UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the period ended September 30, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _________ to _________
Commission File Number: 0-12104
IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1009366
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 American Road, Morris Plains, New Jersey 07950
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(201) 605-8200
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of November 11, 1996, there were 35,126,297 shares of the registrant's common
stock outstanding.
Page 1 of 14
IMMUNOMEDICS, INC.
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - 3
September 30, 1996 and June 30, 1996
Condensed Consolidated Statements of Operations - 4
three months ended September 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows - 5
three months ended September 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements - 6
September 30, 1996
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Page 2 of 14
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
1996 1996
------------- ------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 11,677,033 13,646,000
Marketable Securities 13,588,755 15,044,821
Inventory 542,742 193,672
Other Current Assets 990,751 725,291
------------- ------------
Total Current Assets 26,799,281 29,609,784
Property and Equipment, net of accumulated
depreciation of $4,038,000 and $5,372,000
at September 30, 1996 and June 30, 1996,
respectively 5,883,607 6,110,191
------------- ------------
$ 32,682,888 35,719,975
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 1,682,702 1,631,071
Other Current Liabilities 2,907,144 2,935,698
------------- ------------
Total Current Liabilities 4,589,846 4,566,769
------------- ------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value,
authorized 10,000,000 shares;
Series C convertible, authorized
200,000 shares; issued and outstanding
28,415 shares at June 30,1996 - 284
Series D convertible, authorized 200,000
shares; issued and outstanding 155,330
and 200,000 shares at September 30, 1996
and June 30, 1996, respectively 1,553 2,000
Common stock; $.01 par value, authorized
50,000,000 shares; issued and outstanding
34,880,365 and 34,305,485 shares
at September 30, 1996 and June 30,
1996, respectively 348,803 343,055
Capital contributed in excess of par 93,070,367 92,894,349
Accumulated deficit (65,325,758) (62,080,861)
Accumulated net unrealized loss on
securities (1,923) (5,621)
------------- ------------
Total Stockholders' Equity 28,093,042 31,153,206
------------- ------------
$ 32,682,888 35,719,975
------------- ------------
------------- ------------
See accompanying notes to unaudited condensed consolidated financial statements.
Page 3 of 14
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
June 30,
1996 1995
---------- -----------
REVENUES:
Product sales and royalties 534,659 51,842
Research and development 52,500 67,500
Interest 386,301 324,384
---------- -----------
973,460 443,726
---------- -----------
COSTS AND EXPENSES:
Cost of goods sold 4,290 7,000
Research and development 3,273,654 3,062,954
General and administrative 940,413 682,103
---------- -----------
4,218,357 3,752,057
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Net loss (3,244,897) (3,308,331)
---------- -----------
---------- -----------
Net loss per share (0.09) (0.11)
---------- -----------
---------- -----------
Weighted average number of
shares outstanding 34,606,737 31,434,581
---------- -----------
---------- -----------
See accompanying notes to unaudited condensed consolidated financial statements.
Page 4 of 14
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30,
1996 1995
---- ----
Cash flows from operating activities:
Net loss $ (3,244,897) $(3,308,331)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 330,721 250,793
Changes in operating assets and liabilities (591,453) (534,336)
---------- ----------
Net cash used in operating activities (3,505,629) (3,591,874)
---------- ----------
Cash flows from investing activities:
Purchase of marketable securities (8,391,848) (4,029,956)
Proceeds from maturities of marketable
securities 9,846,256 2,484,609
Proceeds from sales of marketable securities -- --
Additions to property and equipment (98,782) (182,680)
---------- -----------
Net cash provided by/(used in)
investing 1,355,626 (1,728,027)
---------- -----------
Cash flows from financing activities:
Issuance of convertible preferred stock, net -- 9,982,500
Exercise of stock options 181,036 371,937
--------- ---------
Net cash provided by financing activities 181,036 10,354,437
--------- ---------
Increase (Decrease) in cash and cash equivalents (1,968,967) 5,034,536
Cash and cash equivalents at beginning of period 13,646,000 7,162,837
----------- -----------
Cash and cash equivalents at end of period $11,677,033 $12,197,373
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
Page 5 of 14
IMMUNOMEDICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Immunomedics, Inc. (the "Company"), which incorporate the Company's
wholly-owned subsidiary Immunomedics, B.V., have been prepared in
accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, the statements do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. The balance sheet at June 30, 1996 has been derived from the
audited financial statements at that date. Operating results for the
three-month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year
ending June 30, 1997.
For further information, refer to the annual financial statements and
footnotes thereto included in the Company's Form 10-K for the fiscal
year ended June 30, 1996.
(2) Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with maturities of
three months or less, at the time of purchase, to be cash equivalents.
Included in other current assets at September 30, 1996 and June 30,
1996 is accrued interest earned on cash equivalents and marketable
securities of $230,000 and $181,000, respectively.
(3) Income Taxes
The Company has never made payments of Federal or state income taxes
and does not anticipate generating book income in fiscal 1997;
therefore, no income taxes have been reflected for the three-month
period ended September 30, 1996.
(4) Net Loss Per Share
Net loss per share is based upon the weighted average number of common
shares outstanding. Common share equivalents, consisting of
outstanding stock options, are not included in the computations since
the effect would be antidilutive.
Page 6 of 14
IMMUNOMEDICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Stockholders' Equity
On June 27, 1996, the Company completed an equity financing pursuant
to Regulation S under the Securities Act of 1933, pursuant to which
several foreign investors purchased 200,000 shares of 5% Series D
Convertible Preferred Stock (the "Series D Preferred") for
$10,000,000. The terms of the transaction allow the investors, at
their discretion, to convert the Series D Preferred into shares of the
Company's common stock during a twenty-four month period beginning in
June 1996, at a price equal to 89% of the average market price per
share over a 20-day trading period surrounding the date of conversion.
As of November 11, 1996, 99,500 shares of Series D Preferred had been
converted into 731,000 shares of common stock.
(6) License and Distribution Agreements
In April 1996, the Company entered into a U.S. Marketing and
Distribution Agreement for CEA-Scan'r' with Mallinckrodt Group Inc.
("Mallinckrodt Group"). Under the terms of the agreement, Mallinckrodt
Group will market, sell and distribute CEA-Scan'r' in the U.S. on a
consignment basis, and will commit financial resources to this effort.
The Company will retain manufacturing and co-promotional rights, will
pay Mallinckrodt Group a pre-determined amount or percentage of the
net selling price, and will potentially commit additional financial
resources to these activities.
In March 1995, the Company entered into a License Agreement with
Mallinckrodt Medical B.V. ("Mallinckrodt Medical"), pursuant to which
Mallinckrodt Medical will market, sell and distribute CEA-Scan'r'
throughout Western Europe and in specified Eastern European countries,
subject to receipt of regulatory approval in the specified countries.
In addition, the Company will manufacture CEA-Scan'r', for which
Mallinckrodt Medical will pay the Company a pre-determined royalty per
vial or a pre-determined percentage of the net selling price.
(7) Commitments and Contingencies
On February 1, 1994, the Company entered into a master lease
agreement, which was subsequently amended, pursuant to which the
Company may lease equipment for research, development and
manufacturing purposes having an aggregate acquisition cost of up to
$2,200,000. The basic lease payments under the master lease agreement
are determined based on current market rates of interest at the
inception of each equipment schedule take-down, and are payable in
monthly installments over a four-year period. The lease agreement
contains an early purchase option for each equipment schedule, at an
amount which is deemed to be fair
Page 7 of 14
IMMUNOMEDICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
value, exercisable no later than ninety days before the thirty-sixth
installment is due. On November 1, 1996, the Company exercised the early
purchase option on equipment leased on February 14, 1994. Under the
lease agreement, continued compliance with certain financial ratios is
required and, in the event of default, the Company will be required to
provide an irrevocable letter of credit which is generally equal to the
outstanding balance of lease payments due at the time of default. As of
October 31, 1996, the Company has leased equipment with a cost basis
aggregating $2,014,000 under the master lease agreement. The Company has
recorded lease expense for the three months ended September 30, 1996 of
$130,000.
Page 8 of 14
IMMUNOMEDICS, INC.
Part I - Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Except for the historical information contained herein, the following discussion
contains forward- looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed herein, as well as in the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, including Part I (Item 1) and Part
II (Item 7).
Since its inception, the Company has been engaged primarily in the research and
development of proprietary products relating to the detection, diagnosis and
treatment of cancer, and more recently infectious diseases. On June 28, 1996,
the FDA licensed CEA-Scan'r' for the detection of recurrent and/or metastatic
colorectal cancer. On October 4, 1996 the Company received final clearance from
the European Commission to market CEA-Scan'r' in all 15 countries comprising the
European Union. In February 1992, the Company filed with the Health Protection
Branch ("HPB") to market CEA-Scan'r' in Canada. This application remains under
active review.
The Company has also filed with the Committee for Proprietary Medicinal Products
("CPMP"), seeking approval to market LeukoScan'r', an infectious disease imaging
agent, for the detection and diagnosis of osteomyelitis in long bones and in
diabetic foot ulcer patients. On October 16, 1996, the CPMP unanimously rendered
a positive opinion for the approval of LeukoScan'r', which constitutes the final
regulatory step before marketing authorization is granted by the European
Commission. The Company plans to file by December 31, 1996, for FDA approval of
LeukoScan'r' for use in patients with bone infection or with atypical
appendicitis, a second indication. In addition, the Company is currently
negotiating with potential partners for marketing LeukoScan'r' in Europe and the
U.S., if or when the product is approved. However, there can be no assurance
that a successful arrangement will be concluded, if at all, on terms acceptable
to the Company.
The Company is also engaged in developing other biopharmaceutical products,
which are in various states of development and clinical testing. The Company has
not achieved profitable operations and does not anticipate achieving profitable
operations during fiscal year 1997. The Company will continue to experience
operating losses until such time, if at all, that it is able to generate
sufficient revenues from sales of CEA-Scan'r' and its other proposed in vivo
products. Further, the Company's working capital will continue to decrease until
such time, if at all, that the Company is able to generate positive cash flow
from operations or until such time, if at all, that the Company receives an
additional infusion of cash from the sale of the Company's securities or from
corporate alliances to finance the Company's operating expenses and capital
expenditures.
Page 9 of 14
Results of Operations
Revenues for the three-month period ended September 30, 1996 were $973,000 as
compared to $444,000 for the same period in 1995, representing a increase of
$529,000. This increase was principally due to receipt of a license fee of
$500,000 from a corporate partner. No sales revenues from CEA-Scan'r' were
recorded in the current period as sales of the product did not commence until
October 1996.
Total operating expenses for the three-month period ended September 30, 1996
were $4,218,000 as compared to $3,752,000 for the same period in 1995,
representing an increase of $466,000. Research and development costs for the
three-month period ended September 30, 1996 increased by $211,000 as compared to
the same period in 1995, principally resulting from expenses attributable to
validation of the Company's new manufacturing facility. General and
administrative costs for the three-month period ended September 30, 1996
increased by $258,000 as compared to the same period in 1995. This increase was
principally due to additional CEA-Scan'r' marketing expenses prior to launch of
the product and increased legal expenses in connection with the arbitration
claim against Pharmacia & Upjohn, Inc., which was filed in June 1996.
Net loss for the three-month period ended September 30, 1996 was $3,245,000, or
$0.09 per share, as compared to a loss of $3,308,000, or $0.11 per share, for
the same period in 1995. The lower net loss in 1996 as compared to 1995
principally resulted from higher revenues, partially offset by higher operating
expenses, as discussed above. In addition, the net loss per share for the
three-month period ended September 30, 1996 was positively impacted by the
higher weighted average number of common shares outstanding for this period, as
compared to the same period in 1995. The increase in the weighted average number
of common shares outstanding was principally due to the conversion of Preferred
Stock into the Company's Common Stock (see Note 5 to Unaudited Condensed
Consolidated Financial Statements).
Liquidity and Capital Resources
At September 30, 1996, the Company had working capital of $22,209,000, which
represents a decrease of $2,834,000 from June 30, 1996, and had no long-term
debt other than certain lease obligations (see Note 7 to Unaudited Condensed
Consolidated Financial Statements). The net decrease in working capital resulted
principally from the funding of operating expenses and capital expenditures.
In April 1996, the Company entered into a U.S. Marketing and Distribution
Agreement with Mallinckrodt Group, Inc. ("Mallinckrodt Group"). Under the
terms of the agreement, Mallinckrodt Group will market, sell and distribute
CEA-Scan'r' for use in colorectal cancer diagnostic imaging in the U.S. on a
consignment basis. The Company will retain manufacturing rights to CEA-Scan'r'.
Mallinckrodt Group will commit financial resources for marketing and
distribution, and the Company will particpate in the marketing, including,
potentially, committing additional financial resources (see Note 6 to Unaudited
Condensed Consolidated Financial Statements).
Page 10 of 14
Liquidity and Capital Resources (Continued)
In March 1995, the Company entered into a License Agreement with Mallinckrodt
Medical B.V. ("Mallinckrodt Medical"), pursuant to which Mallinckrodt Medical
will market, sell and distribute CEA- Scan'r' throughout Western Europe and in
specified Eastern European countries, subject to receipt of regulatory approval
in the specified countries. In addition, the Company will manufacture
CEA-Scan'r', for which Mallinckrodt Medical will pay the Company a
pre-determined royalty per vial or a pre-determined percentage of the net
selling price (see Note 6 to Unaudited Condensed Consolidated Financial
Statements).
On February 1, 1994, the Company entered into a master lease agreement, which
was subsequently amended, pursuant to which the Company may lease equipment for
research, development and manufacturing purposes having an aggregate acquisition
cost of up to $2,200,000. The basic lease payments under the master lease
agreement will be determined based on current market rates of interest at the
inception of each equipment schedule take-down, and payable in monthly
installments over a four-year period. The lease agreement contains an early
purchase option for each equipment schedule, at an amount which is deemed to be
fair value, exercisable no later than ninety days before the thirty-sixth
installment is due. On November 1, 1996, the Company exercised the early
purchase option on equipment leased on February 14, 1994. Under the lease
agreement, continued compliance with certain financial ratios is required and,
in the event of default, the Company will be required to provide an irrevocable
letter of credit which is generally equal to the outstanding balance of lease
payments due at the time of default. As of October 31, 1996, the Company has
leased equipment with a cost basis aggregating $2,014,000 under the master lease
agreement (see Note 7 to Unaudited Condensed Consolidated Financial Statements).
The Company's liquid asset position, measured by its cash, cash equivalents and
marketable securities, was $25,266,000 at September 30, 1996, representing a
decrease of $3,425,000 from June 30, 1996. This decrease was principally
attributable to the funding of operating expenses and capital expenditures as
discussed above. It is anticipated that working capital and cash, cash
equivalents and marketable securities will decrease during the remainder of
fiscal year 1997 as a result of planned operating and capital expenditures. At
present, the Company believes that its projected financial resources will be
sufficient to fund anticipated operating expenses and capital expenditures at
least through calendar year 1997. The Company intends to supplement its
financial resources from time to time as market conditions permit through
additional financing and through collaborative marketing and distribution
agreements. In addition, the Company continues to evaluate various programs to
raise additional capital and to seek additional revenues from the licensing of
its proprietary technology. At the present time, the Company is unable to
determine whether any of these future activities will be successful and, if so,
the terms and timing of any definitive agreements. There can be no assurance
that the Company will be able to obtain additional funds in the future.
Page 11 of 14
PART II - Other Information:
Items 1-3 Not applicable
Item 4. Submission of Matters to a Vote of Security Holders:
(a) On November 6, 1996, the Annual Meeting of Stockholders of
the Company was held at the Company's headquarters in
Morris Plains, New Jersey.
(b) All eight Directors were re-elected: David M. Goldenberg,
Albert D. Angel, A.E. Cohen, Rolf H. Henel, Marvin E. Jaffe,
Richard R. Pivirotto, Warren W. Rosenthal and Richard C.
Williams. The amendments to the 1992 Stock Option Plan were
approved. The amendment to the Company's Certificate of
Incorporation to authorize additional shares of common stock
was approved. The selection of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending
June 30, 1997 was ratified.
(c) 1. Voting for re-election of eight Directors was as follows:
David M. Goldenberg: 28,217,710 for and 914,263 withheld
Albert D. Angel: 28,214,110 for and 911,863 withheld
A.E. Cohen: 28,213,710 for and 912,263 withheld
Rolf H. Henel: 28,214,110 for and 914,863 withheld
Marvin E. Jaffe: 28,214,110 for and 911,863 withheld
Richerd R. Pivirotto: 28,214,110 for and 911,863 withheld
Warren W. Rosenthal: 28,213,210 for and 912,763 withheld
Richard C. Williams: 28,385,770 for and 911,863 withheld
2. Voting on approval of amendments to the 1992 Stock Option
Plan was as follows:
25,261,742 for and 2,354,912 against, with 168,869 shares
abstaining.
3. Voting on approval of the amendment to the Company's
Certificate of Incorporation to authorize additional shares
of common stock was as follows: 26,385,681 for and 1,725,853
against, with 963,099 shares abstaining.
4. Voting for ratification of the selection of KPMG Peat
Marwick LLP as the Company's independent auditors for the
fiscal year ending June 30, 1997 was as follows:
28,990,414 for and 69,939 against, with 65,620 shares
abstaining.
(d) Not applicable.
Page 12 of 14
Item 5. Not applicable
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
3.1(l) Certificate of Amendment of the Certificate of
Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on
November 7, 1996.
10.15 Immunomedics, Inc. 1992 Stock Option Plan, as amended.
(b) Reports on Form 8-K
The Company did not file a Current Report on Form 8-K
during the three-month period ended September 30, 1996.
Page 13 of 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IMMUNOMEDICS, INC.
---------------------
(Registrant)
DATE: November 13, 1996
/s/ David M. Goldenberg,
--------------------------
David M. Goldenberg,
Chairman, Chief Executive
Officer and Treasurer
(Principal Executive Officer
and Principal Accounting
Officer)
Page 14 of 14