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 September 30, 2001 OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the transition period from
to
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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
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(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 November 13, 2001, there were 49,539,371 shares of the registrant's common
stock outstanding.
Page 1 of 15
IMMUNOMEDICS, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets - 3
September 30, 2001 and June 30, 2001
Consolidated Statements of Operations
and Comprehensive Income (Loss) - 4
three months ended September 30, 2001 and 2000
Condensed Consolidated Statements of Cash Flows - 5
three months ended September 30, 2001 and 2000
Notes to Consolidated Financial Statements - 6
September 30, 2001
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risks 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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Page 2 of 15
Part I - Financial Information
Item 1. Consolidated Financial Statements (Unaudited):
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
2001 2001
-------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 12,275,412 $ 8,607,901
Marketable securities 38,347,468 44,682,954
Accounts receivable, net of allowance for
doubtful accounts of $136,863 and $125,440 at
September 30, 2001 and June 30, 2001, respectively 916,406 792,598
Inventory 650,099 750,769
Other current assets 1,325,088 1,151,548
-------------- --------------
Total current assets 53,514,473 55,985,770
Property and equipment, net of accumulated
depreciation of $8,964,398 and $8,711,412 at
September 30, 2001 and June 30, 2001, respectively 4,397,766 3,395,310
Other long-term assets 51,157 276,157
-------------- --------------
$ 57,963,396 $ 59,657,237
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 28,499 $ 70,412
Accounts payable 2,379,881 1,607,176
Deferred revenue 9,000,000 9,000,000
Other current liabilities 1,706,433 2,106,254
-------------- --------------
Total current liabilities 13,114,813 12,783,842
-------------- --------------
Deferred revenue 3,000,000 5,250,000
Minority interest 182,000 182,000
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value, authorized 10,000,000 shares;
issued and outstanding 0 shares
at September 30, 2001 and June 30, 2001 - -
Common stock; $.01 par value, authorized 70,000,000 shares;
issued and outstanding 49,539,371 and 49,533,871 shares
at September 30, 2001 and June 30, 2001, respectively 495,394 495,339
Capital contributed in excess of par 155,157,820 155,116,973
Accumulated deficit (114,463,419) (114,281,279)
Accumulated other comprehensive income 476,788 110,362
-------------- --------------
Total stockholders' equity 41,666,583 41,441,395
-------------- --------------
$ 57,963,396 $ 59,657,237
============== ==============
See accompanying notes to unaudited consolidated financial statements.
Page 3 of 15
IMMUNOMEDICS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
September 30,
2001 2000
------------- -------------
Revenues:
Product sales $ 980,672 $ 1,238,144
Royalties and license fee 2,275,465 1,716
Research and development 85,607 140,173
Interest and other 673,241 656,418
------------ -------------
4,014,985 2,036,451
------------ -------------
Costs and Expenses:
Cost of goods sold 167,452 81,563
Research and development 2,923,565 2,214,063
Sales and marketing 632,117 559,479
General and administrative 473,991 662,436
------------ -------------
4,197,125 3,517,541
------------- -------------
Net loss $ (182,140) $ (1,481,090)
============= =============
Comprehensive Income (Loss):
Net loss $ (182,140) $ (1,481,090)
------------- -------------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 116,617 (40,604)
Unrealized gain (loss) on securities available for sale 249,809 (21,638)
------------- -------------
Other comprehensive income (loss) 366,426 (62,242)
------------- -------------
Comprehensive income (loss) $ 184,286 $ (1,543,332)
============= =============
Per Share Data (Basic and Diluted):
Net loss $ (0.00) $ (0.03)
============= =============
Weighted average number of common
shares outstanding 49,538,116 49,444,064
============= =============
See accompanying notes to unaudited consolidated financial statements.
Page 4 of 15
IMMUNOMEDICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30,
2001 2000
----------------- -----------------
Cash flows from operating activities:
Net loss $ (182,140) $ (1,481,090)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 252,986 238,143
Provision for allowance for doubtful accounts 6,409 5,070
Amortization of bond premium 67,022 4,801
Non-cash expense relating to issuance of warrants - 232,278
Compensation expense on stock options 26,610 -
Deferred revenue (2,250,000) -
Changes in operating assets and liabilities 169,797 (568,162)
Other 116,617 (40,604)
----------------- -----------------
Net cash used in operating activities (1,792,699) (1,609,564)
----------------- -----------------
Cash flows from investing activities:
Purchases of marketable securities - (19,524,719)
Proceeds from maturities of marketable securities 6,743,273 17,629,722
Additions to property and equipment (1,255,442) (134,562)
----------------- -----------------
Net cash provided by (used in) investing activities 5,487,831 (2,029,559)
----------------- -----------------
Cash flows from financing activities:
Exercise of stock options 14,292 972,027
Payments of debt (41,913) (38,121)
----------------- -----------------
Net cash provided by (used in) financing activities (27,621) 933,906
----------------- -----------------
Increase (decrease) in cash and cash equivalents 3,667,511 (2,705,217)
Cash and cash equivalents at beginning of period 8,607,901 11,114,079
----------------- -----------------
Cash and cash equivalents at end of period $ 12,275,412 $ 8,408,862
================= =================
See accompanying notes to unaudited consolidated financial statements.
Page 5 of 15
IMMUNOMEDICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Business Overview and Basis of Presentation
The accompanying unaudited consolidated financial statements of
Immunomedics, Inc. (the "Company"), which incorporate the Company's
majority owned subsidiaries, 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
annual 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, 2001 has
been derived from the audited consolidated financial statements at that
date. Operating results for the three-month period ended September 30, 2001
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2002 or any other period. Certain adjustments
and reclassifications were made to conform to the current year
presentation.
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. The
Company believes that its existing working capital should be sufficient to
meet its capital and liquidity requirements for the foreseeable future.
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, 2001.
(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 September 30, 2001 and
June 30, 2001 is accrued interest earned on cash equivalents and marketable
securities of approximately $642,000 and $652,000, respectively.
(3) Income Taxes
The Company has never made payments of Federal or State income taxes and to
date has not generated book income; therefore, no income taxes have been
reflected for the three-month period ended September 30, 2001.
Page 6 of 15
IMMUNOMEDICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(4) Net Loss Per Share
Basic and diluted net loss per share is based on the net loss for the
relevant period divided by the weighted average number of shares issued and
outstanding during the period. 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 three-month periods ended September
30, 2001 and 2000. The Company has certain securities outstanding at
September 30, 2001 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. The common stock equivalents excluded from the diluted per share
calculation are 2,716,250 and 1,833,750 at September 30, 2001 and 2000,
respectively.
(5) Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss), net unrealized
gains (losses) on securities available for sale and certain foreign
exchange changes and is presented in the unaudited consolidated statements
of operations and comprehensive income (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 September 30, 2001, the inventory balance
consisted of $140,000 of raw materials and $510,000 of finished goods. At
June 30, 2001, the inventory balance consisted of $140,000 of raw materials
and $611,000 of finished goods.
(7) Marketable Securities
The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value of available-for-sale securities by major
security type at September 30, 2001 and June 30, 2001 were as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
------------------------------------------------------------------------------------------
September 30, 2001
Corporate Debt Securities $ 37,778,000 $ 572,000 $ (3,000) $ 38,347,000
============ ========== =========== ============
June 30, 2001
Corporate Debt Securities $ 44,364,000 $ 351,000 $ (32,000) $ 44,683,000
============ ========== =========== ============
Page 7 of 15
IMMUNOMEDICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(8) 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 throughout
Europe.
The following tables present financial information based on the geographic
location of the facilities of Immunomedics, Inc. as of and for the
three-month period ended September 30, 2001 and 2000:
September 30, 2001
United States Europe Total
------------- -------- -----------
Revenues $ 3,354,331 $ 660,654 $ 4,014,985
Net loss (98,848) (83,292) (182,140)
September 30, 2000
United States Europe Total
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Revenues $ 1,251,622 $ 784,829 $ 2,036,451
Net loss (1,918,020) 436,930 (1,481,090)
(9) Development and License Agreement with Amgen
On December 17, 2000, the Company signed a Development and License
Agreement with Amgen Inc. ("Amgen"). The Agreement provides Amgen with the
exclusive rights to clinical development and commercialization of the
Company's naked CD22 antibody product, epratuzumab, for the treatment of
non-Hodgkin's lymphoma in the territories of North America and Australia.
Pursuant to the Amgen Development and License Agreement, the Company
received an up-front payment of $18,000,000 from Amgen on the closing date
of February 1, 2001 and could potentially receive clinical milestones and
future royalties. The up-front payment of $18,000,000 is being recognized
as revenue of $750,000 per month over a period of 24 months, beginning
February 2001, which is management's best estimate of the period of time
required for the parties to fulfill their obligations under the Development
and License Agreement related to the manufacture of epratuzumab.
Accordingly, the Company recognized $2,250,000 as royalties and license fee
revenue for the three-month period ended September 30, 2001. The remaining
balance of $12,000,000 and $14,250,000, is recorded as "Deferred revenue",
in the accompanying unaudited consolidated balance sheets at September 30,
2001 and June 30, 2001, respectively.
Page 8 of 15
Part I - Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The Company is committed to developing, manufacturing and marketing monoclonal
antibody-based products for the detection and treatment of cancers and other
diseases. The Company's major focus is therapeutic antibodies that are designed
to carry radioisotopes, chemotherapeutic agents, toxins, dyes or other
substances to a specific target, such as a disease site or organ system, and
bind to the target. The Company has several such antibodies in clinical
development, including epratuzumab, which is in Phase III trials for the
treatment of patients with non-Hodgkin's lymphoma. This antibody has been
licensed to Amgen, Inc., for further development and commercialization in North
America and Australia. The Company has two commercial diagnostic imaging agents
which utilize the Company's monoclonal antibodies, CEA-Scan and LeukoScan, that
are being sold for the detection of colorectal cancers and bone infections,
respectively. These are the only products that the Company is currently licensed
to market and sell and to date, the Company has received only limited revenues
from the sale of these products. The Company is also developing new cancer
therapeutic antibody technology involving the selective delivery of therapeutic
agents through pre-targeting, in collaboration with IBC Pharmaceuticals, LLC.
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 September 30, 2001, the Company had an accumulated deficit of
approximately $114,463,000. 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.
Results of Operations
Revenues for the three-month period ended September 30, 2001, were $4,015,000 as
compared to $2,036,000 for the same period in 2000, representing an increase of
$1,979,000 or 97%. Product sales for the three-month period ended September 30,
2001, were $981,000 as compared to $1,238,000 for the same period in 2000,
representing an decrease of $257,000, principally reflecting the Company's
transition in focus from development of in vivo imaging products to the
development of therapeutic compounds. Royalties and license fee revenue for the
three-month period ended September 30, 2001, increased by $2,274,000 from $2,000
to $2,276,000 as compared to the same period in 2000, primarily due to
recognition of $2,250,000 of the $18,000,000 up-front payment received in
February 2001 in conjunction with the execution of the Company's fiscal year
2001 development and license agreement with Amgen. Research and development
revenue for the three-month period ended September 30, 2001 decreased by $54,000
from $140,000 to $86,000 as compared to same period of 2000, primarily due to a
lower rate of funding for grants. Interest and other income for the three-month
period ended September 30, 2001 increased by $17,000, as compared to the same
period of 2000, primarily due to more cash available for investments as a result
of the receipt of the $18,000,000 payment from Amgen in February 2001.
Page 9 of 15
Total operating expenses for the three-month period ended September 30, 2001
were $4,197,000 as compared to $3,517,000 for the same period in 2000,
representing an increase of $680,000 or 19%. Research and development expenses
for the three-month period ended September 30, 2001 increased by $710,000 from
$2,214,000 to $2,924,000 as compared to the same period in 2000, primarily due
to increased research and development efforts and manufacturing expenses,
including lab supplies associated with producing therapeutic compounds to be
used in clinical trials. Cost of goods sold for the three-month period ended
September 30, 2001 increased by $110,000, from $57,000 to $167,000 as compared
to the same period in 2000. Cost of goods sold for the three-month period ended
September 30, 2000 reflects the benefit of product sales from inventory that was
previously expensed by the Company prior to receiving product approval. Sales
and marketing expenses for the three-month period ended September 30, 2001
increased by $48,000, primarily due to convention related expenses. General and
administrative costs for the three-month period ended September 30, 2001
decreased by $188,000 as compared to the same period of 2000, primarily due to
the recognition of an expense for the three-month period ended September 30,
2000 of $232,000 associated with warrants issued to a financial advisor in
December 1999, partially offset by an increase of other administrative expenses.
Net loss for the three-month period ended September 30, 2001 was $182,000, or
$0.00 per share, as compared to $1,481,000, or $0.03 per share, for the same
period in 2000. The lower net loss in 2001 as compared to 2000 primarily
resulted from greater royalties and license revenue partially offset by
increased costs and expenses as discussed above.
Liquidity and Capital Resources
At September 30, 2001, the Company had working capital of $40,400,000, which
represents a decrease of $2,802,000 from June 30, 2001. The decrease in working
capital resulted primarily from the funding of operating expenses.
The Company's liquid asset position, measured by its cash, cash equivalents and
marketable securities, was $50,623,000 at September 30, 2001, representing a
decrease of $2,668,000 from June 30, 2001. This decrease was primarily
attributable to the funding of operating expenses as discussed above. It is
anticipated that working capital and cash, cash equivalents and marketable
securities will decrease during the remainder of fiscal year 2002 as a result of
planned operating expenses and capital expenditures, offset in part by projected
revenues from product sales in the U. S. and Europe. However, there can be no
assurance, as to the amount of revenues, if any, these products will provide.
In October 2001, the Company entered into a Distribution Agreement with Logosys
Logistik GmbH ("Logosys") pursuant to which Logosys will package and distribute
LeukoScan and CEA-Scan within the countries comprising the European Union and
certain other countries beginning in January of 2002.
The Company is obligated under an operating lease for facilities used for
research and development, manufacturing and office space. On May 29, 1998, the
Company exercised its right to renew for an additional term of three years
expiring in May 2002 at a base annual rate of $441,000. On November 1, 2001, the
Company renewed for an additional term of twenty years expiring on October 31,
2021 at a base annual rate of $545,000, which is fixed for the first five years
and increases thereafter every five years, which includes an additional area of
15,000 square feet.
Page 10 of 15
In order to support the clinical trial requirements and commercial quantity of
its cancer therapeutic products, the Company plans to expand its manufacturing
facility at a cost of approximately $6.3 million. The Company plans to fund this
project through its working capital or other financing arrangements. The
facility plan includes design of two distinct manufacturing suites, containing
six new bioreactors, which will allow flexibility in terms of the amount of
therapeutic antibodies that can be produced. We plan to begin construction by
the end of January 2002, and it is projected to be completed in about eight
months.
To date, the Company has not generated positive cash flow from operations. The
Company believes that its existing working capital should be sufficient to meet
its capital and liquidity requirements for the foreseeable future. This
expectation represents a forward-looking statement under the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially from the
Company's expectation as a result of a number of risks and uncertainties,
including the risks described in Exhibit 99 annexed hereto. 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, the impact of the regulatory requirements
applicable to the Company and access to capital markets that can provide the
Company with the resources when necessary to fund its strategic priorities. The
Company is engaged in continuous discussions with investment bankers regarding
financing opportunities. 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 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 such financing will not
cause substantial dilution to existing stockholders.
The Company intends to supplement its financial resources from time to time as
market conditions permit through additional financing and through collaborative
marketing and distribution agreements. 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.
Recently Issued Accounting Pronouncements
In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations be accounted for under a single method -- the purchase
method. Use of the pooling-of-interests method no longer is permitted. SFAS No.
141 requires that the purchase method be used for business combinations
initiated after June 30, 2001. SFAS No. 142 requires that goodwill no longer be
amortized to earnings, but instead be reviewed for impairment. SFAS No. 142 has
no impact on the historical financial statements of the Company as the Company
does not have any goodwill or intangible assets which resulted from business
combinations.
Page 11 of 15
Private Securities Litigation Reform Act of 1995
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. Such forward-looking statements are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. The Company's actual results could differ materially from the results
anticipated in these forward-looking statements as a result of a variety of
factors, including (i) the risks described in Exhibit 99 to this Form 10-Q, (ii)
the risks described under the caption "Business Risks" in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2001 (the "2001 10-K"),
(iii) the risks described elsewhere under the caption "Business" in the 2001
10-K and (iv) the risks described elsewhere in the 2001 10-K. The Company
assumes no obligation to update its forward-looking statements.
Page 12 of 15
Item 3. Quantitative and Qualitative Disclosures About Market Risks
The following discussion about the Company's exposure to market risk of
financial instruments contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those described due to a number of factors, including uncertainties
associated with general economic conditions and conditions impacting the
Company's industry.
The Company's holdings of financial instruments are comprised primarily of
corporate debt. All such instruments are classified as securities available for
sale. The Company does not invest in portfolio equity securities or commodities
or use financial derivatives for trading purposes. The Company's debt security
portfolio represents funds held temporarily pending use in its business and
operations. The Company manages these funds accordingly. The Company seeks
reasonable assuredness of the safety of principal and market liquidity by
investing in rated fixed income securities while at the same time seeking to
achieve a favorable rate or return. The Company's market risk exposure consists
principally of exposure to changes in interest rates. The Company's holdings
also are exposed to the risks of changes in the credit quality of issuers. The
Company typically invests in highly liquid debt instruments with fixed interest
rates.
The table below presents the principal amounts and related weighted average
interest rates by fiscal year of maturity for our investment portfolio as of
September 30, 2001:
Fair
2002 2003 2004 2005 2006 Total Value
------- -------- -------- -------- --------- -------- -------
(in Thousands $)
Fixed rate................ $ 18,832 $ 9,275 $ 8,493 $ -- $ 999 $37,598 $ 38,347
Average interest rate..... 5.90% 5.84% 4.26% -- 7.28% 5.55% -
Page 13 of 15
Part II
Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following documents are filed as exhibits to this
report.
10.1 Amendment No. 2 to the Amended and Restated Employment Agreement,
dated as of July 1, 2001 between the Company and Dr. David M.
Goldenberg.
10.2 Contract for Services, effective as of January 1, 2002 between
the Company and Logosys Logistik GmbH.
99.1 Risk Factors
(b) Reports on Form 8-K. During the quarter for which this Report on Form
10Q is filed, the registrant filed no reports on Form 8-K.
Page 14 of 15
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: November 13, 2001 /s/ Cynthia L. Sullivan
-------------------------------
Cynthia L. Sullivan
President, Chief Executive Officer
and Director
(Principal Executive Officer)
DATE: November 13, 2001 /s/ Gerard G. Gorman
-------------------------
Gerard G. Gorman
Vice President Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 15 of 15
EXHIBIT 10.1
AMENDMENT NO. 2
TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT,
DATED AS OF JULY 1, 2001 BETWEEN THE COMPANY AND DR.
DAVID M. GOLDENBERG
THIS AMENDMENT NO. 2 TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated
as of November 1, 1993, is made and entered into as of the first day of July 1,
2001, by and between IMMUNOMEDICS, INC., a Delaware corporation with its
principal office and place of business in Morris Plains, New Jersey
("Immunomedics"), and DR. DAVID M. GOLDENBERG, an individual presently residing
in Mendham, New Jersey ("Dr. Goldenberg").
PREMISES
WHEREAS, under Paragraph 2 of the Amended and Restated Employment
Agreement, the term of that Agreement was to be automatically renewed for
additional one-year periods unless terminated by either party by notice given at
least 90 days prior to the relevant renewal date or for a period of one such
additional year, on the terms and conditions then in effect if, by a date six
months prior to the expiration of the initial term, no agreement was otherwise
reached by Dr. Goldenberg and Immunomedics on the terms and conditions of an
extension; and
WHEREAS, the parties later agreed to an Amendment No. 1 (dated November 1,
1998) to the Amended and Restated Employment Agreement, wherein they agreed on
the terms and conditions of a five-year extension and various other changes to
their agreement; and
WHEREAS, the parties have now agreed to this Amendment No. 2 in order to
further amend their agreement as set forth below:
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
the parties hereto, intending to be legally bound, agreed that:
A. The parties are amending the Amended and Restated Employment Agreement
(and Amendment No. 1 to the extent it previously amended the Amended and
Restated Employment Agreement) as follows:
1. Paragraph 2 of the Amended and Restated Employment Agreement shall
be amended in its entirety to read as follows:
"2. Term. Dr. Goldenberg will continue to be employed by
Immunomedics through June 30, 2006 (the `current term') and this
Agreement shall be automatically renewed for additional one year
periods thereafter unless terminated by either party by notice to the
other given at least ninety (90) days prior to any such renewal date
or, in any case, unless terminated earlier pursuant to any other terms
of this Agreement. A Contract Year as used herein shall mean a period
of twelve (12) calendar months beginning on the date hereof or any
anniversary thereof and ending on the last day of the twelfth month
thereafter. As used herein, `the Term of Employment' shall mean the
initial and any extended terms hereof or as earlier terminated
pursuant to Paragraph 10 hereof."
Page 1 of 6
2. Subparagraph (a) of Paragraph 3 thereof shall be amended to read as
follows:
"3. Duties.
(a) Description. Dr. Goldenberg shall serve as Chief Scientific
Officer and shall perform such duties in that role as are commensurate
with Dr. Goldenberg's expertise, experience, and professional standing
as the Board of Directors of Immunomedics (the `Board') may determine
from time to time. The Board shall assign specific duties to Dr.
Goldenberg after a review of the requirements of Immunomedics and he
shall thereafter report directly to the Chief Executive Officer.
Immunomedics reserves the right, subject to subparagraph 10(h) below,
to change from time to time the nature and scope of Dr. Goldenberg's
duties, provided that such duties shall remain commensurate with Dr.
Goldenberg's expertise, experience and professional standing. If
elected to such positions, Dr. Goldenberg shall serve as a member of
the Board, and an executive officer and director of any subsidiary or
successor of Immunomedics and may, in the discretion of the Board, be
paid additional reasonable compensation therefor."
3. Subparagraph (a) of Paragraph 4.1 thereof shall be amended in its
entirety to read as follows:
"4.1 Compensation.
(a) Salary. For all duties to be performed by Dr.Goldenberg
pursuant to this Agreement, Dr. Goldenberg shall receive a base salary
(the "Base Salary") as determined from time to time by the Board,
which shall be at the rate of no less than Two Hundred and Seventy
Five Thousand Dollars ($275,000.00) per year, payable ratably not less
frequently than once per month."
4. Subparagraph (b) of Paragraph 4.1 shall be amended in its entirety
to read as follows:
"(b) Bonus. In addition to his Base Salary, Dr. Goldenberg may be
paid bonuses at such times, and in such amounts, as the Board may
determine from time to time, provided that Dr. Goldenberg receives
annually a cash bonus of at least 20% of Base Salary. Dr. Goldenberg's
performance shall be reviewed annually by the Board to determine the
amount of additional bonuses, if any, merited either for past
performance or to grant an incentive for future performance. In the
event Immunomedics adopts a management incentive or bonus plan in
which executives (including executives who are directors) are eligible
to participate, Dr. Goldenberg shall be eligible to participate in
such plan and shall be considered for awards at such times as other
executives are considered.
Page 2 of 6
5. Subparagraph (c) of Paragraph 4.1 shall be amended in its entirety
to read as follows:
"(c) Stock Options. Dr. Goldenberg shall be eligible to
participate in Immunomedics' current stock option plan and any future
stock option plans, phantom stock plans, stock bonus plans or other
plans of a similar nature in which executives (including executives
who are also directors) are eligible to participate ("Stock Plans").
Dr. Goldenberg shall receive annually a minimum award of at least
150,000 stock options, with any further stock option to be awarded at
the discretion of the Board."
6. Subparagraph (c) of Paragraph 5 is amended in its entirety as
follows:
"(c) Expense Allowance. In order to facilitate increased
efficiency by Dr. Goldenberg in the performance of his duties, Dr.
Goldenberg shall be paid an expense allowance of Five Hundred Dollars
($500.00) per month or such greater amount as may be determined by the
Board. The amount of such allowance shall be reported for tax purposes
as income to Dr. Goldenberg. This allowance is not a limitation on,
nor given in lieu, expense reimbursements to which Dr. Goldenberg is
entitled under paragraph 5(b) of this Amended and Restated Employment
Agreement. On the first anniversary of Amendment No. 2 of the Amended
and Restated Employment Agreement, the allowance will increase by 10%
and such increased amount will be paid each month for the remainder of
the year beginning on the anniversary date. An additional 10% increase
will occur on each subsequent anniversary date and shall be similarly
paid during the ensuing year."
7. Subparagraph (f) of Paragraph 10 is amended inits entirety to read
as follows:
"(f) At the option of Dr. Goldenberg, to be exercised by ninety
(90) days prior notice to Immunomedics, if a change in control of
Immunomedics shall be deemed to have occurred. For purposes of this
Agreement, a change of control of the Company is defined (i) an
involuntary change in the composition, as of the effective date of
this Agreement, of more than thirty-three percent (33%) of the Board
of Directors of the Company or (ii) any person, entity or combination
thereof (other than the members of the Goldenberg family) controlling,
individually or collectively through ownership, assignment, voting
proxy or the like, 25% or more percent of the outstanding voting
shares ordinarily having the right to vote for the election of the
directors of the Company or the combined voting power thereof or (iii)
there is a liquidation or dissolution of the Company approved by the
shareholders or (iv) there is a sale of all or substantially all of
the assets of the Company. A change of control immediately vests all
previously stock options awarded to Dr. Goldenberg. Additionally, in
the event that a Change of Control occurs, Dr. Goldenberg, if the
Company and Dr. Goldenberg agree, may remain in his capacity as the
Chief Scientific Officer for up to one year before either a new
contract is consummated or Dr. Goldenberg elects to receive severance
as provided in Paragraph 14(b) of this Amended and Restated Employment
Page 3 of 6
Agreement. If the Company and Dr. Goldenberg do not agree to Dr.
Goldenberg remaining in this capacity for the one-year period
beginning with the change of control, then Dr. Goldenberg's employment
shall terminate and he shall be entitled to severance under Paragraph
14(b) of this Amended and Restated Employment Agreement. Payment made
and performance by the Company in accordance with Paragraph 14(b) of
the Amended and Restated Employment Agreement shall operate to fully
discharge and release the Company and its directors, officers,
employees, subsidiaries, affiliates, stockholders, successors,
assigns, agents and representatives from any further obligation or
liability with respect to Dr. Goldenberg's employment and termination
of employment. Other than paying Dr. Goldenberg's Base Salary, stock
options, and any bonuses through the date of termination of his
employment and making any severance payment pursuant to and in
accordance with Paragraph 14(b) (as applicable), the Company and its
directors, officers, employees, subsidiaries, affiliates,
stockholders, successors, assigns, agents and representatives shall
have no further obligation or liability to Dr. Goldenberg or any other
person under this Agreement. The Company shall have the right to
condition the payment of any severance pursuant to Paragraph 14(b) of
this Amended and Restated Employment Agreement upon the delivery by
Dr. Goldenberg to the Company of a release in form and substance
satisfactory to the Company of any and all claims Dr. Goldenberg may
have against the Company and its directors, officers, employees,
subsidiaries, affiliates, stockholders, employment by the Company and
the termination of such employment."
8. A new subparagraph (g) to Paragraph 10 is added, and is to read as
follows:
"(g) At option of Dr. Goldenberg, to be exercised by ninety (90)
days prior notice to Immunomedics if the terms of the Contract have
not, by June 30, 2004, been extended beyond June 30, 2006, said notice
being effective at any time between ninety (90) days before June 30,
2004 and the expiration of this Agreement on June 30, 2006."
9. A new subparagraph (h) to Paragraph 10 is added, and is to read as
follows:
"(h) At the option of Dr. Goldenberg, to be exercised by ninety
(90) days prior notice to Immunomedics if Dr. Goldenberg in good faith
believes that the Board has altered his duties, responsibilities, and
authority within Immunomedics in a way not commensurate with Dr.
Goldenberg's expertise, experience, and professional standing, said
termination having the same legal effect as if Immunomedics had
terminated Dr. Goldenberg without good cause and being deemed to occur
unless he is restored to his former duties, responsibilities, and
authority within Immunomedics within ninety (90) days of the
aforementioned notice."
10. Present subparagraph (g) of Paragraph 10 is amended to be
referenced as subparagraph "(i)".
Page 4 of 6
11. Subparagraph (a) of Paragraph 14 is amended in its entirety to
read as follows:
"(a) Disability and Death. Immunomedics shall acquire and provide
for life insurance for Dr. Goldenberg as required under paragraphs
5(e) and 5(f) of this Amended and Restated Employment Agreement. Such
insurance shall remain in full force and effect (i) for the duration
of this Amended and Restated Employment Agreement and any extension
thereof and (ii) for three years after the termination of this Amended
and Restated Employment Agreement, unless termination occurs by mutual
agreement of the parties, by termination by Dr. Goldenberg (other than
pursuant to Paragraph 2 or subparagraph 10(d) or 10(f) hereof), or by
termination by Immunomedics for Good Cause (as that term is defined in
subparagraph 10(e) hereof) or by expiration of the Term of
Employment."
12. Subparagraph (b) of Paragraph 14 is amended in its entirety to
read as follows:
"(b) Severance In the event of termination of the employment of
Dr. Goldenberg for any reason other than by mutual agreement of the
parties, unilateral termination by Dr. Goldenberg (pursuant to any
provision other than Paragraph 2 or subparagraph 10(d) or 10(f)
hereof), termination by Immunomedics for Good Cause (as that term is
defined in subparagraph 10(e) hereof), or expiration of the Term of
Employment, then the Company shall continue for a period of three (3)
years Dr. Goldenberg's health and life insurance and other benefits,
including but not limited to Split Dollar Life Insurance, Additional
Incentive Compensation and other benefits under Paragraphs 4.2, 5(d),
5(e), 5(f) and 14(a) of this Amended and Restated Employment Agreement
and shall pay to Dr. Goldenberg in lieu of any further compensation
under Paragraph 4.1 under this Agreement "Severance Pay," as defined
below. "Severance Pay" shall equal to the highest Base Salary paid to
Dr. Goldenberg during any of the three prior years, the highest Bonus
paid to Dr. Goldenberg during any of the three prior years, and the
stock options that Executive would have otherwise received during the
period beginning on such date of termination and ending on the later
of twenty-four (24) months from the effective date of such termination
and the last day of the Term. Such Severance Pay shall be paid, at Dr.
Goldenberg's option (i) commencing with such date of termination at
the times and in the amounts such Base Salary, Bonus and stock options
would have been paid or (ii) in a lump sum present value at the time
of termination. Notwithstanding anything to the contrary contained
herein, in the event that Dr. Goldenberg shall elect to be paid
Severance Pay over time and yet breach Paragraph 6 or 9 of this
Amended and Restated Employment Agreement, in addition to any other
remedies the Company may have in the event Dr. Goldenberg breaches
this Amended and Restated Employment Agreement, the Company's
obligation pursuant to this Paragraph 14(b) of the Amended and
Restated Employment Agreement to continue such salary shall cease and
Dr. Goldenberg's rights thereto shall terminate and shall be
forfeited. Similarly, notwithstanding anything to the contrary
contained herein, in the event that Dr. Goldenberg shall elect to be
paid Severance Pay in a lump sum yet thereafter breach Paragraphs 6 or
9 of this Amended and Restated Employment Agreement, the Company shall
be entitled to pro-rata disgorgement of the lump sum severance
payments already made, calculated to provide disgorgement of all
amounts corresponding to the period following Dr. Goldenberg's initial
breach of Paragraphs 6 or 9."
Page 5 of 6
B. The parties agree that, except as stated above, the terms and conditions
in the Amended and Restated Employment Agreement and Amendment No. 1 thereto
remain in full force and effect.
IN WITNESS WHEROF, the parties have executed this Agreement as of the day,
month and year first above written.
Attest: IMMUNOMEDICS, INC.
("Immunomedics")
_________________________________ By:_________________________________
Secretary
Dated: ____/____/ 2001
Witness:
- --------------------------------- ------------------------------------
Dr. David M. Goldenberg
("Dr. Goldenberg")
Dated: ____/____/ 2001
Page 6 of 6
EXHIBIT 10.2
Contract for Services, effective as of January 1, 2002 between the
Company and Logosys Logistik GmbH.
CONTRACT FOR SERVICES
IMMUNOMEDICS, INC. USA, 300 American Road, Morris Plains, NJ 07950
represented by Cynthia Sullivan, Chief Executive Officer
herinafter CLIENT
and
LOGOSYS Logistik GMBH, Otto-Rohm-Strasse 69, 64293 Darmstadt, Germany
represented by Geschaftsfuhrer Hans Jurgen Nutzel
hereinafter LOGOSYS
contract the following.
Premise
CLIENT manufactures and merchandises pharmaceutical products that may be
distributed under the rules of the AMG (Arzneimittelgesetz, German drug law).
The European affiliate of CLIENT remains holder of the AMG license and exclusive
distributor ( its name only will appear on packages).
CLIENT assigns LOGOSYS the right to furnish an overall service handling logistic
tasks defined in the following clauses. The extent of performance is to be
regarded as a unity, which has to be performed absolutely, fully and perfect in
its single specifications to maintain the functioning of the whole system.
CLIENT has checked the conditions of the warehouse prior to signing this
contract and approves it as suitable for the present assortment.
Section 1. Object of Contract
1. CLIENT entrusts LOGOSYS with distributing pharmaceutical products supplied by
CLIENT in the name of and for invoice of CLIENT in Europe and other countries
outside USA and Canada, as specified in Exhibit A to this Agreement, which
Exhibit may be modified by written agreement between the parties. Subject to
distribution are only such products that are registered by national or
international authorities. The approximate quantity of distribution is set forth
in enclosure 1.
2. Distribution includes generally receiving and registering orders,
warehousing, commissioning, shipping, invoicing and debit-accounting by order
and in the name of CLIENT. The services contracted between CLIENT and LOGOSYS
are set forth in enclosures 2 and 3. Because CLIENT is the pharmaceutical
enterprise, it retains sole discretion with respect to the addition and/or
deletion of customers in the data referred to in Enclosure 3, no. 2.
Page 1 of 10
3. CLIENT remains owner of the goods, until they are paid for by final customer.
The title is transferred directly from CLIENT to the final customer.
4. CLIENT guarantees the exclusive right to LOGOSYS to distribute products of in
Germany for the term set forth herein.
Section 2. Integral parts of contract
1. Integral parts of this contract are:
enclosure 1 Quantities/ Data
enclosure 2 Duties, obligations and extent of service by LOGOSYS
enclosure 3 Duties, obligations and extent of performance by CLIENT
enclosure 4 Specific agreements
enclosure 5 Fee
enclosure 6 "ADSp" (General German Shipping Conditions)
in the issue as may from time to time be esta-
blished)
2. The rules cited in paragraph one, in particular enclosures 1-6, are an
integral part of this contract and binding for both parties concerning all the
regulations set down in them.
To regulate details (procedure diagram/SOP) subenclosures to the enclosures as
mentioned above will be set down through written agreement. The rules for
enclosures apply to the subenclosures as well.
Enclosures and subenclosures can be altered by written agreement only.
Section 3. Term
1. This contract is set in force on 01. Jan. 2002 and is effective for 3 years.
It is automatically prolonged for another year, if no notice of termination is
given. Notice of termination must be made in writing, and be sent by fax and
courier, receipt by the other party being agreed to be 5 days after the date on
which the fax is sent in the event proof of earlier actual receipt does not
exist. The period of notice is 6 months before the end of each contract term. A
contract term begins on 01. Jan.of each year and ends on 31 Dec. of each year.
1. In the event that either party repeatedly does not meet essential
parts of this contract, or if performance suffers of a substantial
defect, the other party has the right to serve written notice of
termination, effective twelve (12) weeks after the end of the month in
which it is received. Prior to notice of termination either party has
to serve a notice of lack of conformity with the contract. If the
other party does not remedy the defect and perform the contract within
14 days after the notice of lack of conformity has been served, then
there has to be served another written notice of lack of conformity
including a warning to terminate the contract if the other party does
not perform within 14 days. The parties retain the right to terminate
this contract without notice for an important reason.
Section 4. Obligations of LOGOSYS
Duties, performance and resulting obligations of LOGOSYS are set forth in
enclosure 2 to this contract.
Section 5. Obligations of CLIENT
Duties, performance and resulting obligations of CLIENT are set forth in
enclosure 3 to this contract.
Page 2 of 10
Section 6. Fee
1. For distribution LOGOSYS obtains the fee contracted in enclosure 5. LOGOSYS
is authorised to deduct this fee from the collected payments or invoice CLIENT.
The due time for payment arises at the time of collection by LOGOSYS of payments
from purchasers, without further precondition.
2. LOGOSYS is responsible for recording all data necessary for drawing up
statements of account. If requested by CLIENT, LOGOSYS must provide all such
data to CLIENT within 14 days after the request.
3. If LOGOSYS has to collect debts for CLIENT it has to forward all payments,
that are done to date for sales, less the expenditures, on the 5th working day
of the following month.
Section 7. Liability and Insurance
1. CLIENT and LOGOSYS contract that LOGOSYS will not insure goods of CLIENT
stocked by LOGOSYS.
2. In addition, LOGOSYS will ship goods for CLIENT under the ADSp (General
Conditions of Shipment in Germany). LOGOSYS is liable on the terms of section 24
(ordered warehousing) ADSp in the issue as may from time to time be established.
Section 24 runs as follows:
2.1 The liability of the shipper for loss or damage of the goods (damage of
goods) is limited in the case of ordered warehousing:
2.1.1 to 10. DM per kilogram gross weight of a shipment,
2.1.2and a maximum of 10.000 DM for each case of damage; in case damage
consists of the difference between the stock - to - be and the actual
stock, liability is limited to a maximum of 50.000 DM, irrespective of the
number of instances causing the difference in the inventory. In both cases
paragraph 2.1.1 is not affected.
2.2. The liability of the shipper for damage other than on goods is for ordered
warehousing limited to 10.000 DM per case of damage.
2.4. In any event the liability of the shipper is limited to 10 Million DM per
case of damage, regardless of the number of claims arising from a particular
case; if there are several parties suffering damage the shipper is liable
proportionately.
Section 8. Prohibition of Poaching
Each party contracts that it will not employ any employees of the other or
induce them to work for it, irrespective of the employee's qualifications, even
in the event that the employee applies to work for the other party. In addition,
each party will not grant any payment, benefit etc. to employees of the other
party. This renunciation shall apply during the contract and a further 12 months
after receipt of notice of termination.
If either party violates the poaching agreement, the violating party contracts
to pay to the other a fine equalling the employee's monthly gross salary for 12
months. The fine is based on the salary earned by the employee the 12 months
preceding termination of the employment. If the employment has existed less than
12 months, the fine is based on the salary the employee would have earned within
12 months.
Page 3 of 10
Section 9. Collateral Regulations
Modifications and supplements to this contract have to be made in writing. This
includes modification of this clause. Collateral regulations have to be made in
writing, too.
Section 10. Confidentiality
LOGOSYS will treat confidential any and all information concerning business
matters that become known to LOGOSYS while performing this contract; such
information may not be given to third parties even after this contract is
terminated. On request LOGOSYS has to give back to CLIENT any documents left to
LOGOSYS by CLIENT concerning business matters.
Section 11. Inventory, deficiencies, surplus stock
Deficiencies and surplus stock are determined through common inventory.
Deficiencies will be invoiced at the net price of production. Surplus stock will
be credited on the same base. Without prejudice to checking by LOGOSYS, LOGOSYS
will be charged with deficiencies if they exceed 0.5% of the annual net sum of
sales.
Section 12. Applicable law
1. This contract and any relations resulting from it are governed by the law of
the Federal Republic of Germany solely. The rules about conflict of laws, the
UN-Convention of Haag or any other convention about buying and selling goods are
excluded.
2. All disputes arising out of, or in connection with, this Agreement shall be
exclusively and finally settled under the Rules of Arbitration of the
International Chamber of Commerce by three arbitrators, who are skilled in the
legal and business aspects of the subject matter of this Agreement, to be
appointed in accordance with such Rules. The arbitration shall take place in New
Jersey, USA; the proceedings shall be conducted in English.
3. This contract will be issued in German and English language. In any doubt
about interpretation of clauses and in case of legal dispute only the English
issue is valid.
Page 4 of 10
Enclosure 1 Quantities / Specifications
between
IMMUNOMEDICS, INC. USA
300 American Road
Morris Plains, NJ 07950
and
LOGOSYS Logistik GmbH
Otto-Rohm-Str. 69
64293 Darmstadt
from.....................
1. # of Orders per year 1301
2. # of single kits per year 9352
3. quantity to be stored in cool condition 1 - 2 Euro palettes
4. Storage temperature 2 - 8 Degrees Celsius
5. # of products 2
Page 5 of 10
Enclosure 2 Duties, obligations and extent of service by LOGOSYS
between
IMMUNOMEDICS, INC USA ("IMMUNOMEDICS" OR "CLIENT")
and
LOGOSYS Logistik GmbH
Otto-Rohm-Str. 69
64293 Darmstadt
from.....................
1. LOGOSYS works by order of Immunomedics, and delivers to customers of
Immunomedics. LOGOSYS is entitled to appoint sub-distributors, pre-approved in
writing by Immunomedics, for the shipments. Such sub-distributors must agree in
writing to be bound by the obligations of LOGOSYS as set forth in the Contract
for Services, including those in Sections 7, 10, and 13.
2. LOGOSYS is obliged to get all required approvals for the distribution
of products. Immunomedics acknowledges, that LOGOSYS only stores and
distributes the products. This does not include the registration of the
products in accordance to AMG, which is to be done by IMMUNOMEDICS.
3. Receive of products / Storage
3.1 Quantity check based upon # of vials at receipt of goods. Check of
damages at receipt of goods.
3.2 Daily electronical accounting of products received and shipped, daily
reported to CLIENT
3.3 Physical lay in
3.4 Annual stock take
4. Commission business
4.1 Order printout by LOGOSYS
4.2 Commissioning of orders according contract
4.3 Checking product going out
4.4 Adequate packaging for transport
5. Shipment to customer
a. Address labeling
b. Prepare shipment for carrier
c. Generating delivery list and signing off by carrier
6. Administration
a. Processing incoming orders (German, English, French) by phone, fax,
or email.
b. Booking in stockpiling system
c. Invoicing customers
d. Debitor bookkeeping
e. Installation of one contact person and one substitute
Page 6 of 10
Enclosure 3 Duties, obligations and extent of
service by CLIENT
between
CLIENT
and
LOGOSYS Logistik GmbH
Otto-Rohm-Str. 69
64293 Darmstadt
from.....................
1. Written notification about storage and commission site at the
Regierungsprasidium Darmstadt, Ludwigsplatz 2, 64283 Darmstadt
2. Transfer of the existing customer data including addresses.
3. Anouncement before delivery whether goods are under the obligation to be
controlled according existing safetyregulations (,,Sicherheitsblatt") or
other legal requirements for storage, commission and transport.
4. Imported Goods are delivered cleared of customs and taxes.
5. Reimbursement of additional expenses caused by specific storage conditions
as not defined here.
6. Costs for product recalls are to be paid by Immunomedics.
7. Update of customer data.
8. Installation of one contact person and one substitute.
Page 7 of 10
Enclosure 4 Specific agreement
between
CLIENT
and
LOGOSYS Logistik GmbH
Otto-Rohm-Str. 69
64293 Darmstadt
from.....................
1. Packaging
lump-sum per vial / carton EUR 0,22
Included is the printing, the labeling and the insertion of the vial and
the package insert. Not included are the costs for the carton, the labels
and package inserts. Package inserts will [be given to?] LOGOSYS prefolded.
Page 8 of 10
Enclosure 5 Fee
between
CLIENT
and
LOGOSYS Logistik GmbH
Otto-Rohm-Str. 69
64293 Darmstadt
from.....................
Storage handling
- ---------------------------------------- --------------------------------------
Total # kits lump-sum per single kit (EUR)
- ---------------------------------------- --------------------------------------
up to 20,000 0,90
- ---------------------------------------- --------------------------------------
20,001 - 35,000 0,85
- ---------------------------------------- --------------------------------------
above 35,000 0,83
- ---------------------------------------- --------------------------------------
Administration
- ---------------------------------------- --------------------------------------
Total # orders lump-sum per order (EUR)
- ---------------------------------------- --------------------------------------
up to 2,500 12,00
- ---------------------------------------- --------------------------------------
2,500 - 4,400 11,40
- ---------------------------------------- --------------------------------------
above 4,400 11,15
- ---------------------------------------- --------------------------------------
Page 9 of 10
Enclosure 6 "ADSp" (General German Shipping Conditions)
between
CLIENT
and
LOGOSYS Logistik GmbH
Otto-Rohm-Str. 69
64293 Darmstadt
from.....................
CLIENT received the ADSp from.....................
...........................................
CLIENT
Page 10 of 10
EXHIBIT 99.1
RISK FACTORS
Certain statements in this Quarterly Report on Form 10-Q and certain
statements made by the Company in other published documents (including, without
limitation, press releases) are forward-looking. These statements involve known
and unknown risks, uncertainties and other factors, including those discussed in
this Exhibit 99.1 which may cause our actual results, performance or
achievements to be materially different from any future results, performances or
achievements expressed or implied by the forward-looking statements.
Forward-looking statements include, but are not limited to, statements about:
regulatory approval of our product candidates, market size for our products,
timing of regulatory approvals and commercial introduction of our products and
potential results of clinical trials. In some cases, you can identify
forward-looking statements by terms such as "may," "will," "should," "could,"
`would," "expects," "plans," "anticipates," "believes," "estimates," "projects,"
"predicts," "potential" and similar expressions intended to identify
forward--looking statements. The Company cautions stockholders and potential
investors that the following important factors, among others, in some cases have
affected, and in the future could affect, the Company's actual operating results
and could cause the actual results to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the Company. The
statements under this caption are intended to serve as cautionary statements
within the meaning of the Private Securities Litigation Reform Act of 1995. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise, except as required by law. Forward looking statements include, but
are not limited to, statements about:
o the development new therapeutic compounds;
o the selection and licensing of therapeutic compounds;
o the ability to conduct clinical trials and obtain regulatory approval;
o anticipated business strategies;
o relationships with collaborators and licensees and the benefits to be
derived from those relationships;
o the impact of competitive products and pricing;
o competition and technological change;
o existing and future regulations affecting our business;
o anticipated trends in our businesses; and
o sources of revenue, anticipated revenue and future capital expenditures.
Page 1 of 13
Risks Relating to Our Business, Industry and Strategy
We have a history of operating losses and may never become profitable.
We have received only limited revenue from our imaging products CEA-Scan
and LeukoScan and have never received revenue from the commercialization of any
of our therapeutic product candidates. We have incurred significant operating
losses since our formation in 1982 and have not earned a profit since our
inception. These operating losses and our failure to be profitable have been due
mainly to the significant amount of money that we spend on research and
development. As of September 30, 2001, we had an accumulated deficit of
approximately $114.5 million. We expect to continue to experience operating
losses as we attempt to develop and commercialize therapeutic product
candidates. We may never have an approved or commercially successful therapeutic
product candidate or any additional imaging products. If we fail in our attempts
to develop our product candidates we may never achieve significant revenues or
profitable operations and may not be able to earn sufficient revenues to
continue as a going concern.
Most of our therapeutic product candidates are at an early stage of development
and we may not be able to successfully develop and commercialize them.
Most of our therapeutic product candidates are still at the research stage
or early stages of pre-clinical and clinical development. Significant further
research and development, financial resources and personnel will be required to
develop commercially viable therapeutic products and obtain regulatory approval.
We may not be able to successfully develop and commercialize our product
candidates, only our diagnostic imaging products, CEA-Scan and LeukoScan, have
been sold commercially; we have never successfully commercialized a therapeutic
product candidate. Much of our efforts and expenditures over the next few years
will be devoted to the development of our therapeutic product candidates. If we
fail to gain approval from the FDA to commercialize our product candidates we
may never generate significant revenues from product sales.
Our ability to market our products and product candidates depends upon obtaining
and maintaining regulatory approval which is subject to a number of
uncertainties.
In order to obtain regulatory approval for the commercialization of each of
our product candidates, we will be required to complete extensive clinical
trials in humans to demonstrate the safety and efficacy of the product
candidates to the satisfaction of the United States Food and Drug Administration
(FDA) and applicable foreign regulatory authorities. This process is very time
consuming; once we begin clinical trials for a new diagnostic or therapeutic
product, it may take five to ten years or more to receive the required
regulatory approval to commercialize that product and begin to market it to the
public. The clinical trials required for approval are a multi-step process as
the product candidate is tested in larger populations and a product candidate
could fail at any step. Various federal and, in some cases, state statutes and
regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of these products. The lengthy process of
seeking these approvals, and the subsequent compliance with applicable statutes
and regulations, will require us to expend substantial resources. In addition,
each stage of clinical development is more costly than the prior stage and we
may expend substantial resources on a product candidate before we determine that
it cannot be successfully commercialized.
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A clinical trial may be suspended or terminated by us or the FDA, or
otherwise fail, for a number of reasons, including:
o the product candidate may cause unforeseen adverse side effects or have
other characteristics that make it impossible or impracticable for us to
continue development or which may limit its commercial use;
o the results from preclinical studies and clinical trials may not be
predictive of results that will be obtained in later-stage testing;
o we may be unable to timely recruit a sufficient number of patients for our
clinical trials and delays in planned patient enrollment may result in
increased costs and delays;
o we may not be able to supply sufficient quantities of the product candidate
to complete the trial;
o the product candidate may not appear to be more effective than current
available therapies; or
o the clinical investigators, trial monitors, or trial subjects may fail to
comply with the trial plan or protocol.
Any failure or substantial delay in successfully completing clinical trials
and obtaining regulatory approval for our product candidates, especially a
pivotal Phase III trial such as the trial for Epratuzumab, could severely harm
our business. Approvals may not be granted on a timely basis, if at all, or if
granted may not cover all the clinical indications for which we are seeking
approval or may contain significant limitations in the form of warnings,
precautions or contraindications with respect to conditions of use. Even after
approval, we may be required to recall or withdraw a product as a result of
subsequently discovered safety or efficacy concerns which would have a
materially adverse effect on us.
If we are unsuccessful in shifting our focus from our diagnostic imaging
products to our antibody-based therapeutic product candidates our business will
be materially and adversely affected.
As we shift our focus from diagnostic imaging to our therapeutic product
candidates and as our scientific efforts lead us in new directions into
conditions and diseases outside of our area of expertise, we will have to
develop internal expertise or form collaborations in those areas. If we proceed
independently we will require additional resources that may be difficult to
obtain. As a result, we may have to enter into collaboration arrangements with
others that may require us to relinquish rights to some of our technologies,
products or product candidates that we would otherwise pursue independently. We
may be unable to acquire the necessary expertise or enter into collaborations on
acceptable terms which would hinder us in our development of additional
therapeutic product candidates.
We may not be able to successfully develop a market for our products or product
candidates.
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We have never developed and commercialized a therapeutic product candidate.
Our diagnostic imaging products, CEA-Scan and LeukoScan, are the only products
which we are licensed to market and sell. To date, we have a limited market for
these products and have received only limited revenues from the sale of these
products. We are still developing a market for these products and have not yet
begun to develop a market for our therapeutic product candidates. We may not be
able to achieve market acceptance of our current products or any of our product
candidates which would have a significant impact on our revenues.
Our relationship with Amgen may not be successful.
We have licensed Epratuzumab to Amgen in North America and Australia. Under
our licensing agreement, Amgen has undertaken the final clinical development,
commercialization and manufacture of Epratuzumab for these markets. We are
dependent on Amgen for the successful commercialization of Epratuzumab in these
markets. If Amgen does not fully perform its responsibilities under our
agreement, or if the ongoing Phase III trial is not successful, the development
of this product candidate could be substantially delayed in these major markets.
In addition, the agreement provides for certain milestone payments to be made to
us upon Amgen's achievement of various clinical and net sales targets. If Amgen
does not diligently pursue development of Epratuzumab, or if the ongoing Phase
III trial is not successful, we may never receive any milestone payments under
this agreement which would seriously reduce our financial resources and
adversely affect our ability to fund the development and testing of our product
candidates.
We currently receive revenues from a limited number of sources; if we do not
receive these revenues we may need to find alternative sources of funding.
To date, we have received revenues from (i) the sale of our equity
securities, (ii) payments from Amgen under our Development and Licensing
Agreement, (iii) product sales of CEA-Scan and LeukoScan, (iv) one-time signing
fees or grants from corporate partners or government grants under agreements
that support the development of our product candidates, and (v) investment
income. We may not continue to receive these revenues or the amount of these
revenues may be dramatically reduced. In the absence of these revenues, we will
have to obtain other sources of funding to continue to conduct our research and
development activities.
We may be unable to obtain the additional capital needed to operate and grow our
business.
We are expending resources on our research and development efforts. We will
need addition capital in order to commercialize any therapeutic product
candidates that we identify. When our needs for cash deplete our existing
capital position, we will be required to significantly reduce our operating
expenses, which could have a significant and adverse effect on us.
Our capital requirements depend on numerous factors, including:
o the progress of our research and development programs;
o the progress of pre-clinical and clinical testing;
o the time and costs involved in obtaining regulatory approvals;
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o the cost of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;
o competing technological and market developments;
o our ability to establish collaborative arrangements with large
pharmaceutical companies and others; and
o the requirements and timing of entering into technology licensing
agreements and other similar arrangements.
We may use our existing resources before we may otherwise expect because of
changes in our research and development and commercialization plans or because
of other factors affecting our operating expenses or capital expenditures,
including potential acquisitions of other businesses, assets or technologies.
Our ability to raise future capital on acceptable terms depends on
conditions in the public and private equity markets and our performance, as well
as the overall performance of other companies in the biopharmaceutical and
biotechnology sectors. Additional financing may not be available to us at all or
on terms we find acceptable. Furthermore, any financing that we do obtain may
cause substantial dilution to our existing stockholders.
If we cannot successfully manufacture our products and product candidates in an
efficient manner, our ability to sell our products and to conduct clinical
trials and commercialize our product candidates would be impaired.
Our ability to supply the demand for our products and to conduct timely
preclinical and clinical research and development programs and commercialize our
product candidates depends, in part, upon our ability to manufacture our
products and product candidates, either directly or through third parties, in
accordance with FDA and other regulatory requirements. We may not be able to
manufacture our products or product candidates in a reproducible or
cost-effective manner at our facilities in the quantities and with the quality
that we require. We may also have difficulties obtaining the raw materials and
supplies necessary to the manufacturing process. In addition, if several of our
product candidates are approved for marketing and sale, we may not be able to
manufacture commercial quantities of multiple products successfully or with
acceptable profit margins.
We have begun to scale up our manufacturing facilities for our product
candidates to supply clinical trials and possible commercial demand. If we are
unable to use our own manufacturing facilities or to contract with a third-party
to manufacture our products candidates on acceptable terms, we may not be able
to conduct preclinical and clinical testing or to supply commercial quantities
of our product candidates.
In addition, if our manufacturing facilities fail to comply with FDA and
other regulatory requirements, we will be required to suspend manufacturing.
This will have a material adverse effect on our financial condition, results of
operations, and cash flow.
Our collaboration efforts and agreements may fail or be terminated, resulting in
significant delays and substantial increases in the cost of the research,
development and commercialization of some of our product candidates.
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We are party to various arrangements with academic and corporate partners
and others. The successful development and manufacture of the product candidates
covered by these arrangements depends upon outside parties' fully performing
their contractual responsibilities. If any of the other parties breaches or
terminates its agreement with us or otherwise fails to conduct its activities in
a timely manner, the development or commercialization of that product candidate
or research program may be delayed.
For example, the Center for Molecular Medicine and Immunology or "CMMI", a
not-for-profit cancer research center, of which Dr. David M. Goldenberg, our
Chairman and Chief Scientific Officer is the founder, President and a member of
the Board of Trustees, performs contracted pre-clinical evaluations in product
areas of importance to us. CMMI also conducts basic research in a number of
areas of potential interest to us. If CMMI were no longer to provide these
services, we would have to make alternative arrangements with third parties,
which could significantly delay and increase expenses associated with
development and commercialization of our product candidates.
Dependence upon third parties for the manufacture of some of our products
candidates may adversely affect our profit margins and our ability to develop
and deliver products on a timely and competitive basis. For example, if we
contract with a third party for the development and production of certain
humanized antibodies and this party does not perform according to our
expectations, our ability to develop and commercialize those product candidates
will be adversely affected. In addition, we rely on a single third party, SP
Pharmaceuticals, to perform certain end-stage portions of the manufacturing
process for CEA-Scan and LeukoScan, which we do not have the resources to
perform. If SP Pharmaceuticals were to become unavailable, we would be unable to
complete the manufacturing process until we entered into an agreement with
another qualified entity, which could cause substantial delays and materially
adversely affect our operations.
We also are considering additional collaboration and other agreements for
various product candidates. We may not be able to negotiate these arrangements
on favorable terms or at all and these relationships may not be successful.
We may not be able to obtain and adequately protect our intellectual property
rights or avoid infringing the rights of others.
Our commercial success is highly dependent upon our own and our
collaborators' ability to obtain and defend patent rights and other intellectual
property rights that are important to the commercialization of our product
candidates. We or our collaborators have filed patent applications on products
and processes relating to our diagnostic imaging products and our antibody-based
therapeutic product candidates, as well as other technologies and inventions in
the United States and in certain foreign countries. Although we have obtained a
number of U.S. patents, patent applications owned or licensed by us may not
result in patents being issued. Moreover, these patents may not afford us
protection against competitors with similar technology or products.
Although we are not aware of any such conflict, parts of our technology,
techniques, and product candidates may conflict with patents owned by or granted
to others. Any patent holders could sue us for damages and seek to prevent us
from selling or developing our products or product candidates. Since we do not
have the resources to maintain a staff whose primary function is to investigate
the level of protection afforded to third parties on devices and components
which we use in our products and product candidates, it is possible that a third
party could successfully claim that our products infringe on their intellectual
property rights.
Page 6 of 13
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, absorbs 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 intellectual property
proceeding is resolved unfavorably to us, we may be enjoined from manufacturing
or selling our products and services without a license from the other party and
be held liable for significant damages. We may not be able to obtain any
required license on commercially acceptable terms, if at all.
Our operations could suffer if we are unsuccessful in our pending infringement
claims concerning our CEA antibodies.
We are involved in certain litigation with F. Hoffmann-LaRoche and its
affiliates concerning the validity of our European patents covering the antibody
we use in our CEA-Scan cancer imaging product and our CEA-Cide cancer therapy
product, as well as the use of highly specific anti-CEA antibodies for a number
of other uses. We have claimed that they have infringed our patent and they have
counterclaimed seeking to nullify the patents that were issued. If we receive an
unfavorable outcome in any of these matters, our business could be significantly
and adversely affected.
If we are not able to keep our trade secrets confidential, our technology and
information may be used by others to compete against us.
In addition to our reliance on patents, we attempt to protect our
proprietary products and processes by relying on trade secret laws,
nondisclosure and confidentiality agreements, and exclusive licensing
arrangements with our employees and certain other persons who have access to our
proprietary products or processes or have licensing or research arrangements
exclusive to us. These agreements or arrangements may not provide meaningful
protection for our proprietary products and processes in the event of
unauthorized use or disclosure of such information. Others may independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets or technology which will materially
and adversely affect our competitive position.
We face substantial competition in the biotechnology field and may not be able
to successfully compete.
The biotechnology industry is highly competitive, particularly in the area
of cancer diagnostic and therapeutic products. There is the potential for
extensive technological innovations in relatively short periods of time and
rapid technological change or developments by others may result in our current
products as well as those in development becoming noncompetitive or obsolete. We
are likely to encounter significant competition with respect to our existing
products as well as our products currently under development. A number of
Page 7 of 13
companies, including IDEC Pharmaceuticals, Genentech, Glaxo SmithKline, Ligand
Pharmaceuticals, Millennium Pharmaceuticals, Nycomed Amersham, Protein Design
Laboratories, Schering AG, and Corixa Pharmaceuticals, are engaged in the
biotechnology field, and in particular the development of cancer diagnostic and
therapeutic products. Many of these companies have significantly greater
financial, technical and marketing resources than we do. In addition, many of
these companies may have more established positions in the pharmaceutical
industry and may be better equipped than us to develop, refine and market their
products. Our smaller competitors may also obtain a significant competitive
advantage if they acquire or discover patentable inventions, form collaborative
arrangements or merge with large pharmaceutical companies.
We also expect to face increasing competition from universities and other
non-profit research organizations. These institutions carry out a significant
amount of research and development in the field of antibody-based technology.
These institutions are becoming increasingly aware of the commercial value of
their findings and more active in seeking patent and other proprietary rights,
as well as licensing revenues.
If a competitor announces a successful clinical study or an approval by a
regulatory agency to market a product that is comparable to one of our product
candidates, such announcement may have a material adverse effect on our
operations, future prospects and the price of our common stock.
Our limited marketing and sales experience and capability could impact our
ability to successfully sell our current products and our product candidates.
We are relying, in substantial part, on our own limited sales and marketing
organization to market our current imaging products CEA-Scan and LeukoScan. We
have no internal marketing or distribution experience for our antibody-based
therapeutic product candidates. Any sales effort we undertake may be costly and
may not be successful. If we are unable to maintain and continue to build our
current sales force or develop a marketing group for our product candidates, our
financial condition and operating results may be significantly and adversely
affected.
Our limited manufacturing experience and capacity, which is restricted to a
single site and facility, could impact our ability to make our products for
clinical testing and commercialization.
We rely on our current manufacturing facilities in our headquarters, and
the staff working there, for all product supplies needed for research and for
future commercial supplies. Any interruption in work at this site, whether by
natural acts or other causes, would significantly and adversely affect our
operations, and product-development and research programs. The same facility
houses all of our other departments, including clinical, regulatory and
financial records. Although we attempt to protect records and proprietary
reagents, any interruption in operations at our headquarters would have a very
adverse impact on us and our programs and plans. Further, since we have never
manufactured a commercial therapeutic product, we are at risk of possibly not
having as much experience as others in the industry may have for this task.
However, we believe that our experience and success in achieving economical,
large-scale production of our antibody-based imaging products is pertinent to
this effort.
Page 8 of 13
We could be temporarily unable to sell our products if our agreements with our
distributors were terminated.
We currently do not have the resources to internally develop and maintain
the operating procedures required by the FDA and comparable foreign regulatory
authorities to oversee distribution of our products. As a result, we have
entered into arrangements with third parties to perform this function for the
foreseeable future. If these agreements are terminated, we will be required to
enter into arrangements with other government approved third parties in order to
be able to distribute our products and we will be unable to continue to
distribute our products until an acceptable alternative is identified. If we
were even only temporarily unable to distribute our products, our business could
be significantly and adversely effected.
We may not receive approval to sell LeukoScan in the United States.
We have not yet received approval from the FDA to market and sell LeukoScan
in the United States and cannot predict when we will obtain approval, if ever.
In addition, the FDA could impose conditions on its approval, which could
significantly affect the commercial viability of the product or could require us
to undertake significant additional studies or otherwise expend additional
significant funds. If we do not receive approval to market and sell LeukoScan in
the United States in the near future or if the FDA imposes significant
conditions or restrictions, our business and operations could be significantly
and adversely affected.
We may be unable to continue to use mouse fluids for future products which could
require us to make expensive and time consuming changes to our products in
development.
CEA-Scan and certain of our other imaging agents are derived from ascites
fluid produced in mice. Regulatory authorities, particularly in Europe, have
expressed concerns about the use of mouse fluids for the production of
monoclonal antibodies. The regulatory authorities may not agree that our quality
control procedures for future products are adequate. While we are continuing our
development efforts to produce certain of our monoclonal antibodies using cell
culture methods, this process constitutes a substantial production change, which
will require additional manufacturing equipment and new regulatory approval. We
may not have the resources to acquire the additional manufacturing equipment and
expertise and we cannot be sure that we will receive the required regulatory
approval on a timely basis, if at all.
We may be liable for contamination or other harm caused by hazardous materials
that we use.
In addition to laws and regulations enforced by the FDA, we are also
subject to regulation under various other foreign, federal, state or local laws
and regulations. Our research and development involve the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds. The
risk of accidental contamination or injury from these materials cannot be
completely eliminated. If an accident occurs, we could be held liable for any
damages that result and any liability could exceed our resources.
We could be exposed to significant liability claims and our insurance coverage
may not be adequate to cover these claims.
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The testing, marketing and manufacturing of our product candidates
necessarily involve the risk of product liability. Their use in clinical trials
and their sale may expose us to substantial liability claims. These claims might
be made directly by patients, consumers, pharmaceutical companies, or others
selling the products. While we currently have product liability insurance that
we consider adequate for our business, we may not be able to obtain insurance in
the future at an acceptable cost, if at all. If we cannot maintain our existing
or comparable liability insurance, our ability to clinically test and market our
products may be significantly impaired. Moreover, the amount and scope of our
insurance coverage or indemnification arrangements with any distributor or other
third party upon which we rely may be inadequate to protect us in the event of a
successful product liability claim. Any claim in excess of the amount of any
insurance could significantly and adversely affect our financial condition and
operating results.
Certain potential conflicts of interest exist which could affect our operations.
Members of our management and Board of Directors have relationships and
agreements with related parties that create conflicts of interest that could
adversely affect our business.
For example, Dr. David M. Goldenberg, our Chairman and Chief Scientific
Officer, is the founder, President and a member of the Board of Trustees of
CMMI, a not-for-profit cancer research center. Dr. Goldenberg devotes more of
his time to working for CMMI than for us and other key personnel currently have
responsibilities both to CMMI and us. As a result, the potential for conflict of
interest exists and disputes could arise over the allocation of research
projects and ownership of intellectual property rights.
The loss of key employees could adversely affect our operations.
We are heavily dependent upon the talents of Dr. Goldenberg and certain key
scientific personnel. If Dr. Goldenberg or any of our other key personnel leave
our employ, our operations could be significantly and adversely affected. In
addition, from time to time we have a need to expand our management and
scientific personnel. Competition for qualified personnel in the biotechnology
and pharmaceutical industries is intense and we may not be successful in our
recruitment efforts. If we are unable to retain or, when needed, attract
additional qualified personnel, our operations also could be significantly and
adversely affected.
We have agreed to certain covenants in our 1999 financing which place
restrictions on the operation of our business.
In connection with our December 1999 financing, we agreed to certain
covenants, including covenants that will apply until such time as the investors
in that offering and their affiliates beneficially own less than 5% of our
common stock. Among other things, we agreed that without the prior consent of
the investors, we may not sell our business to anyone that is an affiliate of
ours, unless the sale is for consideration at least equal to (a) the fair market
value in the event of a sale of assets (as determined in good faith by our board
of directors) or (b) the then current market price in the event of a sale of
stock. As of September 30, 2001, such investors in the aggregate beneficially
owned 5.7% of the Company's outstanding common stock.
Revenues from our products depend in part on reimbursement from health care
payors, which is uncertain.
Page 10 of 13
The continuing efforts of government and insurance companies, health
maintenance organizations and other payors of health care costs to contain or
reduce costs of health care may affect our future revenues and profitability.
Our ability to commercialize our products successfully will depend in part on
the extent to which private health insurers, organizations such as HMOs and
governmental authorities can obtain appropriate reimbursement levels for the
cost of our products and related treatment. Third-party payors are increasingly
challenging the prices charged for medical products and services. Also, the
trend toward managed health care in the United States and the concurrent growth
of organizations such as HMOs, which could control or significantly influence
the purchase of health care services and products, as well as legislative
proposals to reform health care or reduce government insurance programs, may all
result in lower prices for or rejection of our products. The cost containment
measures that health care payors and providers are instituting and the effect of
any health care reform could materially and adversely affect our ability to
operate profitably. Furthermore, even if reimbursement is available, we cannot
be sure that it will be available at price levels sufficient to realize an
appropriate return on our investment in product candidates.
Disruption in New York City and the U.S. commercial activities generally
following the September 2001 terrorist attacks in the U.S. may adversely impact
our results of operations, our ability to raise capital or our future growth.
The operations of our facilities have been and may continue to be harmed by
the recent terrorist attacks on the U.S. For example, we may experience a rise
in operating costs, such as costs for transportation, courier services,
insurance and security. We also may experience delays in receiving payments from
payors that have been affected by the attacks, which, in turn, would harm our
cash flow. The U.S. economy in general may be adversely affected by the
terrorist attacks or by any related outbreak of hostilities. Any such economic
downturn could adversely impact our results of operations, impair our ability to
raise capital or impede our ability to continue growing our business.
Risks Related to Our Common Stock
The market price of our stock may fluctuate based on factors beyond our control.
The market price of our stock has been and is likely to continue to be
highly volatile. Furthermore, the stock market generally and the market for
stocks of companies with lower market capitalizations and small
biopharmaceutical companies, like us, have from time to time experienced and
likely will again experience significant price and volume fluctuations that are
unrelated to the operating performance of a particular company.
From time to time, stock market professionals publish research reports
covering our business and our future prospects. As a result of a number of
factors, we may be unable to meet the expectations of securities analysts or
investors and our stock price may decline. These factors include:
o announcements by us or our competitors of clinical results, technological
innovations, product sales, new products or product candidates;
o the formation or termination of our corporate alliances and distribution
arrangements;
Page 11 of 13
o developments or disputes concerning patent or proprietary rights;
o government regulatory action;
o period-to-period fluctuations in the results of our operations; and
o developments and market conditions for emerging growth companies and
biopharmaceutical companies, in general.
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. If we face such litigation in the
future, it would result in substantial costs and a diversion of management's
attention and resources, which would negatively impact our business.
Our principal stockholder can influence most matters requiring approval by our
stockholders.
As of September 30, 2001, Dr. Goldenberg, our Chairman and Chief Scientific
Officer, controlled the right to vote over approximately 17.6% of our common
stock. As a result of this voting power, Dr. Goldenberg may have the ability to
determine the election of all of our directors, direct our policies and control
the outcome of substantially all matters which may be put to a vote of our
stockholders.
Resales of shares held by our directors and executive officers may lower the
market price of our common stock and impair our ability to raise new funds.
As of September 30, 2001, we had a total of 49,539,371 shares of common
stock outstanding, 8,088,269 of which were held by our directors and executive
officers. These shares may be resold within the limitations imposed by Rule 144
under the Securities Act. Sales of substantial amounts of shares or the mere
prospect that those sales will occur could cause the market price of our common
stock to decline. Those sales might make it more difficult for us to sell equity
and equity-related securities in the future at a time and price that we consider
appropriate.
We have adopted anti-takeover provisions that may frustrate any attempt to
acquire our company or to remove or replace our management.
Provisions of our certificate of incorporation, our by-laws and Delaware
law could make it more difficult for a third party to acquire control of our
company in a transaction not approved by our board of directors.
Our Board of Directors may issue up to 10 million shares of our preferred
stock and may determine the price, rights, preferences, privileges and
restrictions, including voting and conversion rights, of these shares of
preferred stock. These determinations may be made without any further vote or
action by our stockholders. The issuance of preferred stock could have the
effect of delaying, deterring or preventing a change in control of our company,
or could impose various procedural and other requirements that could make it
more difficult for holders of our common stock to effect certain corporate
actions, including the replacement of incumbent directors and the completion of
transactions opposed by the incumbent board of directors. The rights of the
holders of our common stock would be subject to, and may be adversely affected
Page 12 of 13
by, the rights of the holders of any preferred stock that may be issued in the
future. We have no present plans to issue any shares of preferred stock. In
addition, we have adopted a stockholder rights plan which makes it more
difficult for a third party to acquire control of our company without the
support of our board of directors.
We are also subject to Section 203 of the Delaware General Corporation Law,
which prohibits us from engaging in a business combination with any interested
stockholder for a period of three years from the date the person became an
interested stockholder, unless certain conditions are met.
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