Back to GetFilings.com
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-12104
-------------------
IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter)
-------------------
Delaware 61-1009366
(State of incorporation) (I.R.S. Employer Identification No.)
300 American Road, Morris Plains, New Jersey 07950
(Address of principal executive offices) (Zip Code)
The Company's telephone number, including area code: (973) 605-8200
-------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of September 24, 1998, 37,586,087 shares of the Company's common stock
were outstanding, and the aggregate market value of voting and non-voting common
equity held by non-affiliates of the registrant, computed by reference to the
last reported sale price for the Company's common equity on the Nasdaq National
Market at that date, was $87,645,237.
Documents Incorporated by Reference:
Portions of the Company's definitive Proxy Statement to be mailed to
stockholders in connection with the Annual Meeting of Stockholders of the
registrant to be held on November 4, 1998 (the '1998 Definitive Proxy
Statement'), which will be filed with the Commission not later than 120 days
after the end of the fiscal year to which this report relates, are incorporated
by reference in Part III hereof.
- ------------------------------------------------------------------------------
PART I
Item 1 -- Business
Introduction
Immunomedics, Inc. (the 'Company') is a biopharmaceutical company applying
innovative proprietary technology in antibody and peptide selection,
modification and chemistry to the development of products for the detection and
treatment of cancers and other diseases. Integral to these products are highly
specific monoclonal antibodies designed to deliver radioisotopes,
chemotherapeutic agents, toxins, dyes or other substances to a specific disease
site or organ system.
The Company is developing a line of in vivo imaging products for the
detection of various cancers and other diseases. In April, 1991, the Company
filed a Product License Application, now called a Biologics License Application
('BLA'), to which an amendment was filed in June, 1993, with the U.S. Food and
Drug Administration ('FDA') seeking approval to manufacture and market, in the
United States, the Company's proprietary in vivo colorectal cancer imaging
product, CEA-Scan'r'. On June 28, 1996, the FDA licensed CEA-Scan for use with
other standard diagnostic modalities for the detection of recurrent and/or
metastatic colorectal cancer. In March, 1992, the Company filed with the
Committee for Proprietary Medicinal Products ('CPMP') to market the product in
Europe. On October 4, 1996, the Company was granted marketing authorization by
the European Commission for use of CEA-Scan in the 15 countries comprising the
European Union for the same indication as approved in the United States. Phase
III clinical trials of CEA-Scan for the detection of lung cancer are continuing,
and the Company is in discussion with both the FDA and CPMP to evaluate Phase II
clinical trial data for the detection of breast cancer. However, no assurance
can be given as to if, or when, final regulatory approvals for any of these
additional indications for CEA-Scan may be forthcoming. In February, 1992, the
Company filed with the Health Protection Branch ('HPB') to market CEA-Scan in
Canada. On September 16, 1997, the Company received a notice of compliance from
the HPB permitting it to market CEA-Scan in Canada for recurrent and metastatic
colorectal cancer.
On February 14, 1997, the Company was granted regulatory approval by the
European Commission to market LeukoScan'r', an in vivo infectious disease
diagnostic imaging product, in all 15 countries which are members of the
European Union, for the detection and diagnosis of osteomyelitis (bone
infection) in long bones and in diabetic foot ulcer patients. On December 19,
1996, the Company filed a BLA for LeukoScan with the FDA for the same indication
approved in Europe, plus an additional indication for the diagnosis of acute,
atypical appendicitis. A New Drug Submission for LeukoScan for the same
indications as in the U.S. was filed with the HPB in Canada on March 24, 1998
and a marketing application was filed in Switzerland in September, 1998. The
Company also has decided not to continue pursuing the broadening of its approval
for LeukoScan in Europe to include the acute, atypical appendicitis indication,
but will instead publish its Phase III efficacy data. As with all regulatory
filings, there can be no assurance that such filings will be approved by the FDA
or by the HPB. Phase III trials for infected prostheses are continuing, and the
Company is examining other applications for the product.
The Company has developed and filed an Investigational New Drug application
('IND') for two other in vivo cancer imaging products: AFP-Scan'r' for the
detection and diagnosis of liver and germ cell cancers, currently in Phase II
clinical trials, and LymphoScan'TM' for diagnosis and staging of non- Hodgkin's
lymphomas, currently in Phase III clinical trials (see 'Products and Projects in
Development').
The Company also is applying its expertise in antibody selection,
modification and chemistry to develop therapeutic products for cancer using
humanized monoclonal antibodies labeled with radioisotopes or conjugated with
drugs or unlabeled monoclonal antibodies. The Company has been conducting a
multicenter Phase I/II clinical trial with LymphoCide'TM' (formerly
ImmuRAIT-LL2), a non-Hodgkin's B-cell lymphoma therapeutic product. This trial
was designed to obtain knowledge about targeting and dosing with the murine form
of the monoclonal antibody. The Company has now advanced the humanized form of
LymphoCide into Phase I/II clinical trials and is discontinuing trials with the
murine form (see 'In Vivo Therapeutic Products'). Solid tumor therapy with
CEA-Cide'r' for treatment of patients with inoperable, residual and recurrent
solid tumors is advancing into Phase I/II
1
clinical trials in the U.S. and European Union. CEA-Cide targets receptor
sites on CEA-expressing solid tumors of the breast, lung, digestive and other
organ systems.
On November 24, 1997, the Company entered into a Distribution Agreement with
Eli Lilly Deutschland GmbH ('Lilly') pursuant to which Lilly packages and
distributes LeukoScan within the countries comprising the European Union and
certain other countries subject to receipt of certain regulatory approvals.
Effective as of April 6, 1998, the Company terminated its license agreements
with Mallinckrodt Medical, B.V. and Mallinckrodt Medical, Inc. The Company has
entered into an agreement with Lilly to distribute CEA-Scan in the European
Union and an agreement with the ICS Division of Bergen Brunswig Speciality
Corporation to provide product support services in the U.S., including
distribution, order management and customer service for CEA-Scan and other
products from time to time.
The Company assumed full responsibility for sales and marketing of CEA-Scan
worldwide and has employed its own sales and marketing organizations in the U.S.
and Europe and negotiated local distribution agreements in certain markets
outside the U.S. (see 'Marketing, Sales and Distribution' for the current status
of these agreements).
In November, 1997, the Company was awarded damages in the amount of $1.8
million, including interest in its arbitration claim against Pharmacia, Inc.
('Pharmacia') for breach of contract and fiduciary duty arising out of the
license agreement with a predecessor of Pharmacia that had been terminated in
1995 (see 'Legal Proceedings').
In June, 1998, the Company announced its intention to form a joint venture
with Beckman Coulter, Inc. for the development of compatible technologies to
advance the next generation of cancer therapeutics. Beckman Coulter will license
a bi-specific antibody targeting technology known as 'Affinity Enhancement
System' to IBC Pharmaceuticals, LLC, the new joint venture. The Company will
license technology and commercialization expertise to the venture.
The Company was incorporated in Delaware in 1982. The Company's principal
offices are located at 300 American Road, Morris Plains, New Jersey 07950. The
Company's telephone number is (973) 605-8200. The Company also has a subsidiary,
Immunomedics Europe, with offices located in Hillegom, The Netherlands, to
assist the Company in managing sales and marketing efforts and coordinate
clinical trials in Europe.
Products and Projects in Development
In Vivo Imaging Products
The Company's in vivo imaging products utilize radioimmunodetection, which
involves injecting a patient with a radioisotope linked, or conjugated, to an
antibody. An antibody is a protein that can recognize and selectively attach
itself to a specific substance called an antigen. Such antigens are present on
tumor cells, white blood cells that accumulate at the sites of infections, and
other disease entities. By attaching a radioisotope to a disease-targeting
antibody, the radioisotope may be delivered to a disease site for imaging. A
gamma camera (standard nuclear medicine equipment used for imaging) is then used
to detect and display radioisotope concentrations, revealing the presence,
location and approximate size of the site of disease.
The Company's in vivo imaging products utilize only one of the upper arms of
the antibody, the Fab' fragment. The Company uses its proprietary chemistry to
produce the Fab' fragment of a mouse-derived antibody capable of direct and
virtually instant attachment or 'labeling' with technetium-99m. Technetium-99m
is the radioisotope most frequently used in nuclear medicine because of its high
quality imaging capabilities, short half-life, widespread availability and low
cost. The use of a fragment of the antibody, rather than the whole, minimizes
the human body's immune response to the injection of mouse-derived antibodies.
This benefit is enhanced by the low Fab' dosage used in the Company's imaging
products. An additional advantage of using technetium-99m and an antibody
fragment is that imaging is enhanced in the liver, the first site of distant
metastasis for many cancers. Intact antibodies and certain other imaging
radioisotopes accumulate in the liver, potentially interfering with adequate
2
imaging of tumors in this organ. Finally, technetium-99m labeled antibody
fragments not taken up by tumors are quickly excreted via the kidneys, enhancing
tumor-to-background ratios in other regions.
The Company's in vivo imaging products, contained in single vials, can be
easily prepared by nuclear medicine technicians without assistance from a
radiochemist or nuclear pharmacist. Once the technetium-99m is added to the vial
in a saline solution, the product is ready for injection in approximately five
minutes.
On June 28, 1996, the FDA licensed CEA-Scan for use in conjunction with
other standard diagnostic modalities for the detection of the presence, location
and extent of recurrent and/or metastatic colorectal cancer. On October 4, 1996,
this product also was approved by the European Commission for the same
indication. On September 16, 1997, the Company received a notice of compliance
from the HPB permitting it to market CEA-Scan in Canada for recurrent and
metastatic colorectal cancer. In addition, the Company has six proposed in vivo
imaging products or indications in various stages of clinical testing and
regulatory review by the FDA -- five for cancer imaging (CEA-Scan for lung and
breast cancer, AFP-Scan for liver and germ cell cancer and LymphoScan for
non-Hodgkin's lymphoma) and one for imaging infectious diseases (LeukoScan).
Clinical trials of PCP-Scan'TM' ('PCP') for imaging of Pneumocystis carinii
pneumonia were discontinued as the Company continues to assess the product's
commercial value.
The antibody in CEA-Scan is directed at carcinoembryonic antigen ('CEA'),
which is abundant at the site of virtually all cancers of the colon or rectum
(both primary tumors and metastases). CEA is also associated with many other
cancers, and the Company estimates that three quarters of all human cancer
patients have elevated CEA levels at some of their tumor sites. As part of
receiving FDA approval for CEA-Scan, the Company has agreed to conduct Phase IV
clinical studies to evaluate the product following re-administration. The
Company also is performing Phase III clinical trials, using CEA-Scan, for
imaging lung cancer. In addition, Phase II clinical trials for breast cancer
imaging have been completed, results of which are currently being discussed with
FDA and CPMP officials to determine whether such data will support the
submission of applications for this additional indication in the U.S. and
Europe, respectively.
LeukoScan is a monoclonal antibody fragment which seeks out and binds to
granulocytes (white blood cells) associated with a potentially wide range of
infectious and inflammatory diseases. On February 14, 1997, the Company received
European regulatory approval to market the product for detecting and diagnosing
osteomyelitis (bone infection) in long bones and in diabetic foot ulcer
patients. On December 19, 1996, the Company filed a BLA with the FDA, seeking
approval to market LeukoScan in the U.S. for the same indication approved in
Europe, plus an additional indication for diagnosis of acute, atypical
appendicitis. A New Drug Submission for the same indications as in the U.S. was
filed with the HPB in Canada on March 24, 1998, and a marketing application was
filed in Switzerland in September, 1998.
Three other imaging products are being studied pursuant to IND's submitted
to the FDA. The Company also has ongoing clinical trials in Europe for these
agents:
-- LymphoScan, employing an antibody capable of targeting an antigen
on non-Hodgkin's B-cell lymphomas (Phase III clinical trials are
underway).
-- AFP-Scan, employing an antibody capable of targeting
alpha-fetoprotein, a marker on liver cancer and germ-cell tumors
of the ovaries and testes (Phase II clinical trials are
underway).
-- MyeloScan'TM', Tc-99m -- labeled murine antibody for nuclear
imaging of bone marrow for detection of metastatic marrow disease
(Phase I/II clinical trials are completed).
In Vivo Therapeutic Products
The Company is applying its expertise in antibody selection, modification
and chemistry to cancer therapeutics, using monoclonal antibodies labeled with
therapeutic radioisotopes or conjugated with drugs. The Company is engaged in
developing anti-cancer products, principally with a technique called
radioimmunotherapy. This technique may deliver radiolabeled therapeutic agents
to tumor sites more
3
selectively than current radiation therapy technologies, while minimizing
debilitating side effects. The Company conducted a multicenter Phase I/II
clinical trial with the murine form of its non-Hodgkin's B-cell lymphoma
proposed therapeutic product, LymphoCide, for over four years. This product
consists of a monoclonal antibody, highly specific in targeting B-cell
lymphomas, labeled with the radioisotope iodine-131. In this Phase I/II clinical
trial of LymphoCide, several patients, all of whom were late-stage and were
unresponsive to other therapies, experienced varying degrees of tumor
regression. Reversible bone marrow toxicity was also observed. By conducting
this trial, the Company increased its knowledge of antibody targeting and
dosage. The Company has now advanced its humanized antibody program into Phase
I/II clinical trials and is discontinuing its trials with the murine antibody
form of LymphoCide. The Company is currently conducting, in collaboration with
the Center for Molecular Medicine and Immunology ('CMMI') (also known as the
Garden State Cancer Center) and other academic or research centers, research on
murine and humanized forms of targeting antibodies, alternative radioisotopes
and new conjugation methods (see 'Research Programs').
Research Programs
The Company incurred approximately $11,738,000, $13,114,000 and $12,504,000,
in total research and development expense during its fiscal years ended June 30,
1998, 1997 and 1996, respectively.
Antibody Engineering
A major obstacle in the field of monoclonal antibody therapy has been the
patient's immune response to mouse-derived antibodies, making repeated use of
such products impracticable. The Company has made significant progress in
humanizing certain mouse antibodies (i.e., replacing certain components of a
mouse antibody with human antibody components), and with respect thereto the
Company has licensed technology from a third party. Moreover, using the
techniques of molecular biology, the Company's scientists have re-engineered the
humanized antibodies with improved characteristics, such as favorable
pharmacokinetic properties and increased radionuclide and drug loading
capacities.
During the past four fiscal years, the Company, in collaboration with CMMI
and other investigators, continued to demonstrate successful targeting in
patients with the Company's humanized monoclonal antibodies (hMN-14 and hLL2)
against the CEA cancer marker and non-Hodgkin's B-cell lymphoma, respectively,
as compared to the murine counterparts (MN-14 and LL2). The anticancer humanized
antibodies are about 95% human and have shown very good uptake in the patients'
tumors. The Company has now begun focusing on the study of these humanized
monoclonal antibodies labeled with a pure beta-emitting isotope, yttrium-90, in
patients with the appropriate target tumors (discussed below).
Alternative Radioisotopes
The Company has used iodine-131 to label its anti-lymphoma antibody (LL2),
which has been evaluated in a phase I/II clinical trial against non-Hodgkin's
lymphoma. This disease has previously been found to respond well to
radioimmunotherapy using iodine-131-labeled, murine-based anti-lymphoma
antibodies by investigators at several institutions. However, one potential
drawback of an iodine-131-labeled LL2 antibody is the finding that LL2, as a
rapidly internalizing antibody, is readily metabolized with the iodine-131-bound
metabolite quickly excreted from the target cell. This means that full advantage
is not taken of the eight-day half-life of the iodine-131 radionuclide in this
one particular disease. In contrast, yttrium-90 from administered yttrium-90-
labeled LL2 has been shown to be retained inside lymphoma cells for long periods
after antibody metabolism. For this reason, and also for reasons of greater
efficacy against larger tumors and the potential for out-patient use due to lack
of any associated gamma-ray emissions, the Company's scientists have developed
yttrium-90-LL2 as a second-generation product. The Company has developed a
proprietory technology using a compound called 'DOTA' to tightly bind yttrium-
90 to antibodies, assuring that the isotope will stay attached during
circulation, and thus minimally impact the bone marrow and other organ systems.
The Company has begun Phase I/II clinical trials with yttrium-90-labeled
humanized antibodies, and early reports are
4
promising, with some evidence of tumor regression. The Company is not alone in
substituting yttrium-90 for iodine-131 as an antibody-delivered isotope
therapeutic. At least one other competitor is labeling an antibody with
yttrium-90 for similar indications. There can be no assurance that the Company's
clinical trials will result in a successful BLA submission, or that the
resulting product will prove successful in the marketplace.
Other Antibody-Directed Therapy Approaches
The Company is continuing work on selective coupling of therapeutic
site-specific agents onto engineered carbohydrate residues on antibody
fragments. The proprietary antibody constructs offer the advantage of loading
multiple therapeutic moieties onto antibody fragments at a particular site and
in a manner, which is known not to interfere with antigen binding. The Company
also is continuing to investigate 'pre-targeting', whereby an antibody is
administered first and then followed by a separate radionuclide administration.
Secondary recognition groups are attached, one to the targeting antibody and the
other to the radionuclide, such that the radionuclide is localized to the
antibody pre-targeted to the tumor site. Using such methods in preclinical
animal tumor models, target-to-blood uptake ratios of radionuclide have been
improved by orders of magnitude compared to the antibody radiolabeled in the
conventional manner. The advantage of markedly increased target-to-blood ratios
is somewhat offset by the greater complexity involved in multiple administration
and timing of reagents. Accordingly, there can be no assurance at the present
time that this 'pre-targeting' approach will offer a practical alternative for
radioimmunotherapy. Further, other companies also developing pre-targeting
methods may prove to be more successful or faster to commercialization.
Peptides
During fiscal year 1998, the Company continued to improve its proprietary
methods for technetium-99m radiolabeling of peptides, which were developed in
fiscal year 1996, up to clinical-scale levels using single-vial kits. These
automated synthetic methods will be generally applicable to the preparation of
radioconjugates of other diverse chelate-peptides, and will enable rapid
evaluation of different peptide-receptor systems directly with peptide analogs
labeled with technetium-99m, the optimum imaging radionuclide. This technology
has been applied to the preparation of analogs of somatostatin and has
demonstrated reagent utility in pre-clinical in vivo models. In related work,
similar novel synthetic methods have also been used to prepare chelate-peptide
conjugates which can be radiolabeled with indium-111 and yttrium-90.
Intraoperative Cancer Detection
The Company has been developing intraoperative cancer detection applications
with CEA-Scan, utilizing hand-held, radiation-detecting probes. The Company has
learned that surgeons have successfully used CEA-Scan in this way, within 48
hours of its injection and external imaging. The Company has remained in contact
with these surgeons, one of whom reported to the Society of Surgical Oncology on
a prospective study of CEA-Scan imaging and probe-guided surgery in twenty (20)
patients. That study concluded that the probe and CEA-Scan provided useful new
information in 7 of 20 patients, encouraging more aggressive postoperative care,
including chemotherapy. A U.S. patent was issued in 1990 to the Company for this
and endoscopic applications. The Company has discussed with the FDA the use of
CEA-Scan with gamma probes, and is planning clinical trials along lines proposed
by the FDA, with the objectives of gaining regulatory approval for this new
intraoperative use of CEA-Scan. However, there can be no assurance that such
clinical trials or regulatory filings will be successful.
Government Grants
During fiscal year 1998, the Company was awarded a phase I Small Business
Innovation Research ('SBIR') grant from The National Cancer Institute ('NCI') of
the National Institutes of Health, for $100,000, to design a hormone releasing
peptide imaging agent which will be used to non-invasively image breast tumor
receptors. Such an agent could potentially provide very specific benchmark
5
information which could categorize tumors, stage the disease, determine a
cost-effective course of therapy and monitor treatment progress.
In September 1998, the Company was awarded two phase I SBIR grants for
$100,000 each. The first is to produce monoclonal antibody-based agents for use
in early detection of cancer by positron-emission tomography ('PET'). The second
is for improving tumor radioimmunotherapy by peptide nucleic acid ('PNA')
pre-targeting. (see 'In Vivo Imaging Products').
Relationship with The Center for Molecular Medicine and Immunology
The Company's product development has involved, to varying degrees, CMMI, a
specialized cancer research center, for the performance of certain basic
research and patient evaluations, the results of which are made available to the
Company pursuant to a collaborative research and license agreement. CMMI is a
not-for-profit corporation funded primarily by grants from the NCI. CMMI was
previously located adjacent to the Company's former Newark, New Jersey,
manufacturing facility (Newark Facility), but in November 1996, moved to
improved facilities in Belleville, New Jersey. Dr. David M. Goldenberg, Chairman
of the Board and former Chief Executive Officer of the Company, is the founder,
current President and a member of the Board of Trustees of CMMI. Dr. Goldenberg
devotes more of his time working for CMMI than for the Company. Certain
consultants to the Company have employment relationships with CMMI, and Dr. Hans
Hansen, an officer of the Company, is an adjunct member of CMMI. Despite these
relationships, CMMI is independent of the Company, and CMMI's management and
fiscal operations are the responsibility of CMMI's Board of Trustees (see
'Certain Relationships and Related Transactions').
Effective July, 1995, the Company amended its license agreement with CMMI to
assist CMMI in complying with Internal Revenue Service criteria for its then
recently completed tax-exempt financing. Under the terms of the amended license
agreement, the Company has the right of first negotiation to obtain exclusive,
worldwide licenses from CMMI to manufacture and market potential products and
technology covered by the license agreement under terms representing fair market
price, to be negotiated in good-faith at the time the license is obtained. To
date, no products have been licensed from CMMI. The Company retains licensing
rights to inventions made during the term of the agreement for a period of five
years from the time of disclosure. The amended license agreement terminates on
December 31, 1999, with the Company having the right to seek good-faith
negotiation to extend the agreement for an additional five-year period.
The potential for conflicts of interest may exist in the relationship
between the Company and CMMI, and the provisions of the agreement between the
Company and CMMI have been designed to prevent such conflicts from occurring.
The Company and CMMI have agreed that neither will have any right, title or
interest in or to the research grants, contracts or other agreements obtained by
the other. The decision as to whether a potential product has reached the stage
of development such that it must be offered by CMMI to the Company is made by
the Board of Trustees of CMMI, and Dr. Goldenberg has agreed not to participate
in the determination of any such issue. Similarly, the decision by the Company
as to whether or not to exercise its right of first negotiation or release of
any potential product offered by CMMI is determined by a majority vote of the
Board of Directors (or a subcommittee thereof), and Dr. Goldenberg has agreed
not to participate in the determination of any such issue.
The Company has reimbursed CMMI for expenses incurred on behalf of the
Company, including amounts incurred pursuant to research contracts, in the
amount of approximately $98,000, $69,000 and $64,000 during the years ended June
30, 1998, 1997 and 1996, respectively. The Company also provides, at no cost to
CMMI, laboratory materials and supplies in connection with research conducted in
areas of potential interest to the Company.
During each of the years ending June 30, 1998, 1997 and 1996 the Board of
Directors of the Company made grants to CMMI of $200,000, to support research
and clinical work being performed at CMMI, such grants to be expended in a
manner deemed appropriate by the Board of Trustees of CMMI. Pursuant to a
collaborative research and license agreement, dated as of January 21, 1997,
between the Company and CMMI, the Company has agreed to pay CMMI an annual
license fee of
6
$200,000, for which the Company has the first right and option to negotiate a
worldwide commercialization license.
Business Risks
The Company's products are in various stages of development and face a high
degree of technological, regulatory and competitive risk. In addition, the
Company's products must be approved for marketing by regulatory agencies such as
the FDA (with the exception of CEA-Scan and LeukoScan, which have been licensed
as discussed above), and no assurance can be given as to if or when such
approvals could be forthcoming. Product discovery and development activities
require substantial cash outlays. At least until CEA-Scan and/or LeukoScan are
successfully commercialized, future revenues will be dependent in large part
upon the Company entering into new arrangements with collaborative partners and
upon public and private financings. In addition, the Company has only recently
established a sales and marketing organization, including the addition of
specialized sales forces in the U.S. and Europe (see 'Marketing, Sales and
Distribution'). No assurance can be given that the Company's manufacturing costs
will be economically viable, or that the Company can develop an effective sales
and marketing strategy to effectively promote any marketed product.
The risks discussed herein reflect the Company's immediate stage of
development. Inherent in this stage is a range of additional risks, including
the Company's history of losses and the need for, and uncertainty of, obtaining
future financing. The Company also faces numerous risks stemming from the nature
of the biopharmaceutical industry, including the risk of competition and
competing patents, the risk of regulatory change, including potential changes in
health care coverage, and uncertainties associated with obtaining and enforcing
patents and proprietary technology, among others.
Marketing, Sales and Distribution
In Vivo Products
The Company's marketing strategy initially consisted of forming corporate
alliances with pharmaceutical companies for the sale and distribution of its in
vivo imaging and therapeutic products, whereby the partner's established
marketing, sales and distribution networks would minimize the Company's need to
expend funds to develop these areas of expertise. However, the Company now
believes that development of its own sales force, complementary to those of its
partners, will be necessary to increase the likelihood of maximizing market
penetration for its imaging products.
In March, 1995, the Company entered into a license agreement with
Mallinckrodt Medical B.V., pursuant to which Mallinckrodt Medical B.V. marketed,
sold and distributed CEA-Scan throughout Western Europe and in specified Eastern
European countries, subject to receipt of regulatory approval in the specified
countries.
In April, 1996, the Company entered into a Marketing and Distribution
Agreement with Mallinckrodt Medical, Inc., pursuant to which Mallinckrodt
Medical, Inc., marketed, sold and distributed CEA-Scan for use in colorectal
cancer diagnostic imaging in the U.S. on a consignment basis, and was required
to commit financial resources to that effort. The Company retained manufacturing
and co-promotional rights, paid Mallinckrodt Medical, Inc. a pre-determined
amount or percentage of the net selling price, and was allowed to commit
additional financial resources to promotional activities. In connection
therewith, the Company entered into an agreement with MMD Specialty Services,
Inc. ('MMD') pursuant to which MMD provided the Company, during fiscal year
1998, with a full-time oncology sales force for the marketing and sale of
CEA-Scan in the United States.
In April, 1997, the Company launched LeukoScan in Europe. All marketing,
selling and distribution rights to the product have been retained by the Company
and the Company continues to build a sales and marketing organization to support
this effort. Accordingly, the Company has moved its European operations to new
facilities in Hillegom, The Netherlands. In November, 1997, the Company entered
into a Distribution Agreement with Lilly pursuant to which Lilly packages and
distributes LeukoScan within the countries comprising the European Union and
certain other countries subject to the receipt of regulatory approval. The
Company has established sales representation in major
7
European markets, including Germany, the United Kingdom, France and Italy. The
expansion of the sales and marketing organization also has enhanced the
Company's capability to market products in Europe through the appointment of
BYK-Gulden as distributor in Italy, and local distributors in Spain (Nuclear
Iberica) and Greece (P.N. Gerolymontes S.A.). The European headquarters support
staff and infrastructure has been expanded to include a sales manager, and a
physician with responsibilities as Medical Director.
The Company was dissatisfied with the performance of Mallinckrodt Medical
B.V. and Mallinckrodt Medical, Inc., (collectively, the 'Mallinckrodct
Affiliates') under the respective agreements. After protracted discussions with
Mallinckrodt management, the Company decided it was in the best interest of
customers and shareholders to terminate its agreements with Mallinckrodt and, on
April 6, 1998, assumed full control of marketing, sales and distribution of all
its products (See 'Legal Proceedings'). On that date, the Company appointed
Lilly to distribute CEA-Scan in the European Union and a division of Bergen
Brunswig Company as a non-exclusive U.S. distributor of CEA-Scan. Upon further
review, the Company determined that the sales and marketing efforts would be
better supported through a structure that directly identified the Company to its
customers. Accordingly, in May 1998, the Company revised its arrangements with
BBSC, entering into an agreement with Integrated Commercialization Solutions,
Inc. ('ICS'), a subsidiary of Bergen Brunswig Corporation and terminated the
original agreement. Under the new agreement, ICS serves as an agent of the
Company providing product support services including customer service, order
management, distribution, invoicing and collection.
On September 9, 1998, the Company entered into an agreement with Syncor
International, the world's leading provider of radiopharmacy services, under
which Syncor will make CEA-Scan available to its hospitals and clinic accounts
throughout the U.S., supported by Immunomedics' sales and technical support
specialists. Syncor will support the Company's efforts with their own team of
field specialists as well as the licensed radiopharmacists who manage their 118
U.S. facilities. The Company continues to have discussions with other
radiopharmacy chains regarding arrangements which will make CEA-Scan more widely
available to hospitals and clinics, but as of the date of this report no other
agreements have been consumated, and there can be no assurance that any
additional agreements will be entered into.
On January 1, 1998, in anticipation of the Company taking an increasing role
in the marketing and sales of its products worldwide, the Company appointed a
vice president of marketing. On May 1, 1998, the Company acquired substantially
all of its MMD contract sales organization following which the Company added
additional representatives in territories formerly covered by Mallinckrodt. The
Company also has appointed a national sales director and a marketing manager,
each with more than a decade of experience in the pharmaceutical industry. By
October 1, 1998, the Company expects to have 22 sales representatives and three
regional managers concentrated in major metropolitan markets.
Prior to April 1998, the marketing of CEA-Scan was adversely impacted by the
absence of field training personnel and materials dedicated to training new
users how to properly perform, process and interpret CEA-Scan studies. In
response, the Company has hired a manager of technical services with more than a
decade of nuclear medical technology consulting, and more recently, a Western
region technical specialist. Three similarly skilled Company employees also
provide technical support to customers on an ad-hoc basis.
The Company recently repositioned its marketing and sales efforts to focus
on the contributions of CEA-Scan to the evaluation of patients with primary
colorectal cancer, up to a third of whom have unsuspected metastatic disease at
the time of the disease being discovered. In such cases, CEA-Scan holds the
possibilities of detecting those metastases before the patient is taken to the
operating room, allowing for alternative courses of action. By encouraging
preoperative imaging with CEA-Scan, the Company hopes to prepare surgeons for
the day when the residual radiation from those preoperative studies can be
detected by gamma probes, thus reducing the likelihood that unsuspected
malignant tissue will be inadvertently left behind. Also, by 'benchmarking'
colorectal cancer patients for metastases before surgery, surgeons can use
CEA-Scan to routinely follow those same patients for recurrence. The Company is
initiating a clinical trial modeled after a paper presented at the 1998 World
8
Federation of Surgical Oncology Societies meeting. The authors followed 40
rectal cancer patients with CT, colonoscopy, blood studies and CEA-Scan over a
five-year period. They concluded that only CEA-Scan picked up recurrent disease
at a point when it was still surgically curable in about a quarter of the
patients suffering a relapse.
Manufacturing
To date, the Company has manufactured all investigational agents used in its
clinical trial programs and currently manufactures CEA-Scan and LeukoScan for
commercial use. The Company performs antibody processing and purification of its
clinical products at its Morris Plains, New Jersey, facility (see 'Properties').
The Company has entered into a manufacturing agreement with SP Pharmaceuticals,
formerly the Oncology Division of Pharmacia & Upjohn, pursuant to which SP
Pharmaceuticals performs certain end-stage portions of the manufacturing
process. Under the terms of such agreement, the Company pays according to an
established price structure for these services. The Company has identified and
qualified a second entity to perform similar end-stage manufacturing as a second
source to SP Pharmaceuticals.
In February, 1997, the Company closed its Newark, New Jersey, manufacturing
facility and moved these operations to the Company's Morris Plains headquarters,
which also houses regulatory, medical, research and development, finance,
marketing and executive offices (see 'Properties'). The Company has now
scaled-up to commercial levels its antibody purification and fragmentation
manufacturing processes. The new manufacturing facility consists of four
independent antibody-manufacturing suites, several support areas, and a quality
control ('QC') laboratory. Start-up validation and inspection of the new
facility has been completed, encompassing the adoption of a new, more efficient
manufacturing process. In May, 1998, the manufacturing facility and product
manufacturing processes were approved by the CPMP of the European Commission.
The facility and processes are under final review by the FDA. However, there can
be no assurance at this time that the FDA will approve this facility in a timely
manner to meet the manufacturing needs of the Company.
The Company's proposed monoclonal antibody products are currently derived
from ascites fluid produced in mice, and the Company has entered into an
agreement with a third-party supplier for the production of ascites fluid.
Although CEA-Scan has been approved in the U.S., Canada, and Europe, and
LeukoScan has been approved in Europe, regulatory authorities, particularly in
Europe, have expressed concerns about the use of ascites for the production of
monoclonal antibodies. The Company believes that its current quality control
procedures help ensure the purity of the ascites used in its products, but there
can be no assurance that the regulatory authorities will agree that these
procedures will be adequate for future products. The Company's effort to convert
to cell culture production for certain monoclonal antibodies is progressing.
Products manufactured by cell culture processes will require regulatory approval
for this substantial change in process, and will require additional
manufacturing equipment and resources for this effort.
Patents and Proprietary Rights
The Company actively pursues a policy of seeking patent protection, both in
the United States and abroad, for its proprietary technology. The Company has a
diverse patent portfolio for its in vivo diagnostic products, currently
consisting of 54 issued United States patents and 192 issued foreign patents,
with 38 U.S. patent applications pending, of which 5 have been allowed, and 134
foreign patent applications pending, of which 18 have been allowed. Included in
the foregoing are 8 United States patents and their foreign counterparts, to
which the Company has rights pursuant to an exclusive license granted by Dr.
Goldenberg. The Company also has certain rights with respect to patents and
patent applications owned by CMMI, by virtue of a license agreement between the
Company and CMMI.
The Company owns or has licensed patents that contain broad claims covering
significant aspects of current radioimmunodetection technology for tumor imaging
with radiolabeled antibodies and antibody fragments. These U.S. issued patents
expire beginning in 1999, subject to extension under certain circumstances. The
Company's patents also contain broad claims relating to tumor therapy with
9
radiolabeled antibodies and antibody fragments. These patents contain claims
covering the Company's potential in vivo cancer imaging and therapeutic products
currently under development.
In September, 1997, the Company was issued a U.S. patent for modified
radioantibody fragments that are cleared from the body with reduced uptake by
the kidneys.
In October, 1997, the Company was issued a U.S. Patent covering a new
technology for detecting and treating infectious and inflammatory lesions using
a chimeric (or hybrid) antibody. This hybrid antibody consists of an
antigen-binding part that targets human granulocytes, combined with a different
antibody region that bonds to receptors on human mononuclear lymphoid cells
which are involved in chronic infections and inflammations. This represents an
extension of the LeukoScan technology to more chronic infections and to
inflammations.
In November and December, 1997, the Company was issued two U.S. patents
covering broad claims for drugs designed to treat and diagnose
chemotherapy-resistant cancers or infections. Resistance to anti-cancer drugs is
related to the increased expression of certain proteins on the membrane of
resistant cells, such as P-glycoprotein which gives rise to multi-drug
resistance (MDR). The process makes the use of the antibodies fused together to
result in a bi-specific weapon to target both the cancer cells and the
P-glycoproteins of MDR. Attaching diagnostic imaging agents to the bi-specific
drugs for the potential identification of tumors expressing P-glycoproteins and
MDR is also covered in the patent.
Also in December, 1997, two U.S. patents were issued to the Company. One
covers a method for removing non-malignant cells or tissue, such as ectopic
tissue, retained tissue, normal organ tissue and bone marrow, using antibodies
to target the cells or tissue and a cytotoxic agent linked to the antibodies to
kill the cells. This technique is useful for removal of tissues that may be
difficult to access using surgery. The second patent covers a method for
reducing the immunogenicity of avidins such as streptavidin, using a
carbohydrate polymer.
In January, 1998, the Company was issued a U.S. patent for polyspecific
antibody conjugates useful for treating infections. The conjugates have binding
components that seek out different types of white blood cells that are found in
large numbers at sites of infections.
In February, 1998, the Company was awarded a U.S. patent covering
disease-seeking antibody technology for detection and treatment of cancer,
infections, clots and coronary heart disease. The patent covers small antibody
molecules, or fragments, that target disease with payloads of isotopes, drugs,
fluorescent dyes and other substances that detect and treat diseases. The
antibody fragments attach payloads to unique proteins on the surface of tumors,
drug resistant bacteria, blood clots, and even blood cells that collect on
fat-clogged arteries. The patent further grants exclusive rights to use
hand-held radiation-detecting probes, laparoscopes and endoscopes to locate
disease sites where these antibody fragments and their payloads attach.
In March, 1998, a U.S. patent was issued to the Company covering a new
method for labeling proteins with radioactive phosphorus atoms for therapy,
using a labeling molecule that is more stable than those previously used. The
claims also cover proteins labeled with the stable radiophosphorus group.
In April and May, 1998, the Company was awarded two U.S. Patents containing
multiple claims for detecting and treating cancers and infectious and
cardiovascular lesions by delivering imaging or therapeutic agents with
targeting antibodies, fragments or peptides. The first uses a 'pre-targeting
approach' involving a first step of localizing a molecule to the diseased area,
followed by enhanced bonding of the matched molecule bearing a diagnostic or
therapeutic agent. The patent claims an improvement in this method using
naturally occurring molecules carrying diagnostic and therapeutic agents. The
second patent covers new methods of attaching technetium or rhenium isotopes to
peptides. The invention solves a problem in labeling targeting peptides.
Also in May, 1998, a U.S. patent was issued to the Company covering
radiometal-binding analogues of a peptide which binds to certain receptors on
certain types of hormone-sensitive tumors, especially ovarian, breast,
pancreatic and prostate cancers.
In June, 1998, the Company was awarded a Japanese patent and two U.S.
patents related to new radiopharmaceuticals that are either already being
commercialized or are in various stages of
10
development for imaging or treating cancers, infections or other diseases. The
Japanese patent, the counterpart of an already issued U.S. patent, covers the
Company's basic method of attaching technetium and rhenium isotopes to
disease-targeting antibodies.
The U.S. patent extends the labeling technology to receptor-binding
peptides, providing a new method for attaching technetium and rhenium isotopes
to this new class of targeting agents.
In July, 1998, two U.S. patents were issued to the Company covering nuclear
imaging and MRI (Magnetic Resourance Imaging) methods to reveal anatomically
displaced cells or tissues by using very special detector molecules to locate
abnormal cells or tissues by external scanning of the patient. Management of
endometriosis, a painful and debilitating disease occurring in about 10-15% of
women ages 20-40, may be improved as a result of this new targeting method.
Also in July, 1998, the Company was issued another U.S. patent which
provides a method of protecting non-cancerous tissues and cells from the
toxicities of treating cancer with radiation or chemotherapy by selectively
targeting protective drugs to such tissues. Subsequently, thereapeutic doses of
radiation or drugs given to the patient kill cancer cells while normal tissues
and cells, such as in bone marrow, are protected by the drug.
In August, 1998, two U.S. patents were issued to the Company. The first
covers humanized antibodies that target lymphoma and leukemia cells and are
useful for imaging and therapy, in conjunction with drugs and radioactive
agents. The second patent has broad claims to a new type of vaccine that
operates in stages and is able to induce a more complete immune response against
antigens found on tumors and infectious agents.
Pursuant to a License Agreement between the Company and Dr. Goldenberg,
certain patent applications owned by Dr. Goldenberg were licensed to the Company
at the time of the Company's formation in exchange for a royalty in the amount
of 0.5% of the first $20,000,000 of annual net sales of all products covered by
any of such patents and 0.25% of annual net sales of such products in excess of
$20,000,000. Dr. Goldenberg's Amended and Restated Employment Agreement with the
Company dated November 1, 1993 (the 'Employment Agreement') extends the
ownership rights of the Company, with an obligation to diligently pursue all
ideas, discoveries, developments and products, into the entire medical field,
which, at any time during his past or continuing employment by the Company (but
not when performing services for CMMI), Dr. Goldenberg has made or conceived or
hereafter makes or conceives, or the making or conception of which he has
materially contributed to or hereafter contributes to, all as defined in the
Employment Agreement (collectively 'Goldenberg Discoveries').
Further, pursuant to the Employment Agreement, Dr. Goldenberg will receive
incentive compensation of 0.5% on the first $75,000,000 of all defined Annual
Net Revenue of the Company and 0.25% on all such Annual Net Revenue in excess
thereof (collectively 'Revenue Incentive Compensation'). Annual Net Revenue
includes the proceeds of certain dispositions of assets or interests therein
(other than defined Undeveloped Assets), including defined Royalties, certain
equivalents thereof and, to the extent approved by the Board, non-royalty
license fees. Revenue Incentive Compensation will be paid with respect to the
period of Dr. Goldenberg's employment, and two years thereafter, unless he
unilaterally terminates his employment without cause or he is terminated by the
Company for cause. With respect to the period that Dr. Goldenberg is entitled to
receive Revenue Incentive Compensation on any given products, it will be in lieu
of any other percentage compensation based on sales or revenue due him with
respect to such products under this Agreement or the existing License Agreement
between the Company and Dr. Goldenberg. With respect to any periods that Dr.
Goldenberg is not receiving such Revenue Incentive Compensation for any products
covered by patented Goldenberg Discoveries or by certain defined Prior
Inventions of Dr. Goldenberg, he will receive 0.5% on cumulative annual net
sales of, royalties on, certain equivalents thereof, and, to the extent approved
by the Board, other consideration received by the Company for such products, up
to a cumulative annual aggregate of $75,000,000 and 0.25% on any cumulative
Annual Net Revenue in excess of $75,000,000 (collectively 'Incentive Payments').
A $100,000 annual minimum payment will be paid in the aggregate against all
Revenue Incentive Compensation and Royalty Payments ('Annual Minimum Payment')
and the License Agreement (discussed above).
11
Dr. Goldenberg also will receive a percent, not less than 20%, to be
determined by the Board, of net consideration (including license fees) which the
Company receives for any disposition, by sale, license or otherwise (discussions
directed to which commence during the term of his employment plus two years) of
any defined Undeveloped Assets of the Company which are not budgeted as part of
the Company's strategic plan. Dr. Goldenberg will receive not less than a 20%
interest in the Company's investment in IBC Pharmaceuticals, LLC, upon
consummation of the joint venture between the Company and Beckman Coulter, Inc.
Dr. Goldenberg will not be entitled to any incentive compensation with
respect to any products, technologies or businesses acquired from third parties
for a total consideration in excess of $5,000,000, unless the Company had made a
material contribution to the invention or development of such products,
technologies or businesses prior to the time of acquisition. Except as affected
by a defined Change in Control or otherwise approved by the Board, Dr.
Goldenberg will also not be entitled to any Revenue Incentive Compensation or
Incentive Payments other than the Annual Minimum Payment with respect to any
time during the period of his employment (plus two years, unless employment is
terminated by mutual agreement or by Dr. Goldenberg's death or permanent
disability) that he is not the direct or beneficial owner of shares of the
Company's voting stock with an aggregate market value of at least twenty times
his defined annual cash compensation.
The Company has agreed to extend Dr. Goldenberg's employment agreement for a
five-year period. Pursuant to this extension, Dr. Goldenberg's annual base
salary will continue at $265,000. Further, the Company acknowledged and approved
Dr. Goldenberg's continuing involvement with CMMI and IBC Pharmaceuticals, LLC.
Pursuant to a License Agreement dated July 7, 1983, the Company must pay to
Dr. F. James Primus, a co-inventor with Dr. Goldenberg of certain monoclonal
antibodies and immunoassays which are the subject matter of a U.S. patent and
foreign counterparts thereof that are owned jointly by Drs. Primus and
Goldenberg, a royalty in the amount of 0.25% of the first $20,000,000 of annual
net sales of certain products utilizing a CEA-specific antibody (e.g.,
CEA-Scan), and 0.125% of annual net sales of such products in excess of
$20,000,000.
The Company has entered into patent license agreements with non-affiliated
companies, pursuant to which the Company granted to the licensee, for an initial
non-refundable fee plus royalties, a non-exclusive license under the Company's
patents to manufacture and sell certain cancer imaging products. To date, no
royalties have been received under these licenses. In addition, the Company has
sought to enter into patent license agreements with companies that may be
developing or marketing products that could infringe on one or more of the
patents which the Company owns or has licensed. In certain situations, such
companies have declined to enter into license agreements with the Company and
have raised questions as to the scope and validity of certain of the Company's
patents. Discussions are continuing with these companies and the Company intends
to vigorously protect and enforce its patent rights. Although there can be no
assurances as to the outcome of any patent disputes, the Company believes that
its patents are valid and will be upheld if challenged.
In November of 1996, the Company brought suit in The Netherlands against F.
Hoffmann-LaRoche and its Roche Diagnostics subsidiary and European affiliates
for infringement of the Company's European patent covering specific anti-CEA
antibodies which Roche is using in its CEA immunoassay. Roche denied
infringement and countered with nullity actions in The Netherlands and Germany,
seeking to invalidate the Company's Dutch and German patents. A trial was held
on the infringement claim before the Patent Court in The Hague on August 8,
1997, resulting in dismissal of the action. The dismissal was based in part on
the trial judge's inability to resolve validity issues without a full trial of
the nullity action. The Company has appealed.
A trial on the Dutch nullity action was held before the Patent Court in The
Hague on June 5, 1998, resulting in dismissal of that action and maintenance of
all claims of the Company's patent. Affirmation of the validity of this patent
is important because its claims also protect the antibody used in the Company's
in vivo CEA-Scan cancer imaging product and CEA-Cide cancer therapy product, as
well as the use of highly specific CEA antibodies for a number of other uses.
Trial in the German nullity action is scheduled for December, 1998. The Company
believes that its European patents are valid and infringed, and that an
unfavorable outcome in the infringement and nullity actions is unlikely.
12
In July, 1998, a license agreement was signed between the Company and Dako
A/B under the Company's worldwide patents for specific anti-CEA monoclonal
antibodies, which Dako markets for in vitro use. The Company is engaged in
active discussions with other companies that may be using its patented
technology without the Company's approval in current products or products now in
development or clinical testing.
The Company also relies in part on trade secrets, unpatented know-how and
continuing technological advancements to maintain its competitive position. It
is the practice of the Company to enter into confidentiality agreements with
employees, consultants and corporate sponsors. There can be no assurance,
however, that these measures will prevent the unauthorized disclosure or use of
the Company's trade secrets and know-how.
The mark 'IMMUNOMEDICS' is registered in the United States and 20 foreign
countries, and the Company's logo also is registered in the United States and in
several foreign countries. The mark 'IMMUSTRIP' is registered in the United
States and Canada. The mark 'CEA-SCAN' is registered in the United States and 8
foreign countries and an application for a European Community Trademark is
pending. The mark 'LEUKOSCAN' is registered in the United States and 9 foreign
countries, application is pending in Canada, and an application for a European
Community Trademark is also pending. The mark 'LYMPHOSCAN' is registered in the
United States and 9 foreign countries, and an application for a European
Community Trademark is pending. In addition, the Company has applied for
registration in the United States for several other trademarks for use on
products now in development or testing, and for corresponding foreign and/or
European Community Trademarks for certain of those marks.
Government Regulation
The manufacture and marketing of pharmaceutical or biological products
requires approval of the FDA and comparable agencies in foreign countries and,
to a lesser extent, state regulatory authorities. In the United States, the
regulatory approval process for antibody-based products, which are considered
'biologics' under FDA regulations, is similar to that for any new drug for human
use. The FDA has established mandatory procedures and safety standards that
apply to the clinical testing, manufacturing and marketing of pharmaceutical
products. Noncompliance with applicable requirements can result in fines,
recalls or seizure of products, total or partial suspension of production,
refusal of the FDA to approve product license applications or to allow the
Company to enter into supply contracts, and criminal prosecution. The FDA also
has the authority to revoke previously granted product licenses and
establishment licenses.
Generally, there is a substantial period of time between technological
conception of a proposed product and its availability for commercial sale. The
period between technological conception and filing of a Biologics License
Application with the FDA is usually five to ten years for in vivo products and a
minimum of two to three years for in vitro diagnostic products. The period
between the date of submission to the FDA and the date of approval has averaged
two to four years for in vivo products, although the approval process may take
longer, as was the case with CEA-Scan.
The amount of time taken for this approval process is a function of a number
of variables, including the quality of the submission and studies presented, the
potential contribution that the compound will make in improving the diagnosis
and/or treatment of the disease in question and the workload at the FDA. There
can be no assurance that any new product will successfully proceed through this
approval process or that it will be approved in any specific period of time.
Depending upon marketing and distribution plans and arrangements for a
particular product, the Company may require additional time before a proposed in
vivo product is available for commercial sale.
The steps required before biological products can be produced and marketed
usually include preclinical non-human studies, the filing of an IND application,
human clinical trials and the filing and approval of a BLA. In addition to
obtaining FDA approval for each product, the FDA must also approve any
production facilities for the product.
Pre-clinical studies are conducted in the laboratory and in animal model
systems to gain preliminary information on the drug's effectiveness and to
identify major safety problems. The results of
13
these studies are submitted to the FDA as part of the IND application before
approval can be obtained for the commencement of testing in humans. The human
clinical testing program required for a new biologic or pharmaceutical product
involves several phases. The initial clinical evaluation, Phase I, consists of
administering the product and testing for safe and tolerable dosages while
noting the effectiveness of the product at the various dose levels. Typically,
for cancer agents, testing is done with a small group of patients with
widespread cancers that have been unresponsive to other forms of therapy. Phase
II involves a study to evaluate the effectiveness of the product for a
particular indication and to refine optimal dosage and schedule of
administration and identify possible side effects and risks in a larger patient
group. When a product is determined to be effective in Phase II trials, it is
then evaluated in Phase III clinical trials. Phase III trials consist of
additional testing for effectiveness and safety with a further expanded patient
group, usually at multiple test sites. A therapeutic cancer product must be
compared to standard treatments, if such treatments exist, to determine its
relative effectiveness in randomized trials.
Human clinical trials of in vivo monoclonal antibody products may combine
Phase I and Phase II trials. In selected cases, a more traditional Phase II
study may be performed to examine the effectiveness of a single product in one
or a limited number of configurations or dose schedules in a single tumor type.
When Phase III studies are complete, the results of the pre-clinical and
clinical studies, along with manufacturing information, are submitted to the FDA
in the form of a BLA. The BLA involves considerable data collection,
verification and analysis, as well as the preparation of summaries of the
production and testing processes, pre-clinical studies and clinical trials. The
BLA is submitted to the FDA for product marketing approval. The FDA must approve
the BLA and manufacturing facilities before the product may be marketed. The FDA
may also require post-marketing testing, including extensive Phase IV studies,
and surveillance to monitor the effects of the product in general use. Product
approvals may be withdrawn if compliance with regulatory standards is not
maintained or if problems occur following initial marketing. In addition, the
FDA may in some circumstances impose restrictions on the use of the drug that
may limit its market potential, and also make it difficult and expensive to
administer.
The Company seeks to have its proposed products, when applicable, designated
as 'Orphan Drugs' under the Orphan Drug Act of 1983. The Orphan Drug Act
generally provides incentives to manufacturers to develop and market products to
treat relatively rare diseases, i.e., diseases affecting fewer than 200,000
persons in the United States. The Company has received Orphan Drug designation
for, among others, AFP-Scan, LymphoScan and LymphoCide, the Company's liver and
germ-cell imaging, lymphoma imaging and lymphoma therapeutic products,
respectively, and for CEA-Scan for the diagnosis of medullary thyroid cancer. A
drug that receives Orphan Drug designation and is the first product to receive
FDA marketing approval for its product claim is entitled to a seven-year
exclusive marketing period in the United States for that claim for the product.
However, a drug that is considered by the FDA to be different from a particular
Orphan Drug is not barred from sale in the United States during this seven-year
exclusive marketing period.
Manufacture of a biological product must be in a facility approved by the
FDA for such product. The manufacture, storage and distribution of both
biological and nonbiological drugs must be in compliance with Good Manufacturing
Practices ('GMP'). Manufacturers must continue to expend time, money and effort
in the area of production and quality control to ensure full technical
compliance with those requirements. The labeling, advertising and promotion of
drug or biological product must be in compliance with FDA regulatory
requirements. Failure to comply with applicable requirements relating to
manufacture, distribution or promotion can lead to FDA demands that production
and shipment cease, and, in some cases, that products be recalled, or to
enforcement actions that can include seizures, injunctions and criminal
prosecution. Such failures, or new information reflecting on the safety and
effectiveness of the drug that comes to light after approval, can also lead to
FDA withdrawal of approval to market the product.
The drug approval process is similar in other countries and is also
regulated by specific agencies in each geographic area. Approval by the FDA
does not ensure approval in other countries. Generally,
14
however, products that are approved by the FDA in the U.S. will ultimately
gain marketing approval in other countries, but may require considerable
additional time to do so.
The Company's ability to commercialize its products successfully may also
depend in part on the extent to which reimbursement for the cost of such
products and related treatment will be available from government health
administration authorities, private health insurers and other organizations.
The Company's present and future business is also subject to regulation
under state and Federal law regarding work place safety, laboratory practices,
the use and handling of radioisotopes, environmental protection and hazardous
substance control and to other present and possible future local, federal and
foreign regulations. The Company believes its operations comply, in all material
respects, with applicable environmental laws and regulations, and the Company is
continuing its efforts to ensure its full compliance with such laws and
regulations.
Competition
The biotechnology industry is highly competitive, particularly in the area
of cancer diagnostic, imaging and therapeutic products. The Company is likely to
encounter significant competition with respect to its proposed products
currently under development. A number of companies which are engaged in the
biotechnology field, and in particular the development of cancer diagnostic and
therapeutic products, have financial, technical and marketing resources
significantly greater than those of the Company. Some companies with established
positions in the pharmaceutical industry may be better equipped than the Company
to develop, refine and market products based on technologies applied to the
diagnosis and treatment of cancers and infectious diseases. The Company's
ability to compete in the future will depend, in part, on its ability to foster
an environment in which multi-disciplinary teams work together to develop
low-cost, well-defined processes and bring cost-beneficial products successfully
through clinical testing and regulatory approval. A significant amount of
research and antibody-based technology are also carried out at universities and
other non-profit research organizations, which are becoming increasingly aware
of the commercial value of their findings and are becoming more active in
seeking patent and other proprietary rights, as well as licensing revenues.
The Company is pursuing an area of product development in which there is the
potential for extensive technological innovation in relatively short periods of
time. The Company's competitors may succeed in developing products that are
safer or more effective than those of the Company's potential products. Rapid
technological change or developments by others may result in the Company's
present products and potential products becoming obsolete or non-competitive.
The Company believes that the technological attributes of its proposed
diagnostic imaging products, including the ease of use (e.g., single vial, rapid
imaging), employment of technetium-99m (the most widely available radioisotope)
and its use of an antibody fragment (better liver imaging, decreased HAMA
response) will enable the Company to compete effectively in the marketplace.
Employees
As of September 28, 1998, the Company employed 115 persons on a full-time
basis, 24 of whom are in research and development departments, 20 of whom are
engaged in clinical research and regulatory affairs, 18 of whom are engaged in
operations and manufacturing, and 53 of whom are engaged in finance,
administration, sales and marketing. Of these employees, 25 hold M.D., Ph.D. or
other advanced degrees. The Company believes that it has been successful in
attracting skilled and experienced scientific personnel; however, competition
for such personnel continues to be intense. The Company's employees are not
covered by a collective bargaining agreement, and the Company believes that its
relationship with its employees is excellent.
Item 2 -- Properties
The Company's headquarters is located at 300 American Road, Morris Plains,
New Jersey, where it leases approximately 60,000 square feet. On May 29, 1998,
the Company exercised its right to renew the lease, which otherwise would have
expired in May 1999, for an additional term of three years expiring
15
in May, 2002 at a base annual rental of $441,000. The lease provides for a
second renewal period of five years expiring on May, 2007. The lease provides
for an option to purchase the facility, subject to certain terms and conditions
as specified in the lease. The Company's manufacturing, regulatory, medical,
research and development laboratories, finance, marketing and executive offices
are currently located in this facility, occupying approximately 60,000 square
feet. The Company has also completed the construction and equipping of a 7,500
square-foot commercial-scale manufacturing facility within the Morris Plains
headquarters, which consists of four independent antibody manufacturing suites,
several support areas, and a QC laboratory (see 'Manufacturing'). In addition,
the Company's European Subsidiary, Immunomedics Europe, leases executive office
space in Hillegom, The Netherlands.
Item 3 -- Legal Proceedings
Pursuant to its 1991 agreement with Adria Laboratories Division of Erbamont,
Inc., which later became Pharmacia, Inc. and subsequently Pharmacia & Upjohn
('Pharmacia'), the Company granted to Pharmacia an exclusive license to market
and sell CEA-Scan, AFP-Scan and LymphoScan products for certain specified
indications in the United States and Canada. In June, 1994, the Company and
Pharmacia, in the context of discussions directed towards restructuring their
relationship, agreed to release Pharmacia from certain obligations, whereby the
Company regained the marketing and selling rights and assumed financial
responsibility for all future clinical, marketing and selling activities for
LymphoScan and AFP-Scan. On August 2, 1995, the Company announced that its
agreement with Pharmacia was terminated, and that the Company had regained the
North American marketing and selling rights for CEA-Scan from Pharmacia.
Subsequent to termination of the Agreement, the Company and Pharmacia were
unable to agree on the amount of a final payment by Pharmacia to the Company to
satisfy Pharmacia's remaining obligations. In June, 1996, the Company filed a
claim against Pharmacia before the American Arbitration Association claiming
damages for breach of contract and fiduciary duty in the amount of $60 million
plus punitive damages. Arbitration proceedings commenced soon thereafter. Final
closing arguments were made on September 17, 1997. On November 28, 1997, the
Company was awarded damages in the amount of $1.8 million, including interest.
As described in 'Business -- Marketing, Sales and Distribution', the Company
terminated its agreements with the Mallinckrodt Affiliates on April 6, 1998.
Pursuant to the agreements, the Company has the right to audit certain aspects
of performance of the Mallinckrodt Affiliates. Further, the Company has reserved
all of its rights and remedies in connection with the agreements until a full
assessment of compliance with the terms and conditions of the agreements has
been completed.
The Company is involved in various other claims and litigation arising in
the normal course of business. Management believes that the outcome of such
claims and litigation will not have a material adverse effect on the Company's
financial position and results of operations.
Item 4 -- Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of securities holders during the fourth
quarter of fiscal year 1998.
Executive Officers of the Registrant
The Executive Officers of the Company and their positions with the Company
are as follows:
Name Age Position with the Company
- ---------------------------- ----------- -------------------------------------------------
David M. Goldenberg......... 60 Chairman of the Board and Director
Robert J. DeLuccia.......... 53 President, Chief Executive Officer and Director
Hans J. Hansen.............. 65 Vice President, Research and Development
Kevin F.X. Brophy........... 46 Vice President, Finance & Administration and
Chief Financial Officer
Joseph E. Presslitz......... 56 Vice President, Regulatory Affairs
Melvin Snyder............... 55 Vice President, Marketing and Business
Development
16
Each of the Executive Officers was elected as such by the Board of Directors
of the Company and holds his office at the discretion of the Board of Directors
or until his earlier death or resignation, except that Dr. Goldenberg and Mr.
DeLuccia hold their offices pursuant to employment agreements (See 'Executive
Compensation').
Dr. David M. Goldenberg founded the Company in July, 1982, and since that
time, has been Chairman of the Board of the Company. Dr. Goldenberg served as
Chief Executive Officer from July, 1982, through July, 1992, and from February,
1994 through May 1998. Dr. Goldenberg was Professor of Pathology at the
University of Kentucky Medical Center from 1973 until 1983 and Director of such
University's Division of Experimental Pathology from 1976 until 1983. From 1975
to 1980 he also served as Executive Director of the Ephraim McDowell Community
Cancer Network, Inc., and from 1978 to 1980 he was President of the Ephraim
McDowell Cancer Research Foundation, Inc., both in Lexington, Kentucky. Dr.
Goldenberg is a graduate of the University of Chicago College and Division of
Biological Sciences (S.B.), the University of Erlangen-Nuremberg (Germany)
Faculty of Natural Sciences (Sc.D.), and the University of Heidelberg (Germany)
School of Medicine (M.D.). He has written or co-authored more than 950 journal
articles, book chapters and abstracts on cancer research, detection and
treatment, and has researched and written extensively in the area of
radioimmunodetection using radiolabeled antibodies. In addition to his position
with the Company, Dr. Goldenberg is President of CMMI, an independent non-profit
research center, and its clinical unit, the Garden State Cancer Center. He also
holds the position of Adjunct Professor of Microbiology and Immunology with the
New York Medical College in Valhalla, New York. In 1985 and again in 1992, Dr.
Goldenberg received an 'Outstanding Investigator grant' award from the National
Cancer Institute ('NCI') for his work in radioimmunodetection, and in 1986 he
received the New Jersey Pride Award in Science and Technology. Dr. Goldenberg
was honored as the ninth Herz Lecturer of the Tel Aviv University Faculty of
Life Sciences. In addition, he received the 1991 Mayneord 3M Award and
Lectureship of the British Institute of Radiology for his contributions to the
development of radiolabeled monoclonal antibodies used in the imaging and
treatment of cancer. Dr. Goldenberg was also named the co-recipient of the 1994
Abbott Award by the International Society for Oncodevelopmental Biology and
Medicine.
Robert J. DeLuccia has over 28 years of pharmaceutical industry experience
including sales, marketing, new product development and general management. In
1994, Mr. DeLuccia was appointed President of Sanofi Winthrop Pharmaceuticals
U.S., the U.S. subsidiary of Paris based Sanofi. In 1984, he joined Winthrop
Pharmaceuticals as vice president of marketing for its imaging and therapeutic
product lines and held positions of increasing responsibility in Sterling
Winthrop Pharmaceuticals. His pharmaceutical career began in 1970 as a sales
representative for Pfizer Laboratories, and over the succeeding 14 years he rose
to the position of vice president of marketing and sales operations of Pfizer's
Roerig Division. Mr. DeLuccia holds a master's degree in Business Administration
from Iona College.
Dr. Hans J. Hansen has been Vice President, Research and Development, since
March 1987. Prior to joining the Company in 1985 as Director of Cell Biology, he
was for three years the Director of Product Development at Ortho Diagnostic
Systems, Inc., a subsidiary of Johnson & Johnson Corporation, where he developed
monoclonal antibodies for the diagnosis of leukemia and other cancers. From 1969
to 1982, Dr. Hansen was with Hoffmann-La Roche in a variety of positions,
becoming Director of the Department of Immunology in 1982. While at Hoffmann-La
Roche, he developed the first in vitro diagnostic CEA immunoassay and had a
major role in establishing its clinical importance in the diagnosis and
management of cancer. Dr. Hansen has spent 38 years conducting clinical and
basic research in the fields of cancer and autoimmune disease. His work has
resulted in the issuance of eight United States patents and over 90 publications
relating to cancer and autoimmune diseases.
Mr. Kevin F.X. Brophy has been Vice President, Finance and Administration,
and Chief Financial Officer since January 1998. Prior to joining the Company,
Mr. Brophy was Assistant Treasurer with Harris Chemical Group, Inc., a
leveraged buyout group, from February 1996 until December 1997 From October
1980 until April 1995, Mr. Brophy held a series of financial positions with
American Cyanamid Company including Controller of Lederle Pharmaceuticals, and
Director of Finance for Cyanamid Great Britain and Cyanamid Latin America. Prior
to American Cyanamid Company, he was employed by KPMG Peat Marwick. Mr. Brophy
is a Certified Public Account licensed in New Jersey. He is a graduate of St.
Peters College and attended Fairleigh Dickinson University graduate school.
Dr. Joseph E. Presslitz has been employed by the Company since February,
1992, and has served as Vice President, Regulatory Affairs since September,
1997, and prior thereto as Executive Director,
17
Regulatory Affairs. From 1985 until 1992, he held the position of Director,
International Regulatory Affairs at the Lederle Division of American Cyanamid.
From 1980 until 1985, he was Director of Laboratories at Masti-Kure, Inc., a
veterinary pharmaceutical company. Prior thereto, Dr. Presslitz spent nine years
in research and development in the areas of infectious disease and rheumatology
at Pfizer, Inc. He received his Ph.D. in biochemistry from St. Louis University,
and post-doctoral training in molecular biology at the Massachusetts Institute
of Technology.
Mr. Mel Snyder has been Vice President of Marketing and Business Development
since January 1998 after serving as consultant, director of marketing, since
February 1997. In 1975, Mr. Snyder founded ProClinica Inc., a medical education
and marketing communications company in New York. Over the succeeding 19 years,
its clients included New England Nuclear, the predecessor to DuPont
radiopharmaceuticals; the former Hoffmann-LaRoche Medi-Physics division, and
Amersham. In 1988, Mr. Snyder launched RadNET, The Nuclear Network, the first
online doctor-to-doctor computer network, designed to enable sharing of cases
and information among nuclear physicians and technologists worldwide. He has
been active in the Society of Nuclear Medicine since 1978. At the 1992 and 1993
SNM annual meetings, he ran categorical seminars on 'Marketing Your Nuclear
Medicine Department under Managed Care.' He has lectured in the U.S. and Japan
on managed care and disease management. He has consulted for some of Japan's
largest pharmaceutical companies, on strategies for entering the U.S. healthcare
market. For the first two years after the dissolution of the Soviet Union, Mr.
Snyder was consultant to the Ministry of Health & Welfare of the Republic of
Ukraine, helping that nation to convert seized Soviet military factories into
medical products manufacturing. Mr. Snyder holds a bachelor's degree from Lehigh
University.
18
PART II
Item 5 -- Market For Registrant's Common Stock and Related Stockholder Matters
The Company's Common Stock is traded on The Nasdaq National Market under the
symbol 'IMMU'. The table below sets forth for the periods indicated the high and
low sales prices for the Company's Common Stock, as reported by The Nasdaq Stock
Market. As of September 24, 1998, there were approximately 1,140 holders of
record of the Company's Common Stock.
Fiscal Quarter Ended High Low
- ------------------------------------------------------- --------- ---------
September 30, 1996..................................... 13 6 3/8
December 31, 1996...................................... 8 5/8 4 1/2
March 31, 1997......................................... 7 3/8 3 5/8
June 30, 1997.......................................... 6 1/16 3 11/16
--- ---
September 30, 1997..................................... 5 1/2 3 15/16
December 31, 1997...................................... 5 1/2 3 1/8
March 31, 1998......................................... 5 1/8 2 3/4
June 30, 1998.......................................... 6 5/8 3 3/4
--- ---
Item 6 -- Selected Financial Data (fiscal year ended June 30)
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(In thousands, except per share amounts)
Total revenues................................. $ 7,595 $ 3,841 $ 1,700 $ 3,189 $ 4,237
Total operating expenses....................... 19,406 17,775 15,000 14,593 19,293
Net loss prior to dividends.................... (11,811) (13,934) (13,300) (11,404) (15,056)
Dividends on preferred stock................... -- 13 -- -- --
Net loss....................................... (11,811) (13,947) (13,300) (11,404) (15,056)
Net loss per common share...................... $ (0.32) $ (0.39) $ (0.40) $ (0.38) $ (0.50)
Weighted average shares outstanding............ 36,643 35,445 32,904 30,098 30,051
Cash, cash equivalents and marketable
securities................................... $ 7,583 $ 15,024 $ 28,691 $ 22,814 $ 25,230
Total assets................................... 14,942 22,635 35,720 28,224 31,833
Stockholders' equity(1)........................ 10,526 17,446 31,153 23,629 27,395
- ---------
(1) The Company has not paid cash dividends on its Common Stock since its
inception.
Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Statements made in this Form 10-K, other than those concerning historical
information, should be considered forward-looking and subject to various risks
and uncertainties. Such forward-looking statements are made based on
management's belief as well as assumptions made by, and information currently
available to, management pursuant to the 'safe harbor' provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements as a result of a variety of factors, including those identified in
'Business' and elsewhere in this Annual Report on Form 10-K for the fiscal year
ended June 30, 1998.
Since its inception, the Company has been engaged primarily in the research
and development and, more recently, the commercialization of proprietary
products relating to the detection, diagnosis and treatment of cancer and
infectious diseases. On June 28, 1996, the U.S. Food and Drug Administration
('FDA') licensed CEA-Scan for use with other standard diagnostic modalities for
the detection of recurrent and/or metastatic colorectal cancer. On October 4,
1996, the European Commission granted marketing authorization for use of the
product in the 15 countries comprising the European Union for the same
indication. On September 16, 1997, the Company received a notice of compliance
from the
19
Health Protection Branch permitting it to market CEA-Scan in Canada for
colorectal cancer for recurrent and metastatic colorectal cancer.
On February 14, 1997, the Company was granted regulatory approval by the
European Commission to market LeukoScan, an in vivo infectious disease
diagnostic imaging product, in all 15 countries which are members of the
European Union, for the detection and diagnosis of osteomyelitis (bone
infection) in long bones and in diabetic foot ulcer patients. On December 19,
1996, the Company filed a Biologics License Application for LeukoScan with the
FDA for the same indication approved in Europe, plus an additional indication
for the diagnosis of acute, atypical appendicitis. As with all filings, there
can be no assurance that regulatory approval for such indications will be
received.
The Company is also engaged in developing other biopharmaceutical products,
which are in various stages of development and clinical testing. The Company has
not achieved profitable operations and does not anticipate achieving profitable
operations during fiscal year 1999. The Company will continue to experience
operating losses until such time, if at all, that it is able to generate
sufficient revenues from sales of CEA-Scan, LeukoScan and its other proposed in
vivo products. Further, the Company's working capital will continue to decrease
until such time, if at all, that the Company is able to generate positive cash
flow from operations or until such time, if at all, that the Company receives an
additional infusion of cash from the sale of the Company's securities, from
other financing or from corporate alliances to finance the Company's operating
expenses and capital expenditures.
Results of Operations
Fiscal Year 1998 compared to Fiscal Year 1997
Revenues for fiscal year 1998 were $7,595,000 as compared to $3,841,000 in
fiscal year 1997, representing an increase of $3,754,000. The product sales for
fiscal year 1998 were $4,049,000 as compared to $1,387,000 in fiscal year 1997,
representing an increase of $2,662,000. The increase in product sales is
attributable to increased market acceptance of CEA-Scan and the launch of
LeukoScan in April 1997. Royalties and license fees for fiscal year 1998
decreased by $554,000, primarily due to the receipt of a nonrecurring $500,000
license fee from a corporate partner in fiscal 1997. Research and development
revenue for fiscal year 1998 increased by $550,000 as compared to fiscal 1997,
due to the recognition of previously deferred revenue received from Pharmacia.
Interest and other income for fiscal year 1998 increased by $1,096,000,
primarily due to the receipt of an arbitration award of $1.8 million, including
interest, in its dispute with Pharmacia offset by a decrease in interest income
of $721,000 due to reduced levels of cash available for investments (see
'Liquidity and Capital Resources').
Total operating expenses for fiscal year 1998 were $19,406,000 as compared
to $17,775,000 in fiscal year 1997, representing an increase of $1,631,000.
Research and development costs decreased by $1,376,000 as compared to the same
period in 1997, primarily due to a decrease in the level of expenditures
required to obtain validation of the Company's manufacturing facility and lower
cost associated with reduced patient enrollment for clinical trials. Sales and
marketing expenses for fiscal year 1998 were $5,380,000 as compared to
$1,792,000 in fiscal year 1997, representing an increase of $3,588,000,
primarily due to expenses of $1,753,000 associated with the Company's newly
hired full-time oncology sales force and operating expenses for Immunomedics
Europe which increased by $1,632,000 as compared to the same period of 1997.
General and administrative costs for fiscal year 1998 decreased by $758,000 as
compared to the same period of 1997, primarily due to reduced legal costs as a
result of the conclusion of the Pharmacia arbitration, which was settled in
November 1997.
Net loss for the fiscal year 1998 was $11,811,000, or $0.32 per share, as
compared to a net loss of $13,947,000, or $0.39 per share, in fiscal year 1997.
The lower net loss of $2,136,000 in 1998 as compared to 1997 primarily resulted
from higher revenues, partially offset by higher operating expenses, as
discussed above. In addition, the net loss per share for fiscal 1998 was
impacted by the higher weighted average number of shares outstanding during such
period as compared to fiscal 1997, which increase was principally due to the
conversion of the Company's preferred stock (see 'Liquidity and Capital
Resources').
20
Fiscal Year 1997 compared to Fiscal Year 1996
Revenues for fiscal year 1997 were $3,841,000 as compared to $1,700,000 in
fiscal year 1996, representing an increase of $2,141,000. The product sales for
fiscal year 1997 were $1,387,000 as compared to $55,000 in fiscal year 1996,
representing an increase of $1,332,000 as the product launch for CEA-Scan and
LeukoScan did not occur until October 1996 and April 1997, respectively.
Royalties and license fees for fiscal year 1997 increased by $456,000, primarily
due to the receipt of a nonrecurring $500,000 license fee from a corporate
partner in fiscal 1997. Research and development revenue for fiscal year 1997
increased by $471,000, as compared to fiscal 1996, due to increased grants.
Interest and other income for fiscal year 1997 decreased by $236,000, as
compared to fiscal 1996, primarily due to reduced levels of cash available for
investments (see 'Liquidity and Capital Resources').
Total operating expenses for the fiscal year 1997 were $17,775,000 as
compared to $15,000,000 in fiscal year 1996, representing an increase of
$2,775,000. Research and development costs increased by $610,000 as compared to
fiscal 1996 due to expenses associated with the validation of the Company's
manufacturing facility and expenses related to the filing of the application to
the FDA for approval of LeukoScan . Sales and marketing expenses for fiscal year
1997 were $1,792,000 as compared to $630,000 in fiscal year 1996, representing
an increase of $1,162,000, primarily due to marketing expenses for CEA-Scan of
$674,000 and operating expenses for Immunomedics Europe which increased by
$488,000 as compared to the same period of 1996. The general and administrative
costs increased by $1,017,000 as compared to fiscal 1996, of which, $944,000 was
principally due to higher legal expenses incurred in connection with the
arbitration claim against Pharmacia.
Net loss for the fiscal year 1997 was $13,947,000, or $0.39 per share, as
compared to a net loss of $13,300,000, or $0.40 per share, in fiscal year 1996.
The greater net loss resulted principally from higher general and administrative
expense partially offset by increased sales and royalty revenues, as explained
above. The net loss per share for the fiscal 1997 was impacted by the higher
weighted average number of shares outstanding during such period as compared to
fiscal 1996, which increase was principally due to the conversion of the
Company's preferred stock (see 'Liquidity and Capital Resources').
Liquidity and Capital Resources
At June 30, 1998, the Company had working capital of $5,466,000,
representing a decrease of $6,287,000 from June 30, 1997, and had no obligations
other than certain lease obligations (see Note 11 of Notes to Consolidated
Financial Statements). The decrease in working capital resulted principally from
the funding of operating expenses and capital expenditures.
On June 27, 1996, the Company completed an equity financing pursuant to
Regulation S under the Securities Act of 1933 ('Regulation S'), pursuant to
which several foreign investors purchased 200,000 shares of 5% Series D
Convertible Preferred Stock (the 'Series D Preferred') for $10,000,000. The
terms of the transaction allowed the investors, at their discretion, to convert
the Series D Preferred into shares of the Company's common stock during a
24-month period which began in June 1996, at a price equal to 89% of the average
market price per share over a 20-day trading period surrounding the date of
conversion. Dividends on the Series D Preferred were payable annually,
commencing June 30, 1997, on all shares of Series D Preferred that have not been
converted into common stock as of the dividend payment date. In August 1997, the
Company made a dividend payment of $12,498 of the Series D Preferred. As of June
30, 1998, all 200,000 shares of Series D Preferred had been converted into
1,795,771 shares of the Company's common stock.
On December 23, 1997, the Company entered into a structured Equity Line
Flexible Financing Agreement (the 'Equity Line') with an investor (the
'Investor'), pursuant to which, subject to the satisfaction of certain
conditions, the Company may receive up to an aggregate of $30 million over a
36-month period. During each three-month period (each, an 'Investment Period'),
the Company, subject to the satisfaction of certain conditions, can require the
Investor to purchase shares of the Company's common stock for an aggregate
purchase price of between $1.0 million and $2.5 million, and the Investor, at
its option, may purchase additional shares of common stock for an aggregate
purchase price of $1.0 million. The Company retains the right to provide that no
purchases can be made in any given Investment Period. The Investor may select
the dates on which the purchase of shares of the
21
Company's common stock will occur. The purchase price per share to be paid by
the Investor for the shares of the Company's common stock acquired under the
Equity Line will equal 98% of the lowest sales price of the common stock during
the three trading days immediately preceding the notice of purchase by the
Investor. The Investor's obligation to purchase shares of the Company's common
stock under the Equity Line is subject to various conditions, including, among
other things, the price of the Company's common stock being at least such price
as the Company may from time to time set as the minimum purchase price. In
addition, the Investor is not required to purchase, in any Investment Period, an
amount in excess of 8% of the product of the daily average value of open market
trading of the common stock and the number of trading days in the Investment
Period during either the current or immediately preceding Investment Period. The
Company granted the Investor the right to purchase an additional $1.0 million
during the Investment Period ended May 31, 1998. As of June 30, 1998, the
Company received a total of $4.5 million for which the Company issued 1,056,835
shares of common stock.
In connection with entering into the Equity Line with an Investor, the
Investor received a four-year warrant (the 'Warrant') to purchase 50,000 shares
of the common stock at an exercise price equal to $7.5375 per share (180% of
closing sales price of common stock at the time of issuance). In addition, the
Company has agreed to issue to the Investor, at the end of each calendar year,
an additional four-year warrant (each, an 'Additional Warrant' and collectively,
the 'Additional Warrants') to purchase common stock in an amount equal to 5,000
shares for each $500,000 of common stock purchased by the Investor during such
year. The exercise price will be equal to 180% of the weighted average purchase
price of the common stock purchased by the Investor during the year, provided
that the number of shares issuable upon exercise of all the Additional Warrants
will not exceed 125,000.
In February 1994, the Company entered into a master lease agreement, which
was subsequently amended, pursuant to which the Company may lease equipment for
research, development and manufacturing purposes having an aggregate acquisition
cost of up to $2,200,000. The basic lease payments under the master lease
agreement are determined based on current market rates of interest at the
inception of each equipment schedule take-down, and are payable in monthly
installments over a four-year period. The lease agreement contains an early
purchase option, at an amount which is deemed to be fair value.
On November 1, 1996, December 9, 1996, April 1, 1997 and September 1, 1998,
the Company exercised early purchase options on equipment leased on February 14,
1994, April 1, 1994, June 1, 1994 and August 26, 1994, respectively. Under the
lease agreement, continued compliance with certain financial ratios is required
and, in the event of default, the Company will be required to provide an
irrevocable letter of credit which is generally equal to the outstanding balance
of lease payments due at the time of default, which was approximately $412,000
at June 30, 1998. As of June 30, 1998, the Company was not in compliance with
certain of these ratios, but the lessor has not yet declared an event of default
or requested a letter of credit. The Company does not believe that such a
request would have a material adverse effect on the Company. As of June 30,
1998, the Company has leased equipment with a cost basis aggregating $1,247,000
under the master lease agreement and recorded lease expense for fiscal years
1998, 1997 and 1996 of $348,000, $497,000 and $406,000, respectively. The
Company has a commitment to refinance the outstanding lease obligations and
anticipates closing during the second quarter of fiscal year 1999.
The Company's liquid asset position, as measured by its cash, cash
equivalents and marketable securities, was $7,583,000 at June 30, 1998,
representing a decrease of $7,441,000 from June 30, 1997. It is anticipated that
working capital and cash, cash equivalents, and marketable securities will
decrease during fiscal year 1999 as a result of planned operating expenses and
capital expenditures, offset in part by projected revenues from product sales in
the U. S. and Europe. However, there can be no assurance, as to the amount of
revenues, if any, these products will provide. At present, the Company believes
that its current cash resources and funds available under the Equity Line, as
discussed above, will be sufficient to fund anticipated operating expenses and
capital expenditures through calendar year 1999.
In addition to the funds available under the Equity Line, the Company
believes that it may require additional financial resources by the beginning of
calendar year 2000 in order for it to continue its
22
projected levels of research and development and clinical trials of its proposed
products and regulatory filings for new indications of existing products.
In addition, the Company intends to supplement its financial resources from
time to time as market conditions permit through additional financing and
through collaborative marketing and distribution agreements. Also, the Company
continues to evaluate various programs to raise additional capital and to seek
additional revenues from the licensing of its proprietary technology. At the
present time, the Company is unable to determine whether any of these future
activities will be successful and, if so, the terms and timing of any definitive
agreements. There can be no assurance that the Company will be able to obtain
additional funds in the future.
Impact of Year 2000
The Company is in the process of conducting a review of its business
systems, including its computer systems and manufacturing equipment, and has
sent written inquiries to its customers, distributors and vendors as to their
progress in identifying and addressing problems that their systems may face in
correctly interpreting and processing date information as the year 2000
approaches and is reached. This review is expected to be complete by March 1999.
Based on this review, the Company will implement a plan to achieve year 2000
compliance. The Company believes that it will achieve year 2000 compliance in a
manner which will be non-disruptive to its operations. In addition, the Company
has commenced work on various types of contingency planning to address potential
problem areas with internal systems, suppliers and other third parties. Year
2000 compliance should not have a material adverse effect on the Company,
including the Company's financial condition, results of operations or cash flow.
The Company has incurred no costs to date related to year 2000. The Company
estimates the cost of its year 2000 efforts to be approximately $250,000. The
total cost estimate is based on management's current assessment and is subject
to change.
However, the Company may encounter problems with supplier and or revenue
sources which could adversely affect the Company's financial condition, results
of operations or cash flow. The Company cannot accurately predict the occurrence
and or outcome of any such problems, nor can the dollar amount of such problem
be estimated. In addition, there can be no assurance that the failure to ensure
year 2000 compliance by a third party would not have a material adverse effect
on the Company.
23
Item 8 -- Financial Statements and Supplementary Data
PART I. - FINANCIAL INFORMATION
IMMUNOMEDICS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, June 30,
1998 1997
______________ ______________
ASSETS
Current Assets
Cash and cash equivalents $ 7,568,147 6,013,355
Marketable securities 14,845 9,010,275
Accounts receivable 1,039,477 559,017
Inventory 913,927 690,695
Other current assets 345,491 667,983
______________ ______________
Total Current Assets 9,881,887 16,941,325
Property and equipment, net of
accumulated depreciation of
$5,815,000 and $4,852,000 at
June 30, 1998 and 1997,
respectively 5,059,935 5,693,193
______________ ______________
TOTAL ASSETS $ 14,941,822 22,634,518
______________ ______________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 1,831,458 2,360,256
Other current liabilities 2,584,769 2,827,970
______________ ______________
Total Current Liabilities 4,416,227 5,188,226
Commitments and Contingencies
Preferred stock; $.01 par value,
authorized 10,000,000 shares;
Series D convertible, authorized
200,000 shares; issued and
outstanding none and 4,999
shares at June 30, 1998 and 1997,
respectively 0 50
Common stock; $.01 par value,
authorized 70,000,000 shares;
issued and outstanding 37,586,087
and 36,297,170 shares at
June 30, 1998 and 1997, respectively 375,861 362,971
Capital contributed in excess
of par 97,987,728 93,111,855
Accumulated deficit (87,837,979) (76,027,392)
Accumulated net unrealized
loss on securities (15) (1,192)
______________ ______________
Total stockholders' equity 10,525,595 17,446,292
______________ ______________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 14,941,822 22,634,518
______________ ______________
See accompanying notes to consolidated financial statements.
24
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30,
__________________________________________________
1998 1997 1996
____________ ___________ ___________
REVENUES:
Product sales $ 4,049,031 1,387,042 54,609
Royalties and licence
fees 33,751 587,764 131,278
Research and development 1,170,252 620,543 150,000
Interest and other 2,342,505 1,246,118 1,364,205
____________ ___________ ___________
7,595,539 3,841,467 1,700,092
____________ ___________ ___________
COST AND EXPENSES:
Cost of goods sold 191,343 14,508 28,124
Research and development 11,738,155 13,113,991 12,503,837
Sales and marketing 5,379,728 1,792,117 630,091
General and administrative 2,096,900 2,854,884 1,837,517
____________ ___________ ___________
19,406,126 17,775,500 14,999,569
____________ ___________ ___________
Net loss prior to
dividends (11,810,587) (13,934,033) (13,299,477)
Dividends 0 12,498 0
____________ ___________ ___________
Net Loss $(11,810,587) (13,946,531) (13,299,477)
____________ ___________ ___________
Net loss per basic and
diluted common share $ (0.32) (0.39) (0.40)
____________ ___________ ___________
Weighted average number of
common shares outstanding 36,643,319 35,445,033 32,903,764
____________ ___________ ___________
See accompanying notes to consolidated financial statements.
25
IMMUNOMEDICS, INC.
Consolidated Statements of Changes in Stockholders' Equity
Convertible Common Capital Accumulated
Preferred Stock Stock Contributed Unrealized
-------------------------------------------- in Excess Accumulated Gain/(Loss)
Shares Amount Shares Amount of Par Deficit On Securities Total
-----------------------------------------------------------------------------------------------
Balance, at June 30, 1995........... 124,527 $ 1,245 30,624,585 $ 306,246 $ 72,098,771 $ (48,781,384) $ 4,297 $ 23,629,175
Issuance of common stock
in exchange for convertible
preferred stock (Series B), net. (124,527) (1,245) 2,000,584 20,006 (18,761) 0 0 0
Issuance of convertible
preferred stock (Series C), net. 200,000 2,000 0 0 9,980,500 0 0 9,982,500
Issuance of common stock
in exchange for convertible
preferred stock (Series C), net. (171,585) (1,716) 1,356,041 13,560 (11,844) 0 0 0
Issuance of convertible
preferred stock (Series D), net. 200,000 2,000 0 0 9,980,500 0 0 9,982,500
Exercise of options to
purchase common stock........... 0 0 324,275 3,243 865,183 0 0 868,426
Net unrealized loss on securities. 0 0 0 0 0 0 (9,918) (9,918)
Net loss.......................... 0 0 0 0 0 (13,299,477) 0 (13,299,477)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, at June 30, 1996........... 228,415 2,284 34,305,485 343,055 92,894,349 (62,080,861) (5,621) 31,153,206
Issuance of common stock
in exchange for convertible
preferred stock (Series C), net. (28,415) (284) 182,646 1,826 (1,542) 0 0 0
Issuance of common stock
in exchange for convertible
preferred stock (Series D), net. (195,001) (1,950) 1,733,439 17,334 (15,384) 0 0 0
Exercise of options to
purchase common stock........... 0 0 75,600 756 234,432 0 0 235,188
Dividend on preferred stock....... 0 0 0 0 (12,498) 0 (12,498)
Net unrealized gain on securities. 0 0 0 0 0 0 4,429 4,429
Net loss.......................... 0 0 0 0 0 13,934,033) 0 (13,934,033)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, at June 30, 1997........... 4,999 50 36,297,170 362,971 93,111,855 (76,027,392) (1,192) 17,446,292
Issuance of common stock
in exchange for convertible
preferred stock (Series D), net. (4,999) (50) 62,332 623 (573) 0 0 0
Issuance of common stock
pursuant to Equity Line, net... 0 0 1,056,835 10,569 4,446,931 0 0 4,457,500
Exercise of options to
purchase common stock........... 0 0 169,750 1,698 429,515 0 0 431,213
Net unrealized gain on securities. 0 0 0 0 0 0 1,177 1,177
Net loss.......................... 0 0 0 0 0 (11,810,587) 0 (11,810,587)
- -----------------------------------------------------------------------------------------------------------------------------------
===============================================================================================
Balance, at June 30, 1998 0 $ 0 37,586,087 $ 375,861 $ 97,987,728 $ (87,837,979) $ (15) $ 10,525,595
===============================================================================================
See accompanying notes to consolidated financial statements.
26
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
1998 1997 1996
____________ ____________ ____________
Cash Flows From Operating Activities:
Net loss $(11,810,587) (13,946,531) (13,299,477)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 962,943 1,139,163 944,282
Amortization of bond premium 0 7,245 61,632
Change in operating assets and
liabilities:
Accounts receivable (480,460) (555,880) 33
Inventories (223,232) (497,023) (193,672)
Other current assets 322,492 54,171 (37,650)
Accounts payable (528,798) 716,687) (301,837)
Other current liabilities (243,201) (95,229) 273,297
____________ ___________ ____________
Net Cash Used In Operating
Activities $(12,000,843) (13,177,397) (12,553,392)
____________ ___________ ____________
Cash Flows Provided by (Used in)
Investing Activities:
Purchase of marketable securities (10,345,629) (36,095,876) (32,047,487)
Proceeds from maturities of
marketable securities 19,342,236 42,127,605 32,582,485
Additions to property and
equipment (329,685) (722,165) (2,331,869)
____________ ___________ ____________
Net cash provided by (Used in)
investing activities $ 8,666,922 5,309,564 (1,796,871)
____________ ___________ ____________
Cash Flows Provided by
Financing Activities:
Issuance of convertible stock, net 0 0 19,965,000
Issuance of common stock, net 4,457,500 0 0
Exercise of stock options 431,213 235,188 868,426
____________ ___________ ____________
Net cash provided by financing
activities $ 4,888,713 235,188 20,833,426
____________ ___________ ____________
Increase / (decrease) in cash and
cash equivalents 1,554,792 (7,632,645) 6,483,163
Cash and Cash Equivalents, at
beginning of year 6,013,355 13,646,000 7,162,837
____________ ___________ ____________
Cash and Cash Equivalents, at
end of year $ 7,568,147 6,013,355 13,646,000
____________ ___________ ____________
____________ ___________ ____________
See accompanying notes to consolidated financial statements.
27
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business Overview
Immunomedics, Inc. (the 'Company') is engaged in researching, developing,
manufacturing and marketing biopharmaceutical products, particularly
antibody-based diagnostics and therapeutics for cancer and infectious diseases.
The Company currently markets and sells CEA-Scan'r' in the U.S., and CEA-Scan
and LeukoScan'r' throughout Europe and in certain other markets outside the U.S.
The Company's operations encompass all the risks inherent in developing and
expanding a new business enterprise, including: (1) a limited operating history
and uncertainty regarding the timing and amount of future revenues to be derived
from the Company's technology; (2) obtaining future capital as needed; (3)
attracting and retaining key personnel; and (4) a business environment with
heightened competition, rapid technological change and strict government
regulation.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Immunomedics,
Inc. and its wholly-owned subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original maturities
of three months or less, at the time of purchase, to be cash equivalents.
The Company's investments in cash equivalents and marketable securities are
available for sale to fund growth in operations as the Company begins
commercialization of its products. The portfolio primarily consists of U.S.
government securities and corporate bonds.
Concentration of Credit Risk
The Company invests its cash in U.S. Government securities and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company has established guidelines relative to diversification and
maturities that are designed to help ensure safety and liquidity. These
guidelines are periodically reviewed to take advantage of trends in yields and
interest rates. During fiscal year 1998 and 1997, one company represented
approximately 58% and 99%, respectively, of the Company's product sales.
Inventory
Inventory is stated at the lower of average cost (which approximates
first-in, first-out) or market, and includes materials, labor and manufacturing
overhead.
Property and Equipment
Property and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives (5-10 years) of the
respective assets. Leasehold improvements are capitalized and amortized over the
lesser of the life of the lease or the estimated useful life of the asset. The
Company reviews long-lived assets for impairment whenever events or changes in
business circumstances occur that indicate that the carrying amount of the
assets may not be recoverable. The Company assesses the recoverability of
long-lived assets held and to be used based on undiscounted cash flows, and
measures the impairment, if any, using discounted cash flows. SFAS No. 121 has
not had a material impact on the Company's consolidated financial position,
operating results or cash flows.
28
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Revenue Recognition
Payments received under contracts to fund certain research activities are
recognized as revenue in the period in which the research activities are
performed. Payments received in advance which are related to future performance
are deferred and recognized as revenue when the research projects are performed.
Non-refundable payments received under licensing arrangements are recognized
as revenue in the period in which they are received.
Revenue from the sale of diagnostic products is recognized at the time of
shipment.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities relate to the expected future tax
consequences of events that have been recognized in the Company's financial
statements and tax returns. The Company has not recorded any tax benefits
associated with its net deferred tax assets.
Net Loss Per Share
Basic and diluted loss per common share is based on the net loss for the
relevant period, adjusted for Preferred Stock dividends, divided by the weighted
average number of shares issued and outstanding during the period. For the
purposes of the diluted loss per share calculations, the exercise or conversion
of all potential common shares is not included because their effect would have
been anti-dilutive, due to the net loss recorded for the years ended June 30,
1998, 1997 and 1996. The Company has certain securities outstanding at June 30,
1998 that could potentially dilute basic earnings per share in the future that
were not included in the computation of diluted earnings per share because to do
so would have been anti-dilutive for the periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Employee Stock Options
The Company applies Accounting Principles Board ('APB') Opinion No. 25,
'Accounting for Stock Issued to Employees,' and related interpretation in
accounting for stock options issued to employees. Employee stock options are
granted with an exercise price equal to the market price and, in accordance with
APB No. 25, compensation expense is not recognized. Effective July 1, 1996, the
Company adopted the disclosure provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. For the fair value of the employee stock options
issued, see Note 7.
Financial Instruments
The carrying amounts of cash, marketable securities, and other current
assets and current liabilities approximate fair value due to the short-term
maturity of these instruments.
Reclassification
Certain 1996 and 1997 balances have been reclassified to conform to the 1998
presentation.
3. Marketable Securities
The Company utilizes Statement of Financial Accounting Standards Number
115 ('SFAS No. 115'), 'Accounting for Certain Investments in Debt and Equity
Securities,' to account for
29
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
investments in marketable securities. Under this accounting standard, securities
for which there is not the positive intent and ability to hold to maturity are
classified as available-for-sale and are carried at fair value. Unrealized
holding gains and losses on securities classified as available-for-sale are
carried as a separate component of stockholders' equity. The Company considers
all of its current investments to be available-for-sale. Consequently, pursuant
to SFAS No. 115, for the years ended June 30, 1998 and 1997, unrealized holding
losses of $0 and $1,000, respectively, have been recorded in a separate
component of stockholders' equity. Marketable securities at June 30, 1998 and
1997 consist of the following:
Fair Unrealized
Cost Market Holding
June 30, 1998 Basis Value Gain/(Loss)
- -------------------------------------------- --------- --------- ---------------
Securities with contractual maturities from date of Acquisition of greater than
one year:
U.S. Debt Securities.................... $ 15,000 $ 15,000 $ --
--------- --------- -------
--------- --------- -------
Total Marketable Securities......... $ 15,000 $ 15,000 $ --
--------- --------- -------
--------- --------- -------
Fair Unrealized
Cost Market Holding
June 30, 1997 Basis Value Gain/(Loss)
- -------------------------------------------- --------- --------- ---------------
Securities with contractual maturities from date of Acquisition of one year or
less:
U.S. Debt Securities.................... $2,459,000 $2,459,000 $ --
Corporate Debt Securities............... 6,437,000 6,437,000 --
--------- --------- -------
$8,896,000 $8,896,000 $ --
--------- --------- -------
--------- --------- -------
Securities with contractual maturities from date of Acquisition of greater than
one year:
U.S. Debt Securities.................... $ 115,000 $ 114,000 $ (1,000)
--------- --------- -------
--------- --------- -------
Total Marketable Securities......... $9,011,000 $9,010,000 $ (1,000)
--------- --------- -------
--------- --------- -------
4. Inventory
Inventory consists of the following at June 30:
1998 1997
--------- ---------
Finished goods.................................................. $ 607,000 $ 691,000
Raw materials................................................... 307,000 --
--------- ---------
$ 914,000 $ 691,000
--------- ---------
--------- ---------
5. Property and Equipment
Property and equipment consists of the following at June 30:
1998 1997
---------- ---------
Machinery and equipment..................................... $2,909,000 $2,857,000
Leasehold improvements...................................... 6,564,000 6,463,000
Furniture and fixtures...................................... 666,000 637,000
Computer equipment.......................................... 736,000 588,000
---------- ---------
10,875,000 10,545,000
Accumulated depreciation and amortization................... (5,815,000) (4,852,000)
---------- ---------
$5,060,000 $5,693,000
---------- ---------
---------- ---------
30
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Fully amortized property and equipment totaling $1,553,000 were retired in
fiscal year 1997.
6. Other Current Liabilities
Included in other current liabilities are amounts payable to medical
institutions participating in the Company's clinical trial programs of
approximately $568,000 and $458,000 at June 30, 1998 and 1997, respectively.
Also included are amounts payable to various legal counsel of approximately
$178,000 and $417,000, and accrued health insurance liabilities of approximately
$239,000 and $239,000 at June 30, 1998 and 1997, respectively. Further included
at June 30, 1998 and 1997 is $292,000 and $892,000, respectively, received from
a former corporate partner for the funding of ongoing clinical trials (see Note
10).
7. Stockholders' Equity
The Certificate of Incorporation of the Company authorizes 10,000,000 shares
of preferred stock at $.01 par value per share. The preferred stock may be
issued from time to time in one or more series, with such distinctive serial
designations, rights and preferences as shall be determined by the Board of
Directors.
On June 27, 1996, the Company completed an equity financing pursuant to
Regulation S, pursuant to which several foreign investors purchased 200,000
shares of 5% Series D Convertible Preferred Stock (the 'Series D Preferred') for
$10,000,000. The terms of the transaction allowed the investors, at their
discretion, to convert the Series D Preferred into shares of the Company's
common stock during a 24-month period which began in June 1996, at a price equal
to 89% of the average market price per share over a 20-day trading period
surrounding the date of conversion. As of June 30, 1998, all 200,000 shares of
Series D Preferred had been converted into 1,795,771 shares of the Company's
common stock.
On December 23, 1997, the Company entered into a structured Equity Line
Flexible Financing Agreement (the 'Equity Line') with an investor (the
'Investor'), pursuant to which, subject to the satisfaction of certain
conditions, the Company may receive up to an aggregate of $30 million over a
36-month period. During each three-month period (each, an 'Investment Period'),
the Company, subject to the satisfaction of certain conditions, can require the
Investor to purchase shares of the Company's common stock for an aggregate
purchase price of between $1.0 million and $2.5 million and the Investor, at its
option, may purchase additional shares of common stock for an aggregate purchase
price of $1.0 million. The Company retains the right to provide that no
purchases can be made in any given Investment Period. The Investor may select
the dates on which the purchase of shares of the Company's common stock will
occur. The purchase price per share to be paid by the Investor for the shares of
the Company's common stock acquired under the Equity Line will equal 98% of the
lowest sales price of the common stock during the three trading days immediately
preceding the notice of purchase by the Investor. The Investor's obligation to
purchase shares of the Company's common stock under the Equity Line is subject
to various conditions, including, among other things, the price of the Company's
common stock being at least such price as the Company may from time to time set
as the minimum purchase price. In addition, the Investor is not required to
purchase, in any Investment Period, an amount in excess of 8% of the product of
the daily average value of open market trading of the common stock and the
number of trading days in the Investment Period during either the current or
immediately preceding Investment Period. The Company granted the Investor the
right to purchase an additional $1.0 million during the Investment Period ended
May 31, 1998. As of June 30, 1998, the Company received a total of $4.5 million
for which the Company issued 1,056,835 shares of common stock.
In connection with entering into the Equity Line with an Investor, the
Investor received a four-year warrant (the 'Warrant') to purchase 50,000 shares
of the common stock at an exercise price equal to $7.5375 per share (180% of
closing sales price of common stock at the time of issuance). In addition, the
Company has agreed to issue to the Investor, at the end of each calendar year,
an additional four-year warrant (each, an 'Additional Warrant' and collectively,
the 'Additional Warrants') to purchase common stock in an amount equal to 5,000
shares for each $500,000 of common stock purchased by the
31
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Investor during such year. The exercise price will be equal to 180% of the
weighted average purchase price of the common stock purchased by the Investor
during the year, provided that the number of shares issuable upon exercise of
all the Additional Warrants will not exceed 125,000.
Under the terms of the Company's 1983 Stock Option Plan, as amended (the
'1983 Plan'), stock options were granted to employees and members of the Board
of Directors, as determined by the Compensation Committee of the Board of
Directors, at fair market value, become exercisable at 25% per year on each of
the first through fourth anniversaries of the date of grant, and terminate if
not exercised within ten years. In June 1993, the 1983 Plan expired, although
options granted under the 1983 plan which have not terminated may continue to be
exercised. On November 5, 1992, at the Company's Annual Meeting of Stockholders,
adoption of the Company's 1992 Stock Option Plan (the '1992 Plan') was ratified.
The basic terms of the 1992 Plan are substantially similar to those under the
Company's 1983 Plan. Under the 1992 Plan, 3,000,000 shares were originally
reserved for possible future issuance upon exercise of stock options, of which
1,025,875 were still available at June 30, 1998 for future grant. At June 30,
1998, 2,957,375 shares of common stock were reserved for possible future
issuance upon exercise of stock options outstanding and future stock option
grants.
Pursuant to the terms of the 1992 Plan, each outside Director of the Company
who had been a Director prior to July 1 is granted, on the first business day of
July of each year, an option to purchase 10,000 shares of the Company's common
stock at fair market value. On July 1, 1998, 50,000 stock options were granted
to these Directors.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, and applies APB Opinion No. 25 in
accounting for the 1983 plan and, accordingly, has not recognized compensation
cost for stock option plan in its financial statements. Had the Company
determined compensation cost based on the fair value at the grant date
consistent with the provisions of SFAS 123, the Company's net loss would have
been the pro forma amounts indicated below:
1998 1997 1996
--------- ---------- ----------
Net loss -- as reported......................$11,810,587 $13,946,531 $13,299,477
Net loss -- pro forma........................ 11,957,299 14,225,532 13,463,193
Net loss per share -- as reported............ .32 .39 .40
Net loss per share -- pro forma.............. .33 .40 .41
The fair value of each option granted during the three years ended June 30
is estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions; (I) dividend yield of 0%, (II) expected term of
8 years, 9.9 years and 9.9 years, (III) expected volatility of 42%, and (IV) a
risk-free interest rate of 5.57%, 6.5% and 6.5% for the years ended June 30,
1998, 1997 and 1996, respectively. The weighted average fair value at the date
of grant for options granted during the years ended June 30, 1998, 1997 and 1996
was $2.55, $4.91 and $2.34 per share, respectively.
The pro forma effects on net loss and net loss per share for 1998, 1997 and
1996 may not be representative of the pro forma effects in future years since
(i) compensation cost is allocated on a straight-line basis over the vesting
periods of the grants, which extends beyond the reported years, and (ii) does
not take into effect the proforma compensation expense related to grants made
prior to the year ended June 30, 1996.
32
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Information concerning options for the years ended June 30, 1998, 1997 and
1996 is summarized as follows:
Fiscal 1998
--------------------------
Option Price
Shares Range
--------- ---------------
Outstanding, July 1, 1997........................... 2,220,250 $2.25 - 12.88
Granted............................................. 138,000 4.38 - 5.31
Exercised........................................... (169,750) 2.25 - 3.63
Terminated.......................................... (201,000) 3.13 - 7.38
---------
Outstanding, June 30, 1998.......................... 1,987,500 2.25 - 12.88
--------- ---------------
Exercisable, June 30, 1998.......................... 1,078,500
---------
Fiscal 1997
--------------------------
Option Price
Shares Range
--------- ---------------
Outstanding, July 1, 1996........................... 2,280,475 $2.25 - 10.75
Granted............................................. 552,000 4.75 - 12.88
Exercised........................................... (75,600) 2.25 - 3.63
Terminated.......................................... (536,625) 2.31 - 12.88
---------
Outstanding, June 30, 1997.......................... 2,220,250 2.25 - 12.88
--------- ---------------
Fiscal 1996
--------------------------
Option Price
Shares Range
--------- ---------------
Outstanding, July 1, 1995........................... 1,800,000 $2.25 - 10.75
Granted............................................. 890,500 2.31 - 9.50
Exercised........................................... (324,275) 2.25 - 6.75
Terminated.......................................... (85,750) 2.63 - 6.63
---------
Outstanding, June 30, 1996.......................... 2,280,475 2.25 - 10.75
--------- ---------------
8. Income Taxes
The Company utilizes SFAS No. 109 to account for income taxes. Pursuant to
the accounting standard, the tax effects of temporary differences that give rise
to significant portions of the Company's deferred tax assets as of June 30,
1998, 1997 and 1996 are presented below:
1998 1997 1996
---------- ----------- -----------
Deferred tax assets:
Net operating loss carry forwards.. $33,040,000 $29,210,000 $24,362,000
Research and development credits... 4,160,000 3,830,000 3,253,000
Property and equipment............. 647,000 500,000 293,000
Other.............................. 574,000 565,000 422,000
----------- ----------- -----------
Total.......................... 38,421,000 34,105,000 28,330,000
Valuation allowance.................... (38,421,000) (34,105,000) (28,330,000)
----------- ----------- -----------
Net deferred taxes..................... $ -- $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
The valuation allowances for fiscal years 1998, 1997 and 1996 have been
applied to offset the deferred tax assets in recognition of the uncertainty that
such tax benefits will be realized. The valuation allowances as of June 30,
1998, 1997 and 1996 include $4,316,000, $5,775,000 and $6,250,000 relating to
fiscal years 1998, 1997 and 1996 operations, respectively. The tax benefit
assumed using the federal statutory tax rate of 34% has been reduced to an
actual benefit of zero due principally to the aforementioned valuation
allowance.
At June 30, 1998, the Company has available net operating loss carryforwards
for federal income tax reporting purposes of approximately $83,000,000, some of
which expire beginning in fiscal 1999. The
33
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Company made no payments of federal or state income taxes during the years ended
June 30, 1998, 1997 and 1996.
9. Related-Party Transactions
The Center for Molecular Medicine and Immunology ('CMMI') (also known as the
Garden State Cancer Center) is a not-for-profit corporation, established in 1983
by Dr. David M. Goldenberg, Chairman of the Board, former Chief Executive
Officer and the major shareholder of the Company. CMMI is devoted primarily to
cancer research.
Dr. Goldenberg currently serves as the President of CMMI pursuant to an
employment agreement and devotes substantially more of his working time to CMMI
than to the Company. Allocations between CMMI and the Company regarding research
projects are overseen by the Board of Trustees of CMMI and the Board of
Directors of the Company, excluding Dr. Goldenberg, to minimize potential
conflicts of interest. Certain employees of CMMI serve as consultants to the
Company.
CMMI is currently conducting basic research and patient evaluations in a
number of areas of potential interest to the Company. Effective in July 1995,
the Company amended its license agreement with CMMI to assist CMMI in complying
with Internal Revenue Service criteria for its then recently completed
tax-exempt financing. Under the original terms of the license agreement, the
Company had the right to an exclusive, worldwide license to manufacture and
market potential products developed by CMMI (other than those funded by third
parties) for specified royalty payments and on other specified terms. Under the
amended license agreement, the Company maintains the right of first negotiation
to obtain exclusive, worldwide licenses from CMMI to manufacture and market
potential products and technology covered by the license agreement under terms
representing fair market price, to be determined at the time the license is
obtained.
The amended license agreement terminates on December 31, 1999, with the
Company having the right to seek good-faith negotiation to extend the agreement
for an additional five-year period. The Company retains such amended licensing
rights to inventions made during the term of the agreement for a period of five
years from the time of disclosure. Prior to amendment, the license agreement
terminated on December 11, 2010, with the Company having the right to extend the
agreement for two additional five-year periods with specified minimum annual
royalties to be paid during these two periods.
The Company has reimbursed CMMI for expenses incurred on behalf of the
Company, including amounts incurred pursuant to research contracts, in the
amounts of approximately $98,000, $69,000 and $64,000 during the years ended
June 30, 1998, 1997 and 1996, respectively. The Company also provides CMMI with
laboratory materials and supplies in connection with research conducted in areas
of potential interest to the Company at no cost to CMMI.
During each of the years ended June 30, 1998, 1997 and 1996, the Board of
Directors of the Company authorized grants to CMMI of $200,000 to support
research and clinical work being performed at CMMI, such grants to be expended
in a manner deemed appropriate by the Board of Trustees of CMMI. Pursuant to a
collaborative research and license agreement, dated as of January 21, 1997,
between the Company and CMMI, the Company has paid to CMMI an annual license fee
of $200,000 in fiscal years 1998 and 1997.
10. License and Distribution Agreements
On November 24, 1997, the Company entered into a Distribution Agreement with
Eli Lilly Deutschland GmbH ('Lilly') pursuant to which Lilly will package and
distribute LeukoScan within the countries comprising the European Union and
certain other countries subject to receipt of regulatory approvals. Also,
effective April 6, 1998, Lilly began packaging and distributing CEA-Scan within
the countries comprising the European Union. The Company pays Lilly a service
fee based primarily on the
34
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
number of units of product packaged and shipped. The parties contemplate that
other Company products may be handled under this arrangement when appropriate.
Effective as of April 6, 1998, the Company appointed a subsidiary of Bergen
Brunswig Specialty Corporation as a non-exclusive distributor of CEA-Scan in the
U.S.. Such subsidiary (currently Integrated Commercialization Solutions, Inc.
('ICS')) serves as an agent of the Company in providing product support
services, including customer service, order management, distribution, invoicing
and collections.
On November 28, 1997, the Company was awarded $1.8 million, including
interest, from its arbitration claim against Pharmacia for breach of contract
and fiduciary duty arising out of the license agreement with a predecessor of
Pharmacia that had been terminated in 1995. This amount was recognized as
revenue during the quarter ended December 31, 1997. Additionally, the Company
recognized as revenue a portion of funds previously received from Pharmacia
pertaining to CEA-Scan clinical trials for which the Company no longer has an
obligation. Such amounts had been recorded as deferred revenue.
In March 1995, the Company entered into a License Agreement with
Mallinckrodt Medical B.V., pursuant to which Mallinckrodt Medical B.V. marketed,
sold and distributed CEA-Scan throughout Western Europe and in specified Eastern
European countries. In April 1996, the Company entered into a U.S. Marketing and
Distribution Agreement with Mallinckrodt Medical, Inc., pursuant to which
Mallinckrodt Medical, Inc., was to market, sell and distribute CEA-Scan for use
in colorectal cancer diagnostic imaging in the U.S. on a consignment basis.
Effective as of April 6, 1998, the Company terminated the agreements with
Mallinckrodt Medical B.V. and Mallinckrodt Medical Inc.. In addition, effective
as of April 30, 1998, the Company terminated its agreement with MMD Specialty
Services, Inc. and employed directly substantially all of the people who
previously comprised the contract sales force.
11. Commitments and Contingencies
On November 1, 1993, the Company and Dr. Goldenberg entered into a five-year
employment agreement (the 'Agreement') with an additional one-year assured
renewal and thereafter automatically renewable for additional one-year periods
unless terminated by either party as provided in the Agreement. Dr. Goldenberg
will receive an annual base salary of not less than $220,000, subject to
increases as determined by the Board of Directors. Effective July 1, 1997, the
Board of Directors increased Dr. Goldenberg's annual base salary to $265,000.
The Company has agreed to extend Dr. Goldenberg's employment agreement for a
five-year period. Pursuant to this extension Dr. Goldenberg's annual base salary
will continue at $265,000. Further, the Company acknowledged and approved Dr.
Goldenberg's continuing involvement with CMMI and IBC Pharmaceuticals, LLC (a
joint venture being formed between the Company and Beckman Coulter, Inc.).
Pursuant to the Agreement, Dr. Goldenberg may engage in other business,
general investment and scientific activities, provided such activities do not
materially interfere with the performance of any of his obligations under the
Agreement, allowing for those activities he presently performs for CMMI (see
Note 9). The Agreement extends the ownership rights of the Company, with an
obligation to diligently pursue all ideas, discoveries, developments and
products, in the entire medical field, which, at any time during his past or
continuing employment by the Company (but not when performing services for
CMMI), Dr. Goldenberg has made or conceived or hereafter makes or conceives, or
the making or conception of which he has materially contributed to or hereafter
contributes to, all as defined in the Agreement (collectively 'Goldenberg
Discoveries').
Further, pursuant to the Agreement, Dr. Goldenberg will receive, subject to
certain restrictions, incentive compensation of 0.5% on the first $75,000,000 of
all defined annual net revenue of the Company and 0.25% on all such annual net
revenue in excess thereof (collectively 'Revenue Incentive Compensation'). With
respect to the period that Dr. Goldenberg is entitled to receive Revenue
Incentive Compensation on any given products, it will be in lieu of any other
percentage compensation
35
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
based on sales or revenue due him with respect to such products under this
Agreement or the existing License Agreement between the Company and Dr.
Goldenberg. With respect to any periods that Dr. Goldenberg is not receiving
such Revenue Incentive Compensation for any products covered by patented
Goldenberg Discoveries or by certain defined prior inventions of Dr. Goldenberg,
he will receive 0.5% on cumulative annual net sales of, royalties, certain
equivalents thereof, and, to the extent approved by the Board, other
consideration received by the Company for such products, up to a cumulative
annual aggregate of $75,000,000 and 0.25% on any cumulative annual aggregate in
excess of $75,000,000 (collectively 'Incentive Payments'). A $100,000 annual
minimum payment will be paid in the aggregate against all Revenue Incentive
Compensation and Royalty Payments. Dr. Goldenberg will also receive a percent,
not less than 20%, to be determined by the Board, of net consideration
(including license fees) which the Company receives for any disposition, by
sale, license or otherwise (discussions directed to which commence during the
term of his employment plus two years) of any defined Undeveloped Assets of the
Company which are not budgeted as part of the Company's strategic plan.
On February 1, 1994, the Company entered into a master lease agreement,
which was subsequently amended, pursuant to which the Company may lease
equipment for research, development and manufacturing purposes having an
aggregate acquisition cost of up to $2,200,000. The basic lease payments under
the master lease agreement are determined based on current market rates of
interest at the inception of each equipment schedule take-down, and payable in
monthly installments over a four-year period. The lease agreement contains an
early purchase option, at an amount which is deemed to be fair value. On
November 1, 1996, December 9, 1996, April 1, 1997 and September 1, 1998, the
Company exercised early purchase options on equipment leased on February 14,
1994, April 1, 1994, June 1, 1994 and August 26, 1994, respectively. Under the
lease agreement, continued compliance with certain financial ratios is required
and, in the event of default, the Company will be required to provide an
irrevocable letter of credit which is generally equal to the outstanding balance
of lease payments due at the time of default, which was approximately $412,000
at June 30, 1998. As of June 30, 1998, the Company was not in compliance with
certain of these ratios, but the lessor has not yet declared an event of default
or requested a letter of credit. The Company does not believe that such a
request would have a material adverse effect on the Company. As of June 30,
1998, the Company has leased equipment with a cost basis aggregating $1,247,000
under the master lease agreement and recorded lease expense for fiscal years
1998, 1997 and 1996 of $348,000, $497,000 and $406,000, respectively. The
Company has a commitment to refinance the outstanding lease obligations and
anticipates closing during the second quarter of fiscal year 1999.
The Company is obligated under one operating lease for facilities used for
research and development, manufacturing and office space. The lease currently
expires in May 1999, with the latter containing renewal provisions as specified
in the respective lease. On May 29, 1998, the Company exercised its right to
renew for an additional term of three years expiring in May 2002 at a base
annual rate of $441,000. The lease provides for a second renewal period of 5
years expiring May 2007. The lease provides for an option to purchase the
facility, subject to certain terms and conditions as specified in the lease.
Lease expense related to this lease was approximately $425,000, $428,000 and
$453,000 in fiscal years 1998, 1997 and 1996, respectively. Minimum lease
commitments for facilities and equipment are as follows:
1999...................................................... $ 683,000
2000...................................................... $ 596,000
2001...................................................... $ 441,000
2002...................................................... $ 441,000
2003...................................................... $ 441,000
The Company is involved in various claims and litigation arising in the
normal course of business. Management believes that the outcome of such claims
and litigation will not have a material adverse effect on the Company's
financial position and results of operations.
36
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of IMMUNOMEDICS, INC.:
We have audited the accompanying consolidated balance sheets of
Immunomedics, Inc. and subsidiary as of June 30, 1998 and 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended June 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Immunomedics, Inc. and subsidiary as of June 30, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended June 30, 1998, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Short Hills, New Jersey
August 3, 1998
37
Item 9 -- Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10 -- Directors and Executive Officers of the Registrant
The information required for this item is incorporated herein by reference
to the 1998 Definitive Proxy Statement. See also 'Executive Officers of the
Registrant' in Part I, following Item 4.
Item 11 -- Executive Compensation
The information required for this item is incorporated herein by reference
to the 1998 Definitive Proxy Statement.
Item 12 -- Security Ownership of Certain Beneficial Owners and Management
The information required for this item is incorporated herein by reference
to the 1998 Definitive Proxy Statement.
Item 13 -- Certain Relationships and Related Transactions
The information required for this item is incorporated herein by reference
to the 1998 Definitive Proxy Statement.
PART IV
Item 14 -- Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this Report:
1. -- Consolidated Financial Statements:
Consolidated Balance Sheets -- June 30, 1998 and 1997
Consolidated Statements of Operations for the years ended June 30,
1998, 1997 and 1996 Consolidated Statements of Stockholders' Equity
for the years ended June 30, 1998, 1997 and 1996 Consolidated
Statements of Cash Flows for the years ended June 30, 1998, 1997
and 1996 Notes to Consolidated Financial Statements Independent
Auditors' Report -- KPMG Peat Marwick, LLP
2. -- Financial Statement Schedules:
All schedules have been omitted because of the absence of
conditions under which they would be required or because the
required information is included in the financial statements or the
notes thereto.
3. -- Articles of incorporation and by-laws
3.1(a) -- Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on July 6, 1982(e)
3.1(b) -- Certificate of Amendment of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of
Delaware on April 4, 1983(e)
3.1(c) -- Certificate of Amendment of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of
Delaware on December 14, 1984(e)
3.1(d) -- Certificate of Amendment of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of
Delaware on March 19, 1986(e)
3.1(e) -- Certificate of Amendment of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of
Delaware on November 17, 1986(e)
3.1(f) -- Certificate of Amendment of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of
Delaware on November 21, 1990(f)
3.1(g) -- Certificate of Designation of Rights and Preferences, as filed
with the Secretary of State of the State of Delaware on March 1,
1991(g)
3.1(h) -- Certificate of Amendment of the Certificate of Incorporation of
the Company, as filed with the Secretary of State of the State of
Delaware on December 7, 1992(j)
3.1(i) -- Certificate of Designation of Rights and Preferences of the
Company's Series B Convertible Preferred Stock filed with the
Secretary of State of the State of Delaware on December 21, 1994(l)
38
3.1(j) -- Certificate of Designation of Rights and Preferences of the
Company's Series C Convertible Preferred Stock, as filed with the
Secretary of State of the State of Delaware on September 25,
1995(n)
3.1(k) -- Certificate of Designation of Rights and Preferences of the
Company's Series D Convertible Preferred Stock, as filed with the
Secretary of State of the State of Delaware on June 26, 1996(o)
3.1(l) -- Certification of Amendment of the Certificate of Incorporation
of the Company as filed with the Secretary of State of the State of
Delaware on November 7, 1996(u).
3.1(m) -- Certificate of Designation of Rights and Preferences of the
Company's Series E Junior Participating Preferred Stock, as filed
with the Secretary of State of the State of Delaware on January 23,
1998(r)
3.2 -- Amended and Restated By-Laws of the Company(j)
4. -- Instruments defining the rights of security holders, including
indentures.
4.1 -- Specimen Certificate for Common Stock(e)
4.2 -- Structured Equity Line Flexible Financing Agreement, dated as
of December 23, 1997, between Immunomedics, Inc. and Cripple Creek
Securities, LLC(s)
4.3 -- Registration Rights Agreement, dated as of December 23, 1997,
between Immunomedics, Inc. and Cripple Creek Securities, LLC(s)
4.4 -- Common Stock Purchase Warrant issued to Cripple Creek
Securities, LLC(s)
4.5 -- Form of additional Common Stock Purchase Warrant issuable to
Cripple Creek Securities, LLC(s)
4.6 -- Rights Agreement, dated as of January 23, 1998, between
Immunomedics, Inc. and American Stock Transfer and Trust Company,
as rights agent, and form of Rights Certificate(r)
10. -- Material contracts
10.1(a) -- 1983 Stock Option Plan, as amended(h)
10.1(b) -- Form of Stock Option Agreement(e)
10.2 -- Exclusive License Agreement with David M. Goldenberg, dated as
of July 14, 1982(a)
10.3 -- Agreement among the Company, David M. Goldenberg and the Center
for Molecular Medicine and Immunology, Inc. dated, May, 1983(a)
10.4 -- Memorandum of Understanding with David M. Goldenberg, dated
September 10, 1984(b)
10.5 -- Immunomedics, Inc. 401(k) Retirement Plan(c)
10.6 -- Executive Supplemental Benefits Agreement with David M.
Goldenberg, dated as of July 18, 1986(c)
10.7 -- License Agreement between Hoffmann-La Roche, Inc. and David M.
Goldenberg, dated as of April 29, 1986(c)
10.8 -- License Agreement with F. James Primus dated July 7, 1983(d)
10.9 -- Amended and Restated License Agreement among the Company, CMMI
and David M. Goldenberg, dated December 11, 1990(h)
10.10 -- Lease Agreement with Baker Properties Limited partnership, dated
January 16, 1992(i)
10.11 -- Imunomedics, Inc. 1992 Stock Option Plan(p)
10.12 -- Amended and Restated Employment Agreement, dated November 1,
1993, between the Company and Dr. David M. Goldenberg(k)
10.13 -- Amendment, dated March 11, 1995, to the Amended and Restated
License Agreement among the Company, CMMI, and David M. Goldenberg,
dated December 11, 1990(m)
10.14 -- Manufacturing Agreement, dated as of April 4, 1996, between the
Company and SP Pharmaceuticals, formerly the Oncology Division of
Pharmacia & Upjohn (Confidential treatment has been requested for
certain portions of the Agreement)(o)
10.15 -- License Agreement, dated as of January 21, 1997, between the
Company and Center for Molecular Medicine and Immunology, Inc.(q)
10.16 -- Distribution Agreement, dated as of November 24, 1997, between
Immunomedics, Inc. and Eli Lilly Deutschland GmbH (*Confidential
treatment has been requested for certain portions of the
Agreement)(t)
10.17 -- Employment Agreement, dated as of May 15, 1998, between
Immunomedics, Inc. and Robert DeLuccia.
10.18 -- Distribution and Product Services Agreement, dated as of May 15,
1998, between Immunomedics, Inc. and Integrated Commercialization
Solutions, Inc. (Confidentiality treatment has been requested for
certain portions of the Agreement).
39
11. -- Statement recomputation of per share earnings -- Not required
since such computation can be clearly determined from the material
contained in this Annual Report on Form 10-K.
12. -- Statements re computation of ratios -- Not applicable.
21. -- Subsidiaries of the Company -- Immunomedics Europe
23. -- Consent of Experts and Counsel
23.1 -- Consent of Independent Accountants -- KPMG Peat Marwick LLP
27. -- Financial Data Schedule
(a) -- Incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-1 effective October 6, 1983
(Commission File No. 2-84940).
(b) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the year ended June 30, 1985.
(c) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1986.
(d) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1988.
(e) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1990.
(f) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 1990.
(g) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1991.
(h) -- Incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-2 effective July 24, 1991
(Commission File No. 33-41053).
(i) -- Incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-2 effective January 30, 1992
(Commission File No. 33-44750).
(j) -- Incorporated by reference from the Exhibits to the The Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993.
(k) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1993.
(l) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 1994.
(m) -- Incorporated by reference from the Exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995.
(n) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1995.
(o) -- Incorporated by reference from the Exhibits to the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996.
(p) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996.
(q) -- Incorporated by reference from the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 1996.
(r) -- Incorporated by reference from the Exhibits to the Company's
Registration Statement on Form 8-A, as filed with the Commission on
January 29, 1998.
(s) -- Incorporated by reference from the exhibits to the Company's
Registration Statement on Form S-3, as filed with the Commission on
January 29, 1998.
(t) -- Incorporated by reference from the exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 1997.
(b) Reports on Form 8-K:
None
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMMUNOMEDICS, INC.
Date: September 28, 1998
By /s/ ROBERT J. DELUCCIA
................................
Robert J. DeLuccia
President and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------------------- ------------------------------------ ------------------
/s/ DAVID M. GOLDENBERG Chairman September 28, 1998
.................................
David M. Goldenberg
/s/ ROBERT J. DELUCCIA President, Chief Executive Officer September 28, 1998
................................. and Director (Principal Executive
Robert J. DeLuccia Officer)
/s/ KEVIN F.X. BROPHY Vice President, Finance & September 28, 1998
................................. Administration (Principal
Kevin F.X. Brophy Financial and Accounting Officer)
/s/ W. ROBERT FRIEDMAN, JR. Director September 28, 1998
.................................
W. Robert Friedman, Jr.
/s/ MARVIN E. JAFFE Director September 28, 1998
.................................
Marvin E. Jaffe
/s/ RICHARD R. PIVIROTTO Director September 28, 1998
.................................
Richard R. Pivirotto
/s/ WARREN W. ROSENTHAL Director September 28, 1998
.................................
Warren W. Rosenthal
/s/ RICHARD C. WILLIAMS Director September 28, 1998
.................................
Richard C. Williams
41