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 DECEMBER 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 934. 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 February 12, 1997, there were 35,988,170 shares of the registrant's common
stock outstanding.
Page 1 of 13
IMMUNOMEDICS, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - 3
December 31, 1996 and June 30,1996
Condensed Consolidated Statements of Operations - 4
three and six months ended December 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows - 5
six months ended December 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements - 6
December 31, 1996
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II- OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
- ----------
Page 2 of 13
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
DECEMBER 31, JUNE 30,
1996 1996
----------- ----------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 3,567,236 13,646,000
Marketable Securities 17,780,552 15,044,821
Inventory 706,126 193,672
Other Current Assets 1,262,109 725,291
------------ -----------
Total Current Assets 23,316,023 29,609,784
Property and Equipment, net of accumulated
depreciation of $4,269,000 and $5,372,000 at
December 31,1996 and June 30,1996, respectively 5,772,185 6,110,191
------------ -----------
$ 29,088,208 35,719,975
============ ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable 1,430,738 1,631,071
Other Current Liabilities 3,008,122 2,935,698
------------ -----------
Total Current Liabilities 4,438,860 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 74,685 and 200,000 shares
at December 31,1996 and June 30,1996, respectively 747 2,000
Common stock; $.01 par value, authorized 50,000,000 shares;
issued and outstanding 35,519,995 and 34,305,485 shares
at December 31,1996 and June 30, 1996, respectively 355,200 343,055
Capital contributed in excess of par 93,064,776 92,894,349
Accumulated deficit (68,837,098) (62,080,861)
Accumulated net unrealized gain/(loss) on securities 65,723 (5,621)
------------ ----------
Total Stockholders' Equity 24,649,348 31,153,206
------------ ----------
$ 29,088,208 35,719,975
============ ==========
See accompanying notes to unaudited condensed consolidated financial statements.
Page 3 of 13
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
----------- ---------- ----------- ----------
REVENUES:
Product sales and royalties $ 262,406 47,130 797,065 98,972
Research and development 215,147 22,500 267,647 90,000
Interest 325,757 417,315 712,058 741,699
----------- ---------- ----------- ----------
803,310 486,945 1,776,770 930,671
----------- ---------- ----------- ----------
COSTS AND EXPENSES:
Cost of goods sold 3,677 4,884 7,967 11,884
Research and development 3,364,313 3,045,006 6,637,967 6,107,960
General and administrative 946,660 606,168 1,887,073 1,288,271
----------- ---------- ----------- ----------
4,314,650 3,656,058 8,533,007 7,408,115
----------- ---------- ----------- ----------
NET LOSS $(3,511,340) (3,169,113) $(6,756,237) (6,477,444)
=========== ========== =========== ==========
NET LOSS PER SHARE $ (0.10) $ (0.10) $ (0.19) (0.20)
=========== ========== =========== ==========
Weighted average number of
shares outstanding 35,251,126 32,767,833 34,928,931 32,099,576
=========== ========== =========== ==========
See accompanying notes to unaudited condensed consolidated financial statements.
Page 4 of 13
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
Cash flows from operating activities:
Net loss $ (6,756,237) $ (6,477,444)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 563,516 506,874
Changes in operating assets and liabilities (1,177,181) 58,380
------------ ------------
Net cash used in operating activities (7,369,902) (5,912,190)
------------ ------------
Cash flows from investing activities:
Purchase of marketable securities (20,280,120) (15,435,391)
Proceeds from maturities of marketable securities 17,608,581 6,664,382
Additions to property and equipment (218,359) (799,997)
------------ ------------
Net cash used in investing activities (2,889,898) (9,571,006)
------------ ------------
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
------------ ------------
Decrease in cash and cash equivalents (10,078,764) (5,128,759)
Cash and cash equivalents at beginning of period 13,646,000 7,162,837
------------ ------------
Cash and cash equivalents at end of period $ 3,567,236 $ 2,034,078
============ ============
Page 5 of 13
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
six-month period ended December 31, 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 December 31, 1996 and June 30,
1996 is accrued interest earned on cash equivalents and marketable
securities of $237,000 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 six-month
period ended December 31, 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 13
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 February 12, 1997, 171,081 shares of Series D Preferred had been
converted into 1,433,439 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 13
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 and December 9, 1996, Company
exercised the early purchase options on equipment leased on February
14, 1994 and April 1, 1994, respectively. Under the lease agreement,
continued compliance with certain financial ratios is required and, in
the event of default, the Company will be required to provide an
irrevocable letter of credit which is generally equal to the
outstanding balance of lease payments due at the time of default. As
of January 31, 1997, 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 and six months ended
December 31, 1996 of $139,000 and $269,000, respectively.
Page 8 of 13
IMMUNOMEDICS
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 February 14, 1997, the European Commission
granted final clearance to market LeukoScan(R) in all 15 countries comprising
the European Union. On December 19, 1996, the Company submitted an application
to the U.S. Food and Drug Administration ("FDA") for approval of LeukoScan(R)
for use in patients with bone infection or with atypical appendicitis, a second
indication. On February 10, 1997, the FDA notified the Company that it had
accepted this application for filing and was commencing its review. At the
present time, the Company is continuing to negotiate with potential partners for
the distribution of LeukoScan(R) in Europe, and in the U.S., if or when the
product is approved. However, there can be no assurance that successful
arrangements 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), LeukoScan(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, from other financing or from corporate alliances to finance the
Company's operating expenses and capital expenditures.
Page 9 of 13
RESULTS OF OPERATIONS
- ---------------------
Revenues for the six-month period ended December 31, 1996 were $1,777,000 as
compared to $931,000 for the same period in 1995, representing an increase of
$846,000. This increase was principally due to receipt of a license fee of
$500,000 from a corporate partner, sales revenues from CEA-Scan(R) following its
launch in October 1996, and higher government grant income.
Revenues for the three-month period ended December 31, 1996 were $803,000 as
compared to $487,000 for the same period in 1995, representing an increase of
$316,000. This increase was principally due to sales revenues from CEA-Scan(R)
and higher government grant income, partially offset by lower interest income
resulting from less cash available for investment.
Total operating expenses for the six-month period ended December 31, 1996 were
$8,533,000 as compared to $7,408,000 for the same period in 1995, representing
an increase of $1,125,000. Research and development costs for the six-month
period ended December 31, 1996 increased by $530,000 as compared to the same
period in 1995, principally resulting from expenses attributable to ongoing
validation of the Company's new manufacturing facility. General and
administrative costs for the six-month period ended December 31, 1996 increased
by $599,000 as compared to the same period in 1995. This increase was
principally due to operating expenses for Immunomedics, B.V., pre-launch
marketing expenses for CEA-Scan(R) and increased legal expenses. The higher
legal expenses were incurred in connection with the arbitration claim against
Pharmacia & Upjohn, Inc., which was filed in June 1996, and also in connection
with increased patent activity during the six-month period ended December 31,
1996.
Total operating expenses for the three-month period ended December 31, 1996 were
$4,315,000 as compared to $3,656,000 for the same period in 1995, representing
an increase of $659,000. Research and development costs for the three-month
period ended December 31, 1996 increased by $319,000 as compared to the same
period in 1995, for the same reasons as discussed above. Similarly, general and
administrative costs for the three-month period ended December 31, 1996
increased by $341,000 as compared to the same period in 1995, for the same
reasons as discussed above.
Net loss for the six-month period ended December 31, 1996 was $6,756,000, or
$0.19 per share, as compared to a loss of $6,477,000, or $0.20 per share, for
the same period in 1995. Net loss for the three-month period ended December 31,
1996 was $3,511,000, or $0.10 per share, as compared to a loss of $3,169,000, or
$0.10 per share, for the same period in 1995. The higher net losses of $279,000
and $342,000 for the six- and three-month periods ended December 31, 1996 as
compared to the same periods in 1995 principally resulted from higher operating
expenses, partially offset by higher revenues, as discussed above. The net loss
per share for the six- and three-month periods ended December 31, 1996 was
positively impacted by the higher weighted average number of common shares
outstanding for these periods, as compared to the same periods 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).
Page 10 of 13
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1996, the Company had working capital of $18,877,000, which
represents a decrease of $6,166,000 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.
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 and December 9, 1996, the Company
exercised early purchase options on equipment leased on February 14, 1994 and
April 1, 1994, respectively. Under the lease agreement, continued compliance
with certain financial ratios is required and, in the event of default, the
Company will be required to provide an irrevocable letter of credit which is
generally equal to the outstanding balance of lease payments due at the time of
default. As of January 31, 1997 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 $21,348,000 at December 31, 1996, representing a
decrease of $7,343,000 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/or 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 13
PART II - OTHER INFORMATION:
Items 1-3 Not applicable
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
10.24 Consulting Agreement, dated December 16, 1996,
between the Company and Rolf H. Henel.
10.25 License Agreement, dated January 21, 1997, between
the Company and the Center for Molecular Medicine
and Immunology, Inc.
(b) Reports on Form 8-K
The Company did not file a Current Report on Form 8-K
during the three-month period ended December 31, 1996.
Page 12 of 13
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: February 14, 1997 /s/ David M. Goldenberg
-----------------------
David M. Goldenberg,
Chairman, Chief Executive Officer and
Treasurer (Principal Executive Officer
and Principal Accounting Officer)
Page 13 of 13