IMMUNOMEDICS, INC.
Selected Financial Data
in thousands except per share amounts 1995 1994 1993 1992 1991
______________________________________ ________ ________ ________ ________ ________
Total revenues $ 3,189 $ 4,237 $ 5,055 $ 8,810 $ 2,100
Total operating expenses 14,593 19,293 14,482 10,198 6,688
Net loss (11,404) (15,056) (9,427) (1,388) (4,588)
Net loss per share (0.38) (0.50) (0.32) (0.05) (0.20)
Weighted average shares outstanding 30,098 30,051 29,420 26,461 23,201
Cash, cash equivalents and
marketable securities $ 22,814 $ 25,230 $ 41,813 $ 50,288 $ 9,966
Total assets 28,224 31,833 46,165 53,687 12,145
Stockholders' equity<F1> 23,629 27,395 42,622 51,735 6,376
<FN>
<F1> The Company has not paid cash dividends on its Common Stock since its inception.
</FN>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Since its inception, the Company has been engaged primarily in the research
and development of proprietary products relating to the detection,
diagnosis and treatment of cancer, and more recently infectious diseases.
In April 1991, the Company filed a Product License Application ("PLA") with
the U.S. Food and Drug Administration ("FDA") seeking approval to
manufacture and market, in the United States, CEA-Scan , an in vivo
colorectal cancer imaging product. In May 1994, the Company received a
letter from the FDA indicating that the PLA for CEA-Scan for colorectal
cancer imaging was not approvable at that time. In July 1994, the Company
met with FDA officials to review the status of CEA-Scan and believes it
reached an understanding with the FDA that the results of the Phase III
pivotal clinical trial would be further analyzed to ascertain potentially
approvable claims for the product and what additional steps would need to
be taken to achieve approvability. In March 1995, the Company submitted a
response to the FDA's questions, including an analysis suggesting that
CEA-Scan will be useful in the pre-surgical evaluation of recurrent
colorectal cancer patients, particularly in the assessment of tumor
respectability for these patients. In September 1995, the FDA scheduled the
Company to present clinical trial data on CEA-Scan to the Oncology Drugs
Advisory Committee ("ODAC") on October 17, 1995. At the same time, the FDA
sent an action letter to the Company requesting clarification of the data,
additional information, and additional analyses which the Company had
provided in response to the FDA's May 1994 letter. Accordingly, the status
of the Company's PLA remained not-yet-approvable at the time of its
notification of the ODAC presentation. The FDA could delay the meeting if,
upon receipt of the clarification to be provided by the Company, the FDA
deems it needs more time to analyze the data or that the data do not
support the clinical efficacy of the product. It is the Company's intention
to present data to the ODAC supporting the use of CEA-Scan to better
define the spread of colorectal cancer and provide the surgeon with more
complete diagnostic information, helping to avoid unnecessary surgery in
patients who would not benefit from the procedure. In February 1992, the
Company filed with the Health Protection Branch ("HPB") to market CEA-Scan
in Canada. In March 1992, the Company filed with the Committee for
Proprietary Medicinal Products ("CPMP") to market the product in Europe. In
December 1994, the Company received notification from the Department of
Health Medicines Control Agency ("MCA") in the United Kingdom that the
Company's manufacturing operations are in general compliance with the
guidelines of Good Manufacturing Principles ("cGMP"). The Company continues
to work diligently with the U.S. and foreign regulatory authorities and
remains fully committed to the eventual approval of CEA-Scan in the U.S.,
Europe and Canada. However, no assurance can be given as to if or when any
such approvals could be forthcoming.
With respect to LeukoScan , an in vivo infectious disease diagnostic
imaging product, the Company has filed for regulatory approval with the
European Medicines Evaluation Agency ("EMEA"), seeking approval to market
the product in all fifteen countries which are members of the European
Union. The application seeks approval for LeukoScan to be used in the
detection and diagnosis of osteomyelitis (bone infection) in long bones and
diabetic foot ulcers. In March 1995, the Company held a pre-PLA filing
meeting with FDA officials to obtain input from the FDA on proposed claims
for the product. As a result of the meeting, the Company is conducting
further analysis of its Phase III clinical data for the bone infection and
diabetic foot ulcer indications and has discussed with the FDA a filing and
clinical trial strategy, which includes the continued enrollment of
patients into the Phase III trial for these indications. Accordingly, the
earliest the Company believes it will be in a position to file a PLA for
LeukoScan with the FDA is the fourth quarter of calendar year 1995.
Meanwhile, Phase III trials for infected prosthesis and appendicitis are
continuing, and the Company is examining other applications for the
product. As with all regulatory filings, there can be no assurance that
such filings will be acceptable for review, or ultimately approved, by the
FDA.
The Company is also engaged in developing other biopharmaceutical
products, which are in various stages of development and clinical testing.
The Company has not achieved profitable operations and does not anticipate
achieving profitable operations during fiscal year 1996. The Company will
continue to experience operating losses until such time as it is able to
generate sufficient revenues from sales of its proposed in vivo products.
Further, the Company's working capital will continue to decrease until such
time as the Company is able to generate positive cash flow from operations
or until such time, if at all, as the Company receives an additional
infusion of cash from the sale of the Company's securities or from
corporate alliances to finance the Company's operating expenses and capital
expenditures.
Results of Operations
Fiscal Year 1995 Compared to Fiscal Year 1994
Revenues for the fiscal year ended June 30, 1995 were $3,189,000 as
compared to $4,237,000 in fiscal year 1994, representing a decrease of
$1,048,000. Sales and royalties on the Company's in vitro diagnostic
products represented $193,000 of the decrease in revenues for fiscal year
1995 as compared to fiscal year 1994. In June 1994, the Company assigned,
to an independent third party, all of the Company's manufacturing and
marketing rights associated with its in vitro diagnostic products,
excluding those rights relating to the Company's HAMA in vitro diagnostic
product. In exchange for assigning these rights, the Company is to receive
royalty payments through June 2003 on annual sales derived from such
products and recorded $120,000 in royalties during fiscal year 1995.
Interest income in fiscal year 1995 as compared to fiscal year 1994
decreased by $321,000, primarily as a result of reduced levels of cash
available for investments. (See "Liquidity and Capital Resources.")
Revenues in fiscal year 1995 include $1,665,000 of research and development
and milestone payments received from Pharmacia, Inc. ("Pharmacia"
formerly Adria Laboratories Division of Erbamont, Inc.), as compared to
$2,250,000 of such revenue recorded in fiscal year 1994. (See "Liquidity
and Capital Resources.")
Total operating expenses for the fiscal year ended June 30, 1995 were
$14,593,000 as compared to $19,293,000 in fiscal year 1994, representing a
decrease of $4,700,000. Research and development costs for the fiscal year
ended June 30, 1995 decreased by $2,206,000 as compared to the same period
in 1994 due to decreased in vivo product manufacturing, clinical and
regulatory, and research and development costs of $1,263,000, $524,000 and
$419,000, respectively. The Company's decrease in manufacturing costs of
$1,263,000 was due principally to the completion of activities directed at
the validation and qualification of the Company's interim manufacturing
process and facility for CEA-Scan . The decrease in clinical and regulatory
costs of $524,000 resulted principally from the lower costs associated with
patient enrollment in Phase III clinical trials for LeukoScan in fiscal
year 1995, as well as the reduced costs associated with regulatory reviews
for CEA-Scan . The decrease in research and development costs of $419,000
was due, in part, to reduced support for the Center for Molecular Medicine
and Immunology ("CMMI") in fiscal year 1995 as compared to fiscal year 1994
(see Note 9 to Financial Statements).
General and administrative costs for the fiscal year ended June 30,
1995 decreased by $2,333,000 as compared to the same period in 1994. This
was largely due to a decrease in legal expenses of $1,631,000, principally
associated with patent-related activities.
Net loss for the year ended June 30, 1995 was $11,404,000, or $0.38 per
share, as compared to a net loss of $15,056,000, or $0.50 per share in
fiscal year 1994. The lower net loss resulted principally from decreased
expenditures in manufacturing, clinical, and legal activities. Lower
revenues, as explained above, partly offset the positive impact the lower
operating expenses had on the net loss.
Fiscal Year 1994 Compared to Fiscal Year 1993
Revenues for the fiscal year ended June 30, 1994 were $4,237,000 as
compared to $5,055,000 in fiscal year 1993, representing a decrease of
$818,000. Sales of the Company's in vitro diagnostic products represented
$655,000 of the decrease in revenues for fiscal year 1994 as compared to
fiscal year 1993. In vitro product sales in fiscal year 1993 included sales
of $395,000 through an international distributor whose distribution
agreement expired in March 1993. Interest income in fiscal year 1994 as
compared to 1993 decreased by $551,000, primarily as a result of reduced
levels of cash available for investments. (See "Liquidity and Capital
Resources.") Revenues in fiscal year 1994 included $2,250,000 of research
and development and milestone payments received from Pharmacia, as compared
to $1,000,000 of such revenue recorded in fiscal year 1993. Fiscal year
1993 revenues also included $1,000,000 of non-refundable license fees
received from Pharmacia. (See "Liquidity and Capital Resources.")
Total operating expenses for the fiscal year ended June 30, 1994 were
$19,293,000 as compared to $14,483,000 in fiscal year 1993, representing an
increase of $4,810,000. Research and development costs for the fiscal year
ended June 30, 1994 increased by $4,059,000 as compared to the same period
in 1993. This increase is due to increased in vivo product manufacturing,
clinical and regulatory, and research and development costs of $1,155,000,
$2,190,000 and $1,470,000, respectively. The Company's increase in
manufacturing costs of $1,155,000 was due to increased pre-commercial
manufacturing activities, scaling-up and validating the manufacturing
process for CEA-Scan for colorectal cancer imaging and LeukoScan for
infectious disease imaging. The increase in clinical and regulatory costs
of $2,190,000 resulted principally from the costs associated with the
acceleration and completion of Phase III clinical trials for LeukoScan and
the ongoing regulatory reviews for CEA-Scan . The increase in research and
development costs of $1,470,000 is due, in part, to the Company's antibody
humanization program.
General and administrative costs for the fiscal year ended June 30,
1994 increased by $1,062,000 as compared to the same period in 1993,
including an increase in legal costs of $1,015,000 associated with
patent-related activities.
Net loss for the year ended June 30, 1994 was $15,056,000, or $0.50 per
share, as compared to $9,427,000, or $0.32 per share in fiscal year 1993.
This change principally results from expenditures associated with increased
manufacturing, clinical and regulatory and research and development
activities, and decreased revenues, as explained above.
Liquidity and Capital Resources
At June 30, 1995, the Company had working capital of $18,907,000,
representing a decrease of $2,973,000 from June 30, 1994, and had no
long-term debt other than certain lease obligations (see Note 11 to
Financial Statements). The decrease in working capital resulted principally
from the net loss during fiscal year 1995 of $11,404,000, partially offset
by cash received from a financing transaction in January 1995.
On January 18, 1995, the Company completed an equity financing pursuant
to Regulation S under the Securities Act of 1933, pursuant to which a group
of investors purchased 150,000 shares of non-dividend paying Series B
Convertible Preferred Stock (the "Series B Preferred") for $7,500,000. At
the Company's option, one investor was to purchase, in June 1995, an
additional 50,000 shares of the Series B Preferred for $2,500,000, under
substantially the same terms and conditions of the original offering,
provided that the average price of the Company's common stock was equal to
or greater than $2.75 per share during the 20-day trading period
immediately preceding the exercise date of such option. This condition was
not met, and the additional 50,000 shares of Series B Preferred were not
purchased by the investor. The terms of the transaction allow the
investors, at their discretion, to convert the Series B Preferred into
shares of the Company's common stock during a twenty-two month period
beginning in March 1995, at pre-determined discounts from the average
market price per share over a 40-day trading period surrounding the date of
conversion. As of June 30, 1995, 25,473 shares of Series B Preferred had
been converted into 544,116 shares of the Company's common stock. In July
and August 1995, an additional 80,820 shares of Series B Preferred were
converted into 1,545,929 shares of common stock. The proceeds from this
financing transaction will assist the Company in fulfilling its plans to
file for U.S. and European regulatory approval to market LeukoScan ,
advance CEA-Scan through the regulatory review process and initiate
clinical trials for cancer therapeutic products under development.
On August 2, 1995, the Company announced that its Development and
License Agreement with Pharmacia was terminated. Pursuant to this
Agreement, which had originated in July 1991, the Company had granted to
Pharmacia an exclusive license to market and sell its CEA-Scan , AFP-Scan
and LymphoScan products for certain specified indications in the United
States and Canada. Also pursuant to this Agreement, in fiscal 1993 the
Company received non-refundable license fees of $1,000,000, which were
recorded as revenue when received, and earned research and development
revenue of $1,665,000 and $2,000,000 during the years ended June 30, 1995
and 1994, respectively. In June 1994, the Company and Pharmacia, in the
context of discussions directed towards restructuring their relationship,
agreed to release Pharmacia from its obligations and for the Company to
regain its marketing and selling rights for AFP-Scan and LymphoScan ,
whereby the Company assumed financial responsibility for all future
clinical, marketing and selling activities for these products. In August
1995, the Company regained the North American marketing and selling rights
for CEA-Scan from Pharmacia. The Company is discussing with Pharmacia the
amount of a final payment by Pharmacia to the Company to satisfy remaining
obligations. Similarly, the Company assumed financial responsibility for
all future clinical, marketing and selling activities for CEA-Scan . The
Company is now discussing the licensing of certain North American marketing
and selling rights to CEA-Scan with other potential partners.
In March 1995, the Company signed a license agreement with Mallinckrodt
Medical B.V., ("Mallinckrodt"), a leading producer and distributor of
radiopharmaceuticals in Europe. Under the terms of the agreement,
Mallinckrodt will market, sell and distribute CEA-Scan throughout Western
Europe and in select Eastern European countries, subject to receipt of
regulatory approval in the specified countries. In addition, the Company
will manufacture CEA-Scan , for which Mallinckrodt will pay the Company a
pre-determined royalty.
In February 1994, the Company entered into a master lease agreement,
which was subsequently amended, pursuant to which the Company may lease
equipment for research, development and manufacturing purposes having an
aggregate acquisition cost of up to $2,200,000. The basic lease payments
under the master lease agreement are determined based on current market
rates of interest at the inception of each equipment schedule take-down,
and are payable in monthly installments over a four-year period. The lease
agreement contains an early purchase option, at an amount which is deemed
to be fair value, exercisable no later than ninety days before the
thirty-sixth installment is due. Under the lease agreement, continued
compliance with certain financial ratios is required and, in the event of
default, the Company will be required to provide an irrevocable letter of
credit which is generally equal to the outstanding balance of lease
payments due at the time of default. As of June 30, 1995, the Company has
leased equipment aggregating $1,466,000 under the master lease agreement
and recorded lease expense for fiscal year 1995 of $332,000.
The Company has committed approximately $2,700,000 for the design,
construction and equipping of a commercial manufacturing facility at its
Morris Plains, NJ headquarters. The facility will consist of four
independent antibody manufacturing suites, several support areas, and a
quality control ("QC") laboratory. The Company is also obligated under two
operating leases for facilities used for research and development,
manufacturing, and office space. Total commitments for fiscal year 1996
under these leases and the equipment lease described above are $878,000.
The Company's liquid asset position, as measured by its cash, cash
equivalents and marketable securities, was $22,814,000 at June 30, 1995,
representing a decrease of $2,416,000 from June 30, 1994. It is anticipated
that working capital and cash, cash equivalents, and marketable securities
will continue to decrease during fiscal year 1996 as a result of planned
operating expenses and capital expenditures. At present, the Company
believes that its financial resources will be sufficient to fund
anticipated operating expenses and capital expenditures through calendar
year 1996. The Company intends to supplement its financial resources from
time to time, as market conditions permit, through additional financing and
through collaborative marketing and distribution agreements. In addition,
the Company continues to evaluate various programs to raise additional
capital and to seek additional revenues from the licensing of its
proprietary technology. At the present time, the Company is unable to
determine whether any of these activities will be successful and, in such
cases, the terms and timing of any definitive agreements or financing.
There can be no assurance that the Company will be able to obtain
additional funds in the future.
IMMUNOMEDICS, INC.
Balance Sheets
June 30, 1995 1994
_____________________________________________________ ____________ ____________
ASSETS
Current Assets:
Cash and cash equivalents $ 7,162,837 6,371,245
Marketable securities 15,651,369 18,858,609
Other current assets 687,674 1,087,452
____________ ____________
Total Current Assets 23,501,880 26,317,306
Property and Equipment, net of accumulated
depreciation of $4,427,000 and $3,490,000 at
June 30, 1995 and 1994, respectively 4,722,604 5,515,729
____________ ____________
$ 28,224,484 31,833,035
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 1,932,908 2,191,315
Other current liabilities 2,662,401 2,246,299
____________ ____________
Total current liabilities 4,595,309 4,437,614
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value, authorized
10,000,000 shares; Series B convertible,
authorized 200,000 shares;
issued and outstanding 124,527 shares
at June 30, 1995 1,245 0
Common stock; $.01 par value, authorized
50,000,000 shares; issued and outstanding
30,624,585 and 30,055,469 shares at
June 30, 1995 and 1994, respectively 306,246 300,555
Capital contributed in excess of par 72,098,771 64,676,957
Accumulated deficit (48,781,384) (37,377,656)
Accumulated net unrealized gain/(loss)
on securities 4,297 (204,435)
____________ ____________
23,629,175 27,395,421
____________ ____________
$ 28,224,484 31,833,035
<FN>
See Accompanying Notes to Financial Statements
IMMUNOMEDICS, INC.
Statements of Operations
Years Ended June 30, 1995 1994 1993
____________________________ _____________ _____________ _____________
REVENUES:
Product sales and royalties $ 201,006 $ 394,039 $ 1,049,127
Research & development 1,878,500 2,412,500 1,025,000
License fees 0 0 1,000,000
Interest 1,109,721 1,430,276 1,981,074
_____________ _____________ _____________
3,189,227 4,236,815 5,055,201
COSTS AND EXPENSES:
Cost of goods sold 41,829 202,930 514,072
Research & development 12,491,847 14,698,025 10,638,998
General and administrative 2,059,279 4,391,831 3,329,521
_____________ _____________ _____________
14,592,955 19,292,786 14,482,591
_____________ _____________ _____________
Net loss $ (11,403,728) (15,055,971) (9,427,390)
_____________ _____________ _____________
Net loss per share $ (0.38) (0.50) (0.32)
_____________ _____________ _____________
Weighted average number of
shares outstanding 30,097,584 30,051,434 29,419,933
<FN>
See Accompanying Notes to Financial Statements
IMMUNOMEDICS, INC.
Statements of Changes in Stockholders' Equity
Accumulated
Convertible Contributed Realized
Preferred Stock Common Stock in Excess Accumulated Gain/(Loss)
Shares Amount Shares Amount of Par Deficit On Securities Total
____________________________ _________ ________ __________ ________ ___________ ___________ _____________ ____________
Balance, at June 30, 1992 80,000 $ 800 28,146,244 $ 281,462 64,347,381 (12,894,295) 0 51,735,348
Issuance of common stock in
exchange for convertible
preferred stock
(Series A), net (80,000) (800) 1,777,600 17,776 (34,342) 0 0 (17,366)
Exercise of options to
purchase common stock 0 0 116,375 1,164 329,758 0 0 330,922
Net loss 0 0 0 0 0 (9,427,390) 0 (9,427,390)
________ ________ __________ _________ ___________ ___________ _____________ ____________
Balance, at June 30, 1993 0 0 30,040,219 300,402 64,642,797 (22,321,685) 0 46,621,514
Exercise of options to
purchase common stock 0 0 15,250 153 34,160 0 0 34,313
Net unrealized loss
on securities 0 0 0 0 0 0 (204,435) (204,435)
Net loss 0 0 0 0 0 (15,055,971) 0 (15,055,971)
________ _________ __________ _________ ___________ ___________ _____________ ____________
Balance, at June 30, 1994 0 0 30,055,469 300,555 64,676,957 (37,377,656) (204,435) 27,395,421
Issuance of convertible
preferred stock
(Series B), net 150,000 1,500 0 0 7,371,000 0 0 7,372,500
Issuance of common stock in
exchange for convertible
preferred stock
(Series B), net (25,473) (255) 544,116 5,441 (5,186) 0 0 0
Exercise of options to
purchase common stock 0 0 25,000 250 56,000 0 0 56,250
Net unrealized loss
on securities 0 0 0 0 0 0 208,732 208,732
Net loss 0 0 0 0 0 (11,403,728) 0 (11,403,728)
________ ________ __________ _________ ___________ ___________ _____________ ____________
Balance, at June 30, 1995 124,527 $ 1,245 30,624,585 $ 306,246 72,098,771 (48,781,384) 4,297 23,629,175
<FN>
See Accompanying Notes to Financial Statements
IMMUNOMEDICS, INC.
Statements of Cash Flows
Years Ended June 30, 1995 1994 1993
____________________________________________________ _____________ _____________ _____________
Cash Flows Used In Operating Activities:
Net Loss $ (11,403,728) (15,055,971) (9,427,390)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 937,107 1,042,307 632,898
Amortization of bond premium 113,318 311,245 236,051
Changes in operating assets and liabilities:
Other current assets 399,778 444,619 (419,706)
Accounts payable (258,407) 716,747 626,255
Other current liabilities 416,102 206,591 1,011,953
_____________ _____________ _____________
Net cash used in operating activities $ (9,795,830) (12,334,462) (7,339,939)
Cash Flows Provided By Investing Activities:
Purchase of marketable securities (11,639,212) (20,493,754) (31,118,526)
Proceeds from maturities of marketable securities 14,691,866 27,097,771 34,802,727
Proceeds from sale of marketable securities 250,000 5,274,305 4,235,039
Additions to property and equipment (143,982) (1,875,821) (1,166,514)
_____________ _____________ _____________
Net cash provided by investing activities 3,158,672 8,140,561 6,752,726
Cash Flows Provided By Financing Activites:
Issuance of convertible preferred
stock (Series B), net 7,372,500 0 0
Cost of conversion of preferred stock (Series A) 0 0 (17,366)
Exercise of stock options 56,250 34,313 330,922
Principal payments of long-term debt 0 (29,486) (45,635)
_____________ _____________ _____________
Net cash provided by financing activities 7,428,750 4,827 267,921
Increase/(Decrease) In Cash And Cash Equivalents 791,592 (4,189,074) (319,292)
Cash And Cash Equivalents, At Beginning Of Year 6,371,245 10,560,319 10,879,611
_____________ _____________ _____________
Cash And Cash Equivalents, At End Of Year $ 7,162,837 6,371,245 10,560,319
<FN>
See Accompanying Notes to Financial Statements
Notes to Financial Statements
1. Business Overview
Immunomedics, Inc. (the "Company") is engaged in researching, developing,
manufacturing and marketing biopharmaceutical products, particularly
antibody-based diagnostics and therapeutics for cancer and infectious
diseases.
The Company's operations encompass all the risks inherent in developing
and expanding a new business enterprise, including: (1) a limited operating
history and uncertainty regarding the timing and amount of future revenues
to be derived from the Company's technology; (2) obtaining future capital
as needed; (3) attracting and retaining key personnel; and (4) a business
environment with heightened competition, rapid technological change and
strict government regulation.
2. Summary of Significant Accounting Policies
Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with maturities of
three months or less, at the time of purchase, to be cash equivalents.
The Company's investments in marketable securities are available for
sale to fund growth in operations as the Company moves toward
commercialization of its products. The Company, subject to changes in
market conditions, does not intend to hold all marketable securities to
their maturity dates and, accordingly, the portfolio has been classified as
a current asset. The portfolio primarily consists of U.S. government
securities, corporate bonds, and equity securities.
Concentration of Credit Risk
The Company invests its cash in U.S. government securities and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company 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.
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.
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 which are related to future
performance are deferred and recognized as revenue when the research
projects are performed.
Non-refundable payments received under licensing arrangements are
recognized as revenue in the period in which they are received.
Revenue from the sale of in vitro diagnostic products is recognized at
the time of shipment.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards Number 109 ("SFAS No. 109") relating to the accounting
for income taxes. SFAS No. 109 requires the recognition of deferred tax
assets and liabilities relating to the expected future tax consequences of
events that have been recognized in the Company's financial statements and
tax returns. The Company has not recorded any tax benefits associated with
its net deferred tax assets, and therefore the implementation of this
Statement did not have a material effect on the Company's financial
position or results of operations. Prior years' financial statements have
not been restated (see Note 8).
Net Loss Per Share
Net loss per share is based upon the weighted average number of common
shares outstanding. Common share equivalents, consisting of outstanding
stock options and convertible preferred stock, are not included in the
computations since the effect would be antidilutive.
Reclassification
Certain 1994 and 1993 balances have been reclassified to conform to the
1995 presentation.
3. Marketable Securities
Effective June 30, 1994, the Company adopted Statement of Financial
Accounting Standards Number 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities." The effect of adopting this
statement was not material. Under this new 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 on securities classified as
available-for-sale are carried as a separate component of stockholders'
equity. The Company considers all of its current investments to be
available-for-sale. Consequently, pursuant to SFAS No. 115, a $4,000
unrealized holding gain and a $204,000 unrealized holding loss have been
recorded in a separate component of stockholders' equity as of June 30,
1995 and 1994, respectively. Marketable securities at June 30, 1995 and
1994 consist of the following:
Fair Unrealized
Cost Market Holding
June 30, 1995: Basis Value Gain/(Loss)
__________________________________________ ___________ ___________ ___________
Securities with contractual maturities
from date of acquisition of one year
or less:
U.S. Debt Securities $ 5,631,000 5,676,000 45,000
Equity Securities 541,000 479,000 (62,000)
___________ ___________ ___________
$ 6,172,000 6,155,000 (17,000)
Securities with contractual maturities
from date of acquisition greater than
one year:
U.S. Debt Securities $ 6,722,000 6,721,000 (1,000)
Corporate Debt Securities 2,753,000 2,775,000 22,000
___________ ___________ ___________
9,475,000 9,496,000 (21,000)
___________ ___________ ___________
Total Marketable Securities $15,647,000 15,651,000 4,000
Fair Unrealized
Cost Market Holding
June 30, 1994: Basis Value Gain/(Loss)
__________________________________________ ___________ ___________ ___________
Securities with contractual maturities
from date of acquisition of one year
or less:
U.S. Debt Securities $ 8,116,000 8,128,000 12,000
Corporate Dept Securities 2,693,000 2,688,000 (5,000)
Equity Securities 534,000 450,000 (84,000)
___________ ___________ ___________
$11,343,000 11,266,000 (77,000)
Securities with contractual maturities
from date of acquisition greater than
one year:
U.S. Debt Securities $ 4,952,000 4,843,000 (109,000)
Corporate Debt Securities 2,768,000 2,750,000 (18,000)
___________ ___________ ___________
7,720,000 7,593,000 (127,000)
___________ ___________ ___________
Total Marketable Securities $19,063,000 18,859,000 (204,000)
4. Other Current Assets
Included in other current assets is accrued interest income earned on
marketable securities and cash equivalents of approximately $231,000 and
$306,000 at June 30, 1995 and 1994, respectively. Also included in other
current assets at June 30, 1994 is a receivable for $500,000 from a
corporate partner, which was recorded as income in fiscal year 1994 for
research and development funding pursuant to a Development and License
Agreement (see Note 10). The Company received the $500,000 payment in July
1994.
5. Property and Equipment
Property and equipment consists
of the following at June 30: 1995 1994
_________________________________________ ____________ ____________
Machinery and equipment $ 2,936,000 2,962,000
Leasehold improvements 5,199,000 5,101,000
Furniture and fixtures 530,000 520,000
Computer equipment 485,000 423,000
____________ ____________
9,150,000 9,006,000
Accumulated depreciation and amortization (4,427,000) (3,490,000)
$ 4,723,000 5,516,000
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 $468,000 and $612,000 at June 30, 1995 and 1994,
respectively. Also included are amounts payable to various legal counsel of
approximately $284,000 and $400,000, and accrued health insurance
liabilities of approximately $252,000 and $130,000 at June 30, 1995 and
1994, respectively. Further, included at June 30, 1995 is $912,000 received
from a corporate partner for the funding of ongoing clinical trials (see
Note 10).
7. Stockholders' Equity
On November 8, 1990, at the Company's Annual Meeting of Stockholders, the
Company's stockholders ratified a proposal to amend the Certificate of
Incorporation of the Company to authorize 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.
In March 1991, the Company completed a $4 million private placement of
80,000 shares of non-dividend paying Series A Convertible Preferred Stock
("Series A Preferred") at $50 per share. On October 9, 1992, the holders of
the Company's Series A Preferred (the "Preferred Shareholders") converted
all 80,000 outstanding preferred shares into common stock of the Company.
Each share of Series A Preferred was convertible into 22.22 shares of
common stock of the Company; accordingly, 1,777,600 shares of common stock
were issued to the Preferred Shareholders in exchange for the 80,000 shares
of Series A Preferred, all of which were canceled.
On January 18, 1995, the Company completed an equity financing pursuant
to Regulation S under the Securities Act of 1933, pursuant to which a group
of investors purchased 150,000 shares of non-dividend paying Series B
Convertible Preferred Stock (the "Series B Preferred") for $7,500,000. At
the Company's option, one investor was to purchase, in June 1995, an
additional 50,000 shares of the Series B Preferred for $2,500,000, under
substantially the same terms and conditions of the original offering,
provided that the average price of the Company's common stock was equal to
or greater than $2.75 per share during the 20-day trading period
immediately preceding the exercise date of such option. This condition was
not met, and the additional 50,000 shares of Series B Preferred were not
purchased by the investor. The terms of the transaction allow the
investors, at their discretion, to convert the Series B Preferred into
shares of the Company's common stock during a twenty-two month period
beginning in March 1995, at pre-determined discounts from the average
market price per share over a 40-day trading period surrounding the date of
conversion. As of June 30, 1995, 25,473 shares of Series B Preferred had
been converted into 544,116 shares of the Company's common stock. In July
1995, an additional 16,632 shares of Series B Preferred were converted into
376,244 shares of common stock.
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 not exercised within ten years. In June 1993, the
1983 Plan expired. On November 5, 1992, at the Company's Annual Meeting of
Stockholders, adoption of the Company's 1992 Stock Option Plan (the "1992
Plan") was ratified. The basic terms of the 1992 Plan are substantially
similar to those under the Company's 1983 Plan. Under the 1992 Plan,
3,000,000 shares were originally reserved for possible future issuance upon
exercise of stock options, of which 1,777,000 were still available at June
30, 1995 for future grant. At June 30, 1995, 3,577,000 shares of common
stock were reserved for possible future issuance upon exercise of stock
options outstanding and future stock option grants.
Pursuant to the terms of the 1992 Plan, each outside Director of the
Company who had been a Director prior to July 1 is granted, on the first
business day of July each year, an option to purchase 10,000 shares of the
Company's common stock at fair market value. On July 3, 1995, 60,000 stock
options were granted to these Directors.
On April 11, 1995, the Compensation Committee of the Board of Directors
granted the Company's employees the opportunity to terminate their existing
options and receive new options at fair market value of the Company's
common stock on April 11, 1995, with a corresponding recommencement of
vesting. Accordingly, options to purchase 790,000 shares were terminated
and an equal number of new options were issued, which is reflected in the
table below.
Information concerning options for the years ended June 30, 1995, 1994
and 1993 is summarized as follows:
1995
Shares Option Price Range
___________ __________________
Outstanding, July 1, 1994 1,655,750 $ 2.25 - 10.75
Granted 1,214,000 2.63 - 13.38
Exercised (25,000) 2.25
Terminated (1,044,750) 2.25 - 19.13
___________ __________________
Outstanding, June 30, 1995 1,800,000 $ 2.25 - 10.75
___________
Exercisable, June 30, 1995 558,750
1994
Shares Option Price Range
___________ __________________
Outstanding, July 1, 1993 1,675,500 $ 2.25 - 10.75
Granted 461,000 3.63 - 17.12
Exercised (15,250) 2.25
Terminated (465,500) 2.25 - 10.75
___________ __________________
Outstanding, June 30, 1994 1,655,750 $ 2.25 - 10.75
___________
Exercisable, June 30, 1994 771,000
1993
Shares Option Price Range
___________ __________________
Outstanding, July 1, 1992 1,656,750 $ 2.25 - 18.13
Granted 380,000 6.12 - 10.75
Exercised (116,375) 2.25 - 17.88
Terminated (244,875) 2.25 - 19.63
___________ __________________
Outstanding, June 30, 1993 1,675,500 $ 2.25 - 10.75
___________
Exercisable, June 30, 1993 462,750
8. Income Taxes
The Company adopted SFAS No. 109 effective July 1, 1993. Pursuant to the
accounting standard, the tax effects of temporary differences that give
rise to significant portions of the Company's deferred tax assets as of
June 30, 1995 and 1994 are presented below:
1995 1994
_____________ _____________
Deferred tax assets:
Net operating loss carry forwards $ 18,882,000 14,100,000
Research and development credits 2,640,000 2,693,000
Property and equipment 226,000 160,000
Other 62,000 6,000
_____________ _____________
Total 21,810,000 16,959,000
Valuation allowance (21,810,000) (16,959,000)
_____________ _____________
Net deferred taxes $ 0 0
The valuation allowances for fiscal year 1995 and 1994 have been
applied to offset the deferred tax assets in recognition of the uncertainty
that such tax benefits will be realized. The June 30, 1994 valuation
allowance includes $6,500,000 relating to fiscal year 1994 operations.
At June 30, 1995, the Company has available net operating loss
carryforwards for Federal and state income tax reporting purposes of
approximately $47,289,000 and $46,730,000, respectively. These
carryforwards expire beginning in 1998. The Company made no payments of
Federal or state income taxes during the years ended June 30, 1995, 1994
and 1993.
9. Related-Party Transactions
The Center for Molecular Medicine and Immunology ("CMMI") is a
not-for-profit corporation, established in 1983 by Dr. David M. Goldenberg,
Chairman of the Board, Chief Executive Officer and the major shareholder of
the Company. CMMI is devoted primarily to cancer research.
Dr. Goldenberg currently serves as the President of CMMI pursuant to an
employment agreement and devotes substantially more of his working time to
CMMI than to the Company. Allocations between CMMI and the Company
regarding research projects are overseen by the Board of Trustees of CMMI
and the Board of Directors of the Company, excluding Dr. Goldenberg, to
minimize potential conflicts of interest. Certain employees of CMMI serve
as consultants to the Company.
CMMI is currently conducting basic research and patient evaluations in
a number of areas of potential interest to the Company. Effective in July
1995, the Company amended its license agreement with CMMI to assist CMMI in
complying with Internal Revenue Service criteria for their recently
completed tax-exempt financing. Under the original terms of the license
agreement, the Company had the right to an exclusive, worldwide license to
manufacture and market potential products developed by CMMI (other than
those funded by third parties) for specified royalty payments and on other
specified terms. Under the amended license agreement, the Company maintains
the right of first negotiation to obtain exclusive, worldwide licenses from
CMMI to manufacture and market potential products and technology covered by
the license agreement under terms representing fair market price, to be
determined at the time the license is obtained.
The amended license agreement terminates on December 31, 1999, with the
Company having the right to seek good-faith negotiation to extend the
agreement for an additional five-year period. The Company retains such
amended licensing rights to inventions made during the term of the
agreement for a period of five years from the time of disclosure. Prior to
amendment, the license agreement terminated on December 11, 2010, with the
Company having the right to extend the agreement for two additional
five-year periods with specified minimum annual royalties to be paid during
these two periods. The Company is in the process of evaluating what
additional amendments to the license agreement may be necessary to satisfy
Federal laws and rules, including recently issued National Institutes of
Health Guidelines.
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 $57,000, $548,000 and $426,000 during the years
ended June 30, 1995, 1994 and 1993, respectively. The Company also provides
CMMI with laboratory materials and supplies in connection with research
conducted in areas of potential interest to the Company at no cost to CMMI.
During the years ending June 30, 1995, 1994 and 1993, the Board of
Directors of the Company authorized grants to CMMI of $300,000, $200,000
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.
10. License and Distribution Agreements
In July 1991, the Company entered into a Development and License Agreement
(the "Agreement") with Pharmacia, Inc. ("Pharmacia" formerly Adria
Laboratories Division of Erbamont, Inc.), whose parent company is
Sweden-based Pharmacia AB. Pursuant to the Agreement, the Company granted
to Pharmacia an exclusive license to market and sell its CEA-Scan ,
AFP-Scan , and LymphoScan products for certain specified indications (the
"products") in the United States and Canada. Also pursuant to the
Agreement, in fiscal year 1993 the Company received non-refundable license
fees of $1,000,000, which were recorded as revenue when received, and
earned research and development revenue of $1,665,000 and $2,000,000 during
the years ended June 30, 1995 and 1994, respectively.
In June 1994, the Company and Pharmacia, in the context of discussions
directed towards restructuring their relationship, agreed for the Company
to regain its marketing and selling rights, whereby the Company assumed
financial responsibility for all future clinical, marketing and selling
activities for AFP-Scan and LymphoScan .
On August 2, 1995, the Company announced that it had regained the North
American marketing and selling rights for CEA-Scan from Pharmacia. The
Company is discussing with Pharmacia the amount of a final payment by
Pharmacia to the Company to satisfy remaining obligations. Payments which
have been received from Pharmacia to fund ongoing clinical trials for
CEA-Scan will be recorded as income as the trials are conducted (see Note
6).
In March 1995, the Company signed a License Agreement with Mallinckrodt
Medical B.V., ("Mallinckrodt"), a leading producer and distributor of
radiopharmaceuticals in Europe. Under the terms of the agreement,
Mallinckrodt will market, sell and distribute CEA-Scan throughout Western
Europe and in select Eastern European countries, subject to receipt of
regulatory approval in the specified countries. In addition, the Company
will manufacture CEA-Scan , for which Mallinckrodt will pay the Company a
pre-determined royalty on Mallinckrodt sales.
Domestic sales of the Company's in vitro diagnostic products
represented approximately 76%, 27% and 19% of total sales during fiscal
years 1995, 1994 and 1993, respectively. A distribution agreement with an
international distributor expired in March 1993. For the nine months ended
March 31, 1993, sales with this distributor were $395,000. In June 1994,
the Company assigned to an independent third party all of the Company's
manufacturing and marketing rights associated with its in vitro diagnostic
products, excluding those rights relating to the Company's HAMA in vitro
diagnostic product. In exchange for assigning these rights, the Company is
to receive royalty payments through June 2003 on annual sales derived from
such products. In fiscal 1995, the Company recorded royalty income of
$120,000 on sales of these products by the licensee.
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. Dr. Goldenberg will receive an annual base salary of not
less than $220,000, subject to increases as determined by the Board of
Directors.
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. 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
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 "Royalty
Payments"). A $100,000 annual minimum payment will be paid in the aggregate
against all Revenue Incentive Compensation and Royalty Payments. 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 two years) of any defined Undeveloped Assets of the Company which are
not budgeted as part of the Company's strategic plan.
On February 1, 1994, the Company entered into a master lease agreement,
which was subsequently amended, pursuant to which the Company may lease
equipment for research, development and manufacturing purposes having an
aggregate acquisition cost of up to $2,200,000. The basic lease payments
under the master lease agreement are determined based on current market
rates of interest at the inception of each equipment schedule take-down,
and payable in monthly installments over a four-year period. The lease
agreement contains an early purchase option, at an amount which is deemed
to be fair value, exercisable no later than ninety days before the
thirty-sixth installment is due. Under the lease agreement, continued
compliance with certain financial ratios is required and, in the event of
default, the Company will be required to provide an irrevocable letter of
credit which is generally equal to the outstanding balance of lease
payments due at the time of default. As of June 30, 1995, the Company has
leased equipment aggregating $1,466,000 under the master lease agreement
and recorded lease expense for fiscal 1995 of $332,000.
The Company is obligated under two operating leases for facilities used
for research and development, manufacturing and office space. The leases
expire in October 1996 and May 1999, and contain renewal provisions as
specified in the respective leases. The lease expiring in May 1999 provides
for escalating lease payments and an option to purchase the facility,
exercisable by the Company any time after December 1993, subject to certain
terms and conditions as specified in the lease. Lease expense was
approximately $495,000, $484,000 and $439,000 in fiscal years 1995, 1994
and 1993, respectively. Minimum lease commitments for facilities and
equipment are as follows:
1996 $878,000
1997 $814,000
1998 $804,000
1999 $521,000
Thereafter 0
The Company has committed approximately $2,700,000 for the design,
construction and equipping of a commercial manufacturing facility at its
Morris Plains, New Jersey headquarters.
On April 18, 1995, the Company announced that the United States
District Court for the District of New Jersey granted the Company's motion
to dismiss the shareholder lawsuit that was filed June 2, 1994. The
complaint alleged that public disclosures from January 30, 1992 through May
25, 1994 about the future prospects of the Company were fraudulent and
misleading. The court held, among other things, that the claims made by the
Plaintiff were "simply an insufficient basis on which to bring a securities
fraud action." In May 1995, the Plaintiff filed an appeal, which is
currently pending before the U.S. Court of Appeals for the Third Circuit.
The Company is involved in various other claims and litigation arising
in the normal course of business. Management believes, based on the opinion
of counsel representing the Company in such matters, that the outcome of
such claims and litigation will not have a material effect on the Company's
financial position and results of operations.
Independent Auditors' Report
KPMG Peat Marwick LLP
To the Board of Directors and Stockholders of Immunomedics, Inc.:
We have audited the accompanying balance sheets of Immunomedics, Inc. as of
June 30, 1995 and 1994, and the related statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 an 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 financial statements referred to above present fairly,
in all material respects, the financial position of Immunomedics, Inc. as of
June 30, 1995 and 1994, and the results of its operations and its cash flows
for each of the years in the three-year period ended June 30, 1995, in
conformity with generally accepted accounting principles.
Short Hills, New Jersey
July 27, 1995, except for the
third paragraph of Note 10
which is as of August 2, 1995
Price Range of Common Stock
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "IMMU". The table below sets forth for the periods indicated the
high and low sales prices for the Company's Common Stock, as reported by The
Nasdaq Stock Market.
As of September 1, 1995, there were approximately 1,150 holders of record
of the Company's Common Stock.
Fiscal Quarter Ended High Low
________________________________________________
September 30, 1993 8 5 3/4
December 31, 1993 7 5/8 5
March 31, 1994 6 1/2 4 3/8
June 30, 1994 5 7/8 2 7/8
________________________________________________
September 30, 1993 5 3/8 3
December 31, 1993 5 1/8 3
March 31, 1994 4 1/8 2 3/4
June 30, 1994 3 5/8 2 1/8