UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

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 incorporation or organization)	(I.R.S. Employer Identification No.)

300 The American Road, Morris Plains, New Jersey 07950

(Address of principal executive offices) (Zip Code)

(973) 605-8200

(Registrant’s Telephone Number, Including Area Code)

Former Name, Former Address and Former Fiscal Year,

If Changed Since Last Report:  Not Applicable

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	IMMU	Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☑  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period the registrant was required to submit such files).    Yes ☑  No ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☑

The number of shares of the registrant’s common stock outstanding as of May 1, 2020 was 230,900,071.

Immunomedics, Inc.

Table of Contents

Part I:		Financial Information	3
	Item 1.	Financial Statements (Unaudited)	3
		Unaudited Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3
		Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019	4
		Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Ended March 31, 2020 and 2019	5
		Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	6
		Notes to Unaudited Condensed Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
	Item 4.	Controls and Procedures	24
Part II:		Other Information	25
	Item 1.	Legal Proceedings	25
	Item 1A.	Risk Factors	25
	Item 6.	Exhibits	48
		Signatures	49
		Exhibit Index	50

2

PART I.        FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

(Unaudited) 

	March 31, 2020			December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	536,295		$	608,628
Marketable securities	4,325			4,550
Accounts receivable, net of allowances of $0 at March 31, 2020 and December 31, 2019	—			295
Prepaid expenses	17,315			21,818
Other current assets	3,788			3,413
Total current assets	561,723			638,704
Property and equipment, net of accumulated depreciation and amortization of $8,907 and $7,925 at March 31, 2020 and December 31, 2019, respectively	32,150			32,762
Other long-term assets	233			256
Total Assets	$	594,106		$	671,722
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	59,268		$	60,860
Liability related to sale of future royalties - current	7,491			3,455
Lease liability - current	346			337
Convertible senior notes, net	—			7,106
Total current liabilities	67,105			71,758
Liability related to sale of future royalties - non-current	267,215			257,769
Deferred revenues	65,000			65,000
Lease liability - non-current	9,875			9,965
Total Liabilities	409,195			404,492
Commitments and Contingencies (Note 11)
Stockholders' Equity:
Convertible preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued and outstanding at March 31, 2020 and December 31, 2019	—			—
Common stock, $0.01 par value; authorized 250,000,000 shares; issued 213,929,505 shares and outstanding 213,809,884 shares at March 31, 2020; issued 212,529,313 shares and outstanding 212,409,692 shares at December 31, 2019	2,139			2,125
Capital contributed in excess of par	1,590,185			1,579,205
Treasury stock, at cost: 119,621 shares at March 31, 2020 and December 31, 2019	(2,095		)	(2,095		)
Accumulated deficit	(1,403,453		)	(1,310,406		)
Accumulated other comprehensive loss	(802		)	(568		)
Total Immunomedics, Inc. stockholders' equity	185,974			268,261
Noncontrolling interest in subsidiary	(1,063		)	(1,031		)
Total Stockholders' Equity	184,911			267,230
Total Liabilities and Stockholders' Equity	$	594,106		$	671,722

See accompanying notes to unaudited condensed consolidated financial statements.

3

IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE LOSS 

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31,
	2020			2019
Revenues	$	—		$	—
Costs and Expenses:
Research and development	62,428			58,172
Sales and marketing	8,067			7,881
General and administrative	11,473			13,595
Total costs and expenses	81,968			79,648
Operating loss	(81,968		)	(79,648		)
Interest expense	(13,538		)	(9,959		)
Interest and other income	2,427			2,203
Loss before income tax	(93,079		)	(87,404		)
Income tax expense	—			—
Net loss	$	(93,079	)	$	(87,404	)
Net loss attributable to noncontrolling interest	(32		)	(67		)
Net loss attributable to Immunomedics, Inc. stockholders	$	(93,047	)	$	(87,337	)
Loss per common share attributable to Immunomedics, Inc. stockholders (basic and diluted):	(0.44		)	(0.46		)
Weighted average shares used to calculate loss per common share (basic and diluted):	213,247			191,052
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(9		)	(9		)
Unrealized loss on securities available for sale	(225		)	(200		)
Other comprehensive loss, net of tax:	(234		)	(209		)
Comprehensive loss	(93,313		)	(87,613		)
Comprehensive loss attributable to noncontrolling interest	(32		)	(67		)
Comprehensive loss attributable to Immunomedics, Inc. stockholders	$	(93,281	)	$	(87,546	)

See accompanying notes to unaudited condensed consolidated financial statements.

4

IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

	Immunomedics, Inc. Stockholders' Equity
	Convertible Preferred Stock						Capital Contributed in Excess of Par								Accumulated Other Comprehensive Income (Loss)
				Common Stock					Treasury Stock			Accumulated Deficit						Noncontrolling Interest
	Shares	Amount		Shares	Amount																Total
Three Months Ended March 31, 2020:
Balance at December 31, 2019	—	$	—	212,529	$	2,125	$	1,579,205	$	(2,095	)	$	(1,310,406	)	$	(568	)	$	(1,031	)	$	267,230
Exercise of stock options, net	—	—		7	—		32		—			—			—			—			32
Stock-based compensation	—	—		—	—		3,848		—			—			—			—			3,848
Issuance of common stock due to debt conversion	—	—		1,393	$	14	7,100		—			—			—			—			7,114
Other comprehensive loss	—	—		—	—		—		—			—			(234		)	—			(234		)
Net loss	—	—		—	—		—		—			(93,047		)	—			(32		)	(93,079		)
Balance at March 31, 2020	—	$	—	213,929	$	2,139	$	1,590,185	$	(2,095	)	$	(1,403,453	)	$	(802	)	$	(1,063	)	$	184,911
Three Months Ended March 31, 2019:
Balance at December 31, 2018	—	$	—	190,446	$	1,905	$	1,219,237	$	(824	)	$	(953,216	)	$	(351	)	$	(902	)	$	265,849
Exercise of stock options, net	—	—		1,063	10		3,086		(1,271		)	—			—			—			1,825
Stock-based compensation	—	—		—	—		1,743		—			—			—			—			1,743
Other comprehensive income	—	—		—	—		—		—			—			(209		)	—			(209		)
Net loss	—	—		—	—		—		—			(87,337		)	—			(67		)	(87,404		)
Balance at March 31, 2019	—	$	—	191,509	$	1,915	$	1,224,066	$	(2,095	)	$	(1,040,553	)	$	(560	)	$	(969	)	$	181,804

See accompanying notes to unaudited condensed consolidated financial statements.

5

IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(93,079	)	$	(87,404	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	960			804
Loss on disposal of property and equipment	87			—
Interest on non-recourse debt	13,482			9,962
Amortization of debt issuance costs	8			13
Non-cash lease expense	70			64
Non-cash expense related to stock-based compensation	3,848			1,743
Changes in other operating assets and liabilities	2,751			20,141
Net cash used in operating activities	(71,873		)	(54,677		)
Cash flows from investing activities
Purchases of property and equipment	(473		)	(2,064		)
Net cash used in investing activities	(473		)	(2,064		)
Cash flows from financing activities:
Exercise of stock options, net	32			1,825
Net cash provided by financing activities	32			1,825
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	(19		)	(9		)
Net decrease in cash, cash equivalents and restricted cash	(72,333		)	(54,925		)
Cash, cash equivalents and restricted cash beginning of period	612,041			494,173
Cash, cash equivalents and restricted cash end of period	$	539,708		$	439,248
Supplemental disclosure of cash flow information:
Interest paid	$	169		$	169
Schedule for non-cash investing and financing activities:
Accrued capital expenditures	$	132		$	3,140
Shares received in cashless exercise	$	—		$	1,271
Issuance of common stock due to debt conversion	$	7,114		$	—

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows and supplemental cash flow information related to leases (dollars in thousands):

	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	536,295	$	437,935
Restricted cash in other current assets	3,413		1,313
Total cash, cash equivalents and restricted cash	$	539,708	$	439,248
Supplemental cash flow information related to leases for the three months ended:
Non-cash lease expense	$	70	$	64
Change in operating lease liabilities	$	81	$	37

See accompanying notes to unaudited condensed consolidated financial statements.

6

IMMUNOMEDICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Reference is made to the Annual Report on Form 10-K, of Immunomedics, Inc., a Delaware corporation (“Immunomedics,” the “Company,” “we,” “our” or “us”), for the year ended December 31, 2019, which contains our audited consolidated financial statements and the notes thereto.

1.    Business Overview, Basis of Presentation and Recent Accounting Pronouncements

Business Overview

Immunomedics, Inc., a Delaware corporation, together with its subsidiaries (collectively "we," "our," "us," "Immunomedics", or the "Company"), is a leader in next-generation antibody-drug conjugate (“ADC”) technology, committed to help transform the lives of people with hard-to-treat cancers. Immunomedics manages its operations as one line of business of researching, developing, manufacturing and marketing biopharmaceutical products, particularly antibody-based products for patients with difficult-to-treat solid tumor and blood cancers. The Company currently reports as a single industry segment with substantially all business conducted in the United States. Immunomedics conducts its research activities in the United States and runs its development studies in the United States and selected European countries.

On April 22, 2020, the United States Food and Drug Administration ("FDA") granted accelerated approval to Trodelvy™ (sacituzumab govitecan-hziy) for the treatment of adult patients with metastatic triple-negative breast cancer (“mTNBC”). Patients must have received at least two prior therapies before taking Trodelvy. Trodelvy, which was granted Breakthrough Therapy Designation and Priority Review, was approved under the FDA’s Accelerated Approval Program based on the objective response rate of 33.3 percent and duration of response of 7.7 months observed in 108 adult mTNBC patients who had previously received a median of three prior systemic therapies in the metastatic setting in a single-arm, multicenter Phase 2 study. Continued approval may be contingent upon verification of clinical benefit in the Phase 3 confirmatory ASCENT study. On April 6, 2020, we announced that the ASCENT study was halted due to compelling evidence of efficacy across multiple endpoints. This decision was based on the unanimous recommendation by the independent Data Safety Monitoring Committee during its recent routine review. Top-line data for the ASCENT study is expected to be available mid-2020.    

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Immunomedics, which incorporates our foreign subsidiary, Immunomedics GmbH in Rödermark, Germany, have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), for interim financial information and the instructions to the Quarterly Report on Form 10‑Q and Regulation S‑X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete annual financial statements. With respect to the financial information for the interim periods included in this Quarterly Report on Form 10-Q, which is unaudited, management believes that all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation of the results for such interim periods have been included. Operating results for the three month period ended March 31, 2020, are not necessarily indicative of the results that may be expected for the full calendar year ending December 31, 2020, or any other period. The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included in our 2019 Annual Report on Form 10-K. Such significant accounting policies are applicable for periods prior to the adoption of the following new accounting standards.

Recent Accounting Pronouncements

Accounting Pronouncements adopted during the year:

In November 2018, the FASB issued ASU 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606,"    to clarify when ASC 606 should be used for collaborative arrangements when the counterparty is a customer. The guidance precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The guidance is effective for

7

public business entities in fiscal years beginning after December 15, 2019, and interim periods therein. Adoption of ASU 2018-18 did not have any impact to our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," to no longer require public companies to disclose transfers between Level 1 and Level 2 of the fair value hierarchy, and to require disclosure about the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Upon adoption of ASU 2018-13, there was no material effect to the Company's disclosures in the footnotes to the condensed consolidated financial statements. For new disclosures regarding our Level 3 financial instrument please refer to Note 6 - "Estimated Fair Value of Financial Instruments".

Accounting Pronouncements yet to be adopted:

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principals in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. For public business entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. We are currently assessing the impact of ASU 2019-12.

2.          Revenue Recognition

Everest Medicines II Limited

On April 29, 2019, we entered into a license agreement (the "License Agreement") with Everest Medicines II Limited, a China limited company ("Everest"). Pursuant to the License Agreement, we granted Everest an exclusive license to develop and commercialize Trodelvy in the People's Republic of China, Taiwan, Hong Kong, Macao, Indonesia, Philippines, Vietnam, Thailand, South Korea, Malaysia, Singapore and Mongolia (the "Territory"). In consideration for entering into the License Agreement, Everest made a one-time, non-refundable upfront payment to us in the aggregate amount of $65.0 million which is recorded as deferred revenue on the condensed consolidated balance sheets. The License Agreement contains a development milestone payment of $60.0 million based upon our achievement of FDA approval for Trodelvy. On April 22, 2020, the FDA granted accelerated approval to Trodelvy for the treatment of adult patients with mTNBC. Also, on April 22, 2020, Everest announced the China National Medical Products Administration has approved the Clinical Trial Application for a pivotal Phase 3 study of Trodelvy for the treatment of mTNBC in China. The License Agreement also contains additional development milestone payments in a total amount of up to $180.0 million based upon the achievement of certain other development milestones. In addition, the License Agreement contains sales milestone payments in a total amount of up to $530.0 million based upon the achievement of certain sales milestones. Everest will make royalty payments to us based upon percentages of net sales of Trodelvy, ranging from 14% to 20%.

The Company assessed the arrangement in accordance with ASC 606 and concluded that the contract counterparty, Everest, is a customer based on the arrangement structure. The Company identified two material promises to deliver under the contract: (1) grant of license and the (2) clinical and commercial supply of the product. However, given the nature of the manufacturing of the product the license is not considered to be distinct from the clinical and commercial supply promise. The Company therefore concluded that there is one combined performance obligation.

The Company initially deferred and will recognize the $65.0 million over the performance obligation period of the combined performance obligation. As it relates to the upfront consideration, the $65.0 million is recorded as deferred revenue and will be recognized over the term of the of the contract performance obligation period, which the Company has concluded to be 15 years after initial sale of the product in the territory. As concluded above, the Company has a combined performance obligation, which includes delivering the license and clinical and commercial supply to Everest. As such, because the clinical and commercial supply obligation occur throughout the period of the License Agreement, the $65.0 million fixed consideration is recognized over the period in which commercial and clinical supply of product is delivered (over-time). During the three months ended March 31, 2020 and 2019, no revenues were recorded relating to the License Agreement.

The future potential milestone payments are excluded from the transaction price, as the achievement of the milestone events require considerable judgment in determining whether it is probable of being achieved, and that a significant revenue reversal would not occur. As such, all milestone payments are fully constrained. The Company will reevaluate the transaction

8

price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

Janssen Biotech Inc.

On April 5, 2019, the Company entered into a promotion agreement (the "Promotion Agreement") with Janssen Biotech Inc., ("Janssen") pursuant to which the Company would provide non-exclusive product detailing services to Janssen for erdafitinib (the "Product"). Pursuant to the Promotion Agreement, we were obligated to provide a dedicated sales team to detail the Product to oncologists and other targeted health care providers in the United States. Under the terms of the Promotion Agreement, Janssen would maintain ownership of the New Drug Application for the Product as well as legal, regulatory, distribution, commercialization and manufacturing responsibilities for the Product, while the Company would provide product detailing services to Janssen through March 31, 2020. Following the achievement of certain sales targets in 2019 and 2020, Janssen would pay the Company (a) a service fee equal to a percentage in the low double digits of the portion of Cumulative Net Sales (as defined in the Promotion Agreement) in excess of a baseline amount during each of 2019 and 2020, and (b) potential milestone payments of up to $15.0 million when Cumulative Net Sales exceed certain thresholds during each of 2019 and 2020. On April 12, 2019, the Company was informed that the FDA granted accelerated approval to Janssen's Balversa (erdafitinib) for the treatment of adult patients with locally advanced or metastatic urothelial carcinoma that has a type of susceptible genetic alteration known as FGFR3 or FGFR2, and that has progressed during or following prior platinum-containing chemotherapy. During the three months ended March 31, 2020 and 2019, no revenues were recorded relating to the Promotion Agreement.

3.          Marketable Securities

Immunomedics considers all of its current investments to be available-for-sale. Marketable securities at March 31, 2020, consisted of the following (in thousands):

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized (Loss)			Fair Value
U.S. Government Sponsored Agencies	$	4,941	$	—	$	(616	)	$	4,325

Maturities of debt securities classified as available-for-sale were as follows at March 31, 2020 (in thousands):

	Fair Value		Net Carrying Amount
Due after one year through five years	$	4,325	$	4,337

 

Marketable securities at December 31, 2019 consisted of the following (in thousands):

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized (Loss)			Fair Value
U.S. Government Sponsored Agencies	$	4,941	$	—	$	(391	)	$	4,550

 

Maturities of debt securities classified as available-for-sale were as follows at December 31, 2019 (in thousands):

	Fair Value		Net Carrying Amount
Due after one year through five years	$	4,550	$	4,562

4.    Debt

Liability Related to Sale of Future Royalties:

On January 7, 2018, the Company entered into a funding agreement with RPI Finance Trust, a Delaware statutory trust ("RPI"), under which we sold a portion of our right to receive royalties on potential net sales of the ADC Trodelvy, in exchange for $175.0 million in cash. Concurrently, we entered into a common stock purchase agreement with RPI through which RPI purchased 4.4 million shares of the Company's common stock for $75.0 million (the "Financing").

9

The Company concluded that there were two units of accounting in the transaction: (1) the liability related to the sale of future royalties (the "Liability") and (2) the "Financing". We allocated the consideration of $250.0 million on a relative fair value basis to the Liability for $182.2 million and the common stock for $67.8 million. We continue to accrete the Liability related to the sale of future royalties using the effective interest method with an annual interest rate of approximately 21% over a period of 20 years for the three months ended March 31, 2020. As of March 31, 2020, and December 31, 2019, we determined the fair value at $274.7 million and $261.2 million, respectively. During the three months ended March 31, 2020 and 2019, the Company recognized approximately $13.5 million and $10.0 million in interest expense, respectively.

The following table shows the activity within the liability related to sale of future royalties during the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020		2019
Carrying value of liability related to sale of future royalties, beginning of the period	$	261,224	$	221,295
Interest expense recognized	13,482		9,962
Carrying value of liability related to sale of future royalties, end of period	$	274,706	$	231,257

Convertible Senior Notes:

In February 2015, the Company issued $100.0 million of Convertible Senior Notes (the "Convertible Senior Notes") (net proceeds of approximately $96.3 million after deducting the initial purchasers’ fees and offering expenses) in a private offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Rule 144A under the Securities Act. The remaining $7.1 million Convertible Senior Notes at December 31, 2019, converted into 1.4 million shares of common stock based on the initial conversion price of $5.11 per share of common stock on February 14, 2020. The effective interest rate on the Convertible Senior Notes was 5.48% for the period from the date of issuance through settlement. 

Total interest expense for the Convertible Senior Notes for the three months ended March 31, 2020 and 2019 was $0.1 million and $0.1 million, respectively. Included in interest expense was an immaterial amount of amortization of debt issuance costs for the three months ended March 31, 2020 and 2019.

5.     Stock-based Compensation

Stock Incentive Plan

The Company has a stock incentive plan, the Immunomedics, Inc. 2014 Long-Term Incentive Plan (the "Plan") that provides for the granting of stock options, restricted stock units ("RSUs"), performance stock options ("PSOs"), and other stock-based awards to eligible individuals on the terms and subject to the conditions set forth in the Plan. There were no significant modifications to the Plan during the three months ended March 31, 2020 or 2019.

Stock-based compensation expense included in the condensed consolidated statements of comprehensive loss was $3.8 million, and $1.7 million for the three months ended March 31, 2020 and 2019, respectively.

The following table summarizes the activity for stock options, RSUs and PSOs for the three months ended March 31, 2020 (in thousands):

	Stock Options		RSUs	PSOs
Equity awards outstanding, beginning of year	5,901		58	837
Changes during the year:
Granted	1,429		100	—
Exercised	(7	)	—	—
Expired or forfeited	(281	)	—	(153	)
Equity awards outstanding, end of period	7,042		158	684

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As of March 31, 2020, total compensation cost related to unvested awards not yet recognized and the weighted-average periods over which the awards are expected to be recognized were as follows ($ in thousands):

	Stock Options		RSUs		PSOs
Unrecognized compensation cost	$	47,499	$	308	$	4,644
Expected weighted-average period in years of compensation cost to be recognized	3.1		1.9		0.7

6.    Estimated Fair Value of Financial Instruments

Cash Equivalents and Marketable Securities as of:

	(in thousands)
March 31, 2020	Level 1 (a)		Level 2 (b)		Level 3 (c)		Total
Money Market Funds Note (d)	$	502,461	$	—	$	—	$	502,461
Marketable Securities:
U.S. Government Sponsored Agencies	4,325		—		—		4,325
Total	$	506,786	$	—	$	—	$	506,786

	(in thousands)
December 31, 2019	Level 1 (a)		Level 2 (b)		Level 3 (c)		Total
Money Market Funds Note (d)	$	550,788	$	—	$	—	$	550,788
Marketable Securities:
U.S. Government Sponsored Agencies	4,550		—		—		4,550
Total	$	555,338	$	—	$	—	$	555,338

^(a) Level 1 - Financial instruments whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which the company has the ability to access at the measurement date.

^(b) Level 2 - Financial instruments whose values are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.

^(c) Level 3 - Financial instruments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset.

^(d) The money market funds noted above are included in cash and cash equivalents.

Convertible Senior Notes

The carrying amounts and estimated fair values (Level 2) of debt instruments are as follows (in thousands):

	As of March 31, 2020				As of December 31, 2019
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Convertible Senior Notes	$	—	$	—	$	7,106	$	28,900

The fair value of the Convertible Senior Notes, which differs from their carrying values, is influenced by interest rates, the Company’s stock price and stock price volatility, and is determined by prices for the Convertible Senior Notes observed in market trading which are Level 2 inputs. The remaining $7.1 million Convertible Senior Notes at December 31, 2019, converted into 1.4 million shares of common stock on February 14, 2020 (See Note 4 - "Debt").

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Liability Related to the Sale of Future Royalties

The Company has determined the fair value of the liability related to the sale of future royalties is based on the Company's current estimates of future royalties expected to be paid to RPI, over the life of the arrangement, which are considered Level 3 (See Note 4 - "Debt"). The liability related to sale of future royalties and the related non-cash interest expense are measured based on the Company's current estimate of the timing and amount of expected future royalties expected to be paid using a discounted cash flow model. The liability is amortized using the effective interest rate method, resulting in recognition of non-cash interest expense over the estimated term of the agreement. Each reporting period, the Company assesses the estimated timing and amount of future expected royalty payments over the estimated term. If there are changes to the estimate, the Company recognizes the impact to the liability’s amortization schedule and the related non-cash interest expense prospectively.

The following table summarizes the significant unobservable inputs in the fair value measurement of the liability related to the sale of future royalties as of March 31, 2020:

	Fair Value (in thousands)	Valuation Technique	Unobservable Input	Range	Weighted Average
Liability related to the sale of future royalties	$274,706	Discounted cash flow	Discount rate	16% - 26%	19%
			Future royalty payments	2020 to 2036

7.          Stockholders’ Equity

Common Stock 

On December 9, 2019, we closed an underwritten public offering of 16,428,572 shares of common stock at a public offering with a price of $17.50 per share. We received gross proceeds of $287.5 million and net proceeds of $273.0 million after deducting the underwriting discounts and commissions and expenses related to the offering.

On May 1, 2020, we closed an underwritten public offering of 16,947,389 shares of common stock at a public offering price of $28.50 per share. We received gross proceeds of $483.0 million and net proceeds of $464.6 million after deducting the underwriting discounts and commissions and other expenses related to the offering.

At-the-Market Offering

On March 29, 2019, the Company entered into a sales agreement (the "ATM Agreement") with Cowen and Company, LLC ("Cowen") to issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $150.0 million, from time to time during the term of the ATM Agreement, through an “at-the-market” equity offering program at the Company's sole discretion, under which Cowen will act as the Company’s agent and/or principal. The Company will pay Cowen a commission up to 3.0% of the gross sales proceeds of any common stock sold through Cowen under the ATM Agreement. Since inception of the ATM agreement, the Company sold 4,432,416 shares of common stock with net proceeds of $71.6 million at a weighted average price of $16.40 (excluding commissions) under the ATM Agreement. During the three months ended March 31, 2020 and 2019, the Company had no activity under the ATM Agreement.

Treasury Stock

During the three months ended March 31, 2019, there were 84,896 shares received in connection with a non-cash equity transaction related to the Company's Plan.

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8.    Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss were as follows (in thousands):

	Currency Translation Adjustments			Net Unrealized Losses on Available- for-Sale Securities			Accumulated Other Comprehensive Loss
Balance, December 31, 2018	$	(347	)	$	(4	)	$	(351	)
Other comprehensive loss before reclassifications	(9		)	(200		)	(209		)
Net current-period other comprehensive loss	$	(9	)	$	(200	)	$	(209	)
Balance, March 31, 2019	$	(356	)	$	(204	)	$	(560	)
Balance, December 31, 2019	$	(173	)	$	(395	)	$	(568	)
Other comprehensive loss before reclassifications	(9		)	(225		)	(234		)
Net current-period other comprehensive loss	(9		)	(225		)	(234		)
Balance, March 31, 2020	$	(182	)	$	(620	)	$	(802	)

There were no amounts reclassified from accumulated other comprehensive loss during the three months ended March 31, 2020, and 2019. All components of accumulated other comprehensive loss are net of tax, except currency translation adjustments, which exclude income taxes related to indefinite investments in foreign subsidiaries.

9.        Related Party Transactions

The Company appointed Scott Canute, a member of the Company’s Board, as the Company’s Executive Director. Upon recommendation of the Compensation Committee, the Board approved that Mr. Canute would be paid $16,667 per month for his service as Executive Director and was granted a nonqualified stock option to purchase 79,818 shares of the Company’s common stock. The Compensation Committee determined that in order to reflect the scope of his role and the significant time that Mr. Canute would be devoting to his role as Executive Director, Mr. Canute’s cash compensation was increased to $21,372 per month, and Mr. Canute was granted an additional nonqualified stock option to purchase 22,854 shares of the Company’s common stock. The options have a seven-year term and an exercise price equal to the fair market value of the Company’s common stock based on the closing price of the Company’s common stock on each date of grant and would be subject to the terms of a nonqualified stock option agreement. Such options vested in full upon the Company’s receipt of approval from the FDA for the Company’s BLA resubmission for Trodelvy on April 22, 2020. During the three months ended March 31, 2020 and 2019, the Company paid Mr. Canute $0.1 million and $0.1 million, respectively for such services. Effective April 16, 2020, with the appointment of the Company's new Chief Executive Officer, Mr. Canute stepped down from his role as Executive Director but will continue to serve as a Board member.

On November 19, 2019, pursuant to the Plan, the Board of Directors approved a stock option grant to Behzad Aghazadeh, Executive Chairman of the Board of Directors of the Company, to purchase 150,000 shares of the Company's common stock (the "Performance-Based Option") for certain duties performing this role; including providing consulting and advisory services to the Company. The Performance-Based Option is a nonqualified stock option and one third vested upon FDA acceptance of the BLA resubmission in December 2019, and two thirds vested upon approval from the FDA for Trodelvy on April 22, 2020. Additionally, on March 20, 2020, the Board of Directors approved a grant of 100,000 restricted stock units to Dr. Aghazadeh as consideration for services rendered and expected to be rendered in his role as Executive Chairman.

10.    Collaboration Agreements

GBG Forschungs GmbH

In September 2019, the Company entered into a clinical collaboration with the German Breast Group Forschungs-GmbH ("GBG"), Neu-Isenburg, Germany, to develop Trodelvy as a treatment for newly-diagnosed breast cancer patients who do not achieve a pathological complete response ("pCR") following standard neoadjuvant therapy.

The multinational, post-neoadjuvant Phase 3 SASCIA study developed by GBG will be conducted under the sponsorship of GBG. Approximately 1,200 high-risk patients with newly-diagnosed HER2-negative breast cancer not achieving a pCR following standard neoadjuvant therapy will be randomized to receive either Trodelvy or treatment of physician’s choice. Primary endpoint is invasive disease-free survival with overall survival, patient reported outcome/quality of life, circulating tumor DNA clearance, and safety serving as secondary endpoints.

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Under the terms of the agreement, GBG is eligible to receive up to €33.0 million in potential clinical and regulatory milestone payments over a span of approximately six years, of which €0.5 million was paid at signing. In April 2020, a €3.0 million regulatory milestone payment was achieved.

11.    Commitments and Contingencies

a. Legal Matters

Stockholder Complaints:

Class Action Stockholder Federal Securities Cases

Two purported class action cases were filed in the United States District Court for the District of New Jersey; namely, Fergus v. Immunomedics, Inc., et al., filed June 9, 2016; and Becker v. Immunomedics, Inc., et al., filed June 10, 2016. These cases arise from the same alleged facts and circumstances and seek class certification on behalf of purchasers of our common stock between April 20, 2016 and June 2, 2016 (with respect to the Fergus matter) and between April 20, 2016 and June 3, 2016 (with respect to the Becker matter). These cases concern the Company’s statements in press releases, investor conference calls, and filings with the U.S. Securities and Exchange Commission (the "SEC") beginning in April 2016 that the Company would present updated information regarding its IMMU-132 breast cancer drug at the 2016 American Society of Clinical Oncology (“ASCO”) conference in Chicago, Illinois. The complaints allege that these statements were false and misleading in light of June 2, 2016 reports that ASCO had canceled the presentation because it contained previously reported information. The complaints further allege that these statements resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are thus liable under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). An order of voluntary dismissal without prejudice was entered on November 10, 2016 in the Becker matter. An order granting motion to consolidate cases, appoint lead plaintiff, and approve lead and liaison counsel was entered on February 7, 2017 in the Fergus matter. A consolidated complaint was filed on October 4, 2017. The Company filed a motion to dismiss the consolidated complaint on January 26, 2018. On March 31, 2019, the court granted the Company's motion to dismiss, without prejudice, and left plaintiffs with the ability to file an amended complaint within thirty (30) days. Counsel for the Company consented to an extension of time for plaintiffs to file the proposed amended complaint for an additional thirty (30) days. On May 30, 2019, plaintiffs filed an amended complaint alleging many of the same allegations that were set forth in the previously filed complaints, and the Company has filed a motion to dismiss.

A third purported class action case was filed in the United States District Court for the District of New Jersey; namely, Odeh v. Immunomedics, Inc., et al., filed December 27, 2018. The complaint in this action alleges that the Company failed to disclose the results of observations made by the FDA during an inspection of the Company’s manufacturing facility in Morris Plains, New Jersey in August 2018. The complaint alleges that Immunomedics misled investors by failing to disclose the Form 483 inspection report issued by the FDA which set forth the observations of the FDA inspector during the inspection. Such observations purportedly included, inter alia, manipulated bioburden samples, misrepresentation of an integrity test procedure in the batch record, and backdating of batch records. The complaint further alleges that the Company’s failure to disclose the Form 483 resulted in an artificially inflated price for our common stock, and that the Company and certain of its officers are thus liable under Sections 10(b) and 20(a) of the Exchange Act.

On February 8, 2019, a purported class action case was filed in the United States District Court for the District of New Jersey; namely, Choi v. Immunomedics, Inc., et al. The complaint asserts violations of the federal securities laws based on claims that the Company violated the federal securities laws by making alleged misstatements in various press releases and securities filings from February 8, 2018 to November 7, 2018 and by failing to disclose the substance of its interactions with the FDA in connection with the Company's submission of its BLA for Trodelvy. 

Motions for the appointment of a lead plaintiff and lead counsel and to consolidate the Odeh and Choi actions were granted on September 10, 2019. Pursuant to a scheduling order entered by the court on October 7, 2019, the plaintiffs filed an amended complaint on November 18, 2019. The Company filed a motion to dismiss the consolidated, amended complaint on January 17, 2020. The motion is still pending in front of the court.

On April 8, 2019, a putative stockholder of the Company filed a derivative action purportedly on behalf of the Company and against the Company’s board of directors and certain Company current and former officers, in the Superior Court of New Jersey, Law Division (Morris County); namely, Crow v. Aghazadeh, et al. The Crow complaint alleges that the individual defendants breached their fiduciary duties and committed other violations of law based on the same core allegations in the Odeh and Choi actions. The Crow complaint was served on the Company and other defendants on July 18, 2019. On August 13, 2019, the parties

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submitted to the court a stipulation and proposed order to stay the action until either the entry of an order denying all motions to dismiss the now-consolidated federal actions or the entry of an order dismissing the federal actions with prejudice. That stipulation is currently pending court approval.

Stockholder Claim in the Court of Chancery of the State of Delaware

On February 13, 2017, venBio commenced an action captioned venBio Select Advisor LLC v. Goldenberg, et al., C.A. (Del. Ch.) (the “venBio Action”), alleging that the Company’s Board breached their fiduciary duties when the Board (i) amended the Company’s Amended and Restated By-laws (the “By-Laws”) to call for a plurality voting regime for the election of directors instead of majority voting, and providing for mandatory advancement of attorneys’ fees and costs for the Company’s directors and officers, (ii) rescheduled the Company’s 2016 Annual Meeting of Stockholders (the “2016 Annual Meeting”) from December 14, 2016 to February 16, 2017, and then again to March 3, 2017, and (iii) agreed to the proposed licensing transaction with Seattle Genetics (the "Licensing Transaction"). venBio also named Seattle Genetics as a defendant and sought an injunction preventing the Company from closing the Licensing Transaction. On March 6, 2017, venBio amended its complaint, adding further allegations. The Court of Chancery entered a temporary restraining order on March 9, 2017, enjoining the closing of the Licensing Transaction. venBio amended its complaint a second time on April 19, 2017, this time adding Greenhill & Co. Inc. and Greenhill & Co. LLC (together “Greenhill”), the Company’s financial advisor on the Licensing Transaction, as an additional defendant. On May 3, 2017, venBio and the Company and individual defendants Dr. David M. Goldenberg, our former Chairman of our Board of Directors, our former Chief Scientific Officer and our former Chief Patent Officer, Ms. Cynthia L. Sullivan , a former Director and our former President and Chief Executive Officer (who is also the wife of Dr. Goldenberg), and Mr. Brian A. Markison, a director of the Company (collectively, the “Individual Defendants”) entered into the Initial Term Sheet. On June 8, 2017, venBio the Company and Greenhill entered into the Greenhill Term Sheet. On February 9, 2018, the Court of Chancery approved the Settlement, and entered an order and partial judgment releasing all claims that were asserted by venBio against the Individual Defendants and Greenhill in the venBio Action and awarding venBio fees and expenses. On May 24, 2018 the remaining parties to the venBio Action participated in a mediation of the claims against Geoff Cox, Robert Forrester, Bob Oliver, and Jason Aryeh (the "Remaining Defendants"). The mediation was unsuccessful. The Remaining Defendants filed motions to dismiss the claims against them in the venBio Action. On March 18, 2019, venBio amended its complaint, adding further allegations. The Remaining Defendants filed a motion to dismiss the claims against them on May 1, 2019. The Court of Chancery held oral arguments for the motion to dismiss on November 13, 2019 and following arguments, denied Defendants' motion to dismiss on that same date. The parties are now engaged in discovery activities.

Insurance Coverage Arbitration:

The Company has initiated an arbitration with two of its management liability insurers: Starr Indemnity & Liability Company (“Starr”), and Liberty Insurance Underwriters Inc. (“Liberty”) (collectively, “Insurers”).  The arbitration arises from the 2015 Insurers’ refusal to cover $3.4 million in attorneys’ fees and expenses paid to venBio pursuant to a December 1, 2017, settlement agreement between venBio, the Company, Dr. Goldenberg, Ms. Sullivan, Mr. Markison, and Greenhill to partially settle the venBio Action and fully settle the Federal Action and the Delaware Section 225 Action (the “venBio Fee Award”).  

The Insurers argue that the venBio Fee Award does not satisfy their policies’ definitions of covered “loss” because the policies only cover defense costs incurred by the Company.  The Company counters that the venBio Fee Award is a covered settlement, not a claim for defense costs.  Insurers also argue that they have no obligation to pay any defense costs or settlement incurred in the Federal Action or 225 Action because Immunomedics initiated those lawsuits.  The Company’s position is that the Federal Action and 225 Action were defensive in nature and therefore covered because they were initiated to further the defense of the venBio Action.  Additionally, Insurers argue the venBio Fee Award is not covered because the Company was required to obtain Insurers’ consent to enter into a binding term sheet in the venBio Action and to agree to pay the venBio Fee Award and that the Company failed to do so.  The Company takes the position that Insurers at all times were aware of the developments in the venBio Action, that they sought consent to enter into the settlement, and that Insurers cannot show they were prejudiced by an any alleged failure to obtain Insurers’ consent.

Starr is presently advancing the costs to defend the remaining claims in the venBio Action, i.e., those against the Company as Nominal Defendant and individual defendants Aryeh, Cox, Forrester, and Oliver.  However, all Insurers have reserved their rights to contest coverage for any potential settlement of those claims.

b. Other Matters:

Immunomedics is also a party to various claims and litigation arising in the normal course of business.

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c. License

On April 4, 2018, we entered into a license agreement with The Scripps Research Institute ("TSRI"). Pursuant to the license agreement, TSRI granted to us an exclusive, worldwide, sub-licensable, royalty-bearing license to use certain patent rights relating to Trodelvy. The license agreement expires on a country-by-country basis on the expiration date of the last to expire licensed patent rights in such country covering a licensed product. The license agreement may be terminated by the mutual written consent of the Company and TSRI, and TSRI may terminate the license agreement upon the occurrence of certain events, including, but not limited to, if we do not make a payment due pursuant to the license agreement and fail to cure such non-payment within 30 days after the date of TSRI's written notice of such non-payment. As consideration for the license granted, we made a cash payment of $0.3 million to TSRI, and during 2019, we recognized a $0.5 million milestone payment expense. Additionally, we will pay TRSI (i) product development milestone payments that range from the mid six-digit dollar figure to the low seven-digit dollar figure and (ii) royalties on net sales of licensed products in the low-single digit percentage figure range capped at an annual amount. We have agreed to use reasonable efforts to develop and market the licensed products.

d. Michael Pehl Separation

On March 13, 2019, the Company entered into a separation agreement (the “Separation Agreement”) with Michael Pehl, the Company’s former Chief Executive Officer, President and member of the Company’s Board. Mr. Pehl resigned as Chief Executive Officer, President and member of the Company’s Board effective February 23, 2019. Pursuant to the Separation Agreement, Mr. Pehl will receive cash payments of approximately $1.0 million over an eighteen-month period. During the three months ended March 31, 2020, the Company paid approximately $0.2 million to Mr. Pehl, and $0.4 million was accrued for as of March 31, 2020. Mr. Pehl also released the Company from any and all claims with respect to all matters arising out of or related to Mr. Pehl’s employment by the Company and his resignation.

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this Quarterly Report, and they may also be made a part of this Quarterly Report by reference to other documents filed with the SEC, which is known as “incorporation by reference.”

Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance are intended to identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, among other things: expectations for the timing of the commercial launch of Trodelvy and the development of Trodelvy for additional indications, the success of our clinical trials (including the funding therefor, anticipated patient enrollment, trial outcomes, interpretation of those data by regulators, timing or associated costs), regulatory applications and related timelines, including the filing and approval timelines for BLAs and BLA supplements, out-licensing arrangements, forecasts of future operating results, potential collaborations, capital raising activities, and the timing for bringing any product candidate to market, involve significant risks and uncertainties and actual results could differ materially from those expressed or implied herein. Factors that could cause such differences include, but are not limited to, the Company’s reliance on third-party relationships and outsourcing arrangements (for example in connection with manufacturing, logistics and distribution, and sales and marketing) over which it may not always have full control, including the failure of third parties on which the Company is dependent to meet the Company’s business and operational needs for investigational or commercial products and, or to comply with the Company’s agreements or laws and regulations that impact the Company’s business; the Company’s ability to meet post-approval compliance obligations (on topics including but not limited to product quality, product distribution and supply chain requirements, and promotional and marketing compliance); imposition of significant post-approval regulatory requirements on our product candidates, including a requirement for a post-approval confirmatory clinical study, or failure to maintain or obtain full regulatory approval for the Company’s product candidates, if received, due to a failure to satisfy post-approval regulatory requirements, such as the submission of sufficient data from a confirmatory clinical study; the uncertainties inherent in research and development; safety and efficacy concerns related to the Company’s products and product candidates; uncertainties in the rate and degree of market acceptance of products and product candidates, if approved; inability to create an effective direct sales and marketing infrastructure or to partner with third parties that offer such an infrastructure for distribution of the Company’s product candidates, if approved; inaccuracies in the Company’s estimates of the size of the potential markets for the Company’s product

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candidates or limitations by regulators on the proposed treatment population for the Company’s products and product candidates; decisions by regulatory authorities regarding labeling and other matters that could affect the availability or commercial potential of the Company’s products and product candidates; the Company’s dependence on business collaborations or availability of required financing from capital markets, or other sources on acceptable terms, if at all, in order to further develop our products and finance our operations; new product development (including clinical trials outcome and regulatory requirements/actions); the risk that we or any of our collaborators may be unable to secure regulatory approval of and market our drug candidates; risks relating to the COVID-19 pandemic in the U.S. and around the world; risks associated with litigation to which the Company is or may become a party, including the cost and potential reputational damage resulting from such litigation; loss of key personnel; competitive risks to marketed products; and the Company’s ability to repay its outstanding indebtedness, if and when required, as well as the risks discussed in the Company’s filings with the SEC. The Company is not under any obligation, and the Company expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. Refer to Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q for more information.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference in this Quarterly Report on Form 10-Q, as applicable. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise except as may be required by applicable law. All subsequent forward-looking statements attributable to the Company or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Overview

Immunomedics, Inc., a Delaware corporation, together with its subsidiaries (collectively "we," "our," "us," "Immunomedics," or the "Company"), is a leader in next-generation antibody-drug conjugate (“ADC”) technology, committed to help transform the lives of people with hard-to-treat cancers. Our advanced proprietary technologies allow us to create humanized antibodies that can be used either alone in unlabeled or “naked” form, or conjugated with chemotherapeutics, cytokines or toxins. On April 22, 2020, the U.S.  Food and Drug Administration ("FDA") granted accelerated approval to Trodelvy™ (sacituzumab govitecan-hziy) (previously referred to as “IMMU-132”) for the treatment of adult patients with metastatic triple-negative breast cancer (“mTNBC”) who have received at least two prior therapies for metastatic disease. Trodelvy is our lead product and most advanced program in our unique ADC platform. Our current focus is to commercialize Trodelvy as a third-line therapy for patients with mTNBC in the United States and to complete our confirmatory Phase 3 trial for full approval of Trodelvy.

We believe that our antibodies have therapeutic potential, in some cases as a naked antibody or when conjugated with chemotherapeutics, cytokines or other toxins to create unique and potentially more effective treatment options. The attachment of effective anti-tumor compounds to antibodies is intended to allow the delivery of these therapeutic agents to tumor sites with better specificity than conventional chemotherapy. This treatment method is designed to optimize the therapeutic window through reducing the systemic exposure of the patient to the therapeutic agents, which ideally minimizes debilitating side effects while maximizing the concentration of the therapeutic agent at the tumor, potentially leading to better efficacy.

Our portfolio of investigational products includes antibody-drug conjugates ("ADCs") that are designed to deliver a specific payload of a chemotherapeutic directly to the tumor while reducing overall toxicities that are usually associated with conventional administration of these chemotherapeutic agents. Our lead ADC product Trodelvy, was granted Breakthrough Therapy Designation and Priority Review, was approved under the FDA’s Accelerated Approval Program based on the objective response rate of 33.3 percent and duration of response of 7.7 months observed in 108 adult mTNBC patients who had previously received a median of three prior systemic therapies in the metastatic setting in a single-arm, multicenter Phase 2 study. Continued approval may be contingent upon verification of clinical benefit in the Phase 3 confirmatory ASCENT study.

On May 1, 2020, we closed an underwritten public offering of 16,947,389 shares of common stock at a public offering price of $28.50 per share. We received gross proceeds of $483.0 million and net proceeds of $464.6 million after deducting the underwriting discounts and commissions and other expenses related to the offering. We intend to use the net proceeds from this offering primarily to support the commercial launch of Trodelvy in the United States in mTNBC, continue to expand the clinical development programs for Trodelvy, invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), continued scale-up of manufacturing and manufacturing process improvements, as well as for working capital and general corporate purposes.

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On April 7, 2020, the FDA granted Fast Track designation for Trodelvy for the treatment of adult patients with locally advanced or metastatic urothelial cancer ("mUC") who have previously received a programmed death receptor-1 ("PD-1") or programmed death-ligand 1 ("PD-L1") inhibitor, and a platinum containing chemotherapy in the neoadjuvant/adjuvant, locally advanced or metastatic setting, including patients who are platinum ineligible and have previously received a PD-1 or PD-L1 inhibitor in the neoadjuvant/adjuvant, locally advanced, or metastatic setting.

On April 6, 2020, we announced that the ASCENT study will be halted due to compelling evidence of efficacy across multiple endpoints. This decision was based on the unanimous recommendation by the independent Data Safety Monitoring Committee during its recent routine review. Top-line data for the ASCENT study is expected to be available mid-2020.

On April 4, 2020, upon recommendation from the Compensation Committee of the Board of Directors and approval by the Board of Directors, the Company appointed Harout Semerjian as the Company's President and Chief Executive Officer, effective April 16, 2020. Mr. Semerjian was also appointed as a member of the Board of Directors. With the appointment of Mr. Semerjian and effective as of the commencement date of Mr. Semerjian’s employment, Mr. Scott Canute stepped down from his role as Executive Director but will continue to serve as a Board member, while Dr. Aghazadeh remains as Executive Chairman focusing on corporate strategy and business development and, during a transition period, will continue to interface with the investment community on behalf of the Company.

As of March 31, 2020, we had $540.6 million in cash, cash equivalents and marketable securities. We believe our projected financial resources are adequate to (i) support commercial launch of Trodelvy in the United States in mTNBC, (ii) continue to expand the clinical development programs for developing Trodelvy in mTNBC, metastatic urothelial cancer ("mUC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), and other indications of high medical need, (iii) invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), (iv) continued scale up of manufacturing and manufacturing process improvements, and (v) general working capital requirements. However, in case of regulatory delays or other unforeseen events, we may require additional funding. Potential sources of funding in such a case could include (i) the entrance into potential development and commercial partnerships to advance and maximize our full pipeline for mTNBC and beyond in the United States and globally, and (ii) potential private and public capital markets financing. Refer to "Note 7 - Stockholders' Equity" for additional information.

On April 29, 2019, we entered into a license agreement (the "License Agreement") with Everest Medicines II Limited, a China limited company ("Everest"). Pursuant to the License Agreement, we granted Everest an exclusive license to develop and commercialize Trodelvy in the People’s Republic of China, Taiwan, Hong Kong, Macao, Indonesia, Philippines, Vietnam, Thailand, South Korea, Malaysia, Singapore and Mongolia (the "Territory"). In consideration for entering into the License Agreement, Everest made a one-time, non-refundable upfront payment to us in the aggregate amount of $65.0 million which is recorded as deferred revenue on the condensed consolidated balance sheets. The License Agreement contains a development milestone payment of $60.0 million based upon our achievement of FDA approval for Trodelvy. On April 22, 2020, the FDA granted accelerated approval to Trodelvy for the treatment of adult patients with mTNBC. Also, on April 22, 2020, Everest announced the China National Medical Products Administration has approved the Clinical Trial Application for a pivotal Phase 3 study of Trodelvy for the treatment of mTNBC in China. The License Agreement also contains additional development milestone payments in a total amount of up to $180.0 million based upon the achievement of certain other development milestones. In addition, the License Agreement contains sales milestone payments in a total amount of up to $530.0 million based upon the achievement of certain sales milestones. Everest will make royalty payments to us based upon percentages of net sales of Trodelvy, ranging from 14% to 20%. Refer to "Note 2 - Revenue Recognition" for additional information.

As part of our commitment to invest in and scale our global supply capacity with world-class partners in each component of our supply-chain, on September 11, 2018, we entered into a Master Services Agreement (the “MSA”) with Samsung BioLogics Co., Ltd. (“Samsung”), pursuant to which Samsung provides the Company with certain biologics manufacturing and development services in accordance with one or more product specific agreements. In connection with the MSA, on September 11, 2018, we also entered into a product specific agreement with Samsung for the production of hRS7, the antibody used in the Company’s lead ADC Trodelvy. In addition, on December 26, 2018, we expanded our long-term master supply agreement with Johnson Matthey, which will continue to scale the manufacturing of CL2A-SN-38, the drug-linker that is a key component of Trodelvy.

To accelerate the clinical and preclinical development of Trodelvy, we have entered into the following clinical collaborations: with AstraZeneca PLC to investigate Trodelvy in combination with the checkpoint inhibitor, durvalumab (Imfinzi^®), in earlier lines of therapy for mTNBC, mUC and metastatic NSCLC ("mNSCLC"); with Clovis Oncology, Inc. to combine Trodelvy with its poly (ADP-ribose) polymerase (PARP) inhibitor, rucaparib (Rubraca^®), in mTNBC, advanced UC and ovarian cancer; and with Roche to initiate a Phase 1b/2 study (MORPHEUS) comparing the safety and efficacy of the combination of atezolizumab (Tecentriq^®) and Trodelvy as a frontline treatment for patients with metastatic or inoperable locally advanced mTNBC versus

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atezolizumab plus nab-paclitaxel as standard of care. Additionally, we have entered into a collaboration with the German Breast Group to conduct a multinational, post-neoadjuvant registrational Phase 3 study (SASCIA) that will evaluate Trodelvy as a treatment for newly-diagnosed breast cancer patients who do not achieve a pathological complete response ("pCR") following standard neoadjuvant therapy.

We are also working with (i) Massachusetts General Hospital (“MGH”) on a Phase 2 NeoSTAR study to evaluate Trodelvy in patients with localized TNBC using pCR rate as the primary endpoint, with disease-free survival and overall survival serving as secondary endpoints. This multicenter study is sponsored by Dana-Farber/Partners CancerCare, the adult oncology collaboration of Dana Farber Cancer Institute, Brigham and Women’s Hospital, and the MGH Cancer Center; (ii) MGM on a Phase 1b/2 study of Trodelvy combining with Pfizer’s PARP inhibitor, talazoparib (TALZENNA®), in patients with mTNBC previously treated with no more than one prior therapeutic regimen for metastatic disease; (iii) Yale University on a Phase 2 study of Trodelvy in patients with persistent and recurrent endometrial cancer; and (iv) the University of Wisconsin in patients with metastatic castration-resistant prostate cancer who have progressed on second generation androgen receptor-directed therapy on a Phase 2 study.

We also have a number of other product candidates that target solid tumors and hematologic malignancies in various stages of clinical and preclinical development. They include other ADCs such as IMMU-130, which binds the CEACAM5 antigen expressed on CRC and other solid cancers, and IMMU-140, which targets HLA-DR for the potential treatment of hematologic malignancies. We believe that our portfolio of intellectual property provides commercially reasonable protection for our product candidates and technologies.

The development and commercialization of successful therapeutic products is subject to numerous risks and uncertainties including, without limitation, the following:

• the time and expense required for us to comply with all applicable federal, state and foreign legal requirements, including, without limitation, our receipt of the necessary approvals of the FDA (which receipt is uncertain);

• the time and expense required for us to establish and maintain compliant operations for commercial manufacturing, sale, and distribution of products under FDA and healthcare law requirements, and risks of non-compliance;

• we may be unable to obtain additional capital through strategic collaborations, licensing, or potential private and public capital markets financings, including the use of the ATM Agreement, in order to continue our research and secure regulatory approval of and market our lead drug candidate;

• challenges based on the type of therapeutic compound under investigation and nature of the disease in connection with which the compound is being studied;

• our ability, as well as the ability of our partners, to conduct and complete clinical trials on a timely basis, including as a result of any impacts to current or future trials due to COVID-19 pandemic;

• the ability to provide and maintain an adequate clinical and commercial supply, including through contract manufacturer and vendor relationships;

• the financial resources available to us during any particular period; and

• many other factors associated with the commercial development of therapeutic products outside of our control.

See Risk Factors in Item 1A of this Quarterly Report.

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Critical Accounting Policies and Accounting Estimates

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

For a description of our significant accounting policies, refer to "Part II, Item 8. Financial Statements and Supplementary Data, Note 1 - Business Overview and Summary of Significant Accounting Policies" in our 2019 Annual Report on Form 10-K. Of these policies, the following are considered critical to an understanding of our Unaudited Condensed Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments: stock-based compensation expenses, and fair value for the liability related to sale of future royalties and related interest expense. Refer to "Note 4 - Debt", "Note 5 - Stock-based Compensation" and "Note 6 - Estimated Fair Value of Financial Instruments", respectively, for more information.

Recent Accounting Pronouncements

Refer to "Note 1 - Business Overview, Basis of Presentation and Recent Accounting Pronouncements” in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and their expected impact on our financial position and results of operations.

Results of Operations

Our results for any interim period, such as those described in the following analysis, are not necessarily indicative of the results for the entire year or any other future period.

Three-Month Period Ended March 31, 2020 Compared to Three-Month Period Ended March 31, 2019

Costs and Expenses

					($ in thousands)
					Increase/(Decrease)
Three Months Ended March 31,	2020		2019		2020 vs 2019
Research and development	$	62,428	$	58,172	$	4,256		7.3%
Sales and marketing	8,067		7,881		186			2.4%
General and administrative	11,473		13,595		(2,122		)	(15.6)%
Total costs and expenses	$	81,968	$	79,648	$	2,320		2.9%

Total costs and expenses for the three months ended March 31, 2020 increased $2.3 million compared to the three months ended March 31, 2019, primarily due to an increase in research and development expenses of $4.3 million, and an increase in sales and marketing expenses of $0.2 million, partially offset by a decrease in general and administrative expenses of $2.1 million.

Research and Development

We do not track expenses on the basis of each individual compound under investigation and therefore we do not provide a breakdown of such historical information in that format. We evaluate projects under development from an operational perspective, including such factors as results of individual compounds from laboratory/animal testing, patient results and enrollment statistics in clinical trials. It is important to note that multiple product candidates are often tested simultaneously. It is not possible to calculate each antibody’s supply costs. There are many different development processes and test methods that examine multiple product candidates at the same time. We have, historically, tracked our costs in the categories discussed below, specifically “research costs” and “product development costs” and by the types of costs outlined below.

Our research costs consist of outside costs associated with animal studies and costs associated with research and testing of our product candidates prior to reaching the clinical stage. Such research costs primarily include personnel costs, facilities, including depreciation, lab supplies, funding of outside contracted research and license fees. Our product development costs consist of costs from preclinical development (including manufacturing), conducting and administering clinical trials and patent expenses.

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The following table summarizes our research and development costs for the three months ended March 31, 2020, compared to the three months ended March 31, 2019:

					($ in thousands)
					Increase/(Decrease)
Three Months Ended March 31,	2020		2019		2020 vs 2019
Labor	$	14,907	$	11,554	$	3,353		29.0	%
Manufacturing and quality costs	32,885		39,658		(6,773		)	(17.1	)%
Clinical development and operations	10,426		4,655		5,771			nm
Other	4,210		2,305		1,905			82.6	%
Total research and development costs	$	62,428	$	58,172	$	4,256		7.3	%
nm - not meaningful

Research and development costs increased for the three months ended March 31, 2020 by approximately $4.3 million to $62.4 million compared to the three months ended March 31, 2019. The increase in research and development costs for the three months ended March 31, 2020, compared to the three months ended March 31, 2019, relate primarily to increased clinical development and operational costs due to the expansion of clinical trials with increased enrollment and an increase in labor costs due to higher headcount and stock-based compensation expense, partially offset by a decrease in manufacturing and quality costs from lower contract manufacturing expenses and decreased usage of consulting services in response to the FDA's Complete Response Letter and re-inspection readiness.

Completion of clinical trials may take several years or more. The length of time varies according to the type, complexity and the disease indication of the product candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following periods:

	Estimated Completion Period
Clinical Phase	(Years)
I	0-1
II	1-2
III	1-4

The duration and cost of clinical trials through each of the clinical phases may vary significantly over the life of a particular project as a result of, among other things, the following factors:

• the length of time required to recruit qualified patients for clinical trials;

• the duration of patient follow-up in light of trial results;

• the number of clinical sites required for trials; and

• the number of patients that ultimately participate.

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Sales and Marketing

The following table summarizes our sales and marketing expenses for the three months ended March 31, 2020, compared to the three months ended March 31, 2019:

					($ in thousands)
					Increase/(Decrease)
Three Months Ended March 31,	2020		2019		2020 vs 2019
Labor costs	$	5,246	$	6,687	$	(1,441	)	(21.5	)%
Marketing and promotions	1,508		657		851			nm
Consulting services	302		—		302			nm
Other	1,011		537		474			88.3	%
Total sales and marketing	$	8,067	$	7,881	$	186		2.4	%
nm- not meaningful

Sales and marketing expenses for the three months ended March 31, 2020 increased by approximately $0.2 million compared to the three months ended March 31, 2019, primarily due to an increase in marketing and promotions costs in connection with the pending launch of Trodelvy in the United States for patients with mTNBC offset by a decrease in labor costs due to lower headcount.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2020, compared to the three months ended March 31, 2019:

					($ in thousands)
					(Decrease)/Increase
Three Months Ended March 31,	2020		2019		2020 vs 2019
Labor costs	$	4,843	$	6,813	$	(1,970	)	(28.9	)%
Legal and advisory fees	1,749		1,054		695			65.9	%
Consulting services	1,118		2,146		(1,028		)	(47.9	)%
Other	3,763		3,582		181			5.1	%
Total general and administrative	$	11,473	$	13,595	$	(2,122	)	(15.6	)%

General and administrative expenses for the three months ended March 31, 2020 decreased by approximately $2.1 million compared to the three months ended March 31, 2019, primarily due to decreased labor costs from non-recurring charges recorded in the prior period pursuant to the separation agreement on our former CEO along with decreased consulting services offset by an increase in legal and advisory fees due to increased reliance on outside legal counsel.

Interest Expense

Interest expense for the three months ended March 31, 2020 was $13.5 million, compared to $10.0 million for the three months ended March 31, 2019. The $3.5 million increase was due primarily to changes in the fair value of our debt balances as a result of the RPI agreement. Refer to "Note 4 - Debt" for more information.

Income Tax Expense

There was no income tax expense for the three months ended March 31, 2020 and 2019.

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Liquidity and Capital Resources

Since its inception in 1982, Immunomedics’ principal sources of funds have been the private and public sale of equity and debt securities, and revenues from licensing agreements, including up-front and milestone payments, funding of development programs, and other forms of funding from collaborations.

As of March 31, 2020, we had $540.6 million in cash, cash equivalents and marketable securities. We believe our projected financial resources are adequate to (i) support commercial launch of Trodelvy in the United States in mTNBC, (ii) continue to expand the clinical development programs for developing Trodelvy in mTNBC, metastatic urothelial cancer ("mUC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), and other indications of high medical need, (iii) invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), (iv) continued scale up of manufacturing and manufacturing process improvements, and (v) general working capital requirements. However, in case of regulatory delays or other unforeseen events, we may require additional funding. Potential sources of funding in such a case could include (i) the entrance into potential development and commercial partnerships to advance and maximize our full pipeline for mTNBC and beyond in the United States and globally, and (ii) potential private and public capital markets financing. Refer to "Note 7 - Stockholders' Equity" for additional information.

Actual results could differ materially from our expectations as a result of a number of risks and uncertainties, including the risks described in Item 1A Risk Factors, “Risks Relating to Our Business, Operations and Product Development,” and elsewhere in this Quarterly Report on Form 10-Q. Our working capital and working capital requirements are affected by numerous factors and such factors may have a negative impact on our liquidity. Principal among these factors are the success of product commercialization and marketing products, the technological advantages and pricing of our products, the impact of the regulatory requirements applicable to us, and access to capital markets that can provide us with the resources, when necessary, to fund our strategic priorities.

Discussion of Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2020 and 2019:

	($ in thousands)
	Three Months Ended March 31,
	2020			2019
Net cash used in operating activities	$	(71,873	)	$	(54,677	)
Net cash used in investing activities	(473		)	(2,064		)
Net cash provided by financing activities	32			1,825

Net cash used in operating activities. Net cash used in operating activities during the three months ended March 31, 2020 was approximately $71.9 million, compared to $54.7 million during the three months ended March 31, 2019, an increase in cash used in operating activities of $17.2 million. The increase in cash used in operating activities for the period was primarily due to the changes in operating assets and liabilities of $17.4 million to support our clinical development plans and preparations for the approval and launch of Trodelvy in the United States for patients with mTNBC.

Net cash used in investing activities. Net cash used in investing activities during the three months ended March 31, 2020 was $0.5 million, compared to cash used in investing activities of $2.1 million during the three months ended March 31, 2019. The decrease of $1.6 million is due to a decrease in purchases of property and equipment.

Net cash provided by financing activities. Net cash provided by financing activities during the three months ended March 31, 2020 was $32, compared to $1.8 million of cash provided by financing activities during the three months ended March 31, 2019. The decrease of $1.8 million is due to lower exercises of stock options.

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Working Capital and Cash Requirements

Working capital was $494.6 million as of March 31, 2020, compared to $566.9 million as of December 31, 2019. The $72.3 million decrease in working capital was primarily due to increased research and development expenses which relate primarily to increased clinical development and operational costs due to the expansion of clinical trials and an increase in labor costs, partially offset by a decrease in manufacturing and quality costs from lower contract manufacturing expenses and consulting services.

We expect to continue to fund our operations with our current financial resources. Potential sources of funding include (i) the entrance into various potential strategic partnerships targeted at advancing and maximizing our full pipeline for mTNBC and beyond, (ii) the sales and marketing of Trodelvy as a third-line therapy for mTNBC in the United States, and (iii) potential equity and debt financing transactions.

Until we can generate significant cash through (i) the entrance into various potential strategic partnerships towards advancing and maximizing our full pipeline for mTNBC and beyond, or (ii) the sales and marketing of Trodelvy as a third-line therapy for mTNBC in the United States, we expect to continue to fund our operations with our current financial resources. In the future, if we cannot obtain sufficient funding through the above methods, we could be required to finance future cash needs through the sale of additional equity and/or debt securities in capital markets. However, there can be no assurance that we will be able to raise the additional capital needed to complete our pipeline of research and development programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. Our existing debt may also negatively impact our ability to raise additional capital. If we are unable to raise capital on acceptable terms, our ability to continue our business would be materially and adversely affected. Actual results could differ materially from our expectations as a result of a number of risks and uncertainties, including the risks described in Item 1A Risk Factors, “Risks Relating to Our Business, Operations and Product Development” and elsewhere in our Quarterly Report on Form 10-Q. Our working capital and working capital requirements are affected by numerous factors and such factors may have a negative impact on our liquidity. Principal among these factors are the success of product commercialization and marketing products, the technological advantages and pricing of our products, the impact of the regulatory requirements applicable to us, and access to capital markets that can provide us with the resources, when necessary, to fund our strategic priorities.

Off-Balance Sheet Arrangements

We did not have during the periods presented in this quarterly report on Form 10-Q, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk has not changed materially since our disclosure in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 4.    CONTROLS AND PROCEDURES

(a)Disclosure Controls and Procedures: We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to record, process, summarize and report this information within the time periods specified in the rules and forms promulgated by the SEC. Our Principal Executive Officer and our Principal Financial Officer are responsible for establishing and maintaining these disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) and, as required by the rules of the SEC, evaluating their effectiveness. Based on their evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our Principal Executive Officer and Principal Financial Officer believe that these procedures are effective to ensure that we are able to collect, process and disclose the information we are required to disclose in the reports we file with the SEC within the required time periods.

(b)Changes in Internal Controls over Financial Reporting: There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), identified in connection with the evaluation of such internal control that occurred during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The information called for by this item is incorporated by reference to "Note 11 - Commitments and Contingencies" of Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I Item 1 of this Quarterly Report on Form 10-Q.

Item 1A.    RISK FACTORS 

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this quarterly report, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our securities. If any such risks actually occur, our business, financial condition or results of operations could be adversely affected. Our actual results could differ materially from those anticipated in the forward-looking statements including the risks we face described below. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our results of operations and financial condition.

Risks Relating to Our Business, Operations and Product Development 

The outbreak of the SARS-CoV-2 virus and the COVID-19 disease that it causes , or similar public health crises, could have a material adverse impact on our business, financial condition and results of operations, including clinical development of our product candidates, manufacturing, commercial operations and sales.

The outbreak of the SARS-CoV-2 virus and the COVID-19 disease that it causes has evolved into a global pandemic. The novel coronavirus originating in Wuhan, China has spread to many regions of the world, including the United States and Europe. The extent to which this coronavirus impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the virus and the actions to contain the spread of or to detect, prevent, or treat COVID-19, among others.

The spread of COVID-19, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on our business.

For example, such restrictions may present challenges in connection with our ability to successfully commercialize Trodelvy, our ability to manufacture and distribute Trodelvy, and our ability to continue clinical development of this product candidate for other indications or of our other product candidates. Further, if the spread of the coronavirus pandemic continues and our operations are adversely impacted, our ability to meet performance obligations under contracts may be impacted.

Severe respiratory symptoms, infections and deaths related to the pandemic may disrupt healthcare delivery in the United States as well as the operations of regulatory bodies with responsibility for oversight of healthcare and health and therapeutic products, including Trodelvy. With respect to clinical trials, restrictions and efforts to avoid further spread of COVID-19 may present challenges to the conduct of these trials consistent with normally applicable approaches and good clinical practice standards, and although regulators including the FDA have offered guidance applicable during the COVID-19 pandemic allowing for flexibility of standards in certain areas and alternate methods of meeting trial oversight obligations (for example, via remote monitoring), the potential impact of these challenges cannot be fully predicted at this time.

Further, disruptions to health care and product delivery and regulation could result in the focus and prioritization of regulatory resources on emergent matters, which could divert regulatory resources away from more routine regulatory matters that are not COVID-19 related but that have the potential to impact our business. It is unknown how long COVID-19 related disruptions could continue, and whether and at what point they may materially impact our business.

Any elongation or de-prioritization or delay in regulatory review resulting from such disruptions could materially affect our ongoing clinical development and commercialization plans. For example, although our lead product candidate has been approved by FDA and any necessary preapproval inspections were completed despite the COVID-19 issues emerging, the FDA has now announced that domestic and foreign facility inspections are temporarily delayed, while inspections deemed “mission critical” (e.g., pre-approval and for-cause inspections) will be carried out on a case-by-case basis. Depending on the length of the COVID-19 pandemic and FDA’s related internal policies, this could impact future applications and product candidates.

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We currently engage third-party contract manufacturers to, among other things, manufacture components and materials for our product candidates. If either we or any of our third-party vendors or subcontractors in the supply chain for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the coronavirus outbreak, our supply chain may be disrupted, limiting our ability to supply sufficient product for our clinical or commercial plans.

In response to the COVID-19 pandemic, we have closed our physical offices and have predominantly moved to a remote workforce, except with respect to manufacturing operations.

The COVID-19 pandemic could result in other disruptions including disruptions or restrictions on our ability to travel or to distribute our products (either directly or through third parties), as well as temporary closures of our facilities or the facilities of our suppliers or customers. In the event of a shelter-in-place order or other mandated local travel restrictions, our employees or third-parties conducting manufacturing activities may not be able to access necessary facilities, and our core activities may be significantly limited or curtailed, possibly for an extended period of time. Any disruption of our suppliers, contractors, vendors or customers would likely impact our sales and operating results.

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical development programs, commercialization plans for Trodelvy, healthcare systems or the global economy as a whole. For example, due to the COVID-19 pandemic, we have experienced, and expect to continue to experience, enrollment at a slower pace at certain of our clinical trial sites than initially expected. In addition, certain of our clinical trial sites have suspended enrollment due to facility closures, quarantine, travel restrictions and other governmental restrictions. These effects could have a material impact on our operations, and we will continue to monitor the situation closely.

We have a long history of operating losses and it is likely that our operating expenses will continue to exceed our revenues for the foreseeable future.

We have incurred significant operating losses since our formation in 1982. We continue to spend our cash resources to fund our research and development programs and, subject to adequate funding, we expect these expenses to increase for the foreseeable future. There can be no assurance that we will be profitable in future quarters or other periods. Further, we have made the strategic decision to focus on our therapeutic pipeline. Although we recently received accelerated approval for Trodelvy, we historically have never had product sales of any therapeutic product. We expect to experience significant operating losses as we invest further in our research and development activities while simultaneously attempting to develop and commercialize our other therapeutic product candidates. Even if we are able to develop additional commercially viable therapeutic products, certain obligations the Company has to third parties, including, without limitation, our obligation to pay RPI Finance Trust, a Delaware statutory trust ("RPI"), royalties on certain Trodelvy revenues pursuant to the Royalty Agreement may erode profitability of such products. If we are unable to develop and successfully commercialize viable therapeutic products or to license them to third parties, it is likely that we will never achieve significant revenues or become profitable, either of which would jeopardize our ability to continue as a going concern.

We have significant future capital needs and may be unable to raise capital when needed, which could force us to delay or reduce our clinical development efforts.

We believe our projected financial resources are adequate to (i) support commercial launch of Trodelvy in the United States in mTNBC, (ii) continue to expand the clinical development programs for developing Trodelvy in mTNBC, metastatic urothelial cancer ("mUC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), and other indications of high medical need, (iii) invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), (iv) continued scale up of manufacturing and manufacturing process improvements, and (v) general working capital requirements. However, in case of regulatory delays or other unforeseen events, we may require additional funding.

We may require additional funding in the future to complete our clinical trials currently planned or underway, continue research and new development programs, and continue operations. Potential sources of funding include (i) the entrance into various potential strategic partnerships targeted at advancing and maximizing our full pipeline for mTNBC and beyond, (ii) the sales and marketing of Trodelvy as a third-line therapy for mTNBC in the United States, and (iii) potential equity and debt financing transactions.

Until we can generate significant cash through (i) the entrance into various potential strategic partnerships towards advancing and maximizing our full pipeline for mTNBC and beyond, or (ii) the sales and marketing of Trodelvy as a third-line therapy for mTNBC in the United States, we expect to continue to fund our operations with our current financial resources. In the

26

future, if we cannot obtain sufficient funding through the above methods, we could be required to finance future cash needs through the sale of additional equity and/or issuance of debt. However, there can be no assurance that we will be able to raise the additional capital needed to complete our pipeline of research and development programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. Our existing debt may also negatively impact our ability to raise additional capital. If we are unable to raise capital on acceptable terms, our ability to continue our business would be materially and adversely affected.

Although we received accelerated approval of our BLA for Trodelvy for patients with metastatic triple-negative breast cancer, our other most advanced therapeutic product candidates are still only in the clinical development stage, and may require us to raise capital in the future in order to fund further expensive and time-consuming studies before they can even be submitted for final regulatory approval. A failure of a clinical trial could severely harm our business and results of operations.

Clinical trials involve the administration of a product candidate to patients who are already extremely ill, making patient enrollment often difficult and expensive. Moreover, even in ideal circumstances where the patients can be enrolled and then followed for the several months or more required to complete the study, the trials can be suspended, terminated, delayed or otherwise fail for any number of reasons, including:

• later-stage clinical trials may raise safety or efficacy concerns not readily apparent in earlier trials or fail to meet the primary endpoint;

• unforeseen difficulties in manufacturing the product candidate in compliance with all regulatory requirements and in the quantities needed to complete the trial which may become cost-prohibitive;

• we or any of our collaboration partners may experience delays in obtaining, or be unable to obtain, agreement for the conduct of our clinical trials from the FDA, institutional review boards ("IRBs"), or other reviewing entities at clinical sites selected for participation in our clinical trials;

• while underway, the continuation of clinical trials may be delayed, suspended or terminated due to modifications to the clinical trial’s protocols based on interim results obtained or changes required or conditions imposed by the FDA, an IRB, a data and safety monitoring board (“DSMB”), or any other regulatory authority;

• our third-party contractors may fail to meet their contractual obligations to us in a timely manner;

• the FDA or other regulatory authorities may impose a clinical hold, for example based on an inspection of the clinical trial operations or trial sites;

• we or any of our collaboration partners may suspend or cease trials in our or their sole discretion;

• during the long trial process alternative therapies may become available which make further development of the product candidate impracticable; and

• if we are unable to obtain the additional capital we need to fund all of the clinical trials we foresee, we may be forced to cancel or otherwise curtail such trials and other studies.

Any substantial delay in successfully completing clinical trials for our product candidates, Trodelvy and IMMU-130, could severely harm our business and results of operations. For example, due to the COVID-19 pandemic, we have experienced, and expect to continue to experience, enrollment at a slower pace at certain of our clinical trial sites than initially expected. In addition, certain of our clinical trial sites have suspended enrollment due to facility closures, quarantine, travel restrictions and other governmental restrictions. As a result, we expect the results from our clinical trials could be delayed, which in turn could have a material adverse impact on our clinical trial plans and timelines.

Our clinical trials may not adequately show that our drugs are safe or effective, and a failure to achieve the planned endpoints could result in termination of product development or a withdrawal of our accelerated approval for Trodelvy.

Progression of our drug products through the clinical development process is dependent upon our trials indicating our drugs have adequate safety and efficacy in the patients being treated by achieving pre-determined safety and efficacy endpoints or failure by a regulatory authority to agree with our interpretation of clinical trial data according to the trial protocols. Failure to

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achieve either of these endpoints could result in delays in our trials, require the performance of additional unplanned trials, require termination of any further development of the product for the intended indication, or, in the case of our confirmatory Phase 3 clinical trial for Trodelvy, could result in a withdrawal by FDA of our accelerated approval.

These factors could result in delays in the development of our product candidates and could result in significant unexpected costs or the termination of programs.

On April 6, 2020, we announced that our Phase 3 confirmatory ASCENT study will be halted due to compelling evidence of efficacy. This decision was based on the unanimous recommendation of the study's independent data safety monitoring committee after a routine review the data from the ASCENT study. While the study was halted based on the interim analysis, detailed results of the remainder of the study, including a comparison of the efficacy of Trodelvy to the treatment of physician's choice as measured by progression-free survival in patients with mTNBC previously treated with at least two systemic chemotherapy regimens as well as secondary objectives including overall survival, independently-determined objective response rate, duration of response and time to onset of response per RECIST 1.1 criteria, quality of life, and safety, are not yet available. Final results will become available following study close out and unblinding of study data. We cannot guarantee that the final results of the ASCENT study, once known, and other existing clinical data will be sufficient to support the approval of a supplemental BLA, or whether regulatory agencies will require additional clinical trials or information, which could impact the approvability or commercialization timing and prospects of Trodelvy for the treatment of adult patients with mTNBC who have received at least two prior therapies for metastatic disease.

Information obtained from our Expanded Access Program launched in January 2020 may not reliably predict the efficacy of our product candidates in company-sponsored clinical trials and may lead to adverse events that could limit approval.

In January 2020, we instituted an Expanded Access Program for mTNBC patients. Expanded access studies conducted under this program are uncontrolled, carried out by individual investigators and not typically conducted in strict compliance with current Good Clinical Practices (“cGCPs”), all of which can lead to a treatment effect which may differ from that in placebo-controlled trials. These studies provide only anecdotal evidence of efficacy for regulatory review. These studies contain no control or comparator group for reference and these patient data are not designed to be aggregated or reported as study results. Moreover, data from such small numbers of patients may be highly variable.

Expanded access programs provide supportive safety information for regulatory review. Physicians conducting these studies may use Trodelvy in a manner inconsistent with the protocol. Any adverse events or reactions experienced by subjects in the expanded access program may be attributed to Trodelvy and may impact the safety profile of the drug with related labeling and other regulatory implications.

Should the clinical development process be successfully completed, our ability to derive revenues from the sale of therapeutics will depend upon our first obtaining FDA as well as foreign regulatory approvals, all of which are subject to a number of unique risks and uncertainties.

Even if we are able to demonstrate the safety and efficacy of our product candidates in clinical trials, if we fail to gain timely approval to commercialize our product candidates from the FDA and other foreign regulatory authorities, we will be unable to generate the revenues we will need to build our business. The FDA or comparable regulatory authorities in other countries may delay, limit or deny approval of our product candidates for various reasons. For example, such authorities may disagree with the design, scope or implementation of our clinical trials; or with our interpretation of data from our preclinical studies or clinical trials; or may otherwise take the position that our product candidates fail to meet the requirements and standards for regulatory approval. There is limited FDA precedent or guidance on ADCs, and ADC product candidates may present more complex review considerations than conventional drugs, given their biologic (antibody), drug, and linker components. There are numerous FDA personnel assigned to review different aspects of a BLA, and uncertainties can be presented by their ability to exercise judgment and discretion during the review process. During the course of review, the FDA may request or require additional preclinical, clinical, chemistry, manufacturing, and control (“CMC”), or other data and information, and the development and provision of these data and information may be time consuming and expensive. Regulatory approvals may not be granted on a timely basis, if at all, and even if and when they are granted, they may not cover all the indications for which we seek approval, and they may be subject to the submission of additional confirmatory data to verify clinical benefit post-approval (i.e., for products approved under the accelerated approval pathway), as well as postmarketing requirements, and postmarketing commitments.

Further, while we may develop a product candidate with the intention of addressing a large, unmet medical need, the FDA may only approve the use of the drug for indications affecting a relatively small number of patients, thus greatly reducing the market size and our potential revenues. The approvals may also contain significant limitations in the form of warnings, precautions

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or contraindications with respect to conditions of use, which could further narrow the size of the market. In certain countries, even if the health regulatory authorities approve a drug, it cannot be marketed until pricing for the drug is also approved. Finally, even after approval can be obtained, we may be required to recall or withdraw a product as a result of newly discovered safety or efficacy concerns, either of which would have a materially adverse effect on our business and results of operations.

In order to fund future operations, we will need to raise significant amounts of additional capital. Because it can be difficult for a mid-cap company like ours to raise equity capital on acceptable terms, we cannot assure you that we will be able to obtain the necessary capital when we need it, or on acceptable terms, if at all.

Even if our technologies and product candidates are superior, if we lack the capital needed to bring our future products to market, we may not be successful. We have obtained the capital necessary to fund our research and development programs to date primarily from the following sources:

• upfront payments, milestone payments, and payments for limited amounts of our antibodies received from licensing partners;

• proceeds from the public and private sale of our equity or debt securities; and

• licenses and interest income from our investments.

Over the long term, we expect to commercialize Trodelvy in mTNBC in the United States and globally, to expand Trodelvy to treat patients with other solid tumors, including UC, HR+/HER2- mBC, NSCLC and other serious cancers, to continue to expand research and development activities and we do not believe we will have adequate cash to continue commercial expansion and development of Trodelvy, or to complete development of product candidates in line with our pipeline included in our long term corporate strategy. Our capital requirements are dependent on numerous factors, including:

• the rate of progress of commercialization of Trodelvy in mTNBC and our ability to develop it for other cancers;

• the rate at which we progress our research programs and the number of product candidates we have in preclinical and clinical development at any one time;

• the cost of conducting clinical trials involving patients in the United States, Europe and possibly elsewhere;

• our need to establish the manufacturing capabilities necessary to produce the quantities of our product candidates we project we will need;

• the time and costs involved in obtaining FDA and foreign regulatory approvals;

• the cost of first obtaining, and then defending, our patent claims and other intellectual property rights; and

• our ability to enter into licensing and other collaborative agreements to help offset some of these costs.

There may be additional cash requirements for many reasons, including, but not limited to, changes in our commercial expansion plans, our research and development plans, the need for unexpected capital expenditures or costs associated with any acquisitions of other businesses, assets or technologies that we may choose to undertake and marketing and commercialization of our product candidates. If we deplete our existing capital resources, we will be required to either obtain additional capital quickly, or significantly reduce our operating expenses and capital expenditures, either of which could have a material adverse effect on us.

Until we can generate significant cash through either (i) the entrance into various potential strategic partnerships targeted at advancing and maximizing the Company’s full pipeline for mTNBC and beyond, or (ii) the sales and marketing of Trodelvy as a third-line therapy for mTNBC, we may need additional funding. We believe our projected financial resources are adequate to (i) support commercial launch of Trodelvy in the United States in mTNBC, (ii) continue to expand the clinical development programs for developing Trodelvy in mTNBC, metastatic urothelial cancer ("mUC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), and other indications of high medical need, (iii) invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), (iv) continued scale up of manufacturing and manufacturing process improvements, and (v) general working capital requirements. However, in case of regulatory delays or other unforeseen events, we may require additional funding. If, however, we cannot obtain sufficient funding

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through the entrance into various potential strategic partnerships targeted at advancing and maximizing the Company’s full pipeline for mTNBC and beyond, we could be required to finance future cash needs through the sale of additional equity securities and/ or the issuance of debt. However, there can be no assurance that we will be able to raise the additional capital needed to complete our pipeline of research and development programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. The Company’s existing debt will also negatively impact the Company’s ability to raise additional capital. If the Company is unable to raise capital on acceptable terms, its ability to continue its business would be materially and adversely affected. Having insufficient funds may require us to delay, scale-back, or eliminate some or all of our programs, or renegotiate less favorable terms than we would otherwise choose. Failure to obtain adequate financing also may adversely affect our ability to operate as a going concern.

Additionally, if we raise funds by issuing equity securities, dilution to existing stockholders would result; and if we raise funds by incurring additional debt financing, the terms of the debt may involve future cash payment obligations and/or conversion to equity as well as restrictions that may limit our ability to operate our business.

If we, or any of our collaboration partners, or our or their contract manufacturers, cannot successfully and efficiently manufacture the compounds that make up our products and product candidates, our ability, and the ability of our collaboration partners, to sell products and conduct clinical trials will be impaired.

Our ability to conduct our preclinical and clinical research and development programs depends, in large part, upon our ability to manufacture our proprietary compounds in accordance with the FDA and other regulatory requirements. We have limited historical experience in manufacturing these compounds in significant quantities, and we may not be able to do so in the quantities required to commercialize these products. Any interruption in manufacturing across the supply chain, whether by natural disasters, global disease outbreaks such as COVID-19 or otherwise, could significantly and adversely affect our operations, and delay our research and development programs. The COVID-19 pandemic in particular could adversely impact our internal and third party manufacturing operations as well as our supply chains and distribution systems. Due to the uncertainty around the duration and breadth of the COVID-19 pandemic, the ultimate impact on our manufacturing cannot be reasonably estimated at this time.

We and our collaboration partners also depend on third parties to provide certain raw materials, and contract manufacturing and processing services. All manufacturers of biopharmaceutical products must comply with current cGMP standards, required by the FDA and other regulatory agencies. Such regulations address, among other matters, controls in manufacturing processes, quality control and quality assurance requirements and the maintenance of proper records and documentation. The FDA and other regulatory agencies routinely inspect manufacturing facilities, including in connection with the review of a BLA. The FDA generally will issue a notice on Form 483 if it finds issues with respect to its inspections, to which the facility must adequately respond in order to avoid escalated regulatory concerns. If our manufacturing facility or those facilities of our collaboration partners and our respective contract manufacturers or processors do not comply with applicable cGMP standards and other regulatory requirements, in addition to regulatory enforcement, we may be subject to product liability claims, we may be unable to meet clinical demand for our products, and we could suffer delays in the progress of clinical trials for products under development and of potential approval and commercialization.

Although historically we have been a research and development company, we are commercializing our lead product internally rather than licensing such asset. There can be no assurance that we will be successful in developing and expanding commercial operations or balancing our research and development activities with our commercialization activities.

We have historically been engaged primarily in research and development activities, but are commercializing our lead product, Trodelvy, ourselves. There can be no assurance that we will be able to successfully manage the balance of our research and development operations with our commercialization activities. Potential investors should be aware of the problems, delays, expenses and difficulties frequently encountered by companies balancing development of product candidates, which can include problems such as unanticipated issues relating to clinical trials and receipt of approvals from the FDA and foreign regulatory bodies, with commercialization efforts, which can include problems relating to managing manufacturing and supply, reimbursement, marketing problems and additional costs. Our product candidates will require significant additional research and clinical trials, and we will need to overcome significant regulatory burdens prior to commercialization in the United States and other countries. In addition, we may be required to spend significant funds on building out our commercial operations.

Factors that may impact our efforts to commercialize our current or future product candidates and generate product revenues include:

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• the need to recruit, train, manage, and retain adequate numbers of effective sales and marketing personnel over a large geographic area;

• the costs and time associated with the initial and ongoing training of sales and marketing personnel on legal and regulatory compliance matters and monitoring their actions;

• the clinical indications for which the products are approved and the claims that we may make for the products;

• limitations or warnings, including distribution or use restrictions, contained in the products’ approved labeling;

• any distribution and use restrictions imposed by the FDA or to which we agree;

• our ability to appropriately market, detail, and distribute products in light of healthcare provider facility closures, quarantine, travel restrictions and other governmental restrictions caused by COVID-19;

• understanding and training relevant personnel on the limitations on, and the transparency and reporting requirements applicable to, remuneration provided to actual and potential referral sources; and

• liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements.

Additionally, commercial products must now meet the requirements of the Drug Supply Chain Security Act ("DSCSA"), which imposes obligations on manufacturers of prescription drug products for commercial distribution, regulating the distribution of the products at the federal level, and sets certain standards for federal or state registration and compliance of entities in the supply chain (manufacturers and repackagers, wholesale distributors, third-party logistics providers, and dispensers). The DSCSA preempts previously enacted state pedigree laws and the pedigree requirements of the Prescription Drug Marketing Act of 1987 ("PDMA"). Trading partners within the drug supply chain must now ensure certain product tracing requirements are met that they are doing business with other authorized trading partners; and they are required to exchange transaction information, transaction history, and transaction statements. Further, the DSCSA limits the distribution of prescription pharmaceutical products and imposes requirements to ensure overall accountability and security in the drug supply chain. Product identifier information (an aspect of the product tracing scheme) is also now required. The DSCSA requirements, development of standards, and the system for product tracing have been and will continue to be phased in over a period of years through 2023, and subject companies will need to continue their implementation efforts. The distribution of product samples continues to be regulated under the PDMA, and some states also impose regulations on drug sample distribution.

If we are unable to develop commercially viable therapeutic products, certain obligations the Company has to third parties, including, without limitation, our obligation to pay RPI royalties on certain Trodelvy revenues pursuant to the funding agreement may also erode profitability of this product. There can be no assurance that after the expenditure of substantial funds and efforts, we will successfully develop and commercialize any of our product candidates, generate any significant revenues or ever achieve and maintain a substantial level of sales of our products.

We may not successfully establish and maintain collaborative and licensing arrangements, which could adversely affect our ability to develop and commercialize certain of our product and product candidates. Any of our collaboration partners may not adequately perform their responsibilities under our agreements, which could adversely affect our development and commercialization program.

A key element of our business strategy has been to develop, market and commercialize our product and product candidates through collaborations with more established pharmaceutical companies, including, but not limited to, our collaborations with Everest, Clovis, Roche and AstraZeneca. To the extent we continue to rely on this business strategy, we may not be able to maintain or expand these licenses and collaborations or establish additional licensing and collaboration arrangements necessary to develop and commercialize any of our product and product candidates. Even if we are able to maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will restrict our ability to develop, test and market our product and product candidates. Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and commercialize our product and product candidates.

We expect to rely at least in part on third party collaborators to perform a number of activities relating to the development and commercialization of certain of our product candidates, including the manufacturing of product materials, the design and conduct of clinical trials for certain of our product candidates, and potentially the obtaining of regulatory approvals and marketing

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and distribution of any successfully developed products. Our collaborative partners may also have or acquire rights to control aspects of our product development and clinical programs. As a result, we may not be able to conduct these programs in the manner or on the time schedule we currently contemplate. In addition, if any of these collaborative partners withdraw support for our programs or product candidates or otherwise impair their development, our business could be negatively affected. Our expenses may also increase as a result of our plan to undertake these activities internally to commercialize Trodelvy.

In addition, our success depends on the performance of our collaborators of their responsibilities under these arrangements. Some potential collaborators may not perform their obligations in a timely fashion or in a manner satisfactory to us. Because such agreements may be exclusive, we may not be able to enter into a collaboration agreement with any other company covering the same product field during the applicable collaborative period. In addition, our collaborators’ competitors may not wish to do business with us at all due to our relationship with our collaborators. If we are unable to enter into additional product discovery and development collaborations, our ability to sustain or expand our business will be significantly diminished.

Our future success will depend upon our ability to first obtain and then adequately protect our patent and other intellectual property rights, as well as avoiding the infringement of the rights of others.

Our future success will be highly dependent upon our ability to first obtain and then defend the patent and other intellectual property rights necessary for the commercialization of our product candidates. We have filed numerous patent applications on the technologies and processes that we use in the United States and certain foreign countries. Although we have obtained a number of issued United States patents to date, the patent applications owned or licensed by us may not result in additional patents being issued. Moreover, these patents may not afford us the protection we need against competitors with similar technologies or products. A number of jurisdictions where we have sought, or may in the future choose to seek, intellectual property protection, have intellectual property laws and patent offices which are still developing. Accordingly, we may have difficulty obtaining intellectual property protection in these markets, and any intellectual property protections which we do obtain may be less protective than in the United States, which could have an adverse effect on our operations and financial prospects.

The successful development of therapeutic products frequently requires the application of multiple technologies that may be subject to the patent or other intellectual property rights of third parties. Although we believe it is likely we will need to license technologies and processes from third parties in the ordinary course of our business, we are not currently aware of any material conflict involving our technologies and processes with any valid patents or other intellectual property rights owned or licensed by others that would affect commercial sales of Trodelvy or other products starting in 2020. In the event that a third party was to claim such a conflict existed, they could sue us for damages as well as seek to prevent us from commercializing our product candidates. It is possible that a third party could successfully claim that our products infringe on their intellectual property rights. Uncertainties resulting from the litigation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Any patent litigation or other proceeding, even if resolved in our favor, would require significant financial resources and management time.

Some of our competitors may be able to sustain these costs more effectively than we can because of their substantially greater financial and managerial resources. If a patent litigation or other proceeding is resolved unfavorably to us, we may be enjoined from manufacturing or selling our products without a license from the other party, in addition to being held liable for significant damages. We may not be able to obtain any such license on commercially acceptable terms, if at all.

In addition to our reliance on patents, we attempt to protect our proprietary technologies and processes by relying on trade secret laws, nondisclosure and confidentiality agreements and licensing arrangements with our employees and other persons who have access to our proprietary information. These agreements and arrangements may not provide meaningful protection for our proprietary technologies and processes in the event of unauthorized use or disclosure of such information. In addition, our competitors may independently develop substantially equivalent technologies and processes or otherwise gain access to our trade secrets or technology, either of which could materially and adversely affect our competitive position.

Expiry of our intellectual property rights could lead to increased competition.

Even where we are able to obtain and then defend patent and other intellectual property rights necessary for research, development and commercialization of our product candidates, such intellectual property rights will be for a limited term. Where patents which we own or license expire, the technology comprising the subject of the patent may be utilized by third parties in research and development or competing products (for example, biosimilars of a patented product may be manufactured by third parties once the patent expires). While we endeavor to maintain robust intellectual property protection, as our existing issued patents expire, it may materially and adversely affect our competitive position.

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We face substantial competition in the biotechnology industry and may not be able to compete successfully against one or more of our competitors.

The biotechnology industry is highly competitive, particularly in the area of therapeutic oncology products. In recent years, there have been extensive technological innovations achieved in short periods of time, and it is possible that future technological changes and discoveries by others could result in our products and product candidates quickly becoming uncompetitive or obsolete. A number of companies, including ADC Therapeutics, AbbVie, Astellas Pharma, AstraZeneca, Bristol-Myers Squibb, Daiichi Sankyo, GlaxoSmithKline, Immunogen, Merck, Novartis, Pfizer, Roche, Sanofi, Seattle Genetics, and Zyme-Works, are engaged in the development of therapeutic ADC and/or oncology products. Many of these companies have significantly greater financial, technical and marketing resources than we do. In addition, many of these companies have more established positions in the pharmaceutical industry and are therefore better equipped to develop, commercialize and market oncology products. Even some smaller competitors may obtain a significant competitive advantage over us if they are able to discover or otherwise acquire patentable inventions, form collaborative arrangements or merge with larger pharmaceutical companies. Further, even if we are able to successfully develop and commercialize products, other manufacturers operating in emerging markets may also have a competitive advantage over us with respect to competing products due to their ability to manufacture with a lower cost base.

We 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 technologies and they are increasingly aware of the commercial value of their findings. As a result, they are demanding greater patent and other proprietary rights, as well as licensing and future royalty revenues. It is possible that such competition could come from universities with which we have, or have previously had, collaborative research and development relationships, notwithstanding our efforts to protect our intellectual property in the course of such relationships.

We may be liable for contamination or other harm caused by hazardous materials that we use in the operations of our business.

In addition to laws and regulations enforced by the FDA, we are also subject to regulation under various other foreign, federal, state and local laws and regulations. Our manufacturing and research and development programs involve the controlled use of viruses, hazardous materials, chemicals and various radioactive compounds. The risk of accidental contamination or injury from these materials can never be completely eliminated, and if an accident occurs, we could be held liable for any damages that result, which could exceed our available resources.

The nature of our business exposes us to significant liability claims, and our insurance coverage may not be adequate to cover any future claims.

The use of our compounds in clinical trials and any future sale exposes us to liability claims that could be substantial. These claims might be made directly by healthcare providers, medical personnel, patients, consumers, pharmaceutical companies, and others selling or distributing our compounds. While we currently have product liability insurance that we consider adequate for our current needs, we may not be able to continue to obtain comparable insurance in the future at an acceptable cost, if at all. If for any reason we cannot maintain our existing or comparable liability insurance, our ability to clinically test and market products could be significantly impaired. Moreover, the amount and scope of our insurance coverage, as well as the indemnification arrangements with third parties upon which we rely, may be inadequate to protect us in the event of a successful product liability claim. Any successful claim in excess of our insurance coverage could materially and adversely affect our financial condition and operating results.

Certain potential for conflicts of interest, both real and perceived, exist which could result in expensive and time-consuming litigation.

Certain of our former officers and directors have relationships and agreements, both with us as well as among themselves and their respective affiliates, which create the potential for both real, as well as perceived, conflicts of interest. These include Dr. David M. Goldenberg, our former Chairman of our Board of Directors, our former Chief Scientific Officer and our former Chief Patent Officer, and Ms. Cynthia L. Sullivan, a former Director and our former President and Chief Executive Officer (who is also the wife of Dr. Goldenberg). Dr. Goldenberg is also a minority stockholder of our majority-owned subsidiary, IBC. Dr. Goldenberg was the primary inventor of new intellectual property for Immunomedics and IBC and was largely responsible for allocating ownership between the two companies. Immunomedics has incurred expenses on behalf of the IBC operations, including interest, over the past fifteen years. As of March 31, 2020, IBC has a liability to Immunomedics Inc. which is eliminated in consolidation.

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On January 8, 2018, Morris Rosenberg joined the Company as Chief Technology Officer and became a full-time employee and was permitted to continue to provide certain limited outside consulting services through M Rosenberg BioPharma Consulting LLC.

On March 5, 2019, we entered into an agreement with Scott Canute, a member of our Board of Directors, in connection with his appointment as Executive Director of the Company. On April 16, 2020, Mr. Canute stepped down from his role as Executive Director but will continue to serve as a member of our Board of Directors. Refer to Note 9 - "Related Party Transactions" for further information.    

On November 19, 2019, pursuant to the Plan, the Board of Directors approved a stock option grant to Behzad Aghazadeh, Executive Chairman of the Board of Directors of the Company, to purchase 150,000 shares of the Company's common stock (the "Performance-Based Option") for certain duties performing this role; including providing consulting and advisory services to the Company. The Performance-Based Option is a nonqualified stock option and one third vested upon FDA acceptance of the BLA resubmission, and two thirds vested upon approval from the FDA for the Company’s BLA for Trodelvy. On March 20, 2020, we also granted Dr. Aghazadeh an award of 100,000 restricted stock units, which vest as to 1/3 on each of the first, second and third anniversary of the date of grant.

As a result of these and other relationships, the potential for both real and perceived conflicts of interest exist and disputes could arise over the allocation of funds, research projects and ownership of intellectual property rights. In addition, in the event that we become involved in stockholder litigation regarding these potential conflicts, we might be required to devote significant resources and management time defending the Company from these claims, which could adversely affect our results of operations.

The commercial success of our product and product candidates depends on the availability and sufficiency of third-party payor coverage and reimbursement. Given that recent cancer therapeutics for solid cancers such as the ones we are developing can cost approximately in the range of $13,000 to $30,000 a month, even if our product candidates become available for sale it is likely that federal and state governments, insurance companies and other payors of health care costs will try to first limit the use of these drugs to certain patients, and may be reluctant to provide a level of reimbursement that permits us to earn a significant profit on our investment, if any.

Our ability to successfully commercialize therapeutic products will depend, in significant part, on the extent to which hospitals and physicians can obtain appropriate reimbursement levels for the cost of our products and related treatment. Third-party payors are increasingly challenging the prices charged for diagnostic and therapeutic products and related services. Many commercial payors employ “new-to-market blocks” for newly launched medications and other products until the payors have the opportunity to make a coverage decision based upon their internal review of such products. When a medication or other product is not covered, the patient is responsible to pay the full price, which can significantly limit utilization. In addition, legislative proposals to reform health care or reduce government insurance programs may result in lower prices or the actual inability of prospective customers to purchase our products. Furthermore, even if reimbursement is available, it may not be available at price levels sufficient for us to realize a positive return on our investment.

The United States government, state legislatures and foreign governmental entities have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could exclude or limit our product candidates from coverage and limit payments for pharmaceuticals. We continue to monitor the potential impact of proposals to lower prescription drug costs at the federal and state level. For example, on May 11, 2018, President Trump laid out his administration’s “Blueprint” to lower drug prices and reduce out of pocket costs of drugs, as well as additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, and incentivize manufacturers to lower the list price of their products. Although some proposals related to the administration’s Blueprint require additional authorization to become effective, may ultimately be withdrawn, or may face challenges in the courts, the U.S. Congress and the Trump administration have indicated that they will continue to seek new legislative and administrative measures to control drug costs. Drug pricing remains a key bipartisan issue and drug pricing legislation has been introduced in both the Senate and the House. The Senate Finance Committee released “The Prescription Drug Pricing Reduction Act of 2019” in late July 2019 which includes changes to Medicare and Medicaid drug pricing and targets certain pharmacy benefit manager (“PBM”) and pharmaceutical manufacturer pricing practices such as: (i) revisions to Medicare Part D benefit design and capping beneficiary out-of-pocket costs at $3,100; (ii) an inflationary rebate policy that would require pharmaceutical manufacturers to pay rebates when the price of their drug or biologic increases faster than inflation; (iii) manufacturer reporting requirement to the U.S. Department of Health and Human Services ("HHS") for certain drug price increases; and (iv) PBM transparency requirements and a ban on spread pricing in Medicaid. In December 2019, the House passed a drug pricing

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bill, “Lower Drug Costs Now Act of 2019", which features Medicare Parts B and D direct negotiation with manufacturers, inflationary rebates and a restructuring of the Part D benefit. Direct price negotiations would occur for at least 50 of the most costly drugs to Medicare and would target drugs without a comparable generic or biosimilar on the market. Negotiated prices under the House bill could be used by any payor, both governmental and commercial. Republicans in both chambers have opposed the drug pricing bills but the Trump administration has expressed support for the Senate bill and continues to push for drug pricing controls. If drug pricing reform is not meaningfully addressed before the 2020 election, policies to be pursued in the future may be more aggressive, regardless of which party controls the White House.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

In addition, we expect that increased emphasis on managed care and cost containment measures in the United States by third-party payors and government authorities to continue and will place pressure on pharmaceutical pricing and coverage. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more product candidates for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

If we are unable to obtain and maintain sufficient third-party coverage and adequate reimbursement for our product candidates, the commercial success of our product candidates may be greatly hindered, and our financial condition and results of operations may be materially and adversely affected.

Our products may not achieve market acceptance.

If any of our product candidates fail to achieve sufficient market acceptance, we may not be able to generate sufficient revenue to become profitable. The degree of market acceptance of our product candidates, if and when they are approved for commercial sale, will depend on a number of factors, including, but not limited to:

• the timing of our receipt of marketing approvals, the terms of such approvals and the countries in which such approvals are obtained;

• the safety, efficacy, reliability and ease of administration of our product candidates;

• the prevalence and severity of undesirable side effects and adverse events;

• the extent of the limitations or warnings required by the FDA or comparable regulatory authorities in other countries to be contained in the labeling of our product candidates;

• the clinical indications for which our product candidates are approved;

• the availability and perceived advantages of alternative therapies;

• any publicity related to our product candidates or those of our competitors;

• the quality and price of competing products;

• our ability to obtain third-party payor coverage and sufficient reimbursement;

• our ability to appropriately market, detail, and distribute products in light of healthcare provider facility closures, quarantine, travel restrictions and other governmental restrictions caused by COVID-19;

• the willingness of patients to pay out of pocket in the absence of third-party payor coverage; and

• the selling efforts and commitment of our commercialization collaborators.

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If our approved product candidates fail to receive a sufficient level of market acceptance, our ability to generate revenue from sales of our product candidates will be limited, and our business and results of operations may be materially and adversely affected.

A portion of our funding has come from federal government grants and research contracts. Due to reductions in funding, we may not be able to rely on these grants or contracts as a continuing source of funds.

During the last few years, we have generated revenues from awards made to us by the National Institutes of Health and the Department of Defense to partially fund some of our programs. We cannot rely on grants or additional contracts as a continuing source of funds. Funds available under these grants and contracts must be applied by us toward the research and development programs specified by the government rather than for all our programs generally. The government’s obligation to make payments under these grants and contracts is subject to appropriation by the United States Congress for funding in each year. It is possible that Congress or the government agencies that administer these government research programs will continue to scale back these programs or terminate them due to their own budgetary constraints, as they have recently been doing. Additionally, these grants and research contracts are subject to adjustment based upon the results of periodic audits performed on behalf of the granting authority. Consequently, the government may not award grants or research contracts to us in the future, and any amounts that we derive from existing awards may be less than those received to date. In those circumstances, we would need to provide funding on our own, obtain other funding, or scale back or terminate the affected program. In particular, we cannot assure you that any currently contemplated or future efforts to obtain funding for our product candidate programs through government grants or contracts will be successful, or that any such arrangements which we do conclude will supply us with sufficient funds to complete our development programs without providing additional funding on our own or obtaining other funding. Where funding is obtained from government agencies or research bodies, our intellectual property rights in the research or technology funded by the grant are typically subject to certain licenses to such agencies or bodies, which could have an impact on our utilization of such intellectual property in the future.

We face a number of risks relating to the maintenance of our information systems and our use of information relating to clinical trials.

In managing our operations, we rely on computer systems and electronic communications, including systems relating to record keeping, financial information, sourcing, and back-up and the Internet (“Information Systems”). Our Information Systems include the electronic storage of financial, operational, research, patient and other data. Our Information Systems may be subject to interruption or damage from a variety of causes, including power outages, computer and communications failures, system capacity constraints, catastrophic events (such as fires, tornadoes and other natural disasters), cyber risks, computer viruses and security breaches. If our Information Systems cease to function properly, are damaged or are subject to unauthorized access, we may suffer interruptions in our operations, be required to make significant investments to fix or replace systems and/or be subject to fines, penalties, lawsuits, or government action. The realization of any of these risks could have a material adverse effect on our business, financial condition and results of operations. Our clinical trials information and patient data (which may include personally identifiable information) is part of our Information Systems and is therefore subject to all of the risks set forth above, notwithstanding our efforts to code and protect such information.

Risks Related to Government Regulation of Our Industry

Legislative or regulatory reform of the healthcare system may affect our ability to sell our products profitably.

In recent years, there have been numerous initiatives on the federal and state levels in the United States for comprehensive reforms affecting the payment for, the availability of, and reimbursement for, healthcare services. As discussed above, there have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. For example, the Patient Protection and Affordable Care Act (“ACA”) and the Health Care and Education Reconciliation Act of 2010, which amends the ACA, collectively, the United States Health Reform Laws, were signed into law in the United States in March 2010.

Among the provisions of the ACA of importance to the pharmaceutical industry are the following:

• the Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition of Medicare Part B and Medicaid coverage of the manufacturer's outpatient drugs furnished to Medicaid patients. Effective in 2010, the ACA made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers' rebate

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liability by raising the minimum basic Medicaid rebate on most branded prescription drugs from 15.1% of average manufacturer price, or AMP, to 23.1% of AMP, establishing new methodologies by which AMP is calculated and rebates owed by manufacturers under the Medicaid Drug Rebate Program are collected for drugs that are inhaled, infused, instilled, implanted or injected, adding a new rebate calculation for "line extensions" (i.e., new formulations, such as extended release formulations) of oral solid dosage forms of branded products, expanding the universe of Medicaid utilization subject to drug rebates to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, and expanding the population potentially eligible for Medicaid drug benefits;

• the expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals beginning in April 2010 and by adding new mandatory eligibility categories for certain individuals with income at or below 133.0% of the federal poverty level beginning in 2014, thereby potentially increasing both the volume of sales and manufacturer's Medicaid rebate liability;

• in order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to United States government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. Effective in 2010, the ACA expanded the types of entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of children's hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase. Proposed guidance from the United States Department of Health and Human Services Health Resources and Services Administration, if adopted in its current form, may affect manufacturers' rights and liabilities in conducting audits and resolving disputes under the 340B program;

• the ACA imposed a requirement on manufacturers of branded drugs to provide a 50% which increased to 70% on January 1, 2019, discount off the negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., the "donut hole");

• the ACA imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications;

• the ACA implemented the Physician Payments Sunshine Act;

• the ACA requires annual reporting of drug samples that manufacturers and distributors provide to physicians;

• the ACA expanded healthcare fraud and abuse laws in the United States, including the False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for non-compliance;

• the ACA established a licensing framework for follow-on biologics;

• the ACA established the Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with the funding for such research. The research conducted by the Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products by influencing decisions relating to coverage and reimbursement rates; and

• the ACA established the Center for Medicare & Medicaid Innovation within the Centers for Medicare & Medicaid Services ("Innovation Center"), to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. The Innovation Center was funded through 2019, and funding will be automatically renewed for each 10-year budget window thereafter.

Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been

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signed into law. The Tax Cuts and Jobs Act of 2017 ("TCJA"), includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate". Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called "Cadillac" tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole". In July 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. Congress may consider additional legislation to repeal or repeal and replace other elements of the ACA.

On December 14, 2018, the U.S. District Court for the Northern District of Texas struck down the ACA in Texas v. Azar, deeming it unconstitutional given that Congress repealed the individual mandate in 2017; on July 9, 2019, the U.S. Court of Appeals for the Fifth Circuit heard arguments on appeal in this matter. On December 18, 2019, the Fifth Circuit ruled that the ACA's individual mandate is unconstitutional. In concluding that the individual mandate is unconstitutional, the question remains whether, or how much of, the rest of the ACA is severable from that constitutional defect. The Fifth Circuit further remanded the case to the U.S. District Court for the Northern District of Texas to further analyze whether the other provisions of the ACA are severable as they currently exist under the law. On March 2, 2020, however, the Supreme Court agreed to review the case. Oral argument could be scheduled as soon as October 2020, although it is likely that the Court may not issue its decision until after the November 2020 elections. It is unclear how the eventual decision from this appeal, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2.0% per fiscal year, which went into effect in 2013, and due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken. In January 2013, then-President Barack Obama signed into law the American Taxpayer Relief Act of 2012 ("ATRA"), which, among other things, delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. The ATRA also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover over-payments to providers from three to five years. Moreover, CMS has promulgated or amended a number of cost containment and value-based reimbursement measures in the ordinary course of business, and it is expected to continue revising its regulations and policies in response to market conditions and administration directives. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material and adverse effect on our customers and accordingly, our financial operations.

Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent United States Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

In addition, there have been a number of other policy, legislative, and regulatory proposals aimed at changing the pharmaceutical industry. For instance, on May 11, 2018, President Trump laid out his administration’s “Blueprint” to lower drug prices and reduce out of pocket costs of drugs, as well as additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, and incentivize manufacturers to lower the list price of their products. Although some proposals related to the administration’s Blueprint may require additional authorization to become effective, may ultimately be withdrawn, or may face challenges in the courts, the U.S. Congress and the Trump administration have indicated that they will continue to seek new legislative and administrative measures to control drug costs, including by addressing the role of pharmacy benefit managers in the supply chain.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage

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importation from other countries and bulk purchasing. We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.

On May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or Right to Try Act, was signed into law. The law, among other things, provides a federal framework for patients to access certain investigational new product candidates that have completed a Phase I clinical trial. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA approval under the FDA expanded access program. The Right to Try Act did not establish any new entitlement or positive right to any party or individual, nor did it create any new mandates, directives, or additional regulations requiring a manufacturer or sponsor of an eligible investigational new product candidates to provide expanded access.

We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The United States Health Reform Laws and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.

Healthcare laws and regulations may affect the pricing of our product and product candidates and may affect our profitability.

In certain countries, the government may provide healthcare at a subsidized cost to consumers and regulate prices, patient eligibility or third-party payor reimbursement policies to control the cost of product candidates. Such a system may lead to inconsistent pricing of our product candidates from one country to another. The availability of our product candidates at lower prices in certain countries may undermine our sales in other countries where our product candidates are more expensive. In addition, certain countries may set prices by reference to the prices of our product candidates in other countries. Our inability to secure adequate prices in a particular country may adversely affect our ability to obtain an acceptable price for our product candidates in existing and potential markets. If we are unable to obtain a price for our product candidates that provides an appropriate return on our investment, our profitability may be materially and adversely affected.

Our industry and we are subject to intense regulation from the United States Government and other governments and quasi-official authorities regulating where our products are and product candidates may be sold.

Both before and after regulatory approval to market a particular product candidate, including our biologic product candidates, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and record keeping related to the product are subject to extensive, ongoing regulatory requirements, including, without limitation, submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP requirements and good clinical practice requirements for any clinical trials that we conduct post-approval. As a result, we are subject to a number of governmental and other regulatory risks, which include:

• clinical development is a long, expensive and uncertain process; delay and failure can occur at any stage of our clinical trials;

• our clinical trials are dependent on patient enrollment and regulatory approvals; we do not know whether our planned trials will begin on time, or at all, or will be completed on schedule, or at all;

• the FDA or other regulatory authorities may not approve a clinical trial protocol or may place a clinical trial on hold;

• we rely on third parties, such as consultants, contract research organizations, medical institutions, and clinical investigators, to conduct clinical trials for our drug candidates and if we or any of our third-party contractors fail to comply with applicable regulatory requirements, such as requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, European Medicines Agency ("EMA") or comparable foreign regulatory authorities may require us to perform additional clinical trials;

• if the clinical development process is completed successfully, our ability to derive revenues from the sale of therapeutics will depend on our first obtaining FDA or other comparable foreign regulatory approvals, each of which is subject to unique risks and uncertainties;

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• there is no assurance that we will receive FDA or corollary foreign approval for any of our product candidates for any indication; we are subject to government regulation for the commercialization of our product candidates;

• although we have received accelerated approval for Trodelvy in the United States, its continuing approval remains subject to the outcomes of our confirmatory Phase 3 clinical trial along with post-marketing requirements and commitments;

• even if one or more of our product candidates does obtain approval, regulatory authorities may approve such product candidate for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate;

• undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities;

• later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with the regulatory requirements of FDA and other applicable United States and foreign regulatory authorities could subject us to administrative or judicially imposed sanctions;

• although several of our product candidates have received orphan drug designation in the United States and the European Union ("EU"), for particular indications, we may not receive orphan drug exclusivity for any or all of those product candidates or indications upon approval, and even if we do obtain orphan drug exclusivity, that exclusivity may not effectively protect the product from competition; and

• even if one or more of our product candidates is approved in the United States, it may not obtain the 12 years of exclusivity from biosimilars for which innovator biologics are eligible, and even if it does obtain such exclusivity, that exclusivity may not effectively protect the product from competition; the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates, and if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained; and we may be liable for contamination or other harm caused by hazardous materials used in the operations of our business.

Healthcare providers, physicians and third-party payors often play a primary role in the recommendation and prescription of any currently marketed products and product candidates for which we may obtain marketing approval. Our current and future arrangements with healthcare providers, physicians, third-party payors and customers, and our sales, marketing and educational activities, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations (at the federal and state level) that may constrain our business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. In addition, our operations are also subject to various federal and state fraud and abuse, physician payment transparency and privacy and security laws, including, without limitation:

• The federal Anti-Kickback Statute, which prohibits, among other things, persons and entities including pharmaceutical manufacturers from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, overtly or covertly, in case or in kind, to induce or reward, or in return for, or either the referral of an individual for, or the purchase, lease, order or recommendation of, an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare or Medicaid programs. This statute has interpreted broadly to apply to, among other things, arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other hand. The term "remuneration" expressly includes kickbacks, bribes or rebates and also has been broadly interpreted to include anything of value, including, for example, gifts, discounts, waivers of payment, ownership interest and providing anything at less than its fair market value. There are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions; however, the exceptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exception or safe harbor may be subject to scrutiny. The failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Our practices may not meet all of the criteria for safe harbor protection from federal Anti-Kickback Statute liability in all cases. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or

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specific intent to violate it to have committed a violation. In addition, the ACA codified case law supporting that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

• Federal enforcement agencies and private whistleblowers recently have shown interest in pharmaceutical companies’ product and patient assistance programs ("PAPs"), including reimbursement support, co-pay support, nursing, adherence and educational services, referrals to other providers, donations to independent patient assistance charities, and relationships with specialty pharmacies. Co-pay assistance programs are intended to assist qualified patients with private insurance with any out-of-pocket financial obligations but must exclude any government healthcare program beneficiaries. Several investigations into patient assistance practices have resulted in significant civil and criminal settlements. Recently, the HHS-Office of the Inspector General has released several industry guidance documents, special bulletins, and advisory opinions addressing PAPs. Failure to implement certain measures and safeguards may be found by government agencies to courts to be evidence of intent to induce the purchase of drugs paid for by federal programs, in violations of the Anti-Kickback Statute. PAPs have also been the subject of recent Congressional review.

• The federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented, claims for payment to, or approval by, the federal government that are false, fictitious or fraudulent or knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the federal government. Although we do not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed to "cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers, promoting a product off-label, marketing products of sub-standard quality, or, as noted above, paying a kickback that results in a claim for items or services in violation of the Anti-Kickback Statue. In addition, our activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. For example, several pharmaceutical and other healthcare companies have faced enforcement actions under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. The False Claims Act also permits a private individual acting as a "whistleblower" to bring actions on behalf of the federal government alleging violations of the False Claims Act and to share in any monetary recovery. In addition, certain marketing practices, including off-label promotion, may also implicate the False Claims Act. Although the False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes.

• The Federal Health Insurance Portability and Accountability Act of 1996, ("HIPAA"), which imposes criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, ("HITECH"), and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, impose, among other things, obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information held by certain healthcare providers, health plans and healthcare clearinghouses, known as covered entities, and business associates. Among other things, HITECH made certain aspects of HIPAA's rules (notably the Security Rule) directly applicable to business associates - independent contractors or agents of covered entities that receive or obtain individually identifiable health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal court to enforce the federal HIPAA laws and seek attorney's fees and costs associated with pursuing federal civil actions. The Department of Health and Human Services Office of Civil Rights, or ("OCR"), has increased its focus on compliance and continues to train state attorneys general

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for enforcement purposes. The OCR has recently increased both its efforts to audit HIPAA compliance and its level of enforcement, with one recent penalty exceeding $5 million.

• The federal physician payment transparency requirements, sometimes referred to as the "Physician Payments Sunshine Act," created under the United States Patient Protection and Affordable Care Act of 2010, as amended, or the ACA, and its implementing regulations, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the State Children's Health Insurance Program (with certain exceptions) to annually report to HHS, information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. In 2022, the Sunshine Act will be extended to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into effect in 2022 for payments made in 2021). In addition, Section 6004 of the ACA requires annual reporting of information about drug samples that manufacturers and authorized distributors provide to healthcare providers.

• On October 25, 2018, President Trump signed into law the “Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act.” This law, in part (under a provision entitled “Fighting the Opioid Epidemic with Sunshine”), will extend the Sunshine Act to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level healthcare providers (with reporting requirements going into effect in 2022 for payments made in 2021.

• According to the United States Federal Trade Commission, ("FTC"), failing to take appropriate steps to keep consumers' personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a). The FTC expects a company's data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The FTC's guidance for appropriately securing consumers' personal information is similar to what is required by the HIPAA Security Rule.

• To the extent we obtain coverage for our products by state Medicaid programs, we may be required to pay a rebate to each state Medicaid program for any covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program, and to comply with all Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 and the Veterans Healthcare Act of 1992. Moreover, federal law requires that any company participating in the Medicaid Drug Rebate program also participate in the Public Health Service’s 340B Program, which impose additional reporting requirements and price concessions. Manufacturer compliance with 340B Program requirements can be costly. In addition, if our products are made available to authorized users of the Federal Supply Schedule of the General Services Administration or to low income patients of certain hospitals, additional laws and requirements may apply.

• Analogous state laws and regulations, such as state anti-kickback and false claims laws,, and other states laws addressing the pharmaceutical and healthcare industries, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and in some cases that may apply regardless of payor, i.e., even if reimbursement is not available; some state laws require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines (the PhRMA Code) and the relevant compliance program guidance promulgated by the federal government (HHS-OIG) in addition to requiring drug manufacturers to report pricing and marketing information, including, among other things, information related to gifts, payments, or other remuneration to physicians and other healthcare providers, state and local laws that require the registration of pharmaceutical sales representatives, and state laws governing the privacy and security of health information and the use of prescriber-identifiable data in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. For example, California enacted legislation - the California Consumer Privacy Act (“CCPA”) - which goes into effect January 1, 2020. The CCPA, among other things, created new data privacy obligations for covered companies and provided new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also created a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. The California Attorney General has issued clarifying regulations. Although the law includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law and for protected health information collected by covered entities or business associates subject to HIPAA as specified in the law, it may regulate or impact our processing of personal information

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depending on the context. Despite the issuance of clarifying regulations by the Attorney General , it remains unclear how the statue and regulations will be interpreted and enforced.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, it is possible that certain business activities could be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert management's attention from the business.

If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from participation in government healthcare programs, injunctions, private qui tam actions brought by individual whistleblowers in the name of the government and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our results of operations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business, and damage our reputation.

Many aspects of these laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations that increases the risk of potential violations. In addition, these laws and their interpretations are subject to change. In addition, from time to time in the future, we may become subject to additional laws or regulations administered by the FDA, the FTC, HHS, or by other federal, state, local, or foreign regulatory authorities, or the repeal of laws or regulations that we generally consider favorable, or to more stringent interpretations of current laws or regulations. We are not able to predict the nature of such future laws, regulations, repeals, or interpretations, and we cannot predict what effect additional governmental regulation, if and when it occurs, would have on our business in the future.

Our failure to comply with foreign data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

EU member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations. Moreover, the collection and use of personal health data in the EU, which was formerly governed by the provisions of the European Union Data Protection Directive, was replaced with the EU General Data Protection Regulation, ("GDPR"), in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States, provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the non-compliant company, whichever is greater. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management's attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

Our employees and our independent contractors, principal investigators, consultants or commercial collaborators, as well as their respective sub-contractors, if any, may engage in misconduct or fail to comply with certain regulatory standards and requirements, which could expose us to liability and adversely affect our reputation.

Our employees and our independent contractors, principal investigators, consultants or commercial collaborators, as well as their respective sub-contractors, if any, may engage in fraudulent conduct or other illegal activity, which may include intentional, reckless or negligent conduct that violates, among others, (a) FDA laws and regulations, or those of comparable regulatory authorities in other countries, including those laws that require the reporting of true, complete and accurate information to the FDA, (b)

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manufacturing standards, (c) healthcare fraud and abuse laws (d) anti-bribery and anti-corruption laws, including the Foreign Corrupt Practices Act ("FCPA"), or (e) laws that require the true, complete and accurate reporting of financial information or data. For example, such persons may improperly use or misrepresent information obtained in the course of our clinical trials, create fraudulent data in our preclinical studies or clinical trials or misappropriate our drug products, which could result in regulatory sanctions being imposed on us and cause serious harm to our reputation. It is not always possible for us to identify or deter misconduct by our employees and third parties, and any precautions we may take to detect or prevent such misconduct may not be effective. Any misconduct or failure by our employees and our independent contractors, principal investigators, consultants or commercial collaborators, as well as their respective subcontractors, if any, to comply with the applicable laws or regulations may expose us to governmental investigations, other regulatory action or lawsuits. If any action is instituted against us as a result of the alleged misconduct of our employees or other third parties, regardless of the final outcome, our reputation may be adversely affected and our business may suffer as a result. If we are unsuccessful in defending against any such action, we may also be liable to significant fines or other sanctions, which could have a material and adverse effect on us.

Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including from December 22, 2018 until January 25, 2019, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Risks Related to Our Securities

Our indebtedness and debt service obligations may adversely affect our cash flow.

We intend to fulfill our current debt service obligations, including repayment of the principal from our existing cash and investments, as well as the proceeds from potential licensing agreements and any additional financing from equity or debt transactions. However, our ability to make scheduled payments of the principal of, to pay interest on, or to refinance, our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow to meet these obligations, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive, or delaying or curtailing research and development programs. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

We may add lease lines to finance capital expenditures and may obtain additional long‑term debt and lines of credit. If we issue other debt securities in the future, our debt service obligations will increase further.

Our indebtedness could have significant additional negative consequences, including, but not limited to:

• requiring the dedication of a substantial portion of our existing cash and marketable securities balances and, if available, future cash flow from operations to service our indebtedness, thereby reducing the amount of our expected cash flow available for other purposes, including capital expenditures;

• increasing our vulnerability to general adverse economic and industry conditions;

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• limiting our ability to obtain additional financing;

• limiting our ability to sell assets if deemed necessary;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

• placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.

Shares eligible for future sale may adversely affect our ability to sell equity securities.

Sales of our common stock in the public market could materially and adversely affect the market price of shares. As of March 31, 2020, we had 213,929,505 shares of common stock issued, plus (1) outstanding options to purchase 7,041,952 shares of common stock with a weighted-average exercise price of $16.54 per share, (2) 158,002 outstanding restricted stock units held by certain directors of the Company, (3) 684,429 outstanding performance stock options held by certain executive officers, directors and employees of the Company, and (4) 3,492,087 shares of common stock reserved for potential future grant under the Plan. Of the 250,000,000 shares of common stock authorized under our Certificate of Incorporation, there were 24,694,025 shares of common stock available for future issuance as of March 31, 2020.

Our outstanding options may adversely affect our ability to consummate future equity‑based financings due to the dilution potential to future investors.

Due to the number of shares of common stock we are obligated to issue pursuant to outstanding options, potential investors may not purchase our future equity offerings at market price because of the potential dilution such investors may suffer as a result of the exercise of the outstanding options.

The market price of our common stock has fluctuated widely in the past, and is likely to continue to fluctuate widely based on a number of factors, many of which are beyond our control.

The market price of our common stock has been, and is likely to continue to be, highly volatile. Furthermore, the stock market and the market for stocks of comparable biopharmaceutical companies like ours have from time to time experienced, and likely will again experience, significant price and volume fluctuations that are unrelated to actual operating performance.

From time to time, stock market analysts publish research reports or otherwise comment upon our business and future prospects. Due to a number of factors, we may fail to meet the expectations of securities analysts or investors and our stock price would likely decline as a result. These factors include:

• Announcements by us, any collaboration partners, any future alliance partners or our competitors of pre-clinical studies and clinical trial results, regulatory developments, technological innovations or new therapeutic products, product sales, new products or product candidates and product development timelines;

• The formation or termination of corporate alliances;

• Developments in patent or other proprietary rights by us or our respective competitors, including litigation;

• Developments or disputes concerning our patent or other proprietary rights, and the issuance of patents in our field of business to others;

• Government regulatory action;

• Period-to-period fluctuations in the results of our operations; and

• Developments and market conditions for emerging growth companies and biopharmaceutical companies, in general.

In addition, Internet “chat rooms” have provided forums where investors make predictions about our business and prospects, oftentimes without any real basis in fact, that readers may trade on.

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In the past, following periods of volatility in the market prices of the securities of companies in our industry, securities class action litigation has often been instituted against those companies. Refer to “Legal Proceedings” for more information. If we face such litigation in the future, it would result in substantial costs and a diversion of management’s attention and resources, which could negatively impact our business.

Our principal stockholder can significantly influence all matters requiring the approval by our stockholders.

As of March 31, 2020, Avoro Capital Advisors LLC (“Avoro”) was the beneficial owner of approximately 11.5% of our outstanding common stock. Avoro is our largest stockholder, and Dr. Behzad Aghazadeh, the portfolio manager and controlling person of Avoro, serves as our Executive Chairman.

As a result of this voting power, Avoro has the ability to significantly influence the outcome of substantially all matters that may be put to a vote of our stockholders, including the election of our directors.

There are limitations on the liability of our directors, and we may have to indemnify our officers and directors in certain instances.

Our certificate of incorporation limits, to the maximum extent permitted under Delaware law, the personal liability of our directors for monetary damages for breach of their fiduciary duties as directors. Our bylaws provide that we will indemnify our officers and directors and may indemnify our employees and other agents to the fullest extent permitted by law. These provisions may be in some respects broader than the specific indemnification provisions under Delaware law. The indemnification provisions may require us, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers (other than liabilities arising from willful misconduct of a culpable nature), to advance their expenses incurred as a result of certain proceedings against them as to which they could be indemnified and to obtain directors’ and officers’ insurance. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify a director, officer, employee or agent made or threatened to be made a party to an action by reason of the fact that he or she was a director, officer, employee or agent of the corporation or was serving at the request of the corporation, against expenses actually and reasonably incurred in connection with such action if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Delaware law does not permit a corporation to eliminate a director’s duty of care and the provisions of our certificate of incorporation have no effect on the availability of equitable remedies, such as injunction or rescission, for a director’s breach of the duty of care.

We believe that our limitation of officer and director liability assists us to attract and retain qualified employees and directors. However, in the event an officer, a director or the board of directors commits an act that may legally be indemnified under Delaware law, we will be responsible to pay for such officer(s) or director(s) legal defense and potentially any damages resulting there from. Furthermore, the limitation on director liability may reduce the likelihood of derivative litigation against directors and may discourage or deter stockholders from instituting litigation against directors for breach of their fiduciary duties, even though such an action, if successful, might benefit our stockholders and us. Given the difficult environment and potential for incurring liabilities currently facing directors of publicly-held corporations, we believe that director indemnification is in our and our stockholders’ best interests because it enhances our ability to attract and retain highly qualified directors and reduce a possible deterrent to entrepreneurial decision-making.

Nevertheless, limitations of director liability may be viewed as limiting the rights of stockholders, and the broad scope of the indemnification provisions contained in our certificate of incorporation and bylaws could result in increased expenses. Our board of directors believes, however, that these provisions will provide a better balancing of the legal obligations of, and protections for, directors and will contribute positively to the quality and stability of our corporate governance. Our board of directors has concluded that the benefit to stockholders of improved corporate governance outweighs any possible adverse effects on stockholders of reducing the exposure of directors to liability and broadened indemnification rights.

We are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act.

The Sarbanes-Oxley Act requires that we maintain effective internal controls over financial reporting and disclosure controls and procedures. Among other things, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act (“Section 404”). Compliance with Section 404 requires substantial accounting expense and significant management efforts. Our testing, or the subsequent review by

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our independent registered public accounting firm, may reveal deficiencies in our internal controls that would require us to remediate in a timely manner so as to be able to comply with the requirements of Section 404 each year. If we are not able to comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, the Nasdaq Stock Market or other regulatory authorities that would require additional financial and management resources and could adversely affect the market price of our common stock.

We do not intend to pay dividends on our common stock. Until such time as we pay cash dividends, our stockholders, must rely on increases in our stock price for appreciation.

We have never declared or paid dividends on our common stock. We intend to retain future earnings to develop and commercialize our product candidates and therefore we do not intend to pay cash dividends in the foreseeable future. Until such time as we determine to pay cash dividends on our common stock, our stockholders must rely on increases in the market price of our common stock for appreciation of their investment.

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ITEM 6.    EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed on the “Exhibit Index” immediately following the Signatures.

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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.
May 6, 2020	/s/ Harout Semerjian
	Harout Semerjian
	Chief Executive Officer (Principal Executive Officer)
May 6, 2020	/s/ Usama Malik
	Usama Malik
	Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Description of Document
10.41*	Executive Employment Agreement, dated as of February 13, 2020, by and between the Company and Loretta Itri.
10.42*	Incentive Stock Option Grant, dated as of February 13, 2020, by and between the Company and Loretta Itri.
10.43*+	Executive Employment Agreement, dated as of April 16, 2020, by and between the Company and Harout Semerjian.
10.44*	Nonqualified Stock Option Grant, dated as of April 16, 2020, by and between the Company and Harout Semerjian.
10.45*	Time-Based Restricted Stock Unit Agreement, dated as of April 16, 2020, by and between the Company and Harout Semerjian.
10.46*+	Performance-Based Restricted Stock Unit Agreement, dated as of April 16, 2020, by and between the Company and Harout Semerjian.
31.1*	Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1**	Certifications of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certifications of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	The following financial information from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language) filed electronically herewith: (i) the Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019; (ii) the Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended March 31, 2020 and 2019; (iii) the Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited) for the three months ended March 31, 2020 and 2019; (iv) the Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2020 and 2019; and, (v) the Notes to Unaudited Condensed Consolidated Financial Statements.
104*	The cover page of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL, included in Exhibit 101 Inline XBRL Document Set.

*    Filed herewith.

**    In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

+    Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10). The            omitted information is not material and would likely cause competitive harm to the Company if publicly            disclosed.

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