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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 MARCH 31, 2001
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
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IMMUNOGEN, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2726691
------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
128 SIDNEY STREET
CAMBRIDGE, MA 02139
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(Address of principal executive offices, including zip code)
(617) 995-2500
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(Registrant's telephone number, including area code)
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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 / /
At May 9, 2001 there were 38,532,968 shares of common stock, par value $.01
per share, of the registrant outstanding.
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IMMUNOGEN, INC.
TABLE OF CONTENTS
PAGE
--------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
a. Condensed Consolidated Balance Sheets as of March 31, 2001
and June 30, 2000......................................... 3
b. Condensed Consolidated Statements of Operations for the
three months and nine months ended March 31, 2001 and
2000...................................................... 4
c. Condensed Consolidated Statements of Stockholders' Equity
for the year ended June 30, 2000 and the nine months ended
March 31, 2001............................................ 5
d. Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 2001 and 2000...................... 6
e. Notes to Condensed Consolidated Financial Statements........ 7
Item 2. Management's Discussion and Analysis of Financial Condition 14
and Results of
Operations.................................................
18
Item 3. Quantitative and Qualitative Disclosures about Market
Risk.................................................................
19
PART II. OTHER INFORMATION..........................................
20
SIGNATURES...........................................................
21
EXHIBIT INDEX........................................................
2
IMMUNOGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 AND JUNE 30, 2000
(UNAUDITED)
MARCH 31, JUNE 30,
2001 2000
------------- -------------
ASSETS
Cash and cash equivalents................................... $ 16,832,999 $ 8,155,770
Marketable securities....................................... 93,757,489 9,173,622
Due from related parties.................................... -- 47,352
Inventory................................................... 1,574,767 --
Prepaid and other current assets............................ 1,305,517 415,441
------------- -------------
Total current assets........................................ 113,470,772 17,792,185
Long term marketable securities............................. 45,239,992 --
Property and equipment, net of accumulated depreciation..... 3,138,519 1,508,396
Other assets................................................ 43,700 43,700
------------- -------------
Total Assets............................................ $ 161,892,983 $ 19,344,281
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 930,942 $ 891,419
Accrued compensation........................................ 525,085 204,210
Other current accrued liabilities........................... 1,598,797 987,475
Current portion of capital lease obligations................ 20,309 60,083
Current portion of deferred revenue......................... 384,588 325,000
------------- -------------
Total current liabilities................................... 3,459,721 2,468,187
Capital lease obligations................................... -- 8,137
Deferred revenue............................................ 8,000,000 1,500,000
------------- -------------
Total liabilities....................................... 11,459,721 3,976,324
Stockholders' equity:
Common stock, $.01 par value; authorized 50,000,000 shares
as of March 31, 2001 and June 30, 2000; issued and
outstanding 38,531,418 shares and 33,050,659 shares as of
March 31, 2001 and June 30, 2000, respectively............ 385,314 330,507
Additional paid-in capital.................................. 310,818,694 168,682,991
Accumulated deficit......................................... (161,052,162) (153,955,925)
Accumulated other comprehensive income...................... 281,416 310,384
------------- -------------
Total stockholders' equity.............................. 150,433,262 15,367,957
------------- -------------
Total liabilities and stockholders' equity.............. $ 161,892,983 $ 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 AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ------------ -----------
Revenues:
Revenue earned under collaboration
agreements........................... $ 155,412 $ -- $ 2,440,412 $ 6,500,000
Clinical materials reimbursement....... 561,615 -- 561,615 --
Development fees....................... 35,164 -- 135,233 4,800
Licensing.............................. -- -- -- 485
----------- ----------- ------------ -----------
Total revenues....................... 752,191 -- 3,137,260 6,505,285
Expenses:
Cost of clinical materials
reimbursed........................... 561,615 -- 561,615 --
Research and development............... 3,739,396 2,262,513 10,927,145 5,984,229
General and administrative............. 1,179,697 689,167 3,081,231 1,835,445
----------- ----------- ------------ -----------
Total expenses....................... 5,480,708 2,951,680 14,569,991 7,819,674
Net loss from operations................. (4,728,517) (2,951,680) (11,432,731) (1,314,389)
Gain/(loss) on the sale of assets...... -- 50 (1,900) 1,538
Interest income, net................... 2,583,606 115,961 4,038,340 239,919
Realized gains on investments.......... 92,582 -- 92,582 --
Other income........................... 20,266 6,000 290,072 48,030
----------- ----------- ------------ -----------
Net loss before income tax expense and
minority interest...................... (2,032,103) (2,829,669) (7,013,637) (1,024,902)
Income tax expense..................... 27,600 -- 82,600 --
----------- ----------- ------------ -----------
Net loss before minority interest........ (2,059,703) (2,829,669) (7,096,237) (1,024,902)
Minority interest in net loss of
consolidated subsidiary.............. -- 25,290 -- 75,870
----------- ----------- ------------ -----------
Net loss................................. $(2,059,703) $(2,804,379) $ (7,096,237) $ (949,032)
=========== =========== ============ ===========
Loss per common share:
Basic.................................. $ (0.05) $ (0.09) $ (0.20) $ (0.03)
=========== =========== ============ ===========
Diluted................................ $ (0.05) $ (0.09 $ (0.20) $ (0.03)
=========== =========== ============ ===========
Average common shares outstanding:
Basic.................................. 38,518,911 32,051,859 36,058,066 28,356,336
=========== =========== ============ ===========
Diluted................................ 38,518,911 32,051,859 36,058,066 28,356,336
=========== =========== ============ ===========
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 NINE MONTHS ENDED MARCH 31, 2001
(UNAUDITED)
PREFERRED ACCUMULATED
COMMON STOCK 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 losses on marketable
securities, net.................... -- -- -- -- -- -- (28,968)
Net loss for the nine months ended
March 31, 2001..................... -- -- -- -- -- (7,096,237) --
Comprehensive loss................... -- -- -- -- -- -- --
Stock Options exercised.............. 309,944 3,099 -- -- 755,661 -- --
Warrants exercised................... 381,342 3,813 -- -- 1,706,735 -- --
Issuance of Common Stock to Abgenix.. 789,473 7,895 -- -- 14,992,105 -- --
Issuance of Common Stock to Public,
net of financing costs............. 4,000,000 40,000 -- -- 124,681,202 -- --
---------- -------- ------ ---- ------------ ------------- --------
Balance at March 31, 2001............ 38,531,418 $385,314 -- $ -- $310,818,694 $(161,052,162) $281,416
========== ======== ====== ==== ============ ============= ========
TOTAL
COMPREHENSIVE STOCKHOLDERS'
INCOME (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 losses on marketable
securities, net.................... (28,968) (28,968)
Net loss for the nine months ended
March 31, 2001..................... (7,096,237) (7,096,237)
-----------
Comprehensive loss................... $(7,125,205) --
===========
Stock Options exercised.............. -- 758,760
Warrants exercised................... -- 1,710,548
Issuance of Common Stock to Abgenix.. -- 15,000,000
Issuance of Common Stock to Public,
net of financing costs............. -- 124,721,202
----------- ------------
Balance at March 31, 2001............ $ -- $150,433,262
=========== ============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
IMMUNOGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
----------------------------
2001 2000
------------- ------------
Cash flows from operating activities:
Net loss to common stockholders........................... $ (7,096,237) $ (949,032)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization........................... 389,206 367,574
(Gain)/loss on sale of property and equipment........... 1,900 (1,538)
Tax benefit from stock options exercised................ -- 13,419
Minority interest in net loss of consolidated
subsidiary............................................ -- (75,870)
Amortization of deferred lease.......................... -- (35,172)
Changes in operating assets and liabilities:
Due from related parties.............................. 47,352 --
Inventory............................................. (1,574,767) 52,152
Prepaid and other current assets...................... (890,076) (48,841)
Accounts payable...................................... 39,523 (30,757)
Accrued compensation.................................. 320,875 (23,450)
Deferred revenue...................................... 6,559,588 --
Other current accrued liabilities..................... 611,322 (130,527)
------------- ------------
Net cash used for operating activities.............. (1,591,314) (862,042)
Cash flows from investing activities:
Payments received on note receivable...................... -- 350,000
Purchase of marketable securities, net.................... (129,823,859) (10,978,750)
Unrealized gain on cash and cash equivalents.............. (28,968) --
Proceeds from sale of property and equipment.............. 7,500 1,795
Capital expenditures...................................... (2,028,729) (243,044)
------------- ------------
Net cash used for investing activities.................. (131,874,056) (10,869,999)
Cash flows from financing activities:
Proceeds from common stock issuance, net.................. 139,721,202 7,146,671
Proceeds from issuance of subsidiary convertible preferred
stock, net.............................................. -- 2,529,000
Proceeds from stock options exercised, net................ 758,760 --
Proceeds from warrants exercised, net..................... 1,710,548 --
Principal payments on capital lease obligations........... (47,911) (41,824)
------------- ------------
Net cash provided by financing activities............... 142,142,599 9,633,847
------------- ------------
Net change in cash and cash equivalents..................... 8,677,229 (2,098,194)
Cash and cash equivalents, beginning balance................ 8,155,770 4,225,580
------------- ------------
Cash and cash equivalents, ending balance................... $ 16,832,999 $ 2,127,386
============= ============
Supplemental disclosures:
Due from related party for quarterly investment payment..... $ -- $ 843,000
============= ============
Cash paid for taxes......................................... $ 55,000 $ --
============= ============
Cash paid for interest...................................... $ 5,483 $ 14,265
============= ============
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 for the foreseeable future. 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 and compliance with
governmental regulations.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements at March 31,
2001 and June 30, 2000 and for the three-month and nine-month periods ended
March 31, 2001 and 2000 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. Unrealized gains and losses are reported net, as
comprehensive income, within stockholders' equity. The cost of
7
securities is adjusted for amortization of premiums and accretion of discounts
to maturity with all amortization and accretion included in interest income.
As of March 31, 2001 and June 30, 2000, $16,832,999 and $8,155,770,
respectively in cash, overnight government repurchase agreements and other
investments maturing in three months or less were classified as cash and cash
equivalents. The Company's cash, cash equivalents and marketable securities as
of March 31, 2001 are as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------------ ---------- ---------- ------------
Cash and money market funds.................. $ 14,924,048 -- -- $ 14,924,048
Commercial paper............................. 1,909,464 -- (513) 1,908,951
Government treasury notes.................... 42,810,998 114,050 42,925,048
Federal Agencies............................. 10,002,710 -- (10,042) 9,992,668
Asset-backed securities...................... 36,205,601 127,834 -- 36,333,435
Corporate Notes.............................. 46,616,655 58,247 (13,817) 46,661,085
Bank Notes................................... 3,079,588 5,657 -- 3,085,245
------------ -------- -------- ------------
Total.................................... 155,549,064 305,788 (24,372) 155,830,480
Less amounts classified as cash and cash
equivalents................................ (16,833,512) -- 513 (16,832,999)
------------ -------- -------- ------------
Total marketable securities.................. $138,715,552 $305,788 $(23,859) $138,997,481
============ ======== ======== ============
The Company realized gains of $92,582 on available-for-sale securities
during the three- and nine-month periods ended March 31, 2001.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost includes
material, conversion and overhead costs.
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 incorporate 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
5,110,175 and 5,344,791 for the three and nine months ended March 31, 2001,
respectively and 5,009,091 and 4,923,385 for the three and nine months ended
March 31, 2000, respectively. ImmunoGen Common Stock equivalents have not been
included in the loss per share calculations for the three- and nine- month
periods ended March 31, 2001 and 2000 because their effect is anti-dilutive.
Components of calculating net earnings/(loss) per share are set forth in the
following table:
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net loss to common shareholders........... $(2,059,703) $(2,804,379) $(7,096,237) $ (949,032)
=========== =========== =========== ===========
Weighted average common shares
outstanding, basic and diluted.......... 38,518,911 32,051,859 36,058,066 28,356,336
=========== =========== =========== ===========
Loss per common share, basic.............. $ (0.05) $ (0.09) $ (0.20) $ (0.03)
=========== =========== =========== ===========
Loss per common share, diluted............ $ (0.05) $ (0.09) $ (0.20) $ (0.03)
=========== =========== =========== ===========
8
COMPREHENSIVE INCOME/(LOSS)
The Company presents comprehensive income in accordance with Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income." For the
nine-month period ended March 31, 2001, total comprehensive loss equaled
$7.1 million. Comprehensive loss was comprised entirely of net loss and net
unrealized losses recognized on available-for-sale debt securities.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), which addresses accounting policies to be
applied in the recognition, presentation and disclosure of revenues in financial
statements to be filed with the SEC. The net effect of SAB 101, when applicable,
could defer into future accounting periods revenue recognition for some
milestone payments previously received. On June 26, 2000, the SEC deferred the
implementation of SAB 101 from the second calendar quarter of 2000 until no
later than the fourth quarter of fiscal years beginning after December 15, 1999,
in order to provide companies with additional time to determine the effect that
a change in accounting policy under SAB 101 will have on their revenue
recognition practices. The Company will implement SAB 101 in the fourth quarter
of the fiscal year ended June 30, 2001, retroactive to the first quarter of the
year then ended. The implementation of SAB 101 will require companies to report
any changes in accounting principle at the time of implementation in accordance
with Accounting Principles Board Opinion No. 20, "Accounting Changes." The
Company expects that implementation of SAB 101 could have a material effect on
the reported financial results for the year ending June 30, 2001.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with current
year presentation.
B. AGREEMENTS
In February 1999, the Company entered into an exclusive license agreement
with SmithKline Beecham plc, London and SmithKline Beecham, Philadelphia,
wholly-owned subsidiaries of GlaxoSmithKline (collectively, SB) to develop and
commercialize ImmunoGen's lead Tumor Activated Prodrug (or TAP), huC242-DM1 (the
SB Agreement) for the treatment of colorectal, pancreatic and certain non-small
lung cancers. Under the terms of the agreement, the Company could receive up to
$41.5 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 ImmunoGen's option, SB
will purchase up to $5.0 million of ImmunoGen Common Stock over the next two
years, subject to certain conditions. Through March 2001, 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 certain costs associated with the
first and third Phase I/II clinical studies. The first clinical study was
initiated in December 1999. The third clinical study began in May 2001, and is
discussed further in Note E. All costs subsequent to the Phase I/II clinical
studies will be the responsibility of SB.
As of March 31, 2001, the Company had received five milestones totaling
$11.5 million under the SB Agreement. All the milestones have been recorded as
collaboration revenue, with the exception of $85,000 of the fourth milestone,
which has been recorded as deferred revenue until such time as the remaining
ongoing commitments associated with this milestone 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,
9
Genentech will receive exclusive worldwide rights to commercialize anti-HER2
targeting products using ImmunoGen's 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 manufactures 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, ImmunoGen will receive up to nearly $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 TAP technology for use with Genentech's other
proprietary antibodies. This multi-year agreement provides Genentech with a
license to utilize ImmunoGen's 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 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 nearly $40.0 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 manufactures 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, Inc. of Freemont, California (Abgenix). The agreement provides Abgenix
with access to the Company's TAP technology for use with Abgenix's antibodies
along with options to obtain product licenses for antigen targets. The Company
has received a total of $5.0 million in technology access fee payments and is
entitled to potential milestone payments and royalties on net sales of any
resulting products. At March 31, 2001, the Company has recorded $4.8 million of
the technology access fees as deferred revenue to 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. The Company's agreement with Abgenix will terminate
upon expiration of a specified time period during which the Company has given
Abgenix access to its technology. Either party can terminate the agreement for
any material breach by the other party that remains uncured for a certain period
of time. For the nine months ended March 31, 2001, the Company has recognized
$0.2 million of the technology access fees as collaboration revenue.
10
In September 2000, the Company 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 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 an $0.8 million technology access payment, recorded as an R&D charge,
and will pay development-related milestone payments and royalties on net sales
of any resulting products. The Company reimburses MorphoSys for its research and
development efforts related to identifying these antibodies. During the quarter
and nine months ended March 31, 2001 the Company reimbursed Morphosys
approximately $0.2 million and $0.4 million, respectively. 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.
In November 2000, the Company entered into a collaboration agreement with
Genzyme Transgenics Corporation of Framingham, Massachusetts (Genzyme
Transgenics). Pursuant to this agreement, Genzyme Transgenics Corporation will
produce ImmunoGen's humanized monoclonal antibody TAP, huN901. HuN901 is the
antibody component of ImmunoGen's huN901-DM1, being developed in collaboration
with British BioTech for treatment of small-cell lung cancer. The Company paid
Genzyme Transgenics a $0.5 million project start-up fee, recorded as an R&D
charge, 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.
In January 2001, the Company entered into a collaboration agreement with
Avalon, Inc. (Avalon) of Gaithersburg, Maryland. Pursuant to the agreement,
Avalon will provide gene targets to the Company. The Company will be responsible
for the development, manufacture and commercialization of any resulting
products. The Company paid Avalon an up front fee which was recorded as an R&D
charge. Either party can terminate the agreement for any material breach by the
other party that remains uncured for a certain period of time.
In March 2001, ImmunoGen entered into a five-year collaboration agreement
with Millennium Pharmaceuticals, Inc. of Cambridge, Massachusetts (Millennium).
The agreement provides Millennium access to the Company's TAP technology for use
with Millennium's proprietary antibodies. Millennium acquired a license to
utilize the TAP technology in its antibody product research efforts and an
option to obtain product licenses for a restricted number of antigen targets
during the collaboration. ImmunoGen received an up-front fee of $2.0 million
late in the third quarter of 2001. The full amount of the up-front fee has been
deferred and will be recorded as revenue as it is earned over the period of the
agreement. This agreement also provides for certain other payments based on
Millennium's achievement of milestones. Assuming all benchmarks are met,
ImmunoGen could receive more than $40.0 million per antigen target. ImmunoGen
will also receive royalties on net sales of any resulting products. Millennium
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 March 2001, the Company and Raven Biotechnologies, Inc. of San
Carlos, California (Raven) entered into a collaboration aimed at identifying
targets and therapeutic antibodies with the potential to treat ovarian cancer.
Raven will discover and provide to ImmunoGen cell surface targets and monoclonal
antibodies. ImmunoGen will use these targets and antibodies to develop
therapeutic products. ImmunoGen will have the development, manufacturing and
commercialization rights to these products in North America and Europe in
exchange for an up-front licensing fee, research support, milestones and
royalties. Research and development expense for the quarter and nine months
ended March 31, 2001 include the up-front licensing fee and quarterly research
support paid to Raven.
11
C. MINORITY INTEREST
In July 1997, ATI entered into a collaboration agreement with BioChem
Pharma Inc. (BioChem), a biopharmaceutical company based in Quebec, Canada. This
agreement granted 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
had fulfilled all of its funding obligations under the agreement by purchasing a
total of $11.1 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
reverted to ATI effective August 1, 2000. However, certain provisions pertaining
to the license of any products resulting from the collaboration will remain in
force. As of August 1, 2000, no compound leads had been identified.
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 March 31, 2001, 11,125 shares of ATI
preferred stock had been 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- and nine-month periods ended March 31, 2000 by $25,000 and $76,000,
respectively. Based upon an independent appraisal, approximately 3% of the
$11.1 million invested, or approximately $0.3 million, was allocated to the
minority interest in ATI, with the remainder, or approximately $10.8 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 became
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 of such securities. 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.
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, ImmunoGen sold 789,473 shares of unregistered common
stock to Abgenix at $19 per share. Proceeds to the Company were $15.0 million,
which will be used for working capital and general corporate purposes, including
research and development.
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
12
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.
In October 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 57,500 shares of Common Stock at $5.49 per
share. Proceeds from this warrant exercise will be used to fund current
operations.
In October 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 20,000 shares of Common Stock at $3.11 per share.
Proceeds from this warrant exercise will be used to fund current operations.
In November 2000, the Company completed a public offering of 4.0 million
shares of Common Stock at $33.00 per share. Net proceeds to the Company were
$124.7 million. Proceeds from the public offering will be used for working
capital and general corporate purposes, including research and development.
During the nine-month period ended March 31, 2001, holders of options issued
under the Company's Restated Stock Option Plan, as amended, exercised their
rights to acquire an aggregate of 309,944 shares of common stock at prices
ranging from $0.84 per share to $14.75 per share. The total proceeds from these
option exercises, $758,760, will be used to fund current operations.
E. SUBSEQUENT EVENT
On May 8, 2001, ImmunoGen announced that, in collaboration with SB, it had
commenced a third Phase I/II clinical study of huC242-DM1/SB408075, its lead
TAP. The study is designed to evaluate huC242-DM1/SB408075 in a more dose
intensive regimen. ImmunoGen and SB will jointly fund the costs of the study.
13
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, 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 bonds to
and is internalized by the tumor cell. Once internalized, the cytotoxic agent
kills the tumor cell. The cytotoxic agent we currently use in all of our TAPs is
maytansinoid, a chemical derivation of a naturally occurring substance called
maytansine. As of March 31, 2001, our accumulated deficit was approximately
$161.1 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 entered into collaborative agreements that allow companies to use
our TAP technology to develop commercial 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, Millennium, MorphoSys, Genzyme
Transgenics, Avalon and Raven. We expect that substantially all of our revenue
for the foreseeable future will result from payments under our collaborative
arrangements. The terms of the collaborative agreements vary, reflecting the
value we add to the development of any particular product candidate.
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. Through
March 31, 2001, we have received a total of $5.0 million in technology access
fee payments. We are also entitled to 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 upon expiration of a specified time period during which we have given
Abgenix access to our technology. 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 $0.8 million technology
access payment, recorded as an R&D charge, 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.
In November 2000, we entered into a collaboration agreement with Genzyme
Transgenics Corporation of Framingham, Massachusetts. Pursuant to this
agreement, Genzyme Transgenics Corporation will produce our humanized monoclonal
antibody TAP, huN901. HuN901 is the antibody component of our TAP, huN901-DM1,
being developed in collaboration with British Biotech for treatment of
small-cell lung cancer. We paid Genzyme Transgenics a $0.5 million project
start-up fee, recorded as an R&D charge, 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 that remains uncured
for a certain period of time.
14
In January 2001, we entered into an in-license agreement with Avalon.
Pursuant to the agreement, Avalon will provide us with gene targets. We will be
responsible for the development, manufacture and commercialization of any
resulting products. We paid Avalon an up-front fee which was recorded as an R&D
charge. Either party can terminate the agreement for any material breach by the
other party that remains uncured for a certain period of time.
In March 2001, we entered into a five-year collaboration agreement with
Millennium. The agreement provides Millennium with access to our TAP technology
for use with Millennium's antibodies along with options to obtain product
licenses for antigen targets. The agreement may be extended for one subsequent
three-year period for an additional technology access fee. Through March 31,
2001, we have received a total of $2.0 million in technology access fee payments
which was recorded as deferred revenue to be recognized as earned over the
period of the agreement. We are also entitled to potential milestone payments
and royalties on net sales of any resulting products.
Also in March 2001, we entered into an in-license agreement with Raven.
Under the terms of the agreement, Raven will identify and provide to ImmunoGen
both cell surface targets and monoclonal antibodies targeted at ovarian cancer.
ImmunoGen will use these targets and antibodies to develop therapeutic products.
ImmunoGen will have the development, manufacturing and commercialization rights
to these products in North America and Europe in exchange for an up-front
licensing fee, research support, milestones and royalty payments. Research and
development expense for the quarter and nine months ended March 31, 2001 include
the up-front licensing fee and quarterly research support paid to Raven.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 AND 2000
REVENUES
We earn revenue from our collaborations, development fees and licensing
fees. Total revenues for the three months ended March 31, 2001 were
$0.8 million. There were no revenues for the same period in 2000. Our largest
revenue source is collaboration revenue which accounted for substantially all of
our revenue in the three months ended March 31, 2000. Revenues for the three
months ended March 31, 2001 include $0.6 million of reimbursements related to
our manufacture of clinical material under certain collaboration agreements.
Under the terms of these agreements, our collaborators reimburse our fully
burdened cost to manufacture clinical product. Also included in revenue for the
third quarter of 2001 is $0.2 million of previously deferred milestone payments
that are being recognized as earned.
EXPENSES
COST OF CLINICAL MATERIALS REIMBURSED. Cost of clinical materials
reimbursed represents the fully burdened cost of clinical materials that we
produce for our collaborators, and for which we are reimbursed. Our first lots
of clinical product that entitle us to reimbursement were manufactured and
shipped during the quarter ended March 31, 2001.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the three months ended March 31, 2001 increased 65% to $3.7 million from
$2.3 million for the three months ended March 31, 2000. In January 2001, our
Board of Directors established a bonus plan. In February 2001, a bonus was paid
to all of our officers and employees. We expensed the bonus during the third
quarter of 2001, and established an accrual for anticipated future bonuses
related to current Company and individual performance.
The increase in R&D expenses in the quarter ending March 31, 2001 primarily
relates to bonuses paid and accrued during the quarter and payments made in
connection with the Avalon, Raven and MorphoSys licensing agreements. We expect
that future research and development expenses will continue to increase in
connection with the further development of new TAP product candidates.
15
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended March 31, 2001 increased 71% to $1.2 million from
$0.7 million for the three months ended March 31, 2000. This increase was
largely due to the bonuses discussed previously, as well as increased business
development and investor relations efforts. 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 March 31, 2001 increased to
$2.6 million from $0.1 million for the three months ended March 31, 2000. The
increase in interest income from 2000 to 2001 is primarily attributable to
higher cash and investment balances resulting from our November 2000 public
stock offering, a collaborator investment of $15.0 million in September 2000 and
receipt of $9.0 million in collaborator milestone payments during the nine
months ended March 31, 2001.
COMPARISON OF NINE MONTHS ENDED MARCH 31, 2001 AND 2000
REVENUES
Total revenues for the nine months ended March 31, 2001 decreased 52% to
$3.1 million from $6.5 million for the nine months ended March 31, 2000. Our
largest revenue source is our collaboration revenue, which accounted for
substantially all of our revenue in both nine-month periods. The decrease in
revenues from the nine-month period ended March 31, 2000 to the three-month
period ended March 31, 2001 was primarily attributable to the deferral of
certain collaboration technology access payments that we received and that will
be recognized over the period during which we fulfill our commitments. Revenues
for the nine months ended March 31, 2001 include $0.6 million of reimbursements
related to our manufacture of clinical material under certain collaboration
agreements. Also included in revenue for the nine months ended March 31, 2001 is
$2.4 million of previously deferred milestone payments that are being recognized
as earned.
EXPENSES
COST OF CLINICAL MATERIALS REIMBURSED. Cost of clinical materials
reimbursed represents the fully burdened cost of clinical materials that we
produce for our collaborators, and for which we are reimbursed. Our first lots
of clinical product that entitle us to reimbursement were manufactured and
shipped during the quarter ended March 31, 2001.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the nine months ended March 31, 2001 increased 83% to $10.9 million from
$6.0 million for the nine months ended March 31, 2000. This increase primarily
relates to: (i) the bonuses described above, (ii) our efforts to develop new
products for our internal pipeline, including payments made in connection with
the Avalon, Raven, MorphoSys and Genzyme Transgenics agreements and
(iii) expenses related to the support of the Phase I/II clinical trials of our
lead cancer product, huC242-DM1/SB-408075. 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 nine months ended March 31, 2001 increased 68% to $3.1 million from
$1.8 million for the nine months ended March 31, 2000. This increase was largely
due to the bonuses discussed above, as well as increased business development
and investor relations efforts. 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 nine months ended March 31, 2001 increased to
$4.0 million from $0.2 million for the nine months ended March 31, 2000. The
increase in interest income from 2000 to 2001 is primarily
16
attributable to higher cash and investment balances resulting from our
November 2000 public stock offering, a collaborator investment of $15.0 million
in September 2000 and receipt of $9.0 million in collaborator milestone payments
during the nine months ended March 31, 2001.
OTHER INCOME
Other income for the nine months ended March 31, 2001 increased to
$0.3 million from $0.1 million for the same period in the prior year. The
increase is attributable to $0.3 million we received as a settlement in a
securities litigation case filed on our behalf.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, we had approximately $16.8 million in cash and cash
equivalents. In November 2000, we completed a secondary offering of 4.0 million
shares of our common stock. Net proceeds of the offering were $124.7 million. We
intend to use the net proceeds from the offering for working capital and general
corporate purposes, including research and development. 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.
Net cash used in operations during the nine months ended March 31, 2001 was
$1.6 million compared to net cash used in operations of $0.9 million in the nine
months ended March 31, 2000. This increase in operational cash use is largely
due to the increase in operating expenses discussed previously, offset by the
receipt of $9.0 million of collaborator payments during the nine months ended
March 31, 2001.
Net cash used in investing activities was $131.9 million for the nine months
ended March 31, 2001, and primarily represents our investment of excess cash in
marketable securities. Capital purchases were $2.0 million for the nine months
ended March 31, 2001, and consisted primarily of costs associated with the
buildout of our existing Norwood, Massachusetts development and pilot
manufacturing facility. We expect that certain capital outlays will be
reimbursed pursuant to our collaborative agreements.
Net cash provided by financing activities increased to $142.1 million for
the nine months ended March 31, 2001 versus $9.6 million provided by financing
activities for the nine months ended March 31, 2000. The increase is largely due
to our November 2000 public offering of 4.0 million shares of common stock, the
exercise of 381,342 warrants and 309,944 stock options during the nine-month
period ended March 31, 2001 and the September 7, 2000 issuance of 789,473 shares
of our common stock to Abgenix. Our total proceeds from all common stock issued
for the nine months ended March 31, 2001 were $142.2 million.
We anticipate that our capital resources will enable us to meet our
operational expenses and capital expenditures for the foreseeable future. We
believe that the proceeds from our November 2000 public stock offering in
addition to our established collaborative agreements 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the SEC issued SAB 101, which addresses accounting
policies to be applied in the recognition, presentation and disclosure of
revenues in financial statements to be filed with the SEC. The net effect of SAB
101, when applicable, could defer into future accounting periods revenue
recognition for some milestone payments previously received. On June 26, 2000,
the SEC deferred the implementation of
17
SAB 101 from the second calendar quarter of 2000 until no later than the fourth
quarter of fiscal years beginning after December 15, 1999, in order to provide
companies with additional time to determine the effect that a change in
accounting policy under SAB 101 will have on their revenue recognition
practices. The Company will implement SAB 101 in the fourth quarter of the
fiscal year ended June 30, 2001, retroactive to the first quarter of the year
then ended. The implementation of SAB 101 will require companies to report any
changes in accounting principle at the time of implementation in accordance with
Accounting Principles Board Opinion No. 20, "Accounting Changes." We expect that
the implementation of SAB 101 could have a material effect on our reported
financial results for the year ending June 30, 2001.
CERTAIN FACTORS 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 actual results or business conditions may 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
lack of commercial manufacturing experience and commercial sales, distribution
and marketing capabilities; reliance on suppliers of key materials necessary for
production of the Company's 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 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;
and economic conditions, both generally and those specifically related to the
biotechnology industry, each as described in the Company's filings with the SEC
from time to time, including, but not limited to its Annual Reprot on Form 10-K
for the fiscal year ended June 30, 2000. As a result, the Company's future
development efforts involve a high degree of risk.
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 March 31, 2001, a near-term change in interest rates would not
materially affect the fair value of interest rate sensitive instruments.
18
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.
During the nine-month period ended March 31, 2001, holders of options issued
under the Company's Restated Stock Option Plan, as amended, exercised their
rights to acquire an aggregate of 309,944 shares of common stock at prices
ranging from $0.84 per share to $14.75 per share. The total proceeds from these
option exercises, $758,760, 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.
Not applicable
ITEM 5. OTHER INFORMATION.
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Ex. 10.1* Agreement between ImmunoGen, Inc. and Millennium Pharmaceuticals, Inc.,
dated March 30, 2001
Ex. 10.2* Agreement between ImmunoGen, Inc. and Raven Biotechnologies, Inc., dated
March 28, 2001
- ------------------------
* Confidential treatment has been requested for portions of this Exhibit. The
portions have been omitted and filed separately with the U.S. Securities and
Exchange Commission.
(b) Reports on Form 8-K
Form 8-K dated March 5, 2001--Item 5: Other Events: ImmunoGen, Inc. announces the
appointment of Gregg D. Beloff as Chief Financial Officer and ImmunoGen, Inc. and
Millennium Pharmaceuticals, Inc. announce a collaboration agreement between the two
companies that provides Millennium with broad access to ImmunoGen's Tumor-Activated
Prodrug (TAP) technology.
Form 8-K dated March 7, 2001--Item 5: Other Events: ImmunoGen, Inc. announces it has
entered into a collaboration agreement with Millennium Pharmaceuticals, Inc. and
that ImmunoGen will receive an up-front payment of $2.0 million in addition to
potential royalties on net sales, the agreement provides for milestone payments
under which ImmunoGen, Inc. may potentially receive more than $41.0 million per
target.
Form 8-K dated March 29, 2001--Item 5: Other Events: ImmunoGen, Inc. and Raven
Biotechnologies, Inc. announce a collaboration aimed at identifying targets and
therapeutic antibodies with the potential to treat ovarian cancer.
19
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: May 15, 2001 By: /s/ MITCHEL SAYARE
-----------------------------------------
Mitchel Sayare
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Date: May 15, 2001 By: /s/ GREGG D. BELOFF
-----------------------------------------
Gregg D. Beloff
CHIEF FINANCIAL OFFICER AND
VICE PRESIDENT, FINANCE
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
20
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ------------ -----------
Ex. 10.1* Agreement between ImmunoGen, Inc. and Millennium
Pharmaceuticals, Inc., dated March 30, 2001
Ex. 10.2* Agreement between ImmunoGen, Inc. and Raven
Biotechnologies, Inc., dated March 28, 2001
- ------------------------
* Confidential treatment has been requested for portions of this Exhibit. The
portions have been omitted and filed separately with the U.S. Securities and
Exchange Commission.
21