Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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. On June 1, 2020, the court denied the Company’s motion to dismiss. The Company has filed a motion for reconsideration of the decision, which motion is currently pending before the court.

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, another substantially similar putative class action case was filed in the same court. On September 10, 2019, the court appointed a lead plaintiff and lead counsel and consolidated the actions. On November 18, 2019, plaintiffs filed a consolidated amended complaint against the Company and current and former senior officers and directors, and defendants filed a motion to dismiss. On July 31, 2020, the Court issued an order denying defendants’ motion to dismiss. The Company believes the allegations in the consolidated amended complaint lack merit and intends to vigorously defend itself.

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 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 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, 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 Starr and Liberty insurance policies at issue in the arbitration covers claims made in a 2015-2016 policy period. Liberty denied coverage for the venBio Fee Award on the ground that the claim was not made during its (or Starr’s) policy period. In April 2020, the arbitrators held a hearing on cross-motions for summary judgment on this issue and entered a partial final award and judgment in favor of the Company. The Company established that the venBio Fee Award is a claim that falls in falls in the Liberty and Starr 2015-16 policy period and not in the subsequent 2016-2017 policy period.

In the remaining claims in the arbitration, 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.

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. During the six months ended June 30, 2020, we recognized a $0.5 million milestone payment upon FDA approval of Trodelvy.