UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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 0-17999
------------------------
IMMUNOGEN, INC.
____________________________
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2726691
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
128 SIDNEY STREET
CAMBRIDGE, MA 02139
________________________________________
(Address of principal executive offices, including zip code)
(617) 995-2500
______________________________________
(Registrant's telephone number, including area code)
___________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
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.
At September 30, 2000 there were 34,358,076 shares of common stock, par
value $.01 per share, of the registrant outstanding.
EXHIBIT INDEX AT PAGE 17
IMMUNOGEN, INC.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
a. Condensed Consolidated Balance Sheets as of
September 30, 2000 and June 30, 2000................... 3
b. Condensed Consolidated Statements of Operations for
the three months ended September 30, 2000 and
1999................................................ 4
c. Condensed Consolidated Statements of Stockholders'
Equity for the year ended June 30, 2000 and the
three months ended September 30, 2000............... 5
d. Condensed Consolidated Statements of Cash Flows for
the three months ended September 30, 2000 and
1999................................................ 6
e. Notes to Condensed Consolidated Financial
Statements.......................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition
and Results of Operations............................ 13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................... 16
PART II. OTHER INFORMATION.................................. 17
SIGNATURES.................................................. 19
2
IMMUNOGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000 AND JUNE 30, 2000
(UNAUDITED)
SEPTEMBER 30, JUNE 30,
2000 2000
------------- ------------
ASSETS
Cash and cash equivalents................................... $ 19,457,718 $ 1,408,908
Marketable securities....................................... 11,113,563 15,920,484
Due from related parties.................................... 40,611 47,352
Due from Collaborative Partners............................. 5,000,000 --
Prepaid and other current assets............................ 124,303 415,441
------------ ------------
Total current assets................................ 35,736,195 17,792,185
------------ ------------
Property and equipment, net of accumulated depreciation..... 2,095,629 1,508,396
Other assets................................................ 43,700 43,700
------------ ------------
Total assets........................................ $ 37,875,524 $ 19,344,281
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 961,912 $ 891,419
Accrued compensation........................................ 249,304 204,210
Other current accrued liabilities........................... 1,768,250 987,475
Current portion of capital lease obligations................ 47,259 60,083
Current portion of deferred revenue......................... 866,000 325,000
------------ ------------
Total current liabilities........................... 3,892,725 2,468,187
------------ ------------
Capital lease obligations................................... 5,530 8,137
Deferred Revenue............................................ 4,200,000 1,500,000
------------ ------------
Total liabilities................................... 8,098,255 3,976,324
------------ ------------
Stockholders' equity:
Common stock, $.01 par value; authorized 50,000,000 shares
as of September 30, 2000 and June 30, 2000; issued and
outstanding 34,358,076 shares and 33,050,659 shares as
of September 30, 2000 and June 30, 2000, respectively... 343,581 330,507
Additional paid-in capital.................................. 185,530,295 168,682,991
Accumulated deficit......................................... (156,388,717) (153,955,925)
Accumulated other comprehensive income...................... 292,110 310,384
------------ ------------
Total stockholders' equity.......................... 29,777,269 15,367,957
------------ ------------
Total liabilities and stockholders' equity.......... $ 37,875,524 $ 19,344,281
============ ============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
IMMUNOGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------------
2000 1999
----------- ----------
Revenues:
Revenue earned under collaboration agreement.............. $ 1,759,000 $4,000,000
Development fees.......................................... -- 4,800
Licensing................................................. -- 290
----------- ----------
Total revenues........................................ 1,759,000 4,005,090
----------- ----------
Expenses:
Research and development.................................. 3,568,933 1,831,023
General and administrative................................ 853,909 508,335
----------- ----------
Total expenses........................................ 4,422,842 2,339,358
----------- ----------
Net earnings/(loss) from operations......................... (2,663,842) 1,665,732
----------- ----------
Loss on the sale of assets................................ (1,900) (157)
Interest.................................................. 213,601 59,296
Other income.............................................. 19,349 --
----------- ----------
Net earnings/(loss) before minority interest................ (2,432,792) 1,724,871
----------- ----------
Minority interest in net loss of consolidated
subsidiary.............................................. -- 25,290
----------- ----------
Net earnings/(loss)......................................... $(2,432,792) $1,750,161
=========== ==========
Earnings/(loss) per common share:
Basic..................................................... $ (0.07) $ 0.07
=========== ==========
Diluted................................................... $ (0.07) $ 0.05
=========== ==========
Average common shares outstanding:
Basic..................................................... 33,307,465 25,913,856
=========== ==========
Diluted................................................... 33,307,465 33,684,371
=========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
IMMUNOGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 2000 AND THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
ACCUMULATED
COMMON STOCK PREFERRED STOCK ADDITIONAL OTHER
--------------------- ------------------- PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT INCOME
---------- -------- -------- -------- ------------ ------------- --------------
Balance at June 30, 1999........... 25,668,797 $256,687 2,400 $24 $158,790,821 $(153,718,365) $ --
========== ======== ====== === ============ ============= ========
Unrealized gains on marketable
Securities, net.................. -- -- -- -- -- -- 310,384
Net loss for the year ended June
30, 2000......................... -- -- -- -- -- (237,560) --
Comprehensive Income............... -- -- -- -- -- -- --
Stock Options exercised............ 131,567 1,316 -- -- 219,192 -- --
Exercise of put option............. 1,023,039 10,231 -- -- 2,489,769 -- --
Warrants exercised................. 3,403,728 34,037 -- -- 4,408,575 -- --
Conversion of Series E Convertible
Preferred Stock into Common
Stock............................ 2,823,528 28,236 (2,400) (24) (28,212) -- --
Compensation for stock option
vesting acceleration for
terminated officer............... -- -- -- -- 349,716 -- --
Value ascribed to ImmunoGen
warrants issued to BioChem, net
of financing costs............... -- -- -- -- 2,453,130 -- --
---------- -------- ------ --- ------------ ------------- --------
Balance at June 30, 2000........... 33,050,659 $330,507 -- $-- $168,682,991 $(153,955,925) $310,384
========== ======== ====== === ============ ============= ========
Unrealized loss on marketable
Securities, net.................. -- -- -- -- -- -- (18,274)
Net loss for the quarter ended Sept
30, 2000......................... -- -- -- -- -- (2,432,792) --
Comprehensive loss................. -- -- -- -- -- -- --
Stock Options exercised............ 214,101 2,141 -- -- 525,464 -- --
Warrants exercised................. 303,842 3,038 -- -- 1,329,735 -- --
Issuance of Common Stock to
Abgenix.......................... 789,474 7,895 -- -- 14,992,105 -- --
---------- -------- ------ --- ------------ ------------- --------
Balance at September 30, 2000...... 34,358,076 $343,581 -- $-- $185,530,295 $(156,388,717) $292,110
========== ======== ====== === ============ ============= ========
COMPREHENSIVE TOTAL
INCOME STOCKHOLDERS'
(LOSS) EQUITY
-------------- -------------
Balance at June 30, 1999........... $ -- $ 5,329,167
========== ===========
Unrealized gains on marketable
Securities, net.................. 310,384 310,384
Net loss for the year ended June
30, 2000......................... (237,560) (237,560)
----------
Comprehensive Income............... 72,824 --
==========
Stock Options exercised............ -- 220,508
Exercise of put option............. -- 2,500,000
Warrants exercised................. -- 4,442,612
Conversion of Series E Convertible
Preferred Stock into Common
Stock............................ -- --
Compensation for stock option
vesting acceleration for
terminated officer............... -- 349,716
Value ascribed to ImmunoGen
warrants issued to BioChem, net
of financing costs............... -- 2,453,130
---------- -----------
Balance at June 30, 2000........... $ -- $15,367,957
========== ===========
Unrealized loss on marketable
Securities, net.................. (18,274) (18,274)
Net loss for the quarter ended Sept
30, 2000......................... (2,432,792) (2,432,792)
----------
Comprehensive loss................. (2,451,066)
==========
Stock Options exercised............ -- 527,605
Warrants exercised................. -- 1,332,773
Issuance of Common Stock to
Abgenix.......................... -- 15,000,000
---------- -----------
Balance at September 30, 2000...... $ -- $29,777,269
========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
IMMUNOGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
----------- -----------
Cash flows from operating activities:
Net earnings/(loss) to common stockholders................ $(2,432,792) $ 1,750,161
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization........................... 126,441 118,921
Gain on sale of property and equipment.................. 1,900 157
Minority interest in net loss of consolidated
subsidiary............................................ -- (25,290)
Amortization of deferred lease.......................... -- (13,188)
Changes in operating assets and liabilities:
Due from Collaborative Partners....................... (5,000,000) --
Due from related parties.............................. 6,741 (3,964,424)
Prepaid and other current assets...................... 310,585 (16,231)
Accounts payable...................................... 70,493 27,624
Accrued compensation.................................. 45,094 (82,439)
Deferred revenue...................................... 3,241,000 --
Other current accrued liabilities..................... 780,775 (15,414)
----------- -----------
Net cash used for operating activities.............. (2,849,763) (2,189,295)
----------- -----------
Cash flows from investing activities:
Payments received on note receivable...................... -- 350,000
Purchase of marketable securities......................... 4,788,647 --
Proceeds from maturities of marketable securities......... 7,500 --
Proceeds from sale of property and equipment.............. -- 200
Capital expenditures...................................... (723,074) (104,233)
----------- -----------
Net cash provided by investing activities........... 4,073,073 245,967
----------- -----------
Cash flows from financing activities:
Proceeds from Common Stock issuances, net................. 15,000,000 2,500,000
Proceeds from Stock Options exercised, net................ 508,158 656
Proceeds from Warrants exercised, net..................... 1,332,773 --
Proceeds from issuance of subsidiary convertible preferred
stock, net.............................................. -- 843,000
Principal payments on capital lease obligations........... (15,431) (13,471)
----------- -----------
Net cash provided by financing activities........... 16,825,500 3,330,185
----------- -----------
Net change in cash and cash equivalents..................... 18,048,810 1,386,857
----------- -----------
Cash and cash equivalents, beginning balance................ 1,408,908 4,225,580
----------- -----------
Cash and cash equivalents, ending balance................... $19,457,718 $ 5,612,437
=========== ===========
Supplemental disclosure of noncash financing activities:
Due from related party for quarterly investment payment... $ -- $ 843,000
=========== ===========
Noncash exercise of stock options......................... $ 19,447 $ --
=========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
IMMUNOGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
ImmunoGen, Inc. ("ImmunoGen" or the "Company") was incorporated in
Massachusetts in 1981 to develop, produce and market commercial anti-cancer and
other pharmaceuticals based on molecular immunology. The Company continues to
research and develop its various products and technologies, and does not expect
to derive revenue from commercially approved product sales within the
foreseeable future. It is anticipated that the Company's existing capital
resources, enhanced by collaborative agreement funding, will enable current and
planned operations to be maintained through at least the next twelve-month
period. However, if the Company is unable to achieve subsequent milestones under
its collaborative agreements (see Note B), the Company may be required to defer
or limit some or all of its research, development and/or clinical projects.
The Company is subject to risks common to companies in the biotechnology
industry including, but not limited to, the development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology, manufacturing and marketing limitations,
collaboration arrangements, third-party reimbursements, the need to obtain
additional funding, and compliance with governmental regulations.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements at
September 30, 2000 and June 30, 2000 and for the three-month periods ended
September 30, 2000 and 1999 include the accounts of the Company and its
subsidiaries, ImmunoGen Securities Corp. and Apoptosis Technology, Inc. ("ATI").
Although the condensed consolidated financial statements are unaudited, they
include all of the adjustments, consisting only of normal recurring adjustments,
which management considers necessary for a fair presentation of the Company's
financial position in accordance with generally accepted accounting principles
for interim financial information. Certain information and footnote disclosures
normally included in the Company's annual financial statements have been
condensed or omitted. The preparation of interim financial statements requires
the use of management's estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the interim financial statements and the reported
amounts of revenues and expenditures during the reported period. The results of
the interim periods are not necessarily indicative of the results for the entire
year. Accordingly, the interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended June 30, 2000.
CASH AND CASH EQUIVALENTS
The Company considers all investments purchased with maturity dates of three
months or less from the date of acquisition to be cash equivalents.
MARKETABLE SECURITIES
In accordance with the Company's investment policy, surplus cash is invested
in investment-grade corporate and U.S. Government debt securities typically with
maturity dates of less than one year. The Company determines the appropriate
classification of marketable securities at the time of purchase and reevaluates
such designation as of each balance sheet date. Marketable securities which meet
the criteria for classification as available-for-sale are carried at fair value
based on quoted market prices.
7
IMMUNOGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Unrealized gains and losses are reported net, as comprehensive income, within
shareholders' equity. The cost of debt securities is adjusted for amortization
of premiums and accretion of discounts to maturity with all
amortization/accretion included in interest income.
As of September 30, 2000 and June 30, 2000, $19,457,718 and $1,408,908,
respectively in cash and overnight government repurchase agreements were
classified as cash and cash equivalents. The Company's cash, cash equivalents
and marketable securities as of September 30, 2000 are as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ------------ -----------
Cash and money market funds................. $ 4,457,718 $ -- $ -- $ 4,457,718
Commercial paper............................ 18,927,262 272,738 19,200,000
Government treasury notes................... 6,894,191 19,372 6,913,563
----------- -------- ------------ -----------
Total................................... 30,279,171 292,110 30,550,881
Less amounts classified as cash and cash
equivalents............................... (19,457,718) -- -- (19,457,718)
----------- -------- ------------ -----------
Total marketable securities................. $10,821,453 $292,110 $ $11,113,563
=========== ======== ============ ===========
No realized gains or losses on available-for-sale securities were recognized
during the three-month period ended September 30, 2000.
COMPUTATION OF LOSS PER COMMON SHARE
Basic and diluted earnings/(loss) per share is calculated based upon the
weighted average number of common shares outstanding during the period. Diluted
earnings per share incorporates the dilutive effect of stock options, warrants
and other convertible securities. ImmunoGen Common Stock equivalents, as
calculated in accordance with the treasury-stock accounting method, equaled
4,677,120 and 7,770,515, as of September 30, 2000 and 1999 respectively.
Components of calculating net earnings/ (loss) per share are set forth in the
following table:
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------------
2000 1999
----------- ----------
Net earnings/loss to common shareholders.......... $(2,432,792) $1,750,161
=========== ==========
Weighted average common shares outstanding,
basic........................................... 33,307,465 25,913,856
Net effect of dilutive instruments:
Convertible preferred stock................... 339,177 6,797,845
Options....................................... 2,363,100 771,600
Warrants...................................... 1,974,843 201,070
----------- ----------
Weighted average common shares outstanding,
diluted......................................... 37,984,585* 33,684,371
=========== ==========
Earnings/(loss) per common share, basic........... $ (0.07) $ 0.07
=========== ==========
Earnings/(loss) per common share, dilutive........ $ (0.07) $ 0.05
=========== ==========
- ------------------------
* The dilutive effects of common stock equivalents were not included in the
September 30, 2000 calculation, as their effect was antidilutive.
8
IMMUNOGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
COMPREHENSIVE INCOME/(LOSS)
The Company presents comprehensive income in accordance with Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income." For the
periods ended September 30, 2000 and 1999, total comprehensive loss equaled
$2,451,066 and $0, respectively. Comprehensive income was comprised entirely of
unrealized gains recognized on available-for-sale debt securities.
B. AGREEMENTS
In February 1999, the Company entered into an exclusive license agreement
with SmithKline Beecham plc, London and SmithKline Beecham, Philadelphia
(collectively, "SB") to develop and commercialize ImmunoGen's lead tumor
activated prodrug ("TAP"), huC242-DM1/SB-408075 (the "SB Agreement"). Under the
terms of the agreement, the Company could receive more than $40.0 million,
subject to the achievement by the Company of certain development milestones. The
Company is also entitled to receive royalty payments on future product sales, if
and when they commence. Finally, at ImmunoGens's option, SB will purchase up to
$5.0 million of ImmunoGen Common Stock over the next two years, subject to
certain conditions. Through September, 2000 SB had purchased $2.5 million worth
of ImmunoGen Common Stock.
The SB Agreement is expected to provide the Company with sufficient cash
funding to carry out its responsibilities in developing huC242-DM1/SB-408075. To
that end, the Company will be responsible for costs associated with the Phase
I/II clinical study, which was initiated in December 1999. All costs subsequent
to this Phase I/II clinical study will be the responsibility of SB.
As of September 30, 2000, the Company had received five milestones totalling
$11.5 million under the SB Agreement which we recorded as collaboration revenue,
with the exception of $325,000 of the fourth milestone and $241,000 of the fifth
milestone which have been recorded as deferred revenue until such time as the
remaining ongoing commitments associated with these milestones have been
satisfied.
In May 2000, the Company executed two separate licensing agreements with
Genentech, Inc. of South San Francisco, California. The first agreement grants
an exclusive license to Genentech for ImmunoGen's TAP technology for use with
antibodies such as Herceptin-Registered Trademark-. Under the terms of the
agreement, Genentech will receive exclusive worldwide rights to commercialize
anti-HER2 targeting products using ImmunoGen's maytansinoid TAP platform.
Genentech will be responsible for manufacturing, product development and
marketing of any products resulting from the agreement; ImmunoGen will be
reimbursed for any preclinical and clinical materials that it makes under the
agreement. ImmunoGen received and recorded as revenue a $2.0 million
non-refundable payment for execution of the agreement for which no further
performance is required. In addition to royalties on net sales, the terms of the
agreement include certain other payments based upon Genentech's achievement of
milestones, assuming all benchmarks are met, for potentially up to
$40.0 million.
In addition to the Herceptin-Registered Trademark- agreement described
above, the Company announced in May 2000 that it has entered into an additional
agreement with Genentech. This second collaboration provides Genentech with
broad access to ImmunoGen's maytansinoid TAP technology for use with Genentech's
other proprietary antibodies. This multi-year agreement provides Genentech with
a license to utilize ImmunoGen's maytansinoid TAP platform in its antibody
product research efforts and an option to obtain product licenses for a limited
number of antigen targets over the agreement's five-year term. Under this
agreement, the Company received and recorded as revenue a non-refundable
technology
9
IMMUNOGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. AGREEMENTS (CONTINUED)
access fee of $3.0 million in May 2000. This agreement also provides for certain
other payments based on Genentech's achievement of milestones, assuming all
benchmarks are met for potentially up to $39.0 million per antigen target, and
royalties on net sales of resulting products. Genentech will be responsible for
manufacturing, product development and marketing of any products developed
through this collaboration; ImmunoGen will be reimbursed for any preclinical
materials that it makes under the agreement. The agreement can be renewed for
one subsequent three- year period, for an additional technology access fee.
Also in May, 2000, the Company entered into a development, commercialization
and license agreement with British Biotech Pharmaceuticals Limited ("British
Biotech"), a biotechnology company located in Oxford, England, to develop and
commercialize the Company's huN901-DM1 TAP for the treatment of small-cell lung
cancer. The agreement grants British Biotech exclusive rights to develop and
commercialize huN901-DM1 in the European Union and Japan. The Company retains
the rights to commercialize huN901-DM1 in the United States and the rest of the
world, as well as the right to manufacture the product worldwide. Under the
terms of the agreement, British Biotech will be responsible for conducting the
clinical trials necessary to achieve marketing approval in the United States,
European Union and Japan. ImmunoGen is responsible for the remaining preclinical
development, and will be reimbursed for manufacturing the product for clinical
trials. British Biotech paid a fee of $1.5 million for its territorial rights to
huN901-DM1, which has been deferred, to be recorded as revenue as the Company
completes its preclinical development obligations. Upon approval of the product
for marketing in the United States, the Company will pay to British Biotech a
one-time milestone payment of $3.0 million. ImmunoGen will receive royalties on
sales of huN901-DM1 in the European Union and Japan.
In September 2000, the Company entered into a collaboration agreement with
Abgenix. The agreement provides Abgenix with access to the Company's
maytansinoid TAP technology for use with Abgenix's antibodies along with options
to obtain product licenses for antigen targets. The Company expects to receive a
total of $5.0 million in technology access fee payments, of which it has
received $3.0 million in October 2000, as well as potential milestone payments
and royalties on net sales of any resulting products. The $3.0 million initial
access fee has been recorded as deferred revenue and will be recognized over the
period of the collaboration agreement. In addition, on September 7, 2000,
Abgenix purchased $15.0 million of the Company's common stock in accordance with
the agreement. Abgenix has the right to extend its options for a specified
period of time for an extension fee. Our agreement with Abgenix will terminate
on a specified time period during which the Company has given Abgenix access to
its technology ends. Either party can terminate the agreement for any material
breach by the other party that remains uncured for a certain period of time.
In September 2000, the Company entered into a collaboration agreement with
MorphoSys of Martinsried, Germany. Pursuant to this agreement, MorphoSys will
identify fully human antibodies against a specific cell surface marker that the
Company has identified through its apoptosis research and is associated with a
number of forms of cancer. The Company intends to develop products using
antibodies generated by MorphoSys against this marker. The Company paid
MorphoSys a $825,000 technology access payment and will pay development-related
milestone payments and royalties on net sales of any resulting products. The
Company can terminate this agreement unilaterally at any time and either party
can terminate the agreement for any material breach by the other party that
remains uncured for a certain period of time.
10
IMMUNOGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. MINORITY INTEREST
In July 1997, ATI entered into a collaboration agreement with BioChem
Pharma Inc. ("BioChem"), a large Canadian biopharmaceutical company. This
agreement grants BioChem an exclusive worldwide license to ATI's proprietary
screens based on two families of proteins involved in apoptosis, for use in
identifying leads for anti-cancer drug development. As of April 2000, BioChem
has fulfilled all of its funding obligations under the agreement by purchasing a
total of $11.125 million in non-voting, non-dividend-bearing convertible
preferred stock of ATI.
In April 2000, BioChem informed ATI of its decision not to extend the
agreement beyond its scheduled July 31, 2000 termination date. Consequently,
under the terms of the agreement, rights to all screens delivered to BioChem
will revert to ATI effective August 1, 2000. However, certain provisions
pertaining to the license of any products resulting from the collation will
remain in force. As of August 1, 2000, no compound leads were identified. Until
July 31, 2000, all remaining proceeds of the $11.125 million BioChem investment
in ATI were restricted to support the research and development activities of the
collaboration. After that date, all residual proceeds will represent
unrestricted assets of ATI.
The preferred stock issued to BioChem is convertible into ATI common stock
at any time after three years from the date of first issuance, at a conversion
price equal to the then current market price of the ATI common stock, but in any
event at a price that will result in BioChem acquiring at least 15% of the then
outstanding ATI common stock. Through September 30, 2000, 11,125 shares of ATI
preferred stock were issued to BioChem, representing a 15% minority interest (on
an if-converted and fully-diluted basis) in the net equity of ATI. This minority
interest portion of ATI's loss reduced ImmunoGen's net loss in the three-month
period ended September 30, 1999 by $25,290. Based upon an independent appraisal,
approximately 3% of the $11.125 million invested to date, or approximately
$334,000, has been allocated to the minority interest in ATI, with the
remainder, or approximately $10.791 million allocated to the Company's equity.
As part of the BioChem agreement, BioChem also received warrants to purchase
shares of ImmunoGen Common Stock equal to the amount invested in ATI during the
three-year research term. Beginning July 31, 2000, these warrants are
exercisable for a number of shares of ImmunoGen Common Stock determined by
dividing $11.125 million, the amount of BioChem's investment in ATI, by the
market price of ImmunoGen Common Stock on the exercise date, subject to certain
limitations imposed by the Nasdaq Stock Market rules, which limit the sale or
issuance by an issuer of certain securities at a price less than the greater of
book or market value. Consequently, BioChem's ability to convert all of its
ImmunoGen warrants into ImmunoGen Common Stock is limited to a total of 20% of
the number of shares of ImmunoGen's Common Stock outstanding on the date of the
initial transaction to the extent that the conversion price would be less than
the market price of ImmunoGen Common Stock on that date, unless stockholder
approval for such conversion is obtained, if required, or unless the Company has
obtained a waiver of that requirement. The exercise price is payable in cash or
shares of ATI's preferred stock, at BioChem's option. The warrants are expected
to be exercised only in the event that the shares of ATI common stock do not
become publicly traded. ImmunoGen expects that BioChem will use its shares of
ATI preferred stock, in lieu of cash, to exercise the warrants.
11
IMMUNOGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D. CAPITAL STOCK
In July 2000, a holder of warrants originally issued in connection with a
private placement of the Company's Series A Convertible Preferred Stock
exercised his right to acquire 50,000 shares of Common Stock at $3.11 per share.
Proceeds from this warrant exercise will be used to fund current operations.
In September 2000, a holder of warrants originally issued in connection with
a private placement of the Company's Series A Convertible Preferred Stock
exercised his right to acquire 50,000 shares of Common Stock at $3.11 per share.
Proceeds from this warrant exercise will be used to fund current operations.
In September 2000, holders of warrants originally issued in connection with
a private placement of the Company's Series B Convertible Preferred Stock
exercised their rights to acquire 176,569 shares of Common Stock at $5.49 per
share. Proceeds from this warrant exercise will be used to fund current
operations.
In September 2000, holders of warrants originally issued in connection with
a private placement of the Company's Series D Convertible Preferred Stock
exercised their rights to acquire 27,273 shares of Common Stock at $1.94 per
share. Proceeds from this warrant exercise will be used to fund current
operations.
During the three-month period ended September 30, 2000, holders of options
issued through the Company's 1986 Incentive Stock Option Plan, as amended,
exercised their rights to acquire an aggregate of 214,101 shares at prices
ranging from $0.84 per share to $14.75 per share. The total proceeds from these
option exercises, $508,158, will be used to fund current operations.
12
IMMUNOGEN, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since our inception, we have been principally engaged in the development of
antibody based cancer therapeutics. Our product candidates, tumor-activated
prodrugs ("TAPs"), consist of an antibody chemically linked, or conjugated, to a
highly potent cell-killing, or cytotoxic agent which is delivered directly to
the tumor cell where it is released and activated. As of September 30, 2000, our
accumulated deficit was approximately $156.4 million. We have incurred
significant net losses since inception as a result of research and development
and general and administrative expenses in support of our operations. We
anticipate incurring net losses over at least the next several years to continue
development of our TAP technology and product candidates, expand our operations,
conduct clinical trials and apply for regulatory approvals.
We have established collaborative agreements that allow companies to use our
TAP technology to develop products with antibodies. We also have licensed
certain rights to our first two internally developed TAP product candidates to
companies that have product development and commercialization capabilities we
wish to access in exchange for fees, milestone payments and royalties on product
sales. Our collaborative partners include SmithKline Beecham, Genentech,
Abgenix, British Biotech, and MorphoSys. We expect that substantially all of our
revenue for the foreseeable future will result from payments under collaborative
arrangements. The terms of the collaborative agreements vary, reflecting the
value we add to the development of any particular product candidate.
During this quarter, in September 2000, we entered into a collaboration
agreement with Abgenix, Inc. of Freemont, California. The agreement provides
Abgenix with access to our maytansinoid TAP technology for use with Abgenix's
antibodies along with options to obtain product licenses for antigen targets. We
expect to receive a total of $5.0 million in technology access fee payments, of
which we have received $3.0 million, as well as potential milestone payments and
royalties on net sales of any resulting products. In addition, on September 7,
2000 Abgenix purchased $15.0 million of our common stock in accordance with the
agreement. Abgenix has the right to extend its product license options for a
specified period of time for an extension fee. Our agreement with Abgenix will
terminate once the specified time period during which we have given Abgenix
access to our technology ends. Either party can terminate the agreement for any
material breach by the other party that remains uncured for a certain period of
time.
In September 2000, we entered into a collaboration agreement with MorphoSys
AG of Martinsried, Germany. Pursuant to this agreement, MorphoSys will identify
fully human antibodies against a specific cell surface marker that we have
identified through our apoptosis research and which is associated with a number
of forms of cancer. We intend to develop products using antibodies generated by
MorphoSys against this marker. We paid MorphoSys an $825,000 technology access
payment and will pay development-related milestone payments and royalties on net
sales of any resulting products. We can terminate this agreement unilaterally at
any time and either party can terminate the agreement for any material breach by
the other party remains uncured for a certain period of time.
13
IMMUNOGEN, INC.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES
We earn revenue from our collaborations, development fees and licensing
fees. Total revenues for the three months ended September 30, 2000 decreased 56%
to $1.76 million from $4.01 million for the three months ended September 30,
1999. Our largest revenue source is our collaboration revenue, which accounted
for substantially all of our revenue in both three-month periods. The decrease
in revenues from the three month period ended September 30, 1999 to the three
month period ended September 30, 2000 was primarily attributable to lower
collaboration revenue under our agreement with SmithKline Beecham.
EXPENSES
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the three months ended September 30, 2000 increased 95% to $3.57 million from
$1.83 million for the three months ended September 30, 1999. This increase was
primarily due to the increased costs associated with supporting our ongoing
huC242-DM1/SB-408075 Phase I/II human clinical trials, as well as the continued
development of huN901-DM1, in advance of human clinical studies, and our other
TAP product candidates. In addition, we accrued an $825,000 expense for
obligations incurred upon the signing of our September 29, 2000 license
agreement with MorphoSys. We expect that future research and development
expenses will significantly increase in connection with the further development
of new TAP product candidates.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended September 30, 2000 increased 68% to $854,000 from
$508,000 for the three months ended September 30, 1999. This increase was
primarily due to increased administrative and business development staffing as
well as increased expenditures associated with business development and investor
relations. Future general and administrative expenses are also expected to
increase in connection with the continued development of our product candidates
and technologies.
INTEREST INCOME
Interest income for the three months ended September 30, 2000 increased 260%
to $214,000 from $59,000 for the three months ended September 30, 1999. The
increase in interest income from 1999 to 2000 primarily resulted from the
increase in funds available for investment.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, we had approximately $30.6 million in cash and
short-term investments. Since July 1, 2000, we have financed the net cash used
to support operating activities primarily from various collaborative and
financing sources. These sources include milestone revenues earned under our
collaboration agreement with SmithKline Beecham, the sale of equity securities
to Abgenix, the exercise of stock options and warrants to purchase Common Stock
and income earned on invested assets. Cash used in operations in the three
months ended September 30, 2000 primarily supported our various research and
development efforts. In October 2000, we received an additional $3.0 million
from Abgenix in connection with our collaboration agreement with them.
Net cash used in operations during the three months ended September 30, 2000
was $2.85 million compared to $2.19 million used in the three months ended
September 30, 1999. This 30% increase in operational cash use is largely due to
a $2.08 million increase in total operational expenses, of which
14
IMMUNOGEN, INC.
$825,000 represented an accrued expense related to the September 29, 2000
MorphoSys research agreement.
Net cash provided by investing activities was $4.07 million for the three
months ended September 30, 2000, and primarily represents purchases of
higher-yielding, investment-grade corporate and U.S. Government debt securities.
Net cash provided in investing activities during the three-month period ended
September 30, 1999 was $246,000 and primarily resulted from payments received on
a note receivable originally issued in connection with the assignment of the
Company's former Canton, Massachusetts facility.
Capital purchases were $723,000 for the three months ended September 30,
2000, and consisted primarily of costs associated with the update of our
existing Norwood, Massachusetts development and pilot manufacturing facility. We
anticipate additional capital expenditures for the completion of this project to
be $1.0 million over the next six months. Certain capital outlays are expected
to be reimbursed pursuant to our collaborative agreements.
Net cash provided by financing activities increased by $13.5 million for the
three months ended September 30, 2000, to $16.83 million versus $3.33 million
provided by financing activities for the three months ended September 30, 1999.
The increase is largely due to the exercise of 303,842 warrants and 214,101
stock options during the three-month period ended September 30, 2000 and to the
September 7, 2000 issuance of 789,474 shares of our common stock to Abgenix. Our
total proceeds from all common stock issued for the three months ended
September 30, 2000 were $16.84 million.
We anticipate that our capital resources will enable us to meet our
operational expenses and capital expenditures at least through the next
twelve-month period. We believe that our established collaborative agreements,
while subject to specified milestone achievements, will provide funding
sufficient to allow us to meet our obligations under all collaborative
agreements while also allowing us to develop product candidates and technologies
not covered by collaborative agreements. However, we cannot assure you that such
collaborative agreement funding will, in fact, be realized. Should we not meet
some or all of the terms and conditions of our various collaboration agreements,
we may be required to pursue additional strategic partners, secure alternative
financing arrangements, and/or defer or limit some or all of our research,
development and/or clinical projects.
CERTAIN FACTS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
This report contains certain forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are based on management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to differ materially
from those described in the forward-looking statements. The Company cautions
investors that there can be no assurance that actual results or business
conditions will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including, but not
limited to, the following: the uncertainties associated with preclinical studies
and clinical trials; the early stage of the Company's initial product
development and lack of product revenues; the Company's history of operating
losses and accumulated deficit; the Company's limited financial resources and
uncertainty as to the availability of additional capital to fund its development
on acceptable terms, if at all; the Company's lack of commercial manufacturing
experience and commercial sales, distribution and marketing capabilities;
reliance on suppliers of key materials necessary for production of the products
and technologies; the potential development by competitors of competing products
and technologies; the Company's dependence on existing and potential
collaborative partners, and the lack of assurance that the Company will receive
any funding under such relationships to develop and maintain strategic
alliances; the lack of assurance regarding patent and other protection
15
IMMUNOGEN, INC.
for the Company's proprietary technology; governmental regulation of the
Company's activities, facilities, products and personnel; the dependence on key
personnel; uncertainties as to the extent of reimbursement for the costs of the
Company's potential products and related treatments by government and private
health insurers and other organizations; the potential adverse impact of
government-directed health care reform; the risk of product liability claims;
unreported Year 2000 problems; and economic conditions, both generally and those
specifically related to the biotechnology industry. As a result, the Company's
future development efforts involve a high degree of risk. For further
information, refer to the more specific risks and uncertainties discussed
throughout the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2000 as filed with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the financial position of the Company is
subject to certain risks, including market risk associated with interest rate
movements. The Company regularly assesses these risks and has established
policies and business practices designed to mitigate such exposures. The Company
invests surplus cash in low-risk debt securities, typically maturing in one year
or less, pending use in operations. The Company manages these funds by seeking
principal preservation while concurrently enhancing rates of return. The
Company's interest income is therefore sensitive to changes in the general level
of domestic interest rates. Based on the Company's overall interest rate
exposure at September 30, 2000, a near-term change in interest rates would not
materially affect the fair value of interest rate sensitive instruments.
16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In July 2000, a holder of warrants originally issued in connection with a
private placement of the Company's Series A Convertible Preferred Stock
exercised his right to acquire 50,000 shares of Common Stock at $3.11 per share.
Proceeds from this warrant exercise will be used to fund current operations.
In September 2000, a holder of warrants originally issued in connection with
a private placement of the Company's Series A Convertible Preferred Stock
exercised his right to acquire 50,000 shares of Common Stock at $3.11 per share.
Proceeds from this warrant exercise will be used to fund current operations.
In September 2000, holders of warrants originally issued in connection with
a private placement of the Company's Series B Convertible Preferred Stock
exercised their rights to acquire 176,569 shares of Common Stock at $5.49 per
share. Proceeds from this warrant exercise will be used to fund current
operations.
In September 2000, holders of warrants originally issued in connection with
a private placement of the Company's Series D Convertible Preferred Stock
exercised their rights to acquire 27,273 shares of Common Stock at $1.94 per
share. Proceeds from this warrant exercise will be used to fund current
operations.
During the three-month period ended September 30, 2000, holders of options
issued through the Company's 1986 Incentive Stock Option Plan, as amended,
exercised their rights to acquire an aggregate of 214,101 shares at prices
ranging from $0.84 per share to $14.75 per share. The total proceeds from these
option exercises, $508,158, will be used to fund current operations.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated September 11, 2000--Item 5: Other Events.
ImmunoGen, Inc. and Abgenix announce a collaboration agreement
between the two companies which provides Abgenix with broad access to
ImmunoGen's maytansinoid Tumor-Activated Prodrug
17
(TAP) technology for use with Abgenix's fully human antibodies
generated with XenoMouse technology.
Form 8-K/A dated October 10, 2000--Item 5: Other Events. Amendment to
the Form 8-K dated September 11, 2000, to file a redacted copy of the
collaboration agreement between ImmunoGen, Inc. and Abgenix.
Form 8-K dated October 10, 2000--Item 5: Other Events.
ImmunoGen, Inc. and MorphoSys announce a collaboration agreement
between the two companies for the discovery and development by
MorphoSys of human monoclonal antibodies against certain specified
ImmunoGen Targets.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
IMMUNOGEN, INC.
Date: October 27, 2000 By: /s/ MITCHEL SAYARE
-----------------------------------------
Mitchel Sayare
President and Chief Executive Officer
(principal executive and interim principal
financial officer)
Date: October 27, 2000 By: /s/ JAMES T. PHAYRE
-----------------------------------------
James T. Phayre
Controller
(principal accounting officer)
19