UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2002.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ________.
Commission file number: 0-12104
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IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 61-1009366
(State of incorporation) (I.R.S. Employer Identification No.)
300 American Road, Morris Plains, New Jersey 07950
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 605-8200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Preferred Share Purchase Rights
(Title of class)
i
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 requirement for the past 90 days. Yes _X_ No____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of our Common Stock held by non-affiliates as of
September 26, 2002 was approximately $266,452,632, based on the last sale price
as reported by the Nasdaq National Market of $6.20 per share. The number of
shares of our Common Stock outstanding as of September 26, 2002 was 49,877,443.
Documents Incorporated by Reference:
Certain information required in Part III of this Annual Report on Form
10-K is incorporated from our Proxy Statement for the Annual Meeting of
Stockholders to be held on December 4, 2002.
ii
PART I
Item 1 - Business
Introduction
We are a biopharmaceutical company focused on the development, manufacture
and marketing of monoclonal antibody-based products for the detection and
treatment of cancer and other serious diseases. We have developed a number of
advanced proprietary technologies that allow us to create humanized antibodies
that can be used either alone in unlabeled form, or conjugated with radioactive
isotopes, chemotherapeutics or toxins to create highly targeted agents. Using
these technologies, we have built a broad pipeline of diagnostic and therapeutic
product candidates that utilize several different mechanisms of action. Our
technologies are supported by an extensive portfolio of intellectual property
that includes approximately 80 issued patents in the United States and 233 other
issued patents worldwide.
Our most advanced therapeutic product candidate, epratuzumab, is a compound
that binds to the malignant cells that comprise non-Hodgkin's B-cell lymphoma
and certain other lymphocytic leukemias. In December 2000, we granted a license
to Amgen Inc. to further develop and commercialize the unlabeled form of
epratuzumab in North America and Australia. Amgen is currently evaluating this
compound in Phase II and Phase III clinical trials for the treatment of patients
with non-Hodgkin's lymphoma. We currently maintain all other rights to
epratuzumab outside of the territories granted to Amgen, as well as all rights
to the labeled versions of the compound worldwide. Accordingly, we are
conducting clinical trials of the unlabeled and radiolabeled versions of the
compound, epratuzumab and epratuzumab-Y-90, as well as clinically developing
four other therapeutic product candidates. We also have five therapeutic product
candidates in preclinical development. We intend to consider licensing some or
all of the rights we possess in epratuzumab as well as our other product
candidates if the right opportunities arise.
In addition to our therapeutic discoveries, our proprietary technologies
have also enabled us to develop highly specific diagnostic imaging agents, one
of which, CEA-Scan, has already been approved in the United States, Canada and
the European Union and is being marketed in the United States and Europe for the
detection of colorectal cancers. Our second diagnostic product, LeukoScan, has
been approved in Europe and is being marketed for the detection of bone
infections. We have five additional diagnostic product candidates in preclinical
or clinical development. It is our hope that some day physicians will be able to
use our therapeutic and diagnostic products in tandem in order to improve
patient care.
Background: The Use of Antibodies for Cancer Therapy
Antibodies are protective proteins released by the immune system's B-cells,
a type of white blood cell. In the presence of a foreign substance in the body,
such as a virus, B-cells produce millions of different kinds of antibodies with
slightly different shapes that enable them to bind to and thereby affect the
molecular targets of antibodies, molecules known generically as antigens. Unique
antigens are present on viruses, cancer cells and white blood cells that
accumulate at sites of infections as well as other disease entities.
Monoclonal antibodies are currently being developed for therapeutic use
either as single agents, or conjugated with other compounds. When used as single
agents, antibodies attract the naturally occurring cytotoxic host cells to
destroy tumor cells. In cases where monoclonal antibodies are not potent enough
to demonstrate sufficient anti-tumor activity alone, it is now possible to
increase their effectiveness by attaching radioactive isotopes,
chemotherapeutics or toxins. Using these conjugated antibodies, the attached
agents can be concentrated in the targeted cell in order to enhance their effect
on the diseased cells and reduce the impact on healthy tissue.
Several monoclonal antibodies have already been commercially developed and
approved by the U.S. Food and Drug Administration for use in cancer therapy. In
1997, the first such monoclonal antibody for cancer therapy, Rituxan, was
approved for the treatment of certain patients with non-Hodgkin's lymphoma.
Other examples of monoclonal antibodies approved by the FDA include Herceptin,
which was approved in late 1998 for use in breast cancer patients whose tumors
express the HER2 antigen, Mylotarg, which was approved as a drug-antibody
conjugate in June 2000 for the treatment of relapsed acute myeloid leukemia in
elderly patients, and Zevalin, which was approved in February 2002 for the
treatment of relapsed follicular non-Hodgkin's lymphoma.
1
Radioimmunotherapy is rapidly emerging as an important treatment for
cancers of the blood-forming organs due to the radiosensitivity of these
malignancies and the ready accessibility of the blood and lymph systems to
monoclonal antibodies. Radioimmunotherapy is the process of targeting specific
radiation attached to antibodies to tumor cells in order to reduce the toxic
effects of radiation on healthy tissues. Radioimmunotherapy may also become an
important adjunctive therapy for treating certain solid cancers following
surgery, radiation therapy or chemotherapy, in which instances it may be useful
in eliminating circulating and other undetected malignant cells missed by
primary tumor therapies. Attaching other compounds, such as chemotherapeutics or
toxins, to antibodies may also become a significant treatment method for solid
tumor types. Particularly, conjugated antibodies may be effective for targets
that internalize the antibody and release the compound within the cell. Until
released in the cell, the chemotherapeutic or toxin could be inactive, thereby
potentially sparing healthy tissue.
Our Clinical and Preclinical Programs
We acquired our expertise in antibody selection, modification and chemistry
over the course of the development of our diagnostic imaging products. We have
now focused this expertise on the development of monoclonal antibody-based
therapeutics for the treatment of patients with cancer and other serious
diseases. Each antibody we develop is intended to have the capacity to be used
as a therapeutic agent and as a diagnostic imaging agent; in either case it will
bind to the same target. Our diagnostic imaging capacity has aided us in
developing and testing our therapeutic product candidates by providing clinical
trial experience, particularly in targeting cancer with radiolabeled antibodies.
Therapeutic Product Candidates
We are currently evaluating several therapeutic product candidates for the
treatment of various cancers. Each antibody alone has therapeutic potential and
can also be attached to therapeutic radioisotopes (radiolabeled),
chemotherapeutics or toxins to create unique and potentially more effective
product candidates. The attachment of various compounds to the antibodies is
intended to allow the delivery of these therapeutic agents to tumor sites more
selectively than available radiation therapy or chemotherapeutic approaches.
This treatment approach is designed to reduce the total exposure of the patient
to the therapeutic agents, which potentially minimizes debilitating side
effects. We are currently focused on potential therapeutics that are either
naked antibodies or antibodies bound to radioisotopes, such as Yttrium-90,
called Y-90, or Iodine-131, called I-131. All of our therapeutic product
candidates are "humanized," with the portion of the antibody derived from mouse
DNA sequences being less than about 10%.
We currently have six product candidates in clinical development:
epratuzumab, epratuzumab-Y-90, labetuzumab (CEA-Cide), labetuzumab -Y-90,
labetuzumab -I-131 and AFP-Cide-Y-90, as well as five product candidates in
preclinical development: our humanized CD20 antibody (hCD20), ProstaCide,
MelanomaCide, MyelomaCide and LeukoCide. We have licensed the further clinical
development of our most advanced product candidate, the unlabeled form of
epratuzumab, to Amgen for North America and Australia. We also have a broad
pipeline of other product candidates that target other cancers and diseases.
2
The table below summarizes the status of our current therapeutic product
candidates:
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Product Candidate Target Status Marketing Rights
- ----------------- ------ ------ ----------------
epratuzumab (unlabeled) Non-Hodgkin's lymphoma Phase II and Phase III Amgen
clinical trials (North America & Australia)
Immunomedics
(all remaining countries)
epratuzumab-Y-90 Non-Hodgkin's B-cell lymphomas Phase I/II clinical Immunomedics
trials
Labetuzumab Colorectal and breast cancer Phase I clinical trials Immunomedics
(CEA-Cide)
labetuzumab-Y-90 Colorectal and pancreatic Phase I/II clinical Immunomedics
cancer trials
labetuzumab -I-131 Metastatic colorectal cancer Phase II clinical trials Immunomedics
AFP-Cide Liver cancer Phase I/II clinical Immunomedics
trials
hCD20 antibody Non-Hodgkin's lymphoma Preclinical Immunomedics
ProstaCide Prostate cancer Preclinical Immunomedics
MelanomaCide Malignant melanoma Preclinical Immunomedics
MyelomaCide Multiple myeloma Preclinical Immunomedics
LeukoCide Myeloid leukemia Preclinical Immunomedics
- --------------------------- -------------------------------- -------------------------- ---------------------------
Epratuzumab and Epratuzumab-Y-90
Our most advanced therapeutic product candidate, epratuzumab, is a
humanized antibody which targets an antigen, known as the CD22 marker, which is
found on the surface of a certain class of lymphocytes, a type of white blood
cell. This antibody also binds to the malignant forms of these cells, which
comprise non-Hodgkin's B-cell lymphoma and certain lymphocytic leukemias. The
initial 115 patient Phase I/II trials of unlabeled epratuzumab demonstrated good
safety, tolerability and antitumor activity.
On December 17, 2000, we entered into a Development and License Agreement
with Amgen to license this antibody in its unlabeled form in North America and
Australia. Under this agreement, Amgen has undertaken the final clinical
development, manufacture and commercialization of epratuzumab for these markets.
We have retained the right to continue the clinical development of epratuzumab
in the remaining markets, as well as the right to the clinical development of
epratuzumab-Y-90 and other versions of the antibody where a radioisotope has
been attached. Currently, Amgen is conducting Phase III trials in low-grade,
non-Hodgkin's lymphoma patients who have failed chemotherapy or Rituxan therapy,
which Amgen assumed as part of its agreement with us. Amgen is also conducting
Phase II trials to evaluate the safety and activity of epratuzumab combined with
Rituxan, both at their full doses, for the treatment of similar non-Hodgkin's
lymphoma patients, in order to determine if the combination has any advantages
over the use of Rituxan alone.
Amgen has released interim results of this Phase II combination trial
These data suggest that epratuzumab may have a beneficial effect when used in
combination with Rituxan, without altering the safety profile of Rituxan. The
trial included a total of 19 evaluable patients: 15 indolent (low grade) and 4
aggressive non-Hodgkin's lymphoma patients. In the indolent population, 67% of
patients, or 10 out of 15, responded as measured by standard criteria. However,
9 out of the 10 responding indolent patients fell into the complete response
category. Three of the four evaluable aggressive non-Hodgkin's lymphoma patients
showed an objective response, with two constituting a complete response. No
serious drug-related adverse events were observed. This combination trial
together with other supportive trials, such as the Phase III trial and other
trials that are ongoing and planned, are part of the regulatory strategy for
this product. We believe that the fastest track to obtain regulatory approval
will be to focus on the combination trial strategy.
3
We plan to continue clinical development and commercialization of
epratuzumab and epratuzumab-Y-90, either alone or with a partner, to the full
extent permitted by our agreement with Amgen. We have been evaluating
epratuzumab-Y-90 in a Phase I/II clinical trial being conducted in the United
States and Europe. This clinical trial is examining the safety and efficacy of
epratuzumab-Y-90 in patients with indolent or aggressive non-Hodgkin's lymphoma
who have had a relapse of disease following standard chemotherapy. We are
encouraged by the initial results of this trial and we are in the process of
expanding these studies.
Labetuzumab, labetuzumab-Y-90 and labetuzumab-I-131
We are developing a solid tumor therapeutic product candidate that targets
an antigen known as carcinoembryonic antigen, or CEA. The CEA antigen is
abundant at the site of virtually all cancers of the colon and rectum and is
associated with many other solid tumors. Labetuzumab is in clinical testing,
both in an unlabeled form and as a radiolabeled antibody. The unlabeled form is
being tested in a Phase I dose-escalation trial in patients with colorectal or
breast cancers. A Phase II trial is in progress in Europe for labetuzumab-I-131
in patients with proven or suspected metastatic colorectal cancer who failed
chemotherapy. We believe that the initial results are encouraging, which
stimulated us to design a new trial for labetuzumab-Y-90 that uses the more
potent radioisotope, Yttrium-90. This Phase I/II trial with labetuzumab-Y-90 is
ongoing in the United States in patients with advanced colorectal and pancreatic
cancers and is being expanded to investigational sites in Europe.
Other Therapeutic Product Candidates
We are beginning the clinical evaluation of a new humanized antibody,
called AFP-Cide-Y-90, for the treatment of primary liver cancer. An
Investigational New Drug application, or IND, for AFP-Cide to be studied in a
Phase I trial in patients with advanced primary liver cancer has been approved
by the FDA. The AFP-Cide antibody binds to an antigen known as
alpha-fetoprotein, which is commonly produced by primary liver tumors. The
complementary diagnostic product, AFP-Scan, has been studied in Phase II trials
involving patients with primary liver cancer, as well as certain testicular and
ovarian germ-cell cancers, and has shown targeting of these cancers. We expect
to begin a Phase I trial to evaluate this antibody in a radiolabeled form in
late 2002. We plan to submit an IND for the clinical evaluation of our humanized
CD20 antibody for therapy of non-Hodgkin's lymphoma in late 2002. In addition to
these product candidates, our other product candidates in preclinical
development include MyelomaCide for the treatment of multiple myeloma,
MelanomaCide for the treatment of malignant melanoma, ProstaCide for the
treatment of prostate cancer and LeukoCide for the treatment of myeloid
leukemia.
Diagnostic Imaging Products
We believe that the development of diagnostic imaging products that can
complement our therapeutic pipeline will provide us with the means of diagnosing
and staging disease as well as following its progress. Our imaging products
allow localization of disease-specific antigens within the body using an
antibody fragment bound to technetium-99m, which can be visualized by standard
nuclear medicine cameras to reveal the presence, location and approximate size
of the disease sites. We are considering several options for the continued
development of some of our imaging products, including partnering, in order to
allow us to focus on the development of our therapeutic product candidates.
Two of our diagnostic imaging products, CEA-Scan and LeukoScan, are already
being marketed and we hope to bring three additional products to market over the
next several years. We currently have two product candidates in clinical
development, LymphoScan and AFP-Scan, and three product candidates in
preclinical development, ProstaScan, MelanomaScan, and MyelomaScan.
4
The table below summarizes the status of our diagnostic imaging products:
- ------------------------- ------------------------------------ -------------------------- ---------------------
Product Candidate Target Status Marketing Rights
- ----------------- ------ ------ ----------------
CEA-Scan Colorectal cancer Approved for sale in the Immunomedics
United States and Europe
LeukoScan Osteomyelitis Approved for sale in Immunomedics
Europe
LymphoScan Non-Hodgkin's B-cell lymphomas Phase III clinical trials Immunomedics
AFP-Scan Liver cancer Phase II clinical trials Immunomedics
ProstaScan Prostate cancer Preclinical Immunomedics
MelanomaScan Malignant melanoma Preclinical Immunomedics
MyelomaScan Multiple myeloma Preclinical Immunomedics
- ------------------------- ------------------------------------ -------------------------- ---------------------
CEA-Scan
The mouse monoclonal anti-CEA antibody fragment in CEA-Scan is the
diagnostic counterpart to labetuzumab, our humanized antibody-based therapeutic
product. It is directed against CEA, which is an antigen associated with
virtually all cancers of the colon and rectum as well as many other cancers. We
have already received approval from the applicable regulatory agencies in the
United States, the European Union, Canada and certain other countries to market
and sell CEA-Scan. We are conducting Phase IV clinical trials in the United
States to evaluate this product for repeated administration in colorectal cancer
patients. We have also been performing Phase II and Phase III clinical trials in
the United States using CEA-Scan for imaging lung cancer and breast cancer,
respectively. In addition, we are continuing our efforts to evaluate a hand-held
radiation-detecting probe that utilizes CEA-Scan technology to detect tumor
cells during colorectal cancer surgery. We are conducting a Phase-I trial for
this indication in the United States, following successful published results
from Europe using this technology with our product.
LeukoScan
LeukoScan uses a mouse monoclonal antibody fragment that seeks out and
binds to a type of white blood cell known as a granulocyte. These cells are
associated with a potentially wide range of infectious and inflammatory
diseases. We have received regulatory approval to market and sell LeukoScan for
the detection and diagnosis of bone infection (osteomyelitis) in long bones and
in diabetic foot ulcer patients in the European Union and Australia. In
addition, we have filed an application with the FDA and the comparable
regulatory agency in Canada for approval to market LeukoScan for osteomyelitis
as well as for acute, atypical appendicitis. The FDA has advised us that our
data are still not sufficient to support approval for these indications, and we
are considering whether or not to pursue approval for this indication in the
United States at this time. However, we are optimistic that LeukoScan will be
approved in other geographic areas, such as Canada, although we cannot be
certain about timing or if any indications will be approved.
Other Diagnostic Product Candidates
We have been conducting clinical trials on two other diagnostic imaging
products, LymphoScan and AFP-Scan. LymphoScan is being evaluated in a Phase III
trial for detecting non-Hodgkin's lymphoma in patients with possible residual
disease following chemotherapy. AFP-Scan has been undergoing a Phase II trial
for the detection of primary liver cancers. We are also in preclinical
development with ProstaScan for the detection of prostate cancer, MelanomaScan
for the detection of malignant melanoma, and MyelomaScan for the detection of
multiple myeloma.
5
Research Programs
We invest heavily in our research programs and incurred approximately
$14,202,000, $10,264,000 and $8,670,000, in total research and development
expense during our fiscal years ended June 30, 2002, 2001 and 2000,
respectively. The following is a brief summary of our principal research
programs as of June 30, 2002.
Antibody Engineering
A major obstacle in the field of monoclonal antibody therapy has been the
patient's immune response to mouse-derived antibodies, making repeated use of
such products impracticable. We have made significant progress in humanizing
certain mouse antibodies (i.e., replacing certain components of a mouse antibody
with human antibody components), and with respect thereto we have licensed
certain technology from a third party. Moreover, using the techniques of
molecular biology, our scientists have re-engineered the humanized antibodies
with improved characteristics, such as favorable pharmacokinetic properties and
increased radionuclide and drug loading capacities.
During the fiscal year ended June 30, 2002, we, in collaboration with other
investigators, continued to demonstrate successful targeting in patients with
our humanized monoclonal antibodies (hMN-14 and hLL2) against the CEA cancer
marker and non-Hodgkin's B-cell lymphoma, respectively, as compared to the
murine counterparts. The anticancer humanized antibodies are about 95% human and
have shown good uptake in the patients' tumors. We are now focusing on the study
of these humanized monoclonal antibodies unlabeled and labeled with Yttrium-90
in patients with the appropriate target tumors.
Other Antibody-Directed Therapy Approaches
In March 1999, we entered into a joint venture with Beckman Coulter, Inc.
through the formation of a limited liability company named IBC Pharmaceuticals,
LLC. The goal of IBC was and remains the development of novel cancer
radiotherapeutics using pre-targeting with bi-specific antibodies. Bi-specific
antibodies are able to bind both a cancer antigen as well as a small molecule to
which a radioisotope can be attached. Initially, the bi-specific antibody is
injected and allowed to bind to its specific antigen on the tumor and then the
therapeutic isotope attached to the small molecule is administered to the
patient. The small molecule then binds to the antibody, thereby attaching the
therapeutic agent to the target. Pre-targeting allows many of the small
molecules as well as the therapeutic agent that are not bound to the bi-specific
antibody to be rapidly cleared from the patient's blood and tissue. After
promising results from animal studies on this technology, we are conducting
preliminary clinical studies in France using Iodine-131 as the therapeutic agent
and a bi-specific antibody having our humanized anti-CEA antibody. In May 2002,
we acquired all of the Class A membership interests owned by Beckman Coulter in
exchange for shares of our common stock and warrants. In June, 2002, we
reorganized IBC into a corporation that is now one of our majority-owned
subsidiaries. See Item 13, "Certain Relationships and Related Transactions."
We are continuing work on selective coupling of therapeutic site-specific
agents onto engineered carbohydrate residues on antibody fragments. The
proprietary antibody constructs offer the advantage of loading multiple
therapeutic moieties onto antibodies at a particular site and in a manner that
is known not to interfere with antigen binding. We are also continuing to
investigate "pre-targeting"on our own and through IBC using bi-specific
antibodies. In the pre-targeting technique, an antibody is administered first
and then followed by a separate radionuclide or therapeutic drug administration.
Secondary recognition groups are attached, one to the targeting antibody and the
other to the radionuclide or therapeutic drug, such that the radionuclide or
drug is localized to the antibody pre-targeted to the tumor site. Using such
methods in preclinical animal tumor models, target-to-blood uptake ratios of
radionuclide or drug have been improved by orders of magnitude compared to the
antibody radiolabeled in the conventional manner. The advantage of markedly
increased target-to-blood ratios is somewhat offset by the greater complexity
involved in multiple administration and timing of reagents.
6
Peptides
During fiscal 2002, we continued to improve our proprietary methods for
technetium-99m radiolabeling of peptides, which were originally developed in
1996, to clinical-scale levels using single-vial kits. These automated synthetic
methods will be generally applicable to the preparation of radioconjugates of
other diverse chelate-peptides, and will enable rapid evaluation of different
peptide-receptor systems directly with peptide analogs labeled with
technetium-99m, the optimum imaging radionuclide. This technology has been
applied to the preparation of analogs of somatostatin and has demonstrated
reagent utility in pre-clinical in vivo models. In related work, similar
synthetic methods have also been used to prepare chelate-peptide conjugates that
can be radiolabeled with Indium-111 and Yttrium-90 which is being applied to the
bi-specific pre-targeting technology that is developing through IBC.
Intraoperative Cancer Detection
We have been developing intraoperative cancer detection applications with
CEA-Scan, utilizing hand-held, radiation-detecting probes. Surgeons have
successfully used CEA-Scan in this way within 48 hours of its injection and
external imaging and detection internally. We have remained in contact with
these surgeons, one of whom reported to the Society of Surgical Oncology on a
prospective study of CEA-Scan detection and probe-guided surgery in 20 patients.
That study concluded that the probe and CEA-Scan provided useful new information
in 7 of 20 patients, encouraging more aggressive operative intervention and
postoperative care, including chemotherapy. We are conducting a Phase IV
clinical trial evaluating CEA-Scan used in conjunction with an intraoperative
probe in patients undergoing surgery for colorectal cancer. A U.S. patent was
issued in 1990 to us for this as well as other laser and endoscopic
applications. In March 2000, we were awarded a U.S. patent covering the use of
very small portions of antibodies that bind to certain diseased tissues allowing
for improved intraoperative, intravascular and endoscopic detection.
Patents and Proprietary Rights
We actively seek patent protection, both in the United States and abroad,
for our proprietary technologies. As a result, today we enjoy a broad and
diverse patent portfolio, consisting at June 30, 2002 of approximately 80 issued
United States patents (six of our earliest patents have now expired), and 233
issued foreign patents, with 61 United States patent applications pending, of
which two have been allowed, and 240 foreign patent applications pending.
Included in the foregoing is one United States patent and foreign counterparts,
to which we have a right pursuant to an exclusive license granted by Dr.
Goldenberg. We also have certain rights with respect to patents and patent
applications owned by CMMI, by virtue of a license agreement between us and
CMMI. In addition, we have certain rights with respect to patents and patent
applications assigned solely to NIH or jointly to NIH and us, as well as with
respect to certain patent applications assigned to the University of
Massachusetts. We also recently acquired rights to patents and patent
applications assigned or licensed to IBC by virtue of our acquisition of a
controlling interest in IBC. See Item 13, "Certain Relationships and Related
Transactions."
During the fiscal year ended June 30, 2002, we were issued 11 United States
patents and 20 foreign patents (3 in Australia, 3 in Canada, 2 in Ireland, 2 in
Israel, 1 in Singapore, 1 from the European Patent Office which was validated in
Australia, Germany, France, United Kingdom, Denmark, Spain, Italy, Netherlands
and Sweden).
We have entered into patent license agreements with non-affiliated
companies, pursuant to which we granted to the licensee, for an initial
non-refundable fee plus royalties, a non-exclusive license under our patents to
manufacture and sell certain diagnostic and cancer imaging products. Further, we
have sought to enter into patent license agreements with companies that may be
developing or marketing products that could infringe on one or more of the
patents that we own or have licensed. In certain situations, companies have
declined to enter into license agreements with us and have raised questions as
to the scope and validity of certain of our patents. Discussions are continuing
with these companies and we intend to vigorously protect and enforce our patent
rights. Although there can be no assurances as to the outcome of any patent
disputes, we believe that our patents are valid and will be upheld if
challenged.
7
In July 1998, we signed a license agreement with Dako A/B to our worldwide
patents for specific anti-CEA monoclonal antibodies, which Dako markets for in
vitro use. In June 2002, we granted a non-exclusive license to Daiichi Pure
Chemicals Co. under these patents, which included an up-front payment of
$825,300 and additional future royalty payments. We are engaged in active
discussions with other companies that may be using our patented technology
without our approval in current products or products now in development or
clinical testing.
The mark "IMMUNOMEDICS" is registered in the United States and 36 foreign
countries and a European Community Trademark has been granted. Our logo also is
registered in the United States and in 2 foreign countries. The mark "IMMUSTRIP"
is registered in the United States and Canada. The mark "CEA-SCAN" is registered
in the United States and 21 foreign countries, and a European Community
Trademark has been granted. The mark "LEUKOSCAN" is registered in the United
States and 11 foreign countries, and a European Community Trademark has been
granted. The mark "LYMPHOSCAN" is registered in the United States and 9 foreign
countries, and a European Community Trademark has been granted. The mark
"CEA-CIDE" is registered in the United States and 14 foreign countries, and a
European Community Trademark has been granted. The mark "LYMPHOCIDE" is
registered in the United States, and a European Community Trademark has been
granted. In addition, we have applied for registration in the United States for
several other trademarks for use on products now in development or testing, and
for corresponding foreign and/or European Community Trademarks for certain of
those marks.
Strategic Partnering and Relationships
Amgen
We have licensed the final clinical development, manufacturing and
commercialization of our lead therapeutic product candidate, epratuzumab, to
Amgen for the treatment of non-Hodgkin's lymphoma or other diseases in North
America and Australia. We have retained the right to continue the clinical
development of epratuzumab in all remaining markets as well as the right to the
clinical development of epratuzumab-Y-90 and other versions of the antibody
where a radioisotope has been attached. However, Amgen has certain rights to
second-generation CD22-antibody-based therapeutics in exchange for
pre-determined milestone, royalty, and sales-bonus payments. These rights are
also limited to North America and Australia. In exchange for granting this
license, we received an upfront payment of $18.0 million from Amgen on February
1, 2001. This agreement also provides that we may receive additional milestone
payments totaling up to $65.0 million depending on the progress of the product
candidate's development. In addition, we are entitled to receive royalties under
this agreement on any future net sales of epratuzumab by Amgen and may also
receive one-time sales milestone payments. Additional compensation would be
payable to us under the agreement for each second-generation product developed
by Amgen, if any, using the licensed antibody in any such product.
Other Collaborations
We conduct research on a number of our programs in collaboration with a
not-for-profit organization called The Center for Molecular Medicine and
Immunology, or CMMI, and its clinical unit, the Garden State Cancer Center. CMMI
performs contracted pilot and pre-clinical trials in scientific areas of
importance to us and also conducts basic research and pre-clinical evaluations
in a number of areas of potential interest to us. Dr. David Goldenberg, our
Chairman of the Board and Chief Scientific Officer, is the President and a
Trustee of CMMI.
In addition, we had entered into a joint research project with the National
Cancer Institute, or NCI. Through this project we were funding the development
of a new class of biological immunotoxins that can destroy RNA that could be
attached to our antibodies. We contributed the antibody, epratuzumab, as well as
certain of our other antibodies, to this program, as well as research funding,
and NCI contributed the enzyme and other technologies. The independent
development of this product candidate is subject to certain rights held by Amgen
under the license agreement. This research program was terminated in July, 2002.
8
We also collaborate with numerous other academic and research centers. Our
academic collaborators have included such institutions as the University of
Nijmegen, The Netherlands; INSERM, Nantes, France; University of Goettingen,
Germany; University of Marburg, Germany; New York Presbyterian Hospital -
Cornell Medical College; University of Massachusetts; and Peter Bent Brigham
Hospital-Harvard Medical School. We believe these ongoing research efforts will
identify new and improved products and techniques for diagnosing and treating
various cancers and infectious diseases.
Government Regulation
The manufacture and marketing of pharmaceutical or biological products
requires approval of the FDA and comparable agencies in foreign countries and,
to a lesser extent, state regulatory authorities. In the United States, the
regulatory approval process for antibody-based products, which are considered
biological products under FDA regulations, is similar to that for other new
pharmaceuticals for human use. The FDA regulates the preclinical and clinical
testing, manufacturing, recordkeeping and marketing of pharmaceutical products.
Noncompliance with applicable regulations can result in refusal of the FDA to
approve product license applications or to allow us to enter into supply
contracts, fines, recalls or seizure of products, total or partial suspension of
production, and criminal prosecution. The FDA also has the authority to revoke
previously granted product approvals.
Manufacture of a biological product must be in a facility approved by the
FDA for such product. The manufacture, storage and distribution of both
biological and non-biological drugs must be in compliance with FDA's current
Good Manufacturing Practices. Manufacturers must continue to expend time, money
and effort in the area of production and quality control to ensure full
technical compliance with those requirements. The labeling, advertising and
promotion of pharmaceutical or biological products must be in compliance with
FDA regulatory requirements. Any failures, or new information reflecting on the
safety and effectiveness of the drug that comes to light after approval, can
also lead to FDA withdrawal of approval to market the product.
We generally seek to have our product candidates designated as "Orphan
Drugs" by the FDA under the Orphan Drug Act of 1983, when applicable. The Orphan
Drug Act provides incentives to manufacturers to develop and market products to
treat rare diseases, i.e., diseases affecting fewer than 200,000 persons in the
United States. We have received Orphan Drug designation for, among others,
AFP-Scan, LymphoScan and LymphoCide, our liver and germ-cell imaging, lymphoma
imaging and lymphoma therapeutic products, respectively, CEA-Scan for the
diagnosis of medullary thyroid cancer and CEA-Cide for therapy of pancreatic,
ovarian and lung cancers. A drug that receives Orphan Drug designation and is
the first product to receive FDA marketing approval for its product claim is
entitled to a seven-year exclusive marketing period in the United States for
that claim for the product.
The drug approval process is similar in other countries and is also
regulated by specific agencies in each geographic area. Approval by the FDA does
not ensure approval in other countries. In addition, even if we can obtain drug
approval in other countries, it may require considerable more time to obtain
such approval in the United States.
Our ability to commercialize our products successfully may also depend in
part on the extent to which reimbursement for the cost of such products and
related treatment will be available from government health programs, private
health insurers and other third party payors.
Our present and future business is also subject to regulation under state
and federal law regarding work place safety, laboratory practices, the use and
handling of radioisotopes, environmental protection and hazardous substance
control and to other present and possible future local, federal and foreign
regulations. We believe our operations comply, in all material respects, with
all such applicable laws and regulations, and we are continuing our efforts to
ensure ours full compliance with such laws and regulations.
9
Competition
The biotechnology industry is highly competitive, particularly in the area
of cancer diagnostic, imaging and therapeutic products. We are likely to
encounter significant competition with respect to our proposed products
currently under development. A number of companies which are engaged in the
biotechnology field, and in particular the development of cancer diagnostic and
therapeutic products, have financial, technical and marketing resources
significantly greater than our own. Some companies with established positions in
the pharmaceutical industry may be better equipped than us to develop, refine
and market products based on technologies applied to the diagnosis and treatment
of cancers and infectious diseases. We expect to face increasing competition
from universities and other non-profit research institutions. These institutions
carry out a significant amount of research and antibody-based technology, are
becoming increasingly aware of the commercial value of their findings and are
becoming more active in seeking patent and other proprietary rights, as well as
licensing revenues.
Our ability to compete in the future will depend, in part, on our ability
to foster an environment in which multi-disciplinary teams work together to
develop low-cost, well-defined processes and bring cost-beneficial products
successfully through clinical testing and regulatory approval.
We are pursuing an area of product development in which there is the
potential for extensive technological innovation in relatively short periods of
time. Our competitors may succeed in developing products that are safer or more
effective than our own potential products. Rapid technological change or
developments by others may result in our present products and potential products
becoming obsolete or non-competitive. See "Factors That May Affect Our Business
and Results of Operations" in Item 1 of this Annual Report.
Marketing, Sales and Distribution
CEA-Scan is marketed and sold to physicians in the United States directly
by our small internal sales force, which is focused on new customers in major
medical centers. Our nuclear medicine technicians work with our sales force and
provide technical support directly to customers. We also have agreements with
third parties to market CEA-Scan and LeukoScan, that provide customer support
and distribution of the products. To date we have retained all the marketing and
distribution rights for LeukoScan.
Our European operations are headquartered in Darmstadt, Germany. We have
also established sales representation in most major European markets. We service
other markets through the appointment of local organizations that provide sales
and marketing support as well as local product redistribution. In October 2001,
we entered into a Distribution Agreement with Logosys Logistik GmbH. Under this
agreement, Logosys packages and distributes LeukoScan and CEA-Scan in the
European Union since January 2002.
Manufacturing
To date, we have manufactured all the compounds used in our clinical trials
and we currently manufacture CEA-Scan and LeukoScan for commercial use at our
facility in Morris Plains, New Jersey. We currently manufacture epratuzumab for
Amgen while they develop their own manufacturing capacity. We also perform
antibody processing and purification of all our therapeutic product candidates
at this facility.
We have now scaled-up our antibody purification and fragmentation
manufacturing processes for our diagnostic imaging agents to permit us to
produce commercial levels of product. Our manufacturing facility currently
consists of four independent antibody-manufacturing suites, several support
areas, and quality control laboratories. Start-up validation and inspection of
the facility were completed in December 1998. The Committee on Proprietary
Medicinal Products of the European Commission approved the manufacturing
facility and product manufacturing processes in May 1998. The FDA approved the
facility and processes for CEA-Scan in December 1998.
10
Certain end-stage portions of the manufacturing process for CEA-Scan and
LeukoScan are performed under a manufacturing agreement by SP Pharmaceuticals,
formerly the Oncology Division of Pharmacia & Upjohn. This arrangement will
terminate in December, 2002. We are currently in the process of transferring our
end-stage manufacturing processes to a new manufacturing source.
We are currently engaged in expanding our on-site manufacturing facilities
so that we can increase the amounts of epratuzumab and other candidate
therapeutic products needed for current and future clinical trials. We
anticipate that these new facilities and expanded capacity will be available by
early 2003, and will contribute to stocking commercial quantities of epratuzumab
that may be needed for product launch outside of North America and Australia. We
anticipate that further expansion of our manufacturing resources will be
necessary.
Employees
As of September 24, 2002, we employed 94 persons on a full-time basis, 21
of whom were in research and development departments, 18 of whom were engaged in
clinical research and regulatory affairs, 37 of whom were engaged in operations
and manufacturing and quality control, and 18 of whom were engaged in finance,
administration, sales and marketing. Of these employees, 32 hold M.D., Ph.D. or
other advanced degrees. We believe that while we have been successful to date in
attracting skilled and experienced scientific personnel, competition for such
personnel continues to be intense and there can be no assurance that we will
continue to be able to attract and retain the professionals we will need to grow
our business. Our employees are not covered by a collective bargaining
agreement, and we believe that our relationship with our employees is excellent.
Corporate Information
We were incorporated in Delaware in 1982. Our principal offices are located
at 300 American Road, Morris Plains, New Jersey 07950. Our telephone number is
(973) 605-8200. In addition to our majority-owned subsidiary, IBC
Pharmaceuticals, Inc., we also have two foreign subsidiaries, Immunomedics B.V.
in The Netherlands and Immunomedics GmbH in Darmstadt, Germany, to assist us in
managing sales and marketing efforts and coordinating clinical trials in Europe.
Our world wide web address is www.immunomedics.com. We have not incorporated by
reference into this Annual Report the information on our website, and you should
not consider it to be a part of this document. Our web site address is included
in this document as an inactive textual reference only.
Factors That May Affect Our Business and Results of Operations
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 the sale of our first two
diagnostic imaging products, and have never received revenue from the
commercialization of any therapeutic product. We have incurred significant
operating losses since our formation in 1982 and have not earned a profit since
that time. These operating losses and our failure to be profitable have been due
mainly to the significant amount of money that we have spent on our research and
development programs. As of June 30, 2002, we had an accumulated deficit of
approximately $118.0 million. We expect to continue to experience significant
operating losses as we attempt to develop and commercialize our product
candidates. If we fail in our attempts to develop successful therapeutic
products, it is likely that we would never achieve significant revenues or
become profitable, either of which would seriously jeopardize our ability to
continue as a going concern.
11
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 early stages of
pre-clinical and clinical development. Significant further research and
development, financial resources and management time will be required to develop
commercially viable therapeutic products and obtain the necessary regulatory
approvals. We may never be able to successfully develop and commercialize any
therapeutic product candidates. If we fail to gain timely approval from the U.S.
Food and Drug Administration, or FDA, and other foreign regulatory authorities
to commercialize our product candidates, we will be unable to generate the
revenues we will need to execute our business plan.
Our ability to market future products will depend upon our first obtaining
and then maintaining regulatory approvals, both of which are subject to a number
of risks and uncertainties.
In order to obtain the regulatory approvals necessary for the successful
commercialization of our product candidates, we will be required to complete
extensive clinical trials in humans to demonstrate the safety and efficacy of
each product candidate to the satisfaction of the FDA and applicable foreign
regulatory authorities. Even once we begin clinical trials for a new diagnostic
or therapeutic product, it can take many years to receive the required
regulatory approval to commercialize that product and begin to market it to the
public. In addition, each stage of clinical development is generally more costly
than the prior stage, and we may need to expend substantial resources on a
product candidate only to determine that it cannot be successfully
commercialized. Various federal and, in some cases, state statutes and
regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of diagnostic and therapeutic products.
The expensive and lengthy process of obtaining these approvals, and the
maintenance of compliance with applicable statutes and regulations, will require
us to expend substantial financial resources and management time.
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
demonstrate other characteristics that make it impossible or
impracticable for us to continue its development;
o any positive results from pre-clinical studies and initial 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 which may result in increased costs and delays;
o we may not be able to manufacture sufficient quantities of the
compound necessary to complete the clinical trial, or for later
commercialization;
o trial results may indicate that the product candidate is not as safe
or effective as other available therapies; and
o the clinical investigators, trial monitors or trial subjects may fail
to comply with the trial plan or protocol, resulting in delays and
additional expense.
Any failure or substantial delay in successfully completing clinical trials
and obtaining regulatory approvals for our product candidates, particularly the
ongoing Phase II, Phase III and future trials for epratuzumab, could severely
harm our business and results of operation. These approvals may not be granted
on a timely basis, if at all, and even if granted may not cover all the clinical
indications for which we are seeking approval. The approvals may also contain
significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use. Even after approval can be
obtained, we may be required to recall or withdraw a product as a result of
newly discovered safety or efficacy concerns, either of which would have a
materially adverse effect on our business and results of operations.
12
If we are unsuccessful in completing our shift in focus from our diagnostic
imaging products to our pipeline of therapeutic product candidates, our business
will be materially and adversely affected.
As we complete the shift in our focus from diagnostic imaging to our
therapeutic product candidates, and as our scientific efforts lead us into the
study of diseases outside of our area of principal expertise, we will have to
either develop the necessary expertise internally or form strategic
collaborations to obtain access to such expertise. If we proceed independently,
we will require additional technical resources and personnel that may be
difficult and costly to obtain. If we decide to enter into collaboration
arrangements, we may find it necessary to relinquish rights to some of our
technologies, products or product candidates that we would otherwise choose to
pursue independently. If we are unable to either acquire the necessary expertise
or enter into collaborations on acceptable terms, our ability to develop
additional therapeutic product candidates would be adversely affected.
If we were not able to successfully develop a market for our current and
future products, our ability to continue as a going concern would be severely
jeopardized despite any scientific accomplishments we may have achieved.
Our diagnostic imaging products are the only products which we are
currently permitted to market and sell, and we do not have approval to sell
LeukoScan in the United States. To date, we have been able to develop only a
limited market for these products, and as a result have received only limited
revenues from the sale of these products. We have not yet even begun to develop
a market for our therapeutic product candidates. In the event we are unable to
achieve broad market acceptance of our current or future products, our business
and financial condition would be materially and adversely affected.
We are dependent upon Amgen for the final development and commercialization
of epratuzumab in North America and Australia, and they may not be successful.
We have licensed our most advanced therapeutic compound, epratuzumab, to
Amgen in North America and Australia. As a result, Amgen is solely responsible,
and we are depending upon it, for completing the clinical development of
epratuzumab, obtaining all necessary regulatory approvals, and then
commercializing and manufacturing the compound for sale in these markets. If
Amgen does not fully perform its responsibilities under our agreement, or if the
ongoing clinical trials being conducted by Amgen are not successful or are
terminated by Amgen for any other reason, our ability to commercialize this
product candidate in the future, as well as other product candidates we have in
development which are closely related to epratuzumab, would be severely
jeopardized. In such event, it is likely we would never receive any of the
milestone payments or royalties that we are eligible to receive under our
agreement with Amgen, and our ability to fund the development and testing of our
other product candidates would be adversely affected.
We currently receive funds from a limited number of sources, and we will
need to find additional sources of funding in order to be successful.
To date, we have funded our research and development programs using cash
obtained principally from:
o the sale of our equity securities;
o payments from Amgen under our licensing agreement;
o product sales of CEA-Scan and LeukoScan;
o fees and grants from corporate, academic and governmental partners;
and
o interest income from our investments.
13
We may not continue to receive funding from any of these sources, or the
amount of such funding may be dramatically reduced. Even if we do continue to
receive these funds, we will need to obtain other sources of funding to continue
to conduct our research and development programs and execute our business plan.
If we are unable to obtain the additional capital we need on a timely
basis, our ability to operate and grow our business will be adversely affected.
We intend to continue expending substantial financial resources on our
research and development programs, and we will need additional capital in order
to obtain regulatory approvals and commercialize our therapeutic product
candidates. If our need for cash depletes our existing resources sooner than we
otherwise anticipate, we will be required to either obtain additional capital
quickly, or else significantly reduce our operating expenses and capital
expenditures, either of which could have a material and adverse effect on us.
Our future capital requirements will depend on numerous factors, including:
o the progress of our research and development programs;
o the progress of pre-clinical and clinical testing;
o our need for manufacturing sufficient quantities of our product
candidates for clinical testing and commercialization;
o the time and costs involved in obtaining regulatory approvals;
o thecost of filing, prosecuting, defending and enforcing our 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 other qualified strategic partners; and
o the requirements and timing of entering into technology licensing
agreements and other similar arrangements.
While we believe that our existing cash resources, will be sufficient to
fund our operations for at least the next 12 months, we may need additional cash
before then for many reasons, including changes in our research and development
plans, other factors affecting our operating expenses, the need for unexpected
capital expenditures, and costs associated with any acquisitions of other
businesses, assets or technologies that we may choose to undertake.
Our ability to raise future capital on acceptable terms will depend on
conditions in the public and private debt and equity markets, our operating
performance, as well as the overall performance of other companies in the
biopharmaceutical and biotechnology sectors. Additional financing may not be
available to us when we need it on terms we find acceptable, if at all.
Furthermore, the terms of any such debt or equity financing may include
covenants which limit our future ability to manage the business, contain
preferences, privileges and rights superior to those enjoyed by holders of our
common stock, and cause substantial dilution to our existing stockholders.
Certain potential for conflicts of interest, both real and perceived, exist
which could result in expensive and time-consuming litigation.
14
Certain of our affiliates, including members of our senior management and
Board of Directors and their respective affiliates, have relationships and
agreements both with us as well as among themselves that create the potential
for both real, as well as perceived, conflicts of interest. These include Dr.
David M. Goldenberg, our Chairman and Chief Scientific Officer, Ms. Cynthia L.
Sullivan, our President and Chief Executive Officer, and certain companies with
which we do business, including the Center for Molecular Medicine and
Immunology, or CMMI, and IBC Pharmaceuticals, Inc.
For example, Dr. Goldenberg is the founder, President and a member of the
Board of Trustees of CMMI, a not-for-profit cancer research center that we use
to conduct certain research activities. Dr. Goldenberg's employment agreement
with us permits him to devote more of his time working for CMMI than for us, and
other key personnel of our company also have responsibilities to both CMMI and
us. As a result, the potential for both real and perceived conflicts of interest
exists, and disputes could arise over the allocation of research projects and
ownership of intellectual property rights. In addition, in the event that we
become involved in stockholder litigation regarding these potential conflicts,
we might be required to devote significant resources and management time
defending the company from these claims, which could adversely affect our
results of operations. See "Certain Relationships and Related Transactions" in
Item 13 of this Annual Report.
If we cannot successfully and efficiently manufacture the compounds that
make up our products and product candidates, our ability to sell products and
conduct clinical trials will be impaired.
Our ability to supply the demand for our existing diagnostic products, as
well as conduct pre-clinical and clinical research and development programs,
depends, in part, on our ability, or that of our partners, to manufacture our
proprietary compounds in accordance with FDA and other regulatory requirements.
We have no experience in manufacturing these compounds in significant
quantities, and we may not be able to do so in the quantities and with the
degree of purity that is required. We currently rely on our manufacturing
facilities in New Jersey, and the technical staff working there, for
substantially all of our manufacturing needs. Any interruption in manufacturing
at this site, whether by natural acts or otherwise, would significantly and
adversely affect our operations, and delay our research and development
programs. We have encountered manufacturing difficulties in the past, and it is
possible that we will encounter similar difficulties in the future. In addition,
we may also have difficulties from time to time obtaining the raw materials
necessary in the manufacturing process.
We have recently begun to scale up our manufacturing facilities in
anticipation of future needs, but our completion of this build-out is subject to
a number of risks and uncertainties. If we are unsuccessful in expanding our own
manufacturing facilities, or are otherwise unable to contract with a qualified
third-party to manufacture these compounds on acceptable terms, our ability to
complete pre-clinical and clinical testing and to supply commercial quantities
of our products would be adversely affected. In addition, if our manufacturing
facilities fail to comply with FDA and other regulatory requirements, we may be
required to suspend manufacturing, perhaps for an extended period of time. This
could have a material adverse effect on our financial condition and cash flow.
Our collaboration agreements may fail or be terminated unexpectedly, which
could result in significant delays and substantial increases in the cost of our
research, development and commercialization of our product candidates.
We are party to various arrangements with academic, governmental and
corporate partners. The successful development and commercialization of the
product candidates covered by these arrangements will depend upon the ability of
these third parties to fully perform their contractual responsibilities. If any
of these parties breaches or unexpectedly terminates their agreement with us, or
otherwise fails to conduct their activities in a timely manner, the development
or commercialization of our product candidates may be delayed. For example, the
Center for Molecular Medicine and Immunology, a not-for-profit cancer research
center of which Dr. David M. Goldenberg, our Chairman and Chief Scientific
Officer, is President and a Trustee, performs contracted pilot and pre-clinical
trials in areas of importance to us, as well as basic research and pre-clinical
evaluations in a number of areas of potential interest to us. If CMMI were to
become unwilling or unable to provide these services on comparable terms, we
would have to quickly make alternative arrangements with third parties, which
could significantly delay and increase the expenses associated with these
programs.
15
Our dependence upon third parties for the manufacture of proprietary
compounds may have the effect of increasing our costs while also limiting our
ability to develop and deliver these compounds on a timely 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 complete the development and commercialization of
these product candidates will be adversely affected. In addition, we currently
rely on third parties to supply raw materials and to perform certain end-stage
portions of the manufacturing process for our diagnostic imaging products,
CEA-Scan and LeukoScan. We do not currently have the resources necessary to
perform these processes, and if our third party suppliers were to become
unwilling or unable to do so for any reason, we would be unable to deliver these
products to customers until we entered into an agreement with another qualified
manufacturer. This could cause substantial delays in customer deliveries and
adversely affect our results of operations.
While we intend to continue to enter into additional collaborations and
similar agreements as opportunities arise, we may not be able to negotiate these
arrangements on favorable terms, if at all, and these relationships may not be
successful.
Our future success will depend upon our ability to first obtain and then
adequately protect our patent and other intellectual property rights, as well
avoiding the infringement of the rights of others.
Our future success will be highly dependent upon our ability to first
obtain and then defend the patent and other intellectual property rights
necessary for the commercialization of our product candidates. We have filed
numerous patent applications on the technologies and processes that we use in
the United States and certain foreign countries. Although we have obtained a
number of issued U.S. patents to date, the patent applications owned or licensed
by us may not result in additional patents being issued. Moreover, these patents
may not afford us the protection we need against competitors with similar
technologies or products.
The successful development of diagnostic and therapeutic products
frequently requires the application of multiple technologies that may be subject
to the patent or other intellectual property rights of third parties. Although
we believe it is likely we will need to license technologies and processes from
third parties in the ordinary course of our business, we are not currently aware
of any material conflict involving our technologies and processes with any valid
patents or other intellectual property rights owned or licensed by others. In
the event that a third party were to claim such a conflict existed, they could
sue us for damages as well as seek to prevent us from commercializing our
product candidates. It is possible that a third party could successfully claim
that our products infringe on their intellectual property rights. Uncertainties
resulting from the litigation and continuation of patent litigation or other
proceedings could have a material adverse effect on our ability to compete in
the marketplace. Any patent litigation or other proceeding, even if resolved in
our favor, would require significant financial resources and management time.
Some of our competitors may be able to sustain these costs more effectively than
we can because of their substantially greater financial and managerial
resources. If a patent litigation or other proceeding is resolved unfavorably to
us, we may be enjoined from manufacturing or selling our products without a
license from the other party, in addition to being held liable for significant
damages. We may not be able to obtain any such license on commercially
acceptable terms, if at all.
16
Our ability to continue to sell one of our existing products and
successfully commercialize a number of our product candidates will suffer if we
are unsuccessful in defending our European patents involving CEA antibodies.
We have been involved in patent litigation with F. Hoffmann-LaRoche since
1996 concerning the validity of our European patents covering the proprietary
antibody we use in CEA-Scan, our cancer imaging product, and labetuzumab, our
cancer therapy product candidate. These patents also cover the use of certain
highly specific anti-CEA antibodies that we believe have a number of other
therapeutic uses. We believe that Hoffman-LaRoche has infringed our patents, and
they have responded by seeking to nullify the patents in question. If we are
unsuccessful in these proceedings, our ability to execute our business plan
could be materially and adversely affected.
If we were unable to keep our trade secrets confidential, our technologies
and other proprietary information may be used by others to compete against us.
In addition to our reliance on patents, we attempt to protect our
proprietary technologies and processes by relying on trade secret laws,
nondisclosure and confidentiality agreements, and licensing arrangements with
our employees and other persons who have access to our proprietary information.
These agreements and arrangements may not provide meaningful protection for our
proprietary technologies and processes in the event of unauthorized use or
disclosure of such information. In addition, our competitors may independently
develop substantially equivalent technologies and processes or otherwise gain
access to our trade secrets or technology, either of which could materially and
adversely affect our competitive position.
We face substantial competition in the biotechnology industry and may not
be able to compete successfully against one or more of our competitors.
The biotechnology industry is highly competitive, particularly in the area
of diagnostic and therapeutic oncology products. In recent years there have been
extensive technological innovations achieved in short periods of time, and it is
possible that future technological changes and discoveries by others could
result in our products and product candidates quickly becoming uncompetitive or
obsolete. A number of companies, including IDEC Pharmaceuticals, Genentech,
Glaxo SmithKline, Ligand Pharmaceuticals, Millennium Pharmaceuticals, Amersham
Health, Protein Design Laboratories, Schering AG and Corixa Corporation, are
engaged in the development of diagnostic and therapeutic oncology products. Many
of these companies have significantly greater financial, technical and marketing
resources than we do. In addition, many of these companies have more established
positions in the pharmaceutical industry and are therefore better equipped to
develop, commercialize and market oncology products. Even some smaller
competitors may obtain a significant competitive advantage over us if they are
able to discover or otherwise acquire patentable inventions, form collaborative
arrangements or merge with larger pharmaceutical companies.
We expect to face increasing competition from universities and other
non-profit research organizations. These institutions carry out a significant
amount of research and development in the field of antibody-based technologies,
and they are increasingly aware of the commercial value of their findings. As a
result, they are demanding greater patent and other proprietary rights, as well
as licensing and future royalty revenues.
Our limited marketing and sales experience could impair our ability to
successfully sell products.
We are currently relying, in substantial part, on our own limited sales and
marketing staff to market our current diagnostic imaging products, CEA-Scan and
LeukoScan. We currently have no marketing or sales experience for our
therapeutic product candidates and will need to attract qualified sales and
marketing professionals or identify out-licensing opportunities in order to
commercialize any future therapeutic products. If we are unable to successfully
build our sales force, our ability to sell products, as well as our financial
condition and operating results, could be materially and adversely affected.
17
We could be temporarily unable to sell our diagnostic products if our
agreements with distributors are unexpectedly terminated.
We currently do not have the internal resources necessary to 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 unexpectedly terminated, we will
be required to quickly enter into comparable arrangements with other qualified
third parties, and we will be unable 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 materially and adversely
affected.
We may never receive approval to sell LeukoScan in the United States.
We have not received approval from the FDA to sell our LeukoScan diagnostic
imaging product in the United States, and it remains unclear if we will ever
obtain such approval. In addition, the FDA could impose conditions on its
approval that could significantly affect the commercial viability of the
product. The FDA could also require us to undertake additional clinical studies
or otherwise expend additional funds before granting approval, and we could
determine not to pursue our application any further at that time. If we do not
receive approval to market and sell LeukoScan in the United States, our results
of operations and financial condition could be adversely affected.
In the event we are unable to continue to use fluids produced in mice for
certain of our product candidates, we might need to make expensive and time
consuming changes in our development programs.
CEA-Scan and certain of our other imaging agents are derived from the
fluids produced in mice. Regulatory authorities, particularly in Europe, have
expressed concerns about the use of these fluids for the production of
monoclonal antibodies. These regulatory authorities may determine that our
quality control procedures for these products are inadequate. While we are
continuing our development efforts to produce certain of our monoclonal
antibodies using alternative methods, this process constitutes a substantial
production change, which in itself will require additional manufacturing
equipment and new regulatory approvals. In the event we have to discontinue the
use of mouse fluids, we may not have the resources at the time to acquire the
necessary manufacturing equipment and expertise that we will need to make the
changes in our development programs.
We may be liable for contamination or other harm caused by hazardous
materials that we use in the operations of our business.
In addition to laws and regulations enforced by the FDA, we are also
subject to regulation under various other foreign, federal, state and local laws
and regulations. Our research and development programs involve the controlled
use of viruses, hazardous materials, chemicals and various radioactive
compounds. The risk of accidental contamination or injury from these materials
can never be completely eliminated, and if an accident occurs we could be held
liable for any damages that result, which could exceed our available resources.
The nature of our business exposes us to significant liability claims, and
our insurance coverage may not be adequate to cover any future claims.
The use of our compounds in clinical trials and any future sale exposes us
to liability claims that could be substantial. These claims might be made
directly by healthcare providers, medical personnel, patients, consumers,
pharmaceutical companies and others selling or distributing our compounds. While
we currently have product liability insurance that we consider adequate for our
current needs, we may not be able to continue to obtain comparable insurance in
the future at an acceptable cost, if at all. If for any reason we cannot
maintain our existing or comparable liability insurance, our ability to
clinically test and market products could be significantly impaired. Moreover,
the amount and scope of our insurance coverage, as well as the indemnification
arrangements with third parties upon which we rely, may be inadequate to protect
us in the event of a successful product liability claim. Any successful claim in
excess of our insurance coverage could materially and adversely affect our
financial condition and operating results.
18
The loss of key employees could adversely affect our operations.
We are heavily dependent upon the talents of Dr. Goldenberg, our Chief
Scientific Officer, Ms. Sullivan, our President and Chief Executive Officer, and
certain other key personnel. If Dr. Goldenberg, Ms. Sullivan or any of our other
key personnel were to unexpectedly leave our company, our business and results
of operations could be materially and adversely affected. In addition, as our
business grows we will need to continue to attract additional 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 attract, motivate and retain qualified
professionals, our operations could be materially and adversely affected.
We are subject to certain covenants that place restrictions on the
operation of our business.
We are subject to contractual covenants that provide that we may not enter
into certain transactions without the prior consent of certain holders of our
common stock. For example, we may not sell our business to an affiliate without
such approval unless the sale is for consideration at least equal to (a) the
fair market value of our company (as determined by our Board of Directors) in
the event of a sale of assets or (b) the then current market price of our common
stock in the event of a sale of stock. As a result of these covenants, we may be
unable to sell the company under circumstances that you and other stockholders
would otherwise approve.
Our ability to achieve significant revenues from the sale of our products
will depend, in part, on the ability of healthcare providers to obtain adequate
reimbursement from Medicare, Medicaid, private insurers and other health care
payers.
The continuing efforts of government and insurance companies, health
maintenance organizations and other payers of health care costs to contain or
reduce costs of health care may adversely affect our future revenues and ability
to achieve profitability. Our ability to successfully commercialize future
products will depend, in significant part, on the extent to which health care
providers can obtain appropriate reimbursement levels for the cost of our
products and related treatment. Third-party payers are increasingly challenging
the prices charged for diagnostic and therapeutic products and related services.
Also, the trend towards managed health care in the United States and the
concurrent growth of organizations such as HMOs, could control or significantly
influence the purchase of health care services and products. In addition,
legislative proposals to reform health care or reduce government insurance
programs may result in lower prices or the actual inability of prospective
customers to purchase our products. The cost containment measures that health
care payers 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, it may not be available at
price levels sufficient for us to realize a positive return on our investment.
The general business climate is uncertain and we do not know how this will
impact our business.
Over the past two years, there have been dramatic changes in economic
conditions and the general business climate has been negatively impacted.
Indices of the United States stock markets have fallen precipitously, and
consumer confidence has waned. Compounding the general unease about the current
business climate is the still unknown economic and political impact of the
September 11, 2001 terrorist attacks, hostilities in Afghanistan and the
possibility of further conflict with Iraq. We are unable to predict how any of
these factors may affect our business.
19
Risks Related to Our Common Stock
The market price of our stock is likely to continue to fluctuate widely
based on a number of factors, many of which are beyond our control.
The market price of our common stock has been, and is likely to continue to
be, highly volatile. Furthermore, the stock market generally and the market for
stocks of relatively 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 actual operating performance.
From time to time, stock market analysts publish research reports or
otherwise comment upon our business and future prospects. Due to a number of
factors, we may fail to meet the expectations of securities analysts or
investors and our stock price would likely decline as a result. These factors
include:
o announcements by us, our partners or our competitors of clinical
results, technological innovations, product sales, new products or
product candidates and product development timelines;
o the formation or termination of our corporate alliances and
distribution arrangements;
o developments or disputes concerning our patent or other proprietary
rights, and the issuance of patents in our field of business to
others;
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 significantly influence all matters requiring
the approval by our stockholders.
As of June 30, 2002, Dr. Goldenberg, our Chairman and Chief Scientific
Officer, controlled the right to vote approximately 17.7% of our common stock.
As a result of this voting power, Dr. Goldenberg has the ability to
significantly influence the outcome of substantially all matters that may be put
to a vote of our stockholders, including the election of our directors.
A significant number of our shares are eligible for resale that may lower
the market price of our common stock and impair our ability to raise new funds.
As of June 30, 2002, we had 49,877,443 shares of common stock outstanding,
9,240,972 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. As of June 30, 2002, there were an additional 3,174,250 shares
issuable upon the exercise of stock options, of which 1,399,625 were exercisable
and 204,000 shares issuable upon the exercise of warrants. Sales of substantial
amounts of shares of our common stock, 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.
20
We have adopted anti-takeover provisions that may frustrate any unsolicited
attempt to acquire our company or remove or replace our directors and executive
officers.
Provisions of our certificate of incorporation, our by-laws and Delaware
corporate 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. For
example, we have adopted a stockholder rights plan that makes it more difficult
for a third party to acquire control of our company without the support of our
Board of Directors. In addition, our Board of Directors may issue up to ten
million shares of preferred stock and determine the price, rights, preferences
and privileges, including voting and conversion rights, of these shares without
any further vote or action by our stockholders. The issuance of preferred stock
could have the effect of delaying, deterring or preventing an unsolicited 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 by, the rights of the holders of any preferred
stock that may be issued in the future.
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 (as defined in Section 203) for a period of three years from the
date the person became an interested stockholder, unless certain conditions are
met.
Item 2 -- Properties
Our headquarters is located at 300 American Road, Morris Plains, New
Jersey, where we lease approximately 74,000 square feet of commercial office
space. In November 2001, we renewed the lease for an additional term of twenty
years expiring in October 2021 at a base annual rate of $545,000, which rate is
fixed for the first five years and increases thereafter every five years. The
November 2001 renewal includes an additional 15,000 square feet of space. Our
manufacturing, regulatory, medical, research and development laboratories, and
our finance, marketing and executive offices are currently located in this
facility. We have also completed the construction and equipping of a 7,500
square-foot commercial-scale manufacturing facility within our Morris Plains
headquarters, which consists of four independent antibody manufacturing suites,
several support areas, and a QC laboratory. See Item 1, "Manufacturing." In
addition, our European subsidiary, Immunomedics GmbH, leases executive office
space in Darmstadt, Germany.
Item 3 -- Legal Proceedings
In November 1996, we brought suit in The Netherlands against F.
Hoffmann-LaRoche and its Roche Diagnostics subsidiary and European affiliates
for infringement of our European patent covering specific anti-CEA antibodies,
which Roche is using in its CEA immunoassay. The suit sought an injunction
against the sale of CEA immunoassays by Roche that infringe our European
patents, as well as damages for past infringement. Roche denied infringement and
countered with nullity actions in The Netherlands and Germany, seeking to
invalidate our Dutch and German patents. A trial was held before the Patent
Court in The Hague on August 8, 1997, resulting in dismissal of the action. We
have appealed. A trial on the Dutch nullity action was held before the Patent
Court in The Hague on June 5, 1998, resulting in dismissal of that action and
maintenance of all claims of our patent. Roche has appealed. A trial on the
German nullity action was held in Munich on December 9, 1998, resulting in
maintenance of the patent in amended form that continues to protect our products
and which we believe is still infringed by Roche's immunoassays. Roche did not
appeal. The appeals of the Dutch infringement and nullity actions were heard
concurrently on March 2, 2000. A decision, although originally set for September
7, 2000, was rendered on February 15, 2001, and then only a partial decision.
The validity of the patent, with claims amended as they were in the German
action, was upheld and the jurisdiction of the Dutch Court to issue a
cross-border injunction was upheld. The Dutch Appeals court's decision finally
was rendered on July 19, 2002, holding that Roche infringed the patent and that
the decision could be enforced in all countries named in the suit, contingent
upon posting of a bond in the amount of Euro 2 million. Roche has appealed the
holdings of the Appeals Court to the Dutch Supreme Court. Each side has
submitted pleadings to the Supreme Court in this appeal. Our patent counsel
believes that the patents are valid and infringed, and that an unfavorable
outcome is unlikely, although no assurances can be given in this regard. To the
extent that Roche contests or challenges our patents, or files appeals or
further nullity actions, there can be no assurance that significant costs for
defending such patents may not be incurred.
21
We have also sued Cytogen, Inc. and C.R. Bard, Inc. for infringement of our
licensed patent by Cytogen's sale of its "Prostascint" prostate cancer-imaging
product. The complaint was filed in New Jersey on February 23, 2000 and served
on March 20, 2000 after two unsuccessful attempts at settlement. The suit was
bifurcated and damages were separated. Discovery was completed on the liability
issues. A Markman hearing was held for the purpose of determining the scope and
interpretation of the claims, following which each side submitted motions for
summary judgment, all of which have now been denied. Although we believe that
our patent is valid and infringed, there can be no assurance that a judge will
interpret the claims in our favor or that a jury will find infringement, or that
we will not incur significant costs in pursuing the suit despite a negotiated
fee arrangement with our patent counsel.
From time to time we are a party to various claims and litigation arising
in the normal course of business. We believe that the outcome of such claims and
litigation will not have a material adverse effect on our financial position and
results of operations.
Item 4 -- Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of securities holders during the fourth
quarter of fiscal year 2002.
22
PART II
Item 5 -- Market For Registrant's Common Stock and Related Stockholder Matters
Our Common Stock is quoted on the Nasdaq National Market under the symbol
"IMMU." The following table sets forth, for the last two fiscal years, the high
and low sales prices for the Common Stock, as reported by the Nasdaq National
Market.
Fiscal Quarter Ended High Low
-------------------- ---- ---
September 30, 2000........................ $26.500 $15.313
December 31, 2000......................... 26.375 16.000
March 31, 2001............................ 21.813 7.438
June 30, 2001............................. 22.000 7.344
September 30, 2001........................ $20.450 $ 8.650
December 31, 2001......................... 24.840 11.550
March 31, 2002............................ 21.000 13.600
June 30, 2002............................. 19.050 3.970
As of September 26, 2002, there were approximately 681 stockholders of
record of the Common Stock and, according to our estimates, approximately 15,434
beneficial owners of the Common Stock. We have not paid dividends to our Common
Stock since inception and do not plan to pay cash dividends in the foreseeable
future. We currently intend to retain earnings, if any, to finance our growth.
Sale of Unregistered Securities
On May 23, 2002, in consideration of Beckman Coulter, Inc. selling its
membership interests in IBC Pharmaceuticals, LLC to us, we issued to Beckman
Coulter (i) 138,900 shares of our Common Stock and (ii) a warrant to purchase up
to an additional 150,000 shares of our Common Stock at an exercise price of
$65.00 per share, exerciseable until the earlier of May 23, 2007 or a change in
control of Immunomedics. See "IBC Pharmaceuticals" in Item 13 of this Annual
Report. As the sale was made to one accredited purchaser, the Company relied on
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
for the exemption from the registration requirements of the Securities Act. No
person acted as an underwriter with respect to the transaction set forth above.
23
Item 6 -- Selected Financial Data
The following table sets forth our consolidated financial data as of and
for each of the five fiscal years ended June 30, 2002. The selected consolidated
financial data as of and for each of the five years ended June 30, 2002 have
been derived from our consolidated financial statements. The consolidated
financial statements and the report thereon for the year ended June 30, 2002 are
included elsewhere in this Annual Report on Form 10-K. The information below
should be read in conjuction with the consolidated financial statements (and
notes thereon) and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in Item 7.
Fiscal year ended June 30,
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
(In thousands, except per share amounts)
Revenues...................................$ 14,287 $ 8,400 $ 4,777 $ 6,801 $ 5,252
Cost and expenses.......................... 21,308 16,783 15,609 18,838 19,406
Interest and other income.................. 2,069 2,829 1,196 758 2,343
Loss before income tax benefit............. (4,952) (5,554) (9,636) (11,279) (11,811)
Income tax benefit......................... 1,205 803 -- -- --
Net loss................................... (3,747) (4,751) (9,636) (11,279) (11,811)
Preferred stock dividends.................. -- -- 496 409 --
Net loss allocable to common stockholders.. (3,747) (4,751) (10,132) (11,688) (11,811)
Net loss per common share..................$ (0.08) $ (0.10) $ (0.23) $ (0.31) $ (0.32)
Weighted average shares outstanding........ 49,652 49,498 43,977 37,782 36,643
Cash, cash equivalents and marketable
securities...............................$ 44,788 $ 53,291 $ 40,866 $ 9,422 $ 7,583
Total assets............................... 54,951 59,657 48,026 16,959 14,942
Long-term debt............................. -- -- 70 228 --
Stockholders' equity(1).................... 41,096 41,441 44,096 12,455 10,526
(1) We have never paid cash dividends on our Common Stock.
24
Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This Annual Report
contains such "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements may be made directly
in this Annual Report, and they may also be made a part of this Annual Report by
reference to other documents filed with the Securities and Exchange Commission,
which is known as "incorporation by reference."
Words such as "may," "anticipate," "estimate," "expects," "projects,"
"intends," "plans," "believes" and words and terms of similar substance used in
connection with any discussion of future operating or financial performance,
identify forward-looking statements. All forward-looking statements are
management's present expectations of future events and are subject to a number
of risks and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. These risks and
uncertainties include, among other things: our inability to further identify,
develop and achieve commercial success for new products and technologies; the
possibility of delays in the research and development necessary to select drug
development candidates and delays in clinical trials; the risk that clinical
trials may not result in marketable products; the risk that we may be unable to
successfully finance and secure regulatory approval of and market our drug
candidates; our dependence upon pharmaceutical and biotechnology collaborations;
the levels and timing of payments under our collaborative agreements;
uncertainties about our ability to obtain new corporate collaborations and
acquire new technologies on satisfactory terms, if at all; the development of
competing systems; our ability to protect our proprietary technologies;
patent-infringement claims; and risks of new, changing and competitive
technologies and regulations in the United States and internationally. Please
also see the discussion of risks and uncertainties under "Factors That May
Affect Our Business and Results of Operations" in Item 1 of this Annual Report.
In light of these assumptions, risks and uncertainties, the results and
events discussed in the forward-looking statements contained in this Annual
Report or in any document incorporated by reference might not occur.
Stockholders are cautioned not to place undue reliance on the forward-looking
statements, which speak only of the date of this Annual Report or the date of
the document incorporated by reference in this Annual Report. We are not under
any obligation, and we expressly disclaim any obligation, to update or alter any
forward-looking statements, whether as a result of new information, future
events or otherwise. All subsequent forward-looking statements attributable to
Immunomedics or to any person acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section.
Overview
We are a biopharmaceutical company focused on the development, manufacture
and marketing of monoclonal antibody-based products for the detection and
treatment of cancer and other serious diseases. Our most advanced therapeutic
product candidate, epratuzumab, is a compound that binds to the malignant cells
that comprise non-Hodgkin's B-cell lymphoma and certain other lymphocytic
leukemias. In December 2000, we granted a license to Amgen to further develop
and commercialize the unlabeled form of epratuzumab in North America and
Australia. Amgen is currently evaluating this compound in Phase II and Phase III
clinical trials for the treatment of patients with non-Hodgkin's lymphoma. We
currently maintain all other rights to epratuzumab outside of the territories
granted to Amgen, as well as all rights to the labeled versions of the compound
worldwide. Accordingly, we are conducting clinical trials of the unlabeled and
radiolabeled versions of the compound, epratuzumab and epratuzumab-Y-90, as well
as clinically developing four other therapeutic product candidates. We intend to
consider licensing some or all of the rights we possess in epratuzumab as well
as our other product candidates in the future if the right opportunities arise.
In addition to our therapeutic discoveries, our proprietary technologies
have also enabled us to develop highly specific diagnostic imaging agents, one
25
of which, CEA-Scan, has already been approved in the United States and the
European Union, and is being marketed for the detection of colorectal cancers.
Our second diagnostic product, LeukoScan has been approved in Europe and
Australia and is being marketed for the detection of bone infections. These are
the only products that we are currently licensed to market and sell and to date,
we have received only limited revenues from the sale of these products. We are
also developing new cancer therapeutic antibody technology involving the
selective delivery of therapeutic agents through pre-targeting, in collaboration
with our majority-owned subsidiary, IBC Pharmaceuticals, Inc.
From inception in 1982 until June 30, 2002, we had an accumulated deficit
of approximately $118,000,000 and have never earned a profit. In the absence of
increased revenues from the sale of current or future products and licensing
activities (the amount, timing, nature, or source of which cannot be predicted),
our losses will continue as we continue to conduct our research and development
activities. These activities are budgeted to expand over time and will require
further resources if we are to be successful. As a result, our operating losses
are likely to be substantial over the next several years.
The development and commercialization of successful diagnostic and
therapeutic products is subject to numerous risks and uncertainties including,
without limitation, the following:
o the type of therapeutic or diagnostic compound under investigation and
nature of the disease in connection with which the compound is being
studied;
o our ability, as well as the ability of our partners, to conduct and
complete clinical trials on a timely basis;
o the time required for us to comply with all applicable federal, state
and foreign legal requirements, including, without limitation, our
receipt of the necessary approvals of the U.S. Food and Drug
Administration;
o the financial resources available to us during any particular period;
and
o many other factors associated with the commercial development of
therapeutic and diagnostic products outside of our control.
Research and Development
As of June 30, 2002, we employed 46 professionals in our research and
development departments. In addition to salaries and benefits, the other costs
associated with research and development include the costs associated with
producing biopharmaceutical compounds, laboratory equipment and supplies, the
costs of conducting clinical trials, legal fees and expenses associated with
pursuing patent protection, as well as facilities costs. We spent $14.2 million
in the aggregate for the fiscal year ended June 30, 2002 on research and
development operating expenses.
In order to further support our research and development efforts, as well
as prepare for future commercialization of our product candidates, we have
contracted to expand our facilities at a total cost of approximately $6.3
million of which $3.7 million was spent through June 30, 2002. See "Liquidity
and Capital Resources" below. Once this project is completed, we believe that
our facilities, as expanded, will be adequate to support our research and
development activities for at least the next two years without the need for any
material capital expenditures.
At any one time our scientists are engaged in the research and development
of multiple diagnostic and therapeutic compounds. Because we do not track
expenses on the basis of each individual compound under investigation, but
rather aggregate research and development costs for accounting purposes, it is
not possible for investors to analyze and compare the expenses associated with
unsuccessful research and development efforts for any particular fiscal period,
with those associated with compounds that are determined to be worthy of further
development. This may make it more difficult for investors to evaluate our
business and future prospects.
26
Therapeutics
Substantially all of our research and development efforts involve the use
of monoclonal antibodies to treat cancer and other serious diseases in one of
two ways. In the first, the antibodies are unlabeled, or "naked," and used to
treat the disease directly. In the second, the antibodies are labeled, or
conjugated, with radioisotopes, chemotherapeutic agents, toxins or other
substances. In each case the antibodies first seek out, and then bind to a
particular target such as a disease site or organ system.
Epratuzumab
The most advanced of our therapeutic compounds under development,
epratuzumab, is a non-radioactive antibody that targets the CD22 receptor of
B-cells and B-cell lymphomas. In 2000, Amgen purchased a license to epratuzumab
covering the compound's further development and commercialization in North
America and Australia. The license, for which Amgen paid us $18.0 million in
cash and agreed to make additional milestone and royalty payments upon the
achievement of certain future events, resulted in the transfer of responsibility
to Amgen for the Phase II and Phase III clinical trials then being administered
and paid for by us. Amgen is also responsible for any additional trials that may
be necessary to obtain regulatory approvals from the U.S. Food and Drug
Administration and other authorities within Amgen's licensed territory.
Accordingly, apart from the obligation to manufacture epratuzumab for Amgen
until such time as Amgen is able to manufacture its own inventories of the
compound, we have no financial obligations with respect to the commercialization
of epratuzumab in North America and Australia.
While the clinical results to date have been encouraging, we are not able
to determine when, if ever, epratuzumab will be approved for sale in the United
States or anywhere else. Even if it is approved, there can be no assurance that
it will be commercially successful or that we will ever receive any future
milestone or royalty payments.
Other Therapeutic Product Candidates
At the time the Amgen license was granted, we retained all other rights to
the compound, including the development rights to the unlabeled version of the
compound outside of Amgen's licensed territory, as well as the rights to the
different labeled versions of the compound in the United States and everywhere
else. We are evaluating both the labeled and unlabeled versions of the compound
in clinical trials at the present time. Clinical trials are also being conducted
with humanized antibody to carcinoembryonic antigen (CEA) in patients with
colorectal, pancreatic or breast cancers and clinical trials are beginning with
a humanized antibody to alpha-fetoprotein (AFP) in patients with primary liver
cancer. In addition, we have six other therapeutic product candidates in
pre-clinical development. All of these product candidates remain at a very early
stage of development and we do not anticipate seeking regulatory approval with
respect to any particular candidate for at least the next two years.
Diagnostics
In 1998, we began to transition our focus away from the development of
diagnostic imaging products in order to accelerate the development of our
therapeutic product candidates. As a result, as of June 30, 2002 research and
development into diagnostic product candidates was no longer a material portion
of our business. We are evaluating several in vivo diagnostic imaging product
candidates for the detection of various cancers and other diseases, although
none of these is expected to be available for commercial sale for at least the
next two years. These agents are being developed primarily to serve as companion
products that may be used in conjunction with the therapeutic product candidates
under development by us.
27
IBC Pharmaceuticals
In 1999 we began conducting research involving the selective delivery of
therapeutic agents to fight cancer as part of a collaboration with Beckman
Coulter. Upon our formation of the joint venture, IBC Pharmaceuticals, LLC, we
granted certain intellectual property to the venture, as did Beckman Coulter. We
were then reimbursed for all of the research activities we conducted on the
joint venture's behalf. For the fiscal years June 30, 2002, 2001 and 2000, we
received reimbursements of $634,000, $418,000 and $348,000, respectively, from
IBC with respect to these research activities.
In the fourth quarter of fiscal year 2002 we were able to acquire all of
the membership interests in the joint venture held by Beckman Coulter, giving us
majority control of the business. IBC Pharmaceuticals, LLC, was then reorganized
into IBC Pharmaceuticals, Inc., a Delaware corporation. We currently hold all of
the outstanding shares of IBC Series A Preferred stock, representing
approximately 73.26% of the total shares of voting stock outstanding. The
transaction was accounted for as a step acquisition and we recorded an
in-process research and development charge of $936,000 as discussed below. At
June 30, 2002 IBC Pharmaceuticals, Inc. had cash and cash equivalents of $1.7
million. As a result of our majority interest in IBC Pharmaceuticals, we will
now consolidate the operating results of IBC for all future periods.
Critical Accounting Policies
In December 2001, the U.S. Securities and Exchange Commission issued a
statement concerning certain views of the Commission regarding the appropriate
amount of disclosure by publicly held companies with respect to their critical
accounting policies. In particular, the Commission expressed its view that in
order to enhance investor understanding of financial statements, companies
should explain the effects of critical accounting policies as they are applied,
the judgments made in the application of these policies, and the likelihood of
materially different reported results if different assumptions or conditions
were to prevail.
We consider revenue recognition as a critical accounting policy. Payments
received under contracts to fund certain research activities are recognized as
revenue in the period in which the research activities are performed. Payments
received in advance that are related to future performance are deferred and
recognized as revenue when the research projects are performed. Upfront
nonrefundable fees associated with license and development agreements where we
have continuing involvement in the agreement are recorded as deferred revenue
and recognized over the estimated service period. If the estimated service
period is subsequently modified, the period over which the upfront fee is
recognized is modified accordingly on a prospective basis. Revenues from the
achievement of research and development milestones are recognized when the
milestones are achieved. Revenue from the sale of diagnostic products is
recognized at the time of shipment.
Results of Operations
Fiscal Year 2002 compared to Fiscal Year 2001
Revenues for the fiscal year ended June 30, 2002 were $14,287,000 as
compared to $8,400,000 in the fiscal year ended June 30, 2001, representing an
increase of $5,887,000, or 70%. Product sales for fiscal year 2002 were
$3,793,000 as compared to $4,032,000 in fiscal year 2001, representing a
decrease of $239,000, principally reflecting our transition in focus from the
sale of diagnostic imaging products to the development of therapeutic compounds.
License fee revenues for fiscal year 2002 increased to $10,213,000 from
$3,758,000 for the same period in 2001, primarily due to the recognition in 2002
of $9,000,000 as compared to $3,750,000 in fiscal 2001 of the up-front license
payment received from Amgen. In addition, in fiscal 2002 we recognized
$1,025,000 as license fee revenue for a non-exclusive license granted to Daiichi
Pure Chemicals Co. Revenues from grants for research and development for fiscal
year 2002 decreased to $281,000 from $610,000 for the same period of 2001.
28
Total operating expenses for fiscal year 2002 were $21,308,000 as compared
to $16,783,000 in fiscal year 2001, representing an increase of $4,525,000, or
27%. Research and development expenses for fiscal year 2002 increased by
$3,938,000, from $10,264,000 in fiscal year 2001 to $14,202,000, primarily due
to an increased number of professional staff, as well as increased research and
development efforts and associated manufacturing expenses, including lab
supplies associated with producing compounds to be used in clinical trials. Cost
of goods sold for fiscal year 2002 decreased by $216,000 from $891,000 in fiscal
year 2001 to $675,000, primarily due to lower distribution cost and a reduced
number of vials sold. Cost of goods sold in fiscal year 2002 included a charge
of $24,000 as compared to $105,000 in fiscal 2001 relating to the expiration of
certain CEA-Scan inventories previously manufactured and capitalized.
Sales and marketing expenses for fiscal year 2002 were $2,610,000 as
compared to $2,502,000 for fiscal year 2001, representing an increase of
$108,000. General and administrative costs for fiscal year 2002 decreased by
$241,000 from $3,126,000 in fiscal year 2001 to $2,885,000. This was primarily
due to the recognition of an expense of $509,000 in fiscal 2001 associated with
warrants issued to a financial advisor, and an expense of $360,000 as a fee
associated with our entering into the Licensing and Development Agreement with
Amgen (see Note 10 to Consolidated Financial Statements), partially offset by an
increase of other administrative expenses in fiscal year 2002. As a result of
our acquisition of majority control of IBC in the fourth quarter of fiscal 2002,
we recorded a charge related to acquired in-process research and development of
$936,000, which was immediately expensed. At the date of acquisition, none of
the products under development by IBC had achieved technological feasibility and
none were being sold in the market.
Interest and other income for fiscal year 2002 decreased by $761,000 from
$2,830,000 in fiscal year 2001 to $2,069,000 in 2002, primarily due to lower
rate of return and reduced level of cash available for investments.
For fiscal years 2002 and 2001, we recorded a tax benefit of $1,205,000 and
$803,000, respectively, as a result of our sale of approximately $15,269,000 and
$10,106,000 of New Jersey state net operating losses, respectively.
Net loss allocable to common stockholders for fiscal year 2002 was
$3,747,000, or $0.08 per share, as compared to $4,751,000, or $0.10 per share,
in fiscal year 2001.
Fiscal Year 2001 compared to Fiscal Year 2000
Revenues for the fiscal year ended June 30, 2001 were $8,400,000 as
compared to $4,777,000 in the fiscal year ended June 30, 2000, representing an
increase of $3,623,000, or 76%. Product sales for fiscal year 2001 were
$4,032,000 as compared to $4,124,000 in fiscal year 2000, principally reflecting
our continued transition in focus from the sale of diagnostic imaging products
to the development of therapeutic compounds. License fee revenues for fiscal
year 2001 increased by $3,744,000 from $14,000 in fiscal 2001 to $3,758,000 in
fiscal 2002, primarily due to the recognition of $3,750,000 of the $18,000,000
up-front payment received in conjunction with the execution of our development
and license agreement with Amgen. The up-front payment is being recognized as
revenue at a rate of $750,000 per month over an estimated period of 24 months,
beginning February 2001. Revenue from grants for research and development for
fiscal year 2001 decreased by $29,000 from $639,000 to $610,000 as compared to
fiscal 2000.
Total operating expenses for fiscal year 2001 were $16,783,000 as compared
to $15,609,000 in fiscal year 2000, representing an increase of $1,174,000, or
8%. Research and development expenses increased by $1,594,000, from $8,670,000
in fiscal 2001 to $10,264,000 in fiscal year 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 fiscal year 2001 increased by $462,000, from
$429,000 to $891,000 as compared to fiscal year 2000. Cost of goods in fiscal
year 2000 reflects the benefit of product sales from inventory that was
previously expensed prior to receiving the requisite regulatory approvals. Also,
the cost of goods sold in fiscal years 2001 and 2000 includes a charge of
approximately $105,000 and $155,000, respectively, relating to the expiration of
certain CEA-Scan inventories previously manufactured and capitalized.
29
Sales and marketing expenses for fiscal year 2001 were $2,502,000 as
compared to $2,896,000 for fiscal year 2000, representing a decrease of
$394,000, or 14%, primarily due to the Company-wide reorganization/restructuring
as we refocused our efforts on the development of therapeutic compounds. General
and administrative costs for fiscal year 2001 decreased by $488,000 from
$3,614,000 to $3,126,000 in fiscal year 2000. We recognized an expense of
$509,000 in fiscal 2001, as compared to $925,000 in fiscal 2000 associated with
warrants issued to a financial advisor. See Note 7 to Consolidated Financial
Statements. Also, in fiscal 2001, bonuses awarded to executives were $266,000 as
compared to $880,000 in fiscal year 2000. In addition, the Company recognized a
charge of $360,000 during fiscal year 2001 as a fee associated with the
Company's entering into the Licensing and Development Agreement with Amgen. See
Note 10 to Consolidated Financial Statements.
Interest and other income for fiscal year 2001 increased by $1,633,000 from
$1,196,000 in fiscal year 2000 to $2,829,000 in 2001, primarily due to increased
levels of cash available for investment as a result of the sale of unregistered
shares of common stock during fiscal 2000 and the receipt of the $18,000,000
million payment from Amgen in February 2001.
During fiscal 2001, we sold approximately $10,106,000 of New Jersey state
net operating losses, pursuant to a program offered by the State of New Jersey.
We recorded an income tax benefit of $803,000 resulting from that transaction.
Net loss allocable to common stockholders for fiscal year 2001 was
$4,751,000, or $0.10 per common share, as compared to $10,132,000, or $0.23 per
common share, in fiscal year 2000. The higher weighted average number of shares
outstanding positively impacted the net loss allocable to common stockholders
per share for fiscal 2001 as compared to fiscal 2000. The increase in the
weighted average number of shares outstanding from 43,976,658 to 49,498,002 was
primarily due to the conversion in late calendar year 1999 of Series F Preferred
Stock into 5,772,031 shares of common stock and the issuance of 4,825,000 shares
of common stock pursuant to equity financings during fiscal year 2000 as these
shares were outstanding for the entire fiscal year 2001. See Note 7 to
Consolidated Financial Statements.
Liquidity and Capital Resources
Since our inception in 1982, we have financed our operations primarily
through private sales of our equity securities, revenue earned under licensing
agreements, revenue from sales of CEA-Scan and LeukoScan, grants from various
sources and investment income.
At June 30, 2002, we had working capital of $35,042,000, representing a
decrease of $8,160,000 from $43,202,000 at June 30, 2001. At June 30, 2002, we
had no long-term debt or capital lease obligations. The net decrease in working
capital resulted principally from the net loss allocable to common stockholders
during fiscal year 2002 of $3,747,000 and capital expenditures of $4,105,000.
In order to support our clinical trials and anticipated future commercial
requirements, we have entered into construction agreements to expand our
manufacturing facility at a cost of approximately $6.3 million of which $3.7
million was spent through June 30, 2002. We plan to fund this project either
through our existing working capital or other financing arrangements. The
facility plan includes two distinct manufacturing suites, containing six new
bioreactors, which are intended to allow flexibility in terms of the amount of
therapeutic compounds that can be produced. We anticipate that the facility will
be completed sometime during the first quarter of calendar year 2003.
Our cash, cash equivalents and marketable securities amounted to
$44,788,000 at June 30, 2002, representing a decrease of $8,503,000 from
$53,291,000 at June 30, 2001. This decrease was primarily attributable to the
funding of operating expenses and capital expenditures. It is anticipated that
working capital and cash, cash equivalents, and marketable securities will
decrease during fiscal year 2003 as a result of planned operating expenses and
capital expenditures, offset in part by projected revenues from sales of our
diagnostic imaging products in the United States and Europe. However, there can
be no assurance, as to the amount of revenues, if any, these imaging products
will provide.
30
To date, we have not generated positive cash flow from operations,
excluding the effects of the up-front payment received from Amgen in fiscal year
2001. We believe that our existing working capital should be sufficient to meet
our capital and liquidity requirements for the next twelve months. Actual
results could differ materially from our expectations as a result of a number of
risks and uncertainties, including the risks described in Item 1, "Factors That
May Affect Our Business and Results of Operations" and elsewhere in this Annual
Report. Our working capital and working capital requirements are affected by
numerous factors and such factors may have a negative impact on our liquidity.
Principal among these are the success of product commercialization and marketing
products, the technological advantages and pricing of our products, the impact
of the regulatory requirements applicable to us and access to capital markets
that can provide us with the resources when necessary to fund our strategic
priorities. Unless there is a significant increase in product revenues, we will
require additional financial resources after we utilize our current liquid
assets in order for us to continue our projected levels of research and
development, clinical trials of our potential products and regulatory filings
for new indications of existing products. Additional financing may not be
available to us at all or on terms we find acceptable or the terms of such
financing may cause substantial dilution to existing stockholders.
We intend to supplement our financial resources from time to time as market
conditions permit through additional debt or equity financings and through
collaborative marketing and distribution agreements. We continue to evaluate
various programs to raise additional capital and to seek additional revenues
from the licensing of our proprietary technologies. At the present time, we are
unable to determine whether any of these future activities will be successful
and, if so, the terms and timing of any definitive agreements.
Contractual Commitments
Our major contractual obligations relate to an operating lease for our
facility and for the construction agreements to expand our manufacturing
facility. We have identified and quantified the significant commitments in the
following table.
Payments Due by Period
(in $000's)
Contractual Obligation 2003 2004 2005 2006 2007 Thereafter Total
- ---------------------- ---- ---- ---- ---- ---- ---------- -----
Operating Lease (1) $ 545 $545 $545 $545 $552 $10,158 $12,890
Facility Expansion (2) $2,600 $ 2,600
(1) In November 2001, we renewed our operating lease for the Morris Plains
facility for an additional term of twenty years expiring in October 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 15,000
square feet.
(2) In order to support our clinical trials and anticipated future
commercial requirements, we have entered into construction agreements to expand
our manufacturing facility at a cost of approximately $6.3 million of which $3.7
million was spent through June 30, 2002. We plan to fund this project either
through our existing working capital or other financing arrangements. The
facility plan includes two distinct manufacturing suites, containing six new
bioreactors, which are intended to allow flexibility in terms of the amount of
therapeutic compounds that can be produced. We anticipate that the facility will
be completed sometime during the first quarter of calendar year 2003.
Recently Issued Accounting Pronouncements
In July 2001, the FASB issued SFAS No. 141, "Business Combinations" ("SFAS
No. 141"), and SFAS No. 142, "Goodwill and Other Intangible Assets"("SFAS No.
142"). SFAS No. 141 requires that all business combinations be accounted for
under a single method -- the purchase method. Use of the pooling-of-interests
31
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 that resulted from business combinations.
In August 2001, the FASB issued SFAS No. 143, "Asset Retirement
Obligations" ("SFAS No. 143"), which provides the accounting requirements for
retirement obligations associated with tangible long-lived assets. This
statement requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The Company expects
to adopt this standard beginning July 1, 2003. The adoption of SFAS No. 143 is
not expected to have a material impact on the Company's consolidated financial
statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), which excludes
from the definition of long-lived assets goodwill and other intangibles that are
not amortized in accordance with SFAS No. 142. SFAS No. 144 requires that
long-lived assets to be disposed of by sale be measured at the lower of carrying
amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. SFAS No. 144 also expands the
reporting of discontinued operations to include components of an entity that
have been or will be disposed of rather than limiting such discontinuance to a
segment of a business. The adoption of SFAS No. 144 is not expected to have a
material impact on the Company's consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"), which requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability for a cost associated with an exit or disposal
activity is incurred. The Company expects to adopt this standard beginning July
1, 2003. The adoption of SFAS No. 146 is not expected to have a material impact
on the Company's consolidated financial statements.
Item 7A -- Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our 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 our industry.
Our holdings of financial instruments are comprised primarily of corporate
debt. All such instruments are classified as securities available for sale. We
do not invest in portfolio equity securities or commodities or use financial
derivatives for trading purposes. Our debt security portfolio represents funds
held temporarily pending use in our business and operations. We manage these
funds accordingly. We seek 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. Our market risk exposure
consists principally of exposure to changes in interest rates. Our holdings also
are exposed to the risks of changes in the credit quality of issuers. We
typically invest in highly liquid debt instruments with fixed interest rates.
32
The table below presents the principal amounts and related weighted average
interest rates by fiscal year of maturity for our investment portfolio as of
June 30, 2002:
Fair
2003 2004 2005 2006 2007 Total Value
-------- -------- -------- -------- -------- ------- --------
(in thousands)
Fixed rate $ 10,822 $ 12,590 $ -- $ 999 $ -- $24,411 $ 24,725
Average interest rate 4.90% 4.01% -- 7.28% -- 4.54% --
Variable rate $ -- $6,993 $ -- $ -- $ -- $ 6,993 $ 7,000
Average interest rate -- 2.16% -- -- -- 2.16% --
-------- -------- -------- -------- -------- ------- --------
Total $ 10,822 $ 19,583 $ -- $ 999 $ -- $31,404 $ 31,725
======== ======== ======== ======== ======== ======= ========
33
Item 8 - Financial Statements and Supplementary Data
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, June 30,
2002 2001
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 13,062,954 $ 8,607,901
Marketable securities............................................... 31,724,789 44,682,954
Accounts receivable, net of allowance for
doubtful accounts of $289,866 and $125,440 at
June 30, 2002 and June 30, 2001, respectively.................... 1,106,716 792,598
Inventory........................................................... 641,686 750,769
Other current assets................................................ 1,801,979 1,151,548
----------- -----------
Total current assets........................................... 48,338,124 55,985,770
Property and equipment, net of accumulated
depreciation of $9,688,929 and $8,711,412 at
June 30, 2002 and June 30, 2001, respectively.................... 6,561,901 3,395,310
Other long-term assets................................................... 51,157 276,157
----------- -----------
$ 54,951,182 $ 59,657,237
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................................... $ - $ 70,412
Accounts payable.................................................... 3,618,625 1,607,176
Deferred revenue.................................................... 7,475,728 9,000,000
Other current liabilities........................................... 2,201,707 2,106,254
----------- -----------
Total current liabilities...................................... 13,296,060 12,783,842
----------- -----------
Deferred revenue......................................................... - 5,250,000
Minority interest........................................................ 559,222 182,000
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value, authorized 10,000,000 shares;
issued and outstanding 0 shares
at June 30, 2002 and June 30, 2001............................. - -
Common stock; $.01 par value, authorized 70,000,000 shares;
issued and outstanding 49,877,443 and 49,533,871 shares
at June 30, 2002 and June 30, 2001, respectively............... 498,774 495,339
Capital contributed in excess of par................................ 158,569,476 155,116,973
Treasury stock, at cost, 34,725 shares.............................. (458,370) -
Accumulated deficit................................................. (118,028,184) (114,281,279)
Accumulated other comprehensive income.............................. 514,204 110,362
----------- -----------
Total stockholders' equity..................................... 41,095,900 41,441,395
----------- -----------
$ 54,951,182 $ 59,657,237
=========== ===========
See accompanying notes to consolidated financial statements.
34
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Years ended June 30,
---------------------------------------------
2002 2001 2000
---------- ---------- ----------
Revenues:
Product sales........................................$ 3,792,841 $ 4,032,020 $ 4,123,997
License fee revenues................................. 10,212,720 3,758,196 14,598
Research and development............................. 281,200 609,577 638,599
---------- ---------- ----------
Total revenues 14,286,761 8,399,793 4,777,194
Costs and Expenses:
Cost of goods sold................................... 675,240 890,813 428,445
Research and development............................. 14,202,275 10,264,042 8,669,599
Sales and marketing.................................. 2,609,506 2,502,101 2,896,132
General and administrative........................... 2,885,500 3,126,457 3,614,806
Acquired in-process research and development......... 935,889 - -
---------- ---------- ----------
Total costs and expenses 21,308,410 16,783,413 15,608,982
---------- ---------- ----------
Operating loss (7,021,649) (8,383,620) (10,831,788)
Interest and other income............................ 2,069,214 2,829,515 1,196,261
---------- ---------- ----------
Loss before income tax benefit............................ (4,952,435) (5,554,105) (9,635,527)
Income tax benefit........................................ 1,205,530 803,315 -
---------- ---------- ----------
Net loss.................................................. (3,746,905) (4,750,790) (9,635,527)
Preferred stock dividends................................. - - 496,684
---------- ---------- ----------
Net loss allocable to common stockholders.................$ (3,746,905) $ (4,750,790) $(10,132,211)
========== ========== ==========
Net loss allocable to common stockholders
per basic and diluted common share....................$ (0.08) $ (0.10) $ (0.23)
========== ========== ==========
Weighted average number of
shares outstanding..................................... 49,651,547 49,498,002 43,976,658
========== ========== ==========
Comprehensive Loss:
Net loss.............................................$ (3,746,905) $ (4,750,790) $ (9,635,527)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments....... 393,619 (130,009) (86,494)
Unrealized gain (loss) on securities
available for sale.......................... 10,223 349,055 (30,318)
---------- ---------- ----------
Other comprehensive loss.............................. 403,842 219,046 (116,812)
---------- ---------- ----------
Comprehensive loss .......................................$ (3,343,063) $ (4,531,744) $ (9,752,339)
========== ========== ==========
See accompanying notes to consolidated financial statements.
35
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Convertible Common Capital Accumulated
Preferred Stock Stock Contributed Other
---------------------------------- in Excess Treasury Accumulated Comprehensive
Shares Amount Shares Amount of Par Stock Deficit Income/(Loss) Total
---------------------------------------------------------------------------------------------
Balance, at June 30, 1999................1,250 $13.00 37,888,090 $378,881 $111,466,439 $ - $ (99,398,278) $ 8,128$12,455,183
Issuance of common stock
pursuant to private
placements, net..................... - - 4,825,000 48,250 42,611,489 - - - 42,659,739
Issuance of common stock
in exchange for convertible
preferred stock (Series F), net...... (655) (7) 5,772,031 57,720 (57,713) - - - -
Redemption of convertible
preferred stock (Series F), net...... (595) (6) - - (6,187,994) - (297,500) - (6,485,500)
Exercise of options to
purchase common stock................ - - 844,000 8,440 3,628,135 - - - 3,636,575
Accretion of preferred stock dividends. - - - - 199,184 - (199,184) - -
Capital contribution pursuant to
Section 16(b) of Securities
Exchange Act of 1934................ - - - - 657,722 - - - 657,722
Issuance of warrants to financial advisor - - - - 924,738 - - - 924,738
Other comprehensive loss............... - - - - - - - (116,812) (116,812)
Net loss............................... - - - - - - (9,635,527) - (9,635,527)
-------------------------------------------------------------------------------------------
Balance, at June 30, 2000................ - - 49,329,121 493,291 153,242,000 - (109,530,489)(108,684)44,096,118
Exercise of options to
purchase common stock................ - - 204,750 2,048 1,250,672 - - - 1,252,720
Issuance of warrants to financial advisor - - - - 508,991 - - - 508,991
Compensation expense associated with
issuance of stock options to employees - - - - 115,310 - - - 115,310
Other comprehensive income ............ - - - - - - - 219,046 219,046
Net loss............................... - - - - - - (4,750,790) - (4,750,790)
-------------------------------------------------------------------------------------------
Balance, at June 30, 2001................ - - 49,533,871 495,339 155,116,973 - (114,281,279) 110,362 41,441,395
Exercise of options to
purchase common stock................ - - 100,250 1,002 371,370 - - - 372,372
Exercise of warrants to
purchase common stock................ - - 104,422 1,044 375,831 - - - 376,875
Retirement of Shareholder Rights Plan.. - - - - (49,739) - - - (49,739)
Common stock and warrant issued in
connection with the purchase of
additional interest in IBC........... - - 138,900 1,389 2,648,601 (458,370) - - 2,191,620
Compensation expense associated with
issuance of stock options to employees - - - - 106,440 - - - 106,440
Other comprehensive income ............ - - - - - - - 403,842 403,842
Net loss............................... - - - - - - (3,746,905) - (3,746,905)
-------------------------------------------------------------------------------------------
Balance, at June 30, 2002................ - $ - 49,877,443 $498,774 $158,569,476 $(458,370) $(118,028,184)$514,204$41,095,900
===========================================================================================
See accompanying notes to consolidated financial statements.
36
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
-----------------------------------------
2002 2001 2000
---------- ---------- ----------
Cash flows from operating activities:
Net loss.................................................$ (3,746,905) $ (4,750,790) $ (9,635,527)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation............................................. 977,517 950,774 971,481
Provision for allowance for doubtful accounts............ 164,426 54,214 116,019
Amortization of bond premium............................. 246,147 123,479 2,108
Non-cash expense relating to issuance of warrants........ - 508,991 924,738
Compensation expense associated with
issuance of stock options to employees................ 106,440 115,310 -
Other.................................................... 393,619 (130,009) (86,494)
Changes in operating assets and liabilities:
Accounts receivable................................. (476,958) (243,414) 382,403
Inventories......................................... 109,083 286,131 (218,017)
Other current assets................................ (648,193) 172,545 (750,673)
Accounts payable.................................... 1,995,176 (229,107) (242,279)
Deferred revenue.................................... (6,774,272) 14,250,000 -
Other current liabilities........................... 95,453 422,988 (187,683)
---------- ---------- ----------
Net cash from operating activities................... (7,558,467) 11,531,112 (8,723,924)
---------- ---------- ----------
Cash flows from investing activities:
Purchase of marketable securities......................... (13,877,725) (53,295,258) (46,534,240)
Proceeds from maturities of marketable securities......... 26,824,966 38,589,867 22,702,225
Purchase of additional interest in IBC.................... 2,542,344 - -
Additions to property and equipment....................... (4,105,161) (375,404) (124,022)
---------- ---------- ----------
Net cash from investing activities................... 11,384,424 (15,080,795) (23,956,037)
---------- ---------- ----------
Cash flows from financing activities:
Issuance of common stock, net............................. - - 42,659,739
Redemption of preferred stock, net........................ - - (5,950,000)
Preferred stock dividends paid upon redemption............ - - (535,500)
Capital contribution pursuant to Section16(b) of
Securities Exchange Act of 1934...................... - - 657,722
Deposits - cash collateral................................ - (51,157) -
Payments of debt.......................................... (70,412) (158,058) (143,757)
Retirement of 1998 Shareholder Rights Plan................ (49,739) - -
Exercise of warrants...................................... 376,875 - -
Exercise of stock options................................. 372,372 1,252,720 3,636,575
---------- ---------- ----------
Net cash provided by financing activities............ 629,096 1,043,505 40,324,779
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents............... 4,455,053 (2,506,178) 7,644,818
Cash and cash equivalents at beginning of year................. 8,607,901 11,114,079 3,469,261
---------- ---------- ----------
Cash and cash equivalents at end of year.......................$ 13,062,954 $ 8,607,901 $ 11,114,079
========== ========== ==========
Supplemental Disclosure of noncash financing activities:
Common stock and warrant issued in connection with
the purchase of additional interest in IBC...........$ 2,649,990 $ - $ -
Cash paid for interest.........................................$ 1,683 $ 14,974 $ 29,275
See accompanying notes to consolidated financial statements.
37
Notes to Consolidated Financial Statements
1. Business Overview
Immunomedics, Inc., a Delaware corporation ("Immunomedics" or the
"Company") is a biopharmaceutical company focused on the development,
manufacture and marketing of monoclonal antibody-based products for the
detection and treatment of cancer and other serious diseases. Immunomedics
currently markets and sells CEA-Scan(R) in the U.S., and CEA-Scan and
LeukoScan(R)throughout Europe and in certain other markets outside the U.S.
Immunomedics' operations encompass all the risks inherent in developing and
expanding a biopharmaceutical enterprise, including: (1) uncertainty regarding
the timing and amount of future revenues to be derived from the Company's
technologies; (2) obtaining future capital as needed; (3) attracting and
retaining key personnel; and (4) a business environment with substantial
competition, rapid technological change and strict government regulation.
Immunomedics has not yet achieved profitable operations and there is no
assurance that profitable operations, even 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, to a limited extent, product sales.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Presentation
The consolidated financial statements include the accounts of Immunomedics,
Inc. and its majority-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation. Minority interest is
recorded for a majority-owned subsidiary (see Note 9). Certain amounts have been
reclassified to conform to the current year presentation.
Cash Equivalents and Marketable Securities
Immunomedics considers all highly liquid investments with original
maturities of three months or less, at the time of purchase, to be cash
equivalents.
Immunomedics' investments in cash equivalents and marketable securities are
available for sale to fund growth in operations. The portfolio at June 30, 2002
primarily consists of corporate debt securities.
Concentration of Credit Risk
Cash, cash equivalents, and marketable securities are financial instruments
that potentially subject the Company to concentration of credit risk.
Immunomedics invests its cash in debt instruments of financial institutions and
corporations with strong credit ratings. Immunomedics has established guidelines
relative to diversification and maturities that are designed to help ensure
safety and liquidity. These guidelines are periodically reviewed to take
advantage of trends in yields and interest rates. Immunomedics has historically
held the investments to maturity. However, the Company has the ability to sell
these investments before maturity and has therefore classified the investments
as available for sale. Immunomedics has not experienced any significant losses
on its investments.
38
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.
Property and Equipment
Property and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives (5-10 years) of the
respective assets. Leasehold improvements are capitalized and amortized over the
lesser of the life of the lease or the estimated useful life of the asset.
Immunomedics reviews long-lived assets for impairment whenever events or changes
in business circumstances occur that indicate that the carrying amount of the
assets may not be recoverable. Immunomedics assesses the recoverability of
long-lived assets held and to be used based on undiscounted cash flows, and
measures the impairment, if any, using discounted cash flows. Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of has not had a
material impact on the Company's consolidated financial position, operating
results or cash flows.
Revenue Recognition
Payments received under contracts to fund certain research activities are
recognized as revenue in the period in which the research activities are
performed. Payments received in advance that are related to future performance
are deferred and recognized as revenue when the research projects are performed.
Upfront nonrefundable fees associated with license and development agreements
where the Company has continuing involvement in the agreement, are recorded as
deferred revenue and recognized over the estimated service period. If the
estimated service period is subsequently modified, the period over which the
upfront fee is recognized is modified accordingly on a prospective basis.
Revenues from the achievement of research and development milestones are
recognized when the milestones are achieved.
Revenue from the sale of diagnostic products is recognized at the time of
shipment.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities relate to the expected future tax
consequences of events that have been recognized in the Company's consolidated
financial statements and tax returns. During fiscal 2002, the Company recognized
a tax benefit as a result of the sale of New Jersey net operating loss carry
forwards (see Note 8).
Net Loss Per Share Allocable to Common Stockholders
Net loss per basic and diluted common share allocable to common
stockholders is based on the net loss for the relevant period, adjusted for
Preferred Stock dividends, divided by the weighted average number of common
shares outstanding during the period. Preferred Stock dividends for the fiscal
year 2000 included $199,184 related to a 4% per annum stated value increase in
the security and a $297,500 premium paid in December 1999 in connection with the
redemption of the Series F Preferred Stock. No Preferred Stock dividends were
recorded in fiscal years 2002 and 2001 as the related Preferred Stock was fully
redeemed in December 1999. For the purposes of the diluted net loss per common
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 years ended June 30, 2002, 2001 and 2000. The common stock
equivalents excluded from the diluted per share calculation are 3,378,250,
2,456,750 and 1,936,000 for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively.
39
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Comprehensive Loss
Comprehensive loss consists of net loss, net unrealized gains (losses) on
securities available for sale and certain foreign exchange changes and is
presented in the consolidated statements of operations and comprehensive loss.
Employee Stock Options
Immunomedics applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations, in accounting for its
fixed plan stock options. As such, compensation expense would be recorded on the
date of grant only if the then current market price of the underlying stock
exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based
Compensation, established accounting and disclosure requirements using a fair
value-based method of accounting for stock-based employee compensation plans. As
allowed by SFAS No. 123, the Company has elected to continue to apply the
intrinsic value-based method of accounting described above, and has adopted the
disclosure requirements of SFAS No. 123.
When the exercise price of employee or director stock options is less than
the fair value of the underlying stock on the grant date, the Company records
compensation expense for the difference over the vesting period of the options.
Options or stock awards issued to non-employees and consultants are recorded at
their fair value as determined in accordance with SFAS No. 123 and EITF No.
96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services and recognized
over the related vesting period.
Financial Instruments
The carrying amounts of cash and cash equivalents, other current assets and
current liabilities approximate fair value due to the short-term maturity of
these instruments. The fair value, which equals carrying value, of marketable
securities available for sale is based on quoted market prices.
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities was issued and, as amended, is effective for all fiscal years
beginning after June 15, 2000. SFAS No. 133 standardizes the accounting for
derivative instruments including certain derivative instruments embedded in
other contracts and requires derivative instruments to be recognized as assets
and liabilities and recorded at fair value. Immunomedics currently is not party
to any derivative instruments. Immunomedics' adoption of SFAS No. 133 had no
impact on the Company's consolidated financial statements. Any future
transactions involving derivative instruments will be evaluated based on SFAS
No. 133.
40
3. Marketable Securities
Immunomedics utilizes SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities, to account for investments in marketable securities.
Under this accounting standard, securities for which there is not the positive
intent and ability to hold to maturity are classified as available-for-sale and
are carried at fair value. Unrealized holding gains and losses, which are deemed
to be temporary, on securities classified as available-for-sale are carried as a
separate component of accumulated other comprehensive income (loss).
Immunomedics considers all of its current investments to be available-for-sale.
Marketable securities at June 30, 2002 and 2001 consist of the following:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
------------ ----------- ------------ -------------
June 30, 2002
U.S. Government Securities $ 5,488,000 $ 11,000 $ (1,000) $ 5,498,000
Corporate Debt Securities 25,916,000 313,000 (2,000) 26,227,000
------------ ----------- ------------ -------------
$ 31,404,000 $ 324,000 $ (3,000) $ 31,725,000
============ =========== ============ =============
June 30, 2001
Corporate Debt Securities $ 44,364,000 $ 351,000 $ (32,000) $ 44,683,000
============ =========== ============ =============
Maturities of debt securities classified as available for sale were as
follows at June 30, 2002:
Estimated
Amortized Fair
Cost Value
------------ ------------
Due within one year $ 10,822,000 $ 10,889,000
Due after one year through five years 20,582,000 20,836,000
------------ ------------
$ 31,404,000 $ 31,725,000
============ ============
4. Inventory
Inventory consists of the following at June 30:
2002 2001
--------- ---------
Finished goods $ 642,000 $ 611,000
Raw materials 0 140,000
--------- ---------
$ 642,000 $ 751,000
========= =========
41
5. Property and Equipment
Property and equipment consists of the following at June 30:
2002 2001
------------ ------------
Machinery and equipment $ 3,858,000 $ 3,506,000
Leasehold improvements 10,610,000 6,952,000
Furniture and fixtures 722,000 682,000
Computer equipment 1,061,000 967,000
------------ ------------
16,251,000 12,107,000
Accumulated depreciation (9,689,000) (8,712,000)
and amortization ------------ ------------
$ 6,562,000 $ 3,395,000
============ ============
6. Other Current Liabilities
Included in other current liabilities are amounts payable to medical
institutions participating in the Company's clinical trial programs of
approximately $711,000 and $617,000 at June 30, 2002 and 2001, respectively.
Also included are amounts payable to various legal counsel of approximately
$350,000 and $436,000, accrued health insurance liabilities of approximately
$239,000 and $239,000, accrued bonuses of $150,000 and $266,000 and for the
monies owed for Small Business Innovation Research ("SBIR") grant subcontracted
to Garden State Cancer Center ("GSCC") in the amount of $27,000 and $107,000 at
June 30, 2002 and 2001, respectively.
7. Stockholders' Equity
The Certificate of Incorporation of the Company authorizes 10,000,000
shares of preferred stock at $.01 par value per share. The preferred stock may
be issued from time to time in one or more series, with such distinctive serial
designations, rights and preferences as shall be determined by the Board of
Directors.
On December 23, 1997, the Company entered into a Structured Equity Line
Flexible Financing Agreement (the "Equity Line") with an investor (the
"Investor"), which the Company terminated as of December 9, 1998. As of the
termination date, the Company had received a total of $5,350,000 for which the
Company issued 1,358,838 shares of common stock. In connection with the Equity
Line, the Company issued to the Investor two four-year warrants to purchase
50,000 and 54,000 shares of common stock at an exercise price of $7.5375 per
share and $7.087 per share, respectively. The 50,000 warrants with an exercise
price of $7.5375 per share were exercised in December 2001. The warrant for
54,000 shares of common stock continues to be outstanding as of June 30, 2002.
On December 9, 1998, the Company completed a private placement of 1,250
shares of Series F Convertible Preferred Stock (the "Series F Stock") to several
investors and received net proceeds of $12,349,800. Each share of Series F Stock
had an initial stated value of $10,000, which increased at the rate of 4% per
annum. As of December 16, 1999, 655 shares of the Series F Stock had been
converted into 5,772,031 shares of common stock in non-cash transactions. The
remaining 595 shares of Series F Stock were repurchased, in accordance with the
terms of the Series F Stock, by the Company on that date from the then current
holders at a price equal to 109% of the initial stated value of $10,000 per
share of Series F Stock.
On December 16, 1999, the Company issued warrants covering 75,000 shares of
its common stock at an exercise price of $6.50 per share. The warrants were
issued to induce a financial advisor to enter into a financial advisory
agreement with the Company. In accordance with EITF Issue No 96-18, Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services and other relative accounting
literature, the Company was required to measure the expense associated with the
warrants at each reporting date and recognize the appropriate portion of the
expense at the end of each reporting period until the measurement date was
42
reached (December 31, 2000 in this transaction). As a result, the Company
recognized a proportionate share of the general and administrative expense of
approximately $509,000 and $925,000 during the fiscal years ended June 30, 2001
and 2000, respectively, which represented the estimated value of the warrants as
of that date. These warrants were exercised in accordance with their original
terms in December 2001 via a fair value cashless transaction, whereby the
Company issued 54,422 shares of common stock.
On December 14, 1999, the Company completed a private placement of
2,500,000 shares of its common stock at $3.00 per share to several investors and
received net proceeds of $7,220,000. Substantially all of the net proceeds were
used to redeem the Series F Stock as described above.
In conjunction with this private placement, the Company agreed to the
following covenants:
- - Immunomedics agreed to refrain from entering into certain transactions with
persons closely related to the Company, including its executive officers
and directors, without the prior approval of the investors in the private
placement. The investors in this financing agreed not to withhold their
approval unreasonably.
- - Immunomedics agreed that without the prior consent of such investors, it
would not sell its business to anyone that is an affiliate of the Company,
unless the sale is for consideration at least equal to (a) the fair market
value in the event of a sale of assets (as determined in good faith by the
Company's board of directors) or (b) the then current market price in the
event of a sale of stock.
- - Immunomedics agreed that it would not amend its certificate of
incorporation or by-laws in a manner that would adversely affect such
investors, without the prior approval of the investors. The investors in
this financing agreed not to withhold their approval unreasonably.
These covenants will cease to apply at such time as the investors in this
financing and their affiliates beneficially own less than 5% of the Company's
common stock. Such investors in the aggregate currently continue to beneficially
own more than 5% of the Company's outstanding common stock. Prior to the time,
if ever, when the investors' equity interest falls below 5%, the investors may
waive any one or more of the covenants set forth in the Company's Common Stock
Purchase Agreement.
On February 16, 2000, the Company completed another private placement of
2,325,000 shares of common stock at $16.00 per share to several investors and
received net proceeds of $35,443,000.
In February 2002, the Company's Board of Directors made the decision to
concurrently redeem all outstanding stockholder rights under its 1998
Stockholder Rights Plan, and declare a dividend of one new Right pursuant to the
Company's 2002 Stockholder Rights Plan adopted by the Board of Directors. The
Rights Plan involves the distribution of one "Right" as a dividend on each
outstanding share of the Company's common stock to each holder of record on
March 15, 2002. The redemption cost amounted to $49,739. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series G Junior Participating Preferred Stock, par value $0.01 per share (the
"Preferred Shares"), of the Company, at a price of $150.00 per one
one-thousandth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The 2002 Rights Plan provides that if a third party acquires more
than 15% of the Company's common stock without prior approval of the Board of
Directors, all stockholders of the Company (other than the acquiring party) will
be entitled to buy either shares of a special series of the Company's Preferred
Shares, or shares of the Company's common stock with a market value equal to
double the Exercise Price for each 2002 Right they hold. Under these
circumstances, the Board of Directors may instead allow each such Right (other
than those held by the acquiring party) to be exchanged for one share of the
Company's common stock. The exercise or exchange of these 2002 Rights would have
a substantial dilutive effect on the acquiring party. The Company's Board of
Directors retains the right at all times to discontinue the Rights plan through
redemption of all rights or amend the Rights Plan in any respect. The Rights
will expire on March 1, 2012 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by the
Company, in each case, as described in the Rights Plan.
Under the terms of the Company's 1983 Stock Option Plan, as amended (the
"1983 Plan"), stock options were granted to employees and members of the Board
of Directors, as determined by the Compensation Committee of the Board of
Directors, at fair market value, become exercisable at 25% per year on each of
the first through fourth anniversaries of the date of grant, and terminate if
43
not exercised within ten years. In June 1993, the 1983 Plan expired, although
options granted under the 1983 plan that have not terminated may continue to be
exercised. On November 5, 1992, at the Company's Annual Meeting of Stockholders,
adoption of the Company's 1992 Stock Option Plan (the "1992 Plan" and, together
with the 1983 Plan, the "Plans") was ratified. In September 2002, the 1992 Plan
expired, although options granted under the 1992 plan that have not terminated
may continue to be exercised. On December 5, 2001, at the Company's Annual
Meeting of Stockholders, adoption of the Company's 2002 Stock Option Plan (the
"2002 Plan" and, together with the 1992 Plan, the "Plans") was ratified. The
basic terms of the 2002 Plan are substantially similar to those under the
Company's 1992 Plan. Under the 2002 Plan, 8,000,000 shares were reserved for
possible future issuance upon exercise of stock options. At June 30, 2002,
3,634,125 stock options were still available for future grant and 6,808,375
shares of common stock were reserved for possible future issuance upon exercise
of stock options both currently outstanding and which may be issued in the
future.
Pursuant to the terms of the 2002 Plan, each outside Director of the
Company who had been a Director prior to July 1st of each year is granted, on
the first business day of July of each year, an option to purchase shares of the
Company's common stock at fair market value on the grant date, the amount of
which is determined at the discretion of the Company's Board of Directors. For
July 1, 2002, stock options covering 160,000 shares of common stock options were
granted to these Directors.
In April 2000, David M. Goldenberg, the Company's Chairman and his wife,
Cynthia L. Sullivan, the Company's President and Chief Executive Officer, paid
to the Company the sum of $657,722 in accordance with the provisions of Section
16(b) of the Securities Exchange Act of 1934. Such amount represents the short
swing profit realized as a result of purchase and sale transactions that
occurred within a six-month period. Immunomedics recorded such amount as a
contribution of capital in its June 30, 2000 consolidated balance sheet as it is
related to a transaction with the Company's equity.
Immunomedics applies APB Opinion No. 25 in accounting for its plans and,
accordingly, has not recognized compensation cost for its stock option plan in
its consolidated financial statements, except for compensation cost associated
with 325,000 stock options issued at an exercise price lower than the stock
price on the date of grant as described further below. Had the Company
determined compensation cost based on the fair value at the grant date
consistent with the provisions of SFAS No. 123, the Company's net loss allocable
to common shareholders and related per share amounts would have been the pro
forma amounts indicated below:
2002 2001 2000
---- ---- ----
Net loss allocable to common
stockholders - as reported.......... $ 3,746,905 $4,750,790 $10,132,211
Net loss allocable to common
stockholders - pro forma............ $ 9,888,012 $8,808,155 $11,567,788
Net loss allocable to common
stockholders per share - as reported $ .08 $ .10 $.23
Net loss allocable to common
stockholders per share - pro forma.. $ .20 $ .18 $.26
The fair value of each option granted during the three years ended June 30,
2002 is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions: (i) dividend yield of 0%,
(ii) expected term of 8 years for June 30, 2002, 2001, and 2000, (iii) expected
volatility of 89% at June 30, 2002, 129% at June 30, 2001 and 126% at June 30,
2000, and (iv) a risk-free interest rate of 4.70%, 5.01% and 5.90% for the years
ended June 30, 2002, 2001, and 2000, respectively. The weighted average fair
value at the date of grant for options granted during the years ended June 30,
2002, 2001 and 2000 was $11.60, $16.94 and $11.89 per share, respectively.
44
Information concerning options for the years ended June 30, 2002, 2001 and
2000 is summarized as follows:
Fiscal 2002
-----------
Shares Option Price Range
--------- ------------------
Outstanding, July 1, 2001 2,277,750 $1.44 - $24.56
Granted 1,024,000 6.05 - 20.49
Exercised (100,250) 1.78 - 7.25
Terminated (27,250) 1.78 - 21.68
---------
Outstanding, June 30, 2002 3,174,250 1.44 - 24.56
---------
Exercisable, June 30, 2002 1,399,625 1.44 - 24.56
---------
Fiscal 2001
-----------
Shares Option Price Range
--------- ------------------
Outstanding, July 1, 2000 1,757,000 $1.22 - $20.94
Granted 820,500 8.32 - 24.56
Exercised (204,750) 1.44 - 12.88
Terminated (95,000) 1.22 - 24.56
---------
Outstanding, June 30, 2001 2,277,750 1.44 - 24.56
---------
Fiscal 2000
-----------
Shares Option Price Range
--------- ------------------
Outstanding, July 1, 1999 2,507,000 $1.78 - $12.88
Granted 297,000 1.22 - 20.94
Exercised (844,000) 1.78 - 12.88
Terminated (203,000) 1.44 - 8.63
---------
Outstanding, June 30, 2000 1,757,000 1.22 - 20.94
---------
The following table summarizes information concerning options outstanding
under the Plans at June 30, 2002:
Number Weighted Weighted Weighted
outstanding average average Number average
Range of at June 30, exercise remaining exercisable exercise
exercise price 2002 price term (yrs.) at June 30,2002 price
- -------------- ----------- -------- ----------- --------------- --------
$ 1.44- 3.00 274,750 $ 1.76 6.9 190,000 $ 1.78
3.01- 5.00 734,500 3.79 4.2 671,500 3.80
5.01- 8.00 470,500 6.41 8.0 148,500 7.19
8.01-12.00 222,500 10.01 9.4 25,625 8.32
12.01-18.00 739,000 16.81 8.2 300,250 17.28
$18.01-24.56 733,000 20.40 9.0 63,750 20.83
--------- ------- --- --------- -------
3,174,250 $ 11.30 7.4 1,399,625 $ 7.64
========= ======= === ========= =======
On May 18, 2000 the Board of Directors approved granting an aggregate of
325,000 stock options to Dr. David M. Goldenberg and Cynthia L. Sullivan that
were subject to stockholder approval. Such approval was obtained from the
stockholders during December 2000. The stock options were granted with an
exercise price of $17.75 representing the stock price on the day of the Board of
Directors' approval. The difference in the stock price on that date as compared
to the stock price of $19.06 on the date the stockholders approval was obtained
resulted in compensation cost of $425,750 that is being expensed by the Company
over the vesting period of 4 years. During fiscal year 2002 and 2001, the
Company recorded $106,440 and $115,310 respectively, as a general and
administrative expense.
45
8. Income Taxes
Immunomedics utilizes SFAS No. 109, Accounting for Income Taxes to account
for income taxes. For fiscal year 2002 and 2001, the Company recorded a tax
benefit of $1,205,000 and $803,000, respectively, as a result of its sale of
approximately $15,269,000 and $10,106,000 of New Jersey state net operating
losses, respectively.
The tax effects of temporary differences that give rise to significant
portions of the Company's deferred tax assets as of June 30, 2002, 2001, and
2000 are presented below:
2002 2001 2000
Deferred tax assets: ---- ---- ----
Net operating loss carry forwards $ 47,915,000 $ 48,036,000 $ 46,455,000
Research and development credits 5,088,000 4,718,000 4,500,000
Property and equipment 1,453,000 1,248,000 1,058,000
Other 1,280,000 1,429,000 746,000
------------ ------------ ------------
Total 55,736,000 55,431,000 52,759,000
Valuation allowance (55,736,000) (55,431,000) (52,759,000)
------------ ------------ ------------
Net deferred taxes $ -- $ -- $ --
============ ============ ============
A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The valuation
allowances for fiscal years 2002, 2001 and 2000 have been applied to offset the
deferred tax assets in recognition of the uncertainty that such tax benefits
will be realized as the Company continues to incur losses. The tax benefit
assumed using the federal statutory tax rate of 34% has been reduced to an
actual benefit of zero due principally to the aforementioned valuation
allowance. The differences between book income and tax income primarily relates
to exercise of employee stock options and depreciation.
At June 30, 2002, the Company has available net operating loss carry
forwards for federal income tax reporting purposes of approximately $126,000,000
and for state income tax reporting purposes of approximately $86,000,000, which
expire at various dates between fiscal 2003 and 2022. Pursuant to Section 382 of
the Internal Revenue Code of 1986, as amended, the annual utilization of a
company's net operating loss and research credit carry forwards may be limited
if the Company experiences a change in ownership of more than 50 percentage
points within a three-year period. As a result of certain financing
arrangements, the Company may have experienced such ownership changes.
Accordingly, the Company's net operating loss carry forwards available to offset
future federal taxable income arising before such ownership changes may be
limited. Similarly, the Company may be restricted in using its research credit
carry forwards arising before such ownership changes to offset future federal
income tax expense. Of the deferred tax asset valuation allowance related to the
net operating loss carry forwards, approximately $20,500,000 relates to a tax
deduction for non-qualified stock options. Immunomedics will increase capital
contributed in excess of par when these benefits are deemed to be more likely
than not to be realized for tax purposes. The net operating loss carry forwards
for Federal income tax reporting purposes referred to above excludes certain
losses from the Company's operations in The Netherlands, which may also be
limited. Immunomedics made no payments of Federal or state income taxes during
the years ended June 30, 2002, 2001 and 2000.
46
9. Related Party Transactions
Certain of the Company's affiliates, including members of its senior
management and Board of Directors, as well as their respective family members
and other affiliates, have relationships and agreements among themselves as well
as with the Company and its affiliates, that create the potential for both real,
as well as perceived, conflicts of interest. These include Dr. David M.
Goldenberg, the Chairman and Chief Scientific Officer, Ms. Cynthia L. Sullivan,
the President and Chief Executive Officer, and certain companies with which the
Company does business, including the Center for Molecular Medicine and
Immunology and IBC Pharmaceuticals, Inc. In addition, the Company's executive
vice president, Dr. Ivan D. Horak, is married to one of our other employees.
Dr. David M. Goldenberg
Dr. David M. Goldenberg was an original founder of the Company over twenty
years ago and continues to play a critical role in its business. He currently
serves as Chairman of the Board of Directors and Chief Scientific Officer, and
is married to the Company's Chief Executive Officer, Cynthia L. Sullivan. Dr.
Goldenberg is a party to a number of agreements with the Company involving not
only his services, but intellectual property owned by him. In addition, Dr.
Goldenberg performs services for one of the Company's subsidiaries, IBC
Pharmaceuticals, Inc., as well as other businesses with which the Company is
affiliated.
License Agreement. Pursuant to a License Agreement between Immunomedics and
Dr. Goldenberg, certain patent applications owned by Dr. Goldenberg were
licensed to Immunomedics at the time of Immunomedics' formation in exchange for
a royalty in the amount of 0.5% of the first $20,000,000 of annual net sales of
all products covered by any of such patents and 0.25% of annual net sales of
such products in excess of $20,000,000. Five of the licensed United States
patents have since expired. In November 1993 the ownership rights of
Immunomedics were extended as part of Dr. Goldenberg's employment agreement,
with Immunomedics agreeing to diligently pursue all ideas, discoveries,
developments and products, into the entire medical field, which, at any time
during his past or continuing employment by Immunomedics (but not when
performing services for CMMI - see below), Dr. Goldenberg has made or conceived
or hereafter makes or conceives, or the making or conception of which he has
materially contributed to or hereafter contributes to, all as defined in the
Employment Agreement.
Employment Agreement. Pursuant to the terms of his employment agreement as
currently in effect, Dr. Goldenberg is entitled to receive incentive
compensation equal to one-half of one percent (0.5%) on the first $75.0 million
of all Annual Net Revenue (as defined therein) of Immunomedics, and one-quarter
of one percent (0.25%) on all such Annual Net Revenue in excess thereof. Annual
Net Revenue is defined to include the proceeds of certain dispositions of assets
or interests therein, including royalties, certain equivalents thereof and, to
the extent approved by the Board of Directors, non-royalty license fees.
Dr. Goldenberg is also entitled to receive Revenue Incentive Compensation
during the period of his actual employment with the Company, and for a period of
three years thereafter, unless he unilaterally terminates his employment without
cause or is terminated for cause. With respect to the period that Dr. Goldenberg
is entitled to receive Revenue Incentive Compensation on any given products, it
will be in lieu of any other percentage compensation based on sales or revenue
due him with respect to such products under his employment agreement or the
license agreement. With respect to any periods that Dr. Goldenberg is not
receiving such Revenue Incentive Compensation, he is entitled to receive
one-half of one percent (0.5%) on cumulative annual net sales of, royalties on,
certain equivalents thereof, and, to the extent approved by the Board of
Directors, other consideration received by Immunomedics for such products, up to
a cumulative annual aggregate of $75,000,000, and one-quarter of one percent
(0.25%) on any cumulative Annual Net Revenue in excess of $75,000,000. A
$100,000 annual minimum payment must be paid in the aggregate against all
Revenue Incentive Compensation and Royalty Payments and the License Agreement.
The terms of his employment agreement also provide that Dr. Goldenberg is
entitled to receive a percent, not less than twenty percent (20%), as determined
in good faith by the Board of Directors, of net consideration (including,
47
without limitation, license fees) which Immunomedics receives in connection with
any disposition by sale, license or otherwise, of any Undeveloped Assets (as
defined therein ) which are not budgeted as part of Immunomedics' strategic
plan. Pursuant to this provision, Dr. Goldenberg received a 20% profit interest
in the membership interests originally acquired by Immunomedics in connection
with the formation of the IBC Pharmaceuticals joint venture with Beckman Coulter
in March 1999. Dr. Goldenberg also is compensated by IBC Pharmaceuticals as
discussed in greater detail in these notes to the financial statements.
Dr. Goldenberg is not entitled to any incentive compensation with respect
to any products, technologies or businesses acquired from third parties for a
total consideration in excess of $5,000,000, unless Immunomedics had made a
material contribution to the invention or development of such products,
technologies or businesses prior to the time of acquisition. Except as affected
by a Change in Control (as defined therein) or otherwise approved by the Board
of Directors, Dr. Goldenberg will also not be entitled to any Revenue Incentive
Compensation or Incentive Payments other than the Annual Minimum Payment with
respect to any time during the period of his employment (plus three years,
unless employment is terminated by mutual agreement or by Dr. Goldenberg's death
or permanent disability) that he is not the direct or beneficial owner of shares
of Immunomedics' voting stock with an aggregate market value of at least twenty
times his defined annual cash compensation.
Finally, it is a condition to his employment agreement that Dr. Goldenberg
be permitted to continue his involvement with CMMI as discussed in greater
detail below.
In 2001, Dr. Goldenberg's employment agreement was extended for an
additional five-year period, expiring on June 30, 2006.
Life Insurance. The Company has also agreed with Dr. Goldenberg to maintain
in effect for his benefit a $2,000,000 whole life insurance policy. If Dr.
Goldenberg retires from the Company on or after his agreed retirement, or if his
employment ends because of permanent disability, the Company must pay all then
outstanding loans, if any, made under such policy, and assign such policy to Dr.
Goldenberg in consideration of the services previously rendered by Dr.
Goldenberg to the Company. If the employment of Dr. Goldenberg ends for any
other reason, except for cause, Dr. Goldenberg has the option to purchase such
policy for a price mutually agreed upon by him and the Board of Directors, but
not to exceed the cash value thereof less any outstanding policy loans, or he
may purchase such policy at its full cash value, less any outstanding loans,
with the purchase price to the paid out of the proceeds of the policy or any
earlier payment or withdrawal of all or any portion of its net cash value. The
Company also currently maintains $4,000,000 of key man life insurance on Dr.
Goldenberg for the benefit of the Company.
Additionally, a trust created by Dr. Goldenberg has purchased a $10,000,000
whole life policy on his life. The policy provides funds, which may be used to
assist Dr. Goldenberg's estate in settling estate tax obligations and thus
potentially reducing the number of shares of the Common Stock the estate may be
required to sell over a short period of time to raise funds to satisfy such tax
obligations. During what is estimated to be a 15-year period, the Company is
obligated to pay $143,000 per year towards premiums, compared to an equivalent
$250,000 commitment under the previous policies, in addition to amounts required
to be paid by Dr. Goldenberg. The Company has an interest in this new policy up
to the cumulative amount of premium payments made by it under the old and new
policies, which, through June 30, 2002, amounted to $1,837,400. If Dr.
Goldenberg's employment terminates, and the policy is not maintained, the
Company would receive payment of only its invested cumulative premiums, up to
the amount of cash surrender value in the policy.
Severance Agreement. In June 2002, the Board of Directors approved (with
Dr. Goldenberg and Ms. Sullivan abstaining) a severance agreement for Dr.
Goldenberg pursuant to which the Company is required, under certain
circumstances upon his termination for any reason, including as a result of his
disability or a change in control of the Company, to sell to Dr. Goldenberg's
family partnership a $10.0 million life insurance policy the Company has
purchased insuring his life. In addition, if Dr. Goldenberg is terminated upon
his disability or a change in control of the Company within six years of the
date of the agreement, the Company will reimburse him for the total purchase
price of the life insurance policy. If he is terminated for any other reason,
whether voluntarily or involuntarily, the Company will reimburse him for 50% of
the purchase price, so long he has remained employed by the Company for three
years after the agreement, plus an additional amount for each month of service
in excess of three years.
48
Cynthia L. Sullivan
Employment Agreement. On March 20, 2001, the Company entered into an
employment agreement with Cynthia L. Sullivan that sets forth the terms of her
employment with the Company through March 9, 2006. During the term of her
employment, the Company will pay Ms. Sullivan an annual minimum base salary of
$275,000 and an annual bonus as determined by the Compensation Committee of the
our Board of Directors, which in no event shall be less than 20% of the base
salary. Ms. Sullivan shall be awarded a minimum of 150,000 stock options
annually on the anniversary of the employment agreement. Under her employment
agreement, Ms. Sullivan may participate in all benefit plans and programs to the
extent she is eligible including medical and life insurance.
Under the employment agreement, if Ms. Sullivan is terminated for Cause (as
defined in the employment agreement), by reason of death, unavailability (as
defined in the employment agreement), or by reason of voluntary resignation,
then the Company shall pay Ms. Sullivan the base salary through such date of
termination. If Ms. Sullivan is terminated for any other reason, then the
Company shall continue for a period of four years Ms. Sullivan's medical and
life insurance and shall pay Ms. Sullivan the sum of (i) the highest base salary
paid to Ms. Sullivan during any of the prior three years, (ii) the highest bonus
paid to Ms. Sullivan during the prior three years and (iii) the stock options
that Ms. Sullivan would have otherwise received during the period commencing on
the termination date and ending on the later of twenty-four months from the
termination date and March 9, 2006 (such sum, collectively with the extension of
benefits is referred to hereinafter as the "Severance Payment").
In the event of a Change of Control (as defined in the employment
agreement), all previous stock option grants made to Ms. Sullivan shall
immediately vest. If, following the Change of Control, the Company does not
agree to allow Ms. Sullivan to remain in her current capacity for a one year
period before either consummating a new contract, or the election by Ms.
Sullivan to be paid the Severance Payment, then her employment shall be
terminated and the Company shall pay Ms. Sullivan the Severance Payment.
Relationships with The Center for Molecular Medicine and Immunology
The Company's product development has involved, to varying degrees, Center
for Molecular Medicine and Immunology, a not-for-profit specialized cancer
research center, for the performance of certain basic research and patient
evaluations, the results of which are made available to the Company pursuant to
a collaborative research and license agreement. CMMI, which is funded primarily
by grants from the NCI, is located in Belleville, New Jersey. Dr. Goldenberg is
the founder, current President and a member of the Board of Trustees of CMMI.
Dr. Goldenberg's employment agreement permits him to devote more of his time
working for CMMI than for the Company. Certain of the Company's consultants have
employment relationships with CMMI, and Dr. Hans Hansen, our emeritus executive
officer is an adjunct member of CMMI. Despite these relationships, we believe
CMMI is independent of Immunomedics, and CMMI's management and fiscal operations
are the responsibility of CMMI's Board of Trustees.
The Company has reimbursed CMMI for expenses incurred on behalf of the
Company, including amounts incurred pursuant to research contracts, in the
amount of approximately $205,000, $155,000 and $128,000 during the years ended
June 30, 2002, 2001 and 2000, respectively. We also provide, at no cost to CMMI,
laboratory materials and supplies. However, any inventions made independently of
us at CMMI are the property of CMMI.
During the fiscal years 2002 and 2001, the Company's Board of Directors
authorized grants to CMMI of $214,000 and $200,000, respectively, to support
research and clinical work being performed at CMMI, such grants to be expended
in a manner deemed appropriate by the Board of Trustees of CMMI. During each of
fiscal years 2001 and 2000, the Company also paid CMMI a license fee of
$200,000.
49
IBC Pharmaceuticals
In March 1999, IBC Pharmaceuticals, LLC ("IBC"), was formed as a joint
venture between Immunomedics and Beckman Coulter to pursue the development of
novel cancer radiotherapeutics using pre-targeting with bi-specific antibodies.
The initial Immunomedics investment in the IBC joint venture consisted solely of
intellectual property and was effected through the means of a second limited
liability company, IMG Technology, LLC ("IMG"), which was formed together with
Dr. Goldenberg. Pursuant to the terms of his employment agreement as discussed
above, Dr. Goldenberg is entitled to a twenty percent (20%) interest any time
Immunomedics contributes "unimproved assets" (as defined in his employment
agreement) to other ventures such as the joint venture with Beckman Coulter. As
a result, Dr. Goldenberg obtained a 20% profit interest in IMG Technology, which
in turn owned approximately 48.79% of the membership interests in IBC, while
Beckman Coulter owned 42.79% of the IBC membership interests. In connection with
Dr. Goldenberg's receipt of an interest in IMG, Immunomedics recognized $182,000
of compensation expense in fiscal year 1999, based on the fair value of
technology transferred. This is reflected as a minority interest in the June 30,
2001 consolidated balance sheet. Shortly after its formation, additional
investors contributed approximately $3.3 million in cash to the IBC joint
venture in exchange for Class B membership interests representing approximately
8.42% of the total membership interests outstanding. These investors included
members of Dr. Goldenberg's family as well as persons affiliated with the
original Coulter Corporation, a predecessor to Beckman Coulter.
In May 2002, Immunomedics acquired all of the Class A membership interests
owned by Beckman Coulter in exchange for (i) 138,900 shares of Immunomedics
common stock which were valued at approximately $1,800,000 and (ii) a warrant to
purchase an additional 150,000 shares of Immunomedics common stock at an
exercise price of $65.00 per share, exercisable until the earlier of May 2007 or
a change in control of Immunomedics, which was valued at approximately $850,000.
This transaction was accounted for as a step acquisition. . In connection with
this acquisition, the Company recorded a charge related to acquired in-process
research and development of approximately $936,000, which was immediately
expensed. At the date of acquisition none of the products under development by
IBC Pharmaceuticals had achieved technological feasibility and none were being
sold in the market. IBC Pharmaceuticals, Inc.-see below) consolidated with
Immunomedics. As a result of this acquisition, Immunomedics controlled, directly
and indirectly, all of the Class A membership interests in IBC and determined to
reorganize IBC into a Delaware "C" corporation under the Internal Revenue Code.
Other holders of IBC membership interests approved the reorganization. As a
result of this acquisition, the financial statements of IBC Pharmaceuticals,
Inc. are consolidated with Immunomedics.
The IBC reorganization was completed in June 2002, when IBC
Pharmaceuticals, LLC contributed all of its assets, and assigned all of its
liabilities, to a newly formed Delaware corporation, IBC Pharmaceuticals, Inc.,
in exchange for shares of Series A Preferred Stock and Series B Preferred Stock.
These shares of preferred stock were then distributed and IBC Pharmaceuticals,
LLC and IMG Technology, LLC are in the process of being dissolved. Dr.
Goldenberg also contributed 34,725 shares of Immunomedics common stock to IBC
Pharmaceuticals, Inc. Such shares were valued at $458,370 and have been recorded
as treasury stock. This treasury stock will be carried at cost as IBC
Pharmaceuticals, Inc. is controlled by Immunomeeics.
IBC reimbursed the Company for all of the research activities the Company
conducted on the joint venture's behalf. For the fiscal years ended June 30,
2002, 2001 and 2000, the Company received reimbursements of $634,000, $418,000
and $348,000, respectively, from IBC with respect to these research activities.
As of June 30, 2002, the shares of IBC Pharmaceuticals, Inc. were held as
follows:
Percentage
Stockholder Holdings of Total
- ----------- -------- ----------
Immunomedics, Inc. 5,599,705 shares of Series A Preferred Stock 73.26%
Third Party Investors 643,701 shares of Series B Preferred Stock 8.42%
David M. Goldenberg 1,399,926 shares of Series C Preferred Stock 18.32%
-------
100.00%
50
In the event of a liquidation, dissolution or winding up of IBC
Pharmaceuticals, Inc., the Series A, B and C Preferred Stockholders would be
entitled to $0.6902, $5.17 and $0.325 per share (subject to adjustment),
respectively. The Series A and B stockholders would be paid ratably until fully
satisfied. The Series C stockholders would be paid only after the Series A and B
stockholders have been fully repaid. These liquidation payments would be made
only to the extent the assets of IBC Pharmaceuticals, Inc. are sufficient to
make such payments. A majority of the preferred stockholders, voting together as
a single class, also have the right to require IBC Pharmaceuticals, Inc. to
redeem their shares under certain circumstances beginning on June 30, 2007.
Immunomedics, as the holder of a majority of the preferred shares, has the
ability to control whether or not this right is exercised.
In fiscal 2002, Dr. Goldenberg received $55,000 in compensation for his
services to IBC Pharmaceuticals. At July 1, 2002, Dr. Goldenberg was the sole
director of IBC Pharmaceuticals, Inc., while Cynthia L. Sullivan, Gerard G.
Gorman and Phyllis Parker served as the President, Treasurer and Secretary,
respectively.
10. License and Distribution Agreements
On November 24, 1997, the Company entered into a Distribution Agreement
with Eli Lilly Deutschland GmbH ("Lilly") pursuant to which Lilly packaged and
distributed LeukoScan within the countries comprising the European Union and
certain other countries subject to receipt of regulatory approvals. Also,
effective April 6, 1998, Lilly began packaging and distributing CEA-Scan within
the countries comprising the European Union. This agreement was terminated in
December 2001.
In October 2001, the Company entered into a Distribution Agreement with
Logosys Logistik GmbH pursuant to which Logosys packages and distributes the
Company's diagnostic imaging products, LeukoScan and CEA-Scan, within the
countries comprising the European Union and certain other countries.
Effective as of April 6, 1998, the Company appointed a subsidiary of
AmeriSourceBergen Corporation (formerly Bergen Brunswick) as a non-exclusive
distributor of CEA-Scan in the U.S. Such subsidiary (currently Integrated
Commercialization Solutions, Inc. ("ICS")) serves as an agent of the Company in
providing product support services, including customer service, order
management, distribution, invoicing and collections.
In May, 2002, the Company entered into a marketing and distribution
agreement for Latin America with Teva-Tuteur of Buenos Aires, Argentina, a
subsidiary of Teva Pharmaceutical Industries Ltd. Teva-Tuteur will be marketing
the Company's CEA-Scan and LeukoScan diagnostic imaging products throughout
Latin America.
On December 17, 2000, the Company entered into a Development and License
Agreement (the "Amgen Agreement") with Amgen Inc. The Amgen Agreement grants
Amgen exclusive rights to continue the clinical development and
commercialization in North America and Australia of the Company's unlabeled or
"naked" CD22 antibody compound, epratuzumab, for the treatment of patients with
non-Hodgkin's lymphoma.
Pursuant to the Amgen Agreement, the Company received an up-front payment
of $18,000,000 from Amgen on February 1, 2001, and may receive a supply fee (as
discussed below), as well as additional clinical milestones and royalty payments
upon the occurrence of certain future events. No such event has occurred to
date.
The up-front payment of $18,000,000 is being recognized, beginning February
2001, as revenue of $750,000 per month over a period of 24 months, which is the
Company's best estimate of the period of time required for the parties to
fulfill their obligations under the agreement. Accordingly, the Company
recognized $9,000,000 and $3,750,000 as "License fee revenues" for the fiscal
years 2002 and 2001, respectively. The remaining balance of $5,250,000 is
recorded as "Deferred revenue" in the accompanying consolidated balance sheet at
June 30, 2002.
Amgen is also obligated to pay a supply fee to the Company for materials
shipped by the Company to Amgen pursuant to the Amgen Agreement. The fee was
originally payable at the point in time when Amgen is capable of manufacturing
epratuzumab in quantities sufficient to satisfy its requirements for use in the
conduct of all clinical trials deemed necessary by the U.S. Food and Drug
51
Administration for approval of its United States biologics license application.
If the Company fails to comply with its supply obligations, then Amgen does not
owe the supply fee. As of June 30, 2002, Amgen was not yet capable of producing
such quantities of epratuzumab. However, Amgen and the Company have previously
agreed that Amgen shall pay the Company for the materials shipped since
inception of the Amgen Agreement. Accordingly, the Company invoiced Amgen in
December 2001 approximately $2.2 million in payment of all shipments of
materials made through December 31, 2001. Payment was received in January 2002
and has been recorded in the accompanying consolidated balance sheet as deferred
revenue to be recognized at such time as the Company fulfills its supply
obligations as set forth in the Amgen Agreement. Since January 1, 2002, the
Company shipped an additional $972,000 worth of materials to Amgen that were not
yet billed as of June 30, 2002.
Costs incurred relating to the manufacture of the materials supplied to
Amgen are recorded as research and development expense as incurred, as there is
no assurance that such amounts will be reimbursed by Amgen in the future in the
event that the Company fails to fully perform its obligations. The reimbursement
amount for materials supplied to Amgen represents the approximate personnel and
materials costs associated with the manufacturing of such materials. For the
fiscal years ended June 30, 2002 and 2001, the Company incurred $2,036,000 and
$1,162,000, respectively, of costs associated with supplying materials to Amgen
as described above.
In June, 2002, the Company granted a non-exclusive license to Daiichi Pure
Chemicals Co. under Immunomedics' carcinoembryonic antigen (CEA) patents, which
included an up-front payment and royalties. The Company recorded this up-front
payment of $825,300 and royalty of $200,000 as license fee revenue in fiscal
year 2002.
11. Commitments and Contingencies
On November 1, 1993, the Company and Dr. Goldenberg entered into a
five-year employment agreement (the "Agreement") with an additional one-year
assured renewal and thereafter automatically renewable for additional one-year
periods unless terminated by either party as provided in the Agreement. This
Agreement was amended on July 1, 2001, pursuant to which Dr. Goldenberg will
receive an annual minimum base salary of $275,000, an annual bonus to be
determined by the Board of Directors but in no event less than 20% of the base
salary, annual stock options grants covering at least 150,000 shares of common
stock, other benefits and certain change of control protections. Under the
Agreement as amended, the Company has agreed to extend Dr. Goldenberg's
employment agreement for a five-year period which expires on June 30, 2006.
Further, the Company acknowledged and approved Dr. Goldenberg's continuing
involvement with CMMI and IBC.
Pursuant to the Agreement, Dr. Goldenberg may engage in other business,
general investment and scientific activities, provided such activities do not
materially interfere with the performance of any of his obligations under the
Agreement, allowing for those activities he presently performs for CMMI and IBC
(see Note 9). The Agreement extends the ownership rights of the Company, with an
obligation to diligently pursue all ideas, discoveries, developments and
products, in the entire medical field, which, at any time during his past or
continuing employment by the Company (but not when performing services for
CMMI), Dr. Goldenberg has made or conceived or hereafter makes or conceives, or
the making or conception of which he has materially contributed to or hereafter
contributes to, all as defined in the Agreement (collectively "Goldenberg
Discoveries").
Further, pursuant to the Agreement, Dr. Goldenberg will receive, subject to
certain restrictions, incentive compensation of 0.5% on the first $75,000,000 of
all defined annual net revenue of the Company and 0.25% on all such annual net
revenue in excess thereof (collectively "Revenue Incentive Compensation"). With
respect to the period that Dr. Goldenberg is entitled to receive Revenue
Incentive Compensation on any given products, it will be in lieu of any other
percentage compensation based on sales or revenue due him with respect to such
products under this Agreement or the existing License Agreement between the
Company and Dr. Goldenberg. With respect to any periods that Dr. Goldenberg is
not receiving such Revenue Incentive Compensation for any products covered by
52
patented Goldenberg Discoveries or by certain defined prior inventions of Dr.
Goldenberg, he will receive 0.5% on cumulative annual net sales of, royalties,
certain equivalents thereof, and, to the extent approved by the Board, other
consideration received by the Company for such products, up to a cumulative
annual aggregate of $75,000,000 and 0.25% on any cumulative annual aggregate in
excess of $75,000,000 (collectively "Incentive Payments"). A $100,000 annual
minimum payment will be paid in the aggregate against all Revenue Incentive
Compensation and Royalty Payments. For each of the years ended June 30, 2002,
2001 and 2000, the Company paid Dr. Goldenberg the minimum required payment of
$100,000. Dr. Goldenberg will also receive a percent, not less than 20%, to be
determined by the Board, of net consideration (including license fees) which the
Company receives for any disposition, by sale, license or otherwise (discussions
directed to which commence during the term of his employment plus three years)
of any defined Undeveloped Assets of the Company which are not budgeted as part
of the Company's strategic plan. Pursuant thereto, Dr. Goldenberg received his
interest in IMG (See Note 9).
On March 20, 2001, the Company and Cynthia L. Sullivan entered into a
five-year employment agreement (the "Agreement") pursuant to which Ms. Sullivan
has the option to terminate if the Company does not renew the Agreement by March
8, 2004. Pursuant to this agreement, Ms. Sullivan will receive an annual minimum
base salary of $275,000, an annual bonus in an amount to be determined by the
Board of Directors but in no event less than 20% of the base salary, an annual
grant of stock options covering not less than 150,000 shares of common stock per
year and certain other benefits and change of control protections.
Immunomedics is obligated under an operating lease for facilities used for
research and development, manufacturing and office space. In November 2001, the
Company renewed for an additional term of twenty years expiring in October 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 15,000
square feet. Rental expense related to this lease was approximately $589,000,
$441,000 and $441,000 in fiscal years 2002, 2001, and 2000, respectively.
Including the extension of the facility lease as described above, the minimum
lease commitments for facilities are as follows for fiscal years:
2003 .......................... $ 545,000
2004 .......................... $ 545,000
2005 .......................... $ 545,000
2006 .......................... $ 545,000
2007 .......................... $ 552,000
Thereafter..................... $ 10,158,000
Immunomedics is a party to various claims and litigation arising in the
normal course of business. Management believes that the outcome of such claims
and litigation will not have a material adverse effect on the Company's
consolidated financial position and results of operations.
12. Debt
On October 28, 1998, the Company entered into an Equipment Financing
Agreement with the New England Capital Corporation, pursuant to which the
Company has received $450,000, at the interest rate of 9.52% per annum, to be
repaid over a 36-month period. The proceeds of such financing were used to
exercise the early purchase options for equipment previously leased through a
master lease agreement. The financing was secured by various equipment and an
irrevocable letter of credit in the amount of $225,000. The letter of credit was
collateralized by a cash deposit of an equivalent amount which was included in
"Other long- term assets" on the accompanying consolidated balance sheet at June
30, 2001. At June 30, 2002, the Company's indebtedness under this agreement was
$0. In the fiscal years ended June 30, 2002, 2001 and 2000, the Company paid
$1,683, $14,974 and $29,275, respectively, in interest under this agreement.
13. Geographic Segments
Immunomedics 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. Immunomedics markets and
sells its products in the U.S. and throughout Europe. During fiscal years 2002,
2001 and 2000, no product sales from a single customer exceeded 10% of
consolidated product sales.
53
The following table presents financial information based on the geographic
location of the facilities of Immunomedics, Inc. as of and for the years ended:
June 30, 2002
-------------
United States Europe Total
------------- ------ -----
Total assets $ 51,894,497 $ 3,056,685 $ 54,951,182
Long-lived assets 6,557,904 3,997 6,561,901
Revenues 11,593,974 2,692,787 14,286,761
June 30, 2001
-------------
United States Europe Total
------------- ------ -----
Total assets $ 57,249,298 $ 2,407,939 $ 59,657,237
Long-lived assets 3,387,350 7,960 3,395,310
Revenues 5,818,617 2,581,176 8,399,793
June 30, 2000
-------------
United States Europe Total
------------- ------ -----
Total assets $ 47,297,628 $ 728,509 $ 48,026,137
Long-lived assets 3,943,786 26,894 3,970,680
Revenues 2,441,087 2,336,107 4,777,194
14. Quarterly Results of Operations (Unaudited)
Three Months Ended
June 30 March 31 Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30
2002 2002 2001 2001 2001 2001 2000 2000
------- ------- ------- ------- ------- ------- ------- -------
(In thousands, except for per share amounts)
Consolidated Statements
of Operations Data:
Revenues $ 4,302 $ 3,283 $ 3,360 $ 3,342 $ 3,532 $ 2,391 $ 1,097 $ 1,380
Gross profit (1) 809 790 705 814 707 678 599 1,157
Income tax benefit - 1,205 - - - 803 - -
Net loss (2,687) (296) (582) (182) (538) (36) (2,696) (1,481)
Net loss per common
share allocable to
common stockholders $ (0.05) $ (0.01) $ (0.01) $ (0.00) $ (0.01) $ (0.00) $ (0.05) $ (0.03)
Weighted average number
of common shares out-
standing 49,800 49,706 49,565 49,538 49,526 49,521 49,502 49,444
(1) Gross profit is calculated as product sales less cost of goods sold.
54
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Immunomedics, Inc.:
We have audited the accompanying consolidated balance sheets of Immunomedics,
Inc. and subsidiaries as of June 30, 2002 and 2001, and the related consolidated
statements of operations and comprehensive loss, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended June
30, 2002. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Immunomedics, Inc.
and subsidiaries as of June 30, 2002 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 2002, in conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
Princeton, New Jersey
August 9, 2002
55
Item 9 -- Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10 -- Directors and Executive Officers of the Registrant
The response to this item is incorporated by reference from the discussion
responsive thereto in our Proxy Statement for the 2002 Annual Meeting of
Stockholders to be held on December 4, 2002.
Item 11 -- Executive Compensation
The response to this item is incorporated by reference from the discussion
responsive thereto in our Proxy Statement for the 2002 Annual Meeting of
Stockholders to be held on December 4, 2002.
Item 12 -- Security Ownership of Certain Beneficial Owners and Management
Except as set forth below, the response to this item is incorporated by
reference from the discussion responsive thereto in our Proxy Statement for the
2002 Annual Meeting of Stockholders to be held on December 4, 2002.
Equity Plan Compensation Information
The following table provides information as of June 30, 2002 about our
Common Stock that may be issued upon the exercise of options under our existing
equity compensation plans, including the 1992 Stock Option Plan and the 2002
Stock Option Plan.
- -------------------------------- ------------------------------ ----------------------------- ---------------------------------
Available for Future Issuance
Number of Securities to be Under Equity Compensation Plans
Issued Upon Exercise of Weighted-Average Exercise (Excluding Securities Reflected
Plan Category Outstanding Options Price of Outstanding Options in Column (a))
- -------------------------------- ------------------------------ ----------------------------- ---------------------------------
(a) (b) (c)
- -------------------------------- ------------------------------ ----------------------------- ---------------------------------
Equity compensation plans
approved by security
holders 3,174,250 $11.30 3,634,125
- -------------------------------- ------------------------------ ----------------------------- ---------------------------------
Equity compensation plans
not approved by security
holders 0 (1) -- 0
- -------------------------------- ------------------------------ ----------------------------- ---------------------------------
Total 3,174,250 $11.30 3,634,125
- -------------------------------- ------------------------------ ----------------------------- ---------------------------------
(1) We do not have any compensation plans under which equity securities are authorized for issuance which have not been
approved by our stockholders.
56
Item 13 -- Certain Relationships and Related Transactions
Except as set forth below, the response to this item is incorporated by
reference from the discussion responsive thereto in our Proxy Statement for the
2002 Annual Meeting of Stockholders to be held on December 4, 2002.
Certain Relationships and Related Party Transactions
Certain of our affiliates, including members of our senior management and
Board of Directors, as well as their respective family members and other
affiliates, have relationships and agreements among themselves as well as with
us and our affiliates, that create the potential for both real, as well as
perceived, conflicts of interest. These include Dr. David M. Goldenberg, our
Chairman and Chief Scientific Officer, Ms. Cynthia L. Sullivan, our President
and Chief Executive Officer, and certain companies with which we do business,
including the Center for Molecular Medicine and Immunology, and IBC
Pharmaceuticals, LLC. In addition, our executive vice president, Dr. Ivan D.
Horak, is married to one of our other employees.
As a result of these and other relationships, the potential for both real
and perceived conflicts of interest exists, and disputes could arise over the
allocation of research projects and ownership of intellectual property rights.
In addition, in the event that we become involved in stockholder litigation
regarding these potential conflicts, we might be required to devote significant
resources and management time defending these claims, which could adversely
affect our results of operations.
Dr. David M. Goldenberg
Dr. David M. Goldenberg was an original founder of our company over twenty
years ago and continues to play a critical role in our business. He currently
serves as Chairman of our Board of Directors and Chief Scientific Officer, and
is married to our Chief Executive Officer, Cynthia L. Sullivan. Dr. Goldenberg
is a party to a number of agreements with our company involving not only his
services, but also intellectual property owned by him. In addition, Dr.
Goldenberg performs services for one of our subsidiaries, IBC Pharmaceuticals,
Inc., as well as other businesses with which we are affiliated.
If we were to lose the services of Dr. Goldenberg our business and
prospects would be materially and adversely affected.
License Agreement. Pursuant to a License Agreement between us and Dr.
Goldenberg, certain patent applications owned by Dr. Goldenberg were licensed to
us at the time of our formation in exchange for a royalty in the amount of 0.5%
of the first $20,000,000 of annual net sales of all products covered by any of
such patents and 0.25% of annual net sales of such products in excess of
$20,000,000. Five of the licensed United States patents have since expired. In
November 1993 the ownership rights of Immunomedics were extended as part of Dr.
Goldenberg's employment agreement, with Immunomedics agreeing to diligently
pursue all ideas, discoveries, developments and products, into the entire
medical field, which, at any time during his past or continuing employment by
Immunomedics (but not when performing services for CMMI - see below), Dr.
Goldenberg has made or conceived or hereafter makes or conceives, or the making
or conception of which he has materially contributed to or hereafter contributes
to, all as defined in the Employment Agreement.
Employment Agreement. Pursuant to the terms of his employment agreement as
currently in effect, Dr. Goldenberg is entitled to receive incentive
compensation equal to one-half of one percent (0.5%) on the first $75.0 million
of all Annual Net Revenue (as defined therein ) of Immunomedics, and one-quarter
of one percent (0.25%) on all such Annual Net Revenue in excess thereof. Annual
Net Revenue is defined to include the proceeds of certain dispositions of assets
or interests therein, including royalties, certain equivalents thereof and, to
the extent approved by the Board of Directors, non-royalty license fees.
57
Dr. Goldenberg is also entitled to receive Revenue Incentive Compensation
during the period of his actual employment with us, and for a period of three
years thereafter, unless he unilaterally terminates his employment without cause
or is terminated for cause. With respect to the period that Dr. Goldenberg is
entitled to receive Revenue Incentive Compensation on any given products, it
will be in lieu of any other percentage compensation based on sales or revenue
due him with respect to such products under his employment agreement or the
license agreement. With respect to any periods that Dr. Goldenberg is not
receiving such Revenue Incentive Compensation, he is entitled to receive
one-half of one percent (0.5%) on cumulative annual net sales of, royalties on,
certain equivalents thereof, and, to the extent approved by the Board of
Directors, other consideration received by Immunomedics for such products, up to
a cumulative annual aggregate of $75,000,000, and one-quarter of one percent
(0.25%) on any cumulative Annual Net Revenue in excess of $75,000,000. A
$100,000 annual minimum payment must be paid in the aggregate against all
Revenue Incentive Compensation and Royalty Payments and the License Agreement.
The terms of his employment agreement also provide that Dr. Goldenberg is
entitled to receive a percent, not less than twenty percent (20%), as determined
in good faith by the Board of Directors, of net consideration (including,
without limitation, license fees) which Immunomedics receives in connection with
any disposition by sale, license or otherwise, of any Undeveloped Assets (as
defined therein ) which are not budgeted as part of our strategic plan. Pursuant
to this provision, Dr. Goldenberg received a 20% profit interest in the
membership interests originally acquired by us in connection with the formation
of the IBC Pharmaceuticals joint venture with Beckman Coulter in March 1999. Dr.
Goldenberg also is compensated by IBC Pharmaceuticals as discussed in greater
detail below.
Dr. Goldenberg is not entitled to any incentive compensation with respect
to any products, technologies or businesses acquired from third parties for a
total consideration in excess of $5,000,000, unless we had made a material
contribution to the invention or development of such products, technologies or
businesses prior to the time of acquisition. Except as affected by a Change in
Control (as defined therein) or otherwise approved by the Board of Directors,
Dr. Goldenberg will also not be entitled to any Revenue Incentive Compensation
or Incentive Payments other than the Annual Minimum Payment with respect to any
time during the period of his employment (plus three years, unless employment is
terminated by mutual agreement or by Dr. Goldenberg's death or permanent
disability) that he is not the direct or beneficial owner of shares of our
voting stock with an aggregate market value of at least twenty times his defined
annual cash compensation.
Finally, it is a condition to his employment agreement that Dr. Goldenberg
be permitted to continue his involvement with CMMI as discussed in greater
detail below.
In 2001, Dr. Goldenberg's employment agreement was extended for an
additional five-year period, expiring on June 30, 2006.
The foregoing summary of the material terms of Dr. Goldenberg's license
agreement, employment agreement and severance agreement is qualified in its
entirety by reference to the actual agreements, each of which has been filed
with the U.S. Securities and Exchange Commission and is available free of charge
through the Commission's web site located at www.sec.gov.
Life Insurance. We have also agreed with Dr. Goldenberg to maintain in
effect for his benefit a $2,000,000 whole life insurance policy. If Dr.
Goldenberg retires from the Company on or after his agreed retirement, or if his
employment ends because of permanent disability, we must pay all then
outstanding loans, if any, made under such policy, and assign such policy to Dr.
Goldenberg in consideration of the services previously rendered by Dr.
Goldenberg to the Company. If the employment of Dr. Goldenberg ends for any
other reason, except for cause, Dr. Goldenberg has the option to purchase such
policy for a price mutually agreed upon by him and the Board of Directors, but
not to exceed the cash value thereof less any outstanding policy loans, or he
may purchase such policy at its full cash value, less any outstanding loans,
with the purchase price to the paid out of the proceeds of the policy or any
earlier payment or withdrawal of all or any portion of its net cash value. The
Company also currently maintains $4,000,000 of key man life insurance on Dr.
Goldenberg for the benefit of the Company.
58
Additionally, a trust created by Dr. Goldenberg has purchased a $10,000,000
whole life policy on his life. The policy provides funds which may be used to
assist Dr. Goldenberg's estate in settling estate tax obligations, and thus
potentially reducing the number of shares of the Common Stock the estate may be
required to sell over a short period of time to raise funds to satisfy such tax
obligations. During what is estimated to be a 15-year period, the Company is
obligated to pay $143,000 per year towards premiums, compared to an equivalent
$250,000 commitment under the previous policies, in addition to amounts required
to be paid by Dr. Goldenberg. The Company has an interest in this new policy up
to the cumulative amount of premium payments made by it under the old and new
policies, which, through June 30, 2002, amounted to $1,837,400. If Dr.
Goldenberg's employment terminates, and the policy is not maintained, the
Company would receive payment of only its invested cumulative premiums, up to
the amount of cash surrender value in the policy.
Severance Agreement. In June 2002, the Board of Directors approved (with
Dr. Goldenberg and Ms. Sullivan abstaining) a severance agreement for Dr.
Goldenberg pursuant to which we are required, under certain circumstances upon
his termination for any reason, including as a result of his disability or a
change in control of the Company, to sell to Dr. Goldenberg's family partnership
a $10.0 million life insurance policy we have purchased insuring his life. In
addition, if Dr. Goldenberg is terminated upon his disability or a change in
control of the Company within six years of the date of the agreement, we will
reimburse him for the total purchase price of the life insurance policy. If he
is terminated for any other reason, whether voluntarily or involuntarily, we
will reimburse him for 50% of the purchase price, so long he has remained
employed by us for three years after the agreement, plus an additional amount
for each month of service in excess of three years.
Cynthia L. Sullivan
Employment Agreement. On March 20, 2001, we entered into an employment
agreement with Cynthia L. Sullivan that sets forth the terms of her employment
with the Company through March 9, 2006. During the term of her employment, we
will pay Ms. Sullivan an annual minimum base salary of $275,000 and an annual
bonus as determined by the Compensation Committee of the our Board of Directors,
which in no event shall be less than 20% of the base salary. Ms. Sullivan shall
be awarded a minimum of 150,000 stock options annually on the anniversary of the
employment agreement. Under her employment agreement, Ms. Sullivan may
participate in all benefit plans and programs to the extent she is eligible
including medical and life insurance.
Under the employment agreement, if Ms. Sullivan is terminated for Cause (as
defined in the employment agreement), by reason of death, unavailability (as
defined in the employment agreement), or by reason of voluntary resignation,
then we shall pay Ms. Sullivan the base salary through such date of termination.
If Ms. Sullivan is terminated for any other reason, then we shall continue for a
period of four years Ms. Sullivan's medical and life insurance and shall pay Ms.
Sullivan the sum of (i) the highest base salary paid to Ms. Sullivan during any
of the prior three years, (ii) the highest bonus paid to Ms. Sullivan during the
prior three years and (iii) the stock options that Ms. Sullivan would have
otherwise received during the period commencing on the termination date and
ending on the later of twenty-four months from the termination date and March 9,
2006 (such sum, collectively with the extension of benefits is referred to
hereinafter as the "Severance Payment").
In the event of a Change of Control (as defined in the employment
agreement), all previous stock option grants made to Ms. Sullivan shall
immediately vest. If, following the Change of Control, we do not agree to allow
Ms. Sullivan to remain in her current capacity for a one year period before
either consummating a new contract, or the election by Ms. Sullivan to be paid
the Severance Payment, then her employment shall be terminated and we shall pay
Ms. Sullivan the Severance Payment.
59
Relationships with The Center for Molecular Medicine and Immunology
Our product development has involved, to varying degrees, Center for
Molecular Medicine and Immunolgy, a not-for-profit specialized cancer research
center, for the performance of certain basic research and patient evaluations,
the results of which are made available to us pursuant to a collaborative
research and license agreement. CMMI, which is funded primarily by grants from
the NCI, is located in Belleville, New Jersey. Dr. Goldenberg is the founder,
current President and a member of the Board of Trustees of CMMI. Dr.
Goldenberg's employment agreement permits him to devote more of his time working
for CMMI than for us. Certain of our consultants have employment relationships
with CMMI, and Dr. Hans Hansen, our emeritus executive officer, is an adjunct
member of CMMI. Despite these relationships, we believe CMMI is independent of
Immunomedics, and CMMI's management and fiscal operations are the responsibility
of CMMI's Board of Trustees.
We have reimbursed CMMI for expenses incurred on behalf of us, including
amounts incurred pursuant to research contracts, in the amount of approximately
$205,000, $155,000 and $128,000 during the years ended June 30, 2002, 2001 and
2000, respectively. We also provide, at no cost to CMMI, laboratory materials
and supplies. However, any inventions made independently of us at CMMI are the
property of CMMI.
During the fiscal years 2002 and 2001, our Board of Directors authorized
grants to CMMI of $214,000 and $200,000, respectively, to support research and
clinical work being performed at CMMI, such grants to be expended in a manner
deemed appropriate by the Board of Trustees of CMMI. During each of fiscal years
2001 and 2000, the Company also paid CMMI a license fee of $200,000.
IBC Pharmaceuticals
In March 1999, IBC Pharmaceuticals, LLC was formed as a joint venture
between Immunomedics and Beckman Coulter to pursue the development of novel
cancer radiotherapeutics using pre-targeting with bi-specific antibodies. The
initial Immunomedics investment in the IBC joint venture consisted solely of
intellectual property and was effected through the means of a second limited
liability company, IMG Technology, LLC, which was formed together with Dr.
Goldenberg. Pursuant to the terms of his employment agreement as discussed
above, Dr. Goldenberg is entitled to a twenty percent (20%) interest any time
Immunomedics contributes "unimproved assets" (as defined in his employment
agreement) to other ventures such as the joint venture with Beckman Coulter. As
a result, Dr. Goldenberg obtained a 20% profit interest in IMG Technology, which
in turn owned approximately 48.79% of the membership interests in IBC, while
Beckman Coulter owned 42.79% of the membership interests. Shortly after its
formation, additional investors contributed approximately $3.3 million in cash
to the IBC joint venture in exchange for Class B membership interests
representing approximately 8.42% of the total membership interests outstanding.
These investors included members of Dr. Goldenberg's family as well as persons
affiliated with the original Coulter Corporation, a predecessor to Beckman
Coulter.
In May 2002, Immunomedics was able to acquire all of the Class A membership
interests owned by Beckman Coulter in exchange for (i) 138,900 shares of
Immunomedics common stock and (ii) a warrant to purchase an additional 150,000
shares of Immunomedics common stock at an exercise price of $65.00 per share,
exercisable until the earlier of May 2007 or a change in control of
Immunomedics. As a result of this acquisition, Immunomedics controlled, directly
and indirectly, all of the Class A membership interests in IBC and determined to
reorganize IBC into a Delaware "C" corporation under the Internal Revenue Code.
Other holders of IBC membership interests approved the reorganization.
The IBC reorganization was completed in June 2002, when IBC
Pharmaceuticals, LLC contributed all of its assets, and assigned all of its
liabilities, to a newly formed Delaware corporation, IBC Pharmaceuticals, Inc.,
in exchange for shares of Series A Preferred Stock and Series B Preferred Stock.
These shares of preferred stock were then distributed and IBC Pharmaceuticals,
LLC and IMG Technology, LLC are in the process of being dissolved. Dr.
Goldenberg also contributed 34,725 shares of Immunomedics common stock to IBC
Pharmaceuticals, Inc. In addition to these shares of Immunomedics common stock,
at June 30, 2002, IBC Pharmaceuticals, Inc. held approximately $1.7 million in
cash and marketable securities.
60
IBC reimbursed us for all of the research activities we conducted on the
joint venture's behalf. For the fiscal years ended June 30, 2002, 2001 and 2000,
we received reimbursements of $634,000, $418,000 and $348,000, respectively,
from IBC with respect to these research activities.
As of June 30, 2002, the shares of IBC Pharmaceuticals, Inc. were held as
follows:
Percentage
Stockholder Holdings of Total
- ----------- -------- ----------
Immunomedics, Inc. 5,599,705 shares of Series A Preferred Stock 73.26%
Third Party Investors 643,701 shares of Series B Preferred Stock 8.42%
David M. Goldenberg 1,399,926 shares of Series C Preferred Stock 18.32%
-------
100.00%
In fiscal 2002 Dr. Goldenberg received $55,000 in compensation for his
services to IBC Pharmaceuticals.
At July 1, 2002, Dr. Goldenberg was the sole director of IBC
Pharmaceuticals, Inc., while Cynthia L. Sullivan, Gerard G. Gorman and Phyllis
Parker served as the President, Treasurer and Secretary, respectively.
61
PART IV
Item 14 -- Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this Report:
1. Consolidated Financial Statements:
Consolidated Balance Sheets - June 30, 2002 and 2001
Consolidated Statements of Operations and Comprehensive Loss for the years
ended June 30, 2002, 2001 and 2000
Consolidated Statements of Changes in Stockholders' Equity for the years
ended June 30, 2002, 2001 and 2000
Consolidated Statements of Cash Flows for the years ended June 30, 2002,
2001 and 2000
Notes to Consolidated Financial Statements
Independent Auditors' Report - KPMG LLP
2. Financial Statement Schedules:
All schedules have been omitted because of the absence of conditions under
which they would be required or because the required information is
included in the financial statements or the notes thereto.
3.1(a) Certificate of Incorporation of the Company, as filed with the Secretary
of State of the State of Delaware on July 6, 1982 (c)
3.1(b) Certificate of Amendment of the Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State of Delaware on
April 4, 1983 (c)
3.1(c) Certificate of Amendment of the Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State of Delaware on
December 14, 1984 (c)
3.1(d) Certificate of Amendment of the Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State of Delaware on
March 19, 1986 (c)
3.1(e) Certificate of Amendment of the Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State of Delaware on
November 17, 1986 (c)
3.1(f) Certificate of Amendment of the Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State of Delaware on
November 21, 1990 (d)
3.1(g) Certificate of Amendment of the Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State of Delaware on
December 7, 1992 (g)
3.1(h) Certification of Amendment of the Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State of Delaware on
November 7, 1996 (k)
3.1(i) Amended and Restated Certificate of Designations, Preferences and Rights
of Series F Convertible Preferred Stock of Immunomedics, Inc. (p)
3.1(j)* Certificate of Designation of Series G Junior Participating Preferred
Stock of the Company, as filed with the Secretary of State of the State of
Delaware on March 15, 2002
3.2* Amended and Restated By-Laws of the Company
4.1* Specimen Certificate for Common Stock
4.2 Common Stock Purchase Warrant issued to Cripple Creek Securities, LLC (m)
4.3 Form of additional Common Stock Purchase Warrant issuable to Cripple Creek
Securities, LLC (m)
4.4 Rights Agreement, dated as of March 4, 2002, between the Company and
American Stock Transfer and Trust Company, as rights agent, and form of
Rights Certificate (u)
4.5 Warrant For the Purchase of Shares of Common Stock of the Company, dated as
of May 23, 2002 (v)
10.1# Immunomedics, Inc. 401(k) Retirement Plan (b)
10.2# Immunomedics, Inc. 1992 Stock Option Plan (k)
10.3*# Immunomedics, Inc. 2002 Stock Option Plan, as amended
62
10.4# Executive Supplemental Benefits Agreement with David M. Goldenberg, dated
as of July 18, 1986 (b)
10.5# Amended and Restated Employment Agreement, dated November 1, 1993, between
the Company and Dr. David M. Goldenberg (h)
10.6# Amendment No. 2 to the Amended and Restated Employment Agreement, dated as
of July 1, 2001 between the Company and Dr. David M. Goldenberg (t)
10.7*# David M. Goldenberg Severance Agreement, dated as of June 18, 2002,
between David M. Goldenberg and the Company
10.8# Employment Agreement, dated March 10, 2001, between the Company and
Cynthia L. Sullivan (s)
10.9 Exclusive License Agreement with David M. Goldenberg, dated as of July 14,
1982 (a)
10.10 Amended and Restated License Agreement among the Company, CMMI and David
M. Goldenberg, dated December 11, 1990 (e)
10.11 Amendment, dated March 11, 1995, to the Amended and Restated License
Agreement among the Company, CMMI, and David M. Goldenberg, dated December
11, 1990 (i)
10.12 License Agreement, dated as of January 21, 1997, between the Company and
Center for Molecular Medicine and Immunology, Inc. (l)
10.13 License Agreement, dated March 5, 1999, by and between the Company and IBC
Pharmaceuticals, LLC (q)
10.14 Development and License Agreement, dated December 17, 2001, between the
Company and Amgen, Inc. (Confidentiality treatment has been granted for
certain portions of the Agreement) (r)
10.15 Agreement among the Company, David M. Goldenberg and the Center for
Molecular Medicine and Immunology, Inc., dated May, 1983 (a)
10.16 Lease Agreement with Baker Properties Limited Partnership, dated January
16, 1992 (f)
10.17 Manufacturing Agreement, dated as of April 4, 1996, between the Company
and SP Pharmaceuticals, formerly the Oncology Division of Pharmacia &
Upjohn (Confidential treatment has been granted for certain portions of the
Agreement) (j)
10.18 Distribution Agreement, dated as of November 24, 1997, between the Company
and Eli Lilly Deutschland GmbH (Confidential treatment has been granted for
certain portions of the Agreement) (n)
10.19 Distribution and Product Services Agreement, dated as of May 15, 1998,
between the Company and Integrated Commercialization Solutions, Inc.
(Confidentiality treatment has been granted for certain portions of the
Agreement) (n)
10.20 Operating Agreement, dated March 5, 1999, by and among IMG Technology,
LLC, Beckman Coulter Corporation and the investors named therein (q)
10.21 Operating Agreement, dated March 5, 1999, by and among IMG Technology, LLC
and David M. Goldenberg (q)
10.22 Contract for Services dated effective as of January 1, 2002 between the
Company and Logosys Logistik GmbH (t)
10.23 Registration Rights Agreement, dated as of May 21, 2002, between the
Company and Beckman Coulter, Inc. (v)
10.24* Contribution and Assignment Agreement, dated as of June 30, 2002, between
IBC Pharmaceuticals, LLC and IBC Pharmaceuticals, Inc.
21.1* Subsidiaries of the Company
23.1* Independent Accountants' Consent--KPMG LLP
____________________________
(a) Incorporated by reference from the Exhibits to the Company's Registration
Statement on Form S-1 effective October 6, 1983 (Commission File No.
2-84940)
(b) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1986
(c) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1990
63
(d) Incorporated by reference from the Exhibits to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended December31, 1990
(e) Incorporated by reference from the Exhibits to the Company's Registration
Statement on Form S-2 effective July 24, 1991 (Commission File No.
33-41053)
(f) Incorporated by reference from the Exhibits to the Company's Registration
Statement on Form S-2 effective January 30, 1992 (Commission File No.
33-44750)
(g) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993
(h) Incorporated by reference from the Exhibits to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1993
(i) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995
(j) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1996
(k) Incorporated by reference from the Exhibits to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1996
(l) Incorporated by reference from the Exhibits to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended December 31, 1996
(m) Incorporated by reference from the Exhibits to the Company's Registration
Statement on Form S-3, as filed with the Commission on January 29, 1998
(n) Incorporated by reference from the Exhibits to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended December 31, 1997
(o) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1998
(p) Incorporated by reference from the Exhibits to the Company's Current Report
on Form 8-K, dated December 15, 1998
(q) Incorporated by reference from the Exhibits to the Company's Current Report
on Form 8-K, dated March 23, 1999
(r) Incorporated by reference from the Exhibits to the Company's Quarterly
Report on Form 10-Q (as amended) for the fiscal quarter ended March 31,
2001
(s) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 2001
(t) Incorporated by reference from the Exhibits to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 2001
(u) Incorporated by reference from the Exhibits to the Company's Current Report
on Form 8-K, dated March 8, 2002
(v) Incorporated by reference from the Exhibits to the Company's Registration
Statement on Form S-3, as filed with the Commission on June 12, 2002
* Filed herewith
# Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report
(b) Reports on Form 8-K
During the quarter ended June 30, 2002, we filed two current reports on
Form 8-K. The first, dated May 28, 2002, announced that we purchased from
Beckman Coulter, Inc. its membership interests in IBC Pharmaceuticals, LLC. The
second, dated May 31, 2002, amends our prior disclosure on March 1, 2002 of the
decision by our Chairman and Chief Scientific Officer to enter into a written
stock selling plan in accordance with SEC Rule 10b5-1.
64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 30, 2002 By: /s/ CYNTHIA L. SULLIVAN
----------------------------------
Cynthia L. Sullivan
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ DAVID M. GOLDENBERG Chairman September 30, 2002
- -----------------------
David M. Goldenberg
/s/ CYNTHIA L. SULLIVAN President, Chief September 30, 2002
- ----------------------- Executive Officer
Cynthia L. Sullivan and Director
(Principal Executive Officer)
/s/ MARVIN E. JAFFE Director September 30, 2002
- -----------------------
Marvin E. Jaffe
/s/ RICHARD R. PIVIROTTO Director September 30, 2002
- ------------------------
Richard R. Pivirotto
/s/ MORTON COLEMAN Director September 30, 2002
- ------------------------
Morton Coleman
/s/ MARY PAETZOLD Director September 30, 2002
- ------------------------
Mary Paetzold
/s/ GERARD G. GORMAN Vice President Finance and September 30, 2002
- ------------------------ Chief Financial Officer
Gerard G. Gorman (Principal Financial
and Accounting Officer)
65
CERTIFICATIONS
I, Cynthia L. Sullivan, President and Chief Executive Officer of Immunomedics,
Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Immunomedics, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
Date: September 30, 2002
/s/ CYNTHIA L. SULLIVAN
____________________________________
Cynthia L. Sullivan
President and Chief Executive Officer of Immunomedics, Inc.
I, Gerard G. Gorman, Vice President Finance and Chief Financial Officer of
Immunomedics, Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Immunomedics, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
Date: September 30, 2002
/s/ GERARD G. GORMAN
____________________________________
Gerard G. Gorman
Vice President Finance and Chief Financial Officer of Immunomedics, Inc.
66
EXHIBIT LIST
(excludes documents incorporated by reference)
3.1(j) Certificate of Designation of Series G Junior Participating
Preferred Stock of the Company, as filed with the Secretary of State
of the State of Delaware on March 15, 2002
3.2 Amended and Restated By-Laws of the Company
4.1 Specimen Certificate for Common Stock
10.3 Immunomedics, Inc. 2002 Stock Option Plan, as amended
10.7 David M. Goldenberg Severance Agreement, dated as of June 18, 2002,
between David M. Goldenberg and the Company
10.24 Contribution and Assignment Agreement, dated as of June 30, 2002,
between IBC Pharmaceuticals, LLC and IBC Pharmaceuticals, Inc.
21.1 Subsidiaries of the Company
23.1 Independent Accountants' Consent--KPMG LLP
67
EXHIBIT 3.1(j)
CERTIFICATE OF DESIGNATION, PREFERENCES, AND RIGHTS
OF
SERIES G JUNIOR PARTICIPATING PREFERRED STOCK
OF
IMMUNOMEDICS, INC.
Immunomedics, Inc., Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on February 28, 2002:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), the Board
of Directors hereby creates a series of Preferred Stock, par value $0.01 per
share (the "Preferred Stock"), of the Corporation and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
Section 1. Designation and Amount. The shares of this series shall be
designated as "Series G Junior Participating Preferred Stock" (the "Series G
Preferred Stock") and the number of shares constituting the Series G Preferred
Stock shall be 100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series G Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series G Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any other stock) ranking prior and superior to the
Series G Preferred Stock with respect to dividends, the holders of shares
of Series G Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the last day of March,
June, September and December in each year (each such date being referred to
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herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series G Preferred Stock, in an amount (if any) per
share (rounded to the nearest cent), subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in shares of Common Stock, par value $0.01
per share (the "Common Stock"), of the Corporation or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share
of Series G Preferred Stock. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount
to which holders of shares of Series G Preferred Stock were entitled
immediately prior to such event under the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series G Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends due pursuant to paragraph (A) of this Section shall
begin to accrue and be cumulative on outstanding shares of Series G
Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series G Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series G
Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series G Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
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Section 3. Voting Rights. The holders of shares of Series G Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series G Preferred Stock shall entitle the holder thereof to
1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series G Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided in the Restated Certificate of
Incorporation, including any other Certificate of Designations creating a
series of Preferred Stock or any similar stock, or by law, the holders of
shares of Series G Preferred Stock and the holders of shares of Common
Stock and any other capital stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise required by law,
holders of Series G Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series G Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series G Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series G Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series G
Preferred Stock, except dividends paid ratably on the Series G
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
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liquidation, dissolution or winding up) to the Series G Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (as to dividends
and upon dissolution, liquidation or winding up) to the Series G
Preferred Stock.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series G Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein or in
the Restated Certificate of Incorporation, including any Certificate of
Designations creating a series of Preferred Stock or any similar stock, or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation the holders of shares of Series G
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock plus an amount equal to any accrued and unpaid dividends. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series G Preferred
Stock were entitled immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, Etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series G Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series G Preferred Stock shall be adjusted by
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multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Amendment. The Restated Certificate of Incorporation shall not
be amended in any manner, including in a merger or consolidation, which would
alter, change, or repeal the powers, preferences or special rights of the Series
G Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series G
Preferred Stock, voting together as a single class.
Section 9. Rank. The Series G Preferred Stock shall rank, with respect to
the payment of dividends and upon liquidation, dissolution and winding up,
junior to all series of Preferred Stock.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its duly authorized officer this 15th day of March, 2002.
IMMUNOMEDICS, INC.
By: /s/ Cynthia L. Sullivan
-----------------------
Name: Cynthia L. Sullivan
Title: President and Chief Executive Officer
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EXHIBIT 3.2
BY-LAWS
OF
IMMUNOMEDICS, INC.
(A Delaware Corporation)
Adopted by the Board of Directors on June 12, 2002
ARTICLE 1
DEFINITIONS
As used in these By-Laws, unless the context otherwise requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-Laws" means the by-laws of the Corporation, as amended from time to
time.
1.5 "Certificate of Incorporation" means the certificate of incorporation
of the Corporation, as amended, supplemented or restated from time to time.
1.6 "Chairman" means the Chairman of the Board of the Corporation.
1.7 "Chief Executive Officer" means the Chief Executive Officer of the
Corporation.
1.8 "Corporate Officer" means an officer of the Corporation elected by the
Board and designated by the Board as a corporate officer.
1.9 "Corporation" means Immunomedics, Inc., a Delaware corporation.
1.10 "Directors" means members of the Board.
1.11 "Full Board" means the total number of directors of the Board.
1.12 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
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1.13 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.14 "President" means the President of the Corporation.
1.15 "Secretary" means the Secretary of the Corporation.
1.16 "Stockholders" means stockholders of the Corporation.
1.17 "Treasurer" means the Treasurer of the Corporation.
1.18 "Vice Chairman means a Vice Chairman of the Corporation.
1.19 "Vice President" means a Vice President of the Corporation.
1.20 "Votes of the Total Outstanding Shares" means the votes to which the
holders of all of the outstanding shares of the Corporation are entitled to cast
at a meeting of stockholders.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of stockholders shall be held at the
office of the Corporation or at such other place within or without the State of
Delaware as shall be specified or fixed in the notice of such meeting or in the
waiver of notice thereof.
2.2 Annual Meeting. An annual meeting of the stockholders, for the election
of directors to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be held at ten
o'clock a.m. or such other time as is determined by the Board, on such date
(other than a Saturday, Sunday or legal holiday) as is determined by the Board
and at such place as the Board shall each year fix.
2.3 Deferred Meeting for Election of Directors, Etc. If no annual meeting
is held in accordance with the foregoing provisions, the Board shall cause the
meeting to be held as soon thereafter as convenient. If no annual meeting is
held in accordance with the foregoing provisions, a special meeting may be held
in lieu of the annual meeting, and any action taken at that special meeting
shall have the same effect as if it had been taken at the annual meeting, and in
such case all references in these By-Laws to the annual meeting of the
stockholders shall be deemed to refer to such special meeting.
2.4 Other Special Meetings. A special meeting of stockholders, unless
otherwise prescribed by statute, may be called at any time by the Chairman, a
majority of the Full Board or the holders of shares entitled to cast not less
than one-fifth of all of the Votes of the Total Outstanding Shares. At any
special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes of such meeting set forth in the notice
thereof given pursuant to Section 2.6 of the By-Laws or in any waiver of notice
thereof given pursuant to Section 2.7 of the By-Laws.
2
25. Fixing Record Date. For the purpose of determining the stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a date as the record date for any such determination of
stockholders. Such date shall not be more than sixty nor less than ten days
prior to any other action. If no such record date is fixed:
2.5.1 The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held;
2.5.2 The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior
action by the Board is necessary, shall be the day on which the first
written consent is expressed;
2.5.3 The record date for determining stockholders for any purpose
other than those specified in Sections 2.5.1 and 2.5.2 shall be at the
close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of stockholders entitled to notice of or to vote at any
meeting of stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof, unless the Board fixes a
new record date for the adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided in
Section 2.5 and 2.7 of the By-Laws, whenever under the General Corporation Law
or the Certificate of Incorporation or the By-Laws, stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. A copy of the notice of
any meeting shall be given, personally or by mail, not less than ten nor more
than sixty days before the date of the meeting, to each stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice shall be deemed to
be given two days after it is deposited in the United States mail, with postage
prepaid, directed to the stockholder at his address as it appears on the records
of the Corporation. An affidavit of the Secretary or an Assistant Secretary or
of the transfer agent of the Corporation that the notice required by this
section has been given shall, in the absence of fraud, be prima facie evidence
of the facts stated therein. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken, and at
the adjourned meeting any business may be transacted that might have been
transacted at the meeting as originally called. If, however, the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
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2.7 Waivers of Notice. Whenever notice is required to be given to any
stockholder under any provision of the General Corporation Law or the
Certificate of Incorporation or By-Laws, a written waiver thereof, signed by the
stockholder entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a stockholder at a meeting
shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders need be specified in any
written waiver of notice.
2.8 List of Stockholders. The Secretary shall prepare and make, or cause to
be prepared and made, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting is to be held. The
list shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
2.9 Quorum of Stockholders' Adjournment. The holders of shares representing
a majority of the Votes of the Total Outstanding Shares, present in person or
represented by proxy, shall constitute a quorum for the transaction of any
business at such meeting, except as otherwise provided by the General
Corporation Law or the Certificate of Incorporation. If, however, such quorum
shall not be present or represented by proxy at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented by proxy. At such adjourned meeting at which a quorum shall be
present or represented by proxy, any business may be transacted which might have
been transacted at the meeting as originally called. If the adjournment is for
more than thirty days, or, if after adjournment a new record date is set, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. When a quorum is once present to organize a
meeting of stockholders, it is not broken by the subsequent withdrawal of any
stockholders.
2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation, every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his name on
the record of stockholders determined in accordance with Section 2.5 of the
By-Laws. If the Certificate of Incorporation provides for more or less than one
vote for any share, on any matter, every reference in the By-Laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
4
whether any shares of capital stock may be voted and persons, if any, entitled
to vote such shares, but the Corporation shall be protected in treating the
persons in whose names shares of capital stock stand on the record of
stockholders as owners thereof for all purposes. At any meeting of stockholders
(at which a quorum was present to organize the meeting), all matters, except as
otherwise provided by law or by the Certificate of Incorporation or by the
By-Laws, shall be decided by a majority of the votes cast at such meeting by the
holders of shares present in person or represented by proxy and entitled to vote
thereon, whether or not a quorum is present when the vote is taken. All
elections of directors shall be by written ballot unless otherwise provided in
the Certificate of Incorporation. In voting on any other question on which a
vote by ballot is required by law or is demanded by any stockholder entitled to
vote, the voting shall be by ballot. Each ballot shall be signed by the
stockholder voting or by his proxy, and shall state the number of shares voted.
On all other questions, the voting may be viva voce. Every stockholder entitled
to vote at a meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy. The validity and enforceability of any proxy
shall be determined in accordance with Section 212 of the General Corporation
Law.
2.11 Selection and Duties of Inspectors at Meetings of Stockholders. The
Board, in advance of any meeting of stockholders, may appoint one or more
inspectors to act at the meeting of any adjournment thereof. If inspectors are
not so appointed, the person presiding at such meeting may, and on the request
of any stockholder entitled to vote thereat, shall appoint one or more
inspectors. In case any person appointed fails to appear or act, the vacancy may
be filled by appointment made by the Board in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and according
to the best of his ability. The inspector or inspectors shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determining the result, and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting or any
stockholder entitled to vote thereat, the inspector or inspectors shall make a
report in writing of any challenge, question or matter determined by him or them
and execute a certificate of any fact found by him or them. Any report or
certificate made by the inspector or inspectors shall be prima facie evidence of
the facts stated and of the vote as certified by him or them.
2.12 Organization. At every meeting of stockholders, the Chairman, or in
the absence of the Chairman, a Vice Chairman, if one is elected, or, in the
absence of a Vice Chairman, the President, shall act as Chairman of the meeting.
In case none of the Corporate Officers above designated to act as Chairman or
Secretary of the meeting, respectively, shall be present, a chairman or a
secretary of the meeting, as the case may be, shall be chosen by a majority of
the votes cast at such meeting by the holders of shares of capital stock present
in person or represented by proxy and entitled to vote at the meeting.
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2.13 Order of Business. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting.
2.14 Written Consent of Stockholders Without a Meeting. Any action required
to be taken at any annual or special meeting of stockholders, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be (1) signed
and dated by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
(2) delivered to the Corporation within sixty (60) days of the earliest dated
consent by delivery to its registered office in the State of Delaware (in which
case delivery shall be by hand or by certified or registered mail, return
receipt requested), its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or the
By-Laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by the By-Laws, the Board may exercise all powers and
perform all acts which are not required, by the By-Laws or the Certificate of
Incorporation by law, to be exercised and performed by the stockholders.
3.2 Number; Qualification; Term of Office. The Board shall consist of one
or more members. The number of directors may be changed from time to time by
action of the Board. Directors need not be stockholders. Each director shall
hold office until his successor is elected and qualified or until his earlier
death, resignation or removal.
3.3 Election. Directors shall, except as otherwise required by law or by
the Certificate of Incorporation, be elected by a majority of the votes cast at
a meeting of stockholders by the holders of shares entitled to vote in the
election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise provided in
the Certificate of Incorporation, newly created directorships resulting from an
increase in the number of directors and vacancies occurring in the Board for any
other reason, including the removal of directors without cause may be filled by
vote of a majority of the directors then in office, although less than a quorum,
or by a sole remaining director, or may be elected by a majority of the votes
cast by the holders of shares of capital stock entitled to vote in the election
at a special meeting of stockholders called for that purpose. A director elected
to fill a vacancy shall be elected to hold office until his successor is elected
and qualified, or until his earlier death, resignation or removal.
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3.5 Resignations. Any director may resign at any time by written notice to
the Chairman, or in the absence of the Chairman, the Secretary. Such resignation
shall take effect at the time therein specified, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective.
3.6 Removal of Directors. Subject to the provisions of Section 141(k) of
the General Corporation Law, any or all of the directors may be removed with or
without cause, by the holders of shares representing a majority of the Votes of
the Total Outstanding Shares then entitled to vote at an election of directors.
3.7 Compensation. Each director, in consideration of his service as such,
shall be entitled to receive from the Corporation such amount per annum, if any,
or such fees, if any, for attendance at directors' meetings, or both, as the
Board may from time to time determine, together with reimbursement for the
reasonable expenses incurred by him in connection with the performance of his
duties. Each director who shall serve as a member of any committee of directors
in consideration of his serving as such shall be entitled to such additional
amount per annum, if any, or such fees, if any, for attendance at committee
meetings, or both, as the Board may from time to time determine, together with
reimbursement for the reasonable expenses incurred by him in the performance of
his duties. Nothing contained in this section shall preclude any director from
serving the Corporation or its subsidiaries in any other capacity and receiving
proper compensation therefor.
3.8 Place and Time of Meetings of the Board. Meetings of the Board, regular
or special, may be held at any place within or without the State of Delaware.
The times and places for holding meetings of the Board may be fixed from time to
time by resolution of the Board (unless contrary to resolution of the Board) in
the notice of the meeting.
3.9 Annual Meetings. On the day when and at the place where the annual
meeting of stockholders for the election of directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in Section 3.11
of the By-Laws for special meetings of the Board or in a waiver of notice
thereof.
3.10 Regular Meetings. Regular meetings of the Board may be held at such
times and places as may be fixed from time to time by the Board. Unless
otherwise required by the Board, regular meetings of the Board may be held
without notice. If any day fixed for a regular meeting of the Board shall be a
Saturday or Sunday or a legal holiday at the place where such meeting is to be
held, then such meeting shall be held at the same hour at the same place on the
first business day thereafter, which is not a Saturday, Sunday or legal holiday.
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3.11 Special Meetings. Special meetings of the Board shall be held whenever
called by the Chairman, the Chief Executive Officer or by a majority of the Full
Board. Notice of each special meeting of the Board (and of each regular meeting
for which notice shall be required) shall, if mailed, be addressed to each
director at the address designated by him for that purpose or, if none is
designated, at his last known address at least two days before the date on which
the meeting is to be held; or such notice shall be sent to each director at such
address by telegraph, cable, telex, Telecopier or similar means, or be delivered
to him personally, or be given to him by telephone or other similar means not
later than the day before the date on which such meeting is to be held. Every
such notice shall state the time and place of the meeting, but need not state
the purposes of the meeting, except to the extent required by law. If mailed,
each notice shall be deemed given two days after it is deposited, with postage
thereon prepaid, in a post office or official depository under the exclusive
care and custody of the United States Post Office Department. Such mailing shall
be by first class mail. If notice is given by telegraph, cable, telex,
Telecopier or similar means, such notice shall be deemed given when so delivered
or transmitted.
3.12 Adjourned Meetings. A majority of the directors present at any meeting
of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Notice of any
adjourned meeting of the Board need not be given to any director whether or not
present at the time of the adjournment. Any business may be transacted at any
adjourned meeting that might have been transacted at the meeting as originally
called.
3.13 Waiver of Notice. Whenever notice is required to be given to any
director or member of a committee of directors under any provision of the
General Corporation Law or of the Certificate of Incorporation or By-Laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice.
3.14 Organization. At each meeting of the Board, the Chairman, or in the
absence of the Chairman, the Vice Chairman, if one is elected, or in the absence
of the Vice Chairman, the Chief Executive Officer, or in the absence of the
Chief Executive Officer, a chairman chosen by a majority of the directors
present, shall preside. The Secretary shall act as secretary at each meeting of
the Board. In case the Secretary shall be absent from any meeting of the Board,
an Assistant Secretary shall perform the duties of secretary at such meeting;
and in the absence from any such meeting of the Secretary and all Assistant
Secretaries, the person presiding at the meeting may appoint any person to act
as secretary of the meeting.
3.15 Quorum of Directors. A majority of the Full Board shall constitute a
quorum for the transaction of business or of any specified item of business at
any meeting of the Board, and, except as otherwise expressly required by the
General Corporation Law or the Certificate of Incorporation or these By-Laws,
8
the act of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the Board. In the event one or more of the
directors shall be disqualified to vote at any meeting, then the required quorum
shall be reduced by one for each such director so disqualified; provided,
however, that in no case shall less than one-third (1/3) of the number so fixed
constitute a quorum. In the absence of a quorum at any meeting of the Board, a
majority of the directors present thereat may adjourn such meeting to another
time and place. Notice of the time and place of any such adjourned meeting shall
be given to all of the directors unless such time and place were announced at
the meeting at which the adjournment was taken, in which case such notice shall
only be given to the directors who were not present thereat. At any adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally called. The directors shall
act only as a Board and the individual directors shall have no power as such.
3.16 Action by the Board. All corporate action taken by the Board or any
committee thereof shall be taken at a meeting of the Board, or of such
committee, as the case may be, except that any action required or permitted to
be taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee. Members of the Board, or any
committee designated by the Board, may participate in a meeting of the Board, or
of such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 3.16 shall constitute presence in person at such meeting.
ARTICLE 4
COMMITTEES OF THE BOARD
4.1 Committees. The Board may, by resolution passed by a majority of the
Full Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. Such committees, members thereof
and alternate and replacement members may be proposed by the Chairman, subject
to approval by a majority of the Full Board. Each such committee shall serve at
the pleasure of the Board. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution of the Board, shall have and may exercise all the
powers and authority of the Board in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but no such committee shall have the power
or authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the By-Laws of the
Corporation; and, unless the resolution designating it expressly so provides or
the Certificate of Incorporation or these By-Laws so provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
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4.2 Executive Committee. When the Board is not in session, the Executive
Committee shall have and may exercise all of the authority of the Board, except
to the extent that such authority shall be limited by the resolution
establishing the Executive Committee and the General Corporation Law.
4.2.1. Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular meeting of the Board
following his designation and until his successor is designated as a member
of the Executive Committee and is qualified or until his earlier death,
resignation or removal.
4.2.2 Meetings. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may
fix from time to time. The Chairman, or in the absence of the Chairman,
such other member of the Executive Committee as designated by the Executive
Committee shall preside at all meetings. Special meetings of the Executive
Committee may be called by any member thereof upon such notice as provided
in Section 3.11. Such notice shall be deemed to be given as provided in
Section 3.11. Any member of the Executive Committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof
who attends in person. The notice of a meeting of the Executive Committee
need not state the business proposed to be transacted at the meeting.
4.2.3 Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business or of any
specified item of business at any meeting thereof, and except as otherwise
expressly required by the General Corporation Law or the Certificate of
Incorporation or these By-Laws, the act of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
Executive Committee.
4.2.4 Action Without a Meeting. Any action required or permitted to be
taken by the Executive Committee at any meeting may be taken without a
meeting if all of the members of the Executive Committee consent thereto,
in writing, and the writing or writings are filed with the minutes of
proceedings of the Executive Committee. Members of the Executive Committee
may participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
4.2.5 Vacancies. The Chairman may propose to fill, subject to approval
by a majority of the Full Board, and the Board may fill by resolution
adopted by a majority of the Full Board, any vacancy in the Executive
Committee.
4.2.6 Resignations and Removal. Any member of the Executive Committee
may be removed at any time, with or without cause by resolution adopted by
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a majority of the Full Board. Any member of the Executive Committee may
resign at any time from the Executive Committee by giving written notice to
the Chairman or, in the absence of the Chairman, the Secretary. Such
resignation shall take effect at the time therein specified, and, unless
otherwise specified, the acceptance of such resignation shall not be
necessary to make it effective.
4.3. Other Committees. The tenure and qualifications of the members of each
other committee; the time, place and organization of such committee's meetings;
the notice required to call any such meeting; the number of members of each such
committee that shall constitute a quorum; the affirmative vote of the committee
members required effectively to take action at any meeting at which a quorum is
present; the action that any such committee can take without a meeting; the
method in which a vacancy among the members of such committee can be filled and
the procedures by which resignations and removals of members of such committee
shall be acted upon or accomplished shall be fixed by the resolution adopted by
the Board relative to such matters. In the absence of such resolutions, Sections
4.2.1 through 4.2.6 shall apply to each such committee as if such committee were
the Executive Committee.
ARTICLE 5
OFFICERS
5.1 Officers. The Board shall elect a Chairman, a President, a Secretary
and a Treasurer, and may elect one or more Vice Chairmen, Vice Presidents and
such other Corporate Officers and other officers as it may determine. The Board
may designate the standing, seniority or area of special competence of the Vice
Presidents elected or appointed by it. Each officer shall hold his office until
his successor is elected and qualified or until his earlier death, resignation
or removal in the manner provided in Section 5.2 of the By-Laws. Any two or more
offices may be held by the same person. All officers as between themselves and
the Corporation shall have such authority and perform such duties in the
management of the Corporation as may be provided in the By-Laws or as the Board
may from time to time determine.
5.2 Removal of Officers. Any officer elected by the Board may be removed by
the Board with or without cause. The removal of an officer without cause shall
be without prejudice to his contract rights, if any. The election or appointment
of an officer shall not of itself create contract rights.
5.3 Resignations. Any Vice President who is a Corporate Officer may resign
at any time by so notifying the Board or the President. Any other Corporate
Officer may resign at any time by so notifying the Board or the Chairman. Any
other officer may resign at any time by so notifying the person to whom he
reports. Such resignation shall take effect at the date of receipt of such
notice or at such later time as is therein specified, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective. The resignation of an officer shall be without prejudice to the
contract rights of the Corporation, if any.
5.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed in the By-Laws for the regular
election or appointment to such office.
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5.5 Compensation. Salaries or other compensation of the officers may be
fixed from time to time by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that he is also a
director.
5.6 Chairman. The Chairman, if one shall have been elected, shall be a
member of the Board, a Corporate Officer and, if present, shall preside at each
meeting of the Board, the Executive Committee and the stockholders. The Chairman
also shall perform such duties as from time to time may be assigned to him by
the Board.
5.7 President. The President shall perform all duties incident to the
office of President and such other duties as from time to time may be assigned
to him by the Board. He may, with the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer, sign certificates for shares of capital
stock of the Corporation. Subject to the provisions of Section 6.2, he may sign
and execute in the name of the Corporation deeds, mortgages, bonds, contracts
and other instruments, except in cases where the signing and execution thereof
shall be expressly delegated by the Board or by the By-Laws to some other
officer or agent of the Corporation, or shall be required by law otherwise to be
signed or executed. In the absence of inability to act of the President, the
Chairman, or, in his absence or inability to act, such Corporate Officer or
Corporate Officers as designated by the Board, shall perform all of the duties
of the President and so acting shall have all of the powers of and be subject to
all restrictions upon the President.
5.8 Chief Executive Officer. The Chief Executive Officer, if one shall have
been elected by the Board, may, at the discretion of the Board, in general,
supervise and control the affairs and business of the Corporation, subject to
control by the Board. Otherwise, the Chief Executive Officer shall perform such
duties as from time to time may be assigned to him by the Board; and, in
general, shall perform all duties incident to the office of the Chief Executive
Officer.
5.9 Vice Presidents. Each Vice President shall perform such duties as from
time to time may be assigned to him by the Board, or by the President to the
extent not inconsistent with assignments or directions of the Board. Any Vice
President may also, with the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer, sign certificates for shares of capital
stock of the Corporation; may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts or other instruments authorized by the Board,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board or by the By-Laws to some other officer or agent of the
Corporation, or shall be required by law otherwise to be signed or executed.
5.10 Secretary. The Secretary, if present, shall act as secretary of all
meetings of the stockholders and of the Board, and shall keep the minutes
thereof in the property book or books to be provided for that purpose; he shall
see that all notices required to be given by the Corporation are duly given and
served; he may, with the President or a Vice President, sign certificates for
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shares of capital stock of the Corporation; he shall be custodian of the seal of
the Corporation and may seal with the seal of the Corporation, or a facsimile
thereof, all certificates for shares of capital stock of the Corporation and all
documents, the execution of which on behalf of the Corporation under its
corporate seal is authorized in accordance with the provisions of the By-Laws;
he shall have charge of the stock ledger and also of the other books, records
and papers of the Corporation relating to its organization and management as a
Corporation, and shall see that the reports, statements and other documents
required by law are properly kept and filed; and shall, in general, perform all
the duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him by the Board, or by the President to the
extent not inconsistent with assignments or directions of the Board.
5.11 Treasurer. The Treasurer shall have charge and custody of , and be
responsible for, all funds, securities and notes of the Corporation; receive and
give receipts for monies due and payable to the Corporation from any sources
whatsoever; deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositaries as shall be authorized by the Board
and selected in accordance with these By-Laws; against proper vouchers, cause
such funds to be disbursed by checks or drafts on the authorized depositaries of
the Corporation signed in such manner as shall be determined in accordance with
any provisions of the By-Laws, and may be responsible for the accuracy of the
amounts of all monies so disbursed; regularly enter or cause to be entered in
books to be kept by him or under his direction full and adequate account of all
monies received or paid by him for the account of the Corporation; have the
right to require, from time to time, reports or statements giving such
information as he may desire with respect to any and all financial transactions
of the Corporation from the officers or agents transacting the same; render to
the Chief Executive Officer or the Board, whenever the Chief Executive Officer
or the Board, respectively, shall require him so to do, an account of the
financial condition of the Corporation and of all his transactions as Treasurer;
exhibit at all reasonable times his books of account and other records to any of
the directors upon application at the office of the Corporation where such books
and records are kept; and, in general, perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the Board, or by the President to the extent not inconsistent with
assignments or directions of the Board; and he may sign with the President or a
Vice President certificates for shares of capital stock of the Corporation.
5.12 Assistant Secretaries and Assistant Treasurers. Assistant Secretaries
and Assistant Treasurers shall perform such duties as shall be assigned to them
by the Secretary or by the Treasurer, respectively, or by the Board, or by the
President to the extent not inconsistent with assignments or directions of the
Board. Assistant Secretaries and Assistant Treasurers may, with the President or
a Vice President, sign certificates for shares of capital stock of the
Corporation.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize any officer, employee
or agent, in the name and on behalf of the Corporation, to enter into any
contract or execute and satisfy any instrument, and any such authority may be
general or confined to specific instances, or otherwise limited.
13
6.2 Loans. The President or any other officer, employee or agent, when and
to the extent authorized by the Board, may effect loans and advances at any time
for the Corporation from any bank, trust company or other institutions or from
any firm, corporation or individual and for such loans and advances may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, and, when authorized by the Board so to do,
may pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority conferred
by the Board may be general or confined to specific instances or otherwise
limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all notes or other
evidences of indebted-ness of the Corporation shall be signed on behalf of the
Corporation in such manner as shall from time to time be determined by
resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed shall be
deposited from time to time to the order of the Corporation in such banks, trust
companies or other depositaries as the Board may select or as may be selected by
an officer, employee or agent of the Corporation to whom such power may from
time to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of the
Corporation shall be represented by certificates in such form (consistent with
the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and may be sealed with the seal of the Corporation or
a facsimile thereof. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon any certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, such certificate may, unless otherwise ordered by the Board, be issued
by the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by his duly authorized attorney appointed by a power of attorney duly
executed and filed with the Secretary or a transfer agent of the Corporation,
and on surrender of the certificate or certificates representing such shares of
capital stock properly endorsed for transfer and upon payment of all necessary
transfer taxes. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Canceled," with the date of cancellation, by the
14
Secretary or an Assistant Secretary or the transfer agent of the Corporation. A
person in whose name shares of capital stock shall stand on the books of the
Corporation shall be deemed the owner thereof to receive dividends, to vote as
such owner and for all other purposes as respects the Corporation. No transfer
of shares of capital stock shall be valid as against the Corporation, its
stockholders and creditors for any purpose, except to render the transferee
liable for the debts of the Corporation to the extent provided by law, until
such transfer shall have been entered on the books of the Corporation by an
entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from time to time
maintain one or more transfer offices or agents and registry offices or agents
at such place or places as may be determined from time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of any
shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his legal representatives, to make proof satisfactory
to the Board of such loss, destruction, theft or mutilation and to advertise
such fact in such manner as the Board may require, and to give the Corporation
and its transfer agents and registrars, or such of them as the Board may
require, a bond in such form, in such sums and with such surety or sureties as
the Board may direct, to indemnify the Corporation and its transfer agents and
registrars against any claim that may be made against any of them on account of
the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 Regulations. The Board may make such rules and regulations as it may
deem expedient, not inconsistent with the By-Laws or with the Certificate of
Incorporation, concerning the issue, transfer and registration of certificates
representing shares of its capital stock.
ARTICLE 8
INDEMNIFICATION
8.1 Actions other than by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
or she is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
15
proceedings, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
8.2 Actions by or in the Right of the Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
8.3 Success on the Merits. To the extent that any person described in
Section 8.1 or Section 8.2 has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in said Sections, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
8.4 Specific Authorization. Any indemnification under Section 8.1 or
Section 8.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of any
person described in said Sections is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in said Sections. Such
determination shall be made (1) by the Board by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders of the Corporation.
8.5 Advance Payment. Expenses incurred in defending any civil, criminal,
administrative, or investigative action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of any person
described in said Section to repay such amount if it shall ultimately be
determined that he or she is not entitled to indemnification by the Corporation
as authorized in this Article.
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8.6 Non-Exclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, the other Sections of this Article shall
not be deemed exclusive of any other rights to which those provided
indemnification or advancement of expenses may be entitled under the Certificate
of Incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office.
8.7 Insurance. The Board may authorize, by a vote of the majority of the
full board, the Corporation to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of this Article.
8.8. Continuation of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
8.9 Severability. If any word, clause or provision of this Article or any
award made hereunder shall for any reason be determined to be invalid, the
provisions hereof shall not otherwise be affected thereby but shall remain in
full force and effect.
8.10 Intent of Article. The intent of this Article is to provide for
indemnification and advancement of expenses to the fullest extent permitted by
Section 145 of the General Corporation Law of Delaware. To the extent that such
Section or any successor section may be amended or supplemented from time to
time, this Article shall be amended automatically and construed so as to permit
indemnification and advancement of expenses to the fullest extent from time to
time permitted by law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of the
stockholders, the Board and any committee of the Board. The Corporation shall
keep at the office designated in the Certificate of Incorporation or at the
office of the transfer agent or registrar of the Corporation, a record
containing the names and addresses of all stockholders, the number and class of
shares held by each and the dates when they respectively became the owners of
record thereof.
9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
17
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible written
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
9.3 Inspection of Books and Records. Except as otherwise provided by law,
the Board shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations, the accounts, books, minutes and other
records of the Corporation, or any of them, shall be open to the inspection of
the stockholders.
ARTICLE 10
SEAL
The Board may adopt a corporate seal which shall be in the form of a circle
and shall bear the full name of the Corporation, the year of its incorporation
and the word "Delaware".
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be determined, and may be changed,
by resolution of the Board.
ARTICLE 12
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board, the Chairman or the
Chief Executive Officer may, from time to time, appoint one or more attorneys or
agents of the Corporation, in the name and on behalf of the Corporation, to cast
the votes which the Corporation may be entitled to cast as a stockholder or
otherwise in any other corporation, any of whose shares or securities may be
held by the Corporation, at meetings of the holders of stock or other securities
of such other corporation, or to consent in writing to any action by any such
other corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause to
be executed on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies, consents, waivers or other instruments as he
may deem necessary or proper in the premises; or the Chairman or the Chief
Executive Officer may himself attend any meeting of the holders of the stock or
other securities of any such other corporation and thereat vote or exercise any
or all other powers of the Corporation as the holder of such stock or other
securities of such other corporation.
18
ARTICLE 13
AMENDMENTS
The By-laws may be altered, amended, supplemented or repealed, or new
By-laws may be adopted, by vote of the holders of shares representing a majority
of the Votes of the Total Outstanding Shares or by the vote of two-thirds of the
Full Board, when such power is conferred upon the Board by the Certificate of
Incorporation, at any meeting of the stockholders or of the Board, provided
notice of the proposed change was given in the notice of the meeting or, in the
case of a meeting of the Board, in a notice given not less than two (2) days
prior to the meeting.
ARTICLE 14
MISCELLANEOUS
Unless the context specifically requires otherwise, any references in these
By-laws to any gender shall include all genders; any reference to the singular
shall include the plural; and any reference to the plural shall include the
singular.
19
EXHIBIT 4.1
(front)
NUMBER SHARES
MUC ________ ________
IMMUNOMEDICS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
fullypaid and non-assessable shares of the Common Stock of the par value
of One Cent ($.01) each of
IMMUNOMEDICS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its duly authorized officers and its corporate seal to be hereunto
affixed.
Dated:
Secretary [IMMUNOMEDICS, INC. Chairman
CORPORATE
SEAL
DELAWARE]
COUNTERSIGNED
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
_________________________________
AUTHORIZED SIGNATURE
(back)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - __ Custodian __
TEN ENT - as tenants by the entireties (Cust) Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For Value Received, __________________________________________________
_________________________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________shares
of the captial stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated _______________________________________
_______________________________________________________
NOTICE:THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Immunomedics, Inc. (the
"Company") and American Stock Transfer & Trust Company, as Rights Agent, dated
as of March 4, 2002, as it may from time to time be amended or supplemented
pursuant to its terms (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the principal
executive offices of Immunomedics, Inc. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. Immunomedics,
Inc. will mail to the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor. Under certain
circumstances, Rights that are or were acquired or beneficially owned by
Acquiring Persons (as defined in the Rights Agreement) may become null and void.
EXHIBIT 10.3
IMMUNOMEDICS, INC. 2002 STOCK OPTION PLAN
(As amended on June 12, 2002)
1. Purpose of Plan. The purpose of this 2002 Stock Option Plan is to
promote the interests of Immunomedics, Inc. and its stockholders by encouraging
employees, consultants, members of the Corporation's Scientific Advisory Board,
if any, and any members of the Corporation's Board of Directors to acquire a
proprietary interest in the Corporation, thereby increasing the personal
interest and special effort of such persons to achieve sound growth and
profitability for the Corporation, and to enhance the Corporation's efforts to
attract and retain competent Employees, Consultants, Directors and Advisors (as
defined below).
2. Definitions. The following terms when used herein shall have the
meanings set forth below, unless a different meaning is plainly required by the
context:
Advisor. A person who has been appointed to and continues to serve on
the Corporation's Scientific Advisory Board.
Affiliate. Affiliate, as defined in Rule 12b-2 promulgated under
Section 12 of the Exchange Act.
Beneficial Owner. Beneficial Owner, as defined in Rule 13d-3 under the
Exchange Act.
Board. The Board of Directors of the Corporation.
Cause. Cause means, but is not limited to, dishonesty with respect to
the Corporation or any Affiliate, insubordination, substantial malfeasance
or non-feasance of duty, unauthorized disclosure of confidential
information, breach by the Optionee of any provision of any employment,
consulting, advisory, nondisclosure, non-competition or similar agreement
between the Optionee and the Corporation, and conduct substantially
prejudicial to the business of the Corporation or any Affiliate. The
determination of the Committee as to the existence of Cause will be
conclusive on the Optionee and the Corporation. Cause is not limited to
events that have occurred prior to the Optionee's Employment Termination
Date, nor is it necessary that the Committee's finding of Cause occur prior
to termination. Notwithstanding the foregoing, any definition in an
agreement between the Optionee and the Corporation or an Affiliate, which
contains a conflicting definition of "cause" for termination and which is
in effect at the time of such termination, shall supersede the definition
in this Plan with respect to that Optionee unless specifically provided
otherwise in an Option Agreement.
Code. The Internal Revenue Code of 1986, as it has been and may be
amended from time to time. Reference to any section of the Code shall
include any provision successor thereto.
1
Committee. The Committee provided for in Section 8.
Common Stock. Shares of the Corporation's common stock, par value $.01
per share, and any other shares of common stock from time to time
authorized pursuant to the Corporation's Certificate of Incorporation, as
amended.
Consultant. A person performing consulting or advisory services to the
Corporation who is not an Employee or a Director.
Corporation. Immunomedics, Inc., a Delaware corporation.
Director. A person who has been elected to and continues to serve on
the Board.
Employees. Officers and other persons employed by the Corporation or
its Subsidiaries, as determined by the Board or the Committee from time to
time.
Employment Termination Date. The date upon which the employment of the
Optionee with the Corporation, any Parent or Subsidiaries terminates, the
date the Optionee's service as a Director terminates, the date the
Optionee's service as an Advisor terminates, the date the Optionee's
service as a Consultant terminates or, in the case of an Optionee serving
in more than one of such capacities, the last of such dates.
Exchange Act. The Securities Exchange Act of 1934, as amended from
time to time.
Incentive Option. An option to acquire shares of Common Stock which is
intended to satisfy the requirements of Section 422 of the Code.
1992 Plan. The Immunomedics, Inc. 1992 Stock Option Plan, as amended
and restated.
Non-Qualified Option. An option to acquire shares of Common Stock
which is not intended to satisfy the requirements of Section 422 of the
Code.
Option. An Incentive Option or a Non-Qualified Option granted to an
Optionee pursuant to the Plan.
Option Agreement. A written agreement between the Corporation and an
Optionee evidencing the grant of an Option and containing terms and
conditions concerning the exercise of the Option.
Option Price. The price to be paid for shares of Common Stock being
purchased pursuant to the exercise of an Option.
Option Settlement. The cash, shares of Common Stock, or a combination
thereof, which may be paid to an Optionee pursuant to Section 7.
2
Optionee. An Employee, Director, Consultant or Advisor who has been
granted an Option. Also includes the personal representative, heir or
legatee of an Optionee who has the right to exercise an Option upon the
death of an Optionee.
Outside Directors. A Director who is not also an Employee.
Parent. Parent Corporation as defined in Section 424(e) of the Code.
Person. Person, as defined in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Corporation or any of its subsidiaries, (ii)
a trustee or other fiduciary holding securities under an employee benefit
plan of the Corporation or any of its Affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities,
or (iv) a corporation owned, directly or indirectly, by the stockholders of
the Corporation in substantially the same proportions as their ownership of
stock of the Corporation.
Plan. The 2002 Stock Option Plan provided for herein, as it may be
amended from time to time.
Subsidiary. Subsidiary Corporation as defined in Section 424(f) of the
Code.
Value. The price of the last sale of the Common Stock on the NASDAQ
automated quotation system on the date fair market value is to be
determined or, if the Common Stock is not listed on the NASDAQ, the closing
bid price (or the average of the closing bid price and asked price) on the
exchange or system on which the Common Stock is listed or as quoted by the
principal market-maker of the Common Stock; if the Common Stock cannot be
valued by any of the foregoing methods, Value shall be as determined by the
Committee.
3. Eligibility and Participation. Persons eligible to receive Options under
the Plan shall be Employees, Directors, Consultants or Advisors selected by the
Committee; provided, Incentive Options shall be granted to Employees only. In
determining persons to whom Options, both Incentive and Non-Qualified, shall be
granted, the number of shares to be covered by each Option, and whether the
Option shall be an Incentive Option or a Non-Qualified Option, or both, the
Committee shall take into account the duties of the respective persons, their
present and potential contribution to the success of the Corporation, their
anticipated number of years of active service remaining and such other factors
as it deems relevant in connection with accomplishing the purposes of the Plan.
A person who has been granted an Option may be granted an additional Option or
Options as the Committee shall so determine.
4. Shares Subject to the Plan. The shares to be offered under the Plan
shall be the Common Stock, which shares may be authorized but unissued shares or
treasury shares. Subject to the adjustments provided for in Section 9, the
aggregate number of shares of Common Stock to be delivered upon exercise of all
Options granted under the Plan, shall not exceed 8,000,000 shares. Shares of
Common Stock subject to, but not delivered under, an Option terminating or
expiring for any reason prior to the exercise thereof in full, shall be deemed
available for Options thereafter granted during the term of the Plan.
3
5. Terms and Conditions of All Options. All Options granted hereunder shall
be issued subject to the following terms and conditions:
a. Non-Qualified Options may be granted to any Optionee. Incentive
Options shall be granted only to Employees. No Incentive Options shall
be granted to any Optionee who immediately after the granting of an
Incentive Option owns (within the meaning of Section 422(c)(5) of the
Code) more than 10% of the issued and outstanding Common Stock, unless
such Incentive Option is granted with an Option Price of not less than
110% of the Value of the Common Stock at the time of the grant of the
Option.
b. Unless otherwise determined by the Committee, all Options (other than
those granted to Consultants) shall be first exercisable as to 25% of
the total number of shares of Common Stock underlying such Option on
the first anniversary of the date of grant, and to an additional 25%
of such shares on each of the second, third and fourth anniversaries
of such date of grant.
c. If the Option is an Incentive Option, the aggregate Value (determined
at the time the Incentive Option is granted) of the Common Stock with
respect to which Incentive Options granted hereunder and incentive
stock options granted under any other plan of the Corporation (or any
Parent or Subsidiary thereof) are exercisable by the Optionee for the
first time in any calendar year shall not exceed $100,000.
d. Options shall not be transferable by the Optionee otherwise than (i)
by will or the laws of descent and distribution, or (ii) as approved
by the Committee in its discretion and set forth in the applicable
Option Agreement. Notwithstanding the foregoing, an Incentive Option
transferred except in compliance with clause (i) above shall no longer
qualify as an Incentive Option. Except as provided above, an Option
shall be exercisable, during the Optionee's lifetime, only by such
Optionee and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of any Option
or of any rights granted thereunder contrary to the provisions of this
Plan, or the levy of any attachment or similar process upon an Option,
shall be null and void.
e. Upon notice of an Employment Termination Date for Cause, the Options
held by such Optionee at such date shall terminate and be of no
further force and effect. Upon an Employment Termination Date (other
than for Cause or as a result of death or Disability of the Optionee),
the Option shall terminate upon the earlier to occur of (i) three
4
months after the Employment Termination Date, (ii) the Option's
expiration date, or (iii) such other date as shall be specified in the
Option Agreement. The Option shall be exercisable during such period
after the Optionee's Employment Termination Date with respect to the
number of shares as to which the Option shall have been exercisable on
the date immediately preceding the Employment Termination Date.
f. In the event of the Optionee's death prior to his Employment
Termination Date, or if such termination is as a result of the
Optionee's permanent and total disability (as that term is defined in
Section 105(d)(4) of the Code and referred to herein as "Disability"),
or if the termination date of such Option has been extended in
accordance with subsection 5.e hereof, the Option shall terminate upon
the earlier to occur of (i) 12 months after the date of the Optionee's
death or Disability, (ii) the Option's expiration date, or (iii) such
other date as shall be specified in the Option Agreement. The Option
shall be exercisable during such period after the Optionee's death or
Disability with respect to the number of shares as to which the Option
shall have been exercisable on the date immediately preceding the
Optionee's death or Disability.
g. Any exercise or attempt to exercise any Option by an Optionee, and any
request for any Option Settlement in accordance with Section 7 hereof,
during a period commencing 180 days prior to the termination of such
Optionee's employment or other relationship with the Corporation for
any reason and ending 90 days after such termination, shall be subject
to the Corporation's right to (i) deny the exercise of such Option or
such request, (ii) rescind the exercise of such Option (if the Option
has been exercised but the underlying shares of Common Stock have not
been sold), or (iii) be paid by the Optionee, upon the demand of the
Corporation, the amount of any Option Settlement paid and the amount
of profits (i.e., the difference between the exercise price of the
Option and the sale price of the Common Stock acquired upon such
exercise) received by the Optionee as a result of the exercise of such
Option if such Option has been exercised and the underlying shares of
Common Stock have been sold. The right of the Corporation provided in
the foregoing sentence may be exercised only (i) on or prior to the
90th day after termination of the employment or other relationship of
the Optionee with the Corporation and (ii) if the Committee determines
that the Optionee has voluntarily terminated his employment with the
Corporation or the Optionee has been terminated for Cause for
breaching Corporation policy or for a breach of a material duty or
obligation to the Corporation.
6. Terms and Conditions of Option Agreement. The Committee shall have the
power, subject to the limitations contained in this Plan, to prescribe
additional terms and conditions in respect of the granting or exercise of any
Option under the Plan and in particular shall prescribe the following terms and
conditions, which shall be contained in the Option Agreement for such Option:
5
a. Whether the Option is an Incentive Option or a Non-Qualified Option.
b. The number of shares of Common Stock to which the Option pertains.
c. The exercise price of the Option, which shall not be less than 100% of
the Value of the Common Stock at the time of the grant of the Option,
except as provided in Section 5.a.
d. The term of the Option, which shall not exceed 10 years from the date
on which the Option is granted; provided, if the Optionee owns more
than 10% of the issued and outstanding Common Stock, and the Option is
an Incentive Option, the term shall not exceed five years.
e. The method or time when the Option may be exercised in whole or in
part.
f. Whether the Option Price may be paid in whole or in part in shares of
Common Stock then owned by the Optionee.
g. The provisions for the withholding of Federal, state and local income
or other taxes which shall be due in connection with the exercise of
the Option.
h. Each Option Agreement shall provide that, upon request by the
Committee for such a representation, the Optionee shall deliver to the
Committee at the time of any exercise of an Option or portion thereof,
a written representation that the shares of Common Stock to be
acquired upon such exercise are to be acquired for investment and not
for resale or with a view to the distribution thereof. Upon such
request, delivery of such representation prior to the delivery of any
shares of Common Stock issued upon exercise of an Option and prior to
the expiration of the Option period shall be a condition precedent to
the right of the Optionee or such other person to purchase any shares.
7. Option Settlement Provisions. Each Optionee may request that, in lieu of
exercising an Option, he receive shares of Common Stock, cash, or a combination
of Common Stock and cash, having a fair market value equal to the amount by
which the Value of the shares of Common Stock subject to the Option at the time
of such request exceeds the Option Price (the "Option Settlement"), as follows:
a. The request of the Optionee shall be in a writing delivered to the
Committee during the period commencing with the third day after, and
ending with the twelfth day after the release by the Corporation of
its quarterly or annual summary statements of earnings.
6
b. The Committee shall, in its sole discretion, determine whether to
permit an Optionee to receive an Option Settlement in lieu of
exercising the Option and, if the Committee determines to permit the
Optionee to receive an Option Settlement, the Committee, in its sole
discretion, shall determine what portion of the Option Settlement
shall be in cash and what portion shall be in shares of Common Stock.
c. For the purpose of determining the amount of the Option Settlement,
the Value of a share of the Common Stock shall be determined on the
date the written request referred to in Section 7.a. is received by
the Committee; provided, that the amount of the Option Settlement
shall not exceed twice the Option Price of the shares of Common Stock
under the Option being cancelled. For example, if the Option Price per
share is $7, the Option Settlement cannot exceed $14 per share.
d. Upon the payment of an Option Settlement, the Option with respect to
which the Option Settlement was paid shall be cancelled the same as if
the Option had been exercised in full.
8. Administration of Plan.
a. The Plan shall be administered by the Board, except to the extent the
Board delegates its authority to a committee (the "Committee")
comprised of no less than two of the Corporation's Outside Directors.
Unless otherwise determined by the Board, such persons shall be
"disinterested persons" as such term is defined by Rule 16b-3
promulgated under the Securities Act of 1934 and Outside Directors as
defined in Section 162(m) of the Code.
b. Subject to such orders or resolutions not inconsistent with the
provisions of the Plan, as may from time to time be issued or adopted
by the Board, the Committee shall have full power and authority to
interpret the provisions and supervise the administration of the Plan.
All decisions, determinations and selections made by the Committee
pursuant to the provisions of the Plan and applicable existing orders
or resolutions of the Board shall be final, unless otherwise
determined by the Board. In addition, the Board of Directors may take
any action under the Plan that would otherwise be the responsibility
of the Committee. Each Option granted shall be evidenced by an Option
Agreement containing such terms and conditions that may be approved by
the Committee and which shall not be inconsistent with the Plan and
the orders and resolutions of the Board with respect thereto. If
permissible under applicable law, the Board or the Committee may
allocate all or any portion of its responsibilities and powers to any
one or more of its members and may delegate all or any portion of its
responsibilities and powers to any other person selected by it. Any
such allocation or delegation may be revoked by the Board or the
Committee at any time.
7
c. Outside Directors may be granted Options at the discretion of the
Committee. In addition, Outside Directors shall automatically be
granted Options under the Plan in accordance with the formula set
forth below:
(i) Outside Directors shall be granted an Option to purchase 10,000
shares of Common Stock upon the date of his election or
appointment to the Board for the first time.
(ii) On each July 1 during the term of the Plan, each Outside Director
who has been a Director for not less than twelve months prior to
such date shall be granted an Option to purchase 10,000 shares of
Common Stock, and each Outside Director who has been a Director
for at least three months but less than twelve months prior to
the date of grant shall receive an Option to purchase such number
of shares of Common Stock determined by multiplying 10,000 times
a fraction, the denominator of which is twelve and the numerator
of which is the number of complete months which such person has
served as a Director.
(iii)All Options granted to Outside Directors shall (1) be
Non-Qualified Options, (2) be exercisable at a price equal to the
Value at the date of grant and (3) be exercisable for a term of
10 years.
Notwithstanding the forgoing, the number of shares underlying the options
to be granted pursuant to the formula set forth in this Section 8.c. shall
be adjusted upon the occurrence of any event referred to in Section 9
hereof as provided in such section.
9. Adjustments Upon Changes in Capitalization.
a. Notwithstanding the limitation set forth in Section 4, in the event of
a stock dividend, stock split or other change in capitalization
affecting the Common Stock (except for changes set forth in Section
9(b) below), the Committee shall make an appropriate adjustment in the
maximum number of shares available under the Plan or to any one
individual and in the number and kind of shares of Common Stock or
other property subject to Options granted under the Plan and to the
Option Price and other terms relating thereto.
b. If the Corporation is to be consolidated with or acquired by another
entity in a merger, sale of all or substantially all of the
Corporation's assets other than a transaction to merely change the
state of incorporation (a "Corporate Transaction"), the Committee or
the board of directors of any entity assuming the obligations of the
Corporation hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for
8
the Common Stock then subject to such Options either the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Corporate Transaction or securities of any
successor or acquiring entity; or (ii) upon written notice to the
Optionees, provide that all Options must be exercised (either to the
extent then exercisable or, at the discretion of the Committee, all
Options being made fully exercisable for purposes of this
Subparagraph), within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; or
(iii) terminate all Options in exchange for a cash payment equal to
the excess of the Value of the Common Stock subject to such Options
(either to the extent then exercisable or, at the discretion of the
Committee, all Options being made fully exercisable for purposes of
this Subparagraph) over the exercise price thereof.
c. In the event of a recapitalization or reorganization of the
Corporation other than a Corporate Transaction pursuant to which
securities of the Corporation or of another corporation are issued
with respect to the outstanding shares of Common Stock, an Optionee
upon exercising an Option after the recapitalization or reorganization
shall be entitled to receive for the purchase price paid upon such
exercise the number of replacement securities which would have been
received if such Option had been exercised prior to such
recapitalization or reorganization.
d. Upon the dissolution or liquidation of the Corporation, all Options
granted under this Plan which as of such date shall not have been
exercised will terminate and become null and void; provided, however,
that if the rights of an Optionee have not otherwise terminated and
expired, the Optionee will have the right immediately prior to such
dissolution or liquidation to exercise any Option to the extent that
the Option is exercisable as of the date immediately prior to such
dissolution or liquidation.
e. Notwithstanding the foregoing, any adjustments made pursuant to
Subparagraph a, b or c above with respect to Incentive Options shall
be made only after the Committee determines whether such adjustments
would constitute a "modification" of such Incentive Options (as that
term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Options. If
the Committee determines that such adjustments made with respect to
Incentive Options would constitute a modification of such Incentive
Options, it may refrain from making such adjustments, unless the
holder of an Incentive Option specifically requests in writing that
such adjustment be made and such writing indicates that the holder has
full knowledge of the consequences of such "modification" on his or
her income tax treatment with respect to the Incentive Option.
10. Time of Granting Options. Except for Options granted pursuant to
Section 8 hereof, nothing contained in the Plan or in any resolution adopted or
9
to be adopted by the Board or by the stockholders of the Corporation, and no
action take by the Committee (other than the granting of a specific Option),
shall constitute the granting of an Option hereunder. The granting of an Option
pursuant to the Plan shall take place on the date such Option is approved by the
Committee or other authorized person pursuant to Section 8 hereof.
11. Amendment and Discontinuance. The Board may, subject to the limitation
set forth in Section 8.c., discontinue, amend, alter or suspend the Plan, but
may not, without the approval of the holders of a majority of all the issued and
outstanding shares of Common Stock present either in person or by proxy at a
meeting duly held for that purpose, make any alteration or amendment thereof
which operates (a) to increase the total number of shares of Common Stock for
which Options may be granted under the Plan, except as resulting from the
operation of Section 9, (b) to extend the maximum option period provided in
Section 6.d., (c) to decrease the minimum Option Price provided in Section 6.c.,
or (d) extend the class of Optionees permitted to be granted Options. Any Option
which is outstanding under the Plan at the time of its amendment or termination
shall remain in effect in accordance with its terms and conditions and those of
the Plan as in effect when the Option was granted. With the consent of the
Optionee affected, the Committee may amend outstanding Option Agreements in a
manner which may be adverse to the Optionee but which is not inconsistent with
the Plan. In the discretion of the Committee, outstanding Option Agreements may
be amended by the Committee in a manner which is not adverse to the Optionee.
12. Change in Control.
a. In the event of a Change in Control, each Option granted to an
Optionee prior to June 12, 2002 pursuant to this Plan shall
immediately become vested and fully exercisable. Each Option granted
pursuant to this Plan on or after June 12, 2002 shall immediately
become vested and fully exercisable in the event of a Change in
Control only if so specified in the Optionee's Option Agreement or
otherwise approved by the Committee. In addition, any Optionee may
request to receive at such time an Option Settlement, as provided in
Section 7, notwithstanding that such election is not made during the
period set forth in Section 7.a.
b. For purposes of this Section 12, a Change in Control shall be deemed
to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Corporation or its affiliates)
representing 50% or more of the combined voting power of the
Corporation's then outstanding securities, excluding any Person
who becomes such a Beneficial Owner in connection with a
transaction described in clause (A) of paragraph (iii) below; or
10
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the date the Plan is approved by the shareholders of the
Corporation, constitute the Board and any new director (other
than a director whose initial assumption of office is in
connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to
the election of directors of the Corporation) whose appointment
or election by the Board or nomination for election by the
Corporation's shareholders was approved or recommended by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously
so approved or recommended; or
(iii)there is consummated a merger or consolidation of the
Corporation or any direct or indirect subsidiary of the
Corporation with any other corporation, other than (A) a merger
or consolidation which results in the directors of the
Corporation immediately prior to such merger or consolidation
continuing to constitute at least a majority of the board of
directors of the Corporation, the surviving entity or any parent
thereof or (B) a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in
the securities Beneficially Owned by such Person any securities
acquired directly from the Corporation or its Affiliates)
representing 50% or more of the combined voting power of the
Corporation's then outstanding securities; or
(iv) the shareholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets, other than a sale or disposition by the Corporation of
all or substantially all of the Corporation's assets immediately
following which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of the
board of directors of the entity to which such assets are sold or
disposed or any parent thereof.
Notwithstanding the foregoing, a "Change in Control" shall
not be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions immediately
following which the record holders of the common stock of the
Corporation immediately prior to such transaction or series of
transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Corporation immediately
following such transaction or series of transactions.
13. Effectiveness and Termination of the Plan.
a. The Plan shall become effective upon adoption by the Board. The Plan
shall be rescinded and all Options granted hereunder shall be null and
void unless within 12 months from adoption of the Plan it shall have
11
been approved by a vote of the holders of a majority of all the issued
and outstanding shares of Common Stock present either in person or by
proxy at a meeting duly held for such purpose.
b. The Plan shall terminate on the earliest to occur of:
(i) The date when all the shares of Common Stock available under
the Plan shall have been acquired through the exercise of
Options granted under the Plan, or the payment of Settlement
Options in lieu of such exercise;
(ii) 10 years after the date of adoption of the Plan by the
Board; or
(iii) Such other date as the Board shall determine.
14. Governing Law. The provisions of the Plan shall be construed,
administered and enforced according to the laws of the State of Delaware.
15. Miscellaneous.
a. The captions and section headings used herein are for convenience
only, shall not be deemed part of the Plan and shall not in any way
restrict or modify the context and substance of any section or
paragraph hereof.
b. The Plan shall be construed in such a fashion that all Incentive
Options shall qualify as "incentive stock options" under Section 422
of the Code.
The Immunomedics, Inc. 1992 Plan was originally adopted by the Board on
September 10, 1992 and approved by the Corporation's shareholders on November 5,
1992. The 1992 Plan was amended and restated by the Board on May 18, 2000 and
approved by the shareholders at the annual meeting of the Corporation's
shareholders on December 6, 2000. On September 25, 2001 the Board adopted,
subject to approval by the shareholders of the Corporation, the Plan, as an
amendment, restatement and continuation of the 1992 Plan.
12
EXHIBIT 10.7
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into this 18th
day of June , 2002, by and among IMMUNOMEDICS,INC., a Delaware Corporation, with
its principal place of business located at 300 American Road, Morris Plains, New
Jersey 07950 ("Immunomedics" or "Corporation"), Dr. David M. Goldenberg residing
at 330 Pleasant Valley Road, Mendham, New Jersey 07926 ("Dr. Goldenberg" or
"Employee") and DMG ASSOCIATES, L.P., a Delaware Limited Partnership ("DMG
Partnership").
W I T N E S S E T H :
WHEREAS, Dr. Goldenberg is a valued employee and Chairman of the Board,
Chief Scientific Officer and a Director of Immunomedics; and
WHEREAS, As of November 20, 2001, Immunomedics is the owner and beneficiary
of a certain $10 Million Universal Life Insurance Policy insuring the life of
Dr. Goldenberg and requiring the payment of annual premium amounts of $343,732
(paid through 11/20/02), as set forth on Schedule A attached to this Agreement
("Universal Life Policy"); and
WHEREAS, Immunomedics desires to reward Dr. Goldenberg for his past years
of service and for his rendering of future additional services by providing Dr.
Goldenberg with severance insurance benefits and severance compensation in the
event of the termination of Dr. Goldenberg's employment with the Corporation,
including as a consequence of a Change of Control of the Corporation, his
Disability or otherwise.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth, the parties hereby agree as follows:
1. DEFINITIONS.
A. Change of Control. For the purposes of this Agreement, the term
"Change of Control" shall mean the occurrence of any of the following
events:
1
(i) Immunomedics is merged or consolidated with another
corporation, or business entity, and as a result of such merger or
consolidation, less than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting corporation or business
entity are owned or controlled by the present stockholders of
Immunomedics.
(ii) Immunomedics sells all or substantially all of its assets to
another corporation or business entity, which is not owned and
controlled by the present stockholders of Immunomedics, is not a
wholly-owned subsidiary of Immunomedics, or is not an affiliated
business entity controlled by Immunomedics.
(iii) There is an acquisition of more than fifty percent (50%) of
the outstanding voting securities of Immunomedics (whether directly,
indirectly, beneficially, or of record) pursuant to any sale
transaction or combination of sale transactions to any unrelated third
party, excluding present stockholders and employees of Immunomedics.
B. Disability. For the purposes of this Agreement, the term
"Disability" shall mean an illness, injury or other physical or mental
condition of Dr. Goldenberg for a period of one hundred eighty (180)
consecutive days, or for a period aggregating one hundred eighty (180) days
during any two hundred seventy (270) day period from the commencement of
such condition, which results in Dr. Goldenberg's inability to perform
during such period substantially all of the duties he performed in his
capacity as director, officer and employee of Immunomedics and to the
extent he was performing such duties immediately prior to the commencement
of such condition, as determined under the group disability income
insurance policy maintained by Immunomedics for Dr. Goldenberg or, if there
is no such group disability income insurance policy, then as provided under
the employment agreement between Dr. Goldenberg and Immunomedics.
C. Purchaser. For the purposes of this Agreement, the term "Purchaser"
shall mean the purchaser through a sale, merger, or other transfer of more
than fifty percent (50%) of the outstanding voting securities of
Immunomedics or all or substantially all of the assets of Immunomedics
pursuant to a Change of Control.
2
2. TRANSFER OF LIFE INSURANCE POLICY.
A. Purchase of Policy. Immunomedics or the Purchaser, as applicable,
shall transfer ownership to DMG Partnership and DMG Partnership shall
purchase the Universal Life Policy as of the date of the termination of the
employment of Dr. Goldenberg with Immunomedics or the Purchaser, as
applicable, in the event of: (i) a Change of Control within six (6) years
of the date of this Agreement; (ii) the Disability of Dr. Goldenberg within
six (6) years of the date of this Agreement; or (iii) for any other reason
whatsoever, including a voluntary or involuntary termination of employment,
but other than as a consequence of a Change of Control or the Disability or
the death of Dr. Goldenberg, occurring as, of, or at any time after three
(3) years of the date of this Agreement.
B. Purchase Price. The purchase price for the transfer and purchase of
the Universal Life Policy by DMG Partnership shall be equal to the lesser
of (i) the total dollar amount which Immunomedics and the Purchaser, as
applicable, have paid in premium costs on the Universal Life Policy as of
the date of Dr. Goldenberg's termination of employment, less any Universal
Life Policy indebtedness to the insurer or indebtedness secured by the cash
surrender value of the Universal Life Policy; or (ii) the cash surrender
value of the Universal Life Policy as of the date of Dr. Goldenberg's
termination of employment, less any Universal Life Policy indebtedness to
the insurer or indebtedness secured by the cash surrender value of the
Universal Life Policy ("Life Insurance Purchase Price").
C. Payment of Purchase Price and Transfer of Policy. The Life
Insurance Purchase Price shall be paid in cash or by certified check by DMG
Partnership to Immunomedics or the Purchaser, as applicable, as of the date
of the termination of the employment of Dr. Goldenberg with Immunomedics or
the Purchaser, as applicable. Upon Immunomedics' or the Purchaser's, as
applicable, receipt of the Life Insurance Purchase Price, Immunomedics or
the Purchaser, as applicable, shall simultaneously execute and deliver
Changes of Ownership and Beneficiary Designation naming DMG Partnership as
the owner and beneficiary of the Universal Life Policy, together with any
other documentation necessary to transfer full and complete ownership of
the Universal Life Policy, to DMG Partnership.
3
3. SEVERANCE COMPENSATION.
A. Termination of Employment. Dr. Goldenberg shall be paid severance
compensation by Immunomedics or the Purchaser, as applicable, as provided
under Sections 3B (Change of Control and Disability) and 3C (Voluntary or
Involuntary Termination After Three Years) of this Agreement in addition to
and notwithstanding any deferred compensation, severance compensation and
other payments and benefits payable to Dr. Goldenberg by Immunomedics or
the Purchaser, as applicable, pursuant to his employment agreement or under
any other agreement as a consequence of the termination of Dr. Goldenberg's
employment with Immunomedics or the Purchaser, as applicable. It is
understood and agreed, however, that in the event of the termination of the
employment of Dr. Goldenberg with Immunomedics within three (3) years of
the date of this Agreement for any reason whatsoever, including a voluntary
or involuntary termination of employment, but other than as a consequence
of a Change of Control or the Disability of Dr. Goldenberg, no severance
compensation shall be payable by Immunomedics to Dr. Goldenberg under this
Agreement.
B. Change of Control and Disability. In the event of a Change of
Control within six (6) years of the date of this Agreement or the
Disability of Dr. Goldenberg within six (6) years of the date of this
Agreement resulting in the termination of the employment of Dr. Goldenberg
with Immunomedics, or the Purchaser, as applicable, severance compensation
shall be paid by Immunomedics or the Purchaser, as applicable, to Dr.
Goldenberg in cash or by certified check equal to the entire Life Insurance
Purchase Price immediately upon the receipt by Immunomedics or the
Purchaser, as applicable, of the Life Insurance Purchase Price from the DMG
Partnership as provided in Section 2.
C. Voluntary or Involuntary Termination After Three Years. In the
event of the termination of the employment of Dr. Goldenberg with
Immunomedics for any reason whatsoever, including a voluntary or
involuntary termination of employment, but other than as a consequence of a
Change of Control or the Disability or death of Dr. Goldenberg, occurring
as, of, or at anytime after three (3) years of the date of this Agreement,
severance compensation shall be paid by Immunomedics to Dr. Goldenberg in
cash or certified check equal to part or all of the Life Insurance Purchase
Price immediately upon the receipt by Immunomedics of the Life Insurance
Purchase Price from DMG Partnership, as follows:
4
(i) Fifty percent (50%) of the Life Insurance Purchase Price upon
the termination of the employment of Dr. Goldenberg as of the three
(3) year anniversary date of this Agreement, together with and as
increased by an additional pro rata amount of the remaining fifty
percent (50%) balance of the Life Insurance Purchase Price for each
additional entire one (1) month period after the three (3) year
anniversary date of this Agreement that the employment of Dr.
Goldenberg continues with Immunomedics until the six (6) year
anniversary date and thereafter of this Agreement, at which time the
severance compensation paid by Immunomedics to Dr. Goldenberg shall be
equal to the entire amount of the Life Insurance Purchase Price.
4. POLICY RESTRICTIONS.
Immunomedics shall not sell, assign, transfer, pledge, encumber,
surrender, cancel, change the ownership or beneficiary designation
provision, nor change the dividend election option of the Universal Life
Policy. Notwithstanding anything else to the contrary in this Agreement,
Immunomedics shall be allowed to borrow against the cash surrender value of
the Universal Life Policy.
5. AMENDMENT OF AGREEMENT.
This Agreement may not be amended, altered or modified, except by a
written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as
provided herein; provided, however, that Dr. Goldenberg may at any time
substitute any other person, entity or trust as the purchaser of the
Universal Life Policy under this Agreement in place of DMG Partnership or
otherwise change part or all of DMG Partnership's rights as set forth in
Section 6 to purchase the Universal Life Policy under this Agreement.
6. ASSIGNMENT OF PURCHASE RIGHTS.
Notwithstanding anything to the contrary in this Agreement, Dr.
Goldenberg shall have the right at anytime to change part or all of DMG
Partnership's rights to purchase the Universal Life Policy under this
Agreement and assign such rights to any person, entity or trust by
execution of a written assignment delivered to Immunomedics and DMG
Partnership.
5
7. ENTIRE AGREEMENT.
This Agreement represents the entire Agreement between the parties
with respect to all matters addressed herein, and all prior Agreements
between the parties, whether oral or written, with respect to the matters
addressed herein, shall be null and void.
8. BINDING AGREEMENT.
This Agreement shall be binding upon the inure to the benefit of
Immunomedics, or the Purchaser, as applicable, and their successors and
assigns, Dr. Goldenberg and his respective heirs, executors, administrators
and assigns and DMG Partnership and its successor and assigns. It is
specifically understood and agreed that in the event of a Change of
Control, the Purchaser shall be deemed to automatically assume, without any
assignment or further writing, all of the rights and obligations of
Immunomedics under this Agreement.
9. NOTICE.
Any notice, consent or demand required or permitted to be given under
the provisions of this Agreement shall be in writing, and shall be signed
by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified
mail, postage prepaid, addressed to such party's address as set forth
herein, unless such party notifies the other party of a different address.
The date of such mailing shall be deemed the date such notice, consent or
demand was given.
10. GOVERNING LAW.
This Agreement, and the rights of the parties hereunder, shall be
governed by and construed in accordance with the laws of the State of New
Jersey.
6
11. COUNTERPARTS.
This Agreement may be executed in counterparts, each of whom shall be
deemed to be an original, but all of which shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first hereinabove written.
ATTEST: IMMUNOMEDICS, INC.
/s/ Patricia Merwin By: /s/ CYNTHIA L. SULLIVAN
- ----------------------- ------------------------------------------------
CYNTHIA L. SULLIVAN, President
WITNESS: EMPLOYEE:
/s/ Patricia Merwin /s/DR. DAVID M. GOLDENBERG
- ----------------------- ------------------------------------------------
DR. DAVID M. GOLDENBERG
DMG ASSOCIATES, L.P.
By: DMG Associates, I, L.L.C., General Partner
/s/ Barbara West By: /s/ EVA J. GOLDENBERG
- ----------------------- ------------------------------------------------
EVA J. GOLDENBERG, Member
/s/ Brett Orlove By: /s/ DEBORAH S. ORLOVE
- ----------------------- ------------------------------------------------
DEBORAH S. ORLOVE, Member
/s/ Brett Orlove By: /s/ NEIL A. GOLDENBERG
- ----------------------- ------------------------------------------------
NEIL A. GOLDENBERG, Member
By: Trust Under Agreement Dated
April 23, 1993 for the Benefit
of Denis C. Goldenberg, Member
/s/ CYNTHIA L. SULLIVAN By: /s/ EVA J. GOLDENBERG
- ----------------------- ---------------------------------------
EVA J. GOLDENBERG, Trustee
/s/ Brett Orlove By: /s/ DEBORAH S. ORLOVE
- ----------------------- ---------------------------------------
DEBORAH S. ORLOVE, Trustee
By: Trust Under Agreement Dated
August 4, 1998, for the Benefit
of Lee R. Goldenberg, Member
/s/ Brett Orlove By: /s/ DEBORAH S. ORLOVE
- ----------------------- ---------------------------------------
DEBORAH S. ORLOVE, Trustee
7
SEVERANCE AGREEMENT
SCHEDULE A
UNIVERSAL LIFE INSURANCE POLICY
Insurance Policy Death Annual Owner/
Company Number Benefit Premium Insured Beneficiary
General 6217682 $10 Million $343,732 David M. Goldenberg Immunomedics, Inc.
American
8
EXHIBIT 10.24
________________________________________________________________________________
________________________________________________________________________________
CONTRIBUTION AND ASSIGNMENT AGREEMENT
between
IBC Pharmaceuticals, LLC,
and
IBC Pharmaceuticals, Inc.
Dated as of June 30, 2002
________________________________________________________________________________
________________________________________________________________________________
CONTRIBUTION AND ASSIGNMENT AGREEMENT
This Contribution and Assignment Agreement (this "Agreement") is entered
into as of the 30th day of June, 2002 by and between IBC Pharmaceuticals, LLC, a
Delaware limited liability company ("IBC") and IBC Pharmaceuticals, Inc., a
Delaware corporation ("Newco").
WHEREAS, IBC is in the business of research, development and
commercialization of therapeutic drugs that target cancer;
WHEREAS, IBC desires to transfer all of the tangible and intangible assets
of, and the business conducted by, IBC (collectively, the "Business") for the
consideration set forth below and the assumption of all of IBC's liabilities;
and
WHEREAS, Newco desires to acquire the Business.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I
CONTRIBUTION OF ASSETS
SECTION 1.1 Delivery of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
1.5) IBC shall contribute to Newco, subject to all claims, charges, liens,
contracts, rights, options, security interests, mortgages, encumbrances and
restrictions whatsoever (collectively, "Claims"), all of the assets, properties
and rights owned by IBC or in which IBC has any right or interest of every type
and description, real, personal and mixed, tangible and intangible, and all
other assets, properties and rights of every kind and nature owned by IBC,
whether or not specifically referred to in this Agreement (collectively, the
"Transferred Assets"), all with the intention that the Business shall be
transferred to Newco as a going concern.
IBC shall effect the transfer of the Transferred Assets to Newco pursuant
to an Assignment Agreement (the "Assignment Agreement") in substantially the
form of Exhibit A attached hereto, and Newco shall assume all liabilities of IBC
pursuant to an Instrument of Assumption (the "Instrument of Assumption") in
substantially the form of Exhibit B attached hereto.
SECTION 1.2 Consideration. In consideration of the Transferred Assets, at
the Closing Newco shall deliver to IBC the following: (i) 5,599,705 shares of
Newco Series A Convertible Preferred Stock, $0.01 par value per share (the
"Series A Shares"); and (ii) 643,701 shares of Newco Series B Convertible
Preferred Stock, $0.01 par value per share (the "Series B Shares" and together
with the Series A Shares, the "Shares").
1
SECTION 1.3 Further Assurances. At any time and from time to time after the
Closing Date, upon the request of Newco and without further consideration, IBC
shall execute, acknowledge and deliver, or shall cause to be executed,
acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may be reasonably
necessary to effectuate the assignment, transfer and conveyance of and confirm
Newco's title to or interest in the Transferred Assets and the Business to
Newco.
SECTION 1.4 Assumption of Liabilities. Newco shall assume all of the
obligations and liabilities of IBC (the "Assumed Liabilities") in connection
with the transfer of the Transferred Assets, including all obligations and
liabilities on account of the operation of the Business prior to, on and after
the Closing Date.
SECTION 1.5 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts at
10 o'clock a.m., on June 30, 2002, or such other location, date and time as may
be agreed upon by the parties (such date and time being called the "Closing
Date"). At the Closing:
A. IBC shall deliver or cause to be delivered to Newco the following:
(i) the Assignment Agreement; and
(ii) all of the books, data, documents, instruments and other records
relating to the Business, including, without limitation, the
original licenses, patents, patent applications, trademark
registrations, permits and all laboratory notebooks and other
notes and records relating to IBC's intellectual property.
B. Newco shall deliver or cause to be delivered to IBC the following:
(i) the Shares; and
(ii) the Instrument of Assumption.
C. The parties shall deliver such further documents, resolutions,
certificates and instruments as any party or its counsel reasonably
requests to facilitate the consummation of the transactions
contemplated hereby, including, but not limited to, any documents
required to be filed with the United States Patent and Trademark
Office.
SECTION 1.6 Tax Consequences. For federal income tax purposes, the parties
intend that the transactions contemplated by this Agreement be treated as a
tax-free reorganization under Section 351 of the Internal Revenue Code of 1986,
as amended.
2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IBC
As an inducement to Newco to enter into this Agreement and to consummate
the transactions contemplated hereby, IBC hereby represents and warrants to
Newco as follows:
SECTION 2.1 Organization and Qualification. IBC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and is duly licensed or qualified to
transact business as a foreign company and is in good standing in each
jurisdiction in which the nature of the Business or the character of the
properties owned or leased by IBC requires such licensing or qualification.
SECTION 2.2 Corporate Power and Authority. IBC has the corporate power and
authority to own and hold its properties and to carry on its business. IBC has
the corporate power and authority to execute, deliver and perform this Agreement
and the other documents and instruments contemplated hereby. The execution,
delivery and performance of this Agreement and the documents contemplated hereby
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized and approved by IBC, and no other corporate action is
necessary for the authorization, execution, delivery and performance by IBC of
this Agreement and the documents contemplated hereby and the consummation of the
transactions contemplated hereby and thereby. This Agreement, and each of the
other agreements, documents and instruments to be executed and delivered by IBC
have been duly executed and delivered by, and constitute the legal, valid and
binding obligation of, IBC enforceable against IBC in accordance with their
terms.
SECTION 2.3 Validity, Etc. Neither the execution and delivery of this
Agreement and the other documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement and such other agreements in compliance with the
terms and conditions hereof and thereof will (i) violate, conflict with or
result in any breach of any agreement, certificate of formation, bylaw,
judgment, decree, order, statute or regulation applicable to IBC, (ii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, (iii) violate,
conflict with or result in a breach, default or termination or give rise to any
right of termination, cancellation or acceleration of the maturity of any
payment date of any of the obligations of IBC or increase or otherwise affect
the obligations of IBC under any law, rule, regulation or any judgment, decree,
order, governmental permit, license or order or any of the terms, conditions or
provisions of any mortgage, indenture, note, license, agreement or other
instrument or obligation related to IBC or to IBC's ability to consummate the
transactions contemplated hereby or thereby, except for such defaults (or rights
of termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing and provided to Newco, (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to IBC
or (v) result in the creation of any Claim upon the Transferred Assets.
SECTION 2.4 Books and Records. IBC has made available to Newco all of the
books and records of IBC, including without limitation, all the financial
statements of IBC (the "Financial Statements"). IBC has no liabilities or
3
obligations of any nature (whether absolute, accrued, fixed, contingent or
otherwise), and there is no existing fact, condition, or circumstance which
could reasonably be expected to result in such liabilities or obligations,
except as set forth in the Financial Statements. Since December 31, 2001, none
of the business, prospects, financial condition, operations, property or affairs
of IBC has been materially adversely affected by any occurrence or development,
individually or in the aggregate, whether or not insured against.
SECTION 2.5 Complete Assets. The Transferred Assets include all the assets
needed to conduct the Business in the manner in which the Business is currently
being conducted.
SECTION 2.6 Litigation. Except as would not materially adversely affect,
individually or in the aggregate, its businesses, operations, properties, assets
or condition (financial or otherwise), there is no (a) action, suit, claim,
proceeding or investigation pending or, to the best of IBC's knowledge,
threatened against or affecting IBC (whether or not IBC is a party or
prospective party thereto), at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (b) arbitration proceeding
relating to IBC or (c) governmental inquiry pending or threatened against or
involving IBC, and there is no basis for any of the foregoing.
SECTION 2.7 Compliance with Law. IBC has complied in all material respects
with and is not in default under, all laws, ordinances, legal requirements,
rules, regulations and orders applicable to it, its operations, properties,
assets, products and services. There is no existing law, rule, regulation or
order, and IBC is not aware of any proposed law, rule, regulation or order,
whether federal or state, which would prohibit or materially restrict Newco
from, or otherwise materially adversely affect Newco in, conducting the Business
in any jurisdiction in which such business is now conducted.
SECTION 2.8 Licenses and Permits. IBC has all the licenses, permits,
pending applications, consents, approvals and authorizations of or from any
public or governmental agency, used in or otherwise necessary in the conduct of
the Business, (collectively, the "Permits") each of which will be duly and
validly transferred to Newco. IBC has complied with all conditions and
requirements imposed by the Permits and IBC has not received any notice of, and
has no reason to believe, that any appropriate authority intends to cancel or
terminate any of the Permits or that valid grounds for such cancellation or
termination exist. IBC owns or has the right to use the Permits in accordance
with the terms thereof without any conflict or alleged conflict or infringement
with the rights of others and subject to no Claim, and each Permit is valid and
in full force and effect, and will not be terminated or adversely affected by
the transactions contemplated hereby.
SECTION 2.9 Insurance. IBC is adequately insured with responsible insurers
in respect of its properties, assets and businesses against risks normally
insured against by companies in similar lines of business under similar
circumstances.
SECTION 2.10 Outstanding Commitments. IBC has made available to Newco true,
correct and complete copies of all of existing contracts, agreements,
commitments, licenses and franchises (the "Agreements"), whether written or
oral, relating to IBC. IBC has paid in full all amounts due as of the date
4
hereof under each Agreement. All of the Agreements are in full force and effect.
IBC and each other party thereto have performed all the obligations required to
be performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any Agreement.
SECTION 2.11 Intellectual Property. IBC owns or possesses adequate licenses
or other enforceable rights to use all intellectual property (the "Intellectual
Property") necessary or desirable to conduct the Business as conducted and as
proposed to be conducted and all such rights will be duly and validly
transferred to Newco pursuant to the terms of this Agreement. None of the
Intellectual Property is involved in any interference or opposition proceeding,
and there has been no written notice received by IBC or any of its affiliates or
any other indication that any such proceeding will hereafter be commenced. IBC
and its affiliates have used all reasonable efforts to protect their
Intellectual Property against infringement by others and to preserve their trade
secrets and confidential or proprietary information. IBC does not have any basis
for provoking or initiating an interference or opposition proceeding with
respect to any Intellectual Property held or used by others, and does not have
any basis for believing that any of the Intellectual Property is being infringed
by others. All of the Intellectual Property rights of IBC, licenses, and other
contracts and agreements with respect thereto, to which IBC is a party, are
legally valid and binding and in full force and effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to IBC as follows:
SECTION 3.1 Organization. Newco is duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and is duly qualified
to transact business as a foreign corporation in each jurisdiction in which the
failure to so qualify would have a material adverse impact on Newco's ability to
acquire the Transferred Assets.
SECTION 3.2 Newco Power and Authority. Newco has the corporate power and
authority to execute, deliver and perform this Agreement and the other documents
and instruments contemplated hereby. The execution, delivery and performance of
this Agreement and the documents contemplated hereby and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by Newco, and no other corporate action is necessary for the
authorization, execution, delivery and performance by Newco of this Agreement
and the documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby This Agreement, and each of the other
agreements, documents and instruments to be executed and delivered by Newco have
been duly executed and delivered by, and constitute the valid and binding
obligation of Newco enforceable against Newco in accordance with their terms.
SECTION 3.3 Validity, Etc. Neither the execution and delivery of this
Agreement and the other documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement and such other agreements in compliance with the
terms and conditions hereof and thereof will (i) conflict with or result in any
breach of any trust agreement, certificate of incorporation, bylaw, judgment,
decree, order, statute or regulation applicable to Newco (ii) require any
5
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority (iii) result in a breach of or
default (or give rise to any right of termination, cancellation or acceleration)
under any law, rule or regulation or any judgment, decree, order, governmental
permit, license or order or any of the terms, conditions or provisions of any
mortgage, indenture, note, license, agreement or other instrument to which Newco
is a party or (v) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Newco.
SECTION 3.4 Capitalization. The authorized capital stock of Newco
(immediately prior to the Closing) consists of (i) 15,000,000 shares of Common
Stock, par value $0.01 per share, none of which are outstanding, (ii) 5,599,705
shares of Series A Convertible Preferred Stock, par value $0.01 per share, none
of which are outstanding, (iii) 643,701 shares of Series B Convertible Preferred
Stock, par value $0.01 per share, none of which are outstanding, (iv) 1,399,926
shares of Series C Convertible Preferred Stock, par value $0.01 per share (the
"Series C Preferred Stock"), all of which are issued and outstanding, and (v)
2,356,668 shares of undesignated Preferred Stock. All of the issued and
outstanding shares of Series C Preferred Stock have been duly authorized and
validly issued and are fully paid and nonassessable. All of such shares of
Series C Preferred Stock were issued in full compliance with all federal, state
and local rules, laws and regulations. As of the Closing Date, there are no
outstanding subscriptions, options, warrants, rights, calls or convertible
securities, or other commitments of any nature relating to shares of the capital
stock of Newco. As of the date hereof, Newco has no obligation (contingent or
other) to purchase, redeem or otherwise acquire any of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
SECTION 3.5 Operations of Newco. Newco was formed for the purpose of
assuming the Business as contemplated by this Agreement. As of the date hereof,
Newco has engaged in no business other than as contemplated by this Agreement.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission, (iii) sent by recognized
overnight courier, or (iv) sent by registered or certified mail, return receipt
requested, postage prepaid.
If to Newco:
IBC Pharmaceuticals, Inc.
300 American Road
Morris Plains, NJ 07950
Attn: Cynthia L. Sullivan, President
6
With a copy to:
Joseph E. Mullaney III, Esq.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
If to IBC:
IBC Pharmaceuticals, LLC
300 American Road
Morris Plains, NJ 07950
Attn: David M. Goldenberg, Manager
With a copy to:
Jeff Spindler, Esq.
Olsham, Grundman, Frome, Rosenweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
All notices, requests, consents and other communications hereunder shall be
deemed to have been delivered (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the fifth business day following the day such mailing is
made.
SECTION 4.2 Entire Agreement. This Agreement together with the Exhibits
hereto and the other documents executed in connection herewith (together, the
"Documents") embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersedes all prior oral
or written agreements and understandings relating to the subject matter hereof.
No statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the Documents shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
SECTION 4.3 Modifications and Amendments. The terms and provisions of this
Agreement may be modified or amended only by written agreement executed by the
parties hereto.
SECTION 4.4 Waivers and Consents. No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing between the parties hereto, shall operate as a waiver of any such right,
power or remedy of the party.
7
SECTION 4.5 Assignment. Neither this Agreement, nor any right hereunder,
may be assigned by either party hereto without the prior written consent of the
other party, except that Newco may assign all or part of its rights and
obligations under this Agreement to one or more direct or indirect subsidiaries
or affiliates.
SECTION 4.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their permitted assigns,
and nothing in this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement. Nothing in this Agreement shall be construed to create
any rights or obligations except between the parties hereto, and no person or
entity shall be regarded as a third-party beneficiary of this Agreement.
SECTION 4.7 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be construed in accordance with and governed by the
internal laws of the State of Delaware, without giving effect to the conflict of
law principles thereof.
SECTION 4.8 Severability. In the event that any court of competent
jurisdiction shall finally determine that any provision, or any portion thereof,
contained in this Agreement shall be void or unenforceable in any respect, then
such provision shall be deemed limited to the extent that such court determines
it enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof,
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect.
SECTION 4.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[Remainder of page intentionally blank]
8
IN WITNESS WHEREOF, IBC and Newco have executed this Agreement as of the
day and year first above written.
IBC PHARMACEUTICALS, LLC
By: /s/ David M. Goldenberg
-----------------------
Name: David M. Goldenberg
Title: Chairman
IBC PHARMACEUTICALS, INC.
By: /s/ Cynthia L. Sullivan
-----------------------
Name: Cynthia L. Sullivan
Title: President
9
Exhibit A
ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT, dated as of June 30, 2002, is executed and delivered
by IBC Pharmaceuticals, LLC, a Delaware limited liability company ("IBC"), in
favor of IBC Pharmaceuticals, Inc. a Delaware corporation ("Newco"), pursuant to
that certain Contribution and Assignment Agreement by and between IBC and Newco,
dated as of June 30, 2002 (the "Contribution Agreement"). All capitalized terms
used herein and not defined herein shall have the respective meanings ascribed
to such terms in the Contribution Agreement.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, IBC hereby assigns to Newco and its successors and
assigns, to have and to hold forever, and Newco hereby accepts from IBC, all of
IBC's right, title and interest in, to and under the Transferred Assets,
wherever located, including but not limited to the Transferred Assets set forth
on Schedule A hereto.
IBC hereby covenants with and represents and warrants to Newco that IBC has
all right, title, and interest in, to and under the Transferred Assets, and that
IBC has the legal right to assign the Transferred Assets as provided in this
Assignment Agreement.
This Assignment Agreement evidences the consummation of the contribution by
IBC to Newco of the Transferred Assets contemplated by the Contribution
Agreement. IBC, by its execution of this Assignment Agreement, and Newco, by its
acceptance of this Assignment Agreement, each hereby acknowledges and agrees
that neither the representations and warranties nor the rights and remedies of
any party under the Contribution Agreement shall be deemed to be enlarged,
modified or altered in any way by this Assignment Agreement. In the event of any
inconsistencies or ambiguities between this Assignment Agreement and the
Contribution Agreement, the terms of the Contribution Agreement shall govern.
IBC hereby covenants and agrees that it will, at the request of Newco,
execute and deliver such other documents and instruments, in addition to those
specifically required by the provisions of the Contribution Agreement, in form
and substance reasonably satisfactory to Newco, as may be necessary or desirable
to evidence the conveyance of title to the Transferred Assets to Newco made
hereby.
This Assignment Agreement shall inure to the benefit of Newco and its
successors and assigns, and shall be binding upon and enforceable against IBC
and its respective successors and assigns. This Assignment Agreement shall be
governed by the laws of the State of Delaware without giving effect to the
conflict of law principles thereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, and all of which, when taken together, shall constitute
one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Assignment Agreement
under seal as of the date first written above.
IBC PHARMACEUTICALS, LLC
By:________________________
Name:
Title:
IBC PHARMACEUTICALS, INC.
By:________________________
Name:
Title:
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Schedule A
All of the assets, properties and rights owned by IBC or in which IBC has
any right or interest of every type and description, real, personal and mixed,
tangible and intangible, including, without limitation, software (including,
without limitation, source codes, object codes and documentation), licenses
thereto, research and development files, operating data, business agreements,
property, equipment, inventory, all cash on hand and in banks (including all
uncollected items), prepaid expenses and advance payments, tax refunds and tax
credits, notes and accounts receivable and all other sums due IBC, goodwill,
supplier and customer lists, patents, trademarks, trade names, service marks,
licenses and permits, pending applications for patents, trademarks, trade names
and licenses, processes, know-how, show-how, trade secrets, computers and
computer equipment, computer programs, all books of account, files and other
records, systems and processes, contracts, arrangements and understandings, oral
and written, formal and informal, for work to be performed and/or services to be
provided, real estate and interests therein, security deposits, buildings,
leasehold and other improvements, machines, machinery, warehouse equipment,
furniture, fixtures, vehicles, supplies, all rights and claims under insurance
policies and other contracts of whatever nature, all causes of action,
judgments, claims and demands of every nature and all other rights in funds of
whatever nature, and all other assets, properties and rights of every kind and
nature owned by IBC.
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Exhibit B
INSTRUMENT OF ASSUMPTION
INSTRUMENT OF ASSUMPTION (the "Instrument of Assumption"), dated as of June
30, 2002, by IBC Pharmaceuticals, Inc., a Delaware corporation ("Newco"),
pursuant to that certain Contribution and Assignment Agreement (the
"Contribution Agreement"), dated as of June 30, 2002, by and between IBC
Pharmaceuticals, LLC, a Delaware limited liability company ("IBC") and Newco.
Capitalized terms used herein and not defined herein shall have the respective
meanings ascribed to such terms in the Contribution Agreement.
In consideration of the contribution to Newco of the Transferred Assets and
pursuant to Section 1.4 of the Contribution Agreement, Newco hereby agrees as
follows:
1. Newco assumes and agrees to pay, discharge and perform, as and when the
same shall become due, all of the Assumed Liabilities.
2. This Instrument of Assumption shall be binding upon Newco and its
successors and assigns and shall inure to the benefit of IBC and its successors
and assigns.
13
IN WITNESS WHEREOF, the undersigned has caused this Instrument of
Assumption to be executed as of the date set forth above.
IBC PHARMACEUTICALS, INC.
By:________________________
Name:
Title:
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EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY AS OF JUNE 30, 2002
o Immunomedics, B.V. 100% owned subsidiary of Immunomedics, Inc.
(Netherlands)
o Immunomedics GmbH 100% owned subsidiary of Immunomedics, Inc.
(Germany)
o IBC Pharmaceuticals, Inc. 91.58% owned subsidiary of Immunomedics, Inc.
(Delaware)
EXHIBIT 23.1
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Immunomedics, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-90338) on Form S-3 and (Nos. 333-53224, 33-56844 and 33-16260) on Form S-8
of Immunomedics, Inc. of our report dated August 9, 2002, with respect to the
consolidated balance sheets of Immunomedics, Inc. and subsidiaries as of June
30, 2002 and 2001, and the related consolidated statements of operations and
comprehensive loss, changes in stockholders' equity, and cash flows for each of
the years in the three-year period ended June 30, 2002, which report appears in
the June 30, 2002 annual report on Form 10-K of Immunomedics, Inc.
KPMG LLP
Princeton, New Jersey
September 25, 2002