-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FqtVecyq0qBYu1n8ff+L/pMXg+MpEjQZenYKx4A85bo5zwz05/MLzCT1N/zS2RL3 fkznjloZH8rjUojcgZWkig== 0000722830-00-000009.txt : 20000516 0000722830-00-000009.hdr.sgml : 20000516 ACCESSION NUMBER: 0000722830-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUNOMEDICS INC CENTRAL INDEX KEY: 0000722830 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 611009366 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12104 FILM NUMBER: 634172 BUSINESS ADDRESS: STREET 1: 300 AMERICAN RD CITY: MORRIS PLAINS STATE: NJ ZIP: 07950 BUSINESS PHONE: 9736058200 MAIL ADDRESS: STREET 1: 300 AMERICAN ROAD CITY: MORRIS PLAINS STATE: NJ ZIP: 07950 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended March 31, 2000 -------------- OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _________________to_________________ Commission File Number: 0-12104 --------- IMMUNOMEDICS, INC. ------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 61-1009366 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 300 American Road, Morris Plains, New Jersey 07950 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (973) 605-8200 ----------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. As of May 15, 2000, there were 49,283,121 shares of the registrant's common stock outstanding. Page 1 of 19 IMMUNOMEDICS, INC. INDEX Page No. PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Condensed Consolidated Financial Statements (Unaudited): Condensed Consolidated Balance Sheets - 3 March 31, 2000 and June 30, 1999 Condensed Consolidated Statements of Operations and Comprehensive Loss - 4 three and nine months ended March 31, 2000 and 1999 Condensed Consolidated Statements of Cash Flows - 5 nine months ended March 31, 2000 and 1999 Notes to Condensed Consolidated Financial Statements - 6 March 31, 2000 Item 2. Management's Discussion and Analysis of 13 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure About Market Risks 17 PART II - OTHER INFORMATION - --------------------------- Item 2. Changes in Securities and Use of Proceeds 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 - ---------- Page 2 of 19
IMMUNOMEDICS, INC. Condensed Consolidated Balance Sheets (Unaudited) March 31, June 30, 2000 1999 ASSETS --------------- ------------- Current Assets: Cash and cash equivalents $ 17,489,379 $ 3,469,261 Marketable securities 25,365,025 5,952,398 Accounts receivable, net of allowance for doubtful accounts of $57,398 and $39,398 at March 31, 2000 and June 30, 1999, respectively 775,914 1,101,820 Inventory 767,542 818,883 Other current assets 1,337,378 573,420 --------------- ------------- Total current assets 45,735,238 11,915,782 Property and equipment, net of accumulated depreciation of $7,523,536 and $6,789,157 at March 31, 2000 and June 30, 1999, respectively 4,175,216 4,818,139 Other long-term assets 225,000 225,000 --------------- ------------- $ 50,135,454 $ 16,958,921 =============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 154,355 $ 143,757 Accounts payable 2,140,303 2,078,562 Other current liabilities 1,381,837 1,870,949 --------------- ------------- Total current liabilities 3,676,495 4,093,268 --------------- ------------- Long-term debt 111,343 228,470 Minority interest 182,000 182,000 Commitments and Contingencies Stockholders' Equity: Preferred stock; $.01 par value, authorized 10,000,000 shares; Series F convertible, authorized 2,000 shares; issued and outstanding 0 and 1,250 shares at March 31, 2000 and June 30, 1999, respectively (Liquidation preference aggregating $0 and $12,781,944 at March 31, 2000 and June 30, 1999, respectively) - 13 Common stock; $.01 par value, authorized 70,000,000 shares; issued and outstanding 49,277,621 and 37,888,090 shares at March 31, 2000 and June 30, 1999, respectively 492,776 378,881 Capital contributed in excess of par 152,619,596 111,466,439 Accumulated deficit (106,822,894) (99,398,278) Accumulated other comprehensive income (123,862) 8,128 --------------- ------------- Total stockholders' equity 46,165,616 12,455,183 --------------- ------------- $ 50,135,454 $ 16,958,921 =============== ============= See accompanying notes to condensed consolidated financial statements.
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IMMUNOMEDICS, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 --------------- ---------------- ---------------- --------------- Revenues: Product sales $ 1,225,557 $ 1,587,298 $ 3,284,779 $ 4,833,156 Royalties and license fee 5,523 2,598 11,094 13,202 Research and development 181,853 46,934 506,335 275,356 Interest and other 346,180 174,551 555,661 639,849 --------------- ---------------- ---------------- --------------- 1,759,113 1,811,381 4,357,869 5,761,563 --------------- ---------------- ---------------- --------------- Costs and Expenses: Cost of goods sold 57,332 46,100 195,216 184,528 Research and development 2,670,957 2,591,412 6,762,815 7,727,929 Sales and marketing 753,911 1,658,310 2,343,215 4,932,122 General and administrative 1,032,553 642,329 1,984,555 1,640,623 --------------- ---------------- ---------------- --------------- 4,514,753 4,938,151 11,285,801 14,485,202 --------------- ---------------- ---------------- --------------- Net loss (2,755,640) (3,126,770) (6,927,932) (8,723,639) --------------- ---------------- ---------------- --------------- Preferred stock dividends - 204,050 496,684 235,994 --------------- ---------------- ---------------- --------------- Net loss allocable to common shareholders $ (2,755,640) $ (3,330,820) $ (7,424,616) $ (8,959,633) =============== ================ ================ =============== Comprehensive Loss: Net loss $ (2,755,640) $ (3,126,770) $ (6,927,932) $ (8,723,639) --------------- ---------------- ---------------- --------------- Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (133,074) (6,374) (98,424) (23,400) Unrealized gain / (loss) on securities available for sale (25,438) - (25,438) 15 --------------- ---------------- ---------------- --------------- Other comprehensive income (loss) (158,512) (6,374) (123,862) (23,385) --------------- ---------------- ---------------- --------------- --------------- ---------------- ---------------- --------------- Comprehensive loss $ (2,914,152) $ (3,133,144) $ (7,051,794) $ (8,747,024) =============== ================ ================ =============== Per Share Data (Basic and Diluted): Net loss allocable to common shareholders $ (0.06) $ (0.09) $ (0.18) $ (0.24) =============== ================ ================ =============== Weighted average number of common shares outstanding 47,811,205 37,888,090 42,219,357 37,747,267 =============== ================ ================ =============== See accompanying notes to condensed consolidated financial statements.
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IMMUNOMEDICS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended March 31, 2000 1999 ------------------ ----------------- Cash flows used in operating activities: Net loss $ (6,927,932) $(8,723,639) Adjustments to reconcile net loss to net cash used in operating activities: Minority interest - 182,000 Expense relating to issuance of warrants 517,374 - Depreciation and amortization 734,379 770,117 Changes in operating assets and liabilities (156,360) (1,107,951) Other (131,990) (23,400) ------------------ ----------------- Net cash used in operating activities (5,964,529) (8,902,873) ------------------ ----------------- Cash flows from investing activities: Purchases of marketable securities (32,269,131) (9,864,477) Proceeds from maturities of marketable securities 12,856,504 2,974,733 Additions to property and equipment (91,456) (708,007) ------------------ ----------------- Net cash used in investing activities (19,504,083) (7,597,751) ------------------ ----------------- Cash flows from financing activities: Issuance of preferred stock, net - 12,349,800 Issuance of common stock, net 42,659,739 850,000 Purchase of preferred stock, net (5,950,000) - Preferred stock dividends paid (535,500) - Exercise of stock options 3,421,020 - Deposits - cash collateral - (225,000) Proceeds from debt - 450,000 Payments of debt (106,529) (43,915) ------------------ ----------------- Net cash provided by financing activities 39,488,730 13,380,885 ------------------ ----------------- Increase (decrease) in cash and cash equivalents 14,020,118 (3,119,739) Cash and cash equivalents at beginning of period 3,469,261 7,568,147 ------------------ ----------------- Cash and cash equivalents at end of period $ 17,489,379 $ 4,448,408 ================== ================= See accompanying notes to condensed consolidated financial statements.
Page 5 of 19 IMMUNOMEDICS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Immunomedics, Inc. (the "Company"), which incorporate the Company's wholly-owned subsidiary Immunomedics B.V., have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The balance sheet at June 30, 1999 has been derived from the audited consolidated financial statements at that date. Operating results for the nine-month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2000. The Company has not yet achieved profitable operations and there is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company's future operations are dependent on, among other things, the success of the Company's commercialization efforts and market acceptance of the Company's products. Since its inception in 1982, the Company's source of funds has been primarily dependent on private and public offerings of equity securities, revenues from research and development alliances, and product sales. For further information, refer to the annual consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999. (2) 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. Included in other current assets at March 31, 2000 and June 30, 1999 is accrued interest earned on cash equivalents and marketable securities of $218,000 and $38,600, respectively. (3) Income Taxes The Company has never made payments of Federal or state income taxes and does not anticipate generating book income in fiscal 2000; therefore, no income taxes have been reflected for the nine-month period ended March 31, 2000. Page 6 of 19 IMMUNOMEDICS, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) (4) Net Loss Per Share Basic and diluted net loss allocable to common shareholders is based on the net loss for the relevant period, adjusted for Preferred Stock dividends divided by the weighted average number of shares issued and outstanding during the period. Preferred Stock dividends for the nine months ended March 31, 2000 included $199,184 related to a 4% per annum stated value increase in security and a $297,500 premium paid in December 1999 in connection with the redemption of the Series F Preferred Stock. Preferred Stock dividends for the three and nine months ended March 31, 1999 included $125,000 and $156,944, respectively related to a 4% per annum stated value increase in security and the assumed incremental yield attributable to a beneficial conversion feature of $79,050. For the purposes of the diluted net 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 periods ended March 31, 2000 and 1999. The Company has certain securities outstanding at March 31, 2000 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. (5) Comprehensive Income Comprehensive income consists of net income (loss) and net unrealized gains (losses) on securities available for sale and certain foreign exchange changes and is presented in the unaudited condensed consolidated statements of operations and comprehensive loss. (6) 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. At March 31, 2000, the inventory balance consisted of $373,234 of raw materials and $394,308 of finished goods. (7) Stockholders' Equity On December 23, 1997, the Company entered into a Structured Equity Line Flexible Financing Agreement (the "Equity Line") with an investor (the "Investor"), pursuant to which, subject to the satisfaction of certain conditions, the Company could have received up to an aggregate of $30,000,000 over a 36-month period. The Company terminated the Equity Line as of December 9, 1998. As of the termination date, the Company had received a total of $5,350,000 for which the Company issued 1,358,838 shares of Common Stock. In connection with the Equity Line, the Company issued to the Investor a four-year warrant to purchase 50,000 shares of the Common Stock at an exercise price of $7.5375 per share (180% of closing sales price of Common Stock at the time of issuance). In addition, the Company was required to issue to the Investor an additional four-year warrant to purchase 54,000 shares of Common Stock (representing 5,000 shares for each $500,000 of Common Stock purchased by the Investor under the Equity Line Page 7 of 19 IMMUNOMEDICS, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) during calendar 1998). The exercise price of such additional warrant is $7.087 per share (180% of the weighted average purchase price of the Common Stock purchased by the Investor during the year). On December 9, 1998, the Company completed a private placement of 1,250 shares of Series F Convertible Preferred Stock (the "Series F Stock") to several investors and received net proceeds of $12,349,800. Each share of Series F Stock had an initial stated value of $10,000, which increased at the rate of 4% per annum. The Series F Stock became convertible at the option of the investors, in whole or in part, on June 8, 1999. The number of shares of Common Stock issuable upon conversion of each share of Series F Stock was determined by dividing the stated value of $10,000 plus an accretion of 4% per annum, by the conversion price then in effect. In accordance with the terms of the Series F Stock, the Company was required to recognize an assumed incremental yield of $127,500 (calculated at the date of issuance and based on a beneficial conversion feature). Such amount was amortized as a preferred stock dividend over a six month period beginning with the date of issuance. Accrued dividends payable were $156,944 at March 31, 1999. Additionally, the Company has recognized an incremental yield attributable to a beneficial conversion feature of $79,050 at March 31, 1999. As of December 16, 1999, 655 shares of the Series F Stock had been converted into 5,772,031 shares of Common Stock. The remaining 595 shares of Series F Stock were repurchased, in accordance with the terms of the Series F Stock, by the Company on that date from the then current holders at a price equal to 109% of the stated value of $10,000 per share of Series F Stock. On December 16, 1999, the Company issued a warrant covering 75,000 shares of its Common Stock at an exercise price of $6.50 per share. The warrants were issued to induce a financial advisor to enter into a financial advisory agreement with the Company. In accordance with EITF Issue No 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services and other relative accounting literature, the Company is required to measure the expense associated with the warrants at each reporting date and recognize the appropriate portion of the expense at the end of each reporting period until the measurement date is reached (December 31, 2000 in this transaction). As a result, the Company recognized a proportionate share of the general and administrative expense amounting to $517,374 in the quarter ended March 31, 2000 based on the estimated value of the warrants as of that date. On December 14, 1999, the Company completed a private placement of 2,500,000 shares of Common Stock at $3.00 per share to several investors and received net proceeds of $7,220,000. Substantially all of the net proceeds were used to redeem the Series F Stock as described above. On February 16, 2000, the Company completed a private placement of 2,350,000 shares of Common Stock at $16.00 per share to several investors and received net proceeds of Page 8 of 19 IMMUNOMEDICS, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) $35,443,000. Currently, the cash is invested in marketable securities, and will be used as required to fund the continued operations of the Company. (8) 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 number of units of product packaged and shipped. The parties contemplate that other future 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 collection. On December 21, 1998, the Company received $300,000 in final settlement of all claims between the Company and Mallinckrodt, Inc. and its affiliate under certain prior distribution agreements, which were terminated in April 1998. This amount was recognized as other revenue in fiscal year 1999. The Company, through its 80% owned subsidiary, IMG Technology, LLC ("IMG"), has formed a joint venture with Coulter Corporation ("Coulter") for the purpose of developing targeted cancer therapeutics. The joint venture, known as IBC Pharmaceuticals, LLC ("IBC"), was organized as a Delaware limited liability company. On March 5, 1999 the Company contributed to IBC, on behalf of IMG, certain rights to its proprietary humanized antibodies against the cancer marker carcinoembryonic antigen (which had a financial reporting carrying value of zero), which is used in its CEA-Cide therapeutic, and Coulter contributed to IBC certain rights to its bispecific targeting technology called the "Affinity Enhancement System" or AES. The Company assigned its rights pursuant to the terms of a license agreement with IBC dated March 5, 1999 in exchange for the grant to IMG of its interest in IBC ("Immunomedics License Agreement"). Coulter received its interest in IBC in exchange for its contribution. The license granted to IBC is a worldwide, royalty free, exclusive license which is limited to the "IBC Field" with respect to the "Immunomedics Patent Property" and the "Immunomedics Biotechnology Assets," as those terms are defined in the Immunomedics License Agreement. Additionally on March 5, 1999, several investors contributed $3,000,000 to IBC in exchange for a 7% interest in the venture. IMG's and Coulter's interests in IBC are 49.55% and 43.45% respectively. Coulter, IMG and the investors entered into an operating agreement (the "IBC Operating Agreement") which establishes Page 9 of 19 IMMUNOMEDICS, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) the rights and obligations of the respective members. Under the terms of the IBC Operating Agreement, neither IMG nor Coulter may sell any portion of its interest in IBC without first providing the other with a right of first refusal with respect to such sale, provided that after a public offering of IBC securities, IMG and Coulter will be permitted to sell up to 20% of their respective interests in IBC free of such right of first refusal. IMG is a Delaware limited liability company owned 80% by the Company and 20% by Dr. David M. Goldenberg, the Chairman of the Board and Chief Executive Officer of the Company. Dr. Goldenberg received his interest pursuant to the terms of his employment agreement with the Company. IMG is intended to be a single purpose entity, its sole asset being its interest in IBC. Dr. Goldenberg and IMG have entered into an operating agreement (the "IMG Operating Agreement") which establishes their relative rights and obligations. In connection with Dr. Goldenberg's receipt of an interest in IMG, the Company recognized $182,000 of compensation expense, based on the fair value of technology transferred, and has reflected his interest as a minority interest on the consolidated financial statements as of June 30, 1999. Dr. Goldenberg also serves as Chairman of the Board of IBC. (9) Debt On October 28, 1998, the Company entered into an Equipment Financing Agreement with the New England Capital Corporation, pursuant to which the Company received $450,000, at the interest rate of 9.52% per annum, to be repaid over a 36-month period. The proceeds of such financing were used to exercise the early purchase options for equipment previously leased through a master lease agreement. The financing is secured by various items of used equipment and an irrevocable letter of credit in the amount of $225,000. The letter of credit is collateralized by a cash deposit of an equivalent amount which is included in "Other long- term assets" on the accompanying consolidated balance sheet. At March 31, 2000, the Company's indebtedness under this agreement was $265,698. The Company paid $23,243 and $13,763 for the nine months ended March 31, 2000 and 1999, respectively, in interest under this agreement. (10) Geographic Segment The Company manages its operations as one line of business of researching, developing, manufacturing and marketing biopharmaceutical products, particularly antibody-based diagnostics and therapeutics for cancer and infectious diseases, and it currently reports as a single industry segment. The Company markets and sells its products in the U.S. and Europe. The following tables present financial information based on the geographic location of the facilities of Immunomedics, Inc. as of and for the three and nine-month periods ended March 31, 2000 and 1999: Page 10 of 19 IMMUNOMEDICS, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited)
Three Months Ended March 31, 2000 -------------- United States Europe Total ---------------- ---------- -------------- Revenues $ 1,086,138 $672,975 $1,759,113 Net income (loss) (2,936,717) 181,077 (2,755,640) March 31, 1999 United States Europe Total Revenues $ 1,052,210 $759,171 $1,811,381 Net income (loss) (3,319,897) 193,127 (3,126,770) Nine Months Ended March 31, 2000 -------------- United States Europe Total ---------------- ---------- -------------- Revenues $ 2,485,513 $1,872,356 $4,357,869 Net income (loss) (7,350,999) 423,067 (6,927,932) March 31, 1999 -------------- United States Europe Total ---------------- ---------- -------------- Revenues $ 3,632,450 $2,129,113 $5,761,563 Net income (loss) (9,111,648) 388,009 (8,723,639)
(11) Subsequent Events In April, 2000, David M. Goldenberg, the Company's Chief Executive Officer and his wife, Cynthia L. Goldenberg, the Company's Chief Operating Officer, paid to the Company the sum of $657,722 in accordance with the provisions of Section 16(b) of the Securities Exchange Act of 1934. The Company recorded such amount as a contribution of capital in its March 31, 2000 balance sheet as it is related to a transaction with the Company's equity. Page 11 of 19 IMMUNOMEDICS, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) (12) Reclassification Certain amounts previously reported have been reclassified to conform to the current year presentation. Page 12 of 19 Part I - Financial Information Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Statements made in this Form 10-Q, 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 the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999 and in Exhibit 99 to this Quarterly Report on Form 10-Q. Since its inception, the Company has been engaged primarily in the research and development and, more recently, the commercialization of proprietary products relating to the detection, diagnosis and treatment of cancer and infectious diseases. The Company has incurred significant operating losses since its formation in 1982 and has not earned a profit since its inception. These operating losses and failure to be profitable have been due mainly to the significant amount of money that the Company has had to spend on research and development. As of March 31, 2000, the Company had an accumulated deficit of approximately $106,823,000. The Company expects to continue to experience operating losses until such time, if at all, that it is able to generate sufficient revenues from sales of CEA-Scan(R), LeukoScan(R) and its other potential products. On June 28, 1996, the U.S. Food and Drug Administration ("FDA") licensed CEA-Scan for use with other standard diagnostic modalities for the detection of recurrent and/or metastatic colorectal cancer. On October 4, 1996, the European Commission granted marketing authorization for use of the product in the 15 countries comprising the European Union for the same indication. On September 16, 1997, the Company received a notice of compliance from the Health Protection Branch permitting it to market CEA-Scan in Canada for colorectal cancer for recurrent and metastatic colorectal cancer. On February 14, 1997, the Company was granted regulatory approval by the European Commission to market LeukoScan, an in vivo infectious disease diagnostic imaging product, in all 15 countries which are members of the European Union, for the detection and diagnosis of osteomyelitis (bone infection) in long bones and in diabetic foot ulcer patients. On December 19, 1996, the Company filed a Biologics License Application for LeukoScan with the FDA for the same indication approved in Europe, plus an additional indication for the diagnosis of acute, atypical appendicitis. As part of the review process, the Company is in discussions with the FDA to address its comments regarding the adequacy of the Company's data to support final approval for these indications. Consistent with the Company's decision to focus primarily on cancer therapeutic products, on April 12, 2000, the Company withdrew the CEA-Scan breast cancer imaging application submitted on January 26, 1999 to the European Medicines Evaluation Agency (EMEA). Page 13 of 19 CEA-Scan and LeukoScan are the only products which the Company is currently licensed to market and sell. To date, the Company has received only limited revenues from the sale of these products. There can be no assurance that these products will achieve market acceptance or generate significant sales. Unless the Company receives substantial revenues from these products, future revenues will be dependent in large part upon its receiving payments from corporate partners under licensing and research agreements or from government grants. However, there can be no assurance that the Company will receive such payments in a timely manner, or at all. The Company is also engaged in developing other biopharmaceutical products, which are in various stages of development and clinical testing. Results of Operations Revenues for the nine-month period ended March 31, 2000 were $4,358,000 as compared to $5,762,000 for the same period in 1999. Product sales for the nine-month period ended March 31, 2000 decreased by $1,548,000 as compared to the same period of 1999, mainly due to the reorganization of the U.S. and European sales forces, which occurred in April 1999. Research and development revenue for the nine-month period ended March 31, 2000 increased by $231,000 as compared to the same period of 1999, primarily due to higher grant revenue. Interest income increased by $236,000 due to more cash available for investments. Other income decreased by $320,000 primarily due to the receipt of $300,000 in December 1998, in final settlement of all claims between the Company and Mallinckrodt, Inc. and its affiliate under certain prior distribution agreements, which were terminated in April 1998. Revenues for the three-month period ended March 31, 2000 were $1,759,000 as compared to $1,811,000 for the same period in 1999. Product sales for the three-month period ended March 31, 2000 decreased by $362,000 as compared to the same period of 1999, mainly due to reorganization of the U.S. and European sales forces. Research and development revenue for the three-month period ended March 31, 2000 increased by $135,000 as compared to same period of 1999, primarily due to higher grant revenue. Interest and other income for the three-month period ended March 31, 2000 increased by $172,000, primarily reflecting increased interest income due to more cash available for investments. Total operating expenses for the nine-month period ended March 31, 2000 were $11,286,000 as compared to $14,485,000 for the same period in 1999. Research and development costs for the nine-month period ended March 31, 2000 decreased by $965,000 as compared to the same period in 1999, primarily due to the Company's restructuring efforts in fiscal 1999 and due to the reduced patient enrollment in clinical trials. Sales and marketing expenses for the nine-month period ended March 31, 2000 decreased by $2,589,000 primarily due to the Company-wide reorganization/restructuring. General and administrative costs for the nine-month period ended March 31, 2000 increased by $344,000 as compared to the same period in 1999, primarily due to the recognition of an expense of $517,000 associated with warrants issued to a financial advisor partially offset by reduced legal costs. Total operating expenses for the three-month period ended March 31, 2000 were $4,515,000 as compared to $4,938,000 for the same period in 1999. Research and development costs for the three-month period ended March 31, 2000 increased by $80,000 as compared to the same period in 1999, primarily due to the Page 14 of 19 manufacturing of products for clinical trials. Sales and marketing expenses for the three-month period ended March 31, 2000 decreased by $904,000, primarily due to the Company-wide reorganization/restructuring. General and administrative costs for the three-month period ended March 31, 2000 increased by $390,000 as compared to the same period in 1999, primarily due to the recognition of an expense of $517,000 associated with warrants issued to a financial advisor partially offset by reduced legal costs. Net loss allocable to common shareholders for the nine-month period ended March 31, 2000 was $7,425,000, or $0.18 per share, as compared to $8,960,000, or $0.24 per share, for the same period in 1999. The lower net loss allocable to common shareholders in 2000 as compared to 1999 primarily resulted from reduced expenses partially offset by lower revenues and increased preferred stock dividends, as discussed above and in Note 4 to the Unaudited Condensed Consolidated Financial Statements. In addition, the net loss per share for the nine-month period ended March 31, 2000 was positively impacted by the higher weighted average number of common shares outstanding for this period, as compared to the same period in 1999. The increase in the weighted average number of common shares outstanding was primarily due to the conversion of shares related to the prior year equity financings and the private placements which occurred in December 1999 and February 2000 (see Note 7 to the Unaudited Condensed Consolidated Financial Statements). Net loss allocable to common shareholders for the three-month period ended March 31, 2000 was $2,756,000, or $0.06 per share, as compared to $3,331,000, or $0.09 per share, for the same period in 1999. The lower net loss allocable to common shareholders in 2000 as compared to 1999 primarily resulted from reduced expenses and preferred stock dividends, partially offset by lower revenues as discussed above. In addition, the net loss per share for the three-month period ended March 31, 2000 was positively impacted by the higher weighted average number of common shares outstanding for this period, as compared to the same period in 1999. The increase in the weighted average number of common shares outstanding was primarily due to the conversion of shares related to the prior year equity financings and the private placements which occurred in December 1999 and February 2000 (see Note 7 to the Unaudited Condensed Consolidated Financial Statements). Liquidity and Capital Resources At March 31, 2000, the Company had working capital of $42,059,000, which represents an increase of $34,236,000 from June 30, 1999. The net increase in working capital resulted primarily from the private placements which occurred in December 1999 and February 2000 partially offset by the funding of operating expenses. On October 28, 1998, the Company entered into an Equipment Financing Agreement with the New England Capital Corporation, pursuant to which the Company received $450,000, to be repaid over a 36-month period. The proceeds of such financing were used to exercise the early purchase options for the equipment leased through a master lease agreement. The financing is secured by various items of used equipment and an irrevocable letter of credit in the amount of $225,000. The letter of credit is collateralized by a cash deposit of an equivalent amount (see Note 9 to the Unaudited Condensed Consolidated Financial Statements). The Company's liquid asset position, measured by its cash, cash equivalents and marketable securities, was $42,854,000 at March 31, 2000, representing an increase of $33,433,000 from June 30, 1999. This increase was primarily attributable to the private placements which occurred in December 1999 and Page 15 of 19 February 2000 partially offset by the funding of operating expenses. It is anticipated that absent external financing, working capital and cash, cash equivalents and marketable securities will decrease during the remainder of fiscal year 2000 as a result of planned Liquidity and Capital Resources (Continued) operating and capital expenditures, offset in part by projected revenues from product sales in the U.S. and Europe. However, there can be no assurance as to the amount of revenues, if any, these products will provide. In April 1999, the Company implemented a cost reduction program which the Company anticipated saving approximately $3.5 million during the 12 months ending March 31, 2000. Primarily due to the restructuring, the Company has realized savings during the twelve months ended March 31, 2000 of approximately $3.8 million. To date, the Company has not generated positive cash flow from operations. Accordingly, it has relied primarily upon external financing to supply necessary cash flow. The Company believes that its existing working capital should be sufficient to meet its capital and liquidity requirements for approximately three to four years, based on current spending levels. This statement represents a forward-looking statement under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from such statement for a variety of reasons. The Company's working capital and working capital requirements are affected by numerous factors and there is no assurance that such factors will not have a negative impact on the Company's liquidity. Principal among these are the success of its product commercialization and selling products, the technological advantages and pricing of the Company's products, and access to capital markets that can provide the Company with the resources when necessary to fund its strategic priorities. Unless there is a significant increase in product revenues, the Company will require additional financial resources after it utilizes its current liquid assets in order for it to continue its projected levels of research and development and clinical trials of its proposed products and regulatory filings for new indications of existing products. There can be no assurance that any additional financing will be available to the Company at all or on terms it finds acceptable or that the terms of any equity financing will not cause substantial dilution to existing stockholders. The Company may supplement its financial resources from time to time as market conditions permit through additional financing and/or through collaborative marketing and distribution agreements. The Company continues to evaluate various programs to raise additional capital and to seek additional revenues from the licensing of its proprietary technology. At the present time, the Company is unable to determine whether any of these future activities will be successful and, if so, the terms and timing of any definitive agreements. On February 16, 2000, the Company completed a private placement of 2,350,000 shares of Common Stock at $16.00 per share to several investors and received net proceeds of $35,443,000. On December 14, 1999, the Company completed a private placement of 2,500,000 shares of Common Stock at $3.00 per share to several investors and received net proceeds of approximately $7,220,000. Substantially all of the net proceeds were used to redeem the Series F Preferred Stock as described below. On December 9, 1998, the Company completed a private placement of 1,250 shares of Series F Convertible Preferred Stock (the "Series F Stock") to several investors and received net proceeds of $12,349,800. Each share of Series F Stock had an initial stated value of $10,000, which increased at the rate of 4% per Page 16 of 19 annum. The Series F Stock became convertible at the option of the investors, in whole or in part, on June 8, 1999. The number of shares of Common Stock issuable upon conversion of each share of Series F Stock was determined by dividing the stated Liquidity and Capital Resources (Continued) value of $10,000 plus an accretion of 4% per annum, by the conversion price then in effect. In accordance with the terms of the Series F Stock, the Company was required to recognize an assumed incremental yield of $127,500 (calculated at the date of issuance and based on a beneficial conversion feature). Such amount was amortized as a preferred stock dividend over a six month period beginning with the date of issuance. Accrued dividends payable were $156,944 at March 31, 1999. Additionally, the Company has recognized an incremental yield attributable to a beneficial conversion feature of $79,050 at March 31, 1999. As of December 16, 1999, 655 shares of the Series F Stock had been converted into 5,772,031 shares of Common Stock. The remaining 595 shares of Series F Stock were repurchased, in accordance with the terms of the Series F Stock, by the Company on that date from the current holders at a price equal to 109% of the stated value of $10,000 per share of Series F Stock. On December 23, 1997, the Company entered into a Structured Equity Line Flexible Financing Agreement (the "Equity Line") with an investor (the "Investor"), pursuant to which, subject to the satisfaction of certain conditions, the Company could have received up to an aggregate of $30,000,000 over a 36-month period. The Company terminated the Equity Line as of December 9, 1998. As of the termination date, the Company had received a total of $5,350,000 for which the Company issued 1,358,838 shares of Common Stock. The Company also issued certain warrants to the Investor (see Note 7 to the Unaudited Condensed Consolidated Financial Statements). Item 3. Quantitative and Qualitative Disclosures About Market Risks See Item 7A of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999. Page 17 of 19 Part II - Other Information Item 2. Changes in Securities and Use of Proceeds. On February 16, 2000, the Company completed a private placement of 2,350,000 shares of Common Stock at $16.00 per share to several investors and received net proceeds of $35,443,000. The Company intends to use the net proceeds for continuing research and development for its existing product line, for future clinical trials, for general working capital purposes and in the operation of the Company's business. The Company did not register the shares under federal law; instead, the Company relied upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, based upon the fact that there were a limited number of investors, each of whom the Company understands were accredited investors and each of whom made certain investment representations to the Company. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 - Common Stock Purchase Agreement, dated as of February 14, 2000, by and among the Company and the investors named therein (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (No. 333-31178). 27 - Financial Data Schedule 99 - Risk Factors (b) Reports on Form 8-K during the quarter ended March 31, 2000: A Current Report on Form 8-K was filed by the Company on February 23, 2000 to report (under Item 5) the consummation of the private placement described in Item 2 of Part II of this Quarterly Report on Form 10-Q. Page 18 of 19 SIGNATURES Pursuant to the requirements 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. ------------------ (Registrant) DATE: May 15, 2000 /s/ David M. Goldenberg ----------------------------- David M. Goldenberg Chairman and Chief Executive Officer (Principal Executive Officer) DATE: May 15, 2000 /s/ Shailesh R. Asher ----------------------------- Shailesh R. Asher Controller and Acting Chief Financial Officer (Principal Financial and Accounting Officer) Page 19 of 19 EX-99 2 RISK FACTORS Exhibit 99 RISK FACTORS Certain statements in this Quarterly Report on Form 10-Q and certain statements made by the Company in other published documents (including, without limitation, press releases) are forward-looking in nature and, as such, constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about the Company's plans, objectives, expectations and intentions and other statements contained in this Quarterly Report on Form 10-Q or elsewhere that are not historical facts. When used in this Quarterly Report on Form 10-Q or elsewhere, the words "expects," "anticipates," "intends," "plans," "believes," "seeks" and "estimates" and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. In other words, our performance might be quite different from what the forward-looking statements imply. The following factors, as well as those discussed below in this "Risk Factors" section, could cause our performance to differ from the implied results: * inherent uncertainties accompanying the marketing of CEA-Scan and LeukoScan. * inherent uncertainties involving new product development and marketing. * inability to obtain capital for continued product development and commercialization. * actions of regulatory authorities concerning product approval. * actions of government and private organizations concerning reimbursement of medical expenses. * impact of competitive products and pricing. * results of clinical trials. * loss of key employees. * changes in general economic and business conditions. * changes in industry trends. We have no obligation to release publicly the result of any revisions to any of our "forward-looking statements" to reflect events or circumstances that occur after the date of this Quarterly Report or to reflect the occurrence of other unanticipated events. Page 1 of 9 We Have a History of Operating Losses and May Never Become Profitable We have had significant operating losses since our formation in 1982 and have not earned a profit since our inception. These operating losses and failure to be profitable have been due mainly to the significant amount of money that we have had to spend on research and development. As of March 31, 2000, we had an accumulated deficit of approximately $106.8 million. We expect to continue to experience operating losses until such time, if at all, that we are able to generate sufficient revenues from sales of CEA-Scan(R), LeukoScan(R) and/or our other potential products. We May Not Be Able to Successfully Develop a Market for Our Approved Products CEA-Scan and LeukoScan are the only products which we are licensed to market and sell. To date, we have received only limited revenues from the sale of these products. We cannot assure investors that these products or any of our proposed products will achieve market acceptance or generate significant sales. We May Not Receive Approval to Sell LeukoScan in the United States in a Timely Manner We have not yet received approval from the FDA to market and sell LeukoScan in the United States and cannot assure investors as to when, if ever, that we will obtain approval. In addition, the FDA could impose conditions on its approval, which could significantly affect the commercial viability of the product or could require us to undertake significant additional studies or otherwise expend additional significant funds. If we do not receive approval to market and sell LeukoScan in the United States in the near future or if the FDA imposes significant conditions or restrictions, our business and operations could be significantly and adversely affected. We May Not Be Able to Bring to Market the Products We Are Currently Developing or Sustain their Sales After Approval Before any of our products that we are currently developing can be marketed and sold, we must undertake substantial research and development. All new products face a high degree of uncertainty, including the following: * We may not receive regulatory approval to perform human clinical trials for the products we currently have planned or we may be unable to successfully complete our ongoing clinical trials. * The results from preclinical studies and clinical trials may not be indicative of results that will be obtained in later-stage testing. * We may be unable to timely recruit a sufficient number of patients for our clinical trials. Delays in planned patient enrollment may result in increased costs and delays. * We may be unable to obtain approval from the FDA and comparable foreign authorities because we are unable to demonstrate that the product is safe and effective for the intended use, or obtaining regulatory approval may take significantly more time and cost significantly more money than we currently anticipate. Page 2 of 9 * We may discover that the product has undesirable or unintended side effects or other characteristics that make it impossible or impracticable for us to continue development or which may limit the product's commercial use. * We do not expect that any new product which is currently in research and development will be commercially available for at least several years. * We may be unable to produce the product in commercial quantities at reasonable cost. * We may be unable to successfully market the product or to find an appropriate corporate partner, if necessary, to assist us in the marketing of the product. * The product may not gain satisfactory market acceptance. * The product may be superseded by another product commercialized for the same indication or may infringe patents issued to others, which would prevent us from marketing and selling the product. * After approval, the product may be recalled or withdrawn at any time as a result of regulatory issues, including those concerning safety and efficacy. If we are unable to continue to develop products that we can successfully market, our business, financial condition and results of operations will be significantly and adversely affected. Our Limited Marketing and Sales Experience and Capability Could Impact Our Ability to Successfully Sell Our Current Products We are relying, in substantial part, on our own limited sales and marketing organization to market CEA-Scan and LeukoScan. We cannot assure investors that we can successfully maintain and continue to build our sales force. If we are unable to continue to build and maintain our sales force, our financial condition and operating results may be significantly and adversely affected. We May Have to Rely on Partners to Help Us Market and Sell Our Products Under Development The marketing and sale of our proposed products may be dependent upon our entering into arrangements with corporate partners. We cannot assure investors that we will be successful in forming these relationships or that these relationships, even if formed, will be successful. We Could Be Temporarily Unable to Sell Our Products If Our Agreements with our Distributors Were Terminated We currently do not plan to internally develop and maintain the operating procedures required by the FDA and comparable foreign regulatory authorities to oversee distribution of our products. As a result, we have entered into arrangements with third parties to perform this function for the foreseeable future. If these agreements are terminated, we will be required to enter into Page 3 of 9 arrangements with other government approved third parties in order to be able to distribute our products. We will be unable to continue to distribute our products until an acceptable alternative is identified. If we were even only temporarily unable to distribute our products, our business could be significantly and adversely effected. We Could Be Temporarily Unable to Sell Our Products If Our Agreement with our End Stage Manufacturer Was Terminated We rely on a single third party to perform certain end-stage portions of the manufacturing process for CEA-Scan and LeukoScan which we are unable or historically have not had the resources to perform. If this third party were to become unavailable, we would be unable to complete the manufacturing process until we entered into an agreement with another qualified entity. We cannot assure investors that we will be able to negotiate an agreement with another entity on terms we consider acceptable, if at all. Even if we were able to do so, any substantial delay in our ability to manufacture our products could significantly and adversely affect our operations. Our Internal Manufacturing Capability May Limit What We Can Sell If demand for our approved product increases significantly, we cannot assure investors that we will continue to have the capacity to manufacture commercial quantities successfully. In addition, if any of our other products are approved for marketing and sale, we cannot assure investors that we will continue to have the capacity and expertise to manufacture commercial quantities of multiple products successfully or with acceptable profit margins. If we were even only temporarily unable to manufacture sufficient quantities of our products to meet demand, our business could be significantly and adversely effected. We May Be Unable to Continue to Use Mouse Fluids for Future Products Which Could Require Us to Make Expensive and Time Consuming Changes to Our Products in Development CEA-Scan and certain of our other imaging agents are derived from ascites fluid produced in mice. Regulatory authorities, particularly in Europe, have expressed concerns about the use of mice fluid for the production of monoclonal antibodies. We cannot assure investors that regulatory authorities will agree that our quality control procedures will be adequate for future products. While we are continuing our development efforts to produce certain of our monoclonal antibodies using cell culture methods, this process constitutes a substantial production change, which will require additional manufacturing equipment and new regulatory approval. We cannot assure investors that we will have the resources to acquire the additional manufacturing equipment and resources or that we will receive the required regulatory approval on a timely basis, if at all. We also have contracted with a third party for the development and production of certain humanized antibodies, but we cannot assure investors that these efforts will be successful. Our Product Development Is Dependent Upon Our Continued Relationship with The Center for Molecular Medicine and Immunology The Center for Molecular Medicine and Immunology ("CMMI"), a not-for-profit cancer research center, performs pilot and pre-clinical trials in product areas of importance to us. CMMI also conducts basic research and patient evaluations Page 4 of 9 in a number of areas of potential interest to us. If CMMI were no longer to provide these services, we would have to make alternative arrangements with third parties which could significantly delay and increase expenses associated with pre-clinical testing and initial clinical trials. Certain Potential Conflicts of Interest Exist with The Center for Molecular Medicine and Immunology Which Could Affect Our Operations Dr. David M. Goldenberg, our Chairman and Chief Executive Officer, is the founder, President and a member of the Board of Trustees of CMMI. Dr. Goldenberg devotes more of his time working for CMMI than for us. In addition, other key personnel currently have responsibilities both to CMMI and us. As a result, the potential for conflicts of interest exists and disputes could arise over the allocation of research projects and ownership of intellectual property rights. We May Not Be Able to Obtain Government Regulatory Approval in a Timely Manner to Market and Sell Our Products Regulation by governmental authorities in the United States and foreign countries is a significant factor in the manufacture and marketing of our presently marketed and proposed products as well as our research and development activities. All of our proposed products will require regulatory approval by governmental agencies prior to commercialization and our products must undergo rigorous preclinical and clinical testing and other premarket approval procedures by the FDA and comparable foreign authorities. In addition, since certain of our potential products involve the application of new technologies, regulatory approvals may take longer than for products produced using more conventional methods. Once we begin clinical trials for a new diagnostic or therapeutic product, it may take five to ten years or more to receive the required regulatory approval to commercialize that product and begin to market it to the public. Various federal and, in some cases, state statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of these products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable statutes and regulations, will require us to expend substantial resources. If we fail to obtain or are otherwise substantially delayed in obtaining, regulatory approvals, our business and operations could be significantly and adversely affected. In responding to a new drug application, or a biologic license application, government regulators may grant marketing approvals, request additional information or further research, or deny the application if they determine that the application does not satisfy its regulatory approval criteria. Approvals may not be granted on a timely basis, if at all, or if granted may not cover all the clinical indications for which we are seeking approval or may contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use. Even after approval, we may be required to recall or withdraw a product as a result of subsequently discovered safety or efficacy concerns. Our Business Involves the Use of Hazardous Materials In addition to laws and regulations enforced by the FDA, we are also subject to regulation under various other foreign, federal, state or local laws and regulations. Our research and development involve the controlled use of hazardous materials, chemicals, viruses and various radioactive compounds. The risk of accidental contamination or injury from these materials cannot be completely eliminated. If an accident occurs, we could be held liable for any damages that result and any liability could exceed our resources. Page 5 of 9 We Must Maintain Our Manufacturing Facilities in Accordance With Government Regulatory Requirements Our facilities are subject to inspection by the FDA and comparable foreign authorities. A separate license is sometimes required for commercial manufacture of any product. Failure to maintain these licenses or to meet the regulatory inspection criteria would result in disruption to our manufacturing processes and could have a significant and adverse effect on our business and operations. We Have Agreed to Certain Covenants in our 1999 Financing Which Place Restrictions on the Operation of our Business In connection with the Company's December 1999 financing, the Company agreed to certain covenants, including covenants that will apply until such time as the investors in that offering and their affiliates beneficially own less than 5% of our common stock. Among other things, the Company agreed that without the prior consent of the investors, the Company may not sell its business to anyone that is an affiliate of the Company, unless the sale is for consideration at least equal to (a) the fair market value in the event of a sale of assets (as determined in good faith by the Company's board of directors) or (b) the then current market price in the event of a sale of stock. As of March 31, 2000, such investors in the aggregate beneficially owned 5.6% of the Company's outstanding Common Stock. Changes to Health Care Reimbursement Could Adversely Affect Our Operations Our ability to successfully commercialize our products will depend in part on the extent to which reimbursement for the cost of our products and related treatment will be available from government health administration authorities, private health insurers and other organizations. These third-party payers are increasingly challenging the price of medical products and services. Several proposals have been made that may lead to a government-directed national health care system. Adoption of this type of system could further limit reimbursement for medical products, and we cannot assure investors that adequate third-party coverage will be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, we also cannot assure investors that the U.S. government or foreign governments will not implement a system of price controls. Any system might significantly and adversely affect our ability to market our products profitably. The Loss of Key Employees Could Adversely Affect our Operations As a small biotechnology company, we are heavily dependent upon the talents of Dr. Goldenberg and certain key scientific personnel. If Dr. Goldenberg or any of our other key personnel leave our employ, our operations could be significantly and adversely affected. In addition, from time to time we have a need to expand our management and scientific personnel. Competition for qualified personnel in the biotechnology and pharmaceutical industries is intense and we cannot assure investors that we will be successful in our recruitment efforts. If we are unable to retain or, when needed, attract additional qualified personnel, our operations also could be significantly and adversely affected. Page 6 of 9 We Face Substantial Competition in the Biotechnology Field and May Not Be Able to Successfully Compete The biotechnology industry is highly competitive, particularly in the area of cancer diagnostic and therapeutic products. We are likely to encounter significant competition with respect to our existing products as well as our products currently under development. A number of companies, including IDEC Pharmaceuticals, Genentech, SmithKline Beecham, Nycomed Amersham, and Coulter Pharmaceutical, are engaged in the biotechnology field, and in particular the development of cancer diagnostic and therapeutic products. Many of these companies have significantly greater financial, technical and marketing resources than us. In addition, many of these companies may have more established positions in the pharmaceutical industry and may be better equipped than us to develop, refine and market their products. We also expect to face increasing competition from universities and other non-profit research organizations. These institutions carry out a significant amount of research and development in the field of antibody-based technology. These institutions are becoming increasingly more aware of the commercial value of their findings and more active in seeking patent and other proprietary rights, as well as licensing revenues. Our Products May Be Rendered Obsolete By Rapid Technological Change We are pursuing an area of product development in which there is the potential for extensive technological innovations in relatively short periods of time. We cannot assure investors that our competitors will not succeed in developing products that are safer or more effective than our products. Rapid technological change or developments by others may result in our current products as well as those in development becoming noncompetitive or obsolete. If We Are Unable to Protect Our Intellectual Property Rights, We Could Lose Our Competitive Advantage Our commercial success is highly dependent upon patents and other proprietary rights that we own or license. We cannot assure investors that our key patents will not be invalidated or will provide us protection that has commercial significance. Litigation may be necessary to protect our patent positions, which could be costly and time consuming. If any of our key patents that we own or license are invalidated, our business may be significantly and adversely affected. In addition, other companies may independently develop similar trade secrets or know-how or obtain access to our trade secrets, know-how or proprietary technology, which could significantly and adversely affect our business. Our Products May Infringe Third Party Intellectual Property Rights Other companies may have filed applications for, or have been issued, patents and obtained other proprietary rights to technology which may be potentially useful to us. Since we do not have the resources to maintain a staff whose primary function is to investigate the level of protection afforded to third parties on devices and components which we use in our products, it is possible that a third party could successfully claim that our products infringe on their intellectual property rights. If this were to occur, we may be subject to substantial damages, and we may not be able to obtain appropriate licenses at a cost we could afford and we may not have the ability to timely redesign our products. If we are required to pay damages or are unable to obtain these Page 7 of 9 rights, our business could be significantly and adversely affected. Even if we are successful in defeating any alleged infringement claims, litigation could result in a substantial diversion of managerial time and resources, which could be better and more fruitfully utilized on other activities. Our Operations Could Suffer If We Are Unsuccessful in Our Pending Infringement Claims Concerning Our CEA Antibodies We are involved in certain litigation with F. Hoffmann-LaRoche and its affiliates concerning the validity of our European patents covering the antibody we use in our CEA-Scan cancer imaging product and our CEA-Cide(TM) cancer therapy product, as well as the use of highly specific anti-CEA antibodies for a number of other uses. We have claimed that they have infringed our patent and they have counterclaimed seeking to nullify the patents that were issued. If we receive an unfavorable outcome in any of these matters, our business could be significantly and adversely affected. Product Liability Claims in Excess of the Amount of Our Insurance Would Adversely Affect Our Financial Condition The clinical testing, marketing and manufacturing of our products necessarily involve the risk of product liability. While we currently have product liability insurance, we cannot assure investors that we will be able to obtain insurance in the future at an acceptable cost, if at all. If we cannot maintain our existing or comparable liability insurance, our ability to test clinically and market our products may be significantly impaired. Moreover, the amount and scope of our insurance coverage or indemnification arrangements with any distributor or other third party upon which we rely may be inadequate to protect us in the event of a successful product liability claim. Any claim in excess of the amount of any insurance we then had could significantly and adversely affect our financial condition and operating results. Our Principal Stockholder Can Influence Most Matters Requiring Approval By Our Stockholders As of April 30, 2000, Dr. Goldenberg, our Chairman and Chief Executive Officer, controlled the right to vote over approximately 24.7% of our common stock. As a result of this voting power, Dr. Goldenberg may have the ability to determine the election of all of our directors, direct our policies and control the outcome of substantially all matters which may be put to a vote of our stockholders. Resales of Shares Held By Our Directors and Executive Officers May Lower the Market Price of Our Common Stock As of May 15, 2000, we had a total of 49,283,121 shares of common stock outstanding, 7,234,292 of which were held by our directors and executive officers. Absent registration, these shares may only be resold in limited quantities and only within the limitations imposed by Rule 144 under the Securities Act. The mere prospect that these shares may be publicly resold could lower the market price for our common stock. Page 8 of 9 Our Stock Price Has Been Volatile We believe that a variety of factors have caused the market price of our Common Stock to fluctuate substantially, and that it will continue to fluctuate in the future. These factors include: * actual or anticipated fluctuations in our operating results; * the status of our products in development; * new products or technical innovations by us or by our existing or potential competitors; * the formation or termination of our corporate alliances and distribution arrangements; * prolonged periods of regulatory review of new products or new uses for existing products; * determinations regarding our patent applications and those of others; * trading strategies occurring in the market place with respect to our common stock; and * general market conditions and other factors unrelated to us or outside our control. Stockholders Could Be Adversely Affected By Our Anti-Takeover Provisions Our board of directors has the authority, without any further vote by our stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to determine the designations, powers, preferences and relative, participating, optional or other rights thereof, including the dividend rate, whether dividends are cumulative, conversion rights, voting rights, rights and terms of redemption, redemption price and liquidation preference. Issuance of preferred stock could have the effect of delaying, deterring or preventing a change in control of our company, or could impose various procedural and other requirements that could make it more difficult for holders of our Common Stock to effect certain corporate actions, including the ability to replace incumbent directors and to accomplish transactions opposed by the incumbent board of directors. The rights of the holders of our Common Stock would be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. Stockholders Should Not Expect That We Will Pay Dividends We have never paid any dividends on our Common Stock. For the foreseeable future, we expect to retain earnings, if any, to finance the expansion and development of our business. Any future payment of dividends will be within the discretion of our Board of Directors and will depend upon a variety of factors, including our earnings, capital requirements, and operating and financial condition. Page 9 of 9 EX-27 3 FDS
5 0000722830 IMMUNOMEDICS, INC. 1 9-MOS JUN-30-2000 JUL-01-1999 MAR-31-2000 17,489,379 25,365,025 833,312 (57,398) 767,542 45,735,238 11,698,752 (7,523,536) 50,135,454 3,676,495 0 0 0 492,776 45,672,840 50,135,454 3,284,779 4,357,869 195,216 11,285,801 0 0 0 (6,927,932) 0 (6,927,932) 0 0 0 (6,927,932) (0.18) (0.18)
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