UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the period ended March 31, 2000
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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
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IMMUNOMEDICS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 61-1009366
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 American Road, Morris Plains, New Jersey 07950
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(Address of principal executive offices) (Zip code)
(973) 605-8200
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of May 15, 2000, there were 49,283,121 shares of the registrant's common
stock outstanding.
Page 1 of 19
IMMUNOMEDICS, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
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Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - 3
March 31, 2000 and June 30, 1999
Condensed Consolidated Statements of Operations
and Comprehensive Loss - 4
three and nine months ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows - 5
nine months ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements - 6
March 31, 2000
Item 2. Management's Discussion and Analysis of 13
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risks 17
PART II - OTHER INFORMATION
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Item 2. Changes in Securities and Use of Proceeds 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
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Page 2 of 19
IMMUNOMEDICS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, June 30,
2000 1999
ASSETS --------------- -------------
Current Assets:
Cash and cash equivalents $ 17,489,379 $ 3,469,261
Marketable securities 25,365,025 5,952,398
Accounts receivable, net of allowance for
doubtful accounts of $57,398 and $39,398 at
March 31, 2000 and June 30, 1999, respectively 775,914 1,101,820
Inventory 767,542 818,883
Other current assets 1,337,378 573,420
--------------- -------------
Total current assets 45,735,238 11,915,782
Property and equipment, net of accumulated
depreciation of $7,523,536 and $6,789,157 at
March 31, 2000 and June 30, 1999, respectively 4,175,216 4,818,139
Other long-term assets 225,000 225,000
--------------- -------------
$ 50,135,454 $ 16,958,921
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 154,355 $ 143,757
Accounts payable 2,140,303 2,078,562
Other current liabilities 1,381,837 1,870,949
--------------- -------------
Total current liabilities 3,676,495 4,093,268
--------------- -------------
Long-term debt 111,343 228,470
Minority interest 182,000 182,000
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value, authorized 10,000,000 shares; Series F
convertible, authorized 2,000 shares; issued and outstanding 0 and
1,250 shares at March 31, 2000 and June 30, 1999, respectively
(Liquidation preference aggregating $0 and $12,781,944
at March 31, 2000 and June 30, 1999, respectively) - 13
Common stock; $.01 par value, authorized 70,000,000 shares;
issued and outstanding 49,277,621 and 37,888,090 shares
at March 31, 2000 and June 30, 1999, respectively 492,776 378,881
Capital contributed in excess of par 152,619,596 111,466,439
Accumulated deficit (106,822,894) (99,398,278)
Accumulated other comprehensive income (123,862) 8,128
--------------- -------------
Total stockholders' equity 46,165,616 12,455,183
--------------- -------------
$ 50,135,454 $ 16,958,921
=============== =============
See accompanying notes to condensed consolidated financial
statements.
Page 3 of 19
IMMUNOMEDICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
--------------- ---------------- ---------------- ---------------
Revenues:
Product sales $ 1,225,557 $ 1,587,298 $ 3,284,779 $ 4,833,156
Royalties and license fee 5,523 2,598 11,094 13,202
Research and development 181,853 46,934 506,335 275,356
Interest and other 346,180 174,551 555,661 639,849
--------------- ---------------- ---------------- ---------------
1,759,113 1,811,381 4,357,869 5,761,563
--------------- ---------------- ---------------- ---------------
Costs and Expenses:
Cost of goods sold 57,332 46,100 195,216 184,528
Research and development 2,670,957 2,591,412 6,762,815 7,727,929
Sales and marketing 753,911 1,658,310 2,343,215 4,932,122
General and administrative 1,032,553 642,329 1,984,555 1,640,623
--------------- ---------------- ---------------- ---------------
4,514,753 4,938,151 11,285,801 14,485,202
--------------- ---------------- ---------------- ---------------
Net loss (2,755,640) (3,126,770) (6,927,932) (8,723,639)
--------------- ---------------- ---------------- ---------------
Preferred stock dividends - 204,050 496,684 235,994
--------------- ---------------- ---------------- ---------------
Net loss allocable to common shareholders $ (2,755,640) $ (3,330,820) $ (7,424,616) $ (8,959,633)
=============== ================ ================ ===============
Comprehensive Loss:
Net loss $ (2,755,640) $ (3,126,770) $ (6,927,932) $ (8,723,639)
--------------- ---------------- ---------------- ---------------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (133,074) (6,374) (98,424) (23,400)
Unrealized gain / (loss) on securities
available for sale (25,438) - (25,438) 15
--------------- ---------------- ---------------- ---------------
Other comprehensive income (loss) (158,512) (6,374) (123,862) (23,385)
--------------- ---------------- ---------------- ---------------
--------------- ---------------- ---------------- ---------------
Comprehensive loss $ (2,914,152) $ (3,133,144) $ (7,051,794) $ (8,747,024)
=============== ================ ================ ===============
Per Share Data (Basic and Diluted):
Net loss allocable to common shareholders $ (0.06) $ (0.09) $ (0.18) $ (0.24)
=============== ================ ================ ===============
Weighted average number of common
shares outstanding 47,811,205 37,888,090 42,219,357 37,747,267
=============== ================ ================ ===============
See accompanying notes to condensed consolidated
financial statements.
Page 4 of 19
IMMUNOMEDICS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
2000 1999
------------------ -----------------
Cash flows used in operating activities:
Net loss $ (6,927,932) $(8,723,639)
Adjustments to reconcile net loss to net cash used in operating activities:
Minority interest - 182,000
Expense relating to issuance of warrants 517,374 -
Depreciation and amortization 734,379 770,117
Changes in operating assets and liabilities (156,360) (1,107,951)
Other (131,990) (23,400)
------------------ -----------------
Net cash used in operating activities (5,964,529) (8,902,873)
------------------ -----------------
Cash flows from investing activities:
Purchases of marketable securities (32,269,131) (9,864,477)
Proceeds from maturities of marketable securities 12,856,504 2,974,733
Additions to property and equipment (91,456) (708,007)
------------------ -----------------
Net cash used in investing activities (19,504,083) (7,597,751)
------------------ -----------------
Cash flows from financing activities:
Issuance of preferred stock, net - 12,349,800
Issuance of common stock, net 42,659,739 850,000
Purchase of preferred stock, net (5,950,000) -
Preferred stock dividends paid (535,500) -
Exercise of stock options 3,421,020 -
Deposits - cash collateral - (225,000)
Proceeds from debt - 450,000
Payments of debt (106,529) (43,915)
------------------ -----------------
Net cash provided by financing activities 39,488,730 13,380,885
------------------ -----------------
Increase (decrease) in cash and cash equivalents 14,020,118 (3,119,739)
Cash and cash equivalents at beginning of period 3,469,261 7,568,147
------------------ -----------------
Cash and cash equivalents at end of period $ 17,489,379 $ 4,448,408
================== =================
See accompanying notes to condensed consolidated financial
statements.
Page 5 of 19
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Immunomedics, Inc. (the "Company"), which incorporate the Company's
wholly-owned subsidiary Immunomedics B.V., have been prepared in
accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, the statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
balance sheet at June 30, 1999 has been derived from the audited
consolidated financial statements at that date. Operating results for
the nine-month period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the fiscal year
ending June 30, 2000.
The Company has not yet achieved profitable operations and there is no
assurance that profitable operations, if achieved, could be sustained
on a continuing basis. Further, the Company's future operations are
dependent on, among other things, the success of the Company's
commercialization efforts and market acceptance of the Company's
products.
Since its inception in 1982, the Company's source of funds has been
primarily dependent on private and public offerings of equity
securities, revenues from research and development alliances, and
product sales.
For further information, refer to the annual consolidated financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1999.
(2) Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original
maturities of three months or less, at the time of purchase, to be cash
equivalents. Included in other current assets at March 31, 2000 and
June 30, 1999 is accrued interest earned on cash equivalents and
marketable securities of $218,000 and $38,600, respectively.
(3) Income Taxes
The Company has never made payments of Federal or state income taxes
and does not anticipate generating book income in fiscal 2000;
therefore, no income taxes have been reflected for the nine-month
period ended March 31, 2000.
Page 6 of 19
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(4) Net Loss Per Share
Basic and diluted net loss allocable to common shareholders is based on
the net loss for the relevant period, adjusted for Preferred Stock
dividends divided by the weighted average number of shares issued and
outstanding during the period. Preferred Stock dividends for the nine
months ended March 31, 2000 included $199,184 related to a 4% per annum
stated value increase in security and a $297,500 premium paid in
December 1999 in connection with the redemption of the Series F
Preferred Stock. Preferred Stock dividends for the three and nine
months ended March 31, 1999 included $125,000 and $156,944,
respectively related to a 4% per annum stated value increase in
security and the assumed incremental yield attributable to a beneficial
conversion feature of $79,050. For the purposes of the diluted net loss
per share calculations, the exercise or conversion of all potential
common shares is not included because their effect would have been
anti-dilutive, due to the net loss recorded for the periods ended March
31, 2000 and 1999. The Company has certain securities outstanding at
March 31, 2000 that could potentially dilute basic earnings per share
in the future that were not included in the computation of diluted
earnings per share because to do so would have been anti-dilutive for
the periods presented.
(5) Comprehensive Income
Comprehensive income consists of net income (loss) and net unrealized
gains (losses) on securities available for sale and certain foreign
exchange changes and is presented in the unaudited condensed
consolidated statements of operations and comprehensive loss.
(6) Inventory
Inventory is stated at the lower of average cost (which approximates
first-in, first-out) or market, and includes materials, labor and
manufacturing overhead. At March 31, 2000, the inventory balance
consisted of $373,234 of raw materials and $394,308 of finished goods.
(7) Stockholders' Equity
On December 23, 1997, the Company entered into a Structured Equity Line
Flexible Financing Agreement (the "Equity Line") with an investor (the
"Investor"), pursuant to which, subject to the satisfaction of certain
conditions, the Company could have received up to an aggregate of
$30,000,000 over a 36-month period. The Company terminated the Equity
Line as of December 9, 1998. As of the termination date, the Company
had received a total of $5,350,000 for which the Company issued
1,358,838 shares of Common Stock. In connection with the Equity Line,
the Company issued to the Investor a four-year warrant to purchase
50,000 shares of the Common Stock at an exercise price of $7.5375 per
share (180% of closing sales price of Common Stock at the time of
issuance). In addition, the Company was required to issue to the
Investor an additional four-year warrant to purchase 54,000 shares of
Common Stock (representing 5,000 shares for each $500,000 of Common
Stock purchased by the Investor under the Equity Line
Page 7 of 19
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
during calendar 1998). The exercise price of such additional warrant is
$7.087 per share (180% of the weighted average purchase price of the
Common Stock purchased by the Investor during the year).
On December 9, 1998, the Company completed a private placement of 1,250
shares of Series F Convertible Preferred Stock (the "Series F Stock")
to several investors and received net proceeds of $12,349,800. Each
share of Series F Stock had an initial stated value of $10,000, which
increased at the rate of 4% per annum. The Series F Stock became
convertible at the option of the investors, in whole or in part, on
June 8, 1999. The number of shares of Common Stock issuable upon
conversion of each share of Series F Stock was determined by dividing
the stated value of $10,000 plus an accretion of 4% per annum, by the
conversion price then in effect. In accordance with the terms of the
Series F Stock, the Company was required to recognize an assumed
incremental yield of $127,500 (calculated at the date of issuance and
based on a beneficial conversion feature). Such amount was amortized as
a preferred stock dividend over a six month period beginning with the
date of issuance. Accrued dividends payable were $156,944 at March 31,
1999. Additionally, the Company has recognized an incremental yield
attributable to a beneficial conversion feature of $79,050 at March 31,
1999.
As of December 16, 1999, 655 shares of the Series F Stock had been
converted into 5,772,031 shares of Common Stock. The remaining 595
shares of Series F Stock were repurchased, in accordance with the terms
of the Series F Stock, by the Company on that date from the then
current holders at a price equal to 109% of the stated value of $10,000
per share of Series F Stock.
On December 16, 1999, the Company issued a warrant covering 75,000
shares of its Common Stock at an exercise price of $6.50 per share. The
warrants were issued to induce a financial advisor to enter into a
financial advisory agreement with the Company. In accordance with EITF
Issue No 96-18, Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services and other relative accounting literature, the Company
is required to measure the expense associated with the warrants at each
reporting date and recognize the appropriate portion of the expense at
the end of each reporting period until the measurement date is reached
(December 31, 2000 in this transaction). As a result, the Company
recognized a proportionate share of the general and administrative
expense amounting to $517,374 in the quarter ended March 31, 2000 based
on the estimated value of the warrants as of that date.
On December 14, 1999, the Company completed a private placement of
2,500,000 shares of Common Stock at $3.00 per share to several
investors and received net proceeds of $7,220,000. Substantially all of
the net proceeds were used to redeem the Series F Stock as described
above.
On February 16, 2000, the Company completed a private placement of
2,350,000 shares of Common Stock at $16.00 per share to several
investors and received net proceeds of
Page 8 of 19
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
$35,443,000. Currently, the cash is invested in marketable securities,
and will be used as required to fund the continued operations of the
Company.
(8) License and Distribution Agreements
On November 24, 1997, the Company entered into a Distribution Agreement
with Eli Lilly Deutschland GmbH ("Lilly") pursuant to which Lilly will
package and distribute LeukoScan within the countries comprising the
European Union and certain other countries, subject to receipt of
regulatory approvals. Also, effective April 6, 1998, Lilly began
packaging and distributing CEA-Scan within the countries comprising the
European Union. The Company pays Lilly a service fee based primarily on
the number of units of product packaged and shipped. The parties
contemplate that other future Company products may be handled under
this arrangement when appropriate.
Effective as of April 6, 1998, the Company appointed a subsidiary of
Bergen Brunswig Specialty Corporation as a non-exclusive distributor of
CEA-Scan in the U.S. Such subsidiary (currently Integrated
Commercialization Solutions, Inc. ("ICS")) serves as an agent of the
Company in providing product support services, including customer
service, order management, distribution, invoicing and collection.
On December 21, 1998, the Company received $300,000 in final settlement
of all claims between the Company and Mallinckrodt, Inc. and its
affiliate under certain prior distribution agreements, which were
terminated in April 1998. This amount was recognized as other revenue
in fiscal year 1999.
The Company, through its 80% owned subsidiary, IMG Technology, LLC
("IMG"), has formed a joint venture with Coulter Corporation
("Coulter") for the purpose of developing targeted cancer therapeutics.
The joint venture, known as IBC Pharmaceuticals, LLC ("IBC"), was
organized as a Delaware limited liability company. On March 5, 1999 the
Company contributed to IBC, on behalf of IMG, certain rights to its
proprietary humanized antibodies against the cancer marker
carcinoembryonic antigen (which had a financial reporting carrying
value of zero), which is used in its CEA-Cide therapeutic, and Coulter
contributed to IBC certain rights to its bispecific targeting
technology called the "Affinity Enhancement System" or AES. The Company
assigned its rights pursuant to the terms of a license agreement with
IBC dated March 5, 1999 in exchange for the grant to IMG of its
interest in IBC ("Immunomedics License Agreement"). Coulter received
its interest in IBC in exchange for its contribution. The license
granted to IBC is a worldwide, royalty free, exclusive license which is
limited to the "IBC Field" with respect to the "Immunomedics Patent
Property" and the "Immunomedics Biotechnology Assets," as those terms
are defined in the Immunomedics License Agreement. Additionally on
March 5, 1999, several investors contributed $3,000,000 to IBC in
exchange for a 7% interest in the venture. IMG's and Coulter's
interests in IBC are 49.55% and 43.45% respectively. Coulter, IMG and
the investors entered into an operating agreement (the "IBC Operating
Agreement") which establishes
Page 9 of 19
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
the rights and obligations of the respective members. Under the terms
of the IBC Operating Agreement, neither IMG nor Coulter may sell any
portion of its interest in IBC without first providing the other with a
right of first refusal with respect to such sale, provided that after a
public offering of IBC securities, IMG and Coulter will be permitted to
sell up to 20% of their respective interests in IBC free of such right
of first refusal. IMG is a Delaware limited liability company owned 80%
by the Company and 20% by Dr. David M. Goldenberg, the Chairman of the
Board and Chief Executive Officer of the Company. Dr. Goldenberg
received his interest pursuant to the terms of his employment agreement
with the Company. IMG is intended to be a single purpose entity, its
sole asset being its interest in IBC. Dr. Goldenberg and IMG have
entered into an operating agreement (the "IMG Operating Agreement")
which establishes their relative rights and obligations. In connection
with Dr. Goldenberg's receipt of an interest in IMG, the Company
recognized $182,000 of compensation expense, based on the fair value of
technology transferred, and has reflected his interest as a minority
interest on the consolidated financial statements as of June 30, 1999.
Dr. Goldenberg also serves as Chairman of the Board of IBC.
(9) Debt
On October 28, 1998, the Company entered into an Equipment Financing
Agreement with the New England Capital Corporation, pursuant to which
the Company received $450,000, at the interest rate of 9.52% per annum,
to be repaid over a 36-month period. The proceeds of such financing
were used to exercise the early purchase options for equipment
previously leased through a master lease agreement. The financing is
secured by various items of used equipment and an irrevocable letter of
credit in the amount of $225,000. The letter of credit is
collateralized by a cash deposit of an equivalent amount which is
included in "Other long- term assets" on the accompanying consolidated
balance sheet. At March 31, 2000, the Company's indebtedness under this
agreement was $265,698. The Company paid $23,243 and $13,763 for the
nine months ended March 31, 2000 and 1999, respectively, in interest
under this agreement.
(10) Geographic Segment
The Company manages its operations as one line of business of
researching, developing, manufacturing and marketing biopharmaceutical
products, particularly antibody-based diagnostics and therapeutics for
cancer and infectious diseases, and it currently reports as a single
industry segment. The Company markets and sells its products in the
U.S. and Europe.
The following tables present financial information based on the
geographic location of the facilities of Immunomedics, Inc. as of and
for the three and nine-month periods ended March 31, 2000 and 1999:
Page 10 of 19
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Three Months Ended
March 31, 2000
--------------
United States Europe Total
---------------- ---------- --------------
Revenues $ 1,086,138 $672,975 $1,759,113
Net income (loss) (2,936,717) 181,077 (2,755,640)
March 31, 1999
United States Europe Total
Revenues $ 1,052,210 $759,171 $1,811,381
Net income (loss) (3,319,897) 193,127 (3,126,770)
Nine Months Ended
March 31, 2000
--------------
United States Europe Total
---------------- ---------- --------------
Revenues $ 2,485,513 $1,872,356 $4,357,869
Net income (loss) (7,350,999) 423,067 (6,927,932)
March 31, 1999
--------------
United States Europe Total
---------------- ---------- --------------
Revenues $ 3,632,450 $2,129,113 $5,761,563
Net income (loss) (9,111,648) 388,009 (8,723,639)
(11) Subsequent Events
In April, 2000, David M. Goldenberg, the Company's Chief Executive
Officer and his wife, Cynthia L. Goldenberg, the Company's Chief
Operating Officer, paid to the Company the sum of $657,722 in
accordance with the provisions of Section 16(b) of the Securities
Exchange Act of 1934. The Company recorded such amount as a
contribution of capital in its March 31, 2000 balance sheet as it is
related to a transaction with the Company's equity.
Page 11 of 19
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(12) Reclassification
Certain amounts previously reported have been reclassified to conform
to the current year presentation.
Page 12 of 19
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Statements made in this Form 10-Q, other than those concerning historical
information, should be considered forward-looking and subject to various risks
and uncertainties. Such forward-looking statements are made based on
management's belief as well as assumptions made by, and information currently
available to, management pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements as a result of a variety of factors, including those identified in
"Business" and elsewhere in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999 and in Exhibit 99 to this Quarterly Report on
Form 10-Q.
Since its inception, the Company has been engaged primarily in the research and
development and, more recently, the commercialization of proprietary products
relating to the detection, diagnosis and treatment of cancer and infectious
diseases. The Company has incurred significant operating losses since its
formation in 1982 and has not earned a profit since its inception. These
operating losses and failure to be profitable have been due mainly to the
significant amount of money that the Company has had to spend on research and
development. As of March 31, 2000, the Company had an accumulated deficit of
approximately $106,823,000. The Company expects to continue to experience
operating losses until such time, if at all, that it is able to generate
sufficient revenues from sales of CEA-Scan(R), LeukoScan(R) and its other
potential products.
On June 28, 1996, the U.S. Food and Drug Administration ("FDA") licensed
CEA-Scan for use with other standard diagnostic modalities for the detection of
recurrent and/or metastatic colorectal cancer. On October 4, 1996, the European
Commission granted marketing authorization for use of the product in the 15
countries comprising the European Union for the same indication. On September
16, 1997, the Company received a notice of compliance from the Health Protection
Branch permitting it to market CEA-Scan in Canada for colorectal cancer for
recurrent and metastatic colorectal cancer.
On February 14, 1997, the Company was granted regulatory approval by the
European Commission to market LeukoScan, an in vivo infectious disease
diagnostic imaging product, in all 15 countries which are members of the
European Union, for the detection and diagnosis of osteomyelitis (bone
infection) in long bones and in diabetic foot ulcer patients. On December 19,
1996, the Company filed a Biologics License Application for LeukoScan with the
FDA for the same indication approved in Europe, plus an additional indication
for the diagnosis of acute, atypical appendicitis. As part of the review
process, the Company is in discussions with the FDA to address its comments
regarding the adequacy of the Company's data to support final approval for these
indications. Consistent with the Company's decision to focus primarily on cancer
therapeutic products, on April 12, 2000, the Company withdrew the CEA-Scan
breast cancer imaging application submitted on January 26, 1999 to the European
Medicines Evaluation Agency (EMEA).
Page 13 of 19
CEA-Scan and LeukoScan are the only products which the Company is currently
licensed to market and sell. To date, the Company has received only limited
revenues from the sale of these products. There can be no assurance that these
products will achieve market acceptance or generate significant sales. Unless
the Company receives substantial revenues from these products, future revenues
will be dependent in large part upon its receiving payments from corporate
partners under licensing and research agreements or from government grants.
However, there can be no assurance that the Company will receive such payments
in a timely manner, or at all.
The Company is also engaged in developing other biopharmaceutical products,
which are in various stages of development and clinical testing.
Results of Operations
Revenues for the nine-month period ended March 31, 2000 were $4,358,000 as
compared to $5,762,000 for the same period in 1999. Product sales for the
nine-month period ended March 31, 2000 decreased by $1,548,000 as compared to
the same period of 1999, mainly due to the reorganization of the U.S. and
European sales forces, which occurred in April 1999. Research and development
revenue for the nine-month period ended March 31, 2000 increased by $231,000 as
compared to the same period of 1999, primarily due to higher grant revenue.
Interest income increased by $236,000 due to more cash available for
investments. Other income decreased by $320,000 primarily due to the receipt of
$300,000 in December 1998, in final settlement of all claims between the Company
and Mallinckrodt, Inc. and its affiliate under certain prior distribution
agreements, which were terminated in April 1998.
Revenues for the three-month period ended March 31, 2000 were $1,759,000 as
compared to $1,811,000 for the same period in 1999. Product sales for the
three-month period ended March 31, 2000 decreased by $362,000 as compared to the
same period of 1999, mainly due to reorganization of the U.S. and European sales
forces. Research and development revenue for the three-month period ended March
31, 2000 increased by $135,000 as compared to same period of 1999, primarily due
to higher grant revenue. Interest and other income for the three-month period
ended March 31, 2000 increased by $172,000, primarily reflecting increased
interest income due to more cash available for investments.
Total operating expenses for the nine-month period ended March 31, 2000 were
$11,286,000 as compared to $14,485,000 for the same period in 1999. Research and
development costs for the nine-month period ended March 31, 2000 decreased by
$965,000 as compared to the same period in 1999, primarily due to the Company's
restructuring efforts in fiscal 1999 and due to the reduced patient enrollment
in clinical trials. Sales and marketing expenses for the nine-month period ended
March 31, 2000 decreased by $2,589,000 primarily due to the Company-wide
reorganization/restructuring. General and administrative costs for the
nine-month period ended March 31, 2000 increased by $344,000 as compared to the
same period in 1999, primarily due to the recognition of an expense of $517,000
associated with warrants issued to a financial advisor partially offset by
reduced legal costs.
Total operating expenses for the three-month period ended March 31, 2000 were
$4,515,000 as compared to $4,938,000 for the same period in 1999. Research and
development costs for the three-month period ended March 31, 2000 increased by
$80,000 as compared to the same period in 1999, primarily due to the
Page 14 of 19
manufacturing of products for clinical trials. Sales and marketing expenses for
the three-month period ended March 31, 2000 decreased by $904,000, primarily due
to the Company-wide reorganization/restructuring. General and administrative
costs for the three-month period ended March 31, 2000 increased by $390,000 as
compared to the same period in 1999, primarily due to the recognition of an
expense of $517,000 associated with warrants issued to a financial advisor
partially offset by reduced legal costs.
Net loss allocable to common shareholders for the nine-month period ended March
31, 2000 was $7,425,000, or $0.18 per share, as compared to $8,960,000, or $0.24
per share, for the same period in 1999. The lower net loss allocable to common
shareholders in 2000 as compared to 1999 primarily resulted from reduced
expenses partially offset by lower revenues and increased preferred stock
dividends, as discussed above and in Note 4 to the Unaudited Condensed
Consolidated Financial Statements. In addition, the net loss per share for the
nine-month period ended March 31, 2000 was positively impacted by the higher
weighted average number of common shares outstanding for this period, as
compared to the same period in 1999. The increase in the weighted average number
of common shares outstanding was primarily due to the conversion of shares
related to the prior year equity financings and the private placements which
occurred in December 1999 and February 2000 (see Note 7 to the Unaudited
Condensed Consolidated Financial Statements).
Net loss allocable to common shareholders for the three-month period ended March
31, 2000 was $2,756,000, or $0.06 per share, as compared to $3,331,000, or $0.09
per share, for the same period in 1999. The lower net loss allocable to common
shareholders in 2000 as compared to 1999 primarily resulted from reduced
expenses and preferred stock dividends, partially offset by lower revenues as
discussed above. In addition, the net loss per share for the three-month period
ended March 31, 2000 was positively impacted by the higher weighted average
number of common shares outstanding for this period, as compared to the same
period in 1999. The increase in the weighted average number of common shares
outstanding was primarily due to the conversion of shares related to the prior
year equity financings and the private placements which occurred in December
1999 and February 2000 (see Note 7 to the Unaudited Condensed Consolidated
Financial Statements).
Liquidity and Capital Resources
At March 31, 2000, the Company had working capital of $42,059,000, which
represents an increase of $34,236,000 from June 30, 1999. The net increase in
working capital resulted primarily from the private placements which occurred in
December 1999 and February 2000 partially offset by the funding of operating
expenses.
On October 28, 1998, the Company entered into an Equipment Financing Agreement
with the New England Capital Corporation, pursuant to which the Company received
$450,000, to be repaid over a 36-month period. The proceeds of such financing
were used to exercise the early purchase options for the equipment leased
through a master lease agreement. The financing is secured by various items of
used equipment and an irrevocable letter of credit in the amount of $225,000.
The letter of credit is collateralized by a cash deposit of an equivalent amount
(see Note 9 to the Unaudited Condensed Consolidated Financial Statements).
The Company's liquid asset position, measured by its cash, cash equivalents and
marketable securities, was $42,854,000 at March 31, 2000, representing an
increase of $33,433,000 from June 30, 1999. This increase was primarily
attributable to the private placements which occurred in December 1999 and
Page 15 of 19
February 2000 partially offset by the funding of operating expenses. It is
anticipated that absent external financing, working capital and cash, cash
equivalents and marketable securities will decrease during the remainder of
fiscal year 2000 as a result of planned Liquidity and Capital Resources
(Continued)
operating and capital expenditures, offset in part by projected revenues from
product sales in the U.S. and Europe. However, there can be no assurance as to
the amount of revenues, if any, these products will provide. In April 1999, the
Company implemented a cost reduction program which the Company anticipated
saving approximately $3.5 million during the 12 months ending March 31, 2000.
Primarily due to the restructuring, the Company has realized savings during the
twelve months ended March 31, 2000 of approximately $3.8 million.
To date, the Company has not generated positive cash flow from operations.
Accordingly, it has relied primarily upon external financing to supply necessary
cash flow. The Company believes that its existing working capital should be
sufficient to meet its capital and liquidity requirements for approximately
three to four years, based on current spending levels. This statement represents
a forward-looking statement under the Private Securities Litigation Reform Act
of 1995. Actual results could differ materially from such statement for a
variety of reasons. The Company's working capital and working capital
requirements are affected by numerous factors and there is no assurance that
such factors will not have a negative impact on the Company's liquidity.
Principal among these are the success of its product commercialization and
selling products, the technological advantages and pricing of the Company's
products, and access to capital markets that can provide the Company with the
resources when necessary to fund its strategic priorities. Unless there is a
significant increase in product revenues, the Company will require additional
financial resources after it utilizes its current liquid assets in order for it
to continue its projected levels of research and development and clinical trials
of its proposed products and regulatory filings for new indications of existing
products. There can be no assurance that any additional financing will be
available to the Company at all or on terms it finds acceptable or that the
terms of any equity financing will not cause substantial dilution to existing
stockholders.
The Company may supplement its financial resources from time to time as market
conditions permit through additional financing and/or through collaborative
marketing and distribution agreements. The Company continues to evaluate various
programs to raise additional capital and to seek additional revenues from the
licensing of its proprietary technology. At the present time, the Company is
unable to determine whether any of these future activities will be successful
and, if so, the terms and timing of any definitive agreements.
On February 16, 2000, the Company completed a private placement of 2,350,000
shares of Common Stock at $16.00 per share to several investors and received net
proceeds of $35,443,000.
On December 14, 1999, the Company completed a private placement of 2,500,000
shares of Common Stock at $3.00 per share to several investors and received net
proceeds of approximately $7,220,000. Substantially all of the net proceeds were
used to redeem the Series F Preferred Stock as described below.
On December 9, 1998, the Company completed a private placement of 1,250 shares
of Series F Convertible Preferred Stock (the "Series F Stock") to several
investors and received net proceeds of $12,349,800. Each share of Series F Stock
had an initial stated value of $10,000, which increased at the rate of 4% per
Page 16 of 19
annum. The Series F Stock became convertible at the option of the investors, in
whole or in part, on June 8, 1999. The number of shares of Common Stock issuable
upon conversion of each share of Series F Stock was determined by dividing the
stated
Liquidity and Capital Resources (Continued)
value of $10,000 plus an accretion of 4% per annum, by the conversion price then
in effect. In accordance with the terms of the Series F Stock, the Company was
required to recognize an assumed incremental yield of $127,500 (calculated at
the date of issuance and based on a beneficial conversion feature). Such amount
was amortized as a preferred stock dividend over a six month period beginning
with the date of issuance. Accrued dividends payable were $156,944 at March 31,
1999. Additionally, the Company has recognized an incremental yield attributable
to a beneficial conversion feature of $79,050 at March 31, 1999.
As of December 16, 1999, 655 shares of the Series F Stock had been converted
into 5,772,031 shares of Common Stock. The remaining 595 shares of Series F
Stock were repurchased, in accordance with the terms of the Series F Stock, by
the Company on that date from the current holders at a price equal to 109% of
the stated value of $10,000 per share of Series F Stock.
On December 23, 1997, the Company entered into a Structured Equity Line Flexible
Financing Agreement (the "Equity Line") with an investor (the "Investor"),
pursuant to which, subject to the satisfaction of certain conditions, the
Company could have received up to an aggregate of $30,000,000 over a 36-month
period. The Company terminated the Equity Line as of December 9, 1998. As of the
termination date, the Company had received a total of $5,350,000 for which the
Company issued 1,358,838 shares of Common Stock. The Company also issued certain
warrants to the Investor (see Note 7 to the Unaudited Condensed Consolidated
Financial Statements).
Item 3. Quantitative and Qualitative Disclosures About Market Risks
See Item 7A of the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1999.
Page 17 of 19
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds.
On February 16, 2000, the Company completed a private placement of 2,350,000
shares of Common Stock at $16.00 per share to several investors and received net
proceeds of $35,443,000. The Company intends to use the net proceeds for
continuing research and development for its existing product line, for future
clinical trials, for general working capital purposes and in the operation of
the Company's business. The Company did not register the shares under federal
law; instead, the Company relied upon the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933, based upon the fact that there
were a limited number of investors, each of whom the Company understands were
accredited investors and each of whom made certain investment representations to
the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 - Common Stock Purchase Agreement, dated as
of February 14, 2000, by and among the
Company and the investors named therein
(incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form
S-3 (No. 333-31178).
27 - Financial Data Schedule
99 - Risk Factors
(b) Reports on Form 8-K during the quarter ended March
31, 2000:
A Current Report on Form 8-K was filed by the Company on February 23, 2000 to
report (under Item 5) the consummation of the private placement described in
Item 2 of Part II of this Quarterly Report on Form 10-Q.
Page 18 of 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IMMUNOMEDICS, INC.
------------------
(Registrant)
DATE: May 15, 2000 /s/ David M. Goldenberg
-----------------------------
David M. Goldenberg
Chairman and
Chief Executive Officer
(Principal Executive Officer)
DATE: May 15, 2000 /s/ Shailesh R. Asher
-----------------------------
Shailesh R. Asher
Controller and Acting Chief
Financial Officer
(Principal Financial and
Accounting Officer)
Page 19 of 19