UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the period ended September 30, 1997
Commission File Number: 0-12104
IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter.)
Delaware 61-1009366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 American Road, Morris Plains, New Jersey, U.S.A. 07950
(Address of principle executive offices) (Zip code)
Registrant's telephone number, including area code:
(973) 605-8200
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable date:
Common stock, $0.01 Par Value - 36,364,502 shares as of
November 13, 1997.
PART I. - FINANCIAL INFORMATION
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1997 1997
______________ ______________
ASSETS
Current Assets
Cash and cash equivalents $ 6,221,023 $ 6,013,355
Marketable securities 5,518,252 9,010,275
Inventory 683,442 690,695
Other current assets 1,144,893 1,227,000
______________ ______________
Total Current Assets 13,567,610 16,941,325
Property and equipment, net of
accumulated depreciation of
$5,009,000 and $4,852,000 at
September 30, 1997 and June
30, 1997, respectively 5,529,033 5,693,193
______________ ______________
TOTAL ASSETS 19,096,643 22,634,518
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 2,479,528 $ 2,360,256
Other current liabilities 2,589,477 2,827,970
______________ ______________
Total Current Liabilities 5,069,005 5,188,226
Commitments and Contingencies
Preferred stock; $.01 par value,
authorized 10,000,000 shares;
series D convertible, authorized
200,000 shares; issued and
outstanding none and 4,999
shares at September 30, 1997 and
June 30, 1997, respectively 0 50
Common stock; $.01 par value,
authorized 70,000,000 shares at
September 30, 1997; issued and
outstanding 36,363,002 and
36,297,170 shares at
September 30, 1997 and
June 30, 1997, respectively 363,630 362,971
Capital contributed in excess
of par 93,123,931 93,111,855
Accumulated deficit (79,458,210) (76,027,392)
Accumulated net unrealized
loss on securities (1,713) (1,192)
______________ ______________
Total stockholders' equity $ 14,027,638 $ 17,446,292
______________ ______________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 19,096,643 22,634,518
<FN>
See accompanying notes to condensed consolidated financial statements.
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Septemer 30,
1997 1996
______________ ______________
Cash Flows From Operating Activities:
Net loss $ (3,430,818) $ (3,244,897)
Adjustments to reconsile net loss to
net cash used in operating
activities:
Depreciation and amortization 235,802 330,721
Change in operating assets and
liabilities (29,861) (591,453)
______________ ______________
Net Cash Used In Operating
Activities $ (3,224,877) $ (3,505,629)
______________ ______________
Cash Flows From Investing Activities:
Purchase of marketable securities (5,415,631) (8,391,848)
Proceeds from maturities of
marketable securities 8,907,133 9,846,256
Additions to property and
equipment (71,642) (98,782)
______________ ______________
Net Cash Provided By Investing
Activities $ 3,419,860 $ 1,355,626
______________ ______________
Cash Flows From Financing Activities:
Exercise of stock options 12,685 181,036
______________ ______________
Net Cash Provided By Financing
Activities $ 12,685 $ 181,036
______________ ______________
Increase (Decrease) in cash
equivalents 207,668 (1,968,967)
Cash and cash equivalents at beginning
of period 6,013,355 13,646,000
______________ ______________
Cash and cash equivalents at end
of period $ 6,221,023 $ 11,677,033
<FN>
See accompanying notes to condenced consolidated financial statements.
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH OPERATIONS
(Unaudited)
[CAPTION]
Three Months Ended Septemer 30,
1997 1996
______________ ______________
REVENUES:
Product sales $ 971,299 $ 8,330
Royalties and license fee 5,299 526,329
Research and development 146,039 52,500
Interest and other 177,918 386,301
______________ ______________
1,300,555 973,460
______________ ______________
COST AND EXPENSES:
Cost of goods sold 24,236 4,290
Research and development 3,016,537 3,273,654
General and administrative 1,690,600 940,413
______________ ______________
4,731,373 4,218,357
______________ ______________
NET LOSS $ (3,430,818) $ (3,244,897)
______________ ______________
NET LOSS PER SHARE $ (0.09) $ (0.09)
______________ ______________
Weighted average number of common
shares outstanding 36,324,582 34,606,737
<FN>
See accompanying notes to condensed consolidated financial statements.
IMMUNOMEDICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Immunomedics, Inc. (the "Company"), which incorporate the Company's
wholly-owned subsidiary Immunomedics Europe, have been prepared in
accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, the statements do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. The balance sheet at June 30, 1997 has been derived
from the audited financial statements at that date. Operating results
for the three-month period ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending
June 30, 1998.
For further information, refer to the annual financial statements and
footnotes thereto included in the Company's Form 10-K for the fiscal
year ended June 30, 1997.
(2) 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.
Included in other current assets at September 30, 1997 and June 30, 1997
is accrued interest earned on cash equivalents and marketable securities
of $79,000 and $104,000, respectively.
(3) Income Taxes
The Company has never made payments of Federal or State income taxes and
does not anticipate generating book income in fiscal 1998; therefore, no
income taxes have been reflected for the three-month period ended
September 30, 1997.
(4) Net Loss Per Share
Net loss per share is based upon the weighted average number of common
shares outstanding. Common share equivalents, outstanding stock options,
are not included in the computations since the effect would be
antidilutive.
IMMUNOMEDICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Stockholders' Equity
On June 27, 1996, the Company completed an equity financing pursuant to
Regulation S under the Securities Act of 1933, pursuant to which several
foreign investors purchased 200,000 shares of 5% Series D Convertible
Preferred Stock (the "Series D Preferred") for $10,000,000. The terms
of the transaction allow the investors, at their discretion, to convert
the Series D Preferred into shares of the Company's common stock during
a twenty-four month period beginning in June 1996, at a price equal to
89% of the average market price per share over a 20-day trading period
surrounding the date of conversion. As of November 11, 1997, all of the
200,000 shares of Series D Preferred had been converted into 1,795,771
shares of common stock.
(6) License and Distribution Agreements
In March 1995, the Company entered into a License Agreement with
Mallinckrodt Medical B.V., pursuant to which Mallinckrodt Medical B.V.
markets, sells and distributes CEA-Scan(r) throughout Western Europe
and in specified Eastern European countries, subject to receipt of
regulatory approval in the specified Eastern European countries.
The Company manufactures CEA-Scan, for which Mallinckrodt Medical B.V.
pays the Company a predetermined percentage of the net selling price.
In April 1996, the Company entered into a U.S. Marketing and Distribution
Agreement with Mallinckrodt Medical, Inc., pursuant to which Mallinckrodt
Medical, Inc. markets, sells and distributes CEA-Scan for use in colorectal
cancer diagnostic imaging in the U.S. on a consignment basis, and is
required to commit financial resources to this effort. The Company
retains manufacturing and co-promotional rights, pays Mallinckrodt Medical,
Inc. a pre-determined amount or percentage of the net selling price, and
is allowed to commit additional financial resources to promotional
activities. In connection therewith, the Company has entered into an
agreement with MMD Specialty Services, Inc. ("MMD") pursuant to which MMD
provides the Company, during fiscal year 1998, with a fulltime oncology
sales force for the marketing and sale of CEA-Scan in the U.S.
The Company has not been satisfied with the performance of Mallinckrodt
Medical B.V. or Mallinckrodt Medical Inc. (collectively, the "Mallinckrodt
Affiliates") under the respective agreements. This has raised a number of
issues which have been the subject of meetings and the correspondence
between parties. If these issues cannot be resolved, the Company may
have no alternative but to terminate the agreements with the Mallinckrodt
Affiliates for what it believes to be cause under those respective
agreements.
IMMUNOMEDICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(7) Commitments and Contingencies
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 are payable in monthly installments over a four-year period. The
lease agreement contains an early purchase option for each equipment
schedule, at an amount which is deemed to be fair value, exercisable no
later than ninety days before the thirty-sixth installment is due. On
November 1, 1996, December 9, 1996, and April 1, 1997, the Company
exercised the early purchase options on equipment leased on February 14,
1994, April 1, 1994, and June 1, 1994, respectively. 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 September 30,
1997, the Company was not in compliance with certain of these ratios, but
the lessor has not yet declared an event of default or requested a letter
of credit. The Company does not believe that such a request would have a
material adverse effect on the Company. As of October 31, 1997, the
Company has leased equipment with a cost basis aggregating $1,247,000
under the master lease agreement. The Company has recorded lease expense
for the three months ended September 30, 1997 of $87,000.
Part I - Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
Statements made in this form 10-Q, other than those concerning historical
information, should be considered foward-looking and subject to various
risks and uncertainties. Such foward-looking statements are made based on
management's belief as well as assumptions made by, and information currently
available to, management pursuant to the "safe harbor' provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual
results may differ materially from the results anticipated in these
foward-looking statements as a result of a variety of factors, including
those identified in "Business" and elsewhere in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1997.
Since its inception, the Company has been engaged primarily in the research
and development and, more recently, the commercialization of proprietary
products relating to the detection, diagnosis and treatment of cancer and
infectious diseases. On June 28, 1996, the U.S. Food and Drug Administration
("FDA") licensed CEA-Scan for use with other standard diagnostic modalities
for the detection of recurrent and/or metastatic colorectal cancer. On
October 4, 1996, the European Commission granted marketing authorization for
use of the product in the 15 countries comprising the European Union for the
same indication. On September 16, 1997, the Company received a notice of
compliance from the Health Protection Branch permitting it to market CEA-Scan
in Canada for colorectal cancer for recurrent and metastatic colorectal cancer.
On February 14, 1997, the Company was granted regulatory approval by the
European Commission to market LeukoScan(r), an in vivo infectious disease
diagnostic imaging product, in all 15 countries which are members of the
European Union, for the detection and diagnosis of osteomyelitis (bone
infection) in long bones and in diabetic foot ulcer patients. On December 19,
1996, the Company filed a Biologics License Application ("BLA") for LeukoScan
with the FDA for the same indication approved in Europe, plus an additional
indication for the diagnosis of acute, atypical appendicitis. The Company has
also been pursuing the broadening of its approval for LeukoScan in Europe to
include the acute, atypical appendicitis indication. As with all filings,
there can be no assurance that the regulatory approval for such indications
will be received.
The Company is also engaged in developing other biopharmaceutical products,
which are in various states of development and clinical testing. The Company
has not achieved profitable operations and does not anticipate achieving
profitable operations during fiscal year 1998. The Company will continue to
experience operating losses until such time, if at all, that it is able to
generate sufficient revenues from sales of CEA-Scan, LeukoScan and its other
proposed in vivo products. Further, the Company's working capital will
continue to decrease until such time, if at all, that the Company is able to
generate positive cash flow from operations or until such time, if at all,
that the Company receives an additional infusion of cash from the sale of the
Company's securities, from other financing or from corporate alliances to
finance the Company's operating expenses and capital expenditures.
Results of Operations
Revenues for the three-month period ended September 30, 1997 were $1,301,000
as compared to $973,000 for the same period in 1996, representing a increase
of $328,000. The product sales for the three-month period ended September 30,
1997, increased by $963,000 as compared to the same period of 1996, as the
Company's results included sales of products which were not sold during the
prior period as the product launch did not occur until October 30, 1996.
Research and development revenue increased by $94,000 for the three-month
period ended September 30, 1997 as compared to the same period of 1996, due
to higher grant income. Offsetting these increases, were a decrease in
revenue for royalties and license fees of $521,000, mainly due to the receipt
of a non-recurring $500,000 license fee from a corporate partner in July
1996. Interest income decreased by $208,000 due to less cash available for
investments.
Total operating expenses for the three-month period ended September 30, 1997
were $4,731,000 as compared to $4,218,000 for the same period in 1996,
representing an increase of $513,000. Research and development costs for the
three-month period ended September 30, 1997 decreased by $257,000 as compared
to the same period in 1996, primarily due to decrease in a level of expenditures
required to obtain validation of the Company's new manufacturing facility.
General and administrative costs for the three-month period ended September
30, 1997 increased by $750,000 as compared to the same period in 1996.
This increase was principally due to marketing expenses of $399,000 for the
Company's full-time oncology sales force provided by MMD Specialty Services,
Inc. In addition, operating expences for Immunomedics Europe increased by
$346,000, from an insignificant amount during the period ended September 30,
1996.
Net loss for the three-month period ended September 30, 1997 was $3,431,000,
or $0.09 per share, as compared to a loss of $3,245,000, or $0.09 per share,
for the same period in 1996. The higher net loss of $186,000 in 1997 as
compared to 1996 principally resulted from higher operating expences, partially
offset by higher revenues, as discussed above. In addition, the net loss
per share for the three-month period ended September 30, 1997 was positively
impacted by the higher weighted average number of common shares outstanding
for this period, as compared to the same period in 1996. The increase in the
weighted average number of common shares outstanding was principally due to
the conversion of Preferred Stock into the Company's Common Stock (see Note
5 to Unaudited Condensed Consolidated Financial Statements).
Liquidity and Capital Resources
At September 30, 1997, the Company had working capital of $8,499,000, which
represents a decrease of $3,254,000 from June 30, 1997, and had no long-term
debt other than certain lease obligations (see Note 7 to Unaudited Condensed
Consolidated Financial Statements). The net decrease in working capital
resulted principally from the funding of operating expenses and capital
expenditures.
Liquidity and Capital Resources (Continued)
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 will be 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 for each equipment schedule, at an amount
which is deemed to be fair value, exercisable no later than ninety days before
the thirty-sixth installment is due. On November 1, 1996, December 9, 1996,
and April 1, 1997, the Company exercised the early purchase options on
equipment leased on February 14, 1994, April 1, 1994, and June 1, 1994,
respectively. 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 September 30, 1997, the Company was not in compliance with certain of
these ratios, but the lessor has not yet declared an event of default or
requested a letter of credit. The Company does not believe that such a request
would have a material adverse effect on the Company. As of October 31, 1997,
the Company has leased equipment with a cost basis aggregating $1,247,000
under the master lease agreement (see Note 7 to Unaudited Condensed Consolidated
Financial Statements).
The Company's liquid asset position, measured by its cash, cash equivalents
and marketable securities, was $11,739,000 at September 30, 1997,
representing a decrease of $3,285,000 from June 30, 1997. This decrease was
principally attributable to the funding of operating expenses and capital
expenditures as discussed above. It is anticipated that working capital and
cash, cash equivalents and marketable securities will decrease during the
remainder of fiscal year 1998 as a result of planned operating and capital
expenditures. At present, the Company believes that its projected financial
resources will be sufficient to fund anticipated operating expenses and
capital expenditures through fiscal year 1998. However, the Company believes
that it will require additional financial resourses by the beginning of fiscal
1999 in order for it to continue its budgeted levels of research and development
and clinical trials of its proposed products and regulatory filings for new
indications of existing products. The Company has commenced the planning
process to raise such funds and anticipates that such funds should be available
through a private placement of securities or other financial alternatives.
However, there can be no assurance that any such additional funds will be
available upon terms acceptable to the Company, or at all. The failure to
obtain such funds on a timely basis would have a material adverse effect on
the Company. In addition, 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.
Also, the Company continues to evaluate various programs to raise additional
capital and to seek additional revenues from the licensing of its proprietary
technology. At the present time, the Company is unable to determine whether
any of these future activities will be successful and, if so, the terms and
timing of any definitive agreements.
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share".
SFAS 128 establishes standards for computing and presenting earnings per share.
In accordance with the effective date of SFAS 128, the Company will adopt SFAS
128 as of December 31, 1997. This statement is not expected to have a material
impact on the Company's financial statements.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Not Applicable
(b) Reports on Form 8-K
The Company did not file a Current Report on Form 8-K during the
three-month period ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IMMUNOMEDICS, INC.
(Registrant)
DATE: November 13, 1997 /s/ David M. Goldenberg
David M. Goldenberg
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
DATE: November 13, 1997 /s/ Robert Komenda
Robert Komenda
Vice President,
Finance & Administration
(Principal Financial and
Accounting Officer)