunication system and
upgrading certain equipment.
However, the Company may encounter problems with supplier and/or
revenue sources which could adversely affect the Company's financial condition,
results of operations or cash flow. The Company cannot accurately predict the
occurrence and/or outcome of any such problems, nor can the dollar amount of
such problems be estimated. In addition, there can be no assurance that the
failure to ensure year 2000 compliance by a third party would not have a
material adverse effect on the Company.
Item 7A -- Quantitative and Qualitative Disclosures About Market Risk
The following discussion about the Company's exposure to market risk of
financial instruments contains forward-looking statements. Actual results may
differ materially from those described.
The Company's holdings of financial instruments are comprised primarily
of corporate debt. All such instruments are classified as securities available
for sale. The Company does not invest in portfolio equity securities or
commodities or use financial derivatives for trading purposes. The Company's
debt security portfolio represents funds held temporarily pending use in its
business and operations. The Company manages these funds accordingly. The
Company seeks reasonable assuredness of the safety of principal and market
liquidity by investing in rated fixed income securities while at the same time
seeking to achieve a favorable rate or return. The Company's market risk
exposure consists principally of exposure to changes in interest rates. The
Company's holdings also are exposed to the risks of changes in the credit
quality of issuers. The Company typically invests in the shorter-end of the
maturity spectrum, and at June 30, 1999 virtually all of the Company's holdings
were in instruments maturing in one year or less.
31
<PAGE>
Item 8 -- Financial Statements and Supplementary Data
<TABLE>
IMMUNOMEDICS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1999 1998
------------------- -------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,469,261 $ 7,568,147
Marketable securities 5,952,398 14,845
Accounts receivable, net of allowance for
doubtful accounts of $39,398 and $21,398 at
June 30, 1999 and 1998, respectively 1,101,820 1,039,477
Inventory 818,883 913,927
Other current assets 573,420 345,491
------------------- -------------------
Total current assets 11,915,782 9,881,887
Property and equipment, net of accumulated
depreciation of $6,789,157 and $5,815,070 at
June 30, 1999 and 1998, respectively 4,818,139 5,059,935
Other long-term assets 225,000 -
=================== ===================
$ 16,958,921 $ 14,941,822
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 143,757 $ -
Accounts payable 2,078,562 1,831,458
Other current liabilities 1,870,949 2,584,769
------------------- -------------------
Total current liabilities 4,093,268 4,416,227
------------------- -------------------
Long-term debt 228,470 -
Minority interest 182,000 -
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value, authorized 10,000,000 shares;
Series F convertible, authorized 2,000 shares;
issued and outstanding 1,250 and 0 shares
at June 30, 1999 and 1998, respectively
(Liquidation preference aggregating $12,781,944 and $0
at June 30, 1999 and 1998, respectively) 13 -
Common stock; $.01 par value, authorized 70,000,000 shares;
issued and outstanding 37,888,090 and 37,586,087 shares
at June 30, 1999 and 1998, respectively 378,881 375,861
Capital contributed in excess of par 111,466,439 97,987,728
Accumulated deficit (99,398,278) (87,837,979)
Accumulated other comprehensive income / (loss) 8,128 (15)
------------------- -------------------
Total stockholders' equity 12,455,183 10,525,595
------------------- -------------------
$ 16,958,921 $ 14,941,822
=================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
<TABLE>
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<CAPTION>
Years ended June 30,
------------ ------------ -----------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
REVENUES:
Product sales.............................................................$ 6,096,628 $ 4,049,031 $ 1,387,042
Royalties and license fee................................................. 18,454 33,751 587,764
Research and development.................................................. 686,537 1,170,252 620,543
Interest and other........................................................ 757,813 2,342,505 1,246,118
------------ ------------ -----------
7,559,432 7,595,539 3,841,467
------------ ------------ -----------
COSTS AND EXPENSES:
Cost of goods sold........................................................ 278,135 191,343 14,508
Research and development.................................................. 10,099,893 11,738,155 13,113,991
Sales and marketing....................................................... 6,523,634 5,379,728 1,792,117
General and administrative................................................ 1,936,125 2,096,900 2,854,884
------------ ------------ -----------
18,837,787 19,406,126 17,775,500
------------ ------------ -----------
Net loss ......................................................................(11,278,355) (11,810,587) (13,934,033)
Preferred stock dividends ( including assumed
incremental yield attributable to a beneficial
conversion feature of $127,500 for the year
ended June 30, 1999 )....................................................... 409,444 - 12,498
-------------- -------------- --------------
Net loss allocable to common shareholders $ (11,687,799) $ (11,810,587) $ (13,946,531)
============== ============== ==============
COMPREHENSIVE LOSS:
Net loss................................................................$ (11,278,355) $ (11,810,587) $ (13,934,033)
Other comprehensive income, net of tax:
Foreign currency translation adjustments........................... 8,128 - -
Unrealized gain on securities ..................................... 15 1,177 4,429
-------------- -------------- --------------
Other comprehensive income 8,143 1,177 4,429
-------------- -------------- --------------
Comprehensive loss ..........................................................$ (11,270,212) $ (11,809,410) $ (13,929,604)
============== ============== ==============
PER SHARE DATA:
Net loss per basic and diluted common share..................................$ (0.31) $ (0.32) $ (0.39)
============== ============== ==============
Weighted average number of common
shares outstanding........................................................ 37,782,376 36,643,319 35,445,033
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE>
<TABLE>
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended June 30,
____________________________________________________
1999 1998 1997
______________ _____________ _____________
<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss $(11,278,355) $(11,810,587) $(13,934,033)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 978,975 962,943 1,139,163
Amortization of bond premium - - 7,245
Compensation expense for granting of minority interest 182,000 - -
Other 8,128 - -
Changes in operating assets and liabilities:
Accounts receivable (62,343) (480,460) (555,880)
Inventories 95,044 (223,232) (497,023)
Other current assets (227,929) 322,492 54,171
Accounts payable 247,104 (528,798) 716,687
Other current liabilities (713,820) (243,201) (95,229)
______________ ____________ ____________
Net cash used in operating activities (10,771,196) (12,000,843) (13,164,899)
______________ ____________ ____________
Cash flows provided by (used in) investing activities:
Purchases of marketable securities (15,816,875) (10,345,629) (36,095,876)
Proceeds from maturities of marketable securities 9,879,337 19,342,236 42,127,605
Additions to property and equipment (737,179) (329,685) (722,165)
______________ ____________ ____________
Net cash provided by / (used in) investing activities (6,674,717) 8,666,922 5,309,564
______________ ____________ ____________
Cash flows provided by financing activities:
Issuance of convertible preferred stock, net 12,349,800 - -
Issuance of common stock, net 850,000 4,457,500 -
Deposits - cash collateral (225,000) - -
Proceeds from debt 450,000 - -
Payments of debt (77,773) - -
Preferred stock dividends paid - - (12,498)
Exercise of stock options - 431,213 235,188
______________ ____________ ____________
Net cash provided by financing activities 13,347,027 4,888,713 222,690
______________ ____________ ____________
Increase / (Decrease) in cash and cash equivalents (4,098,886) 1,554,792 (7,632,645)
Cash and cash equivalents at beginning of period 7,568,147 6,013,355 13,646,000
______________ ____________ ____________
Cash and cash equivalents at end of period $ 3,469,261 $ 7,568,147 $ 6,013,355
============== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
<TABLE>
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Capital Accumulated
Convertible Common Contributed Other
Preferred Stock Stock in Excess Accumulated Comprehensive
---------------------------------------------
Shares Amount Shares Amount of Par Deficit Income / (Loss) Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Issuance of common stock
in exchange for convertible
preferred stock (Series C), net..(28,415) (284) 182,646 1,826 (1,542) - - -
Issuance of common stock
in exchange for convertible
preferred stock (Series D), net.(195,001) (1,950) 1,733,439 17,334 (15,384) - - -
Exercise of options to
purchase common stock.......... - - 75,600 756 234,432 - - 235,188
Dividend on preferred stock...... - - - - - (12,498) (12,498)
Other comprehensive income....... - - - - - - 4,429 4,429
Net loss......................... - - - - - (13,934,033) - (13,934,033)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, at June 30, 1997..............4,999 50 36,297,170 362,971 93,111,855 (76,027,392) (1,192) 17,446,292
Issuance of common stock
in exchange for convertible
preferred stock (Series D), net...(4,999) (50) 62,332 623 (573) - - -
Issuance of common stock pursuant to
Equity Line, net.......... - - 1,056,835 10,569 4,446,931 - - 4,457,500
Exercise of options to
purchase common stock.............. - - 169,750 1,698 429,515 - - 431,213
Other comprehensive income........... - - - - - - 1,177 1,177
Net loss............................. - - - - - (11,810,587) - (11,810,587)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, at June 30, 1998 - - 37,586,087 375,861 97,987,728 (87,837,979) (15) 10,525,595
Issuance of common stock
pursuant to Equity Line, net.......... - - 302,003 3,020 846,980 - - 850,000
Issuance of convertible
preferred stock (Series F), net... 1,250 13 - - 12,349,787 - - 12,349,800
Accretion of preferred
stock dividends................... - - - - 281,944 (281,944) - -
Other comprehensive income...... 8,143 8,143
Net loss............................ - - - - - (11,278,355) - (11,278,355)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, at June 30, 1999 1,250 $ 13 37,888,090 $ 378,881 $111,466,439 $ (99,398,278) $ 8,128 $ 12,455,183
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
35
<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 currently markets and sells CEA-Scan(R) in the U.S., and CEA-Scan
and LeukoScan(R) throughout Europe and in certain other markets outside the U.S.
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.
The Company has not yet achieved profitable operations and there is no
assurance that profitable operations, if achieved, could be sustained on a
continuing basis. Further, the Company's future operations are dependent on,
among other things, the success of the Company's commercialization efforts and
market acceptance of the Company's products.
Since its inception in 1982, the Company's source of funds has been
primarily dependent on private and public offerings of equity securities,
revenues from research and development alliances, and product sales. The Company
believes that its existing working capital should be sufficient to meet its
capital and liquidity requirements through fiscal 2000 based on reduced spending
levels, if necessary.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
Immunomedics, Inc. and its majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Minority interest is recorded for a majority-owned subsidiary (see Note 10).
Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original
maturities of three months or less, at the time of purchase, to be cash
equivalents.
The Company's investments in cash equivalents and marketable securities
are available for sale to fund growth in operations as the Company begins
commercialization of its products. The portfolio at June 30, 1999 primarily
consists of corporate debt securities.
Concentration of Credit Risk
The Company invests its cash in debt instruments of financial
36
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
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.
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.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset. The Company reviews
long-lived assets for impairment whenever events or changes in business
circumstances occur that indicate that the carrying amount of the assets may not
be recoverable. The Company assesses the recoverability of long-lived assets
held and to be used based on undiscounted cash flows, and measures the
impairment, if any, using discounted cash flows. 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" has not had a
material impact on the Company's consolidated financial position, operating
results or cash flows.
Revenue Recognition
Payments received under contracts to fund certain research activities
are recognized as revenue in the period in which the research activities are
performed. Payments received in advance which are related to future performance
are deferred and recognized as revenue when the research projects are performed.
Non-refundable payments received under licensing arrangements are
recognized as revenue in the period in which they are received.
Revenue from the sale of diagnostic products is recognized at the time
of shipment.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities relate to the expected future tax
consequences of events that have been recognized in the Company's consolidated
financial statements and tax returns. The Company has not recorded any tax
benefits associated with its net deferred tax assets.
37
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
Net Loss Per Share
Basic and diluted net loss allocable to common shareholders is based on
the net loss for the relevant period, adjusted for Preferred Stock dividends
which includes $127,500 of an assumed incremental yield related to a beneficial
conversion feature and $281,944 related to a 4% per annum stated value increase
in security (see Note 7), divided by the weighted average number of shares
issued and outstanding during the period. For the purposes of the diluted loss
per share calculations, the exercise or conversion of all potential common
shares is not included because their effect would have been anti-dilutive, due
to the net loss recorded for the years ended June 30, 1999, 1998 and 1997. The
Company has certain securities outstanding at June 30, 1999 that could
potentially dilute basic earnings per share in the future that were not included
in the computation of diluted earnings per share because to do so would have
been anti-dilutive for the periods presented.
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 the financial
statements and the reported amounts of revenues and expenses during the reported
period.
Actual results could differ from those estimates.
Comprehensive Income
On July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for reporting and
presentation of comprehensive income (loss) and its components in a full set of
financial statements. Comprehensive income consists of net income (loss) and net
unrealized gains (losses) on securities and certain foreign exchange changes and
is presented in the consolidated statements of operations and comprehensive
loss. The statement requires only additional disclosures in the consolidated
financial statements; it does not affect the Company's financial position or
results of operations. Prior year financial statements have been reclassified to
conform to the requirements of SFAS No. 130.
Employee Stock Options
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretation in
accounting for stock options issued to employees. Employee stock options are
granted with an exercise price equal to the market price and, in accordance with
APB No. 25, compensation expense is not recognized. Effective July 1, 1996, the
Company adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation". For the fair value of the employee stock options
issued (see Note 7).
Financial Instruments
The carrying amounts of cash and cash equivalents, marketable
securities and other current assets and current liabilities approximate fair
value due to the short-term maturity of these
38
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
instruments. Long-term debt rates are consistent with market rates so carrying
value approximates fair value.
Reclassification
Certain 1997 and 1998 balances have been reclassified to conform to the
1999 presentation.
3. Marketable Securities
The Company utilizes 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
accumulated other comprehensive income/(loss). The Company considers all of its
current investments to be available-for-sale. Marketable securities at June 30,
1999 and 1998 consist of the following:
<TABLE>
<CAPTION>
Fair Unrealized
Market Holding
June 30, 1999 Cost Basis Value Gain/(Loss)
_____________ __________ ___________ ___________
<S> <C> <C> <C>
Securities with contractual maturities
from Date of Acquisition of one year or less:
Corporate Debt Securities....................... $5,952,000 $5,952,000 $ --
========== ========== ===========
Total Marketable Securities................. $5,952,000 $5,952,000 $ --
========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Fair Unrealized
Market Holding
June 30, 1998 Cost Basis Value Gain/(Loss)
_____________ __________ ___________ ___________
<S> <C> <C> <C>
Securities with contractual maturities from date
of Acquisition of greater than one year:
U.S. Debt Securities............................ $ 15,000 $ 15,000 $ --
========== ========== ===========
Total Marketable Securities................. $ 15,000 $ 15,000 $ --
========== ========== ===========
</TABLE>
4. Inventory
Inventory consists of the following at June 30:
1999 1998
___________ ___________
Finished goods ................... $ 446,000 $ 607,000
Raw materials..................... 373,000 307,000
___________ ___________
$ 819,000 $ 914,000
=========== ===========
39
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
5. Property and Equipment
Property and equipment consists of the following at June 30:
1999 1998
____________ ____________
Machinery and equipment............. $ 3,112,000 $ 2,909,000
Leasehold improvements.............. 6,925,000 6,564,000
Furniture and fixtures.............. 679,000 666,000
Computer equipment.................. 891,000 736,000
____________ ____________
11,607,000 10,875,000
Accumulated depreciation and
amortization....................... (6,789,000) (5,815,000)
____________ ____________
$ 4,818,000 $ 5,060,000
============ ============
6. Other Current Liabilities
Included in other current liabilities are amounts payable to medical
institutions participating in the Company's clinical trial programs of
approximately $640,000 and $568,000 at June 30, 1999 and 1998, respectively.
Also included are amounts payable to various legal counsel of approximately
$260,000 and $178,000, and accrued health insurance liabilities of approximately
$239,000 at June 30, 1999 and 1998.
7. Stockholders' Equity
The Certificate of Incorporation of the Company authorizes 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 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 allowed the investors, at their
discretion, to convert the Series D Preferred into shares of the Company's
common stock during a 24-month period which began 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 June 30, 1998, all 200,000 shares of
Series D Preferred had been converted into 1,795,771 shares of the Company's
common stock.
On December 23, 1997, the Company entered into a Structured Equity Line
Flexible Financing Agreement (the "Equity Line") with an investor (the
"Investor"), pursuant to which, subject to the satisfaction of certain
conditions, the Company could have received up to an aggregate
40
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
of $30,000,000 over a 36-month period. The Company terminated the Equity Line as
of December 9, 1998. As of the termination date, the Company had received a
total of $5,350,000 for which the Company issued 1,358,838 shares of common
stock. In connection with the Equity Line, the Company issued to the Investor a
four-year warrant to purchase 50,000 shares of the common stock at an exercise
price of $7.5375 per share (180% of closing sales price of common stock at the
time of issuance). In addition, the Company issued to the Investor an additional
four-year warrant to purchase 54,000 shares of common stock (representing 5,000
shares for each $500,000 of common stock purchased by the Investor under the
Equity Line during calendar 1998). The exercise price of such additional warrant
is $7.087 per share (180% of the weighted average purchase price of the common
stock purchased by the Investor during the year).
On December 9, 1998, the Company completed a private placement of 1,250
shares of 4% Series F Convertible Preferred Stock (the "Series F Stock") to
several investors and received net proceeds of approximately $12,349,800. Each
share of Series F Stock has an initial stated value of $10,000, which increases
at the rate of 4% per annum. The increase in stated value of the Series F Stock
totaled $281,944 at June 30, 1999. The Series F Stock became convertible at the
option of the investors, in whole or in part, on June 8, 1999, subject to
acceleration in certain instances. The number of shares of common stock issuable
upon conversion of each share of Series F Stock will be determined by dividing
the stated value of $10,000 plus an accretion of 4% per annum, by the conversion
price then in effect. The conversion price for the Series F Stock generally will
be the lesser of (a) 125% of the average market price on June 7, 1999 and (b)
the average closing bid price of the Company's common stock during a specified
period prior to conversion. In accordance with the terms of the Series F
Preferred Stock, the Company was required to recognize an assumed incremental
yield of $127,500 (calculated at the date of issuance and based on a beneficial
conversion feature). Such amount was amortized as a preferred stock dividend
over the six month period beginning with the date of issuance.
Upon the occurrence of certain events, the Company may be required to
redeem the Series F Stock, pay certain penalties and/or adjust the conversion
price. These events include the following:
(a) If the Company consolidates, merges or otherwise combines with
another entity and as a result the stockholders of the Company immediately prior
to such transaction do not retain sufficient voting power to elect a majority of
the board of directors of the new or combined entity, then the holders of the
Series F Stock may require the Company to redeem their shares at a price per
share equal to the greater of (1) 125% of the stated value of $10,000 per share
plus the accretion of 4% per annum, and (2) the value of the Common Stock that
would be issuable upon conversion of the Series F Stock. However, if the
consolidation, merger or other business combination occurs as a result of a
proxy solicitation which was not approved or recommended by the Company's Board
of Directors, then, if the holders exercise their redemption rights, the Company
may, in lieu of redemption, either (y) readjust the Initial Fixed Price to 80%
of the lower of (A) the lowest Variable Price during the period beginning on the
date such solicitation is announced and ending on the date such solicitation is
consummated, abandoned or terminated or (B) the Initial Fixed Price then in
effect, or (z) pay a penalty of 1% per day of the stated value of $10,000 per
share plus the accretion of 4% per annum for a maximum of 10 days in any 365-day
period.
41
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
(b) If at least a specified percentage of the holders of the Common
Stock accept a purchase, tender or exchange offer, then the holders of the
Series F Stock may require the Company to redeem their shares at a price per
share equal to the greater of (1) 125% of the stated value of $10,000 per share
plus the accretion of 4% per annum, and (2) the value of the Common Stock that
would be issuable upon conversion of the Series F Stock. However, if such
purchase, tender or exchange offer was not approved or recommended by the
Company's Board of Directors; then, if the holders exercise their redemption
rights, the Company may, in lieu of redemption, either (y) readjust the Initial
Fixed Price to 80% of the lower of (A) the lowest Variable Price during the
period beginning on the date such offer is announced and ending on the date such
offer is consummated, abandoned or terminated or (B) the Initial Fixed Price
then in effect, or (z) pay a penalty of 1% per day of the stated value of
$10,000 per share plus the accretion of 4% per annum for a maximum of 10 days in
any 365-day period.
(c) If the Company completes a sale of all or substantially all of its
assets, then the holders of the Series F Stock may require the Company to redeem
their shares at a price per share equal to the greater of (1) 125% of the stated
value of $10,000 per share plus the accretion of 4% per annum, and (2) the value
of the Common Stock that would be issuable upon conversion of the Series F
Stock.
(d) If the registration statement under the Securities Act of 1933
covering the resale by the investors of the Common Stock issuable upon
conversion of the Series F Stock ceases to be available to the investors for the
resale of their shares for more than 10 consecutive days, then the holders of
the Series F Stock may require the Company to redeem their shares at a price per
share equal to the greater of (1) 125% of the stated value of $10,000 per share
plus the accretion of 4% per annum, and (2) the value of the Common Stock that
would be issuable upon conversion of the Series F Stock. However, if the
unavailability of the registration statement is not the result of the Company's
failure to use its best efforts, then, if the holders exercise their redemption
rights, the Company may, in lieu of redemption, (y) pay a penalty of 1% per day
of the stated value of $10,000 per share plus the accretion of 4% per annum for
a maximum of 15 days in any 365-day period, and (z) readjust the Initial Fixed
Price to 80% of the lowest Variable Price during the period commencing on the
day the registration statement became unavailable and ending on the day the
registration statement is again available for use.
(e) If the Common Stock is delisted or suspended from the Nasdaq
National Market for a period of more than five consecutive days, then the
holders of the Series F Stock may require the Company to redeem their shares at
a price per share equal to the greater of (1) 125% of the stated value of
$10,000 per share plus the accretion of 4% per annum, and (2) the value of the
Common Stock that would be issuable upon conversion of the Series F Stock.
However, if the Common Stock is delisted from the Nasdaq National Market then,
if the holders exercise their redemption rights, the Company may, in lieu of
redemption, (y) readjust the Initial Fixed Price to 68.5% of the lowest Variable
Price during the period commencing on the date of delisting and continuing for
45 days thereafter, or (z) pay a penalty of 1% per day of the stated value of
$10,000 per share plus the accretion of 4% per annum for a maximum of 15 days in
any 365-day period.
Pursuant to its agreement with the investors, the Company called a
Special Meeting of Stockholders on March 19, 1999, at which meeting stockholders
approved the issuance of any shares
42
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
upon conversion of the Series F Stock in excess of 20% of the number of shares
of common stock the Company had outstanding on December 9, 1998 (i.e.,
7,577,617) in accordance with the rules and regulations of The Nasdaq Stock
Market, Inc.
Each investor has agreed that if it engages in short sales transactions
or other hedging activities during the 45 trading days immediately preceding a
conversion date which involve, among other things, sales of shares of the Common
Stock, the investor will place its sale orders for common stock in the course of
such activities so as not to complete or effect any such sale on any trading day
during such period at a price which is lower than the lowest sale effected on
such day by persons other than such investor or its affiliates.
Because the market price of the Common Stock is subject to fluctuation,
the Company agreed, pursuant to the terms of a registration rights agreement, to
register for resale by the investors at least 200% of the number of shares of
common stock that would be issuable if all the Series F Stock were converted as
of the date of the filing of the registration statement and, thereafter,
maintain the registration of at least 150% of the number of shares of common
stock that would be issuable if all the Series F Stock were then converted. The
registration statement currently in effect covers 10,000,000 shares of common
stock. If the registration statement is insufficient to permit the resale by the
investors of all the common shares issuable upon conversion of the Series F
Stock, the investors, in addition to any other remedies, have the right to
require the Company to redeem all or any portion of the remaining outstanding
shares of Series F Stock (at a price equal to the greater of 125% of the stated
value of $10,000 per share plus the accretion of 4% per annum and the value of
the Common Stock which would have been issued upon conversion) as well as pay to
them a penalty of $5 per share of Series F Stock for each day that sales cannot
be made. The registration statement would not cover a sufficient number of
shares to permit the investors to resell all the shares they could acquire upon
conversion if the Variable Price is less than approximately $1.29 (which
threshold will increase over time due to the 4% accretion to the stated value).
The Common Stock in the recent past has traded below this price.
The Company has received a waiver, dated October 11, 1999, from the
holders of the Series F Stock with respect to the rights discussed above either
to require redemption or to receive penalties conditioned upon the Company (a)
filing a registration statement, on or before November 11, 1999, covering at
least 200% of the number of shares of common stock that would be issuable if all
the Series F Stock were converted as of the date of the filing of the
registration statement and (b) having such registration statement declared
effective on or before December 11, 1999. However, if failure of the
registration statement to be declared effective by December 11, 1999 is not the
result of the Company's failure to use its best efforts, then, if the holders
exercise their redemption rights, the Company may, in lieu of redemption, (y)
pay a penalty of 1% per day of the stated value of $10,000 per share plus the
accretion of 4% per annum for a maximum of 15 days in any 365-day period, and
(z) readjust the Initial Fixed Price to 80% of the lowest Variable Price during
the period commencing on the day the registration statement became unavailable
for sale of all the shares and ending on the day the registration statement is
again available for use for sale of all the shares. In addition, notwithstanding
whether or not the Company has used its best efforts, if the registration
statement is not filed by November 11, 1999 and declared effective by December
11, 1999, the investors also will be entitled to the $5 per day penalty
(discussed above) accruing from the
43
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
first day that the Company was in breach of such registration obligation, which
penalties would be significant. The Company intends to file the registration
statement on or before November 11, 1999 and to use its best efforts to have it
declared effective on or before December 11, 1999. While the new registration
statement will cover a significant number of additional shares, the Company
would not be required to issue any shares which are the subject of this
additional registration statement unless the Variable Price at the time of
conversion is below $1.29 (increased over time due to the 4% accretion to the
stated value).
If the Company were required to redeem the Series F Stock or make any
of the penalty payments, it may not have the financial ability to make such
payments. Even if the Company did have the financial ability to redeem the
Series F Stock or pay the required penalties, such payment could significantly
and adversely affect its financial condition and deplete its cash resources.
As of October 7, 1999, 22 shares of the Series F Stock had been
converted into 193,994 shares of Common Stock. If all the remaining outstanding
shares of Series F Stock had been converted as of October 7, 1999, the Company
would have been required to issue approximately 10,836,000 additional shares of
Common Stock.
Under the terms of the Company's 1983 Stock Option Plan, as amended
(the "1983 Plan"), stock options were granted to employees and members of the
Board of Directors, as determined by the Compensation Committee of the Board of
Directors, at fair market value, become exercisable at 25% per year on each of
the first through fourth anniversaries of the date of grant, and terminate if
not exercised within ten years. In June 1993, the 1983 Plan expired, although
options granted under the 1983 plan which have not terminated may continue to be
exercised. On November 5, 1992, at the Company's Annual Meeting of Stockholders,
adoption of the Company's 1992 Stock Option Plan (the "1992 Plan") was ratified.
The basic terms of the 1992 Plan are substantially similar to those under the
Company's 1983 Plan. Under the 1992 Plan, 3,000,000 shares were originally
reserved for possible future issuance upon exercise of stock options, of which
497,875 were still available at June 30, 1999 for future grant. At June 30,
1999, 2,857,375 shares of common stock were reserved for possible future
issuance upon exercise of stock options outstanding and future stock option
grants.
Pursuant to the terms of the 1992 Plan, each outside Director of the
Company who had been a Director prior to July 1 is granted, on the first
business day of July of each year, an option to purchase shares of the Company's
common stock at fair market value, the amount of which is determined at the
discretion of the Company's Board of Directors. On July 1, 1999, 80,000 stock
options were granted to these Directors.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
and applies APB Opinion No. 25 in accounting for its plans and, accordingly, has
not recognized compensation cost for its stock option plan in its consolidated
financial statements. Had the Company determined compensation cost based on the
fair value at the grant date consistent with the provisions of SFAS
44
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
No. 123, the Company's net loss allocable to common shareholders and related per
share amounts would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
___________ ___________ ___________
<S> <C> <C> <C>
Net loss allocable to common
shareholders- as reported.......................... $11,687,799 $11,810,587 $13,946,531
Net loss allocable to common
shareholders- pro forma............................ 11,962,194 11,957,299 14,225,532
Net loss allocable to common
shareholders per share - as reported............... .31 .32 .39
Net loss allocable to common
shareholders per share - pro forma................. .32 .33 .40
</TABLE>
The fair value of each option granted during the three years ended June
30, 1999 is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions; (I) dividend yield of 0%,
(II) expected term of 8 years, 8 years and 9.9 years, (III) expected volatility
of 80% at June 30, 1999 and 42% at June 30, 1998 and 1997, and (IV) a risk-free
interest rate of 5.06%, 5.57% and 6.50% for the years ended June 30, 1999, 1998
and 1997, respectively. The weighted average fair value at the date of grant for
options granted during the years ended June 30, 1999, 1998 and 1997 was $1.26,
$2.55 and $4.91 per share, respectively.
The pro forma effects on net loss allocable to common shareholders and
related per share amounts for 1999, 1998 and 1997 may not be representative of
the pro forma effects in future years since (i) compensation cost is allocated
on a straight-line basis over the vesting periods of the grants, which extends
beyond the reported years, (ii) and does not take into effect the proforma
compensation expense related to grants made prior to the year ended June 30,
1996.
Information concerning options for the years ended June 30, 1999, 1998
and 1997 is summarized as follows:
<TABLE>
<CAPTION>
Fiscal 1999
___________
Shares Option Price Range
_________ ___________________
<S> <C> <C>
Outstanding, July 1, 1998.............................. 1,987,500 $2.25 - 12.88
Granted................................................ 945,000 1.78 - 4.63
Exercised.............................................. - -
Terminated............................................. (573,000) 2.25 - 12.88
_________
Outstanding, June 30, 1999............................. 2,359,500 1.78 - 12.88
_________
Exercisable, June 30, 1999............................. 1,343,625 2.25 - 12.88
_________ ___________________
</TABLE>
45
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
Fiscal 1998
___________
Shares Option Price Range
_________ ___________________
<S> <C> <C>
Outstanding, July 1, 1997............................. 2,220,250 $2.25 - 12.88
Granted............................................... 138,000 4.38 - 5.31
Exercised............................................. (169,750) 2.25 - 3.63
Terminated............................................ (201,000) 3.13 - 7.38
_________
Outstanding, June 30, 1998............................ 1,987,500 2.25 - 12.88
_________ ___________________
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1997
___________
Shares Option Price Range
_________ ___________________
<S> <C> <C>
Outstanding, July 1, 1996............................. 2,280,475 $2.25 - 10.75
Granted............................................... 552,000 4.75 - 12.88
Exercised............................................. (75,600) 2.25 - 3.63
Terminated............................................ (536,625) 3.13 - 7.38
_________
Outstanding, June 30, 1997............................ 2,220,250 2.25 - 12.88
_________ ___________________
</TABLE>
8. Income Taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes" 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, 1999, 1998 and 1997 are presented below:
<TABLE>
<CAPTION>
1999 1998 1997
____________ ____________ ____________
Deferred tax assets:
<S> <C> <C> <C>
Net operating loss carry forwards.................. $37,722,000 $33,040,000 $29,210,000
Research and development credits................... 4,364,000 4,160,000 3,830,000
Property and equipment............................. 838,000 647,000 500,000
Other.............................................. 383,000 574,000 565,000
____________ ____________ ____________
Total.................................................. 43,307,000 38,421,000 34,105,000
Valuation allowance.................................... (43,307,000) (38,421,000) (34,105,000)
____________ ____________ ____________
Net deferred taxes..................................... $ -- $ -- $ --
============ ============ ============
</TABLE>
46
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
The valuation allowances for fiscal years 1999, 1998 and 1997 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,
1999, 1998 and 1997 include $4,886,000, $4,316,000 and $5,775,000 relating to
fiscal years 1999, 1998 and 1997 operations, respectively. The tax benefit
assumed using the federal statutory tax rate of 34% has been reduced to an
actual benefit of zero due principally to the aforementioned valuation
allowance.
At June 30, 1999, the Company has available net operating loss
carryforwards for federal income tax reporting purposes of approximately
$96,000,000, which expire at various dates between 2000 and 2019. Pursuant to
Section 382 of the Internal Revenue Code of 1986, as amended, the annual
utilization of a company's net operating loss and research credit carryforwards
may be limited if the Company experiences a change in ownership of more than 50
percentage points within a three-year period. As a result of certain financing
arrangements, the Company may have experienced such ownership changes.
Accordingly, the Company's net operating loss carryforwards available to offset
future federal taxable income arising before such ownership changes may be
limited. Similarly, the Company may be restricted in using its research credit
carryforwards arising before such ownership changes to offset future federal
income tax expense. The Company made no payments of federal or state income
taxes during the years ended June 30, 1999, 1998 and 1997.
9. Related-Party Transactions
The Center for Molecular Medicine and Immunology ("CMMI") (also known
as the Garden State Cancer Center) is a not-for-profit corporation, established
in 1983 by Dr. David M. Goldenberg, Chairman of the Board, Chief Executive
Officer and the major shareholder of the Company. CMMI is devoted primarily to
cancer research.
Dr. Goldenberg currently serves as the President of CMMI pursuant to an
employment agreement and during fiscal 1999 devoted 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. Dr. Hans Hansen, an officer of the Company, is an adjunct
member of CMMI. Certain employees of CMMI serve as consultants to the Company.
CMMI is currently conducting basic research and patient evaluations in
a number of areas of potential interest to the Company. Under its license
agreement with CMMI, 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 determined at the time the license is
obtained.
The 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 has reimbursed CMMI for expenses incurred on behalf of the
Company,
47
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
including amounts incurred pursuant to research contracts, in the amounts of
approximately $45,000, $98,000 and $69,000 during the years ended June 30, 1999,
1998 and 1997, 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 each of the years ended June 30, 1999, 1998 and 1997, the Board
of Directors of the Company authorized grants to CMMI of $200,000 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. Pursuant to a
collaborative research and license agreement, dated as of January 21, 1997,
between the Company and CMMI, the Company has paid to CMMI an annual license fee
of $200,000 in fiscal years 1999, 1998 and 1997.
10. License and Distribution Agreements
On November 24, 1997, the Company entered into a Distribution Agreement
with Eli Lilly Deutschland GmbH ("Lilly") pursuant to which Lilly packages and
distributes LeukoScan within the countries comprising the European Union and
certain other countries subject to receipt of regulatory approvals. Also,
effective April 6, 1998, Lilly began packaging and distributing CEA-Scan within
the countries comprising the European Union. The Company pays Lilly a service
fee based primarily on the number of units of product packaged and shipped. The
parties contemplate that other Company products may be handled under this
arrangement when appropriate.
On November 28, 1997, the Company was awarded $1.8 million, including
interest, from its arbitration claim against Pharmacia for breach of contract
and fiduciary duty arising out of the license agreement with a predecessor of
Pharmacia that had been terminated in 1995. This amount was recognized as other
revenue in fiscal year 1998. Additionally, the Company recognized as revenue a
portion of funds previously received from Pharmacia pertaining to CEA-Scan
clinical trials for which the Company no longer has an obligation. Such amounts
had been recorded as deferred revenue.
Effective as of April 6, 1998, the Company appointed a subsidiary of
Bergen Brunswig Specialty Corporation as a non-exclusive distributor of CEA-Scan
in the U.S. Such subsidiary (currently Integrated Commercialization Solutions,
Inc. ("ICS")) serves as an agent of the Company in providing product support
services, including customer service, order management, distribution, invoicing
and collections.
On December 21, 1998, the Company received $300,000 in final settlement
of all claims between the Company and Mallinckrodt, Inc. and its affiliate under
the prior distribution agreements, which were terminated in April 1998. This
amount was recognized as other revenue in fiscal year 1999.
The Company, through its 80% owned subsidiary, IMG Technology, LLC ("IMG"), has
formed a joint venture with Coulter Corporation ("Coulter") for the purpose of
developing targeted cancer therapeutics. The joint venture, known as IBC
Pharmaceuticals, LLC ("IBC") was organized as a Delaware limited liability
company. On March 5, 1999 the Company contributed to IBC, on
48
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
behalf of IMG , certain rights to its proprietary humanized antibodies against
the cancer marker carcinoembryonic antigen (which had a financial reporting
carrying value of zero), which is used in its CEA-Cide therapeutic, and Coulter
contributed to IBC certain rights to its bispecific targeting technology called
the "Affinity Enhancement System" or AES. The Company assigned its rights
pursuant to the terms of a license agreement with IBC dated March 5, 1999 in
exchange for the grant to IMG of its interest in IBC ("Immunomedics License
Agreement"). Coulter received its interest in IBC in exchange for its
contribution. The license granted to IBC is a worldwide, royalty free, exclusive
license which is limited to the "IBC Field" with respect to the "Immunomedics
Patent Property" and the "Immunomedics Biotechnology Assets," as those terms are
defined in the Immunomedics License Agreement. Additionally on March 5, 1999,
several investors contributed $3,000,000 to IBC in exchange for a 7% interest in
the venture. IMG's and Coulter's interests in IBC are 49.55% and 43.45%
respectively. Coulter, IMG and the investors entered into an operating agreement
(the "IBC Operating Agreement") which establishes the rights and obligations of
the respective members. Under the terms of the IBC Operating Agreement, neither
IMG nor Coulter may sell any portion of its interest in IBC without first
providing the other with a right of first refusal with respect to such sale,
provided that after a public offering of IBC securities, IMG and Coulter will be
permitted to sell up to 20% of their respective interests in IBC free of such
right of first refusal. IMG is a Delaware limited liability company owned 80% by
the Company and 20% by Dr. David Goldenberg. Dr. Goldenberg received his
interest pursuant to the terms of his employment agreement with the Company. IMG
is intended to be a single purpose entity, its sole asset being its interest in
IBC. Dr. Goldenberg and IMG have entered into an operating agreement (the "IMG
Operating Agreement") which establishes their relative rights and obligations
(see Note 11). In connection with Dr. Goldenberg's receipt of an interest in
IMG, the Company recognized $182,000 of compensation expense, based on the fair
value of technology transferred, and has reflected his interest as a minority
interest on the consolidated financial statements as of June 30, 1999. Dr.
Goldenberg also serves as Chairman of the Board of IBC.
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, 1997,
the Board of Directors increased Dr. Goldenberg's annual base salary to
$265,000. The Company has agreed to extend Dr. Goldenberg's employment agreement
for a five-year period which expires on October 31, 2003. Dr. Goldenberg
voluntarily reduced his annual base salary effective June 1999, from $265,000 to
$225,000. Further, the Company acknowledged and approved Dr. Goldenberg's
continuing involvement with CMMI and IBC.
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 (see
Note 9). The Agreement extends the ownership rights of the Company, with an
obligation to diligently pursue all ideas, discoveries, developments and
products, in the entire medical field, which, at any time during his past or
continuing employment by the Company (but not when
49
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
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 Royalty Payments. For each of the years ended
June 30, 1999, 1998 and 1997, the Company paid Dr. Goldenberg the minimum
required payment of $100,000. Dr. Goldenberg will also receive a percent, not
less than 20%, to be determined by the Board, of net consideration (including
license fees) which the Company receives for any disposition, by sale, license
or otherwise (discussions directed to which commence during the term of his
employment plus two years) of any defined Undeveloped Assets of the Company
which are not budgeted as part of the Company's strategic plan. Pursuant
thereto, Dr. Goldenberg received his interest in IMG (See Note 10).
The Company is obligated under an operating lease for facilities used
for research and development, manufacturing and office space. On May 29, 1998,
the Company exercised its right to renew for an additional term of three years
expiring in May 2002 at a base annual rate of $441,000. The lease provides for a
second renewal period of five years expiring May 2007. The lease provides for an
option to purchase the facility, subject to certain terms and conditions as
specified in the lease. Rental expense related to this lease was approximately
$425,000, $425,000 and $428,000 in fiscal years 1999, 1998 and 1997,
respectively. Minimum lease commitments for facilities and equipment are as
follows for fiscal years ending:
2000 ..............................$596,000
2001 ............................. $441,000
2002 ..............................$441,000
2003 ..............................$446,000
2004 ..............................$449,000
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.
50
<PAGE>
Immunomedics, Inc.
Notes to Consolidated Financial Statements - (Continued)
12. Debt
On October 28, 1998, the Company entered into an Equipment Financing
Agreement with the New England Capital Corporation, pursuant to which the
Company has received $450,000, at the interest rate of 9.52% per annum, to be
repaid over a 36-month period. The proceeds of such financing were used to
exercise the early purchase options for equipment previously leased through a
master lease agreement. The financing is secured by various equipment and an
irrevocable letter of credit in the amount of $225,000. The letter of credit is
collateralized by a cash deposit of an equivalent amount which is included in
"Other long- term assets" on the accompanying consolidated balance sheet. At
June 30, 1999, the Company's indebtedness under this agreement was $372,227. In
the fiscal year ended June 30, 1999, the Company paid $23,162 in interest under
this agreement.
13. Geographic Segments
Effective July 1, 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information". As discussed in Note
1, the Company manages its operations as one line of business of researching,
developing, manufacturing and marketing biopharmaceutical products, particularly
antibody-based diagnostics and therapeutics for cancer and infectious diseases,
and it currently reports as a single industry segment. The Company markets and
sells its products in the U.S. and throughout Europe. During fiscal year 1999,
revenues from one major customer amounted to approximately 16% of total
consolidated revenues.
The following table presents financial information based on the
geographic location of the facilities of Immunomedics, Inc. as of and for the
year ending June 30, 1999:
United States Europe Total
_____________ __________ ___________
Total assets $ 15,759,669 $1,199,252 $16,958,921
Long-lived assets 4,764,546 53,593 4,818,139
Revenues 4,594,966 2,964,466 7,559,432
51
<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 subsidiaries as of June 30, 1999 and 1998, and the
related consolidated statements of operations and comprehensive loss, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1999. 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 subsidiaries as of June 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1999, in conformity with generally accepted accounting
principles.
Short Hills, New Jersey KPMG LLP
August 20, 1999, except as to
paragraphs nine through eleven of
Note 7, which are as of
October 11, 1999
52
<PAGE>
Item 9 -- Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10 -- Directors and Executive Officers of the Registrant
The information required for this item is incorporated herein by
reference to the 1999 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 1999 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 1999 Definitive Proxy Statement.
Item 13 -- Certain Relationships and Related Transactions
The information required for this item is incorporated herein by
reference to the 1999 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, 1999 and 1998
Consolidated Statements of Operations and Comprehensive Loss for the
years ended June 30, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the years ended
June 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended June 30,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
Independent Auditors' Report - KPMG LLP
53
<PAGE>
2. -- Financial Statement:
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 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)
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, 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(j)
3.1(i) -- Certificate of Designation of Rights and Preferences of the
Company's Series B Convertible Preferred Stock filed with the
Secretary of State of the State of Delaware on December 21, 1994(l)
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
(n)
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(o)
3.1(l) -- Certification of Amendment of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of
Delaware on November 7, 1996(p).
3.1(m) -- Certificate of Designation of Rights and Preferences of the
Company's Series E Junior Participating Preferred Stock, as filed
with the Secretary of State of the State of Delaware on January 23,
1998(r)
3.1(n) -- Amended Certificate of Designations, Preferences and Rights of
Series F Convertible Preferred Stock of Immunomedics, Inc.(v)
3.2 -- Amended and Restated By-Laws of the Company(j)
4. -- Instruments defining the rights of security holders, including
indentures.
4.1 -- Specimen Certificate for Common Stock(e)
4.2 -- Structured Equity Line Flexible Financing Agreement, dated as of
December 23, 1997, between Immunomedics, Inc. and Cripple Creek
Securities, LLC(s)
4.3 -- Registration Rights Agreement, dated as of December 23, 1997,
between Immunomedics, Inc. and Cripple Creek Securities, LLC(s)
4.4 -- Common Stock Purchase Warrant issued to Cripple Creek Securities,
LLC(s)
4.5 -- Form of additional Common Stock Purchase Warrant issuable to
Cripple Creek Securities, LLC(s)
4.6 -- Rights Agreement, dated as of January 23, 1998, between
Immunomedics, Inc. and American Stock Transfer and Trust Company,
as rights agent, and form of Rights Certificate(r)
54
<PAGE>
10. -- Material contracts
10.1(a) -- 1983 Stock Option Plan, as amended(h)
10.1(b) -- Form of Stock Option Agreement(e)
10.2 -- Exclusive License Agreement with David M. Goldenberg, dated as of
July 14, 1982(a)
10.3 -- Agreement among the Company, David M. Goldenberg and the Center for
Molecular Medicine and Immunology, Inc. dated, May, 1983(a)
10.4 -- Memorandum of Understanding with David M. Goldenberg, dated
September 10, 1984(b)
10.5 -- Immunomedics, Inc. 401(k) Retirement Plan(c)
10.6. -- Executive Supplemental Benefits Agreement with David M. Goldenberg,
dated as of July 18, 1986(c)
10.7. -- License Agreement between Hoffmann-La Roche, Inc. and David M.
Goldenberg, dated as of April 29, 1986(c)
10.8 -- License Agreement with F. James Primus dated July 7, 1983(d)
10.9 -- Amended and Restated License Agreement among the Company, CMMI and
David M. Goldenberg, dated December 11, 1990(h)
10.10 -- Lease Agreement with Baker Properties Limited partnership, dated
January 16, 1992(i)
10.11 -- Immunomedics, Inc. 1992 Stock Option Plan(p)
10.12. -- Amended and Restated Employment Agreement, dated November 1, 1993,
between the Company and Dr. David M. Goldenberg(k)
10.13. -- Amendment, dated March 11, 1995, to the Amended and Restated
License Agreement among the Company, CMMI, and David M.
Goldenberg, dated December 11, 1990(m)
10.14. -- Manufacturing Agreement, dated as of April 4, 1996, between the
Company and SP Pharmaceuticals, formerly the Oncology
Division of Pharmacia & Upjohn (Confidential treatment has been
requested for certain portions of the Agreement)(o)
10.15 -- License Agreement, dated as of January 21, 1997, between the
Company and Center for Molecular Medicine and Immunology, Inc.(q)
10.16 -- Distribution Agreement, dated as of November 24, 1997,
between Immunomedics, Inc. and Eli Lilly Deutschland GmbH
(Confidential treatment has been requested for certain portions
of the Agreement)(t)
10.17 -- Distribution and Product Services Agreement, dated as of May 15,
1998, between Immunomedics, Inc. and Integrated Commercialization
Solutions, Inc. (Confidentiality treatment has been requested for
certain portions of the Agreement)(u).
10.18 -- Securities Purchase Agreement, dated December 9, 1998, by and among
Immunomedics, Inc. and the Investors.(v)
10.19 -- Registration Rights Agreement by and among dated December 9, 1998,
by and among Immunomedics, Inc. and the Investors.(v)
10.20 -- Operating Agreement, dated March 5, 1999, by and among IMG
Technology, LLC, Coulter Corporation and the investors named
therein.(w)
10.21 -- License Agreement, dated March 5, 1999, by and between
Immunomedics, Inc. and IBC Pharmaceuticals, LLC.(w)
10.22 -- Operating Agreement, dated March 5, 1999, by and between IMG
Technology, LLC and David M. Goldenberg.(w)
55
<PAGE>
11. -- Statement recomputation 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 Company
23. -- Consent of Experts and Counsel
23.1 -- Consent of Independent Accountants -- KPMG LLP
27. -- Financial Data Schedule
____________________________________
(a) -- Incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-1 effective October 6, 1983
(Commission File No. 2-84940).
(b) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the year ended June 30, 1985.
(c) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1986.
(d) -- Incorporated by reference from the Exhibits to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1988.
(e) -- Incorporated by reference from the Exhibits to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1990.
(f) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
December31, 1990.
(g) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1991.
(h) -- Incorporated by reference from the Exhibits to the Company'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 Company's
Registration Statement on Form S-2 effective January 30, 1992
(Commission File No. 33-44750).
(j) -- Incorporated by reference from the Exhibits to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1993.
(k) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1993.
(l) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1994.
(m) -- Incorporated by reference from the Exhibits to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1995.
(n) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1995.
(o) -- Incorporated by reference from the Exhibits to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
(p) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996.
(q) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1996.
(r) -- Incorporated by reference from the Exhibits to the Company's
Registration Statement on Form 8-A, as filed with the Commission
on January 29, 1998.
(s) -- Incorporated by reference from the exhibits to the Company's
Registration Statement on Form S-3, as filed with the Commission
on January 29, 1998.
56
<PAGE>
(t) -- Incorporated by reference from the exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1997.
(u) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998.
(v) -- Incorporated by reference from the Exhibits to the Company's
Current Report on Form 8-K, dated December 15, 1998.
(w) -- Incorporated by reference from the Exhibits to the Company's
Current Report on Form 8-K, dated March 23, 1999.
(b) Reports on Form 8-K:
None
57
<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: October 13, 1999
By /s/ DAVID M. GOLDENBERG
__________________________
David M. Goldenberg
Chairman and Chief 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.
Signature Title Date
/s/ DAVID M. GOLDENBERG Chairman and Chief October 13, 1999
.......................... Executive Officer
David M. Goldenberg (Principal Executive Officer)
/s/ SHAILESH R. ASHER Controller and Acting October 13, 1999
.......................... Chief Financial Officer
Shailesh R. Asher (Principal Financial
and Accounting Officer)
/s/ MARVIN E. JAFFE Director October 13, 1999
.........................
Marvin E. Jaffe
/s/ RICHARD R. PIVIROTTO Director October 13, 1999
.........................
Richard R. Pivirotto
/s/ RICHARD C. WILLIAMS Director October 13, 1999
.........................
Richard C. Williams
58
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANIES
_______________________________
Name of Subsidiary Jurisdiction of Incorporation
__________________ _____________________________
Immunomedics B.V. Netherlands
(dba Immunomedics Europe)
IMG Technologies, LLC Delaware
59
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
_______________________________
The Board of Directors
Immunomedics, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-44501 and 333-69975) on Form S-3 and (No. 33-56844 and 33-16260) on Form S-8
of Immunomedics, Inc. of our report dated August 20, 1999, except as to
paragraphs nine through eleven of Note 7, which are as of October 11, 1999,
relating to the consolidated balance sheets of Immunomedics, Inc. and
subsidiaries as of June 30, 1999 and 1998, and the related consolidated
statements of operations and comprehensive loss, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended June
30, 1999, which report appears in the June 30, 1999 annual report on Form 10-K
of Immunomedics, Inc.
KPMG LLP
Short Hills, New Jersey
October 13, 1999
60
<PAGE>
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