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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-17999
IMMUNOGEN, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
MASSACHUSETTS 04-2726691
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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333 PROVIDENCE HIGHWAY, NORWOOD, MA 02062
(Address of principal executive offices, including zip code)
(781) 769-4242
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports,) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Aggregate market value, based upon the closing sale price of the shares as
reported by the Nasdaq National Market, of voting stock held by non-affiliates
at September 15, 1999: $53,571,450 (excludes shares held by Executive Officers,
Directors, and beneficial owners of more than 10% of the Company's Common
Stock). Exclusion of shares held by any person should not be construed to
indicate that such person possesses the power, direct or indirect, to direct or
cause the direction of management or policies of the registrant, or that such
person is controlled by or under common control with the registrant. Common
Stock outstanding at September 15, 1999: 26,692,336 shares.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitive Proxy Statement for its 1999 Annual
Meeting of Shareholders are incorporated by reference into Part III of this
Report.
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ITEM 1. BUSINESS
THE COMPANY
ImmunoGen, Inc. ("ImmunoGen" or the "Company") develops pharmaceuticals,
primarily for the treatment of cancer. The Company's product candidates are
called tumor-activated prodrugs ("TAPs") and are based on its proprietary
immunoconjugate technology platform. Unlike conventional chemotherapeutic
agents, TAPs are intended to deliver potent chemotherapy specifically to a
tumor. Each TAP immunoconjugate comprises a small-molecule drug which has been
chemically linked to a monoclonal antibody. The small-molecule drugs are highly
potent cell-killing (cytotoxic) agents, while the monoclonal antibodies identify
and bind to tumor cells. An important characteristic of TAPs is that they remain
inactive and nontoxic until they bind to the surface of a target cell, after
which their full cytotoxicity is restored.
In August 1999, ImmunoGen filed an Investigational New Drug ("IND")
application with the United States Food and Drug Administration ("FDA") to begin
human trials of huC242-DM1/SB-408075, the Company's lead product candidate for
the treatment of colorectal and pancreatic cancers. In September 1999, the IND
became effective, and the Company expects that Phase I trials will begin before
calendar year-end 1999. HuC242-DM1/SB-408075 is being developed in collaboration
with SmithKline Beecham plc ("SB") under a license agreement executed in
February 1999. The Company's other TAP candidate, huN901-DM1, is currently in
preclinical testing for the treatment of small-cell lung cancer. ImmunoGen is
aggressively pursuing a corporate partner to support the development and
commercialization of this product.
Through its 97-percent-owned subsidiary, Apoptosis Technology, Inc.
("ATI"), the Company develops additional technologies based on the regulation of
the biochemical signals which instruct cells to undergo programmed cell death,
or apoptosis. Disruption of the apoptosis pathway is recognized as an essential
element in both cancer and viral infections. ATI directs its research toward
identification of lead compounds for the treatment of cancer and viral
infections.
ATI has identified several key proteins which play a role in the regulation
of apoptosis in cancer cells and virus-infected cells. Using this information,
ATI has developed proprietary biochemical model systems, or screens, with which
to identify leads for drug development. In August 1997, the Company announced a
collaboration between ATI and BioChem Pharma Inc. ("BioChem"), a Canadian
biopharmaceutical company, for the discovery and development of novel
anti-cancer therapeutics using screens developed at ATI. See "-- Licenses --
Apoptosis Technology, Inc. -- BioChem Pharma Inc."
TAPs and ATI's drug discovery technologies represent two different
approaches to developing new cancer therapeutics. Since combination therapy is
prevalent in cancer, the Company expects that drugs developed using ATI's
approach may be complementary to the Company's TAPs.
- The Company has a multi-faceted business strategy which includes:
- Developing and commercializing huC242-DM1/SB-408075 with SB;
- Pursuing a partner to support aggressive clinical development and
commercialization of huN901-DM1;
- Collaborating with third parties to create new TAPs that will employ
ImmunoGen's immunoconjugate technology in combination with antibodies
furnished by such third parties;
- Self-funding the development of some TAPs using monoclonal antibodies
obtained from third parties;
- Utilizing additional chemotherapeutics, such as DC1, to complement and
broaden existing TAPs; and
- Exploiting its proprietary antibody resurfacing technology.
See "-- Business Strategy."
TUMOR-ACTIVATED PRODRUGS (TAPS)
Despite recent advances in diagnosis and treatment, cures in many forms of
cancer continue to be elusive. Surgery may be used to remove primary masses of
some solid tumors, but it is largely ineffective once the tumor spreads to other
parts of the body (metastatic disease). Treatment with combination chemotherapy
and radiation also may not be capable of eradicating disease because of
inadequate drug potency at the tumor site, the result of limitations in dosage
due to side-effects on healthy tissues. For the most part, these agents attack
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dividing cells -- not only rapidly dividing cancer cells, but also other cells
undergoing cell division such as bone marrow and certain epithelial cells (e.g.,
hair follicles and the gastrointestinal lining). As a further impediment to
successful therapy, tumor cells may be genetically predisposed to become
resistant to treatment with chemotherapy or radiation, making repeat courses of
therapy often ineffective.
Because of toxicities, limited potency and resistance associated with
conventional anti-cancer therapies, a significant need still exists for new
therapeutic products. One way in which the Company seeks to address this
therapeutic void is through applications of its tumor cell-specific TAP
immunoconjugate technology for the targeted delivery of highly potent
chemotherapeutic drugs to tumor cells. Importantly, because TAPs are inactive
until released from the antibody inside the target cell, they are capable of
killing tumor cells while sparing normal cells -- even those in close
association with a tumor.
Each of the Company's TAPs consists of a monoclonal antibody coupled to a
small-molecule agent (an effector molecule) with a high degree of cell-killing
ability/potency. A monoclonal antibody is a protein which detects and binds to a
specific antigen, or marker. Since cancer cells may have unique antigens on
their surface, an antibody with the appropriate specificity for those cells may
be used as a targeting agent. Importantly, some of these markers are found on
several types of tumors. A TAP which uses an antibody that targets such markers
therefore may be used in the treatment of different types of tumors.
ImmunoGen has identified monoclonal antibodies which it believes possess
the requisite characteristics for use in TAPs. Two of these, huC242 and huN901,
are used in ImmunoGen's TAP product candidates currently in development for the
treatment of colorectal cancer and small-cell lung cancer, respectively. The
Company has performed additional laboratory experiments using the C242 antibody
which suggest that it may also be useful to target pancreatic tumors and non
small-cell tumors of the lung.
The Company believes the following attributes distinguish its TAP
immunoconjugates from other anti-cancer agents and suggest its TAP may have
enormous potential:
- Targeting, which directs the cell killing potential of TAPs specifically
to the tumor;
- A stable linkage and release mechanism, allowing the high potency of the
effector molecule to be released after binding to and internalization by
the tumor cell;
- A high degree of cell-killing at the tumor site; and
- A tolerable side-effect profile and, consequently, a minimal disturbance
of patients' quality of life during treatment.
Small-Drug Effector Molecules: The Company has conducted laboratory and
animal tests of two types of small-molecule drugs which it believes offer great
promise for use as effector molecules in TAPs. The Company has developed
derivatives of these drugs which allow them to be attached to antibodies to
target tumor cells and allow for their release in a fully active form at the
target site.
The first compound, DM1, is a potent inhibitor of cell division. It is
derived from maytansine, a natural product. ImmunoGen has incorporated DM1 into
TAPs for the treatment of colorectal cancer and small-cell lung cancer. Two
United States patents covering the use of maytansine in conjugated form have
issued to the Company. Several patent applications are undergoing prosecution
abroad. See "-- Patents, Trademarks and Trade Secrets."
The second small-drug compound, DC1, is one of a class of agents called DNA
groove-binding compounds. After binding to DNA, these agents remain strongly
fixed to it, thereby interfering with cellular function and inducing the death
of cells. In December 1998, United States patent No. 5,846,545 covering the use
of DC1 in immunoconjugates issued to the Company. See "-- Patents, Trademarks
and Trade Secrets."
Because different tumor types possess different biological characteristics,
DM1-based TAPs may be more effective against some tumor types, while DC1-based
TAPs may be more effective against others. To be able to treat a broad range of
cancers effectively, the Company develops both classes of small molecules.
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Based on its in vitro and animal studies, the Company believes that TAPs
containing either DM1 or DC1 will be more effective than current anti-cancer
drugs at killing tumor cells. This high degree of killing power is important in
shrinking large tumor masses. In animal studies of mice specially bred to
tolerate human tumors, the Company's TAPs have shown therapeutic efficacy and
complete cures at doses with no detectable toxicity.
Antibody Humanization: Humanized antibodies are essential components of
ImmunoGen's TAPs. These antibodies, originally derived from mice, have been
engineered to appear human to the immune system. In this way, they are not
treated as foreign substances and removed from circulation, which may occur over
time with native antibodies of nonhuman origin. Humanized antibodies therefore
are expected to be nonimmunogenic to patients, an essential characteristic for
long-term administration and repeated dosing.
The Company, in collaboration with researchers at the University of Bath in
the United Kingdom, has developed a proprietary method, called resurfacing,
which it uses to humanize the monoclonal antibodies it uses in its
immunoconjugates. As a result of extensive in vitro testing and computer
modeling, the Company believes it has successfully humanized several monoclonal
antibodies using resurfacing, including C242 and N901. However, until patients
are treated with TAPs containing such antibodies, successful humanization cannot
be verified.
TAP Products
HUC242-DM1/SB-408075. ImmunoGen uses an antibody, C242, which the Company
believes possesses the requisite specificity as a targeting agent. The antibody
binds to all, and binds strongly to approximately 70% of, colorectal cancers and
has minimal cross-reactivity with normal human tissues. In addition, laboratory
tests indicate that the marker targeted by C242 is found on all pancreatic
tumors and non small-cell lung tumors tested.
According to estimates of the American Cancer Society ("ACS"), there will
be 129,400 new cases of colorectal cancer in the United States in 1999, and
56,600 deaths from the disease. The ACS also estimates that in the United States
during 1999, there will be 28,600 new cases of pancreatic cancer and 28,600
deaths, as well as 171,600 new cases and 158,900 deaths from lung cancer. The
Company has linked the humanized version of C242 ("huC242") to the
small-molecule drug, DM1. Because DM1 is a small-molecule, nonprotein drug,
huC242-DM1/SB-408075 is not expected to be immunogenic, which should allow for
the administration of repeat courses of therapy. HuC242-DM1/SB-408075 therefore
may be a suitable agent for substantially shrinking or eliminating large tumor
masses, either used alone or in combination with other chemotherapeutics. In
June 1998, the Company executed an agreement to license use of the huC242
antibody in maytansinoid products for the treatment of cancer from its
discoverer, Pharmacia & Upjohn AB. See "--Licenses -- ImmunoGen, Inc. --
Pharmacia & Upjohn AB."
The Company expects to begin human studies of huC242-DM1/SB-408075 in
colorectal and pancreatic cancer patients by calendar year end 1999. Clinical
development and commercialization of this product will be supported through
ImmunoGen's 1999 agreement with SB, which is worth more than $45 million not
including royalties on any product sales (see note E to the financial
statements).
The preclinical testing of this product has also been supported in part by
the National Cancer Institute ("NCI") of the National Institutes of Health. In
August 1997, the Company announced receipt of a $750,000 Phase II Small Business
Innovation Research grant from NCI to support preclinical research and
development of huC242-DM1/SB-408075, including final product formulation in
advance of the start of human clinical studies. The award is for $375,000
annually for two years retroactive to April 1, 1997.
HUN901-DM1. This product consists of the humanized version of the antibody,
N901, conjugated to DM1. N901 binds to CD56, an antigen found on the surface of
small-cell lung cancer cells. This antibody also has been humanized using the
Company's resurfacing technology. The Company has established cell lines that
express humanized N901 at sufficiently high levels to be suitable for scale up.
As with huC242-DM1/SB-408075, huN901-DM1 is not expected to be immunogenic,
which should allow for the administration of repeat courses of therapy.
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Of the 171,600 new cases of lung cancer estimated by ACS for 1999,
approximately 20 percent are expected to be small-cell lung cancer.
The Company expects to test the ability of huN901-DM1 to substantially
reduce or eliminate small-cell lung tumors. The Company conducted pilot animal
studies with huN901-DM1 in cynomolgus monkeys during the past year. No
significant toxicities or pathological abnormalities were observed at doses that
had been shown to be curative in human tumor models in immunodeficient mice. The
Company currently is seeking a corporate partner to support aggressive clinical
development and commercialization of this product. See "--Business Strategy."
APOPTOSIS TECHNOLOGY
Recent research has shown that human cells have an intrinsic "suicide
program" called apoptosis. All cells which undergo apoptosis do so in order to
protect the body against disease. Defects in this program may allow cancer cells
to survive and proliferate or viruses to reproduce and spread. Inappropriate
regulation of apoptosis also has emerged as a key factor in immunological,
neurodegenerative and cardiovascular diseases, as well as cancer. Based on the
belief that regulation of the biochemical pathways leading to apoptosis offers a
promising, novel approach to the treatment of disease, the Company established
ATI as a majority-owned subsidiary to pursue development of therapeutics for the
regulation of apoptosis.
ATI's drug discovery approach is "gene-based"; namely, it is predicated on
the identification and understanding of the role specific genes and gene
products play in the biochemical pathways regulating apoptosis. A gene-based
approach has particular appeal in cancer and viral diseases because inhibition
of the apoptotic program is recognized as an essential element of these
diseases. ATI focuses its research in these two areas. ATI has identified
several key proteins which regulate apoptosis in cancer cells and viruses. Using
these proteins, ATI has developed proprietary screens with which to identify
leads for drug development.
In August 1997, the Company announced a collaboration between ATI and
BioChem for the discovery and development of novel anti-cancer therapeutics
based on the use of ATI's proprietary screens for the identification of
compounds that regulate the activity of "anti-death" genes and cellular survival
factors. In accordance with the collaborative research plan, during 1998 and
1999, ATI delivered a total of four high-throughput screens to BioChem. All four
screens have been used by BioChem to screen their chemical compound library.
"Hits" have been identified and these hits are now being evaluated by BioChem to
determine their suitability for compound lead development.
Regulation of Apoptosis and Cancer
In normal, healthy tissue, cell proliferation and cell death are intimately
linked, providing an efficient means for organisms to control unwanted or excess
cellular proliferation. Cancer cells have accumulated mutations, however, that
circumvent the normal regulation of proliferation and cell death, leading to
excess and uncontrolled cell growth. Tumor cells escape apoptosis through the
active suppression, or blockage, of stimuli which otherwise would directly
induce cell death. The restoration of apoptosis in these cells by interference
with such blockage of the cell-death pathway therefore constitutes a promising,
gene-based approach to the eradication of cancer.
It is now well accepted within the scientific community that there are two
key, distinct mechanisms that block apoptosis in cancer cells: (i) the
activation of "anti-death" genes; and (ii) the regulation of cellular survival
factors. Some types of cancer cells may survive due to the activation of
anti-death genes while others may survive due to the activation of specific
survival signals.
Activation of "anti-death" genes. Bcl-2, the product of one of these
anti-death genes, is a member of a family of proteins that has been shown to
regulate apoptosis. Some of these proteins actively suppress apoptosis while
others trigger it. Interactions between those members of the Bcl-2 family which
promote apoptosis, and those which suppress it, regulate the cell-death program.
The Bcl-2 protein has been shown to block apoptosis in tumors and also to make
tumors resistant to chemotherapy. ATI believes that inhibition of the function
of Bcl-2 and other Bcl-2 family cell-death suppressors may restore the
susceptibility of a tumor
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cell to apoptosis and thereby provide an innovative approach to the development
of anti-cancer therapeutics. A specific cellular screen was developed to find
inhibition of Bcl-2 family cell-death suppressors, and this was delivered to
BioChem in 1999 as part of the ATI/BioChem collaboration.
ATI has collaborated in this area with researchers at the Medical Center of
St. Louis University ("SLU"). In March 1998, ATI licensed rights to certain SLU
inventions relating to methods and use of Bcl-2 in modulating apoptosis. See "--
Licenses -- Apoptosis Technology, Inc. -- St. Louis University."
ATI has discovered and characterized several proteins of the Bcl-2 family
that are potent promoters of cell death, but whose function in tumor cells is
disrupted by cell-death suppressors such as Bcl-2. The first of these is the Bak
protein. Laboratory experiments have shown that expression of Bak induces rapid
and extensive apoptosis, raising the possibility that it is directly involved in
triggering the cell-death program. In September 1997, United States patent No.
5,672,686 issued to ATI claiming antibodies which bind to the Bak protein. ATI
also has filed an additional United States patent application claiming methods
and use of Bak. See "-- Patents, Trademarks and Trade Secrets."
ATI and collaborators have discovered two other promoters of cell death,
Bik and Bbk. In November 1998, United States patent No. 5,834,234 issued to ATI
claiming composition of matter of Bbk; ATI also has filed separate United States
patent applications claiming methods and use of Bbk and Bik.
Importantly, ATI scientists also have identified BH3, a domain present in
all three of these promoters of cell death, as well as in other proteins of the
Bcl-2 family. ATI believes that BH3, also known as the GD domain, is sufficient
for the triggering of cell death. ATI believes that the reason apoptosis is
blocked in tumor cells is due to the binding of Bcl-2-related cell-death
suppressors to BH3. Identification of the BH3 domain therefore gives ATI
molecular information with which it can design screens for drugs which
counteract the influence of Bcl-2 and related suppressors of cell death, and
thereby restore apoptosis in tumor cells. In August 1997, ATI was awarded a
United States patent, No. 5,656,725, claiming composition of matter of the GD
(BH3) domain. In January 1998, a second United States patent, No. 5,863,795,
claiming composition of matter of the GD (BH3) domain issued to ATI. ATI also
has filed an additional United States patent application claiming methods and
use of BH3. BH3 is a molecular target for which ATI has developed a screen, and
this screen was delivered to BioChem in 1998 as part of the ATI/BioChem
collaboration.
Regulation of survival signals. Cells also may suppress the cell-death
program through survival signals provided by growth factors such as insulin-like
growth factor 1 ("IGF-1"). Research by collaborators at the Imperial Cancer
Research Fund ("ICRF"), a leading cancer research foundation in the United
Kingdom, has shown that survival signals provided by IGF-1 help prevent cancer
cells from undergoing apoptosis. ATI has established a research program with
ICRF to elucidate the role of IGF-1 and other survival factors in the death
pathway and to identify drugs that mimic or disrupt the survival signal of IGF-1
in cells. The IGF-1 receptor ("IGF-1R") is overexpressed on cells of many tumor
types, such as breast and small-cell lung carcinoma, and may be a critical
requirement for the survival of tumor cells. ATI therefore believes that the
suppression of survival signals may induce apoptosis in a great number of tumor
types.
ATI also collaborates in this area with researchers at Thomas Jefferson
University ("TJU"), Philadelphia, Pennsylvania, who have shown that IGF-1R is
required for cells to become cancerous and that blocking IGF-1R expression can
trigger apoptosis. Through the collaboration, ATI has identified a domain on
IGF-1R which is essential for the transmission of the survival signal, thereby
providing a molecular target for drug design. In December 1997, ATI licensed
exclusive, worldwide rights from TJU to inventions relating to use of unique
domains on IGF-1R in modulating apoptosis. See "-- Licenses -- Apoptosis
Technology, Inc. -- Thomas Jefferson University." IGF-1R is a molecular target
for which ATI has developed two screens, one each in 1998 and 1999. Both screens
have been delivered to BioChem by ATI as part of their collaboration.
Regulation of Apoptosis and Viral Disease
Viral disease starts with virus infection, which at the cellular level
involves the binding of virus to host cells, virus entry into those cells and
commandeering of the host cells' synthetic machinery. This leads ultimately to
the generation of new virus particles. It is now generally recognized within the
scientific
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community that host cells often use their ability to undergo apoptosis as an
effective means of stopping virus propagation. However, in many viruses, genes
have evolved that block apoptosis in the host cell and thereby permit virus
production. In vitro experiments with several viruses have demonstrated that
suppression of their anti-apoptotic mechanisms may effectively limit viral
infection.
ATI has focused on the identification of the anti-apoptotic genes of human
cytomegalovirus ("CMV"), a herpes virus which often infects immunocompromised
persons, such as those afflicted with AIDS or following organ transplantation.
Infection with CMV is often life threatening. During 1998 and 1999, ATI
identified two major CMV anti-apoptotic genes. ATI developed a screen based on
one of these genes which it believes will permit the identification of compounds
effective against the propagation of CMV. In 1998, ATI filed a United States
patent application covering this technology and in 1999 sought further
protection with a continuation-in-part application.
BUSINESS STRATEGY
ImmunoGen's objective is to be a leader in the development of TAPs and
other novel pharmaceuticals for the treatment of cancer and other human
diseases. The Company has developed a multi-faceted business strategy to fund
development of its products:
- The Company is pursuing the clinical development of its lead product
candidate for colorectal and pancreatic cancers, huC242-DM1/SB-408075,
which is slated to begin clinical trials by the end of calendar 1999.
ImmunoGen's collaboration with SB, executed in February 1999, has
accelerated the development of huC242-DM1/SB-408075. In September 1999,
the Company's IND to begin human testing of huC242-DM1/SB-408075 became
effective. If development milestones continue to be achieved, this
collaboration, which has provided $9.5 million of working capital to
date, will continue to be a significant source of funding. ImmunoGen will
also receive milestone payments and royalties on any sales of this
product.
- ImmunoGen is pursuing a corporate partner to support aggressive clinical
development and commercialization of huN901-DM1 for the treatment of
small-cell lung cancer.
- The Company will seek to extend its product portfolio by developing new
TAPs in collaboration with third parties. These TAPs will employ
ImmunoGen's immunoconjugate technology in combination with antibodies
furnished by such third parties.
- The Company expects to self-fund the development of some TAPs, the
antibodies for which are to be obtained from third parties. The
disposition of commercial rights will depend on market size and access,
as well as the cost of commercial development. Outlicensing such a
product before, during, or after clinical development, while retaining
certain rights for self-marketing, represents an approach that the
Company may pursue in certain circumstances.
- The Company will utilize additional chemotherapeutics, such as DC1, to
complement and broaden its existing TAPs.
- The Company will pursue additional opportunities to exploit its antibody
resurfacing technology.
LICENSES
Licenses -- ImmunoGen, Inc.
The Company and ATI each have entered into license agreements with third
parties in order to acquire rights to materials and techniques, usually in
exchange for a royalty on sales of products which incorporate such materials and
techniques. ImmunoGen has also entered into a development and commercialization
agreement for its lead product candidate. Principal licensing and collaborative
agreements are listed below.
SMITHKLINE BEECHAM PLC. In February 1999, the Company executed an
agreement with SB to develop and commercialize ImmunoGen's lead tumor activated
prodrug, huC242-DM1/SB-408075. Under the terms of the agreement, in addition to
royalties, ImmunoGen could receive milestone payments totaling more than
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$40 million. SB received exclusive worldwide rights to commercialize
huC242-DM1/SB-408075, except in certain Far East Territories, and SB and
ImmunoGen are collaborating on the remaining development of this product. To
date, ImmunoGen has received $7 million from SB in milestone payments. In
addition, in accordance with this agreement, SB has purchased $2.5 million of
ImmunoGen Common Stock. At ImmunoGen's option, SB has agreed to purchase up to
an additional $2.5 million of ImmunoGen Common Stock, subject to certain
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
PHARMACIA & UPJOHN AB. In January 1999, the Company executed an agreement
with Pharmacia & Upjohn AB under which the Company received rights to
commercialize maytansinoid products that incorporate the C242 antibody for the
treatment of cancer in exchange for a royalty on product sales and other
payments.
OXFORD MOLECULAR LTD. In March 1995, the Company entered into an agreement
with Oxford Molecular Ltd ("OML") under which the two companies cross-licensed
technology for the design of monoclonal antibodies. Under the agreement, the
Company receives access to OML's molecular modeling software in exchange for
granting OML the right to use the Company's proprietary resurfacing technology
in the humanization of monoclonal antibodies outside of the field of oncology
and case-by-case rights within oncology areas not under development at the
Company. OML also will pay the Company a percentage of the gross revenues it
derives from the use of resurfacing.
DANA-FARBER CANCER INSTITUTE. Under a Research and License Agreement with
the Dana-Farber Cancer Institute ("Dana-Farber"), entered into in May 1981, the
Company has provided funds for research projects conducted by Dana-Farber
involving the development of monoclonal antibodies, toxins and drugs for
conjugation and use as cancer therapeutics. Dana-Farber retains ownership of the
technology developed through such research and has granted the Company a
worldwide exclusive license to use such technology in the Company's products,
including the right to sublicense to others. In return for these rights, the
Company agreed to pay Dana-Farber royalties on product sales by ImmunoGen and
its sublicensees.
The Company has no funding obligations to Dana-Farber except for payment of
royalties on future sales of products which incorporate Dana-Farber technology.
The N901 antibody, used in one of the Company's products currently under
development, in part derives from Dana-Farber technology which has been licensed
to the Company under this agreement.
Licenses -- Apoptosis Technology, Inc.
ST. LOUIS UNIVERSITY. In March 1998, ATI licensed rights to inventions
relating to methods and use of Bcl-2 in modulating apoptosis from SLU. ATI
receives exclusive, worldwide rights to SLU's allowed United States patent
claiming an antiproliferation domain of Bcl-2 and certain other Bcl-2-related
inventions claimed in SLU's patent applications, in exchange for license fees
and a royalty on product sales.
THOMAS JEFFERSON UNIVERSITY. In December 1997, ATI licensed rights to
inventions relating to methods and use of IGF-1R in modulating apoptosis from
TJU. ATI receives exclusive, worldwide rights to the inventions claimed in TJU's
patent applications, filed in the United States and elsewhere, in exchange for
license fees and a royalty on product sales.
BIOCHEM PHARMA INC. In July 1997, ATI and BioChem entered into a
three-year research collaboration arrangement and a licensing agreement under
which ATI granted BioChem an exclusive, worldwide license to ATI's proprietary
screens based on the Bcl-2 family of proteins and IGF-1R for use in identifying
leads for drug development. The collaboration also covers the identification of
novel targets and the development of new screens in the two areas.
Under the collaboration, BioChem has committed to invest up to $11.125
million in ATI through a series of private placements over a three-year period
to fund research conducted by ATI with respect to the collaboration during that
period. In consideration for its investment, BioChem receives convertible
preferred stock in ATI and warrants to purchase shares of ImmunoGen Common Stock
equal to the amount invested in ATI during the three-year research term. The
research agreement also may be extended beyond that time
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under conditions substantially similar to the original three-year term. BioChem
will also make milestone payments of up to $15 million for each product
resulting from the research collaboration over the course of its development. In
addition, ATI will receive royalties on the sale of products resulting from the
collaboration. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
DANA-FARBER CANCER INSTITUTE. In January 1993, ATI and Dana-Farber entered
into a licensing agreement in the field of apoptosis under which ATI was granted
an exclusive, worldwide license, with full right to enter into sublicense
agreements, for all therapeutic applications and certain diagnostic applications
arising from existing inventions and an option to license future inventions made
in specified laboratories at Dana-Farber. In consideration for this license,
Dana-Farber received a minority equity share in ATI, an initial license fee and
a commitment by ATI to fund the research activities of those laboratories at
Dana-Farber from which ATI is to derive rights under the agreement. In June
1996, ATI made its final payment under the license agreement. There are no
further funding obligations to Dana-Farber except for payment of royalties on
future sales of products that incorporate Dana-Farber technology.
PATENTS, TRADEMARKS AND TRADE SECRETS
ImmunoGen and ATI seek patent protection for their proprietary technologies
and products both in the United States and abroad. Among them, the Company has
received:
- Two United States patents and one European patent claiming the use of
maytansinoids in conjugated form as an invention;
- Three United States patents claiming use of DC1 and its analogs in
immunoconjugates; and
- One United States patent claiming methods and use of its resurfacing
technology.
ATI has received:
- A United States patent claiming antibodies which bind to the
apoptosis-related protein, Bcl-Y (also referred to as Bak);
- Two United States patents claiming composition of matter of the GD (BH3)
domain and its gene;
- A United States patent claiming the anti-proliferation domain of Bcl-2
and a Notice of Allowance of a United States patent claiming methods for
screening for genetic mutations in the anti-proliferation domain of
Bcl-2;
- A United States patent claiming composition of matter of the
apoptosis-related protein, Bbk;
- A United States patent claiming the apoptosis gene, EI24; and
- A Notice of Allowance of a United States patent claiming composition of
matter of the active survival domains of IGF-IR.
In addition, several patents have issued to Dana-Farber in the United
States covering immunoconjugate technology and apoptosis-related technology,
exclusively licensed by ImmunoGen and ATI, respectively, from Dana-Farber.
Additional patent applications covering proprietary small-drug derivatives,
immunoconjugates, apoptosis technology and use of certain of these products and
inventions for indicated diseases have been submitted in the United States,
Canada, Europe and Japan and are pending or awaiting examination. Work leading
to other patent applications is being performed by Company employees. In all
such cases, the Company or ATI will either be the assignee or owner of such
patents or have an exclusive license to the technology covered by the patents.
No assurance can be given, however, that the patent applications will issue as
patents or that any patents, if issued, will provide ImmunoGen or ATI, as the
case may be, with adequate protection against competitors with respect to the
covered products, technologies or processes.
Many of the processes and much of the know-how of importance to the
Company's and ATI's technologies are dependent upon the skills, knowledge and
experience of certain of their key scientific and technical personnel, which
skills, knowledge and experience are not patentable. To protect their rights in
these areas, the Company and ATI require all employees and their consultants,
advisors and collaborators to enter
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<PAGE> 10
into confidentiality agreements with ImmunoGen or ATI, as the case may be. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's or ATI's respective trade secrets, know-how or
other proprietary information in the event of any unauthorized use or disclosure
of such trade secrets, know-how or proprietary information. Further, in the
absence of patent protection, the Company or ATI may be exposed to competitors
who independently develop substantially equivalent technology or otherwise gain
access to the Company's or ATI's respective trade secrets, know-how or other
proprietary information.
COMPETITION
The areas of product development on which the Company has focused are
highly competitive. ImmunoGen's competitors include:
- Major pharmaceutical and chemical companies;
- Specialized biotechnology firms; and
- Universities and research institutions.
Many of the above companies and institutions also compete with the Company
in recruiting and retaining highly qualified scientific personnel. Many
competitors and potential competitors have substantially greater scientific
research and product development capabilities, as well as greater financial,
marketing and human resources than the Company. In addition, many specialized
biotechnology firms have formed collaborations with large, established companies
to support research, development and commercialization of products that may be
competitive with those of the Company.
Competitive factors within the cancer therapeutic market include:
- The safety and efficacy of products;
- The timing of regulatory approval and commercial introduction;
- Special regulatory designation of products, such as Orphan Drug status;
and
- The effectiveness of marketing and sales efforts.
The Company's competitive position also depends on its ability to develop
effective proprietary products, implement production and marketing plans, obtain
patent protection and secure sufficient capital resources.
Continuing development of conventional and targeted chemotherapeutics by
large pharmaceutical companies may result in the identification of new compounds
which may compete with the Company's product candidates. In addition, two
monoclonal antibodies recently have been approved for use as cancer
therapeutics. Although neither of these antibodies was approved for the same
indications as the Company's current product candidates, other monoclonal
antibodies may compete with the Company's product candidates.
Because of the prevalence of combination therapy in cancer and the variety
of genes and targets implicated in cancer progression, the Company believes that
products resulting from applications of new technologies may be complementary to
the Company's products. Such new technologies include, but are not limited to;
- The use of genomics technology to identify new gene-based targets for the
development of anti-cancer drugs;
- The use of high-throughput screening to identify and optimize lead
compounds; and
- The use of gene therapy to deliver genes to regulate gene function.
ATI's technology also has competition. Over the past several years, many
companies and research institutions, including academic laboratories,
biotechnology companies and large pharmaceutical firms, have dedicated resources
to apoptosis research and the understanding of the genetic basis of certain
diseases,
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<PAGE> 11
including cancer. ATI is expected to face competition from other biotechnology
approaches as well as more traditional, drug-based approaches to cancer and
viral diseases. ATI will experience competition from fully-integrated
pharmaceutical companies with expertise in research and development,
manufacturing and product commercialization. Such companies have greater
resources in these areas than ATI. The Company also is aware of numerous
development-stage companies that are exploring new therapies for the same
disease targets as ATI.
REGULATORY ISSUES
ImmunoGen's products are regulated in the United States by the FDA in
accordance with the United States Federal Food, Drug, and Cosmetic Act, as well
as the Public Health Service Act. Parenteral monoclonal antibody products are
most often considered biologicals and therefore subject to regulation by the
Center for Biologics Evaluation and Research within the FDA, while new chemical
entities are regulated under the FDA Center for Drug Evaluation and Research
("CDER"). The Company expects that its huC242-DM1/SB-408075 product candidate
and its other TAPs will be reviewed by CDER.
The steps required before a pharmaceutical agent may be marketed in the
United States include: (a) preclinical laboratory, in vivo, and formulation
studies; (b) the submission to the FDA of an IND, which must become effective
before human clinical trials may commence; (c) adequate and well-controlled
human clinical trials to establish the safety and efficacy of the drug; (d) the
submission of a New Drug Application ("NDA") to the FDA; and (e) FDA approval of
the NDA, including approval of all product labeling and advertising.
Even if regulatory approvals for the Company's product candidates are
obtained, the Company, its products, and the facilities manufacturing the
Company's products are subject to continual review and periodic inspection. The
FDA will require post-marketing reporting to monitor the safety of the Company's
products. Each United States drug manufacturing establishment must be registered
with the FDA. Domestic manufacturing establishments are subject to periodic
inspections by the FDA and must comply with the FDA's Good Manufacturing
Practices ("GMP"). In complying with GMP, manufacturers must expend funds, time
and effort in the areas of production and quality control to ensure full
technical compliance. The FDA stringently applies regulatory standards for
manufacturing.
The regulatory issues that have potential impact on the future marketing of
ImmunoGen products are summarized in the following paragraphs:
Clinical Trials Process: Before a pharmaceutical product may be sold in
the United States and other countries, clinical trials of the product must be
conducted and the results submitted to the appropriate regulatory agencies for
approval.
In the United States, these clinical trial programs generally involve a
three-phase process. Typically, Phase I trials are conducted in healthy
volunteers to determine the early side-effect profile and the pattern of drug
distribution and metabolism. In Phase II, trials are conducted in groups of
patients afflicted with the target disease to determine preliminary efficacy and
optimal dosages and to expand the safety profile. In Phase III, large-scale
comparative trials are conducted in patients with the target disease to provide
sufficient data for the proof of efficacy and safety required by federal
regulatory agencies. In the case of drugs for cancer and other life-threatening
diseases, Phase I human testing often is performed in patients with advanced
disease rather than in healthy volunteers. Because these patients are already
afflicted with the target disease, it is possible for such studies to provide
results traditionally obtained in Phase II trials and they often are referred to
as Phase I/II studies.
The Company intends to conduct clinical trials not only in accordance with
FDA regulations, but also with guidelines established by the International
Committee on Harmonization. Whether or not FDA approval has been obtained,
approval of a product by the comparable regulatory authorities of foreign
countries must be obtained prior to the commencement of marketing of the product
in those countries. Regulatory approval in Europe is obtained through the
Medicines Control Agency, but regulations governing pharmaceutical sales
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<PAGE> 12
may vary from country to country. The Company intends to rely on foreign
licensees to obtain regulatory approvals to market ImmunoGen products in foreign
countries.
Regulatory approval often takes a number of years and involves the
expenditure of substantial resources. Approval times also depend on a number of
factors including, but not limited to, the severity of the disease in question,
the availability of alternative treatments and the risks and benefits
demonstrated in clinical trials.
Orphan Drug Designation: The Orphan Drug Act of 1983 generally provides
incentives to manufacturers to undertake development and marketing of products
to treat relatively rare diseases or diseases affecting fewer than 200,000
persons in the United States at the time of application for Orphan Drug
designation.
ImmunoGen may pursue this designation with respect to its products intended
for qualifying patient populations. A drug that receives Orphan Drug designation
and is the first product of its kind to receive FDA marketing approval for its
product claim is entitled to a seven-year exclusive marketing period in the
United States for that product claim. However, a drug that is considered by the
FDA to be different from a particular Orphan Drug is not barred from sale in the
United States during such seven-year exclusive marketing period.
New Drugs for Serious or Life-Threatening Illnesses: The recently enacted
FDA Modernization Act allows the designation of "Fast Track" status to expedite
development of new drugs, including review and approvals, and is intended to
speed the availability of new therapies to desperately ill patients. "Fast
Track" procedures permit early consultation and commitment from the FDA
regarding preclinical and clinical studies necessary to gain marketing approval.
ImmunoGen's products should be qualified for "Fast Track" status.
"Fast Track" status also incorporates initiatives announced by the
President of the United States and the FDA Commissioner in March 1996, intended
to provide cancer patients with faster access to new cancer therapies. One of
these initiatives states that the initial basis for approval of anti-cancer
agents to treat refractory, hard-to-treat cancer may be objective evidence of
response, rather than statistically improved disease-free and/or overall
survival, as has been common practice. The sponsor of a product approved under
this accelerated mechanism is required to follow up with further studies on
clinical safety and effectiveness in larger groups of patients.
RESEARCH AND DEVELOPMENT SPENDING
During each of the three years ended June 30, 1999, 1998 and 1997, the
Company spent approximately $6.1 million, $5.7 million and $7.4 million,
respectively, on research and development activities. Most of these expenditures
were for Company-sponsored research and development.
EMPLOYEES
As of June 30, 1999, the Company had 57 full-time employees, of whom 40
were engaged in the Company's research and development activities. Twenty-nine
employees hold post-graduate degrees, including 14 Ph.D. degrees. The Company
considers its relations with its employees to be good. None of the Company's
employees is covered by a collective bargaining agreement. The Company has
entered into confidentiality agreements with all of its employees, members of
the Scientific Advisory Board and other consultants.
SCIENTIFIC ADVISORY BOARD
Apoptosis Technology, Inc.
Walter A. Blattler, Ph.D., Vice President, ATI and Chairman of the ATI
Scientific Advisory Board. Dr. Blattler was the founding scientist of ImmunoGen,
Inc. and currently serves as ImmunoGen's Executive Vice President, Science and
Technology.
Gerard Evan, Ph.D., Gerson and Barbara Bass Bakar Distinguished Professor
of Cancer Biology, Cancer Research Institute, University of California San
Francisco.
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<PAGE> 13
Elliott D. Kieff, M.D., Ph.D., Professor of Medicine and Professor of
Microbiology and Molecular Genetics, Harvard University Medical School; Director
of Infectious Diseases, Brigham & Women's Hospital; member of the National
Academy of Sciences; Chairman of Virology at Harvard University and an authority
on herpes viruses.
Stuart F. Schlossman, M.D., Professor of Medicine, Harvard University
Medical School; member of the National Academy of Sciences; Head of the Division
of Tumor Immunology, Dana-Farber Cancer Institute.
ImmunoGen, Inc. does not currently have a Scientific Advisory Board.
ITEM 2. PROPERTIES
ImmunoGen leases approximately 52,700 square feet of laboratory and office
space at two locations in Cambridge, Massachusetts, of which one facility, or
37,700 square feet, has been subleased by the Company through February 2000. The
sublessee holds options to renew through May 2000. The Company also leases
27,500 square feet of space in Norwood, Massachusetts, which serves as the
Company's pilot manufacturing facility as well as its corporate offices. The
Company had also leased 47,000 square feet of space in Canton, Massachusetts
until January 1, 1996, when it assigned the lease on that facility to another
biotechnology company. The Company believes that the manufacturing portion of
the Norwood facility complies with all applicable FDA Good Manufacturing
Practice Regulations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ImmunoGen's Common Stock is quoted on The Nasdaq National Market under the
symbol IMGN. The table below sets forth the high and low sale prices for
ImmunoGen Common Stock for each of the quarters indicated during the Company's
last two fiscal years.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year 1999
First Quarter............................................. $1 27/32 $1
Second Quarter............................................ 3 1/8 1 3/16
Third Quarter............................................. 3 25/32 1 15/16
Fourth Quarter............................................ 2 29/32 2 5/32
Fiscal Year 1998
First Quarter............................................. $1 13/16 $1 5/32
Second Quarter............................................ 1 1/2 23/32
Third Quarter............................................. 2 5/8 27/32
Fourth Quarter............................................ 2 15/32 1 5/16
</TABLE>
As of September 15, 1999, there were approximately 819 holders of record of
the Company's Common Stock and, according to the Company's estimates,
approximately 14,800 beneficial owners of the Company's Common Stock.
The Company has not paid any cash dividends on its Common Stock since its
inception and does not intend to pay any cash dividends in the foreseeable
future.
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<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth consolidated financial data with respect to
the Company for each of the five years in the period ended June 30, 1999. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes included elsewhere in
this report on Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
IN THOUSANDS, EXCEPT PER SHARE -------------------------------------------------------------------
DATA AND SHARES OUTSTANDING 1995 1996 1997 1998 1999
- ------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues............. $ 459 $ 541 $ 630 $ 540 $ 3,652
Total expenses excluding
in-process research and
development expense...... 20,369 19,492 9,713 7,485 7,884
In-process research and
development expense...... -- -- -- 872 --
Non-operating income....... 53 28 -- 46 55
Non-cash dividends and other
expenses................. -- -- 3,512 605 918
Minority interest.......... -- -- -- 160 101
Net loss to common
stockholders............. (19,857) (18,923) (12,595) (8,216) (4,993)
Basic and diluted loss per
common share............. (1.58) (1.32) (0.70) (0.34) (0.20)
Total assets............... 17,046 8,506 6,350 5,877 7,171
Long-term debt and capital
lease obligations, less
current portion.......... 2,456 5,788 59 35 68
Stockholders' equity....... 10,123 777 4,462 4,311 5,329
Weighted average common shares
outstanding.............. 12,571,134 14,379,064 17,930,164 24,210,340 25,525,061
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since inception, ImmunoGen has been principally engaged in the research and
development of immunoconjugate products which the Company believes have
significant commercial potential as human therapeutics. The Company's 97%-owned
subsidiary, Apoptosis Technology, Inc. ("ATI"), focuses its efforts on the
discovery and development of anti-cancer and anti-viral therapeutics based upon
regulation of programmed cell death, or apoptosis.
In February 1999, the Company entered into an exclusive license agreement
with SmithKline Beecham plc, London and SmithKline Beecham, Philadelphia
(collectively, "SB") to develop and commercialize ImmunoGen's lead tumor
activated prodrug ("TAP"), huC242-DM1/SB-408075, for the treatment of colorectal
and pancreatic cancers (the "SB Agreement"). In preclinical studies,
huC242-DM1/SB-408075 has also been shown to be effective against non-small cell
lung cancer. In September 1999, the Company's Investigational New Drug
application ("IND") to begin human testing of huC242-DM1/SB-408075 became
effective and enrollment of patients into a Phase I clinical trial is expected
to begin before the end of calendar 1999. The Company also continues to develop
its TAP for the treatment of small-cell lung cancer, huN901-DM1, and to pursue
additional antibodies to be used to develop TAP's effective against other
cancers. In July 1997, ATI began a three-year research and development
collaboration with BioChem Pharma Inc. ("BioChem"), a large Canadian
biopharmaceutical company. At BioChem's option, this collaboration may be
extended beyond its initial three-year term.
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<PAGE> 15
To date, the Company has not generated revenues from product sales and
expects to incur significant operating losses over the foreseeable future. From
July 1, 1998 through September 20, 1999, the Company generated additional
working capital from the following sources:
- $9.50 million under the SB Agreement;
- $3.37 million under the BioChem agreement; and
- $400,000 under the Small Business Innovation Research Program ("SBIR") of
the National Cancer Institute pursuant to two grants awarded to advance
the development of the Company's TAP's.
The Company anticipates that its existing capital resources, which include
the September 1999 exercise of a $2.5 million put option, the September 1999
$4.0 million milestone achievement (see Note L to the financial statements), and
the $843,000 received from BioChem in July 1999, will enable the Company to
maintain its current and planned operations through at least fiscal year 2000.
Further, the Company believes that the SB Agreement, while subject to the
achievement by the Company of certain milestones, is expected to provide
sufficient cash-based milestone payments to allow current and planned operations
to continue beyond fiscal year 2000. However, no assurances can be given that
such milestones will in fact be realized. If the Company is unable to meet some
or all of the terms and conditions in the SB Agreement, it may be required to
pursue additional strategic partners, secure alternative financing arrangements,
and/or be required to defer or limit some or all of its planned research and
development projects.
RESULTS OF OPERATIONS
Revenues
The Company's total revenues for the year ended June 30, 1999 ("1999") were
$3.65 million, compared with $540,000 for the year ended June 30, 1998 ("1998")
and $630,000 for the year ended June 30, 1997 ("1997"). The 576% increase in
revenues from 1998 to 1999 is primarily attributable to $3.0 million in
milestone payments recognized as collaboration revenue under the SB Agreement.
No collaboration revenue was earned during 1998 or 1997. The $3.0 million of
milestone payments represent one-time, non-refundable, unrestricted payments
where no future obligations to perform exist. As previously described, in
September 1999, the Company recorded an additional $4.0 million milestone when
its IND for huC242-DM1/SB-408075 became effective. Additional collaboration
revenues of approximately $34.5 million will be earned upon the achievement of
scientific and regulatory milestones as defined within the SB Agreement.
Therefore, historically recognized collaboration revenues should not be used as
indicators of the timing or extent of future milestone payments.
In all three years ended June 30, revenues ($400,000, $305,000 and $394,000
in 1999, 1998 and 1997, respectively) were also derived from development fees
received under the SBIR program of the National Cancer Institute. SBIR revenue
is recognized when reimbursable expenses are incurred. As of July 1999, all
available funds under currently authorized SBIR programs have been recognized.
Accordingly, no material development fees are anticipated to be earned in future
periods.
Interest income was $251,000 in 1999 compared to $233,000 in 1998 and
$209,000 in 1997. Interest income in all three years included interest earned on
cash balances available for investment and, to a lesser extent, interest earned
on a note receivable from an assignee of one of the Company's facilities. The
increase in total interest income from 1997 to 1998 and then again from 1998 to
1999 is a result of increases in the average daily invested cash balances offset
by the declining average principal balance of the outstanding note receivable.
Research and Development Expenses
Research and development expenses, which constituted the principal
component of the Company's total operational expenditures (77%, 77% and 76% in
1999, 1998 and 1997, respectively), were $6.1 million in 1999 as compared to
$5.7 million in 1998 and $7.4 million in 1997. The $400,000, or 7%, increase
from 1998 to 1999 was primarily due to costs associated with the development and
manufacturing of huC242-DM1/SB-408075 components, as well as the further
development of huN901-DM1. Total 1999 increases were offset by
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<PAGE> 16
significant reductions in depreciation and, to a lesser extent, reduced
scientific staffing levels. The $1.7 million, or 23%, decrease in research and
development expenses between 1997 and 1998 was mostly due to staffing reductions
prompted by the Company's 1997 decision to refocus its efforts on the
development of huC242-DM1/SB-408075 and huN901-DM1, as well as continued cost
reduction efforts initiated in 1994. Future research and development expenses
are expected to significantly increase as the Company expects to begin Phase 1
clinical trials of huC242-DM1/SB-408075 in the last quarter of calendar year
1999. Similarly, additional preclinical development costs associated with the
Company's huN901-DM1 product candidate are also expected to increase future
research and development spending.
General and Administrative Expenses
General and administrative expenses were $1.8 million in 1999 compared to
$1.7 million in 1998 and $2.2 million in 1997. The approximate $100,000, or 6%,
increase from 1998 to 1999 was primarily due to increased non-scientific
staffing levels and increased expenditures associated with public relations and
business development. Reduced legal fees, financing-related expenditures and
decreased depreciation costs offset the total 1999 increase. The $500,000, or
23%, decrease in general and administrative expenses from 1997 to 1998 reflects
decreased financing charges in 1998, and the further effects of cost containment
programs. Future general and administrative expenses are expected to increase in
support of the continued development of the Company's product candidates and
technologies.
In-process Research and Development
In connection with the exercise of a put option held by a founding
researcher of ATI, in January of 1998, the Company acquired 500,000 shares of
ATI common stock in exchange for the equivalent of $871,930 in ImmunoGen Common
Stock (See Note F to the financial statements). The value of the ImmunoGen
Common Stock issued was determined by the terms of the put option and subject to
the closing price of the ImmunoGen Common Stock on the date of the exercise. The
value of the incremental ATI ownership purchased by the Company was ascribed to
in-process research and development technology and, therefore, the cost of the
acquisition, $871,930, or ($0.03) per common share, was charged to operations.
No such transaction occurred in either 1999 or 1997.
Non-operating Income
Non-operating income and gains were $55,000 in 1999 compared to $46,000 in
1998 and zero in 1997. Non-operating income in 1999 was primarily comprised of
prior-period, retroactive insurance rate adjustments and, to a lesser extent,
gains on the sales of idle assets. 1998 non-operating income was comprised of
similar, yet smaller retroactive rate adjustments and gains on sales of idle
assets. No such gains or adjustments were recognized in 1997.
Minority Interest
ATI operating losses of $101,000 and $160,000 for fiscal 1999 and 1998,
respectively, were allocated to ATI's minority stockholder within the Company's
consolidated financial statements. No minority interest was recognized in 1997.
Non-cash Dividends
Non-cash dividends were approximately $918,000 in 1999 compared to $605,000
in 1998 and $3.5 million in 1997. The $918,000 non-cash dividends in 1999
represented the Black-Scholes derived fair value of warrants to purchase 1.4
million shares of ImmunoGen Common Stock issued in connection with the sale of
the Company's Series E Convertible Preferred Stock ("Series E Stock"). Total
non-cash dividends in 1998 were approximately $605,000, almost all of which
represented non-cash charges for the value of the discount embedded in the
conversion terms of previously issued Series E Stock and related Common Stock
purchase warrants. In 1997, total non-cash dividends of $3.5 million included
approximately $351,000 in charges associated with the 9% dividend rate on
convertible preferred stock issued in that year, approximately
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<PAGE> 17
$1.1 million associated with the discount feature embedded in the then issued
convertible preferred stock and approximately $2.1 million of value related to
Common Stock purchase warrants issued in connection with the convertible
preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1999 1998 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $4,226 $1,742 $1,669
Working capital............................................. 3,770 2,138 419
Stockholders' equity........................................ 5,329 4,311 4,462
</TABLE>
Since July 1, 1997, the Company has financed its cumulative cash-based
operating deficit of approximately $9.5 million, exclusive of non-cash charges,
from various sources, including revenues earned under collaboration agreements,
issuances of convertible equity securities, SBIR grant support, amounts received
from the assignment of facilities and equipment, income earned on invested
assets and, to a lesser extent, proceeds from exercised stock options. In July
1999, subsequent to the balance sheet date, the Company received $843,000 from
BioChem with respect to BioChem's quarterly investment. Furthermore, in
September 1999, the Company recorded $6.5 million due from SB pursuant to the
exercise by the Company of a $2.5 million put option and the recognition of a
$4.0 million milestone payment earned when the Company's IND application to
begin human clinical trials of huC242-DM1/SB-408075 became effective (see Note L
to the financial statements).
Substantially all cash expended for operations for fiscal 1999 was used to
support the Company's various research and development activities. During 1999,
approximately $3.5 million in operating cash was used to fund the net loss to
stockholders of $3.7 million (exclusive of the non-cash dividends, minority
interest adjustments, depreciation and amortization charges). Available
operating cash as of June 30, 1999 was further enhanced by approximately
$200,000 in current payable increases.
Capital purchases increased in 1999 as compared to 1998 from $27,000 to
$120,000. Current year purchases mainly included information system upgrades and
acquisitions of additional scientific equipment needed to further develop
huC242-DM1/SB-408075. In March 1999 and again in June 1999, the Company entered
into agreements to lease computer hardware required to upgrade certain finance
and administrative information systems. The lease payments were derived using
current market rates of interest available to the Company, and are payable in
monthly installments over 24 months to 36 months. The lease agreements contain
options to purchase the equipment at the end of the lease terms in amounts
ranging from $1 to 10% of the original capitalized costs. The Company is
anticipating additional equipment purchases and upgrades; however, future cash
expenditures on property and equipment through fiscal 2000 are not expected to
be material.
Through June 30, 1999, the Company received $960,000 in scheduled note
receivable payments from the assignee of the Company's former Canton,
Massachusetts manufacturing facility. On July 1, 1999, the final payment of
$350,000 was received in full, thereby satisfying all obligations under the note
receivable.
In July 1998, the Company sold 1,200 shares of Series E Stock for an
aggregate of $1.5 million. Proceeds were used to fund working capital. The sale
represented the final installment under a December 1997 agreement, as amended,
to sell $3.0 million of Series E Stock to an institutional investor. Under the
terms of the agreement, in addition to the 1,200 shares of Series E Stock, the
institutional investor also received warrants to purchase 1,411,764 shares of
Common Stock. These warrants expire in 2005 and are exercisable after a two-year
holding period, subject to certain provisions, at $2.125 per share. Also in
connection with the final phase of the Series E Stock sale, 75,000 shares of
Common Stock were issued to a third party as a finder's fee.
From July 1, 1998 to June 30, 1999 an aggregate of approximately $3.4
million was received from BioChem with respect to the June 30, 1998, September
30, 1998, December 31, 1998 and March 31, 1999 quarterly investments. As
previously described, in July 1999, the investment payment of $843,000
outstanding
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at June 30, 1999 was received in full. In accordance with the BioChem agreement,
quarterly payments will continue through March 31, 2000 to fund ATI research
obligations which continue through July of 2000. Although the BioChem agreement
may be extended beyond the initial three-year term ending in July 2000, there
can be no assurances that such extensions will occur.
In September 1999, subsequent to the June 30, 1999 balance sheet date, the
Company exercised a $2.5 million put option available to it under the SB
Agreement. In exchange for the $2.5 million received, 1,023,039 shares of the
Company's Common Stock were issued to SB.
The Company anticipates that its existing capital resources, which include
the exercised $2.5 million put option, the $4.0 million milestone achieved when
the Company's huC242-DM1/SB-408075 IND became effective, and the $843,000
quarterly investment received from BioChem, will enable the Company to maintain
its current and planned operations through at least fiscal year 2000. Moreover,
the Company believes that the SB Agreement, while subject to the achievement of
future one-time development milestones, will not only provide sufficient equity
and milestone payments to carry out its responsibilities in developing huC242-
DM1/SB-408075, but also provide enough additional funding to support the
Company's other current and planned research and development expenditures beyond
fiscal year 2000. However, no assurances can be given that such future
milestones will in fact be realized. If the Company is unable to achieve some or
all of the milestones in connection with the SB Agreement, it may be required to
pursue additional strategic partners, secure alternative financing arrangements,
and/or be required to defer or limit some or all of its planned research and
development projects.
YEAR 2000 ISSUES
The Company has completed all mission-critical upgrades necessary to ensure
that its information systems, facilities and research and development equipment
containing date-sensitive hardware and software are Year 2000 compliant. The
Company is also in the final phases of upgrading all non-critical information
and research systems to commercially produced Year 2000 compliant versions. All
remaining conversions will be completed before December 31, 1999. Accordingly,
the Company does not believe that it has material exposure with respect to its
own Year 2000 issues.
The Company has also sent questionnaires to its currently engaged
third-party suppliers, vendors, administrators and custodians, inquiring of
their progress in identifying and addressing their respective Year 2000
problems. To date, the Company has received responses from all surveyed vendors.
Based upon information contained in those responses, the Company believes that
Year 2000 issues have been or will be addressed by the Company's critical
vendors by the end of calendar year 1999. Should a vendor not be able to
overcome its respective Year 2000 system issues, the Company believes that
appropriate, alternative vendors are readily available. Though not considered
likely, the failure of a major supplier or vendor with Year 2000 problems to
convert its systems on a timely basis, or a conversion that is incompatible with
the Company's information systems, could have a material adverse effect on the
Company's business, financial condition and results of operations.
To date, Year 2000 remediation expenses have not been material, and the
Company does not anticipate that it will incur any additional significant future
expenditures in relation to Year 2000 issues. All implemented Year 2000
remediations have been recorded in accordance with the Company's capitalization
policy or otherwise expensed as incurred.
CERTAIN FACTS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
This report contains certain forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are based on management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to differ materially
from those described in the forward-looking statements. The Company cautions
investors that there can be no assurance that actual results or business
conditions will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including, but not
limited to, the following: the uncertainties associated with preclinical studies
and clinical trials; the early stage of the Company's initial
17
<PAGE> 19
product development and lack of product revenues; the Company's history of
operating losses and accumulated deficit; the Company's limited financial
resources and uncertainty as to the availability of additional capital to fund
its development on acceptable terms, if at all; the Company's lack of commercial
manufacturing experience and commercial sales, distribution and marketing
capabilities; reliance on suppliers of key materials necessary for production of
the products and technologies; the potential development by competitors of
competing products and technologies; the Company's dependence on existing and
potential collaborative partners, and the lack of assurance that the Company
will receive any funding under such relationships to develop and maintain
strategic alliances; the lack of assurance regarding patent and other protection
for the Company's proprietary technology; governmental regulation of the
Company's activities, facilities, products and personnel; the dependence on key
personnel; uncertainties as to the extent of reimbursement for the costs of the
Company's potential products and related treatments by government and private
health insurers and other organizations; the potential adverse impact of
government-directed health care reform; the risk of product liability claims;
potential Year 2000 problems; and economic conditions, both generally and those
specifically related to the biotechnology industry. As a result, the Company's
future development efforts involve a high degree of risk. For further
information, refer to the more specific risks and uncertainties discussed
throughout this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
18
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 20
Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1999 and
1998.................................................. 21
Consolidated Statements of Operations for the Years
Ended June 30, 1999, 1998 and 1997.................... 22
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1997, 1998 and 1999.............. 23
Consolidated Statements of Cash Flows for the Years
Ended June 30, 1999, 1998 and 1997.................... 24
Notes to Consolidated Financial Statements............. 25
</TABLE>
19
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of ImmunoGen, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of
ImmunoGen, Inc. (the "Company") at June 30, 1999 and 1998, and the results of
its operations and its cash flows for each of the three years in the period
ended June 30, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
July 28, 1999, except for Note L as to which
the date is September 16, 1999
20
<PAGE> 22
IMMUNOGEN, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999 AND JUNE 30, 1998
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 4,225,580 $ 1,741,825
Due from related party...................................... 910,108 915,473
Current portion of note receivable.......................... 350,000 960,000
Prepaid and other current assets............................ 57,915 51,360
------------- -------------
Total current assets................................. 5,543,603 3,668,658
------------- -------------
Property and equipment, net of accumulated depreciation..... 1,583,350 1,891,696
Note receivable............................................. -- 272,638
Other assets................................................ 43,700 43,700
------------- -------------
Total assets...................................... $ 7,170,653 $ 5,876,692
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 869,996 $ 699,418
Accrued compensation........................................ 282,390 225,126
Other current accrued liabilities........................... 528,969 553,246
Current portion of deferred lease and capital lease
obligations............................................... 91,911 52,756
------------- -------------
Total current liabilities............................ 1,773,266 1,530,546
------------- -------------
Capital lease obligations................................... 68,220 --
Deferred lease.............................................. -- 35,176
------------- -------------
Total liabilities................................. 1,841,486 1,565,722
------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.01 par value; authorized 5,000,000 as
of June 30, 1999 and 1998:
Convertible preferred stock, Series E, $.01 par
value; issued and outstanding 2,400 and 1,200
shares as of June 30, 1999 and 1998, respectively
(liquidation preference -- stated value).......... 24 12
Common stock, $.01 par value; authorized 50,000,000 shares
as of June 30, 1999 and June 30, 1998, respectively;
issued and outstanding 25,668,797 and 25,419,552 shares
as of June 30, 1999 and June 30, 1998, respectively.... 256,687 254,195
Additional paid-in capital................................ 158,790,821 152,782,585
------------- -------------
159,047,532 153,036,792
Accumulated deficit......................................... (153,718,365) (148,725,822)
------------- -------------
Total stockholders' equity........................... 5,329,167 4,310,970
------------- -------------
Total liabilities and stockholders' equity........ $ 7,170,653 $ 5,876,692
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE> 23
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Revenue earned under collaboration agreement..... $ 3,000,000
Development fees................................. 400,105 $ 304,723 $ 393,583
Interest......................................... 250,995 232,937 209,398
Licensing........................................ 1,158 2,454 27,057
----------- ----------- ------------
Total revenues.............................. 3,652,258 540,114 630,038
----------- ----------- ------------
Expenses:
Research and development......................... 6,097,869 5,744,572 7,418,315
Purchase of in-process research and development
technology.................................... -- 871,930 --
General and administrative....................... 1,780,400 1,732,115 2,215,969
Interest......................................... 5,351 8,232 79,150
----------- ----------- ------------
Total expenses.............................. 7,883,620 8,356,849 9,713,434
----------- ----------- ------------
Loss from operations............................... (4,231,362) (7,816,735) (9,083,396)
----------- ----------- ------------
Gain on the sale of assets.................... 4,200 25,629 --
Other income.................................. 51,042 20,645 --
----------- ----------- ------------
Net loss before minority interest.................. (4,176,120) (7,770,461) (9,083,396)
----------- ----------- ------------
Minority interest in net loss of consolidated
subsidiary.................................... 101,160 159,524 --
----------- ----------- ------------
Net loss........................................... (4,074,960) (7,610,937) (9,083,396)
----------- ----------- ------------
Non-cash dividends on convertible preferred
stock......................................... (917,583) (605,479) (3,511,510)
----------- ----------- ------------
Net loss to common stockholders.................... $(4,992,543) $(8,216,416) $(12,594,906)
=========== =========== ============
Basic and diluted loss per common share............ $ (0.20) $ (0.34) $ (0.70)
=========== =========== ============
Shares used in computing basic and diluted loss per
share amounts.................................... 25,525,061 24,210,340 17,930,164
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE> 24
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE I)
FOR THE YEARS ENDED JUNE 30, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL TOTAL
--------------------- --------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- -------- ------ ------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996................. 16,599,855 $165,999 -- $-- $128,525,884 $(127,914,500) $ 777,383
========== ======== ====== ==== ============ ============= ===========
Stock options exercised................ 54,644 545 -- -- 87,310 -- 87,855
Issuance of Common Stock............... 41,481 415 -- -- 69,585 -- 70,000
Conversion of convertible debentures
into Common Stock.................... 351,662 3,517 -- -- 1,315,217 -- 1,318,734
Exchange of convertible debentures for
Series A Convertible Preferred
Stock................................ -- -- 2,500 25 4,749,586 -- 4,749,611
Issuance of Series B Convertible
Preferred Stock...................... -- -- 3,000 30 3,486,342 -- 3,486,372
Issuance of Series C Convertible
Preferred Stock...................... -- -- 3,000 30 4,720,003 -- 4,720,033
Issuance of Series D Convertible
Preferred Stock...................... -- -- 1,000 10 1,287,092 -- 1,287,102
Conversion of Series A
Convertible Preferred Stock into
Common Stock....................... 1,328,744 13,287 (1,400) (14) 106,642 -- 119,915
Conversion of Series B Convertible
Preferred Stock into Common Stock.... 1,384,823 13,848 (3,000) (30) 52,879 -- 66,697
Conversion of Series C Convertible
Preferred Stock into Common Stock.... 2,018,558 20,186 (2,300) (23) 46,259 -- 66,422
Compensation for put right............. -- -- -- -- 306,739 -- 306,739
Dividends on convertible preferred
stock................................ -- -- -- -- -- (3,511,510) (3,511,510)
Net loss for the year ended June 30,
1997................................. -- -- -- -- -- (9,083,396) (9,083,396)
---------- -------- ------ ---- ------------ ------------- -----------
Balance at June 30, 1997................. 21,779,767 $217,797 2,800 $ 28 $144,753,538 $(140,509,406) $ 4,461,957
========== ======== ====== ==== ============ ============= ===========
Stock options exercised................ 114,302 1,143 -- -- 101,728 -- 102,871
Issuance of Common Stock in exchange
for shares of subsidiary............. 475,425 4,754 -- -- 867,176 -- 871,930
Conversion of Series A Convertible
Preferred Stock into Common Stock.... 1,347,491 13,475 (1,100) (11) 119,947 -- 133,411
Conversion of Series C Convertible
Preferred Stock into Common Stock.... 701,180 7,012 (700) (7) 25,481 -- 32,486
Conversion of Series D Convertible
Preferred Stock into Common Stock.... 1,001,387 10,014 (1,000) (10) 16,195 -- 26,199
Issuance of Series E Convertible
Preferred Stock, net of financing
costs................................ -- -- 1,200 12 1,448,376 -- 1,448,388
Value of Common Stock purchase warrants
issued............................... -- -- -- -- 580,056 -- 580,056
Value ascribed to ImmunoGen warrants
issued to BioChem, net of financing
costs................................ -- -- -- -- 4,870,088 -- 4,870,088
Non-cash dividends on convertible
preferred stock...................... -- -- -- -- -- (605,479) (605,479)
Net loss for the year ended June 30,
1998................................. -- -- -- -- -- (7,610,937) (7,610,937)
---------- -------- ------ ---- ------------ ------------- -----------
Balance at June 30, 1998................. 25,419,552 $254,195 1,200 $ 12 $152,782,585 $(148,725,822) $ 4,310,970
========== ======== ====== ==== ============ ============= ===========
Stock options exercised................ 174,245 1,742 -- -- 313,545 -- 315,287
Issuance of Series E Convertible
Preferred Stock, net of financing
costs................................ -- -- 1,200 12 1,495,193 -- 1,495,205
Issuance of Common Stock in exchange
for Series E Preferred Stock
placement services................... 75,000 750 -- -- (750) -- --
Value of Common Stock purchase warrants
issued............................... -- -- -- -- 917,583 -- 917,583
Compensation for stock option vesting
acceleration for retired director.... -- -- -- -- 13,275 -- 13,275
Value ascribed to ImmunoGen warrants
issued to BioChem, net of financing
costs................................ -- -- -- -- 3,269,390 -- 3,269,390
Non-cash dividends on convertible
preferred stock...................... -- -- -- -- -- (917,583) (917,583)
Net loss for the year ended June 30,
1999................................. -- -- -- -- -- (4,074,960) (4,074,960)
---------- -------- ------ ---- ------------ ------------- -----------
Balance at June 30, 1999................. 25,668,797 $256,687 2,400 $ 24 $158,790,821 $(153,718,365) $ 5,329,167
========== ======== ====== ==== ============ ============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE> 25
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss to common stockholders........................... $(4,992,543) $(8,216,416) $(12,594,906)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization........................... 555,357 1,053,441 1,496,598
Purchase of in-process research and development
technology............................................ -- 871,930 --
Other................................................... -- -- 5,791
Loss (gain) on sale of property and equipment........... (4,200) (25,629) (8,665)
Interest earned on note receivable...................... (77,362) (103,722) (119,981)
Compensation for stock option vesting acceleration...... 13,275 -- --
Non-cash dividend on convertible preferred stock........ 917,583 605,479 3,511,510
Minority interest in net loss of consolidated
subsidiary............................................ (101,160) (159,524) --
Amortization of deferred lease.......................... (52,760) (60,664) (66,870)
Changes in operating assets and liabilities:
Due from related party................................ 5,365 (72,473) --
Prepaid and other current assets...................... (6,555) 197,131 (85,217)
Accounts payable...................................... 170,578 86,859 (50,881)
Accrued compensation.................................. 57,264 (23,346) 14,957
Other current accrued liabilities..................... (24,277) (121,319) (88,970)
----------- ----------- ------------
Net cash used for operating activities.............. (3,539,435) (5,968,253) (7,986,634)
----------- ----------- ------------
Cash flows from investing activities:
Capital expenditures...................................... (120,223) (27,480) (50,386)
Payments received on note receivable...................... 960,000 330,000 --
Proceeds from sale of property and equipment.............. 4,200 37,705 11,600
----------- ----------- ------------
Net cash (used for) provided by investing
activities........................................ 843,977 340,225 (38,786)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from convertible preferred stock, net............ 1,495,205 1,429,136 6,951,512
Proceeds from issuance of subsidiary convertible preferred
stock, net.............................................. 3,370,550 4,205,865 --
Stock issuances, net...................................... 315,287 102,870 87,855
Principal payments on capital lease obligations........... (1,829) (37,068) (141,533)
----------- ----------- ------------
Net cash provided by financing activities........... 5,179,213 5,700,803 6,897,834
----------- ----------- ------------
Net change in cash and cash equivalents..................... 2,483,755 72,775 (1,127,586)
----------- ----------- ------------
Cash and cash equivalents, beginning balance................ 1,741,825 1,669,050 2,796,636
----------- ----------- ------------
Cash and cash equivalents, ending balance................... $ 4,225,580 $ 1,741,825 $ 1,669,050
=========== =========== ============
Supplemental disclosure of noncash financing activities:
Capital lease obligations assumed on acquired equipment... $ 126,788 $ -- $ --
=========== =========== ============
Due from related party for quarterly investment payment... $ 843,000 $ 843,000 $ --
=========== =========== ============
Conversion of convertible debentures including accrued
interest Into Common Stock.............................. $ -- $ -- $ 1,318,734
=========== =========== ============
Conversion of convertible debentures to preferred stock... $ -- $ -- $ 4,749,611
=========== =========== ============
Third party financing of leasehold improvements........... $ -- $ -- $ 215,465
=========== =========== ============
Issuance of Common Stock to relieve accounts payable...... $ -- $ -- $ 70,000
=========== =========== ============
Conversion of Series A Preferred Stock to Common Stock.... $ -- $ 2,089,828 $ 2,659,777
=========== =========== ============
Conversion of Series B Preferred Stock to Common Stock.... $ -- $ -- $ 3,486,372
=========== =========== ============
Conversion of Series C Preferred Stock to Common Stock.... $ -- $ 1,101,341 $ 2,910,692
=========== =========== ============
Conversion of Series D Preferred Stock to Common Stock.... $ -- $ 1,287,102 $ --
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE> 26
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF BUSINESS AND PLAN OF OPERATION:
ImmunoGen, Inc. ("ImmunoGen" or the "Company") was incorporated in
Massachusetts on March 27, 1981 to develop, produce and market commercial
anti-cancer and other pharmaceuticals based on molecular immunology. The Company
continues to research and develop its various products and technologies, and
expects no revenues to be derived from product sales in the foreseeable future.
The Company has been unprofitable since inception and expects to incur net
losses over the next several years.
In February 1999, the Company entered into an exclusive license agreement
with SmithKline Beecham plc, London and SmithKline Beecham, Philadelphia
(collectively, "SB") to develop and commercialize ImmunoGen's lead tumor
activated prodrug, huC242-DM1/SB-408075, which has been shown in preclinical
studies to be effective against colorectal, pancreatic and non-small cell lung
cancers (the "SB Agreement") (see Note F). The SB Agreement is expected to
provide the Company with sufficient cash funding to carry out its
responsibilities in developing huC242-DM1/SB-408075, as well as enough
additional funding to support further development of the Company's other current
and planned research and development efforts.
In September 1999, subsequent to the balance sheet dated June 30, 1999, the
Company exercised a $2.5 million put option available to it under the SB
Agreement. (See Note L). If certain conditions are met, an additional $2.5
million put option will be available to the Company. Also in September 1999, the
Company recognized an additional $4.0 million milestone under the SB Agreement
when the Company's Investigational New Drug application ("IND") to begin human
clinical testing of huC242-DM1/SB-408075 became effective. (See Note L).
The Company anticipates that its existing capital resources, which includes
the above-mentioned $6.5 million recorded subsequent to June 30, 1999, will
enable it to maintain its current and planned operations at least through fiscal
year 2000. However, if the Company is unable to achieve subsequent milestones
under the SB Agreement, the Company may be required to pursue additional
strategic partners, secure alternative funding arrangements and/or be required
to defer or limit some or all of its planned research and development projects.
The Company is subject to risks common to companies in the biotechnology
industry including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology, the need to obtain additional funding and
compliance with governmental regulations.
B. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, ImmunoGen Securities Corp. (established in
December 1989), and Apoptosis Technology, Inc. ("ATI") (established in January
1993) (see Notes E and F). All intercompany transactions and balances have been
eliminated.
Revenue Recognition
Development revenues of approximately $400,000, $305,000 and $394,000 in
fiscal years 1999, 1998 and 1997, respectively, represent income earned, on a
cost reimbursement basis, under the Small Business Innovation Research Program
of the National Institute of Health and amounts received pursuant to licensing
agreements of the Company and ATI.
Collaboration revenue is recognized pursuant to licensing and collaborative
agreements upon the scientific and or regulatory achievement of specified
milestones. Non-refundable, nonrecurring and un-
25
<PAGE> 27
restricted milestones payments due from collaborators are recognized as revenue
in the period in which they are earned.
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
reporting period. Actual results could differ from those estimates.
Research and Development Costs
Research and development costs are expensed as incurred.
Debt and Equity Instruments Issued with Provisions for Conversion Into Common
Stock at a Discount to the market price of Common Stock
The value of discounts inherent in convertible instruments issued with
provisions for conversion into Common Stock at a discount to the market price of
Common Stock or the value of any warrants issued in connection with those
instruments, is calculated as of the date of issuance of the convertible
securities as either dividends to preferred shareholders or as interest to
debtholders. The calculated value of the discount is amortized over the period
in which the discount is earned. In certain instances, the number and/or
exercise prices of warrants to be issued are tied to the market price of the
Common Stock at a future date (the "future price"). Therefore, the number of
warrants to be issued and/or the exercise price of those warrants is not readily
determinable at the date of issuance, when the value is required to be
calculated. In those instances, for warrant valuation purposes, the Company
assumes that the future price is equal to the quoted market price of the Common
Stock on the date of issuance. Accordingly, upon conversion, actual numbers
and/or prices may differ from original estimates.
Cash and Cash Equivalents
The Company considers all investments purchased with maturity dates of
three months or less from the date of acquisition to be cash equivalents.
Cash and cash equivalents include, at cost plus accrued interest which
approximates market value, $3,910,186 and $1,355,395 of money market funds and
repurchase agreements at June 30, 1999 and 1998, respectively.
Financial Instruments and Concentration of Credit Risk
The Company minimizes the risk associated with concentration of credit by
assuring that financial instruments purchased by its cash manager include only
high-grade, low-risk investments. At June 30, 1999 and 1998, those investments
included various U.S. Government overnight repurchase agreements, money market
investments with major financial institutions and cash on deposit with major
banks.
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation based upon expected useful lives using the straight-line method
over the following estimated useful lives:
<TABLE>
<S> <C>
Machinery and equipment..................... 3-5 years
Computer hardware and software.............. 3-5 years
Furniture and fixtures...................... 5 years
Leasehold improvements...................... Shorter of lease term or estimated useful life
</TABLE>
26
<PAGE> 28
Maintenance and repairs are charged to expense as incurred. Upon retirement
or sale, the cost of disposed assets and the related accumulated depreciation
are removed from the accounts and any resulting gain or loss is credited or
charged to non-operating income. Gains recorded under sale/leaseback
arrangements are deferred and amortized to operations over the life of the
lease.
Income Taxes
The Company uses the liability method whereby the deferred tax liabilities
and assets are recognized based on temporary differences between the financial
statement and tax basis of assets and liabilities using current statutory tax
rates. A valuation allowance against net deferred tax assets is recorded if,
based on the available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
Management evaluates on a quarterly basis the recoverability of the
deferred tax assets and the level of the valuation allowance. At such time as it
is more likely than not that deferred tax assets are realizable, the valuation
allowance will be appropriately reduced.
Impairment of Long-Lived Assets
The Company periodically evaluates the potential impairment of its
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. At the occurrence of a
certain event or change in circumstances, the Company evaluates the potential
impairment of an asset based on estimated future undiscounted cash flows. In the
event impairment exists, the Company will measure the amount of such impairment
based on the present value of estimated future cash flows using a discount rate
commensurate with the risks involved. Based on management's assessment as of
June 30, 1999, the Company has determined that no impairment of long-lived
assets exists.
Reclassifications
Certain amounts in the 1998 and 1997 financial statements have been
reclassified to conform to the 1999 presentation.
C. LOSS PER COMMON SHARE:
Basic and diluted earnings/(loss) per share is calculated based on the
weighted average number of common shares outstanding during the period. Diluted
earnings per share incorporates the dilutive effect of stock options, warrants
and other convertible securities. As of June 30, 1999, 1998 and 1997, the total
number of options, warrants and other securities convertible into ImmunoGen
Common Stock equaled 12,610,917, 9,779,683 and 7,812,112, respectively.
ImmunoGen Common Stock equivalents, as calculated in accordance with the
treasury-stock accounting method, totaled 3,666,523, 1,683,325 and 2,330,436 as
of June 30, 1999, 1998 and 1997, respectively. ImmunoGen Common Stock
equivalents have not been included in the loss per share calculation because
their effect is antidilutive.
D. NOTE RECEIVABLE:
Effective January 1, 1996, the Company assigned its leases on its Canton
facility and equipment to another biotechnology company. Under the terms of the
agreements, the assignee has assumed all payment obligations under the leases,
which amount to approximately $116,000 per month and will make cash payments to
the Company at various dates through July 1999 which will total approximately
$2.4 million. Approximately $2.05 million of the $2.4 million total had been
received through June 30, 1999. Amounts due the Company from the assignee under
these agreements were discounted to a present value using a risk-adjusted
discount rate of approximately 9%. The Company recognizes interest income over
the life of the note and, accordingly, the note receivable balance in the
Company's consolidated balance sheets as of June 30, 1999 reflects the
discounted present value of $345,030 plus accrued interest since the last
payment of $4,970. On July 1, 1999, the final scheduled payment of $350,000 was
received in full, thereby satisfying all obligations under the note.
27
<PAGE> 29
E. MINORITY INTEREST:
In July 1997, ATI entered into a collaboration agreement with BioChem
Pharma Inc., a Canadian biopharmaceutical company ("BioChem"). The agreement
grants BioChem an exclusive, worldwide license to ATI's proprietary screens
based on two families of proteins involved in apoptosis, for use in identifying
leads for anti-cancer drug development. The agreement also covers the subsequent
development of new screens in two defined areas.
Under the agreement, BioChem will invest a total of $11.1 million in
non-voting, non-dividend-bearing convertible preferred stock of ATI in a series
of private placements over a three-year period to be used exclusively to fund
research conducted under the collaboration during the three-year research term.
As of June 30, 1999, BioChem had invested $8.6 million, of which $7.8 million
had been received and $843,000 remained outstanding and included in the asset
entitled "due from related party" on the consolidated balance sheets. The
outstanding $843,000 balance was subsequently received in July 1999. The
remaining $2.5 million balance of the investment will be paid in equal quarterly
payments of $843,000 through March 2000. The preferred stock is convertible into
ATI common stock at any time after three years from the date of first issuance,
at a conversion price equal to the current market price of the ATI common stock
on the date of conversion, but in any event at a price that will result in
BioChem acquiring at least 15% of the then outstanding ATI common stock. Through
June 30, 1999, 8,596 shares of ATI preferred stock were issued or issuable,
representing an 11.6% minority interest (on an if-converted and fully-diluted
basis) in the net equity of ATI. This minority interest portion of ATI's loss
for the year reduced ImmunoGen's net loss by $101,160 and $159,524 for the years
ended June 30, 1999 and 1998, respectively. Based upon an independent appraisal,
approximately 3% of the $8.6 million invested to date, or approximately $258,000
has been allocated to minority interest in ATI, with the remainder, or
approximately $8.3 million, allocated to the Company's equity. Under the BioChem
agreement, the research agreement may be extended beyond the initial three-year
term, on terms substantially similar to those for the original term. BioChem
will also make milestone payments of up to $15.0 million for each product over
the course of its development. In addition, if and when product sales commence,
ATI will receive royalties on any future worldwide sale of products resulting
from the collaboration. BioChem's obligation to provide additional financing to
ATI each quarter is subject to satisfaction of specified conditions, including a
condition that ATI maintain sufficient cash and other resources to allow it to
continue its planned operations (other than performance of its obligations under
the research agreement) for a minimum period of time.
In accordance with the agreement, proceeds received by ATI from BioChem are
restricted to support the research and development activities of the
collaboration through July 2000. The agreement also establishes certain
restrictions on the transferability of assets between ATI and the Company.
Summarized information for ATI at June 30, 1999, 1998 and 1997 and for the years
then ended follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total assets................................ $ 2,617,265 $ 2,361,334 $ 22,215
Total liabilities........................... 382,561 250,438 14,348,345
Total revenues.............................. 123,920 112,423 6,657
Total expenses (principally research and
development).............................. (3,370,661) (3,159,437) (4,079,124)
Net loss.................................... (3,246,741) (3,047,014) (4,072,467)
</TABLE>
Of the Company's $4,225,580 in total cash and cash equivalents as of June
30, 1999, $1,682,602 is restricted to fund current ATI research and
administrative expenditures under the BioChem collaboration.
ATI also incurs certain fees reimbursable by BioChem. At June 30, 1999,
total outstanding reimbursable fees equaled $67,108 and were reflected on the
Company's consolidated balance sheets within the asset "due from related party."
As part of the BioChem agreement, BioChem also receives warrants to
purchase shares of ImmunoGen Common Stock equal to the amount invested in ATI
during the three-year research term. These warrants will
28
<PAGE> 30
be exercisable for a number of shares of ImmunoGen Common Stock determined by
dividing the amount of BioChem's investment in ATI by the market price of the
ImmunoGen Common Stock on the exercise date, subject to certain limitations
imposed by the Nasdaq Stock Market rules, which limits the sale or issuance by
an issuer of certain securities at a price less than the greater of book or
market value. Consequently, BioChem's ability to convert all of its ImmunoGen
warrants into ImmunoGen Common Stock is limited to a total of 20% of the total
number of shares of the Company's Common Stock outstanding on the date of the
initial transaction to the extent that the conversion price would be less than
the market price of the ImmunoGen Common Stock on that date, unless shareholder
approval for such a conversion is obtained, if required, or unless the Company
has obtained a waiver of that requirement. The exercise price is payable in cash
or shares of ATI preferred stock, at BioChem's option. The warrants are expected
to be exercised only in the event that the shares of ATI common stock do not
become publicly traded. In the event that ATI common stock does not become
publicly traded, the Company expects that BioChem will use its shares of ATI
preferred stock, in lieu of cash, to exercise the warrants.
F. AGREEMENTS:
SmithKline Beecham Licensing and Stock Purchase Agreements
In February 1999, the Company entered into an exclusive license agreement
with SB to develop and commercialize ImmunoGen's lead tumor activated prodrug,
huC242-DM1/SB-408075. Under the terms of the agreement, the Company could
receive up to a total of $41.5 million, subject to the achievement by the
Company of certain development milestones. The Company is also entitled to
receive royalty payments on future product sales, if and when they commence.
Finally, at ImmunoGen's option, SB will purchase up to $5.0 million of ImmunoGen
Common Stock over the next two years, subject to certain conditions. (See also
Note L.)
The SB Agreement is expected to provide the Company with sufficient cash
funding to carry out its responsibilities in developing huC242-DM1/SB-408075. To
that end, the Company will be responsible for the product's initial assessment
in humans, which is expected to begin before the end of calendar year 1999. All
costs subsequent to the initial assessment will be the responsibility of SB. The
SB Agreement is also expected to provide enough additional funding to support
further development of the Company's other current and planned research and
development efforts.
As of June 30, 1999, the first two milestone payments totaling $3.0 million
had been received and recorded as collaboration revenue. Pursuant to the SB
Agreement, the payments represented non-refundable, unrestricted milestones
where no future obligation to perform exists. (See also Note L.)
ImmunoGen/Dana-Farber Cancer Institute
The Company had a long-standing research and license agreement with
Dana-Farber Cancer Institute, Inc. ("Dana-Farber"), a Massachusetts
not-for-profit corporation. As part of the research and licensing agreement, the
Company agreed to fund certain research and development projects conducted by
Dana-Farber in relation to the development and eventual commercialization of
certain biologicals to be used in the treatment of certain forms of cancer. No
funding of such projects occurred in fiscal 1998 or 1999 and none is anticipated
in the foreseeable future. To the extent that any invention develops at
Dana-Farber, which derived its principal support and prior funding from the
Company, the Company has the exclusive right to use such invention. Also as part
of the arrangement, the Company is required to pay to Dana-Farber, if and when
product sales commence, certain royalties based on a formula stipulated in the
agreement.
ATI/Dana-Farber Agreements
ATI was established as a joint venture between ImmunoGen and Dana-Farber to
develop therapeutics based on apoptosis technology developed at Dana-Farber. In
January 1993, the Company purchased 7,000 shares of Class A Preferred Stock of
ATI. The Class A Preferred Stock is voting stock and carries a liquidation
preference over the common stock of ATI. In addition to previous investments in
ATI, ImmunoGen was committed to obtain or furnish another $3.0 million in equity
for ATI on such terms and
29
<PAGE> 31
conditions as were mutually agreed to by ATI and the providers of such
additional equity. As of June 30, 1997, amounts owed by ATI to ImmunoGen
approximated $14.2 million. In July 1997, this balance due ImmunoGen was
converted into shares of ATI common stock, thereby satisfying the agreement to
provide an additional $3.0 million in equity and increasing ImmunoGen's majority
ownership from approximately 72% to approximately 95%. Under the terms of a
stock purchase agreement entered into among the Company, ATI, Dana-Farber and a
founding researcher of ATI, if ATI had not concluded a public offering of its
stock for at least $5.0 million prior to January 11, 1998, Dana-Farber and the
individual stockholder each could require the Company to purchase (the "put
option"), or the Company could require such stockholders to sell (the "call
option"), their shares of ATI common stock at a predetermined price through
January 11, 1999. At the Company's discretion, the options were exercisable
through cash or by the delivery of shares of Common Stock. In January 1998, the
individual stockholder exercised his put option for 500,000 shares of ATI common
stock, par value $0.00002 per share, for an aggregate of $871,930. The value of
the Common Stock issued was determined by the terms of the put agreement and
subject to the closing price of the Common Stock on the date of the exercise of
the put option. The Company elected to issue its Common Stock in lieu of a cash
payment and, in March 1998, 475,425 shares of Common Stock were issued to the
individual stockholder, thereby increasing the Company's ownership of ATI from
approximately 95% to approximately 97%. The transaction was accounted for as a
step acquisition of a minority interest in a subsidiary. The incremental 1.5%
ATI ownership interest received by the Company is based upon in-process ATI
research and development technology and, therefore, not considered a
substantiated intangible asset. Accordingly, the cost of the acquisition,
$871,930, or ($0.03) per common share, was charged to operations.
Under agreements between ATI and Dana-Farber, ATI was the licensee of
Dana-Farber's apoptosis technology and ImmunoGen possessed the exclusive right
to license products developed by ATI, including those products based on
Dana-Farber's apoptosis technology. These agreements were terminated as of
January 1, 1996. Under the terms of the termination agreement, the Company
satisfied all past and present obligations under the license agreement and ATI
retains any rights to technology developed prior to January 1, 1996.
G. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at June 30, 1999 and
1998:
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Machinery and equipment................................... $ 1,976,411 $ 5,098,931
Computer hardware and software............................ 531,998 1,055,980
Assets under construction................................. 113,321 --
Furniture and fixtures.................................... 15,401 120,304
Leasehold improvements.................................... 8,346,859 8,346,859
----------- -----------
10,983,990 14,622,074
Less accumulated depreciation and amortization............ 9,400,640 12,730,378
----------- -----------
$ 1,583,350 $ 1,891,696
=========== ===========
</TABLE>
During 1999, the Company wrote off approximately $3.9 million in fully
depreciated idle assets. Depreciation and amortization expense was $555,357,
$1,053,441 and $1,496,598 for the years ended June 30, 1999, 1998 and 1997,
respectively.
H. INCOME TAXES:
No income tax provision or benefit has been provided for U.S. federal
income tax purposes as the Company has incurred losses since inception. As of
June 30, 1999, net deferred tax assets totaled approximately $38.9 million,
consisting of federal net operating loss carryforwards of approximately $108.7
million, state net operating loss carryforwards of approximately $32.2 million,
net book to tax timing differences of approximately $9.2 million and
approximately $4.4 million of research and experimentation credit carryforwards.
These net operating loss and credit carryforwards will expire at various dates
between
30
<PAGE> 32
2000 and 2014 and may be subject to limitation when used due to certain changes
in ownership of the Company's capital stock. Due to the uncertainty surrounding
the realization of these favorable tax attributes in future tax returns, the net
deferred tax assets of approximately $48.4 million and $38.9 million at June 30,
1999 and 1998, respectively, have been fully offset by a valuation allowance.
Income tax expense consists primarily of state income taxes levied on the
interest income of the Company's wholly-owned subsidiary, ImmunoGen Securities
Corp., at a rate of 1.32%, and state minimum excise tax liability.
I. CAPITAL STOCK:
Common and Preferred Stock
In October 1996, the Company's $2.5 million debenture issued in June 1996
was converted into 2,500 shares of the Company's Series A Convertible Preferred
Stock ("Series A Stock"), with a stated value of $1,000 per share. Holders of
the Series A Stock were entitled to receive, when and as declared by the Board
of Directors, cumulative dividends in cash, or at the Company's option, shares
of the Company's Common Stock, in arrears on the conversion date. The 2,500
shares of Series A Stock were convertible into the same number of shares of
Common Stock as the $2.5 million debenture. Each share of Series A Stock was
convertible into a number of shares of Common Stock determined by dividing
$1,000 by the lower of (i) $2.50 (subject to certain restrictions) and (ii) 85%
of the average of the closing bid price of the Common Stock for the five days
prior to conversion. In addition, holders of Series A Stock were entitled to
receive, on conversion of the Series A Stock, a number of warrants equal to 50%
of the number of shares of Common Stock issued on conversion. On January 5,
1998, the remaining 1,100 unconverted shares of the Series A Stock plus accrued
dividends thereon were converted into 1,347,491 shares of the Company's Common
Stock. In connection with the Series A Stock conversions, warrants to purchase
1,338,117 shares of Common Stock were issued. The warrants have an exercise
price of $4 per share and expire at various dates during 2002 and 2003. The
warrants were valued at $623,000 and were accounted for as non-cash dividends on
convertible preferred stock at the time of issuance of the Series A Stock.
Also in October 1996, the Company sold 3,000 shares of its Series B
Convertible Preferred Stock ("Series B Stock"). As of February 4, 1997, all
3,000 shares of Series B Stock plus accrued dividends thereon had been converted
into 1,384,823 shares of the Company's Common Stock. In connection with the
issuance of the Series B Stock, warrants to purchase 500,000 shares of the
Company's Common Stock were also issued. Of these, 250,000 warrants are
exercisable at $5.49 per share and expire in October 2001. The remaining 250,000
warrants are exercisable at $3.68 per share and expire in January 2002. These
warrants were valued at $618,900, and were accounted for as non-cash dividends
on convertible preferred stock at the time of issuance of the Series B Stock.
In January 1997, the Company sold $3.0 million of its Series C Convertible
Preferred Stock ("Series C Stock") in connection with the October 1996 Private
Placement (the "October 1996 Private Placement") to an institutional investor.
Each share of Series C Stock was convertible into a number of shares of Common
Stock determined by dividing $1,000 by the lower of (i) $2.61 and (ii) 85% of
the market price of the Company's Common Stock at the time of conversion. On
August 1, 1997, the remaining 700 unconverted shares of the Series C Stock plus
accrued dividends thereon were converted into 701,180 shares of the Company's
Common Stock. In connection with all Series C Stock, warrants to purchase
1,147,754 shares of Common Stock were issued to the investor. These warrants are
exercisable at $2.31 per share and expire in April 2002. The $1.2 million value
of these warrants was accounted for as non-cash dividends on convertible
preferred stock at the time of issuance of the Series C Stock.
In June 1997, the Company sold $1.0 million of its Series D Convertible
Preferred Stock ("Series D Stock") in connection with a financing agreement that
was entered into in October 1996. The Series D Stock was convertible at any time
into a number of shares of Common Stock determined by dividing $1,000 by the
lower of (i) $1.4375 and (ii) 85% of the market price of the Company's Common
Stock at the time of conversion. As of December 31, 1997, all 1,000 shares of
Series D Stock and accumulated dividends thereon had been converted into
1,001,387 shares of Common Stock. In addition, the investor received warrants to
purchase 454,545 shares of the Company's Common Stock. These warrants have an
exercise price of $1.94 per
31
<PAGE> 33
share and expire in 2002. The value of these warrants, $278,000, was determined
at the time of issuance of the convertible securities and was accounted for as
non-cash dividends on convertible preferred stock at that time.
Also in June 1997, the Company and ATI satisfied an obligation of ATI to
one of its scientific advisors, totaling $120,000, by paying the advisor a
combination of cash and 41,481 shares of the Company's Common Stock.
In December 1997, the Company entered into an agreement, which was amended
in March 1998, to sell $3.0 million of its non-dividend-bearing Series E
Convertible Preferred Stock ("Series E Stock") to an institutional investor. The
investment was completed in three installments: $1.0 million in December 1997;
$500,000 in March 1998; and $1.5 million in July 1998. The issued Series E Stock
will be convertible into Common Stock at the end of a two-year holding period at
$1.0625 per share. In addition, as of June 30, 1999, warrants to purchase
2,823,528 shares of Common Stock had been issued. These warrants become
exercisable at the end of a two-year holding period, subject to certain
provisions. The value of the warrants was determined at the time of their
issuance and accounted for as non-cash dividends on convertible preferred stock.
Approximately $580,500 and $918,000 in non-cash dividends were recorded in each
of fiscal 1998 and 1999, respectively. These warrants have an exercise price of
$2.125 per share, and vest over a period of two years subject to certain
provision. Of the total 2,823,528 warrants issued, 941,176 expire in 2004 and
1,882,352 expire in 2005. Also in relation to this agreement, 75,000 shares of
common stock were issued to a third party as a finder's fee. The value of these
issued shares equaled $107,000 based on closing prices on the date of grant and
charged to operations.
Warrants
In addition to the warrants discussed in this footnote, subheading Common
and Preferred Stock, the Company issued warrants to purchase 509,000 and 500,000
shares of Common Stock at exercise prices of $4.00 and $6.00 per share,
respectively, in connection with a private placement of the Company's
convertible debentures in March 1996. These warrants expire in 2001. As a
finder's fee, the Company issued warrants to purchase 250,000 shares of the
Company's Common Stock to a third party. The 250,000 warrants have an exercise
price of $3.105 and expire in 2003.
Warrants to purchase 26,738 shares of Common Stock at $7.48 per share
issued in March 1994 in connection with a capital lease financing expired in
April 1999.
32
<PAGE> 34
Stock Options
Under the Company's Restated Stock Option Plan (the "Plan"), originally
adopted by the Board of Directors on February 13, 1986, and subsequently amended
and restated, employees, consultants and directors may be granted options to
purchase shares of Common Stock of the Company. In July 1997, the Board of
Directors authorized, and the shareholders subsequently approved, amendments to
the Plan to increase the total number of shares reserved for the grant of
options to 3.525 million shares of Common Stock. In addition to options granted
under the Plan, the Board previously approved the granting of other,
non-qualified options. Information related to stock option activity under the
Plan and outside of the Plan during fiscal years 1997, 1998 and 1999 is as
follows:
<TABLE>
<CAPTION>
NON-QUALIFIED OPTIONS
OPTIONS ISSUED UNDER ISSUED
THE PLAN OUTSIDE OF THE PLAN
--------------------------- -------------------------
AVERAGE AVERAGE
SHARES PRICE PER SHARE SHARES PRICE PER SHARE
--------- --------------- ------- ---------------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1996........... 1,663,862 $4.40 28,000 $4.40
--------- ----- ------- -----
Granted........................... 46,700 3.51 10,000 3.38
Exercised......................... 36,645 2.07 18,000 0.67
Canceled.......................... 180,950 4.83 -- --
--------- ----- ------- -----
Outstanding at June 30, 1997........... 1,492,967 $4.40 20,000 $7.69
--------- ----- ------- -----
Granted........................... 1,306,700 0.99 -- --
Exercised......................... 114,302 0.90 -- --
Canceled.......................... 193,012 4.00 -- --
--------- ----- ------- -----
Outstanding at June 30, 1998........... 2,492,353 $2.92 20,000 $7.69
--------- ----- ------- -----
Granted........................... 642,700 2.06 -- --
Exercised......................... 174,245 1.81 -- --
Canceled.......................... 151,659 5.58 -- --
--------- ----- ------- -----
Outstanding at June 30, 1999........... 2,809,149 $2.65 20,000 $7.69
========= ===== ======= =====
</TABLE>
The following table summarizes aggregate information about total stock
options under the Plan and outside the Plan, outstanding at June 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
WEIGHTED-AVERAGE
REMAINING
RANGE OF NUMBER CONTRACTUAL WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.84 -- 2.50 2,407,974 8.24 $ 1.56 940,226 $ 1.74
2.51 -- 5.00 48,975 7.01 4.03 31,300 4.08
5.01 -- 7.50 156,150 4.46 5.92 156,075 5.92
7.51 -- 10.00 6,200 4.35 8.44 6,200 8.44
10.01 -- 12.50 165,050 2.63 11.48 165,050 11.48
12.51 -- 14.75 44,800 2.08 14.75 44,800 14.75
----------- -----------
2,829,149 1,343,651
=========== ===========
</TABLE>
The Company has granted options at the fair market value of the Common
Stock on the date of such grant. The following options and their respective
average prices per share were outstanding and exercisable at June 30, 1999, 1998
and 1997:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
OUTSTANDING PRICE PER SHARE EXERCISABLE PRICE PER SHARE
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
June 30, 1999........................ 2,829,149 $2.65 1,343,651 $3.94
June 30, 1998........................ 2,512,353 2.92 1,196,978 4.95
June 30, 1997........................ 1,512,967 4.57 1,251,785 4.82
</TABLE>
33
<PAGE> 35
Options vest at various rates over periods of up to four years and may be
exercised within ten years from the date of grant.
The Company applies the Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretation in
accounting for its Plan. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had compensation costs for
the Company's stock-based compensation been determined based on the fair value
at the grant dates as calculated in accordance with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the
Company's net basic and diluted loss per common share for the years ended June
30, 1999, 1998 and 1997 would have been adjusted to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net Loss......................................... $5,648,419 $8,681,477 $12,852,855
Basic and diluted loss per share................. $ 0.22 $ 0.36 $ 0.72
</TABLE>
The above amounts only include grants within the last three years and may
not be indicative of future pro forma net loss or earnings amounts because
expense is recognized over the vesting period, which is greater than the three
years shown.
The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Dividend Yield.......................................... None None None
Volatility.............................................. 85.00% 85.00% 75.00%
Risk-free interest rate................................. 4.96% 5.53% 6.49%
Expected life (years)................................... 5.5 5.5 5.5
</TABLE>
Using the Black-Scholes option-pricing model, the fair value of options
granted during fiscal 1999 and 1998 was $1.47 and $0.72, respectively.
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the use of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimates, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock-based compensation.
Common Stock Reserved
Shares of authorized Common Stock have been reserved for the exercise of
all options and warrants outstanding.
J. COMMITMENTS:
Operating Leases
At June 30, 1999, the Company leased facilities in Norwood and Cambridge,
Massachusetts. In fiscal year 1997, the Company amended its lease on the Norwood
facility, extending the lease term to June 30, 2000, with an option to renew
until June 30, 2003. The Cambridge facilities are rented under two separate
lease arrangements. In fiscal year 1997, the Company entered into a three-year
lease renewal for one of these properties, to September 2000. The lease term for
the second Cambridge facility expires in 2003. This facility is subject to a
sublease agreement, with the current sublease term expiring in February 2000.
Total net receipts under the sublease agreement, which are credited to rent
expense, are expected to total approximately $3.2 million through February 2000,
of which approximately $796,000, $774,000 and $753,000 was received by the
Company in fiscal 1999, 1998 and 1997, respectively. The Company is required to
pay all operating expenses for the leased premises subject to escalation charges
for certain expense increases over a base
34
<PAGE> 36
amount. Facilities rent expense/(income), net of the above mentioned subleased
income, was approximately $146,000, $140,000 and ($15,000) during fiscal years
1999, 1998 and 1997.
During fiscal year 1999, the Company entered into several non-cancelable
capital lease agreements in connection with certain information system
acquisitions. The leases have initial terms of 24 to 36 months and the
corresponding leased equipment serves as pledged capital. At June 30, 1999, the
gross amounts of computer hardware and software equipment, construction in
progress and the related accumulated depreciation and amortization recorded
under capital leases were as follows:
<TABLE>
<CAPTION>
JUNE 30,
1999
--------
<S> <C>
Computer hardware and software.............................. $ 28,339
Construction in progress.................................... 113,321
--------
141,660
Accumulated amortization.................................... (787)
--------
$140,873
--------
</TABLE>
The minimum rental commitments, including real estate taxes and other
expenses, for the next four years under the noncancelable capital and operating
lease agreements are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
PERIOD LEASES LEASES
------ -------- -----------
<S> <C> <C>
2000........................................................ $ 70,546 $ 1,284,255
2001........................................................ 65,632 580,188
2002........................................................ 8,683 501,635
2003........................................................ -- 386,435
-------- -----------
Total minimum lease payment................................. 144,861 2,752,513
-------- -----------
Less 2000 sublease income................................... -- (1,036,054)
-------- -----------
Total lease commitments..................................... -- $ 1,716,459
-------- ===========
Less amount representing interest........................... 19,902
--------
Present value of net minimum capital lease payments......... $124,959
========
</TABLE>
K. EMPLOYEE BENEFIT PLANS:
Effective September 1, 1990, the Company implemented a deferred
compensation plan under Section 401(k) of the Internal Revenue Code (the "401(k)
Plan"). Under the 401(k) Plan, eligible employees are permitted to contribute,
subject to certain limitations, up to 15% of their gross salary. The Company
makes a matching contribution that currently totals 20% of the employee's
contribution, up to a maximum amount equal to 1% of the employee's gross salary.
In fiscal, 1999, 1998 and 1997, the Company's contributions to the 401(k) Plan
amounted to approximately $26,000, $25,000, and $29,500, respectively.
L. SUBSEQUENT EVENT:
On September 1, 1999, the Company exercised the first of two put options
under the SB Agreement and received $2.5 million upon the issuance of 1,023,039
shares of the Company's Common Stock.
On September 16, 1999, the Company recognized $4.0 million in collaboration
revenue under the SB Agreement, the date on which the Company's IND to begin
human clinical trials of huC242-DM1/SB-408075 became effective.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
35
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The section entitled "Election of Directors" in the Company's definitive
proxy statement for its 1999 Annual Meeting of Shareholders, which the Company
intends to file with the Securities and Exchange Commission on or about October
12, 1999, is hereby incorporated by reference.
EXECUTIVE OFFICERS
The following is a list of the executive officers of the Company and their
positions with the Company. Each individual executive officer serves at the
pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------
<S> <C> <C>
Mitchel Sayare, Ph.D........... 51 Chairman of the Board of Directors, Chief Executive
Officer and President
Walter A. Blattler, Ph.D....... 50 Executive Vice President, Science and Technology
John M. Lambert, Ph.D.......... 48 Vice President, Research and Development
Kathleen A. Carroll............ 47 Vice President, Finance and Administration, Treasurer
and Assistant Secretary
</TABLE>
The background of each executive officer is as follows:
Mitchel Sayare, Chief Executive Officer since 1986, a Director since 1986
and Chairman of the Board of Directors since 1989, joined the Company in 1986.
From 1986 to July 1992 and currently since 1994, Mr. Sayare has served as
President of the Company. From 1982 to 1985, Mr. Sayare was Vice President for
Development at Xenogen, Inc., a biotechnology company specializing in monoclonal
antibody-based diagnostic systems for cancer. From 1977 to 1982, Mr. Sayare was
Assistant Professor of Biophysics and Biochemistry at the University of
Connecticut. He holds a Ph.D. in Biochemistry from Temple University School of
Medicine.
Walter A. Blattler, Ph.D., elected a Director in September 1995, served as
Vice President, Research and Development from 1987 to October 1994 and as Senior
Vice President, Research and Development from October 1994 to October 1996.
Since October 1996 Dr. Blattler has served as Executive Vice President, Science
and Technology. Dr. Blattler joined the Company in October 1987. From 1981 to
1987 Dr. Blattler was chief scientist for the ImmunoGen-supported research
program at Dana-Farber Cancer Institute. Dr. Blattler received his Ph.D. from
the Swiss Federal Institute of Technology in Zurich in 1978.
John M. Lambert, Ph.D., Vice President, Research and Development since
November 1996, joined the Company in 1987. Dr. Lambert served as Senior Director
of Research from November 1992 to October 1994 and served as Vice President of
Research from October 1994 to November 1996. Prior to joining ImmunoGen, Dr.
Lambert was Assistant Professor of Pathology at the Dana-Farber Cancer
Institute, where he worked on the research program supported by ImmunoGen. Dr.
Lambert received his Ph.D. in Biochemistry from Cambridge University in England.
Kathleen A. Carroll, Vice President, Finance and Administration, Treasurer
and Assistant Secretary, joined the Company in 1987. Ms. Carroll served as
Controller from October 1990 to October 1996 and has served as Vice President,
Finance and Administration since November 1996, Assistant Secretary since April
1997 and Treasurer since June 1997. Prior to joining ImmunoGen, Ms. Carroll held
various positions in both private industry and public accounting. Ms. Carroll
received her B.S. in Finance from Boston University and a J.D. from Suffolk
University Law School.
The section entitled "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's definitive proxy statement for its 1999 Annual
Meeting of Shareholders is hereby incorporated by reference.
36
<PAGE> 38
ITEM 11. EXECUTIVE COMPENSATION
The sections entitled "Executive Compensation" and "Employment Contracts,
Termination of Employment and Change in Control Agreements" in the Company's
definitive proxy statement for its 1999 Annual Meeting of Shareholders are
hereby incorporated by reference.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Principal Shareholders" in the Company's definitive
proxy statement for its 1999 Annual Meeting of Shareholders is hereby
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" in the Company's definitive
proxy statement for its 1999 Annual Meeting of Shareholders is hereby
incorporated by reference.
37
<PAGE> 39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) and (2) See "Index to Consolidated Financial Statements and
Supplemental Schedules" at Item 8 of this Annual Report on Form 10-K. Schedules
not included herein are omitted because they are not applicable or the required
information appears in the Consolidated Financial Statements or Notes thereto.
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
(3.1) Restated Articles of Organization(1)
(3.2) By-Laws, as amended(2)
(4.1) Article 4 of the Restated Articles of Organization as
amended (See Exhibits 3.1 and 3.2)(1)
(4.2) Designation of Series A Preferred Stock(3)
(4.3) Designation of Series B Preferred Stock(4)
(4.4) Designation of Series C Preferred Stock(4)
(4.5) Designation of Series D Preferred Stock(5)
(4.6) Designation of Series E Preferred Stock(6)
(4.7) Form of Common Stock Certificate(7)
(10.1) Research and License Agreement dated as of May 22, 1981 by
and between the Registrant and Sidney Farber Cancer
Institute, Inc. (now Dana-Farber Cancer Institute, Inc.)
with addenda dated as of August 13, 1987 and August 22,
1989(7)
(10.2) Amended and Restated Registration Rights Agreement dated as
of December 23, 1988 by and among the Registrant and various
beneficial owners of the Registrant's securities(7)
(10.3)x Restated Stock Option Plan(8)
(10.4)x Letter Agreement Regarding Employment dated as of October 1,
1987 between the Registrant and Dr. Walter A. Blattler(7)
(10.5) Lease dated May 15, 1997 by and between Harry F. Stimpson,
III, as trustees, lessor, and the Registrant, lessee(5)
(10.6) Leases dated as of December 1, 1986 and June 21, 1988 by and
between James H. Mitchell, Trustee of New Providence Realty
Trust, lessor, and Charles River Biotechnical Services, Inc.
("Lessee") together with Assignment of Leases dated June 29,
1989 between Lessee and the Registrant(9)
(10.7) First Amendment, dated as of May 9, 1991, to Lease dated as
of June 21, 1988 by and between James A. Mitchell, Trustee
of New Providence Realty Trust, lessor, and the
Registrant(10)
(10.8) Confirmatory Second Amendment to Lease dated June 21, 1988
by and between James A. Mitchell, Trustee of New Providence
Realty Trust, lessor, and the Registrant, Lessee(5)
(10.9)x Letter Agreement Regarding Compensation of Mitchel Sayare,
dated April 29, 1994(11)
(10.10) Lease dated as of December 23, 1992 by and between
Massachusetts Institute of Technology, lessor, and the
Registrant, lessee(8)
(10.11) Option Agreement dated April 5, 1990 by and between the
Registrant and Takeda Chemical Industries, Ltd.(12)
(10.12) Capital Lease Agreement dated March 31, 1994 by and between
the Registrant and Aberlyn Capital Management Limited
Partnership(11)
(10.13) Sublease dated as of August 31, 1995 by and between the
Registrant, as landlord, and Astra Research Center Boston,
Inc., as tenant(13)
(10.14) Equipment Use and Services Agreement dated as of August 31,
1995 by and between the Registrant, as landlord, and Astra
Research Center Boston, Inc., as tenant(13)
(10.15) Consent to Sublease and Agreement dated as of August 31,
1995 by and between Massachusetts Institute of Technology,
as lessor, the Registrant, as sublessor, and Astra Research
Center Boston, Inc., as sublessee(13)
(10.16) Amendment to Lease dated August 31, 1995 between
Massachusetts Institute of Technology, as lessor, and the
Registrant, as lessee(14)
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
(10.17) Securities Purchase Agreement, including the Form of
Convertible Debenture and The Form of Stock Purchase
Warrant, dated as of March 15, 1996 by and among the
Registrant and Capital Ventures International(14)
(10.18) Registration Rights Agreement dated as of March 15, 1996 by
and among the Registrant and Capital Ventures
Internationa1(14)
(10.19) Letter Agreement dated as of March 21, 1996 by and among the
Registrant and Capital Ventures International regarding the
Securities Purchase Agreement dated as of March 15, 1996(14)
(10.20) Letter Agreement dated as of June 6, 1996 by and among the
Registrant and Capital Ventures International regarding an
amendment to their agreement dated March 15, 1996(15)
(10.21) First Amendment to Sublease dated August 31, 1995 by and
between the Registrant, as landlord, and Astra Research
Center Boston, Inc., as tenant(16)
(10.22) Convertible Preferred Stock Purchase Agreement dated as of
October 16, 1996 between Southbrook International
Investments, Ltd. and the Registrant, as amended by an
agreement dated October 16, 1996 and attached thereto(3)
(10.23) Registration Rights Agreement dated as of October 16, 1996
between Southbrook International Investments, Ltd. and the
Registrant(3)
(10.24) Warrant dated October 16, 1996 issued to Southbrook
International Investments, Ltd.(3)
(10.25) Warrant dated October 16, 1996 issued to Brown Simpson,
LLC(3)
(10.26) Warrant dated January 6, 1997 issued to Southbrook
International Investments, Ltd.(4)
(10.27) Convertible Debenture, dated as of June 28, 1996, by and
among the Registrant and The Dana-Farber Cancer Institute,
Inc.(17)
(10.28) Form of Warrant issued by the Registrant to LBC Capital
Resources, Inc.(17)
(10.29) Research Collaboration Agreement dated July 31, 1997 between
Apoptosis Technology, Inc. and BioChem Therapeutic Inc.*(5)
(10.30) License Agreement dated July 31, 1997 between Apoptosis
Technology, Inc., BioChem Pharma Inc., Tanaud Holdings
(Barbados) Ltd. and Tanaud L.L.C.*(5)
(10.31) Stock Purchase Agreement dated July 31, 1997 by and among
Apoptosis Technology, Inc., BioChem Pharma (International)
Inc., and the Registrant*(5)
(10.32) Registration Agreement dated July 31, 1997 between the
Registrant and BioChem Pharma (International) Inc.(5)
(10.33) Registration Agreement dated July 31, 1997 between Apoptosis
Technology, Inc. and the Registrant(5)
(10.34) Form of Warrant issued by the Registrant to BioChem Pharma
(International) Inc.(5)
(10.35) Warrant Certificate dated September 16, 1997 issued to
Southbrook International Investments, Ltd.(18)
(10.36) Warrant Certificate dated July 31, 1997 issued to Capital
Ventures International(18)
(10.37) Warrant Certificate dated August 1, 1997 issued to Capital
Ventures International(18)
(10.38) Warrant Certificate dated August 21, 1997 issued to Capital
Ventures International(18)
(10.39) Warrant Certificate dated October 6, 1997 issued to BioChem
Pharma (International)(18)
(10.40) Series E Convertible Preferred Stock Purchase Agreement by
and among ImmunoGen, Inc., Biotechnology Venture Partners,
L.P., Biotechnology Value Fund, L.P., Biotechnology Value
Fund, Ltd. and Investment 10, L.L.C. dated December 10,
1997*(6)
(10.41) Registration Agreement among ImmunoGen, Inc., Biotechnology
Venture Partners, L.P., Biotechnology Value Fund, L.P.,
Biotechnology Value Fund, Ltd. and Investment 10, L.L.C.
dated December 10, 1997(6)
(10.42) Form of Warrant Certificate issued by the Registrant to
Biotechnology Venture Partners, L.P., Biotechnology Value
Fund, L.P., Biotechnology Value Fund, Ltd. and Investment
10, L.L.C.(6)
(10.43) Warrant Certificate dated December 1,1997 issued to Capital
Ventures International (6)
(10.44) Warrant Certificate dated December 5,1997 issued to Capital
Ventures International (6)
(10.45) Warrant Certificate dated January 5,1998 issued to Capital
Ventures International (6)
(10.46) Warrant Certificate dated January 5, 1998 issued to BioChem
Pharma Inc. (6)
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
(10.47) First Amendment to Stock Purchase Agreement dated as of
March 18, 1998 by and among ImmunoGen, Inc., Biotechnology
Venture Partners, L.P., Biotechnology Value Fund, Ltd. and
Investment 10, L.L.C.*(19)
(10.48) License Agreement dated effective June 1, 1998 by and
between the Registrant and Pharmacia & Upjohn AB*
(10.49) License Agreement dated February 1, 1999 between the
Registrant and SmithKline Beecham Corporation*(20)
(10.50) Stock Purchase Agreement dated February 1, 1999 between the
Registrant and SmithKline Beecham plc*(20)
(21) Subsidiaries of the Registrant
(23) Consent of PricewaterhouseCoopers LLP
(27) Financial Data Schedule
</TABLE>
- ---------------
(1) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's Registration Statement on Form
S-1, File No. 33-38883.
(2) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's annual report on Form 10-K for
the fiscal year ended June 30, 1990.
(3) Previously filed with the Commission as an exhibit to, and incorporated
herein by reference from, the Registrant's quarterly report on Form 10-Q,
as amended by Form 10-Q/A, for the quarter ended September 30, 1996.
(4) Previously filed with the Commission as an exhibit to, and incorporated
herein by reference from, the Registrant's quarterly report on Form 10-Q,
as amended by Forms 10-Q/A, for the quarter ended December 31, 1996.
(5) Previously filed with the Commission as an exhibit to, and incorporated
herein by reference from, the Registrant's annual report on Form 10-K for
the year ended June 30, 1997.
(6) Previously filed as an exhibit to, and incorporated herein by reference
from, the Registrant's quarterly report on Form 10-Q for the quarter ended
December 31, 1997.
(7) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's Registration Statement on Form
S-1, File No. 33-31219.
(8) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's quarterly report on Form 10-Q
for the quarter ended December 31, 1992.
(9) Previously filed with the Commission as Exhibit No. 10.10 to, and
incorporated herein by reference from, the Registrant's Registration
Statement on Form S-1, File No. 33-31219.
(10) Previously filed with the Commission as Exhibit No. 10.10a to, and
incorporated herein by reference from, the Registrant's Registration
Statement on Form S-1, File No. 33-43725, as amended.
(11) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from the registrant's annual report on Form 10-K in the
fiscal year ended June 30, 1994.
(12) Previously filed with the Commission as Exhibit No. 10.15 to, and
incorporated herein by reference from, the Registrant's Registration
Statement on Form S-1, File No. 33-38883.
(13) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's annual report on Form 10-K for
the fiscal year ended June 30, 1995.
(14) Previously filed as exhibits to the Registrant's Current Report on Form 8-K
for the March 25, 1996 event, and incorporated herein by reference.
(15) Previously filed as Exhibit 10.29 to the Registrant's Current Report on
Form 8-K for the June 6, 1996 event, and incorporated herein by reference.
(16) Previously filed as an exhibit to, and incorporated herein by reference
from, the Registrant's annual report on Form 10-K for the fiscal year ended
June 30, 1996.
40
<PAGE> 42
(17) Previously filed with the Commission as an exhibit to, and incorporated
herein by reference from, the Registrant's Registration Statement on Form
S-3, File No. 333-07661.
(18) Previously filed as an exhibit to, and incorporated herein by reference
from, the Registrant's quarterly report on Form 10-Q, as amended by Form
10-Q/A, for the quarter ended September 30, 1997.
(19) Previously filed as an exhibit to, and incorporated herein by reference
from, the Registrant's quarterly report on Form 10-Q for the quarter ended
March 31,1998.
(20) Previously filed as an exhibit to, and incorporated herein by reference
from, the Registrant's quarterly report on Form 10-Q for the quarter ended
December 31,1998.
(x) Exhibit is a management contract or compensatory plan, contract or
arrangement required to be filed as an exhibit to Form 10-K.
(*) The Registrant has filed a confidential treatment request with the
Commission with respect to this document.
(b) Form 8-K dated February 9, 1999 - Item 5: Other Events. The Company
announced the signing of a $45 million agreement with SmithKline Beecham
plc, London/SmithKline Beecham, Philadelphia for the development and
commercialization of huC242-DM1/SB-408075.
Form 8-K dated June 2, 1999 - Item 5: Other Events. The Company announced
that it had received a $2.0 million milestone payment from SmithKline
Beecham plc pursuant to its license agreement with SmithKline. The Company
also announced that upon achievement of this milestone, and in addition to
the $2.0 million milestone payment, the Company had fulfilled the
condition required to exercise the first of two put options.
41
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMMUNOGEN, INC.
By: /s/ MITCHEL SAYARE
----------------------------------
MITCHEL SAYARE
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Dated: September 28, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MITCHEL SAYARE Chairman of the Board of Directors, September 28, 1999
- ------------------------------------------ Chief Executive Officer and President
MITCHEL SAYARE (principal executive officer)
/s/ KATHLEEN A. CARROLL Vice President, Finance and September 28, 1999
- ------------------------------------------ Administration, Treasurer and
KATHLEEN A. CARROLL Assistant Secretary (principal
financial officer and principal
accounting officer)
/s/ WALTER A. BLATTLER Executive Vice President, Science and September 28, 1999
- ------------------------------------------ Technology, and Director
WALTER A. BLATTLER
/s/ DAVID W. CARTER Director September 28, 1999
- ------------------------------------------
DAVID W. CARTER
/s/ MICHAEL R. EISENSON Director September 28, 1999
- ------------------------------------------
MICHAEL R. EISENSON
/s/ STUART F. FEINER Director September 28, 1999
- ------------------------------------------
STUART F. FEINER
</TABLE>
42
<PAGE> 44
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
21 Subsidiaries of the Registrant
23 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedule
<PAGE> 1
IMMUNOGEN, INC.
SUBSIDIARIES OF THE REGISTRANT
ImmunoGen Securities Corp
Apoptosis Technology, Inc.
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-3 (File Nos. 333-2441, 333-15819, 333-22153, 333-31795,
333-07661 and 333-48385) and on Form S-8 (File Nos. 33-41534 and 33-73544) of
ImmunoGen, Inc. (the "Company") of our report dated July 28, 1999, except for
Note L as to which the date is September 16, 1999, relating to the Company's
financial statements, which appears in this Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
September 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUN-30-1998
<PERIOD-END> JUN-30-1999
<CASH> 4,255,580
<SECURITIES> 0
<RECEIVABLES> 1,260,108
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,543,603
<PP&E> 10,983,990
<DEPRECIATION> 9,400,640
<TOTAL-ASSETS> 7,170,653
<CURRENT-LIABILITIES> 1,773,266
<BONDS> 0
0
24
<COMMON> 256,687
<OTHER-SE> 158,790,821
<TOTAL-LIABILITY-AND-EQUITY> 7,170,653
<SALES> 0
<TOTAL-REVENUES> 3,652,258
<CGS> 0
<TOTAL-COSTS> 7,878,269
<OTHER-EXPENSES> (55,242)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,351
<INCOME-PRETAX> (4,176,120)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,992,543)
<EPS-BASIC> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
