ImmunoGen, Inc.
830 Winter Street
Waltham, MA 02451
781-895-0600
www.immunogen.com
Our Targeted Antibody Payload (TAP) technology uses tumor-targeting antibodies to
deliver one of our potent cancer-cell killing agents specifically to tumor cells. Multiple
TAP compounds are in clinical testing today, with 3-4 more expected to enter the clinic
by the end of 2011.
Clinical-Stage Pipeline Today
Compound
Partner
Indication
Stage
3rd-line in advanced HER2+
breast cancer
Phase II
(completed)
2nd-line in advanced HER2+
breast cancer
Phase III
Trastuzumab-DM1
(T-DM1)
Genentech/
Roche
1st-line in advanced HER2+
breast cancer
Phase III
Adjuvant use in HER2+
breast cancer
Phase II expected
to start 4Q10
Use in combination with other
anticancer agents
Multiple trials
Merkel cell carcinoma
Decision in 4Q10 about
initiating pivotal testing
Small-cell lung cancer (SCLC)
– combination
Phase I/II expected
to start 4Q10
Lorvotuzumab
mertansine
(IMGN901)
Wholly
owned
SCLC, Merkel cell carcinoma,
ovarian cancer – single agent
Phase I
Multiple myeloma
– single agent
Multiple myeloma
– combination
Phase I
Phase I
IMGN388
Wholly
owned*
Solid tumors – single agent
Phase I
SAR3419
sanofi-aventis
Non-Hodgkin’s lymphoma
– single agent
BT-062
Biotest*
BIIB015
Biogen Idec
Multiple myeloma
– single agent
Cripto+ solid tumors
– single agent
SAR650984**
sanofi-aventis
Hematologic malignancies
– single agent
SAR566658
sanofi-aventis
CA6+ solid tumors
– single agent
Phase I
Phase I
Phase I
Phase I
Phase I
Corporate Information
Directors
Chairman of the Board
Stephen C. McCluski
Former Senior Vice President
and Chief Financial Officer,
Baush & Lomb, Inc.
David W. Carter
Former Chairman and
Chief Executive Officer,
Xenogen Corporation
Daniel M. Junius
President and
Chief Executive Officer,
ImmunoGen, Inc.
Nicole Onetto, M.D.
Deputy Director,
Ontario Institute for Cancer
Research
Howard Pien
Former Chairman of the Board
and Chief Executive Officer,
Medarex, Inc.
Mitchel Sayare, Ph.D.
Former President and
Chief Executive Officer,
ImmunoGen, Inc.
Mark Skaletsky
Chairman and
Chief Executive Officer,
Fenway Pharmaceuticals
Joseph J. Villafranca, Ph.D.
Senior Vice President,
Life Sciences,
Business Development,
Tunnell Consulting
Richard J. Wallace
Former Senior Vice President,
Research and Development,
GlaxoSmithKline plc.
Executive Management
Corporate Headquarters
Daniel M. Junius
President and
Chief Executive Officer
John M. Lambert, Ph.D.
Executive Vice President and
Chief Scientific Officer
Gregory D. Perry
Senior Vice President and
Chief Financial Officer
Craig Barrows
and Secretary
James J. O’Leary, M.D.
Vice President and
Chief Medical Officer
Peter J. Williams
Vice President,
Business Development
Vice President, General Counsel
Stock Transfer Agent and
ImmunoGen, Inc.
830 Winter Street
Waltham, MA 02451
781.895.0600
www.immunogen.com
Annual Meeting
11:00 AM on November 16, 2010
at the offices of the Company
830 Winter Street
Waltham, MA 02451
Registrar
BNY Mellon Shareowner Services
Newport Office Center VII
480 Washington Boulevard
Jersey City, NJ 07310
www.bnymellon.com/shareowners/
Toll-Free Number: 888.810.7458
isd
Auditors
Ernst & Young LLP
Boston, Massachusetts
Shareholder Inquiries
Information about ImmunoGen can
be found at www.immunogen.com.
Inquiries related to the Company
may be directed to the Investor
Relations department at our
headquarters. Communications
related to stock and transfer
requirements, including lost stock
certificates and change of name or
address, should be directed to the
Transfer Agent.
This annual report includes forward-looking statements based on management’s current expectations. These statements include,
but are not limited to, ImmunoGen’s expectations related to the advancement of new Company and partner compounds into clinical
testing, the initiation of new clinical trials, the timing of go/no go clinical decisions, and the timing and occurrence of the
presentation of new preclinical and clinical data, of potential business development events, and of potential future regulatory
submissions. For these statements, ImmunoGen claims the protection of the safe harbor for forward-looking statements provided
by the Private Securities Litigation Reform Act of 1995. Various factors could cause ImmunoGen’s actual results to differ materially
from those discussed or implied in the forward-looking statements, and you are cautioned not to place undue reliance on these
forward-looking statements, which are current only as of the date of this annual report. Factors that could cause future results to
differ materially from such expectations include, but are not limited to: the timing and outcome of ImmunoGen’s and the Company’s
partners’ research and clinical development processes; the difficulties inherent in the development of novel pharmaceuticals,
including uncertainties as to the timing, expense and results of preclinical studies, clinical trials and regulatory processes;
ImmunoGen’s ability to financially support its product programs; ImmunoGen’s dependence on collaborative partners; industry
merger and acquisition activity; and other factors more fully described in ImmunoGen’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2010 and other reports filed with the Securities and Exchange Commission.
*Centocor Ortho Biotech (J&J) has opt-in rights to IMGN388; ImmunoGen has opt-in rights to BT-062
**Therapeutic antibody (non-TAP) compound
Revlimid® is a registered trademark of Celgene Corporation.
Dear Fellow Shareholders,
ImmunoGen today has a growing and
expanding product pipeline as well as a
significant technology. Eight compounds
are in clinical testing through our own
programs and those of our partners, and
we expect this to increase to as many as
twelve by the end of 2011.
Of particular importance, we’ve increased
the support we’re putting behind
advancing our own compounds to value-
inflection points. We envision that – over
time – ImmunoGen will become known for
the targeted anticancer products we
develop, complementing the leadership
position of our TAP technology in the field
of antibody-drug conjugates.
Driving this increased support behind our
own compounds is – first and foremost –
the validation of our TAP technology in the
clinic. While we are disappointed with the
FDA’s refuse-to-file decision on the first
marketing application for trastuzumab-
DM1 (T-DM1) that was announced in late
August, there is no question that the
clinical findings reported to date with this
product candidate are impressive – both in
efficacy and tolerability – and support the
continued comprehensive evaluation of
the compound that Roche is pursuing.
Encouraging findings are being reported
with other TAP compounds in earlier
stages of clinical testing, and we expect
the support behind our technology will
continue to expand as we go forward.
We’re implementing an aggressive clinical
program with our lead wholly owned
compound, lorvotuzumab mertansine
(IMGN901); are making solid progress
with our second compound, IMGN388;
and expect to advance our third compound
into the clinic in 2011. At the same time,
our partners also are making meaningful
progress, and we’re seeing an
unprecedented level of interest from other
companies in our TAP technology.
Our Lead Wholly Owned Compound:
Lorvotuzumab Mertansine
This TAP compound targets an antigen,
CD56, found on an array of cancers with
limited treatment options today. Up until
quite recently, lorvotuzumab mertansine
was still just being assessed in early stage
dose-escalation trials, used as a single
agent.
In late 2009, we started our first trial that
evaluates this agent used as part of a
combination regimen, since that is how
cancer generally is treated. That study
assesses lorvotuzumab mertansine used
together with Revlimid® (lenalidomide)
and dexamethasone in patients with
relapsed multiple myeloma. While patient
enrollment in this study is still in early
stages, we’re encouraged by the findings
to date.
In late 2009, we also advanced to the
expansion phase of our Study 002, which
previously had been assessing alternative
doses of lorvotuzumab mertansine for
CD56+ solid tumors. We narrowed the
enrollment criteria of this trial to focus on
metastatic cancers of particular interest –
ovarian cancer, small-cell lung cancer
(SCLC), and Merkel cell carcinoma (MCC)
– to inform our next steps with the
compound for these cancers. We chose
ovarian cancer and SCLC due to the size
of these markets, their unmet need, and
the preclinical and clinical data available.
Our interest in MCC, a rare cancer, came
from the notable findings seen with
lorvotuzumab mertansine in the first six
MCC patients treated: one patient had
complete remission, another has had
marked, sustained tumor shrinkage, and a
third had stable disease. As metastatic
MCC today has a median survival of less
than seven months and no approved
therapies, development of lorvotuzumab
mertansine for this use is potentially one of
its fastest routes to market. We plan to
decide by the end of 2010 whether we
should initiate a pivotal trial with the
compound in MCC.
Study 002 assesses lorvotuzumab
mertansine in patients previously treated
with other agents. We believe it is
important to assess the compound used
1st-line in SCLC, as this is a very
aggressive cancer. Thus, we’re preparing
to initiate a trial that assesses
lorvotuzumab mertansine, used in
combination with standard care, as a 1st-
line treatment for SCLC. We expect to
start this trial in the fourth quarter of 2010.
We believe lorvotuzumab mertansine is a
promising product candidate for a number
of cancers that have poor outcomes today.
We’re implementing an aggressive clinical
program designed to establish the value of
this compound, with an eye to eventually
partnering it.
Our Earlier-Stage Compounds
We’re also making solid progress with
IMGN388, our second clinical-stage
compound, which is in development for the
treatment of solid tumors. We reported the
first IMGN388 clinical data at the American
Society of Clinical Oncology (ASCO)
meeting in June. We’ve since completed
the dose-escalation process in our
evaluation of it when administered every
three weeks, and we’ll report updated
findings at the EORTC-AACR-NCI
conference in November. The initial
findings with IMGN388 are encouraging,
and we’re evaluating the next steps in its
development.
About two years ago, our scientists
resumed developing product candidates
for our proprietary product pipeline upon
the completion of our research and
development obligations to our
collaborator, sanofi-aventis. Since then,
our team has been aggressively creating
and advancing targeted anticancer
compounds. We expect to submit an IND
for the first of these new product
candidates, IMGN529, in mid-2011 and to
submit an IND for another new compound
in 2012.
Our goal is to have an ongoing stream of
new antibody-based anticancer agents
entering the clinic. While we plan to take
many of these forward ourselves, we also
have the option of selectively partnering
one or more product candidate(s), as
appropriate, to accelerate development
without overextending our human and
financial resources.
Partner Product Candidates
There are currently six compounds in
clinical testing through our collaborations
with other companies, and we expect
another 2-3 partner compounds to enter
the clinic in 2011.
The most advanced partner compound,
T-DM1, is in global development by Roche
under a licensing agreement between
ImmunoGen and Genentech, a member of
the Roche Group. T-DM1 is being
assessed for 2nd-line treatment of
advanced HER2+ breast cancer in a
Phase III trial, EMILIA, that started in early
2009. Roche expects to apply in 2012 for
marketing approval of T-DM1 in the US
and Europe for 2nd-line and later treatment
of advanced HER2+ breast cancer.
T-DM1 also is being assessed for 1st-line
treatment of this cancer in a separate
Phase III trial, MARIANNE, that began
earlier this summer. Roche intends to use
MARIANNE to apply for marketing
approval of T-DM1 for 1st-line treatment of
HER2+ breast cancer. Roche projects this
regulatory submission could occur
sometime after 2013, since this trial has
only recently begun.
Additionally, Roche is now preparing to
start a Phase II trial assessing T-DM1
used in the adjuvant setting that we hope
will lead to the compound being evaluated
for this use in a registration trial.
Initial findings from a Phase II trial
assessing T-DM1 for 1st-line treatment of
advanced HER2+ breast cancer will be
reported at the European Society of
Medical Oncology (ESMO) meeting taking
place in Milan next month. We’re
particularly interested in seeing these
data, as they will be the first findings with a
compound utilizing our TAP technology for
1st-line treatment of an advanced cancer.
In 2003-2008, we were in a collaboration
with sanofi-aventis in which we agreed to
generate novel antibody-based
compounds for its pipeline in exchange for
meaningful research support funding.
Three compounds are now in clinical
testing as a result of this collaboration:
SAR3419, SAR650984, and SAR566658.
While we’re no longer developing
compounds for sanofi-aventis, we continue
to be entitled to receive milestone
payments on the advancement of
collaboration compounds and royalties on
their sales, if any.
SAR3419 uses our TAP technology with
an ImmunoGen antibody that binds to
CD19, a target found on non-Hodgkin’s
lymphoma and other B-cell malignancies.
Sanofi-aventis is planning to further
expand its Phase I evaluation of SAR3419
with an intent to promptly start its Phase II
program in the second half of 2011. We
expect the full Phase I findings to be
reported at ASH in late 2011.
While ImmunoGen is known for our TAP
technology, we have full antibody
development capabilities. Some of the
antibodies we create are for use in TAP
compounds, such as the one we
developed for SAR3419. Others are
designed for use as therapeutic antibodies
– antibody compounds that do not utilize a
payload. We developed both types of
antibody-based compounds for sanofi-
aventis, and the SAR650984 compound
now in the clinic is a therapeutic antibody
for the treatment of hematological
malignancies.
Additionally, we can identify promising
targets and use antibodies created by
others to develop TAP compounds.
SAR566658 uses an antibody from one of
our academic collaborators to a target
found on a number of types of solid
tumors, including ovarian, breast and lung
cancers. We humanized this antibody
using our proprietary technology and
created the SAR566658 TAP compound
with it.
In addition to the compounds in the clinic
through our collaborations with Genentech
and sanofi-aventis, BT-062 and BIIB015
are in clinical testing through our partners
Biotest and Biogen Idec, respectively.
Continued Commitment to Our TAP
Technology
We continue to invest in our TAP
technology – further expanding our
portfolio of linkers and cell-killing agents –
to maintain our leadership position in
antibody-drug conjugates (ADCs). For
example, today certain cancers can be
highly problematic because they have
intrinsic multi-drug resistance (MDR).
ImmunoGen scientists have created a
family of linkers for use in TAP compounds
for cancers with MDR, to enable the
achievement of the necessary efficacy
while retaining the tolerability benefits of
our targeted approach. A compound
incorporating one of these linkers is now in
preclinical development.
Business Development
We’re seeing an unprecedented level of
interest in licensing access to our
technology by major healthcare
companies. We believe our technology is
worth considerably more today than it was
before it had been validated in the clinic
and that its value will only increase over
time. This, combined with our solid
financial position, means that we can be
much more selective – and more
demanding – in entering into new licenses
to our technology. Business development
will continue to be an important source of
non-dilutive funding for ImmunoGen and a
means to more broadly advance our
technology than we could accomplish on
our own.
Thank You
As we have since our inception, we remain
committed to the development of novel
anticancer compounds that make a real
difference for patients with cancer. What
has changed is that we are putting more
support behind the aggressive
advancement of our own compounds to
value-inflection points and being more
selective in entering into new
collaborations than in the past.
I thank our Directors for their guidance and
encouragement and our employees for
their scientific insights, teamwork, and
unrelenting commitment in helping us
reach this new stage for ImmunoGen.
And, I particularly wish to thank you, our
shareholders, for your support of our
progress.
Sincerely,
Daniel M. Junius
President and Chief Executive Officer
September 21, 2010
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(cid:3)
For the fiscal year ended June 30, 2010
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 0-17999
ImmunoGen, Inc.
Massachusetts
(State or other jurisdiction
of incorporation or organization)
04-2726691
(I.R.S. Employer
Identification No.)
830 Winter Street, Waltham, MA 02451
(Address of principal executive offices, including zip code)
(781) 895-0600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $.01 par value
NASDAQ Global Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. (cid:3) Yes (cid:2) No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. (cid:3) Yes (cid:2) No
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. (cid:2) Yes (cid:3) No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). (cid:3) Yes (cid:3) No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ and ‘‘smaller reporting company’’ in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer (cid:3)
Smaller reporting company (cid:3)
Accelerated filer (cid:2)
Non-accelerated filer (cid:3)
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). (cid:3) Yes (cid:2) No
Aggregate market value, based upon the closing sale price of the shares as reported by the NASDAQ Global Market, of
voting stock held by non-affiliates at December 31, 2009: $444,794,248 (excludes shares held by executive officers and directors).
Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or
indirect, to direct or cause the direction of management or policies of the registrant, or that such person is controlled by or
under common control with the registrant. Common Stock outstanding at August 24, 2010: 67,949,840 shares.
Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of
Shareholders to be held on November 16, 2010 are incorporated by reference into Part III.
DOCUMENTS INCORPORATED BY REFERENCE
ImmunoGen, Inc.
Form 10-K
TABLE OF CONTENTS
Item
1.
1A.
1B.
2.
3.
3.1
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
Part I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
Number
3
24
38
39
39
39
40
41
43
43
58
59
95
95
97
98
98
98
98
98
99
100
2
Item 1. Business
In this Annual Report on Form 10-K, ImmunoGen, Inc. (ImmunoGen, Inc., together with its
subsidiaries, is referred to in this document as ‘‘we’’, ‘‘us’’, ‘‘ImmunoGen’’, or the ‘‘Company’’),
incorporates by reference certain information from parts of other documents filed with the Securities
and Exchange Commission. The Securities and Exchange Commission allows us to disclose important
information by referring to it in that manner. Please refer to all such information when reading this
Annual Report on Form 10-K. All information is as of June 30, 2010 unless otherwise indicated. For a
description of the risk factors affecting or applicable to our business, see ‘‘Risk Factors,’’ below.
The Company
We develop novel, targeted therapeutics for the treatment of cancer using our expertise in cancer
biology, the development of monoclonal antibodies, the creation of highly potent cytotoxic, or
cell-killing, agents, and the engineering of linkers used to attach our cell-killing agents to antibodies.
Most of the product candidates being developed by us and through our collaborations with others
utilize our Targeted Antibody Payload, or TAP, technology. A TAP compound consists of a monoclonal
antibody that binds specifically to an antigen target found on cancer cells with one of our highly potent
cytotoxic agents attached using one of our linkers. Our linkers are engineered to keep the cytotoxic
agent stably attached to the antibody while the TAP compound is in the blood stream and then release
it in a fully active form after delivery to a cancer cell. Six TAP compounds and one therapeutic
antibody are in clinical testing through our own programs and those of our partners, with more
expected to enter the clinic in 2010 and 2011.
We develop targeted, antibody-based anticancer compounds for our own proprietary pipeline. Our
most advanced wholly owned product candidate is lorvotuzumab mertansine (also known as IMGN901).
This TAP compound is a potential treatment for cancers that express CD56, which include small-cell
lung cancer, Merkel cell carcinoma, ovarian cancer, and multiple myeloma. We have several clinical
trials underway with lorvotuzumab mertansine and expect to initiate additional trials going forward.
Our second most advanced compound, IMGN388, is a potential treatment for solid tumors including
melanomas, sarcomas and many carcinomas. IMGN388 also is a clinical-stage TAP compound. We have
three TAP compounds currently in or positioned to begin preclinical toxicology studies. One of these
compounds, IMGN529, is being developed for the treatment of certain liquid tumors and we expect to
submit an investigational new drug, or IND, application to the FDA for this product candidate in 2011.
We expect to submit an IND for another of these in 2012. In addition to our product programs, we
continue to invest in our TAP technology, including the development of additional cytotoxic agents and
linkers, to maintain a leadership position in our field.
Part of our business model is to establish collaborations with other companies in order to provide
us with cash and revenue short term and potential significant value long term. The collaborations also
expand the utilization of our TAP technology. The most advanced TAP compound, Trastuzumab-DM1
or T-DM1, is in development through our collaboration with Genentech, a member of the Roche
Group, and it is in Phase III testing for two indications. SAR3419 and SAR650984 are in clinical
testing through a collaboration with sanofi-aventis. BIIB015 and BT-062 are in clinical development
through our collaborations with Biogen Idec and Biotest, respectively. Companies with licenses to
develop TAP compounds to other targets include Amgen, Bayer Schering Pharma, Genentech, and
sanofi-aventis.
We were organized as a Massachusetts corporation in 1981. Our principal offices are located at
830 Winter Street, Waltham, Massachusetts (MA) 02451, and our telephone number is (781) 895-0600.
We maintain a website at www.immunogen.com, where certain information about us is available. Please
note that information contained on the website is not a part of this document. Our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to
3
those reports are available free of charge through the ‘‘Investor Information’’ section of our website as
soon as reasonably practicable after those materials have been electronically filed with, or furnished to,
the Securities and Exchange Commission. We have adopted a Code of Corporate Conduct that applies
to all our directors, officers and employees and a Senior Officer and Financial Personnel Code of
Ethics that applies to our senior officers and financial personnel. Our Code of Corporate Conduct and
Senior Officer and Financial Personnel Code of Ethics are available free of charge through the
‘‘Investor Information’’ section of our website.
Product Candidates
The following table summarizes the status for compounds in development by us and our
collaborators. The results from preclinical testing and early clinical trials may not be predictive of
results obtained in subsequent clinical trials and there can be no assurance that our or our
4
collaborators’ clinical trials will demonstrate the level of safety and efficacy of any product candidates
necessary to obtain regulatory approval.
Product Candidate
Trastuzumab-DM1
Development Stage
Collaborative
Partner, if any
(T-DM1) . . . . . . . . For advanced HER2+ breast cancer:
Genentech/Roche
(cid:129) 2nd-line use—Phase III trial underway
(cid:129) 1st-line use—Phase III trial underway
(cid:129) Adjuvant use—described as being under
consideration
Lorvotuzumab
mertansine
(IMGN901) . . . . . . For CD56+ solid tumors:
Proprietary to ImmunoGen
(cid:129) Merkel cell carcinoma—patients with advanced
disease being enrolled into expansion phase
of a Phase I trial; Go/no go decision to
be made regarding initiation of pivotal testing
(cid:129) Small-cell lung cancer—patients with advanced
disease being enrolled into expansion phase
of a Phase I elial; Phase I/II trial
in 1st-line use expected to start
by late 2010
(cid:129) Ovarian cancer—patients with advanced disease
being recruited into expansion phase of a
Phase I trial; next steps to be determined
For CD56+ multiple myeloma:
(cid:129) Use as monotherapy in advanced disease—
patients being enrolled into expansion
phase of a Phase I trial
(cid:129) Use in combination in advanced
disease—patients being enrolled into
Phase I trial
SAR3419 . . . . . . . . . . For advanced CD19+ non-Hodgkin’s
sanofi-aventis
lymphoma—Phase I
IMGN388 . . . . . . . . . For advanced solid tumors—Phase I
Centocor Ortho Biotech has
opt-in rights
BIIB015 . . . . . . . . . . For advanced solid tumors—Phase I
Biogen Idec
BT-062 . . . . . . . . . . . For advanced multiple myeloma—Phase I
Biotest; ImmunoGen has
opt-in rights
SAR650984(1) . . . . . . . For advanced hematological malignancies—Phase I
sanofi-aventis
SAR566658 . . . . . . . . For advanced solid tumors—Preclinical
sanofi-aventis
Other compounds
. . . Research/preclinical
ImmunoGen/collaborators
(1) Therapeutic antibody; the rest of the product candidates are TAP compounds.
Trastuzumab-DM1 (T-DM1)
The most advanced compound in our pipeline is T-DM1, which is in global development by Roche
for the treatment of advanced HER2+ breast cancer. T-DM1 consists of our DM1 cell-killing agent
attached to trastuzumab, which is the active component of the marketed anticancer compound,
5
Herceptin(cid:4). T-DM1 was created under a HER2-specific license agreement established in 2000 between
ImmunoGen and Genentech.
To date, we have earned $13.5 million of a potential $44 million in milestone payments with
Genentech/Roche’s advancement of T-DM1: $2 million when the IND became effective in January
2006, $5 million when T-DM1 entered Phase II clinical testing in July 2007, and $6.5 million when it
began Phase III evaluation in February 2009. Genentech retained us to develop a commercial-scale
manufacturing process for T-DM1 in May 2006 and we have completed and transferred this process.
In early July 2010, Roche announced the submission of a Biologics License Application, or BLA,
to the FDA to gain U.S. marketing approval for use of T-DM1 to treat patients with advanced HER2+
breast cancer who had previously received multiple chemotherapies and HER2-targeted medicines; this
is also known as 3rd-line use. The basis of the submission is the single-arm Phase II clinical trial that
was reported at the San Antonio Breast Cancer Symposium in December 2009. In August 2010, Roche
announced that the FDA issued a Refuse to File letter for this BLA. Roche will continue to work with
the FDA and expects to submit a new BLA in mid 2012 based on results of the ongoing EMILIA trial
described below.
In February 2009, patient dosing began in a Phase III trial, EMILIA, being conducted by Roche to
assess T-DM1 for 2nd-line use in advanced HER2+ breast cancer. EMILIA compares T-DM1, used
alone, against the marketed anticancer agents, lapatinib and capecitabine, used together. Roche has
noted that, if successful, this trial would be used to apply in 2012 for marketing approval of T-DM1 for
2nd-line use in the U.S. It would also be used to apply in 2012 for marketing approval in Europe.
In July 2010, patient dosing began in a Phase III trial, MARIANNE, being conducted by Roche to
assess T-DM1 for 1st-line use in advanced HER2+ breast cancer. MARIANNE compares T-DM1, used
alone, against the marketed agent, trastuzumab, used together with a taxane, in patients not previously
treated for metastatic disease. This trial also includes comparison to T-DM1 used with Roche’s
experimental agent, pertuzumab. Roche has noted that, if successful, MARIANNE would be used to
apply some time after 2013 for marketing approval of T-DM1 for 1st-line use in the U.S. and Europe.
The first findings with T-DM1 used for 1st-line treatment of advanced HER2+ breast cancer are
expected to be reported at a medical meeting in October 2010. These data would be from a Phase II
trial.
Roche also is assessing T-DM1 used in combination with several approved and experimental
agents, and reported the first data on T-DM1 used together with pertuzumab at a medical meeting in
June 2010. It expects to report additional data at a medical meeting in December 2010.
Lorvotuzumab mertansine
Our most advanced wholly owned compound is lorvotuzumab mertansine, also known as
IMGN901. The target for this TAP compound, CD56, is found on a number of tumor types, including
small-cell lung cancer, ovarian cancer, Merkel cell carcinoma, and the liquid tumor, multiple myeloma.
We believe lorvotuzumab mertansine has the potential to be the first effective antibody-based therapy
for the treatment of these cancers.
There is a need for better therapies for a number of CD56+ cancers. For example, patients with
advanced small-cell lung cancer can respond to their first treatment regimen, but typically their disease
then recurs fairly quickly and, at that stage, patients usually survive for less than 6 months. There are
no approved therapies for metastatic Merkel cell carcinoma, and patients with advanced disease
typically survive for less than 7 months. In recent years, several new therapies have become available to
treat multiple myeloma; however, patients still die from this disease and we believe there is a need for
a treatment, such as lorvotuzumab mertansine, that has a different mechanism of action from the
approved therapies.
6
We are evaluating lorvotuzumab mertansine for the treatment of CD56+ cancers, focusing initially
on small-cell lung cancer, Merkel cell carcinoma, ovarian cancer, and multiple myeloma:
Small-cell lung cancer, or SCLC—Patients with recurrent SCLC were enrolled in the first
lorvotuzumab mertansine Phase I trial conducted, which has been completed, and are being
enrolled in the expansion phase of a second Phase I trial, which is in progress. To assess
lorvotuzumab mertansine for 1st-line treatment of SCLC, we plan to commence a Phase I/II trial
by late 2010 assessing it used in combination with etoposide/carboplatin, the standard 1st-line
treatment for this cancer. We have applied for orphan drug designation in SCLC in the U.S. and
Europe and are awaiting the decision.
Merkel cell carcinoma, or MCC—A limited number of patients with advanced MCC received
lorvotuzumab mertansine in the ongoing Phase I trial referenced previously. Additional patients
with advanced MCC are being enrolled in the expansion phase of this trial to gain more
experience with lorvotuzumab mertansine in the treatment of this disease. These findings—along
with other clinical data and input gained from regulatory agencies—will be used to determine
whether or not we will initiate a pivotal Phase II trial for this use during 2011. We have received
orphan drug designation in MCC in the U.S. and Europe.
Ovarian cancer—To gain experience with lorvotuzumab mertansine in this disease, patients with
CD56+ ovarian cancer are being recruited to the expansion phase of the ongoing Phase I trial
referenced previously.
Multiple myeloma, or MM—Two Phase I trials are underway in this indication. One evaluates
lorvotuzumab mertansine when used as a single agent and is currently in its expansion phase. The
other evaluates the compound used in combination with the standard treatment for this cancer,
lenalidomide plus dexamethasone. We expect to report interim data from one or both of these
trials at the ASH annual meeting in December 2010. The findings from these trials will inform the
future development of lorvotuzumab mertansine for MM.
SAR3419
We created this TAP compound for the treatment of non-Hodgkin’s lymphoma and other B-cell
malignancies and licensed it to sanofi-aventis as part of a broader research collaboration. We earned a
$1 million milestone payment from sanofi-aventis in October 2007 with the its advancement into clinical
testing. SAR3419 is currently in Phase I testing for the treatment of non-Hodgkin’s lymphoma.
Encouraging findings from the first Phase I trial conducted were reported at a medical meeting in
December 2009. Sanofi-aventis is evaluating the compound using a different dosing schedule in a
second Phase I trial, and SAR3419 is expected to advance into Phase II testing in the second half of
2011. Like Genentech for T-DM1, sanofi-aventis retained us to develop a commercial-scale
manufacturing process for the compound. We have completed and transferred this process.
IMGN388
We are developing IMGN388 for the treatment of solid tumors. It includes an integrin-targeting
antibody developed by Centocor Ortho Biotech, previously Centocor. IMGN388’s target occurs on
many types of solid tumors and also on vascular endothelial cells in the process of forming new blood
vessels, a process that needs to occur for solid tumors to grow. IMGN388 is in Phase I testing and
clinical data from this trial were presented at a medical meeting in June 2010. Centocor Ortho Biotech
has opt-in rights for this compound.
7
Other Compounds in Development by Us
In addition to lorvotuzumab mertansine and IMGN388, we have a number of product candidates
at earlier stages in our pipeline. We expect to submit an IND for our third compound, IMGN529, in
2011, and an IND for our fourth compound in 2012. These are both TAP compounds. IMGN529 is a
potential treatment for certain types of liquid tumors.
We also continue to invest in our TAP technology, including the development of additional
cytotoxic agents and linkers, to maintain our leadership position in our field.
Other Compounds in Development by Our Partners
In addition to T-DM1 and SAR3419, other compounds in clinical testing through our
collaborations with other companies are BT-062, BIIB015, and SAR650984. We expect 3 - 4 additional
TAP compounds to advance into clinical testing during 2010 and 2011 through our existing
collaborative partnerships. Companies with licenses to develop TAP compounds other than those
already in the clinic include Amgen, Bayer Schering Pharma, Genentech, and sanofi-aventis.
Incidence of Relevant Cancers
Cancer remains a leading cause of death worldwide, and is the second leading cause of death in
the U.S. Based on American Cancer Society estimates, we believe approximately 1.5 million new cases
of cancer will be diagnosed in the U.S. in 2010 and that approximately 570,000 people will die from
various cancers. The total number of people living with cancer significantly exceeds the number of
patients diagnosed with cancer in a given year as patients can live with cancer for a year or longer.
Additionally, the potential market for anticancer drugs exceeds the number of patients treated as many
types of cancer typically are treated with multiple compounds at the same time. Additionally, patients
often receive multiple drug regimens sequentially, either to treat or help prevent recurrence of the
disease. In recent years, several antibody-based anticancer drugs have enjoyed considerable commercial
success, as have other targeted anticancer agents.
T-DM1—Based on American Cancer Society and Roche estimates, we believe approximately
42,000-50,000 new cases of HER2+ breast cancer will be diagnosed in 2010. These include diagnoses
for both localized disease and advanced, or metastatic, disease. The first approvals of T-DM1 are
expected to be for advanced disease. Roche has estimated the 2nd-line and later patient population in
the U.S. to be approximately 13,700 patients.
Lorvotuzumab mertansine—We are assessing this compound for the treatment of CD56+ solid
tumors, including small-cell lung cancer, ovarian cancer and Merkel cell carcinoma, as well as the liquid
tumor, multiple myeloma. Based on our own studies and scientific literature, we believe that CD56 is
expressed on approximately 100% of small-cell lung cancer and Merkel cell carcinoma cases, 70% of
multiple myeloma cases, and 58% of ovarian cancer cases. Based on American Cancer Society
estimates and other sources, we believe that approximately 28,000 new cases of small-cell lung cancer
will be diagnosed in the U.S. in 2010. Based on American Cancer Society estimates, we also believe
that approximately 22,000 new cases of ovarian cancer and 20,000 new cases of multiple myeloma will
be diagnosed in the U.S. in 2010. Based on other published data, we believe approximately 1,900 new
cases of Merkel cell carcinoma will be diagnosed in the U.S. in 2010.
We are assessing our IMGN388 compound for the treatment of solid tumors. Cancers of particular
interest include melanoma, lung, breast, and ovarian cancers. Based on American Cancer Society
estimates, we believe approximately 522,000 new cases of these cancers will be diagnosed in the U.S. in
2010.
8
Out-licenses and Collaborations
As part of our business strategy to expand the use of and financial return from our TAP
technology, we enter into license agreements with third parties where we grant the other party the
exclusive right to use our TAP technology with their antibodies to specific antigen targets. We also had
a research collaboration with sanofi-aventis that provided them access to compounds in our preclinical
pipeline. As part of these agreements, we are entitled to receive upfront fees, potential milestone
payments and royalties on the sales of any resulting products. Our principal out-licenses and
collaborative agreements are described below.
Genentech (a member of the Roche Group)
In May 2000, we entered into two separate agreements with Genentech. The first agreement grants
Genentech an exclusive license to our maytansinoid TAP technology for use with antibodies that target
HER2, such as trastuzumab. Under the terms of this agreement, Genentech has exclusive worldwide
rights to develop and commercialize maytansinoid TAP compounds with antibodies that target HER2.
Genentech is responsible for the manufacturing, product development and marketing of any products
resulting from the agreement. We are reimbursed for any preclinical and clinical materials that we
manufacture under the agreement. We received a $2 million non-refundable payment from Genentech
upon execution of the agreement. We also are entitled to receive up to $44 million in milestone
payments from Genentech under this agreement, as amended in May 2006, in addition to royalties on
the net sales of any resulting products. Genentech and Roche began Phase III evaluation of T-DM1 in
February 2009, which triggered a $6.5 million milestone payment to us. Through June 30, 2010, we
have received a total of $13.5 million in milestone payments.
In May 2000 we also entered into a ‘‘right-to-test’’ agreement with Genentech. This agreement
provided Genentech with the right to test our maytansinoid TAP technology with antibodies to a
defined number of targets on an exclusive basis for specified option periods and to take exclusive
licenses to use our maytansinoid TAP technology to develop products directed to individual targets on
agreed-upon terms. We received non-refundable technology access fees totaling $5 million for the
eight-year term of the agreement. Genentech no longer has the right to designate new targets under
this ‘‘right-to-test’’ agreement.
Under this agreement, Genentech licensed exclusive rights to use our maytansinoid TAP
technology with antibodies to four undisclosed targets. The most recent license was taken in December
2008. Under the terms defined in the 2000 ‘‘right-to-test’’ agreement, for each license we received a
$1 million license fee and may receive up to $38 million in milestone payments. We are also entitled to
receive royalties on the sales of any resulting products. Genentech is responsible for the development,
manufacturing, and marketing of any products resulting from these licenses.
Amgen
In September 2000, we entered into a ten-year ‘‘right-to-test’’ agreement with Abgenix, Inc., which
was later acquired by Amgen. The agreement provides Amgen with the right to test our maytansinoid
TAP technology with antibodies to a defined number of targets on either an exclusive and non-exclusive
basis for specified option periods and to take exclusive or non-exclusive licenses to use our
maytansinoid TAP technology to develop products for individual targets on agreed-upon terms. We
received a $5 million technology access fee in September 2000. Under the agreement, in September
2009 and November 2009, we entered into two development and license agreements with Amgen and
received a $1 million upfront payment with each license taken. In addition to the $1 million upfront
payment, we are entitled to earn milestone payments potentially totaling $34 million per target for each
compound developed under the ‘‘right-to-test’’ agreement, as well as royalties on the commercial sales
of any resulting products. In March 2010, we granted Amgen a non-exclusive option to test our TAP
9
technology with antibodies to a specific target, for which Amgen paid us a nominal fee. Under this
‘‘right-to-test’’ agreement, there can be option periods in effect that extend beyond the expiration of
the agreement in September 2010.
sanofi-aventis
In July 2003, we entered into a broad collaboration agreement with sanofi-aventis to discover,
develop and commercialize antibody-based anticancer therapeutics.
The agreement provides sanofi-aventis with worldwide commercialization rights to new anticancer
therapeutics developed to targets that were included in the collaboration, including the right to use our
TAP technology and our humanization technology in the creation of therapeutics to these targets. The
product candidates (targets) currently in the collaboration include SAR3419 (CD19), SAR650984
(CD38), SAR566658 (CA6) and additional compounds at earlier stages of development that have yet to
be disclosed.
The collaboration agreement entitles us to receive milestone payments potentially totaling
$21.5 million for each therapeutic now included in the collaboration agreement. Through June 30, 2010,
we have earned a total of $4 million in milestone payments related to the three product candidates
noted above and one target not yet disclosed. We also earned an aggregate of $8 million of milestone
payments related to two product candidates previously in the collaboration that have been returned to
us along with the rights to the respective targets.
The agreement also entitles us to royalties on the commercial sales of any resulting products if and
when such sales commence. Sanofi-aventis is responsible for the cost of the development,
manufacturing and marketing of any products created through the collaboration. We are reimbursed for
any preclinical and clinical materials that we make under the agreement. The collaboration agreement
also provides us an option to certain co-promotion rights in the U.S. on a product-by-product basis.
The terms of the collaboration agreement allow sanofi-aventis to terminate our co-promotion rights if
there is a change of control of our company.
The overall term of the agreement extends to the later of the latest patent to expire or twelve
years after the latest launch of any product discovered, developed and/or commercialized under the
agreement. Sanofi-aventis paid us an upfront fee of $12.0 million in August 2003. Inclusive of all of its
allowed extensions, the agreement enabled us to receive committed research funding totaling
$79.3 million over the five years of the research collaboration. The two companies subsequently agreed
to extend the date of research funding through October 31, 2008 to enable completion of previously
agreed-upon research. We recorded the research funding as it was earned based upon its actual
resources utilized in the collaboration. We earned $81.5 million of committed funding over the duration
of the research program and are now compensated for research performed for sanofi-aventis on a
mutually agreed-upon basis.
In October 2006, sanofi-aventis licensed non-exclusive rights to use our proprietary resurfacing
technology to humanize antibodies to targets not included in the collaboration, including antibodies for
non-cancer applications. This license provides sanofi-aventis with the non-exclusive right to use our
proprietary humanization technology through August 31, 2011 with the right to extend for one or more
additional periods of three years each by providing us with written notice prior to expiration of the
then-current license term. Under the terms of the license, we are entitled to a $1 million license fee,
half of which was paid upon contract signing and the second half was paid in August 2008, and in
addition, we are entitled to receive milestone payments potentially totaling $4.5 million for each
antibody humanized under this agreement and also royalties on commercial sales, if any.
In August 2008, sanofi-aventis exercised its option under a 2006 agreement for expanded access to
our TAP technology. The exercise of this option enables sanofi-aventis to evaluate, with certain
10
restrictions, our maytansinoid TAP technology with antibodies to targets that were not included in the
research collaboration between the companies and to license the exclusive right to use the technology
to develop products to specific targets based on the terms in the 2006 agreement. We are entitled to
earn upfront and milestone payments potentially totaling $32 million per target for each compound
developed under the 2006 agreement, as well as royalties on the commercial sales of any resulting
products. We are also entitled to manufacturing payments for any materials made on behalf of sanofi-
aventis. We received $500,000 in December 2006 with the signing of the option agreement and we
received $3.5 million with the exercise of this option in August 2008. The agreement has a three-year
term from the date of the exercise of the option and can be renewed by sanofi-aventis for one
additional three-year term by payment of a $2 million fee.
Biogen Idec
In October 2004, we entered into a development and license agreement with Biogen Idec. The
agreement grants Biogen Idec exclusive rights to use our maytansinoid TAP technology to develop and
commercialize therapeutic compounds to the target Cripto. Biogen Idec is responsible for the research,
development, manufacturing, and marketing of any products resulting from the license. We received a
$1 million upfront payment upon execution of the agreement. In January 2008, Biogen Idec submitted
an IND to the FDA for BIIB015, which was created under this agreement. This event triggered a
$1.5 million milestone payment to us. Assuming all benchmarks are met, we could receive up to
$42 million in milestone payments under this agreement. We are also entitled to receive royalties on
net sales of resulting products. We also receive compensation from Biogen Idec for any product
development research done on its behalf, as well as for the production of preclinical and clinical
materials.
Biotest
In July 2006, we entered into a development and license agreement with Biotest. The agreement
grants Biotest exclusive rights to use our maytansinoid TAP technology to develop and commercialize
therapeutic compounds directed to the target CD138. We received a $1 million upfront payment upon
execution of the agreement. In September 2008, Biotest began Phase I evaluation of BT-062, which was
created under this agreement. This event triggered a $500,000 milestone payment to us. Assuming all
benchmarks are met under this agreement, we could receive up to $35.5 million in milestone payments.
We are also entitled to receive royalties on net sales of any resulting products. We receive payments for
manufacturing any preclinical and clinical materials made at the request of Biotest.
The agreement also provides us with the right to elect, at specific stages during the clinical
evaluation of any compound created under this agreement, to participate in the U.S. development and
commercialization of that compound in lieu of receiving royalties on U.S. sales and the milestone
payments not yet earned. We can exercise this right by making a payment to Biotest of an agreed-upon
fee of $5 million or $15 million, depending on the stage of development. Upon exercise of this right,
we would share equally with Biotest the associated costs of product development and commercialization
in the U.S. along with the profit, if any, from U.S. product sales.
Bayer Schering Pharma
In October 2008, we entered into a development and license agreement with Bayer Schering
Pharma AG. The agreement grants Bayer Schering Pharma exclusive rights to use our maytansinoid
TAP technology to develop and commercialize therapeutic compounds directed to a specific target.
Bayer Schering Pharma is responsible for the research, development, manufacturing and marketing of
any products resulting from the license. We received a $4 million upfront payment upon execution of
the agreement, and—for each compound developed and marketed by Bayer Schering Pharma under
this collaboration—we could potentially receive up to $170.5 million in milestone payments;
11
additionally, we are entitled to receive royalties on the net sales of any resulting products. In
September 2009, Bayer Schering Pharma reached a preclinical milestone which triggered a $1 million
payment to us. We also are entitled to receive payments for manufacturing any preclinical and clinical
materials at the request of Bayer Schering Pharma as well as for any related process development
activities.
In-Licenses
From time to time we may in-license certain rights to targets or technologies for use in conjunction
with our internal efforts to develop both TAP and naked-antibody products and related technologies. In
exchange, we may be obligated to pay upfront fees, potential milestone payments and royalties on any
product sales.
Centocor Ortho Biotech
In December 2004, we entered into a development and license agreement with a predecessor to
Centocor Ortho Biotech, a wholly owned subsidiary of Johnson & Johnson. Under the terms of this
agreement, Centocor was granted exclusive worldwide rights to develop and commercialize anticancer
therapeutics that consist of our maytansinoid cell-killing agent attached to an (cid:2)v integrin-targeting
antibody that was developed by Centocor. Under the terms of the agreement, we received an upfront
payment of $1 million upon execution of the agreement.
In December 2007, we licensed from Centocor the exclusive, worldwide right to develop and
commercialize a TAP compound, IMGN388, that consists of an (cid:2)v integrin-targeting antibody
developed by them and one of our maytansinoid cell-killing agents. This license reallocates the parties’
respective responsibilities and financial obligations from the license referenced above. Centocor has the
right to opt-in on future development and commercialization of IMGN388 at an agreed-upon stage in
early clinical testing. Should Centocor not exercise this right, Centocor would be entitled to receive
milestone payments potentially totaling $30 million, with the first payment due upon the completion of
a successful Phase III trial, and also royalties on IMGN388 sales, if any. In this event, ImmunoGen has
the right to obtain a new partner for IMGN388, with certain restrictions. Should Centocor exercise its
opt-in right, ImmunoGen would receive an opt-in fee and be released from its obligation to pay
Centocor any milestone payments or royalties on sales. Both companies would contribute to the costs
of developing the compound. The two companies would share equally any profits on the sales of the
compound in the U.S. and ImmunoGen would receive royalties on any international sales. The
companies have agreed to share certain third-party payments. In June 2008, the FDA approved the
IND application for IMGN388. This event triggered a $1 million milestone payment to a third-party,
half of which was paid by ImmunoGen. As of June 30, 2010, the maximum amount that may be
payable in the future to such third-parties under this agreement is $11 million.
Other Licenses
We also have licenses with third parties, including other companies and academic institutions, to
gain access to techniques and materials for drug discovery and product development and the rights to
use those techniques and materials to make our product candidates. These licenses include rights to
certain antibodies.
Patents, Trademarks and Trade Secrets
Our intellectual property strategy centers on obtaining patent protection for our proprietary
technologies and product candidates. As of June 30, 2010, our patent portfolio had a total of 299 issued
patents worldwide and 463 pending patent applications worldwide that we own or license from third
parties. We seek to protect our TAP technology and our product candidates through a multi-pronged
12
approach. In this regard, we have patents and patent applications covering antibodies and other
cell-binding agents, linkers, maytansinoid and other cell-killing agents, and complete antibody-drug
conjugates, or immunoconjugates, comprising these components and methods of making and using each
of the above. Typically, multiple issued patents and pending patent applications cover various aspects of
each product candidate.
We consider our maytansinoid technology to be a key component of our overall corporate strategy.
We currently own 21 issued U.S. patents covering various embodiments of our maytansinoid technology
including claims directed to certain maytansinoids, antibody-maytansinoid conjugates and other
cell-binding agents used with maytansinoids, and methods of making and using the same. In all cases,
we have received or are applying for comparable patents in other jurisdictions including Europe and
Japan. We have issued patents that cover numerous aspects of the manufacture of both our DM1 and
DM4 cell-killing agents. These issued patents remain in force until various times between 2020 and
2026. We also have a composition of matter patent on our DM4 cell-killing agent that is expected to
remain in force until 2024.
Our intellectual property strategy also includes pursuing patents directed to linkers, antibodies,
conjugation methods, immunoconjugate formulations and the use of specific antibodies and
immunoconjugates to treat certain diseases. In this regard, we have issued patents and pending patent
applications related to many of our linker technologies. These issued patents, expiring in 2021-2023,
and any patents which may issue from the patent applications, cover antibody-maytansinoid conjugates
using these linkers. We also have issued U.S. patents and pending patent applications covering methods
of assembling immunoconjugates from their constituent antibody, linker and cell-killing agent moieties.
These issued patents will expire in 2021, while any patents that may issue from pending patent
applications also covering various aspects of these technologies will, if issued, expire between 2021 and
2030. We also have issued patents and pending patent applications related to monoclonal antibodies
that may be a component of a TAP compound or may be developed as a therapeutic, or ‘‘naked,’’
antibody anticancer compound. Among these patents is an issued U.S. patent claiming a method of
humanizing murine antibodies to avoid their detection by the human immune system. We have received
patents in other jurisdictions, including Europe and Japan, that correspond to our antibody
humanization U.S. patent. These patents will expire between 2013 and 2014.
We expect our continued work in each of these areas will lead to other patent applications. In all
such cases, we will either be the assignee or owner of such patents or have an exclusive license to the
technology covered by the patents. For example, we also own issued patents covering proprietary
derivatives of non-maytansinoid cell-killing molecules. However, we do not currently consider these
additional patent families to be material to our business.
As described elsewhere in this annual report on Form 10-K under the heading ‘‘In-Licenses—
Centocor Ortho Biotech,’’ we have in-licensed certain technology from Centocor Ortho Biotech in
connection with the development of our IMGN388 product candidate. In addition, we have in-licensed
intellectual property relating to our lorvotuzumab mertansine product candidate from Dana-Farber
Cancer Institute. We do not believe that the terms of this license are material to our business or
prospects.
We cannot provide assurance that the patent applications will issue as patents or that any patents,
if issued, will provide us with adequate protection against competitors with respect to the covered
products, technologies or processes. Defining the scope and term of patent protection involves complex
legal and factual analyses and, at any given time, the result of such analyses may be uncertain. In
addition, other parties may challenge our patents in litigation or administrative proceedings resulting in
a partial or complete loss of certain patent rights owned or controlled by ImmunoGen, Inc.
Furthermore, as a patent does not confer any specific freedom to operate, other parties may have
patents that may block or otherwise hinder the development and commercialization of our technology.
13
In addition, many of the processes and much of the know-how that are important to us depend
upon the skills, knowledge and experience of our key scientific and technical personnel, which skills,
knowledge and experience are not patentable. To protect our rights in these areas, we require that all
employees, consultants, advisors and collaborators enter into confidentiality agreements with us.
Further, we require that all employees enter into assignment of invention agreements as a condition of
employment. We cannot provide assurance, however, that these agreements will provide adequate or
any meaningful protection for our trade secrets, know-how or other proprietary information in the
event of any unauthorized use or disclosure of such trade secrets, know-how or proprietary information.
Further, in the absence of patent protection, we may be exposed to competitors who independently
develop substantially equivalent technology or otherwise gain access to our trade secrets, know-how or
other proprietary information.
Competition
We focus on highly competitive areas of product development. Our competitors include major
pharmaceutical companies and other biotechnology firms. For example, Pfizer, Seattle Genetics, and
Bristol Myers Squibb have programs to attach a proprietary cell-killing small molecule to an antibody
for targeted delivery to cancer cells. Pharmaceutical and biotechnology companies, as well as other
institutions, also compete with us for promising targets for antibody-based therapeutics and in
recruiting highly qualified scientific personnel. Many competitors and potential competitors have
substantially greater scientific, research and product development capabilities, as well as greater
financial, marketing and human resources than we do. In addition, many specialized biotechnology
firms have formed collaborations with large, established companies to support the research,
development and commercialization of products that may be competitive with ours.
In particular, competitive factors within the antibody and cancer therapeutic market include:
(cid:129) the safety and efficacy of products;
(cid:129) the timing of regulatory approval and commercial introduction;
(cid:129) special regulatory designation of products, such as Orphan Drug designation; and
(cid:129) the effectiveness of marketing, sales, and reimbursement efforts.
Our competitive position depends on our ability to develop effective proprietary products,
implement clinical development programs, production plans and marketing plans, including
collaborations with other companies with greater marketing resources than ours, and to obtain patent
protection and secure sufficient capital resources.
Continuing development of conventional and targeted chemotherapeutics by large pharmaceutical
companies and biotechnology companies may result in new compounds that may compete with our
product candidates. In addition, antibodies developed by certain of these companies have been
approved for use as cancer therapeutics. In the future, additional antibodies may compete with our
product candidates. In addition, other companies have created or have programs to create potent
cell-killing agents for attachment to antibodies. These companies may compete with us for technology
out-license arrangements.
Because of the acceptance of combination therapy for the treatment of cancer and the variety of
genes and targets implicated in cancer incidence and progression, we believe that products resulting
from applications of new technologies may be complementary to our own.
Such new technologies include, but are not limited to:
(cid:129) the use of genomics technology to identify new gene-based targets for the development of
anticancer drugs;
14
(cid:129) the use of high-throughput screening to identify and optimize lead compounds;
(cid:129) the use of gene therapy to deliver genes to regulate gene function; and
(cid:129) the use of therapeutic vaccines.
Regulatory Matters
Government Regulation and Product Approval
Government authorities in the U.S., at the federal, state and local level, and other countries
extensively regulate, among other things, the research, development, testing, manufacture, quality
control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution,
marketing and export and import of products such as those we are developing. A new drug must be
approved by the FDA through the new drug application, or NDA, process and a new biologic must be
approved by the FDA through the biologics license application, or BLA, process before it may be
legally marketed in the U.S.
U.S. Drug Development Process
In the U.S., the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act, or FDCA,
and in the case of biologics, also under the Public Health Service Act, or PHSA, and implementing
regulations. The process of obtaining regulatory approvals and the subsequent compliance with
appropriate federal, state, local, and foreign statutes and regulations require the expenditure of
substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any
time during the product development process, approval process or after approval, may subject an
applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to
approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product
recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or
judicial enforcement action could have a material adverse effect on us. The process required by the
FDA before a drug or biologic may be marketed in the U.S. generally involves the following:
(cid:129) completion of preclinical laboratory tests, animal studies and formulation studies according to
Good Laboratory Practices or other applicable regulations;
(cid:129) submission to the FDA of an IND which must become effective before human clinical trials may
begin;
(cid:129) performance of adequate and well-controlled human clinical trials according to Good Clinical
Practices to establish the safety and efficacy of the proposed drug for its intended use;
(cid:129) submission to the FDA of an NDA or BLA;
(cid:129) satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which
the drug is produced to assess compliance with current good manufacturing practice, or cGMP,
to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,
strength, quality and purity; and
(cid:129) FDA review and approval of the NDA or BLA.
The testing and approval process requires substantial time, effort and financial resources, and we
cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at
all.
Once a pharmaceutical candidate is identified for development it enters the preclinical testing
stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as
15
well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with
manufacturing information and analytical data, to the FDA as part of the IND. The sponsor will also
include a protocol detailing, among other things, the objectives of the first phase of the clinical trial,
the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the
first phase lends itself to an efficacy evaluation. Some preclinical testing may continue even after the
IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless
the FDA, within the 30-day time period, places the clinical trial on a clinical hold. In such a case, the
IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.
Clinical holds also may be imposed by the FDA at any time before or during studies due to safety
concerns or non-compliance.
All clinical trials must be conducted under the supervision of one or more qualified investigators in
accordance with good clinical practice regulations. These regulations include the requirement that all
research subjects provide informed consent. Further, an institutional review board, or IRB, must review
and approve the plan for any clinical trial before it commences at any institution. An IRB considers,
among other things, whether the risks to individuals participating in the trials are minimized and are
reasonable in relation to anticipated benefits. The IRB also approves the information regarding the
trial and the consent form that must be provided to each trial subject or his or her legal representative
and must monitor the study until completed.
Each new clinical protocol must be submitted to the FDA for its review, and to the IRBs for
approval. Protocols detail, among other things, the objectives of the study, dosing procedures, subject
selection and exclusion criteria, and the parameters to be used to monitor subject safety.
Human clinical trials are typically conducted in three sequential phases that may overlap or be
combined:
(cid:129) Phase I: The drug is initially introduced into healthy human subjects and tested for safety,
dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some
products for severe or life-threatening diseases, such as cancer, especially when the product may
be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is
often conducted in patients.
(cid:129) Phase II: Involves studies in a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases
and to determine dosage tolerance and optimal dosage.
(cid:129) Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in
an expanded patient population at geographically dispersed clinical study sites. These studies are
intended to establish the overall risk-benefit ratio of the product and provide, if appropriate, an
adequate basis for product labeling.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the
FDA and safety reports must be submitted to the FDA and the investigators for serious and
unexpected adverse events. Phase I, Phase II, and Phase III testing may not be completed successfully
within any specified period, if at all. The FDA or the sponsor may suspend a clinical trial at any time
on various grounds, including a finding that the research subjects or patients are being exposed to an
unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its
institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if
the drug has been associated with unexpected serious harm to patients.
16
Concurrent with clinical trials, companies usually complete additional animal studies and must also
develop additional information about the chemistry and physical characteristics of the drug and finalize
a process for manufacturing the product in commercial quantities in accordance with cGMP
requirements. The manufacturing process must be capable of consistently producing quality batches of
the product candidate and, among other things, the manufacturer must develop methods for testing the
identity, strength, quality and purity of the final drug. Additionally, appropriate packaging must be
selected and tested and stability studies must be conducted to demonstrate that the product candidate
does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
The results of product development, preclinical studies and clinical trials, along with descriptions of
the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling,
and other relevant information are submitted to the FDA as part of an NDA or BLA requesting
approval to market the product. The submission of an NDA or BLA is subject to the payment of user
fees; a waiver of such fees may be obtained under certain limited circumstances.
In addition, under the Pediatric Research Equity Act of 2007, or PREA, an NDA, BLA and
certain types of supplements to an NDA or BLA must contain data to assess the safety and
effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to
support dosing and administration for each pediatric subpopulation for which the drug is safe and
effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless
otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan
designation has been granted. PREA sunsets on October 1, 2012.
The FDA reviews all NDAs and BLAs submitted to ensure that they are sufficiently complete for
substantive review before it accepts them for filing. The FDA may request additional information
rather than accept a NDA or BLA for filing. In this event, the NDA must be resubmitted with the
additional information. The resubmitted application also is subject to review before the FDA accepts it
for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review.
FDA may refer the NDA or BLA to an advisory committee for review, evaluation and recommendation
as to whether the application should be approved and under what conditions. The FDA is not bound
by the recommendation of an advisory committee, but it generally follows such recommendations. The
approval process is lengthy and difficult and the FDA may refuse to approve an NDA or BLA if the
applicable regulatory criteria are not satisfied or may require additional clinical or other data and
information. Even if such data and information is submitted, the FDA may ultimately decide that the
NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not
always conclusive and the FDA may interpret data differently than we interpret the same data. The
FDA may issue a complete response letter, which may require additional clinical or other data or
impose other conditions that must be met in order to secure final approval of the NDA or BLA, or an
approved letter following satisfactory completion of all aspects of the review process. The FDA reviews
an NDA to determine, among other things, whether a product is safe and effective for its intended use
and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity,
strength, quality and purity. The FDA reviews a BLA to determine, among other things whether the
product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held
meets standards designed to assure the product’s continued safety, purity and potency. Before
approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured.
NDAs or BLAs receive either standard or priority review. A drug representing a significant
improvement in treatment, prevention or diagnosis of disease may receive priority review. In addition,
products studied for their safety and effectiveness in treating serious or life-threatening illnesses and
that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval
and may be approved on the basis of adequate and well-controlled clinical trials establishing that the
17
drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit
or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a
condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval
perform adequate and well-controlled post-marketing clinical trials. Priority review and accelerated
approval do not change the standards for approval, but may expedite the approval process.
If a product receives regulatory approval, the approval may be significantly limited to specific
diseases and dosages or the indications for use may otherwise be limited, which could restrict the
commercial value of the product. In addition, the FDA may require us to conduct Phase IV testing
which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA or
BLA approval, and may require testing and surveillance programs to monitor the safety of approved
products which have been commercialized.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some
of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition
and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-
Waxman Amendments permit a patent restoration term of up to five years as compensation for patent
term lost during product development and the FDA regulatory review process. However, patent term
restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s
approval date. The patent term restoration period is generally one-half the time between the effective
date of an IND, and the submission date of an NDA or BLA, plus the time between the submission
date of an NDA or BLA and the approval of that application. Only one patent applicable to an
approved drug is eligible for the extension and the extension must be applied for prior to expiration of
the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and
approves the application for any patent term extension or restoration. In the future, we intend to apply
for restorations of patent term for some of our currently owned or licensed patents to add patent life
beyond their current expiration date, depending on the expected length of clinical trials and other
factors involved in the filing of the relevant NDA or BLA.
Market exclusivity provisions under the FDCA also can delay the submission or the approval of
certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within
the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new
chemical entity if the FDA has not previously approved any other new drug containing the same active
moiety, which is the molecule or ion responsible for the action of the drug substance. During the
exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA,
or a 505(b)(2) NDA submitted by another company for another version of such drug where the
applicant does not own or have a legal right of reference to all the data required for approval.
However, an application may be submitted after four years if it contains a certification of patent
invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an
NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than
bioavailability studies, that were conducted or sponsored by the applicant are deemed by FDA to be
essential to the approval of the application, for example, for new indications, dosages, or strengths of
an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical
investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original
active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full
NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of
reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to
demonstrate safety and effectiveness.
Pediatric exclusivity is another type of exclusivity in the U.S. Pediatric exclusivity, if granted,
provides an additional six months to an existing exclusivity or statutory delay in approval resulting from
18
a patent certification. This six-month exclusivity, which runs from the end of other exclusivity protection
or patent delay, may be granted based on the voluntary completion of a pediatric study in accordance
with an FDA-issued ‘‘Written Request’’ for such a study. The current pediatric exclusivity provision will
sunset on October 1, 2012.
Biologics Price Competition and Innovation Act of 2009
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care
Act which included the Biologics Price Competition and Innovation Act of 2009, or BPCIA. The
BPCIA amended the PHSA to create an abbreviated approval pathway for two types of ‘‘generic’’
biologics—biosimilars and interchangeable biologic products, and provides for a twelve-year exclusivity
period for the first approved biological product, or reference product, against which a biosimilar or
interchangeable application is evaluated. A biosimilar product is defined as one that is highly similar to
a reference product notwithstanding minor differences in clinically inactive components and for which
there are no clinically meaningful differences between the biological product and the reference product
in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar
product that may be substituted for the reference product without the intervention of the health care
provider who prescribed the reference product.
The biosimilar applicant must demonstrate that the product is biosimilar based on data from
(1) analytical studies showing that the biosimilar product is highly similar to the reference product;
(2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity
and potency in one or more appropriate conditions of use for which the reference product is approved.
In addition, the applicant must show that the biosimilar and reference products have the same
mechanism of action for the conditions of use on the label, route of administration, dosage and
strength, and the production facility must meet standards designed to assure product safety, purity and
potency.
An application for a biosimilar product may not be submitted until four years after the date on
which the reference product was first approved; however if pediatric studies are performed and
accepted by the FDA, the twelve-year exclusivity period will be extended for an additional six months.
The first approved interchangeable biologic product will be granted an exclusivity period of up to one
year after it is first commercially marketed, but the exclusivity period may be shortened under certain
circumstances.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to
treat a rare disease or condition, which is generally a disease or condition that affects fewer than
200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is no
reasonable expectation that the cost of developing and making available in the U.S. a drug for this type
of disease or condition will be recovered from sales in the U.S. for that drug. Orphan drug designation
must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation,
the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.
Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory
review and approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the
disease for which it has such designation, the product is entitled to orphan product exclusivity, which
means that the FDA may not approve any other applications to market the same drug for the same
indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also
could block the approval of one of our products for seven years if a competitor obtains approval of the
19
same drug as defined by the FDA or if our product candidate is determined to be contained within the
competitor’s product for the same indication or disease.
The FDA also administers a clinical research grants program, whereby researchers may compete
for funding to conduct clinical trials to support the approval of drugs, biologics, medical devices, and
medical foods for rare diseases and conditions. A product does not have to be designated as an orphan
drug to be eligible for the grant program. An application for an orphan grant should propose one
discrete clinical study to facilitate FDA approval of the product for a rare disease or condition. The
study may address an unapproved new product or an unapproved new use for a product already on the
market.
In March 2010 and August 2010, the FDA granted Orphan Drug designation to our lorvotuzumab
mertansine compound when used for the treatment of Merkel cell carcinoma (MCC) and small-cell
lung cancer (SCLC), respectively. Orphan drug designation provides ImmunoGen with seven years of
market exclusivity that begins once lorvotuzumab mertansine receives FDA marketing approval for the
use for which the orphan drug status was granted. Through a separate process, lorvotuzumab
mertansine has been granted orphan medicinal product designation for the treatment of MCC in the
European Union. The European Medicines Agency Committee for Orphan Medicinal Products
rendered a positive opinion in July 2010 on also granting lorvotuzumab mertansine orphan medicinal
product status for SCLC, and finalization of that designation is expected in 2010. Orphan medicinal
product designation provides ImmunoGen with ten years of market exclusivity that begins once
lorvotuzumab mertansine receives European approval for the use for which it was granted. We may
pursue these designations for other indications for lorvotuzumab mertansine, and for other product
candidates intended for qualifying patient populations.
New Drugs for Serious or Life Threatening Illnesses
The FDA Modernization Act allows the designation of ‘‘Fast Track’’ status to expedite
development of new drugs, including review and approvals, and is intended to speed the availability of
new therapies to desperately ill patients. ‘‘Fast Track’’ procedures permit early consultation and
commitment from the FDA regarding preclinical studies and clinical trials necessary to gain marketing
approval. We may seek ‘‘Fast Track’’ status for some, or all, of our product candidates.
‘‘Fast Track’’ status also incorporates initiatives announced by the President of the U.S. and the
FDA Commissioner in March 1996 intended to provide cancer patients with faster access to new cancer
therapies. One of these initiatives states that the initial basis for approval of anticancer agents to treat
refractory, hard-to-treat cancer may be objective evidence of response, rather than statistically improved
disease-free and/or overall survival, as had been common practice. The sponsor of a product approved
under this accelerated mechanism is required to follow up with further studies on clinical safety and
effectiveness in larger groups of patients.
Post-Approval Requirements
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory
standards is not maintained or if problems occur after the product reaches the market. Later discovery
of previously unknown problems with a product may result in restrictions on the product or even
complete withdrawal of the product from the market. After approval, some types of changes to the
approved product, such as adding new indications, manufacturing changes and additional labeling
claims, are subject to further FDA review and approval. Drug manufacturers and other entities involved
in the manufacture and distribution of approved drugs are required to register their establishments with
the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA
and certain state agencies for compliance with cGMP and other laws. We rely, and expect to continue
to rely, on third parties for the production of clinical and commercial quantities of our products. Future
20
FDA and state inspections may identify compliance issues at the facilities of our contract manufacturers
that may disrupt production or distribution, or require substantial resources to correct.
Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to
continuing regulation by the FDA, including, among other things, record-keeping requirements,
reporting of adverse experiences with the drug, providing the FDA with updated safety and efficacy
information, drug sampling and distribution requirements, complying with certain electronic records and
signature requirements, and complying with FDA promotion and advertising requirements. FDA strictly
regulates labeling, advertising, promotion and other types of information on products that are placed
on the market. Drugs may be promoted only for the approved indications and in accordance with the
provisions of the approved label.
From time to time, legislation is drafted, introduced and passed in Congress that could significantly
change the statutory provisions governing the approval, manufacturing and marketing of products
regulated by the FDA. For example, on September 27, 2007, the Food and Drug Administration
Amendments Act of 2007, or FDAAA, gave the FDA enhanced postmarket authority, including the
authority to require postmarket studies and clinical trials, labeling changes based on new safety
information, and compliance with a risk evaluation and mitigation strategy approved by the FDA.
Failure to comply with any requirements under the new law may result in significant penalties. The new
law also authorizes significant civil money penalties for the dissemination of false or misleading
direct-to-consumer advertisements. Additionally, the new law expands the clinical trial registry so that
sponsors of all clinical trials, except for Phase I trials, are required to submit certain clinical trial
information for inclusion in the clinical trial registry data bank, including summary adverse effect
information. In addition, FDA regulations and guidance are often revised or reinterpreted by the
agency in ways that may significantly affect our business and our products. It is impossible to predict
whether further legislative changes will be enacted, or FDA regulations, guidance or interpretations
changed or what the impact of such changes, if any, may be.
Foreign Regulation
In addition to regulations in the U.S., we will be subject to a variety of foreign regulations
governing clinical trials and commercial sales and distribution of our products. Whether or not we
obtain FDA approval for a product, we must obtain approval of a product by the comparable
regulatory authorities of foreign countries before we can commence clinical trials or marketing of the
product in those countries. The approval process varies from country to country and the time may be
longer or shorter than that required for FDA approval. The requirements governing the conduct of
clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
Under European Union regulatory systems, we may submit marketing authorization applications
either under a centralized or decentralized procedure. The centralized procedure, which is compulsory
for medicines produced by certain biotechnological processes, orphan drugs and products containing a
new active substance intended for treatment of specific conditions/illnesses including cancer, provides
for the grant of a single marketing authorization that is valid for all European Union member states. If
a drug does not fall within a mandatory category, it may still be submitted to the centralized procedure
if it contains a new active substance and constitutes a significant therapeutic, scientific or technical
innovation. Other new drugs without approval in any Member State, will follow the decentralized
procedure which provides for approval by one or more other, or concerned, Member States of an
assessment of an application performed by one Member State, known as the reference Member State.
Under this procedure, an applicant submits an application, or dossier, and related materials (draft
summary of product characteristics, draft labeling and package leaflet) to the reference Member State
and concerned Member States. The reference Member State prepares a draft assessment and drafts of
the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the
reference Member State’s assessment report, each concerned Member State must decide whether to
21
approve the assessment report and related materials. If a Member State cannot approve the assessment
report and related materials on the grounds of potential serious risk to public health, the disputed
points may eventually be referred to the European Commission, whose decision is binding on all
Member States.
Reimbursement
Sales of pharmaceutical products depend in significant part on the availability of third-party
reimbursement. Third-party payors include government healthcare programs, managed care providers,
private health insurers and other organizations. We anticipate third-party payors will provide
reimbursement for our products. However, these third-party payors are increasingly challenging the
price and examining the cost-effectiveness of medical products and services. In addition, significant
uncertainty exists as to the reimbursement status of newly approved healthcare products. We may need
to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our
products. Our product candidates may not be considered cost-effective. It is time consuming and
expensive for us to seek reimbursement from third-party payors. Reimbursement may not be available
or sufficient to allow us to sell our products on a competitive and profitable basis.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA,
imposed new requirements for the distribution and pricing of prescription drugs for Medicare
beneficiaries, and included a major expansion of the prescription drug benefit under Medicare Part D.
Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities
which provide coverage of outpatient prescription drugs. Part D plans include both stand-alone
prescription drug benefit plans and prescription drug coverage as a supplement to Medicare Advantage
plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug
plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its
own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D
prescription drug formularies must include drugs within each therapeutic category and class of covered
Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a
Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic
committee.
It is not clear what effect the MMA will have on the prices paid for currently approved drugs and
the pricing options for future approved drugs. Government payment for some of the costs of
prescription drugs may increase demand for products for which we receive marketing approval.
However, any negotiated prices for our products covered by a Part D prescription drug plan will likely
be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug
benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment
limitations in setting their own payment rates. Any reduction in payment that results from the MMA
may result in a similar reduction in payments from non-governmental payors.
We expect that there will continue to be a number of federal and state proposals to implement
governmental pricing controls and limit the growth of healthcare costs, including the cost of
prescription drugs. For example, in March 2010, President Obama signed one of the most significant
health care reform measures in decades, the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Affordability Reconciliation Act, collectively referred to as the
PPACA. The PPACA will significantly impact the pharmaceutical industry. The PPACA will require
discounts under the Medicare drug benefit program and increased rebates on drugs covered by
Medicaid. In addition, the PPACA imposes an annual fee, which will increase annually, on sales by
branded pharmaceutical manufacturers starting in 2011. The financial impact of these discounts,
increased rebates and fees and the other provisions of the PPACA on our business is unclear.
22
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it
may be lawfully marketed. The requirements governing drug pricing vary widely from country to
country. For example, the European Union provides options for its member states to restrict the range
of medicinal products for which their national health insurance systems provide reimbursement and to
control the prices of medicinal products for human use. A member state may approve a specific price
for the medicinal product or it may instead adopt a system of direct or indirect controls on the
profitability of the company placing the medicinal product on the market. There can be no assurance
that any country that has price controls or reimbursement limitations for pharmaceutical products will
allow favorable reimbursement and pricing arrangements for any of our products.
Research and Development Spending
During each of the three years ended June 30, 2010, 2009 and 2008, we spent approximately
$50.3 million, $45.9 million and $60.0 million, respectively, on research and development activities.
During the year ended June 30, 2010, approximately 1% of our full-time equivalent research and
development personnel were dedicated to our sanofi-aventis collaboration compared to 14% and 36%
during the years ended June 30, 2009 and 2008, respectively.
Raw Materials and Manufacturing
We procure certain raw material components of finished conjugate, including antibodies, DM1,
DM4, and linker, for ourselves and on behalf of our collaborators. In order to meet our commitments
to our collaborators as well as our own needs, we are required to enter into agreements with third
parties to produce these components well in advance of our production needs. Our principal suppliers
for these components include Cytovance Biologics LLC, SAFC, Inc. and Societ`a Italiana
Corticosteroidi S.r.l.
In addition, we operate a conjugate manufacturing facility. A portion of the cost of operating this
facility, including the cost of manufacturing personnel, is reimbursed by our collaborators based on the
number of batches of preclinical and clinical materials produced on their behalf. Over the past few
years, we have expanded and upgraded the capabilities of our manufacturing facility.
Employees
As of June 30, 2010, we had 211 full-time employees, of whom 178 were engaged in research and
development activities. Seventy-seven research and development employees hold post-graduate degrees,
of which 41 hold Ph.D. degrees and four hold M.D. degrees. We consider our relations with our
employees to be good. None of our employees is covered by a collective bargaining agreement.
We have entered into confidentiality agreements with all of our employees, members of our board
of directors and consultants. Further, we have entered into assignment of invention agreements with all
of our employees.
Third-Party Trademarks
Herceptin is a registered trademark of Genentech.
23
Item 1A. Risk Factors
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THOSE THAT WE CURRENTLY
BELIEVE MAY MATERIALLY AFFECT OUR COMPANY. ADDITIONAL RISKS AND
UNCERTAINTIES THAT WE ARE UNAWARE OF OR THAT WE CURRENTLY DEEM
IMMATERIAL ALSO MAY BECOME IMPORTANT FACTORS THAT AFFECT OUR COMPANY.
We have a history of operating losses and expect to incur significant additional operating losses.
We have generated operating losses since our inception. As of June 30, 2010, we had an
accumulated deficit of $372.4 million. For the years ended June 30, 2010, 2009, and 2008, we generated
losses of $50.9 million, $31.9 million and $32.0 million, respectively. We may never be profitable. We
expect to incur substantial additional operating expenses over the next several years as our research,
development, preclinical testing, clinical trials and collaborator support activities continue. We intend to
continue to invest significantly in our product candidates. Further, we expect to invest significant
resources supporting our existing collaborators as they work to develop, test and commercialize TAP
and other antibody compounds. We or our collaborators may encounter technological or regulatory
difficulties as part of this development and commercialization process that we cannot overcome or
remedy. We may also incur substantial marketing and other costs in the future if we decide to establish
marketing and sales capabilities to commercialize our product candidates. None of our or our
collaborators’ product candidates has generated any commercial revenue and our only revenues to date
have been primarily from upfront and milestone payments, research and development support and
clinical materials reimbursement from our collaborative partners. We do not expect to generate
revenues from the commercial sale of our internal product candidates in the near future, and we may
never generate revenues from the commercial sale of internal products. Even if we do successfully
develop products that can be marketed and sold commercially, we will need to generate significant
revenues from those products to achieve and maintain profitability. Even if we do become profitable,
we may not be able to sustain or increase profitability on a quarterly or annual basis.
If we are unable to obtain additional funding when needed, we may have to delay or scale back some
of our programs or grant rights to third parties to develop and market our product candidates.
We will continue to expend substantial resources developing new and existing product candidates,
including costs associated with research and development, acquiring new technologies, conducting
preclinical studies and clinical trials, obtaining regulatory approvals and manufacturing products as well
as providing certain support to our collaborators in the development of their products. We believe that
our current working capital and expected future payments from our collaboration arrangements will be
sufficient to meet our current and projected operating and capital requirements for fiscal year 2011 and
approximately the first half of fiscal 2012. However, we may need additional financing sooner due to a
number of factors including:
(cid:129) if either we incur higher than expected costs or we or any of our collaborators experience slower
than expected progress in developing product candidates and obtaining regulatory approvals;
(cid:129) lower revenues than expected under our collaboration agreements; or
(cid:129) acquisition of technologies and other business opportunities that require financial commitments.
Additional funding may not be available to us on favorable terms, or at all. We may raise
additional funds through public or private financings, collaborative arrangements or other
arrangements. Debt financing, if available, may involve covenants that could restrict our business
activities. If we are unable to raise additional funds through equity or debt financing when needed, we
may be required to delay, scale back or eliminate expenditures for some of our development programs
or grant rights to develop and market product candidates that we would otherwise prefer to internally
24
develop and market. If we are required to grant such rights, the ultimate value of these product
candidates to us may be reduced.
If our TAP technology does not produce safe, effective and commercially viable products, our business
will be severely harmed.
Our TAP technology yields novel product candidates for the treatment of cancer. To date, no TAP
product candidate has obtained regulatory approval and the most advanced TAP product candidate is
in Phase III clinical testing. Our TAP product candidates and/or our collaborators’ TAP product
candidates may not prove to be safe, effective or commercially viable treatments for cancer and our
TAP technology may not result in any future meaningful benefits to us or for our current or potential
collaborative partners. Furthermore, we are aware of only one compound that is a conjugate of an
antibody and a cytotoxic small molecule that has obtained approval by the FDA and is based on
technology similar to our TAP technology. This product was recently taken off the market by its owner
due to toxicity concerns. If our TAP technology fails to generate product candidates that are safe,
effective and commercially viable treatments for cancer, or fails to obtain FDA approval, our business
will be severely harmed.
Clinical trials for our and our collaborative partners’ product candidates will be lengthy and expensive
and their outcome is uncertain.
Before obtaining regulatory approval for the commercial sale of any product candidates, we and
our collaborative partners must demonstrate through clinical testing that our product candidates are
safe and effective for use in humans. Conducting clinical trials is a time-consuming, expensive and
uncertain process and typically requires years to complete. The most advanced product candidate
incorporating our TAP technology is in Phase III clinical testing. In our industry, the results from
preclinical studies and early clinical trials often are not predictive of results obtained in later-stage
clinical trials. Some compounds that have shown promising results in preclinical studies or early clinical
trials subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory
approval. At any time during the clinical trials, we, our collaborative partners, or the FDA might delay
or halt any clinical trials of our product candidates for various reasons, including:
(cid:129) occurrence of unacceptable toxicities or side effects;
ineffectiveness of the product candidate;
(cid:129) insufficient drug supply;
(cid:129) negative or inconclusive results from the clinical trials, or results that necessitate additional
studies or clinical trials;
(cid:129) delays in obtaining or maintaining required approvals from institutions, review boards or other
reviewing entities at clinical sites;
(cid:129) delays in patient enrollment;
(cid:129) insufficient funding or a reprioritization of financial or other resources; or
(cid:129) other reasons that are internal to the businesses of our collaborative partners, which they may
not share with us.
Any failure or substantial delay in successfully completing clinical trials and obtaining regulatory
approval for our product candidates or our collaborative partners’ product candidates could severely
harm our business.
25
We and our collaborative partners are subject to extensive government regulations and we and our
collaborative partners may not be able to obtain necessary regulatory approvals.
We and our collaborative partners may not receive the regulatory approvals necessary to
commercialize our product candidates, which would cause our business to be severely harmed.
Pharmaceutical product candidates, including those in development by us and our collaborative
partners, are subject to extensive and rigorous government regulation. The FDA regulates, among other
things, the development, testing, manufacture, safety, record-keeping, labeling, storage, approval,
advertising, promotion, sale and distribution of pharmaceutical products. If our potential products or
our collaborators’ potential products are marketed abroad, they will also be subject to extensive
regulation by foreign governments. None of our product candidates has been approved for sale in the
U.S. or any foreign market. The regulatory review and approval process, which includes preclinical
studies and clinical trials of each product candidate, is lengthy, complex, expensive and uncertain.
Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting
information to the FDA for each indication to establish the product candidate’s safety and efficacy.
Data obtained from preclinical studies and clinical trials are susceptible to varying interpretation, which
may delay, limit or prevent regulatory approval. The approval process may take many years to complete
and may involve ongoing requirements for post-marketing studies. In light of the limited regulatory
history of monoclonal antibody-based therapeutics, regulatory approvals for our or our collaborative
partners’ product candidates may not be obtained without lengthy delays, if at all. Any FDA or other
regulatory approvals of our or our collaborative partners’ product candidates, once obtained, may be
withdrawn. The effect of government regulation may be to:
(cid:129) delay marketing of potential products for a considerable period of time;
(cid:129) limit the indicated uses for which potential products may be marketed;
(cid:129) impose costly requirements on our activities; and
(cid:129) place us at a competitive disadvantage to other pharmaceutical and biotechnology companies.
We may encounter delays or rejections in the regulatory approval process because of additional
government regulation from future legislation or administrative action or changes in FDA policy during
the period of product development, clinical trials and FDA regulatory review. Failure to comply with
FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties,
recall or seizure of products, total or partial suspension of production or injunction, as well as other
regulatory action against our product candidates or us. Outside the U.S., our ability to market a
product is contingent upon receiving clearances from the appropriate regulatory authorities. The
foreign regulatory approval process includes similar risks to those associated with the FDA approval
process. In addition, we are, or may become, subject to various federal, state and local laws, regulations
and recommendations relating to safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use and disposal of hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with our research work. If we fail to
comply with the laws and regulations pertaining to our business, we may be subject to sanctions,
including the temporary or permanent suspension of operations, product recalls, marketing restrictions
and civil and criminal penalties.
Our and our collaborative partners’ product candidates will remain subject to ongoing regulatory
review even if they receive marketing approval. If we or our collaborative partners fail to comply with
continuing regulations, we could lose these approvals and the sale of our products could be suspended.
Even if we or our collaborative partners receive regulatory approval to market a particular product
candidate, the approval could be conditioned on us or our collaborative partners conducting costly
post-approval studies or could limit the indicated uses included in product labeling. Moreover, the
product may later cause adverse effects that limit or prevent its widespread use, force us or our
26
collaborative partners to withdraw it from the market or impede or delay our or our collaborative
partners’ ability to obtain regulatory approvals in additional countries. In addition, the manufacturer of
the product and its facilities will continue to be subject to FDA review and periodic inspections to
ensure adherence to applicable regulations. After receiving marketing approval, the manufacturing,
labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping related
to the product remain subject to extensive regulatory requirements. We or our collaborative partners
may be slow to adapt, or we or our collaborative partners may never adapt, to changes in existing
regulatory requirements or adoption of new regulatory requirements.
If we or our collaborative partners fail to comply with the regulatory requirements of the FDA and
other applicable U.S. and foreign regulatory authorities, or if previously unknown problems with our or
our partners’ products, manufacturers or manufacturing processes are discovered, we could be subject
to administrative or judicially imposed sanctions, including:
(cid:129) restrictions on the products, manufacturers or manufacturing processes;
(cid:129) warning letters;
(cid:129) civil or criminal penalties;
(cid:129) fines;
(cid:129) injunctions;
(cid:129) product seizures or detentions;
(cid:129) import bans;
(cid:129) voluntary or mandatory product recalls and publicity requirements;
(cid:129) suspension or withdrawal of regulatory approvals;
(cid:129) total or partial suspension of production; and
(cid:129) refusal to approve pending applications for marketing approval of new drugs or supplements to
approved applications.
Any one of these could have a material adverse effect on our business or financial condition.
If our collaborative partners fail to perform their obligations under our agreements with them, or
determine not to continue with clinical trials for particular product candidates, our business could be
severely impacted.
Our strategy for the development and commercialization of our product candidates depends, in
large part, upon the formation and maintenance of collaborative arrangements. Collaborations provide
an opportunity for us to:
(cid:129) generate cash flow and revenue;
(cid:129) fund some of the costs associated with our internal research and development, preclinical
testing, clinical trials and manufacturing;
(cid:129) seek and obtain regulatory approvals faster than we could on our own;
(cid:129) successfully commercialize existing and future product candidates; and
(cid:129) secure access to targets which, due to intellectual property restrictions, would otherwise be
unavailable to our technology.
If we fail to secure or maintain successful collaborative arrangements, the development and
marketing of compounds that use our technology may be delayed, scaled back or otherwise may not
27
occur. In addition, we may be unable to negotiate other collaborative arrangements or, if necessary,
modify our existing arrangements on acceptable terms. We cannot control the amount and timing of
resources our collaborative partners may devote to our product candidates. Our collaborative partners
may separately pursue competing product candidates, therapeutic approaches or technologies to
develop treatments for the diseases targeted by us or our collaborative efforts, or may decide, for
reasons not known to us, to discontinue development of product candidates under our agreements with
them. Any of our collaborative partners may slow or discontinue the development of a product
candidate covered by a collaborative arrangement for reasons that can include, but are not limited to:
(cid:129) a change in the collaborative partner’s strategic focus as a result of merger, management
changes, adverse business events, or other causes;
(cid:129) a change in the priority of the product candidate relative to other programs in the collaborator’s
pipeline;
(cid:129) a reassessment of the patent situation related to the compound or its target;
(cid:129) a change in the anticipated competition for the product candidate;
(cid:129) preclinical studies and clinical trial results; and
(cid:129) a reduction in the financial resources the collaborator can or is willing to apply to the
development of new compounds.
Even if our collaborative partners continue their collaborative arrangements with us, they may
nevertheless determine not to actively pursue the development or commercialization of any resulting
products. Also, our collaborative partners may fail to perform their obligations under the collaborative
agreements or may be slow in performing their obligations. Our collaborative partners can terminate
our collaborative agreements under certain conditions. The decision to advance a product that is
covered by a collaborative agreement through clinical trials and ultimately to commercialization is in
the discretion of our collaborative partners. If any collaborative partner were to terminate or breach
our agreements, fail to complete its obligations to us in a timely manner, or decide to discontinue its
development of a product candidate, our anticipated revenue from the agreement and from the
development and commercialization of the products would be severely limited. If we are not able to
establish additional collaborations or any or all of our existing collaborations are terminated and we are
not able to enter into alternative collaborations on acceptable terms, or at all, our continued
development, manufacture and commercialization of our product candidates could be delayed or scaled
back as we may not have the funds or capability to continue these activities. If our collaborators fail to
successfully develop and commercialize TAP compounds, our business prospects would be severely
harmed.
We depend on a small number of collaborators for a substantial portion of our revenue. The loss of, or
a material reduction in activity by, any one of these collaborators could result in a substantial decline
in our revenue.
We have and will continue to have collaborations with a limited number of companies. As a result,
our financial performance depends on the efforts and overall success of these companies. Also, the
failure of any one of our collaborative partners to perform its obligations under its agreement with us,
including making any royalty, milestone or other payments to us, could have an adverse effect on our
financial condition. Further, any material reduction by any one of our collaborative partners in its level
of commitment of resources, funding, personnel, and interest in continued development under its
agreement with us could have an adverse effect on our financial condition. To date, we have recorded
$13.5 million in milestone payments with the advancement of T-DM1. Our agreement with Genentech,
a member of the Roche Group, entitles us to receive up to $44 million in milestone payments and also
royalties on commercial sales, if any. Failure of Genentech and Roche to continue to advance T-DM1
28
would have an adverse effect on our financial outlook. Also, if consolidation trends in the healthcare
industry continue, the number of our potential collaborators could decrease, which could have an
adverse impact on our development efforts. If a present collaborator or future collaborator of ours
were to be involved in a business combination, the collaborator’s continued pursuit and emphasis on
our product development program could be delayed, diminished or terminated.
If our collaborative partners’ requirements for clinical materials to be manufactured by us are
significantly lower than we have estimated, our financial results and condition could be adversely
affected.
We procure certain components of finished conjugate, including DM1, DM4, and linker, on behalf
of our collaborators. In order to meet our commitments to our collaborative partners, we are required
to enter into agreements with third parties to produce these components well in advance of our
production of clinical materials on behalf of our collaborative partners. If our collaborative partners do
not require as much clinical material as we have contracted to produce, we may not be able to recover
our investment in these components and we may suffer significant losses. Collaborators have
discontinued development of product candidates in the past and in the periods subsequent to these
discontinuations, we had significantly reduced demand for conjugated material which adversely
impacted our financial results.
In addition, we operate a conjugate manufacturing facility. A portion of the cost of operating this
facility, including the cost of manufacturing personnel, is reimbursed by our collaborators based on the
number of batches of preclinical and clinical materials produced on their behalf. If we produce fewer
batches of clinical materials for our collaborators, a smaller amount of the cost of operating the
conjugate manufacturing facility will be charged to our collaborative partners and our financial
condition could be adversely affected.
If our antibody requirements for clinical materials to be manufactured are significantly higher than we
estimated, the inability to procure additional antibody in a timely manner could impair our ability to
initiate or advance our clinical trials.
We rely on third-party suppliers to manufacture antibodies used in our own proprietary
compounds. Due to the specific nature of the antibody and availability of production capacity, there is
significant lead time required by these suppliers to provide us with the needed materials. If our
antibody requirements for clinical materials to be manufactured are significantly higher than we
estimated, we may not be able to readily procure additional antibody which would impair our ability to
advance our clinical trials currently in process or initiate additional trials. There can be no assurance
that we will not have supply problems that could delay or stop our clinical trials or otherwise could
have a material adverse effect on our business.
We currently rely on one third-party manufacturer with commercial production experience to produce
our cell-killing agents, DM1 and DM4.
We rely on third-party suppliers to manufacture materials used to make TAP compounds. Our
cell-killing agents DM1 and DM4, collectively DMx, are manufactured from a precursor, ansamitocin
P3. As part of preparing to produce TAP compounds for later-stage clinical trials and
commercialization, we have transitioned from our original supplier of ansamitocin P3, as well as our
single supplier that converts ansamitocin P3 to DMx, to one larger company with more commercial
production experience. Any delay or interruption in our supply of DMx could lead to a delay or
interruption in our manufacturing operations, preclinical studies and clinical trials of our product
candidates and our collaborators’ product candidates, which could negatively affect our business.
29
We may be unable to establish the manufacturing capabilities necessary to develop and commercialize
our and our collaborative partners’ potential products.
Currently, we have only one conjugate manufacturing facility that we use to manufacture
conjugated compounds for us and our collaborative partners for preclinical studies and early-stage
clinical testing. Two of our partners have contracted for separate, large-scale manufacturing capacity to
make materials to support potential future commercialization of their TAP compounds. We do not
currently have the manufacturing capacity needed to make our product candidates for commercial sale.
In addition, our manufacturing capacity may be insufficient to complete all clinical trials contemplated
by us and our collaborative partners over time. We intend to rely in part on third-party contract
manufacturers to produce sufficiently large quantities of drug materials that are and will be needed for
later-stage clinical trials and commercialization of our potential products. We are currently in the
process of developing relationships with third-party manufacturers that we believe will be necessary to
continue the development of our product candidates. Third-party manufacturers may not be able to
meet our needs with respect to timing, quantity or quality of materials. If we are unable to contract for
a sufficient supply of needed materials on acceptable terms, or if we should encounter delays or
difficulties in our relationships with manufacturers, our clinical trials may be delayed, thereby delaying
the submission of product candidates for regulatory approval and the market introduction and
subsequent commercialization of our potential products. Any such delays may lower our revenues and
potential profitability.
In addition to the outsourcing of manufacturing, we may develop our manufacturing capacity in
part by expanding our current facilities. This activity would require substantial additional funds and we
would need to hire and train significant numbers of employees to staff these facilities. We may not be
able to develop manufacturing facilities that are sufficient to produce drug materials for later-stage
clinical trials or commercial use. We and any third-party manufacturers that we may use must
continually adhere to current good manufacturing practice, or cGMP, regulations enforced by the FDA
through its facilities inspection program. If our facilities or the facilities of third-party manufacturers
cannot pass a pre-approval plant inspection, the FDA will not grant approval to our product
candidates. In complying with these cGMP regulations and foreign regulatory requirements, we and any
of our third-party manufacturers will be obligated to expend time, money and effort on production,
record-keeping and quality control to assure that our potential products meet applicable specifications
and other requirements. If we or any third-party manufacturer with whom we may contract fail to
maintain regulatory compliance, we or the third party may be subject to fines and/or manufacturing
operations may be suspended.
We have only one conjugate manufacturing facility and any prolonged and significant disruption at
that facility could impair our ability to manufacture our and our collaborative partners’ product
candidates for clinical testing.
Currently, in certain cases, we are contractually obligated to manufacture Phase I and non-pivotal
Phase II clinical products for companies licensing our TAP technology. We manufacture this material,
as well as material for our own product candidates, in our conjugate manufacturing facility. We have
only one such manufacturing facility in which we can manufacture clinical products. Our current
manufacturing facility contains highly specialized equipment and utilizes complicated production
processes developed over a number of years that would be difficult, time-consuming and costly to
duplicate. Any prolonged disruption in the operations of our manufacturing facility would have a
significant negative impact on our ability to manufacture products for clinical testing on our own and
would cause us to seek additional third-party manufacturing contracts, thereby increasing our
development costs. Even though we carry business interruption insurance policies, we may suffer losses
as a result of business interruptions that exceed the coverage available or any losses may be excluded
under our insurance policies. Certain events, such as natural disasters, fire, political disturbances,
30
sabotage or business accidents, which could impact our current or future facilities, could have a
significant negative impact on our operations by disrupting our product development efforts until such
time as we are able to repair our facility or put in place third-party contract manufacturers to assume
this manufacturing role.
Unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives
applicable to our product candidates could limit our potential product revenue.
Antibody-based anticancer products are often much more costly to produce than traditional
chemotherapeutics and tend to have significantly higher prices. Factors that help justify the price
include the high mortality associated with many types of cancer and the need for more and better
treatment options.
Regulations governing drug pricing and reimbursement vary widely from country to country. Some
countries require approval of the sales price of a drug before it can be marketed. Some countries
restrict the physicians that can authorize the use of more expensive medications. Some countries
establish treatment guidelines to help limit the use of more expensive therapeutics and the pool of
patients that receive them. In some countries, including the U.S., third-party payers frequently seek
discounts from list prices and are increasingly challenging the prices charged for medical products.
Because our product candidates are in the development stage, we do not know the level of
reimbursement, if any, we will receive for any products that we are able to successfully develop. If the
reimbursement for any of our product candidates is inadequate in light of our development and other
costs, our ability to achieve profitability would be affected.
We believe that the efforts of governments and third-party payors to contain or reduce the cost of
healthcare will continue to affect the business and financial condition of pharmaceutical and
biopharmaceutical companies. A number of legislative and regulatory proposals to change the
healthcare system in the U.S. and other major healthcare markets have been proposed and adopted in
recent years. For example, the U.S. Congress enacted a limited prescription drug benefit for Medicare
recipients as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003.
While the program established by this statute may increase demand for any products that we are able
to successfully develop, if we participate in this program, our prices will be negotiated with drug
procurement organizations for Medicare beneficiaries and are likely to be lower than prices we might
otherwise obtain. Non-Medicare third-party drug procurement organizations may also base the price
they are willing to pay on the rate paid by drug procurement organizations for Medicare beneficiaries.
Also, in March 2010, President Obama signed one of the most significant health care reform measures
in decades, the Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Affordability Reconciliation Act, collectively referred to herein as the PPACA. The PPACA
will significantly impact the pharmaceutical industry. The PPACA will require discounts under the
Medicare drug benefit program and increased rebates on drugs covered by Medicaid. In addition, the
PPACA imposes an annual fee, which will increase annually, on sales by branded pharmaceutical
manufacturers starting in 2011. The financial impact of these discounts, increased rebates and fees and
the other provisions of the PPACA on our business is unclear and there can be no assurance that our
business will not be materially adversely affected by the PPACA. In addition, ongoing initiatives in the
U.S. have increased and will continue to increase pressure on drug pricing. The announcement or
adoption of any such initiative could have an adverse effect on potential revenues from any product
candidate that we may successfully develop.
31
We may be unable to establish sales and marketing capabilities necessary to successfully
commercialize our potential products.
We currently have no direct sales or marketing capabilities. We anticipate relying on third parties
to market and sell most of our primary product candidates or we may outlicense these products prior
to the time when these capabilities are needed. If we decide to market our potential products through
a direct sales force, we would need either to hire a sales force with expertise in pharmaceutical sales or
to contract with a third party to provide a sales force which meets our needs. We may be unable to
establish marketing, sales and distribution capabilities necessary to commercialize and gain market
acceptance for our potential products and be competitive. In addition, co-promotion or other marketing
arrangements with third parties to commercialize potential products could significantly limit the
revenues we derive from these potential products, and these third parties may fail to commercialize our
compounds successfully.
If our product candidates or those of our collaborative partners do not gain market acceptance, our
business will suffer.
Even if clinical trials demonstrate the safety and efficacy of our and our collaborative partners’
product candidates and the necessary regulatory approvals are obtained, our and our collaborative
partners’ product candidates may not gain market acceptance among physicians, patients, healthcare
payors and other members of the medical community. The degree of market acceptance of any product
candidates that we or our collaborative partners develop will depend on a number of factors, including:
(cid:129) their degree of clinical efficacy and safety;
(cid:129) their advantage over alternative treatment methods;
(cid:129) our/the marketer’s and our collaborative partners’ ability to gain acceptable reimbursement and
the reimbursement policies of government and third-party payors; and
(cid:129) the quality of the distribution capabilities for product candidates, both ours and our collaborative
partners.
Physicians may not prescribe any of our future products until such time as clinical data or other
factors demonstrate the safety and efficacy of those products as compared to conventional drug and
other treatments. Even if the clinical safety and efficacy of therapies using our products is established,
physicians may elect not to recommend the therapies for any number of other reasons, including
whether the mode of administration of our products is effective for certain conditions, and whether the
physicians are already using competing products that satisfy their treatment objectives. Physicians,
patients, third-party payors and the medical community may not accept and use any product candidates
that we, or our collaborative partners, develop. If our products do not achieve significant market
acceptance and use, we will not be able to recover the significant investment we have made in
developing such products and our business will be severely harmed.
We may be unable to compete successfully.
The markets in which we compete are well established and intensely competitive. We may be
unable to compete successfully against our current and future competitors. Our failure to compete
successfully may result in pricing reductions, reduced gross margins and failure to achieve market
acceptance for our potential products. Our competitors include research institutions, pharmaceutical
companies and biotechnology companies, such as Pfizer, Seattle Genetics and Bristol-Meyers Squibb.
Many of these organizations have substantially more experience and more capital, research and
development, regulatory, manufacturing, human and other resources than we do. As a result, they may:
(cid:129) develop products that are safer or more effective than our product candidates;
32
(cid:129) obtain FDA and other regulatory approvals or reach the market with their products more
rapidly than we can, reducing the potential sales of our product candidates;
(cid:129) devote greater resources to market or sell their products;
(cid:129) adapt more quickly to new technologies and scientific advances;
(cid:129) initiate or withstand substantial price competition more successfully than we can;
(cid:129) have greater success in recruiting skilled scientific workers from the limited pool of available
talent;
(cid:129) more effectively negotiate third-party licensing and collaboration arrangements; and
(cid:129) take advantage of acquisition or other opportunities more readily than we can.
A number of pharmaceutical and biotechnology companies are currently developing products
targeting the same types of cancer that we target, and some of our competitors’ products have entered
clinical trials or already are commercially available.
Our product candidates, if approved and commercialized, will also compete against
well-established, existing, therapeutic products that are currently reimbursed by government healthcare
programs, private health insurers and health maintenance organizations. In addition, if our product
candidates are approved and commercialized, we may face competition from generic products if the
product candidate is a small molecule drug, or biosimilars if the product candidate is a biologic. The
route to market for generic versions of small molecule drugs was established with the passage of the
Hatch-Waxman Amendments in 1984 and for biosimilars with the passage of the PPACA in March
2010. The PPACA establishes a pathway for the FDA approval of follow-on biologics and provides
twelve years exclusivity for reference products and an additional six months exclusivity period if
pediatric studies are conducted. In Europe, the European Medicines Agency has issued guidelines for
approving products through an abbreviated pathway, and biosimilars have been approved in Europe. If
a biosimilar version of one of our potential products were approved in the United States or Europe, it
could have a negative effect on sales and gross profits of the potential product and our financial
condition.
We face and will continue to face intense competition from other companies for collaborative
arrangements with pharmaceutical and biotechnology companies, for relationships with academic and
research institutions and for licenses to proprietary technology. In addition, we anticipate that we will
face increased competition in the future as new companies enter our markets and as scientific
developments surrounding antibody-based therapeutics for cancer continue to accelerate. While we will
seek to expand our technological capabilities to remain competitive, research and development by
others may render our technology or product candidates obsolete or noncompetitive or result in
treatments or cures superior to any therapy developed by us.
If we are unable to protect our intellectual property rights adequately, the value of our technology and
our product candidates could be diminished.
Our success depends in part on obtaining, maintaining and enforcing our patents and other
proprietary rights and our ability to avoid infringing the proprietary rights of others. Patent law relating
to the scope of claims in the biotechnology field in which we operate is still evolving, is surrounded by
a great deal of uncertainty and involves complex legal, scientific and factual questions. To date, no
consistent policy has emerged regarding the breadth of claims allowed in biotechnology patents.
Accordingly, our pending patent applications may not result in issued patents. Although we own
numerous patents, the issuance of a patent is not conclusive as to its validity or enforceability. Through
litigation, a third party may challenge the validity or enforceability of a patent after its issuance.
33
Also, patents and applications owned or licensed by us may become the subject of interference,
opposition, nullity, or other proceedings in a court or patent office in the United States or in a foreign
jurisdiction to determine validity, enforceability or priority of invention, which could result in
substantial cost to us. An adverse decision in such a proceeding may result in our loss of rights under a
patent or patent application. It is unclear how much protection, if any, will be given to our patents if
we attempt to enforce them or if they are challenged in court or in other proceedings. A competitor
may successfully invalidate our patents or a challenge could result in limitations of the patents’
coverage. In addition, the cost of litigation or interference proceedings to uphold the validity of patents
can be substantial. If we are unsuccessful in these proceedings, third parties may be able to use our
patented technology without paying us licensing fees or royalties. Moreover, competitors may infringe
our patents or successfully avoid them through design innovation. To prevent infringement or
unauthorized use, we may need to file infringement claims, which are expensive and time-consuming. In
an infringement proceeding, a court may decide that a patent of ours is not valid. Even if the validity
of our patents were upheld, a court may refuse to stop the other party from using the technology at
issue on the ground that its activities are not covered by our patents.
In recent years, policymakers have also proposed reforming U.S. patent laws and regulations. For
example, in March 2010, the Senate Judiciary Committee released the Patent Reform Act of 2010.
Although it has not yet been approved by both houses, in general, the proposed legislation attempts to
address issues surrounding the enforceability of patents and the increase in patent litigation by, among
other things, changing the way damages for patent infringement are determined, moving to a first-
inventor-to-file system, establishing new procedures for challenging patents and establishing different
methods for invalidating patents. While we cannot predict what form any new patent reform laws or
regulations ultimately may take, final legislation could introduce new substantive rules and procedures
for challenging patents, and certain reforms that make it easier for competitors to challenge our
patents could have a material adverse effect on our business and prospects.
Policing unauthorized use of our intellectual property is difficult, and we may not be able to
prevent misappropriation of our proprietary rights, particularly in countries where the laws may not
protect such rights as fully as in the United States.
In addition to our patent rights, we also rely on unpatented technology, trade secrets, know-how
and confidential information. Third parties may independently develop substantially equivalent
information and techniques or otherwise gain access to or disclose our technology. We may not be able
to effectively protect our rights in unpatented technology, trade secrets, know-how and confidential
information. We require each of our employees, consultants and corporate partners to execute a
confidentiality agreement at the commencement of an employment, consulting or collaborative
relationship with us. Further, we require that all employees enter into assignment of invention
agreements as a condition of employment. However, these agreements may not provide effective
protection of our information or, in the event of unauthorized use or disclosure, they may not provide
adequate remedies.
Any inability to license from third parties their proprietary technologies or processes which we use in
connection with the development and manufacture of our product candidates may impair our business.
Other companies, universities and research institutions have or may obtain patents that could limit
our ability to use, manufacture, market or sell our product candidates or impair our competitive
position. As a result, we would have to obtain licenses from other parties before we could continue
using, manufacturing, marketing or selling our potential products. Any necessary licenses may not be
available on commercially acceptable terms, if at all. If we do not obtain required licenses, we may not
be able to market our potential products at all or we may encounter significant delays in product
development while we redesign products or methods that are found to infringe on the patents held by
others.
34
We may incur substantial costs as a result of litigation or other proceedings relating to patent and
other intellectual property rights held by third parties and we may be unable to protect our rights to,
or to commercialize, our product candidates.
Patent litigation is very common in the biotechnology and pharmaceutical industries. Third parties
may assert patent or other intellectual property infringement claims against us with respect to our
technologies, products or other matters. From time to time, we have received correspondence from
third parties alleging that we infringe their intellectual property rights. Any claims that might be
brought against us alleging infringement of patents may cause us to incur significant expenses and, if
successfully asserted against us, may cause us to pay substantial damages and limit our ability to use the
intellectual property subject to these claims. Even if we were to prevail, any litigation would be costly
and time-consuming and could divert the attention of our management and key personnel from our
business operations. Furthermore, as a result of a patent infringement suit, we may be forced to stop or
delay developing, manufacturing or selling potential products that incorporate the challenged
intellectual property unless we enter into royalty or license agreements. There may be third-party
patents, patent applications and other intellectual property relevant to our potential products that may
block or compete with our products or processes. In addition, we sometimes undertake research and
development with respect to potential products even when we are aware of third-party patents that may
be relevant to our potential products, on the basis that such patents may be challenged or licensed by
us. If our subsequent challenge to such patents were not to prevail, we may not be able to
commercialize our potential products after having already incurred significant expenditures unless we
are able to license the intellectual property on commercially reasonable terms. We may not be able to
obtain royalty or license agreements on terms acceptable to us, if at all. Even if we were able to obtain
licenses to such technology, some licenses may be non-exclusive, thereby giving our competitors access
to the same technologies licensed to us. Ultimately, we may be unable to commercialize some of our
potential products or may have to cease some of our business operations, which could severely harm
our business.
We use hazardous materials in our business, and any claims relating to improper handling, storage or
disposal of these materials could harm our business.
Our research and development and manufacturing activities involve the controlled use of
hazardous materials, chemicals, biological materials and radioactive compounds. We are subject to
federal, state and local laws and regulations governing the use, manufacture, storage, handling and
disposal of these materials and certain waste products. Although we believe that our safety procedures
for handling and disposing of these materials comply with the standards prescribed by applicable laws
and regulations, we cannot completely eliminate the risk of accidental contamination or injury from
these materials. In the event of such an accident, we could be held liable for any resulting damages,
and any liability could exceed our resources. We may be required to incur significant costs to comply
with these laws in the future. Failure to comply with these laws could result in fines and the revocation
of permits, which could prevent us from conducting our business.
We face product liability risks and may not be able to obtain adequate insurance.
While we secure waivers from all participants in our clinical trials, the use of our product
candidates during testing or after approval entails an inherent risk of adverse effects, which could
expose us to product liability claims. Regardless of their merit or eventual outcome, product liability
claims may result in:
(cid:129) decreased demand for our product;
(cid:129) injury to our reputation and significant negative media attention;
(cid:129) withdrawal of clinical trial volunteers;
35
(cid:129) costs of litigation;
(cid:129) distraction of management; and
(cid:129) substantial monetary awards to plaintiffs.
We may not have sufficient resources to satisfy any liability resulting from these claims. We
currently have $5 million of product liability insurance for products which are in clinical testing. This
coverage may not be adequate in scope to protect us in the event of a successful product liability claim.
Further, we may not be able to maintain our current insurance or obtain general product liability
insurance on reasonable terms and at an acceptable cost if we or our collaborative partners begin
commercial production of our proposed product candidates. This insurance, even if we can obtain and
maintain it, may not be sufficient to provide us with adequate coverage against potential liabilities.
We depend on our key personnel and we must continue to attract and retain key employees and
consultants.
We depend on our key scientific and management personnel. Our ability to pursue the
development of our current and future product candidates depends largely on retaining the services of
our existing personnel and hiring additional qualified scientific personnel to perform research and
development. We will also need to hire personnel with expertise in clinical testing, government
regulation, manufacturing, marketing and finance. Attracting and retaining qualified personnel will be
critical to our success. We may not be able to attract and retain personnel on acceptable terms given
the competition for such personnel among biotechnology, pharmaceutical and healthcare companies,
universities and non-profit research institutions. Failure to retain our existing key management and
scientific personnel or to attract additional highly qualified personnel could delay the development of
our product candidates and harm our business.
Our stock price can fluctuate significantly and results announced by us and our collaborators can
cause our stock price to decline.
Our stock price can fluctuate significantly due to business developments announced by us and by
our collaborators, as a result of market trends and daily trading volume. The business developments
that could impact our stock price include disclosures related to clinical findings with compounds that
make use of our TAP technology, new collaborations and clinical advancement or discontinuation of
product candidates that make use of our TAP technology. Our stock price can also fluctuate
significantly with the level of overall investment interest in small-cap biotechnology stocks.
Our operating results have fluctuated in the past and are likely to continue to do so in the future.
Our revenue is unpredictable and may fluctuate due to the timing of non-recurring licensing fees,
decisions of our collaborative partners with respect to our agreements with them, reimbursement for
manufacturing services, the achievement of milestones and our receipt of the related milestone
payments under new and existing licensing and collaboration agreements. Revenue historically
recognized under our prior collaboration agreements may not be an indicator of revenue from any
future collaborations. In addition, our expenses are unpredictable and may fluctuate from quarter to
quarter due to the timing of expenses, which may include obligations to manufacture or supply product
or payments owed by us under licensing or collaboration agreements. It is possible that our quarterly
and/or annual operating results will not meet the expectations of securities analysts or investors, causing
the market price of our common stock to decline. We believe that quarter-to-quarter and year-to-year
comparisons of our operating results are not good indicators of our future performance and should not
be relied upon to predict the future performance of our stock price.
36
The potential sale of additional shares of our common stock may cause our stock price to decline.
On April 9, 2010, we filed a Registration Statement on Form S-3 with the Securities and Exchange
Commission. The Securities and Exchange Commission declared the Registration Statement effective
on April 22, 2010. Subject to our ongoing obligations under the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, the Registration Statement permits us to offer
and sell up to an aggregate of $125 million of our common stock. Pursuant to the shelf registration
statement, on May 6, 2010, we sold 10,350,000 shares of our common stock at $8.00 per share in a
public offering resulting in gross proceeds of $82.8 million. Additionally, pursuant to a shelf registration
statement filed on July 11, 2007, on June 23, 2009, we sold 5,750,000 shares of our common stock at
$7.00 per share in a public offering resulting in gross proceeds of $40.3 million and, on June 20, 2008, a
private investor purchased 7,812,500 shares of our common stock at $3.20 per share resulting in gross
proceeds of $25 million. The potential sale of additional shares of our common stock may be dilutive to
our shares outstanding and may cause our stock price to decrease.
We do not intend to pay cash dividends on our common stock.
We have not paid cash dividends since our inception and do not intend to pay cash dividends in
the foreseeable future. Therefore, shareholders will have to rely on appreciation in our stock price, if
any, in order to achieve a gain on an investment.
37
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements relate to analyses and other information which are
based on forecasts of future results and estimates of amounts that are not yet determinable. These
statements also relate to our future prospects, developments and business strategies.
These forward-looking statements are identified by their use of terms and phrases, such as
‘‘anticipate,’’ ‘‘believe,’’ ‘‘could,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘may,’’ ‘‘plan,’’ ‘‘predict,’’ ‘‘project,’’
‘‘will’’ and other similar terms and phrases, including references to assumptions. These statements are
contained in the ‘‘Business,’’ ‘‘Risk Factors’’ and ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations’’ sections, as well as other sections of this Annual Report on
Form 10-K.
Forward-looking statements in this report include, but are not limited to:
(cid:129) successfully finding and managing the relationships with collaborative partners;
(cid:129) the uncertainty as to whether our TAP compounds or those of our collaborators will succeed in
entering human clinical trials and uncertainty as to the results of such trials;
(cid:129) the risk that we and/or our collaborators may not be able to obtain regulatory approvals
necessary to commercialize product candidates;
(cid:129) the potential development of competing products and technologies; uncertainty whether our
TAP technology will produce safe, effective and commercially viable products;
(cid:129) our ability to successfully protect our intellectual property;
(cid:129) our reliance on third-party manufacturers to achieve supplies of our maytansinoid cell-killing
agents, DM1 and DM4;
(cid:129) the risk that we may be unable to establish the manufacturing capabilities necessary to develop
and commercialize our potential products;
(cid:129) the adequacy of our liquidity and capital resources;
(cid:129) government regulation of our activities, facilities, products and personnel; the dependence on
key personnel;
(cid:129) uncertainties as to the extent of reimbursement for the costs of our potential products and
related treatments by government and private health insurers and other organizations; the
potential adverse impact of government-directed health care reform; and
(cid:129) the risk of product liability claims; and economic conditions, both generally and those specifically
related to the biotechnology industry.
These forward-looking statements involve known and unknown risks, uncertainties and other
factors that may cause actual results to be materially different from those contemplated by our forward-
looking statements. These known and unknown risks, uncertainties and other factors are described in
detail in the ‘‘Risk Factors’’ section and in other sections of this Annual Report on Form 10-K. We
disclaim any intention or obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Item 1B. Unresolved Staff Comments
None.
38
Item 2. Properties
We lease approximately 89,000 square feet of laboratory and office space in a building located at
830 Winter Street, Waltham, MA. The initial term of the 830 Winter Street lease expires on March 31,
2020, with an option for us to extend the lease for two additional five-year terms. In December 2009,
we entered into a sublease for 14,100 square feet of our office and laboratory space at 830 Winter
Street, Waltham, MA through January 2015. We also lease approximately 43,850 square feet of space in
Norwood, MA, which serves as our conjugate manufacturing facility and office space. The Norwood
lease expires on June 30, 2011, with an option for us to extend the lease for an additional five-year
term.
We also lease approximately 15,000 square feet of laboratory and office space in a building located
at 148 Sidney Street, Cambridge, MA, which we vacated in March 2008 when we relocated all our
Cambridge operations to Waltham, MA. The 148 Sidney Street lease term was to expire on October 30,
2010. In May 2008, we entered into a sub-sublease for this entire space for the remainder of the lease
term. Both the lease and sub-sublease for 148 Sidney Street were terminated as of July 31, 2010.
Item 3. Legal Proceedings
From time to time we may be a party to various legal proceedings arising in the ordinary course of
our business. We are not currently subject to any material legal proceedings.
Item 3.1. Executive Officers of the Registrant
ImmunoGen’s executive officers are appointed by the Board of Directors at the first meeting of
the Board following the annual meeting of shareholders or at other Board meetings as appropriate, and
hold office until the first Board meeting following the next annual meeting of shareholders and until a
successor is chosen, subject to prior death, resignation or removal. Information regarding our executive
officers is presented below.
Daniel M. Junius, age 58, joined ImmunoGen in 2005, and has served as our President and Chief
Executive Officer since January 2009. Prior to that he served as our President and Chief Operating
Officer and Acting Chief Financial Officer from July 2008 to December 2008, as our Executive Vice
President and Chief Financial Officer from 2006 to July 2008, and as our Senior Vice President and
Chief Financial Officer from 2005 to 2006. Prior to joining ImmunoGen in 2005, he served as Executive
Vice President and Chief Financial Officer of New England Business Service, Inc. (NEBS), a supplier
of business products and services to small businesses, from 2002 to 2004, and as Senior Vice President
and Chief Financial Officer of NEBS from 1998 to 2002. Mr. Junius holds a Masters of Management
from Northwestern University’s Kellogg School of Management.
John M. Lambert, Ph.D., age 59, joined ImmunoGen in 1987, and has served as our Executive
Vice President, Research and Development and Chief Scientific Officer since July 2008. Prior to that
he served as our Senior Vice President, Research and Development and Chief Scientific Officer from
early 2008 to July 2008, as our Senior Vice President, Pharmaceutical Development, from 2000 to early
2008, as our Vice President, Research and Development, from 1994 to 2000, and as our Senior Director
of Research from 1987 to 1994. Prior to joining ImmunoGen, Dr. Lambert was an assistant professor at
Harvard Medical School working at the Dana-Farber Cancer Institute. Dr. Lambert holds a Ph.D. in
Biochemistry from University of Cambridge in England, and completed his postdoctoral work at the
University of California at Davis and at Glasgow University in Scotland.
James J. O’Leary, MD, age 46, joined ImmunoGen in 2008, and has served as our Vice President
and Chief Medical Officer since that date. Prior to joining ImmunoGen, Dr. O’Leary served as Senior
Medical Director Clinical Oncology of Bayer Corporation, a pharmaceutical company, from 2006 to
2008. Prior to that he served as Medical Director Clinical Oncology of Pfizer Global Research and
39
Development, a pharmaceutical company, from 2003 to 2006, and as Assistant Medical Director
Clinical Oncology of Pfizer from 2000 to 2003. Prior to that he served as a Medical Reviewer, Division
of Oncology Drug Products at the U.S. Food and Drug Administration from 1998 to 2000. Dr. O’Leary
has a Doctor of Medicine degree from the State University of New York–Health Science Center at
Brooklyn.
Gregory D. Perry, age 50, joined ImmunoGen in January 2009, and has served as our Senior Vice
President and Chief Financial Officer since that date. Prior to joining ImmunoGen, he served as Chief
Financial Officer of Elixir Pharmaceuticals, Inc., a pharmaceutical company, from 2007 to 2008. Prior
to that he served as Chief Financial Officer for Domantis Ltd., a biopharmaceutical company, in 2006,
as Senior Vice President, Finance and Chief Financial Officer of Transkaryotic Therapies, Inc., a
biopharmaceutical company, from 2003 to 2005.
Peter J. Williams, age 56, joined ImmunoGen in August 2009, and has served as our Vice
President, Business Development since that date. Prior to joining ImmunoGen, he served as a Senior
Director of Business Development at Alnylam Pharmaceuticals, Inc., a biopharmaceutical company,
from 2006 to August 2009. Prior to that he served as Vice President of Business Development of Link
Medicine Corporation, a drug development company, from 2005 to 2006. Prior to that he acted as an
independent business development consultant from 2003 to 2006. Prior to that he served as a Senior
Director of Business Development at Millennium Pharmaceuticals, Inc., a biopharmaceutical company,
from 1998 to 2003.
Item 4. Reserved
40
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market Price of Our Common Stock and Related Stockholder Matters
Our common stock is quoted on the NASDAQ Global Market under the symbol ‘‘IMGN.’’ The
table below sets forth the high and low closing price per share of our common stock as reported by
NASDAQ:
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.13
$ 9.55
$ 8.34
$10.90
$6.88
$6.44
$6.25
$7.69
$5.80
$4.89
$7.19
$8.83
High
Low
High
Low
$2.95
$2.47
$3.85
$6.49
Fiscal Year 2010
Fiscal Year 2009
As of August 11, 2010, the closing price per share of our common stock was $8.93, as reported by
NASDAQ, and we had approximately 503 holders of record of our common stock and, according to
our estimates, approximately 18,342 beneficial owners of our common stock.
We have not paid any cash dividends on our common stock since our inception and do not intend
to pay any cash dividends in the foreseeable future.
41
Stock Price Performance Graph
The graph and table below compare the annual percentage change in our cumulative total
shareholder return on our common stock for the period from June 30, 2005 through June 30, 2010
(as measured by dividing (i) the sum of (A) the cumulative amount of dividends for the measurement
period, assuming dividend reinvestment, and (B) the difference between our share price at the end and
the beginning of the measurement period; by (ii) the share price at the beginning of the measurement
period) with the total cumulative return of the NASDAQ Stock Market Index (U.S.) and the NASDAQ
Pharmaceutical Stocks Total Return Index during such period. We have not paid any dividends on our
common stock, and no dividends are included in the representation of our performance. The stock
price performance on the graph below is not necessarily indicative of future price performance. This
graph is not ‘‘soliciting material,’’ is not deemed filed with the Commission and is not to be
incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing. Information used on the graph for
the NASDAQ Pharmaceutical Stocks Total Return Index and the NASDAQ Stock Market Index (U.S.)
was prepared by the Center for Research in Security Prices, a source believed to be reliable, but we are
not responsible for any errors or omissions in such information.
IMMUNOGEN INC
NASDAQ STOCK MARKET INDEX (U.S.)
NASDAQ PHARMACEUTICAL STOCKS TOTAL RETURN INDEX
)
s
r
a
l
l
o
D
.
.
S
U
n
I
(
s
i
s
a
B
$180.00
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
2005
2006
2007
2008
2009
17AUG201018231515
2010
IMMUNOGEN, INC. . . . . . . . . . . . . . . . . . . . . .
$100.00
$ 54.05
$ 95.85
$ 52.84
$148.85
$160.07
NASDAQ STOCK MARKET INDEX (U.S.) . . . . .
$100.00
$106.33
$126.75
$110.83
$ 71.44
$ 88.54
NASDAQ PHARMACEUTICAL STOCKS TOTAL
RETURN INDEX * . . . . . . . . . . . . . . . . . . . .
$100.00
$110.01
$119.75
$119.32
$116.61
$120.30
2005
2006
2007
2008
2009
2010
*
This index represents a group of peer issuers compiled by the Center for Research in Security Prices.
The above graph and table assume $100 invested on June 30, 2005 with all dividends reinvested,
in each of our common stock, the NASDAQ Stock Market Index (U.S.) and the NASDAQ
Pharmaceutical Stocks Total Return Index. Upon written request by any shareholder, we will promptly
provide a list of the companies comprising the NASDAQ Pharmaceutical Stocks Total Return Index.
42
Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities; Issuer
Repurchases of Equity Securities
None.
Item 6. Selected Financial Data
The following table (in thousands, except per share data) sets forth our consolidated financial data
for each of our five fiscal years through our fiscal year ended June 30, 2010. The information set forth
below should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations’’ and the consolidated financial statements and related notes
included elsewhere in this Annual Report on Form 10-K.
Year Ended June 30,
2010
2009
2008
2007
2006
Consolidated Statement of Operations Data:
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . .
(Benefit) provision for income taxes . . . . . . . . .
$ 13,943
65,178
58
(265)
$ 27,988
59,804
(221)
(100)
$ 40,249
74,361
2,119
27
$ 38,212
60,438
3,274
35
$ 32,088
53,474
3,569
17
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (50,912) $ (31,937) $(32,020) $(18,987) $(17,834)
Basic and diluted net loss per common share . .
$
(0.87) $
(0.63) $ (0.75) $ (0.45) $ (0.43)
Basic and diluted weighted average common
shares outstanding . . . . . . . . . . . . . . . . . . . .
58,845
51,068
42,969
41,759
41,184
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable
securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . .
$110,298
137,208
102,048
$ 71,125
100,704
66,857
$ 47,871
83,338
55,299
$ 59,700
80,421
58,401
$ 75,023
94,128
72,350
Item 7. 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 novel, targeted
therapeutics for the treatment of cancer using our expertise in cancer biology, monoclonal antibodies,
highly potent cytotoxic, or cell-killing, agents, and the design of linkers that enable these agents to be
stably attached to the antibodies while in the blood stream and released in their fully active form after
delivery to a cancer cell. An anticancer compound made using our Targeted Antibody Payload, or TAP,
technology consists of a monoclonal antibody that binds specifically to an antigen target found on
cancer cells with multiple copies of one of our proprietary cell-killing agents attached using one of our
engineered linkers. Its antibody component enables a TAP compound to bind specifically to cancer cells
that express a particular target antigen, the highly potent cytotoxic agent serves to kill the cancer cell,
and the engineered linker controls the release and activation of the cytotoxic agent inside the cancer
cell. Our TAP technology is designed to enable the creation of highly effective, well-tolerated
anticancer products. All of our and our collaborative partners’ TAP compounds currently in preclinical
and clinical testing contain either DM1 or DM4 as the cytotoxic agent. Both DM1 and DM4,
collectively DMx, are our proprietary derivatives of a naturally occurring substance called maytansine.
We also use our expertise in antibodies and cancer biology to develop ‘‘naked,’’ or non-conjugated,
antibody anticancer product candidates.
43
We have entered into collaborative agreements that enable companies to use our TAP technology
to develop commercial product candidates to specified targets. We have also used our proprietary TAP
technology in conjunction with our in-house antibody expertise to develop our own anticancer product
candidates. Under the terms of our collaborative agreements, we are generally entitled to upfront fees,
milestone payments, and royalties on any commercial product sales. In addition, under certain
agreements we are entitled to research and development funding based on activities performed at our
collaborative partner’s request. We are reimbursed for our direct and a portion of overhead costs to
manufacture preclinical and clinical materials and, under certain collaborative agreements, the
reimbursement includes a profit margin. Currently, our collaborative partners include Amgen, Bayer
Schering Pharma, Biogen Idec, Biotest, Genentech (a member of the Roche Group) and sanofi-aventis.
We expect that substantially all of our revenue for the foreseeable future will result from payments
under our collaborative arrangements. Details for some of our major and recent collaborative
agreements can be found in this 10-K under Item 1, Business.
To date, we have not generated revenues from commercial product sales and we expect to incur
significant operating losses for the foreseeable future. As of June 30, 2010, we had approximately
$110.3 million in cash and marketable securities compared to $71.1 million in cash and marketable
securities as of June 30, 2009.
We anticipate that future cash expenditures will be partially offset by collaboration-derived
proceeds, including milestone payments, royalties and upfront fees. Accordingly, period-to-period
operational results may fluctuate dramatically based upon the timing of receipt of the proceeds. We
believe that our established collaborative agreements, while subject to specified milestone achievements,
will provide funding to assist us in meeting obligations under our collaborative agreements while also
assisting in providing funding for the development of internal product candidates and technologies.
However, we can give no assurances that such collaborative agreement funding will, in fact, be realized
in the time frames we expect, or at all. Should we or our partners not meet some or all of the terms
and conditions of our various collaboration agreements, we may be required to secure alternative
financing arrangements and/or defer or limit some or all of our research, development and/or clinical
projects. However, we cannot provide assurance that any such opportunities presented by additional
strategic partners or alternative financing arrangements will be entirely available to us, if at all.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with accounting principles
generally accepted in the U.S. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses
and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to our collaborative agreements and inventory. We base our estimates
on historical experience and various other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ from these estimates.
We believe the following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We enter into licensing and development agreements with collaborative partners for the
development of monoclonal antibody-based anticancer therapeutics. We follow the provisions of FASB’s
Accounting Standards Codification (ASC) Topic 605, Revenue Recognition. Accordingly, we recognize
revenue related to research activities as they are performed, as long as there is persuasive evidence of
an arrangement, the fee is fixed or determinable, and collection of the related receivable is probable.
The terms of our agreements contain multiple elements which typically include non-refundable license
44
fees, payments based upon the achievement of certain milestones and royalties on product sales. We
evaluate such arrangements to determine if the deliverables are separable into units of accounting and
then apply applicable revenue recognition criteria to each unit of accounting. Agreements containing
multiple elements are divided into separate units of accounting if certain criteria are met, including
whether the delivered element has stand-alone value to the collaborator and whether there is objective
and reliable evidence of the fair value of the undelivered obligation(s). The consideration received is
allocated among the separate units either on the basis of each unit’s fair value or using the residual
method, and the applicable revenue recognition criteria are applied to each of the separate units.
In October 2009 a new accounting standard for the recognition of revenue arrangements with
multiple deliverables was issued. This standard provides accounting principles and application guidance
on whether multiple deliverables exist, how the arrangement should be separated, and how the
consideration should be allocated. This new approach is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010
(our fiscal year 2011). While we do not expect the adoption of this standard to have a material impact
on our financial position and results of operations, this standard may impact us in the event we
complete future transactions or modify existing collaborative relationships. Refer to Note B, Recent
Accounting Pronouncements, to our Consolidated Financial Statements for additional discussion of this
standard and its impact on us.
At June 30, 2010, we had the following three types of collaborative contracts with the parties
identified below:
(cid:129) Exclusive license to use our TAP technology and/or certain other intellectual property to develop
compounds to a single target antigen:
Amgen (multiple single-target licenses)
Bayer Schering Pharma (single-target license)
Biogen Idec (single-target license)
Biotest (single-target license)
Genentech (multiple single-target licenses)
sanofi-aventis (license to multiple individual targets)
(cid:129) Option agreement for a defined period of time to secure licenses to use our TAP technology to
develop anticancer compounds to a limited number of targets on established terms (broad
option agreement):
Amgen
sanofi-aventis
(cid:129) Non-exclusive license to our humanization technology:
sanofi-aventis
Generally, the foregoing collaboration agreements provide that we will (i) at the collaborator’s
request, manufacture and provide to them preclinical and clinical materials which are reimbursed at
our cost, or, in some cases, cost plus a margin, (ii) earn payments upon the collaborators’ achievements
of certain milestones and (iii) earn royalty payments, generally until the later of the last applicable
patent expiration or 10 to 12 years after product launch. Royalty rates may vary over the royalty term
depending on our intellectual property rights. We provide technical training and share any process
improvements and know-how with our collaborators during the research term of the collaboration
agreements.
45
Generally, upfront payments on single-target licenses are deferred over the period of our
substantial involvement during development. The determination of the length of this period is subject
to judgment and estimation and can have an impact on the amount of revenue recognized in a given
period. Our employees are available to assist our collaborators during the development of their
products. We estimate this development phase to begin at the inception of the collaboration agreement
and conclude at the end of non-pivotal Phase II testing. We believe this period of involvement is,
depending on the nature of the license, on average six and one-half years. Quarterly, we reassess our
periods of substantial involvement over which we amortize our upfront license fees and we make
adjustments as appropriate. In the event that a single-target license were to be terminated, we would
recognize as revenue any portion of the upfront fee that had not previously been recorded as revenue,
but was classified as deferred revenue at the date of such termination.
We defer upfront payments received from our broad option agreements over the period during
which the collaborator may elect to receive a license. These periods are specific to each collaboration
agreement, but are between three and 12 years. If a collaborator selects an option to acquire a license
under these agreements, any option fee is deferred and is recorded over the life of the option,
generally 12 to 18 months. If a collaborator exercises an option and we grant a single-target license to
the collaborator, we defer the license fee and account for the fee as we would an upfront payment on a
single-target license, as discussed above. Upon exercise of an option to acquire a license, we would
recognize any remaining deferred option fee over the period of our substantial involvement under the
license acquired. In the event a broad option agreement were to be terminated, we would recognize as
revenue any portion of the upfront fee that had not previously been recorded as revenue, but was
classified as deferred revenue at the date of such termination. In the event a collaborator elects to
discontinue development of a specific product candidate under a single- target license, but retains its
right to use our technology to develop an alternative product candidate to the same target or a target
substitute, we would cease amortization of any remaining portion of the upfront fee until there is
substantial preclinical activity on another product candidate and our remaining period of substantial
involvement can be estimated.
When milestone fees are specifically tied to a separate earnings process and are deemed to be
substantive and at risk, revenue is recognized when such milestones are achieved. In addition, we
recognize research and development support revenue from certain collaboration and development
agreements based upon the level of research services performed during the period of the research
agreement. Deferred revenue substantially represents amounts received under collaborative agreements
and not yet earned pursuant to these policies. Where we have no continuing involvement, we will
record non-refundable license fees as revenue upon receipt and will record revenue upon achievement
of milestones by our collaborative partners.
We produce preclinical and clinical materials for our collaborators. We are reimbursed for our
direct costs and a portion of our overhead costs to produce clinical materials. We recognize revenue on
preclinical and clinical materials when the materials have passed all quality testing required for
collaborator acceptance and title and risk of loss have transferred to the collaborator.
We also produce research material for potential collaborators under material transfer agreements.
Additionally, we perform research activities, including developing antibody-specific conjugation
processes, on behalf of our collaborators and potential collaborators during the early evaluation and
preclinical testing stages of drug development. Generally, we are reimbursed for certain of our direct
and overhead costs of producing these materials or providing these services. We record the amounts
received for the preclinical materials produced or services performed as a component of research and
development support. We also develop conjugation processes for materials for later stage testing and
commercialization for certain collaborators. We are reimbursed for certain of our direct and overhead
costs and may receive milestone payments for developing these processes which are recorded as a
component of research and development support.
46
Inventory
We review our estimates of the net realizable value of our inventory at each reporting period. Our
estimate of the net realizable value of our inventory is subject to judgment and estimation. The actual
net realizable value of our inventory could vary significantly from our estimates. We consider quantities
of raw materials in excess of twelve-month projected usage that are not supported by firm, fixed
collaborator orders and projections at the time of the assessment to be excess. During fiscal 2008, we
obtained additional amounts of DMx from a new supplier. Due to the need to evaluate the process
which was developed to prepare such material from this new supplier across multiple batches, we had
committed to a level of production which yielded more material than would be required by our
collaborators over the next twelve months. As a result, during the year ended June 30, 2008, we
recorded a $2.1 million charge to research and development expense related to raw material inventory
identified as excess. We also recorded $1.6 million to write down the raw material inventory purchased
during the fiscal year 2008 to its net realizable value, which is also included in research and
development expense for the year ended June 30, 2008. During fiscal 2010, we obtained additional
amounts of DMx from our supplier which yielded more material than would be required by our
collaborators over the next twelve months and as a result, we recorded $900,000 of charges to research
and development expense related to raw material inventory identified as excess. We also recorded
$28,000 to write down certain raw material inventory to its net realizable value, which is also included
in research and development expense for the year ended June 30, 2010. No similar costs were recorded
during the year ended June 30, 2009. Our collaborators’ estimates of their clinical material
requirements are based upon expectations of their clinical trials, including the timing, size, dosing
schedule and the maximum tolerated dose likely to be reached for the compound being evaluated. Our
collaborators’ actual requirements for clinical materials may vary significantly from their projections.
Significant differences between our collaborators’ actual manufacturing orders and their projections
could result in our actual twelve-month usage of raw materials varying significantly from our estimated
usage at an earlier reporting period. Reductions in collaborators’ projections could indicate that we
have additional excess raw material inventory and we would then evaluate the need to record further
write-downs, which would be included as charges to research and development expense.
Stock-based Compensation
As of June 30, 2010, the Company is authorized to grant future awards under one share-based
compensation plan, which is the ImmunoGen, Inc. 2006 Employee, Director and Consultant Equity
Incentive Plan. The stock-based awards are accounted for under ASC Topic 718, ‘‘Compensation—
Stock Compensation,’’ using the modified prospective transition method. Under this methodology, the
estimated fair value of awards is charged to the statement of operations over the requisite service
period, which is the vesting period. Such amounts have been reduced by our estimate of forfeitures of
all unvested awards.
The fair value of each stock option is estimated on the date of grant using the Black-Scholes
option-pricing model. Expected volatility is based exclusively on historical volatility data of our stock.
The expected term of stock options granted is based exclusively on historical data and represents the
period of time that stock options granted are expected to be outstanding. The expected term is
calculated for and applied to one group of stock options as we do not expect substantially different
exercise or post-vesting termination behavior amongst our employee population. The risk-free rate of
the stock options is based on the U.S. Treasury rate in effect at the time of grant for the expected term
of the stock options. Estimated forfeitures are based on historical data as well as current trends. Stock
compensation cost incurred during the years ended June 30, 2010, 2009 and 2008 was $4.2 million,
$4.0 million and $2.9 million, respectively. During fiscal year 2009, we recorded approximately $843,000
of stock compensation cost related to the modification of certain outstanding common stock options in
accordance with the former Chief Executive Officer’s succession plan.
47
Investment in Marketable Securities
We invest in marketable securities of highly rated financial institutions and investment-grade debt
instruments and limit the amount of credit exposure with any one entity. We have classified our
marketable securities as ‘‘available-for-sale’’ and, accordingly, carry such securities at aggregate fair
value. In accounting for investments, we evaluate if a decline in the fair value of a marketable security
below our cost basis is other-than-temporary, and if so, we record an impairment charge related to any
credit loss in our consolidated statement of operations. The factors that we consider in our evaluation
include the fair market value of the security, the duration and magnitude of the security’s decline, and
our intent to sell or whether we would more likely than not to be required to sell the security before
the expected recovery of the amortized cost basis. The determination of whether a loss is other than
temporary is highly judgmental and can have a material impact on our results. During the fiscal years
ended June 30, 2009 and 2008, we recorded approximately $516,000 and $535,000, respectively, in
other-than-temporary impairment charges. No similar charges were recorded in the fiscal year ended
June 30, 2010. We adopted certain provisions of ASC Topic 320, ‘‘Investments—Debt and Equity
Securities,’’ on April 1, 2009. As a result of the adoption of these provisions, during fiscal year 2009 we
reclassified $54,000 of previously recognized other-than-temporary impairment charges to other
comprehensive loss as a cumulative effect adjustment.
Fair Value of Financial Instruments
As of July 1, 2008, we partially adopted the provisions of ASC Topic 820, ‘‘Fair Value
Measurements and Disclosures,’’ for financial assets and liabilities recognized at fair value on a
recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in
accordance with accounting principles generally accepted in the U.S., and expands disclosures about fair
value measurements. Certain provisions of ASC Topic 820 related to other non-financial assets and
liabilities were adopted by us on July 1, 2009 and did not have a material impact on our financial
position or results of operations upon adoption; however, this standard may impact us in subsequent
periods and require additional disclosures.
Fair value is defined under ASC Topic 820 as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and
minimize the use of unobservable inputs. The standard describes a fair value hierarchy to measure fair
value which is based on three levels of inputs, of which the first two are considered observable and the
last unobservable. This standard is applicable to all assets and liabilities (i.e. financial and
non-financial) and requires enhanced disclosures, including interim and annual disclosure of the input
and valuation techniques (or changes in techniques) used to measure fair value and the defining of the
major security types comprising debt and equity securities held based upon the nature and risk of the
security. The fair value of our investments is generally determined from market prices based upon
either quoted prices from active markets or other significant observable market transactions at fair
value.
48
Results of Operations
Revenues
Our total revenues for the year ended June 30, 2010 were $13.9 million compared with
$28.0 million and $40.2 million for the years ended June 30, 2009 and 2008, respectively. The
$14.1 million decrease in revenues in fiscal year 2010 from fiscal year 2009 is primarily attributable to
lower revenues from research and development support, license and milestone fees and clinical
materials reimbursement, as discussed below. The $12.2 million decrease in revenues in fiscal year 2009
from fiscal year 2008 is primarily attributable to lower revenues from research and development
support and clinical materials reimbursement, partially offset by higher revenues from license and
milestone fees, as discussed below.
Research and development support was $5.4 million for the year ended June 30, 2010, $7.6 million
for the year ended June 30, 2009, and $15.0 million for the year ended June 30, 2008. These amounts
primarily represent research funding earned based on actual resources utilized under our agreements
with our collaborators as shown in the table below. The decreased research and development support
fees in fiscal years 2010 and 2009 compared to fiscal year 2008 is primarily due to a reduction in the
amount earned from sanofi-aventis with the conclusion of its committed funding obligations in the first
half of fiscal 2009. Also included in research and development support revenue are development fees
charged for reimbursement of our direct and overhead costs incurred in producing and delivering
research-grade materials to our collaborators and for developing antibody-specific conjugation processes
on behalf of our collaborators and potential collaborators during the early evaluation and preclinical
testing stages of drug development. The amount of development fees we earn is directly related to the
number of our collaborators and potential collaborators, the stage of development of our collaborators’
product candidates and the resources our collaborators allocate to the development effort. As such, the
amount of development fees may vary widely from quarter to quarter and year to year. Total revenue
recognized from research and development support from each of our collaborative partners in the years
ended June 30, 2010, 2009 and 2008 is included in the following table (in thousands):
Research and Development Support
Collaborative Partner:
Year Ended June 30,
2010
2009
2008
Amgen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bayer Schering Pharma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Biogen Idec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Biotest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centocor Ortho Biotech . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Genentech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
sanofi-aventis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,470
96
186
1,041
—
424
148
—
$
8
227
621
1,361
—
238
4,861
250
$
5
88
336
1,648
466
741
11,697
54
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,365
$7,566
$15,035
Revenue from license and milestone fees for the year ended June 30, 2010 decreased
approximately $9.4 million to $5.7 million from $15.1 million in the year ended June 30, 2009. Revenue
from license and milestone fees for the year ended June 30, 2008 was $13.2 million. Included in license
and milestone fees for the year ended June 30, 2010 were $1 million and $500,000 of preclinical
milestones earned pursuant to our agreements with Bayer and sanofi-aventis, respectively, as well as a
$1 million milestone related to the initiation of Phase I clinical testing of SAR650984 by sanofi-aventis.
Included in license and milestone fees for the year ended June 30, 2009 was a $6.5 million milestone
related to the initiation of Phase III clinical testing of trastuzumab-DM1, or T-DM1, by Genentech, a
$4 million milestone related to the initiation of Phase II clinical testing of AVE1642 by sanofi-aventis
49
and a $500,000 milestone related to the initiation of Phase I clinical testing of BT-062 by Biotest. Also
during the year ended June 30, 2009, Millennium Pharmaceuticals and Boehringer Ingelheim agreed to
terminate their licenses with us that were no longer being used to develop products and as a result, we
recognized as license and milestone fees $361,000 and $486,000, respectively, of upfront fees previously
deferred. Included in license and milestone fees for the year ended June 30, 2008 was $5 million
related to the achievement of a milestone under the Genentech agreement from the initiation of
Phase II clinical testing of T-DM1, $1.5 million related to the achievement of a milestone under the
Biogen Idec agreement from the submission of the IND application for BIIB015, $2 million related to
the achievement of milestones under the sanofi-aventis agreement from the initiation of clinical testing
of SAR3419 and certain preclinical milestones. Total revenue recognized from license and milestone
fees from each of our collaborative partners in the years ended June 30, 2010, 2009 and 2008 is
included in the following table (in thousands):
License and Milestone Fees
Collaborative Partner:
Year Ended June 30,
2010
2009
2008
Amgen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bayer Schering Pharma . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Biogen Idec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Biotest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boehringer Ingelheim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centocor Ortho Biotech . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Genentech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millennium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
sanofi-aventis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 689
1,616
157
149
—
114
38
—
2,935
$
511
410
228
669
486
138
6,651
361
5,663
$
433
—
1,684
169
—
69
5,991
—
4,810
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,698
$15,117
$13,156
Deferred revenue of $11.7 million at June 30, 2010 represents payments received from our
collaborators pursuant to our license and supply agreements with them which we have yet to earn
pursuant to our revenue recognition policy.
Clinical materials reimbursement decreased by approximately $2.4 million to $2.9 million in the
year ended June 30, 2010 compared to $5.3 million in the year ended June 30, 2009. We earned clinical
materials reimbursement of $12.1 million during the year ended June 30, 2008. During the years ended
June 30, 2010, 2009 and 2008, we shipped clinical materials in support of a number of clinical trials
including, for certain of these years, those of T-DM1, AVE9633, SAR3419, SAR566658, BIIB015,
BT-062, as well as preclinical materials in support of the development efforts of certain other
collaborators and DMx shipments to certain collaborators in support of development and
manufacturing efforts. The decrease in clinical materials reimbursement in fiscal year 2010 as compared
to fiscal year 2009 is primarily related to less clinical material shipped in support of two of our
collaborators’ trials due to various factors, including the dosage schedule and speed of enrollment
within the trials. The decrease in clinical materials reimbursement in fiscal year 2009 as compared to
fiscal year 2008 is primarily related to $5.0 million in revenue recognized from supplying DMx to a
collaborator in fiscal year 2008, along with the transfer of T-DM1 to commercial-scale production at a
third-party contract manufacturing organization in fiscal year 2009. During fiscal year 2009, sanofi-
aventis discontinued clinical trial activity for AVE9633. We are reimbursed for certain of our direct and
overhead costs to produce clinical materials plus, for certain programs, a profit margin. The amount of
clinical materials reimbursement we earn, and the related cost of clinical materials charged to research
and development expense, is directly related to the number of clinical trials our collaborators are
preparing or have underway, the speed of enrollment in those trials, the dosage schedule of each
clinical trial and the time period, if any, during which patients in the trial receive clinical benefit from
50
the clinical materials, and the supply of clinical- grade material to our collaborators for process
development and analytical purposes. As such, the amount of clinical materials reimbursement revenue
and the related cost of clinical materials charged to research and development expense may vary
significantly from quarter to quarter and year to year.
Research and Development Expenses
Our net research and development expenses relate to (i) research to evaluate new targets and to
develop and evaluate new antibodies, linkers and cytotoxic agents, (ii) preclinical testing of our own
and, in certain instances, our collaborators’ product candidates, and the cost of our own clinical trials,
(iii) development related to clinical and commercial manufacturing processes and (iv) manufacturing
operations. Our research and development efforts have been primarily focused in the following areas:
(cid:129) activities pursuant to our discovery, development and commercialization agreement with sanofi-
aventis;
(cid:129) activities pursuant to our development and license agreements with various other collaborators;
(cid:129) activities related to the preclinical and clinical development of lorvotuzumab mertansine,
IMGN388 and IMGN529;
(cid:129) process development related to production of the lorvotuzumab antibody and lorvotuzumab
mertansine conjugate for clinical materials;
(cid:129) process development related to production of IMGN388 conjugate for clinical materials;
(cid:129) process improvements related to the production of DM1, DM4 and strain development of their
precursor, ansamitocin P3;
(cid:129) funded development activities with contract manufacturers for the antibody component of
IMGN529, the lorvotuzumab antibody, and DM1, DM4 and their precursor, ansamitocin P3;
(cid:129) production costs for the supply of the lorvotuzumab antibody;
(cid:129) production costs for the supply of DMx for our and our partners’ preclinical and clinical
activities;
(cid:129) operation and maintenance of our conjugate manufacturing facility, including production of our
own and our collaborators’ clinical materials;
(cid:129) process improvements to our TAP technology;
(cid:129) evaluation of potential antigen targets;
(cid:129) evaluation of internally developed and/or in-licensed product candidates and technologies; and
(cid:129) development and evaluation of additional cytotoxic agents and linkers.
Research and development expense for the year ended June 30, 2010 increased $4.4 million to
$50.3 million from $45.9 million for the year ended June 30, 2009. Research and development expense
was $60.0 million for the year ended June 30, 2008. Research and development salaries and related
expenses increased by $1.8 million in the year ended June 30, 2010 compared to the year ended
June 30, 2009 and increased by $1.4 million in the year ended June 30, 2009 compared to the year
ended June 30, 2008. Included in salaries and related expenses for the year ended June 30, 2010 is
$2.7 million of stock compensation costs compared to $1.7 million and $1.6 million of stock
compensation costs for fiscal years 2009 and 2008, respectively. The higher stock compensation costs in
fiscal 2010 are driven by higher stock prices and increases in the number of annual options granted.
Clinical trial costs increased $1.1 million during fiscal year 2010 compared to fiscal year 2009 and
increased $523,000 in fiscal year 2009 compared to fiscal year 2008. Additionally, overhead utilization
51
from the manufacture of clinical materials on behalf of our collaborators decreased $1.8 million during
fiscal year 2010 compared to fiscal year 2009 and decreased by $1.3 million in fiscal year 2009
compared to fiscal year 2008.
Included in research and development expenses for the year ended June 30, 2010 is $900,000
related to raw material inventory identified as excess, as well as $28,000 to write down certain raw
material inventory to its net realizable value. Included in research and development expenses for the
year ended June 30, 2008 is a $2.1 million charge related to raw material inventory identified as excess
and a $1.6 million charge to write down raw material purchased during that year to its net realizable
value. No similar costs were recorded during fiscal year 2009. Reserve requirements for excess
quantities of DMx are principally determined based on our collaborators’ forecasted demand compared
to our inventory position. The DMx purchased during fiscal year 2008 was produced by a supplier in
conjunction with process scale-up, resulting in the purchase of quantities of material exceeding
anticipated collaborator demand in the next twelve months. Due to lead times required to secure
material, process development and the changing requirements of our collaborators, expenses to
recognize excess quantities have fluctuated from period to period and we expect that these period
fluctuations will continue in the future. See ‘‘Inventory’’ within our Critical Accounting Policies above
for further discussion of our inventory reserve policy.
We are unable to accurately estimate which potential product candidates, if any, will eventually
move into our internal preclinical research program. We are unable to reliably estimate the costs to
develop these products as a result of the uncertainties related to discovery research efforts as well as
preclinical and clinical testing. Our decision to move a product candidate into the clinical development
phase is predicated upon the results of preclinical tests. We cannot accurately predict which, if any, of
the discovery stage product candidates will advance from preclinical testing and move into our internal
clinical development program. The clinical trial and regulatory approval processes for our product
candidates that have advanced or that we intend to advance to clinical testing are lengthy, expensive
and uncertain in both timing and outcome. As a result, the pace and timing of the clinical development
of our product candidates is highly uncertain and may not ever result in approved products.
Completion dates and development costs will vary significantly for each product candidate and are
difficult to predict. A variety of factors, many of which are outside our control, could cause or
contribute to the prevention or delay of the successful completion of our clinical trials, or delay or
prevent our obtaining necessary regulatory approvals. The costs to take a product through clinical trials
are dependent upon, among other factors, the clinical indications, the timing, size and design of each
clinical trial, the number of patients enrolled in each trial, and the speed at which patients are enrolled
and treated. Product candidates may be found to be ineffective or to cause unacceptable side effects
during clinical trials, may take longer to progress through clinical trials than anticipated, may fail to
receive necessary regulatory approvals or may prove impractical to manufacture in commercial
quantities at reasonable cost or with acceptable quality.
The lengthy process of securing FDA approvals for new drugs requires the expenditure of
substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals would
materially adversely affect our product development efforts and our business overall. Accordingly, we
cannot currently estimate, with any degree of certainty, the amount of time or money that we will be
required to expend in the future on our product candidates prior to their regulatory approval, if such
approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of our
clinical trials, we are currently unable to estimate when, if ever, our product candidates that have
advanced into clinical testing will generate revenues and cash flows.
We do not track our research and development costs by project. Since we use our research and
development resources across multiple research and development projects, we manage our research and
52
development expenses within each of the categories listed in the following table and described in more
detail below (in thousands):
Research and Development Expense
Year Ended June 30,
2010
2009
2008
Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preclinical and Clinical Testing . . . . . . . . . . . . . . . . . . . . . . . . .
Process and Product Development . . . . . . . . . . . . . . . . . . . . . .
Manufacturing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,200
12,892
5,959
17,229
$13,965
9,762
6,037
16,140
$15,265
8,280
5,731
30,737
Total Research and Development Expense . . . . . . . . . . . . . . . .
$50,280
$45,904
$60,013
Research—Research includes expenses associated with activities to evaluate new targets and to
develop and evaluate new antibodies, linkers and cytotoxic agents for our products and in support of
our collaborators. Such expenses primarily include personnel, fees to in-license certain technology,
facilities and lab supplies. Research expenses increased $235,000 to $14.2 million in fiscal year 2010
from fiscal year 2009 and decreased $1.3 million to $14.0 million in fiscal year 2009 from fiscal year
2008. The increase in fiscal year 2010 was principally the result of an increase in stock compensation
costs. The decrease in research expense in fiscal year 2009 was principally the result of a decrease in
salaries and related expenses due to a reorganization of departments in March 2008 and July 2008,
resulting in lower personnel costs included in research expense for the period.
Preclinical and Clinical Testing—Preclinical and clinical testing includes expenses related to
preclinical testing of our own and, in certain instances, our collaborators’ product candidates, regulatory
activities, and the cost of our own clinical trials. Such expenses include personnel, patient enrollment at
our clinical testing sites, consultant fees, contract services, and facility expenses. Preclinical and clinical
testing expenses increased $3.1 million to $12.9 million in fiscal year 2010 from fiscal 2009 and
$1.5 million to $9.8 million in fiscal year 2009 from fiscal year 2008. The increase in fiscal year 2010 is
primarily the result of an increase in clinical trial costs, an increase in consulting fees for regulatory
assistance and preclinical studies conducted, and an increase in salaries and related expenses due to the
addition of two executive officers and higher salary levels. The increase in fiscal year 2009 was primarily
due to an increase in salaries and related expenses due to a reorganization of departments in March
2008 and July 2008, as well as an increase in clinical trials costs.
Process and Product Development—Process and product development expenses include costs for
development of clinical and commercial manufacturing processes for our own and collaborator
compounds. Such expenses include the costs of personnel, contract services and facility expenses. Total
development expenses decreased $78,000 to $6.0 million in fiscal year 2010 from fiscal year 2009 and
expenses increased $306,000 to $6.0 million in fiscal year 2009 from fiscal year 2008. The increase in
fiscal year 2009 was primarily the result of the reorganization of departments in July 2008.
Manufacturing Operations—Manufacturing operations expense includes costs to manufacture
preclinical and clinical materials for our own and our collaborators’ product candidates, quality control
and quality assurance activities and costs to support the operation and maintenance of our conjugate
manufacturing facility. Such expenses include personnel, raw materials for our and our collaborators’
preclinical studies and clinical trials, development costs with contract manufacturing organizations,
manufacturing supplies, and facilities expense. Manufacturing operations expense increased $1.1 million
to $17.2 million in fiscal year 2010 from fiscal year 2009 and decreased $14.6 million to $16.1 million in
fiscal year 2009 from fiscal year 2008. The increase in fiscal year 2010 was primarily the result of (i) a
decrease in overhead utilization from the manufacture of clinical materials on behalf of our
collaborators; (ii) an increase in antibody supply and development expenses; and (iii) an increase in
stock compensation costs. Partially offsetting these increases, contract service expense decreased and
53
cost of clinical materials reimbursed decreased. The decrease in fiscal year 2009 was primarily the
result of (i) a decrease in supply of DMx and clinical materials to our collaborators; (ii) a decrease in
antibody supply and development expenses; (iii) a decrease in contract service expenses; and (iv) a
significant decrease in charges incurred related to the write down of raw material inventory. Partially
offsetting these decreases, salaries and related expenses increased, depreciation and amortization
increased, and overhead utilization from the manufacture of clinical materials on behalf of our
collaborators decreased.
Antibody expense in anticipation of potential future clinical trials, as well as our ongoing trials, was
$1.1 million in fiscal year 2010, $503,000 in fiscal year 2009, and $7.4 million in fiscal year 2008. The
process of antibody production is lengthy as is the lead time to establish a satisfactory production
process at a vendor. Accordingly, costs incurred related to antibody production and development have
fluctuated from period to period and we expect these cost fluctuations to continue in the future.
General and Administrative Expenses
General and administrative expenses for the year ended June 30, 2010 increased $998,000 to
$14.9 million from $13.9 million for the year ended June 30, 2009. General and administrative expenses
for the year ended June 30, 2008 were $14.3 million. The increase in fiscal year 2010 as compared to
fiscal year 2009 was primarily due to an increase in patent expenses, an increase in consulting fees, an
increase in directors’ fees and an increase in other general corporate expenses, partially offset by a
decrease in salaries and related expenses. During fiscal year 2009, the Company recognized a total of
$1.6 million in stock compensation expense and other compensation costs related to the former Chief
Executive Officer’s succession plan and a termination of an executive. The decrease in fiscal year 2009
as compared to fiscal year 2008 was primarily the result of a decrease in rent expense and move-related
expenses, partially offset by greater salaries and related expenses. During fiscal year 2008, the Company
recognized $1.5 million of expense related to the rental of laboratory and office space in Waltham prior
to occupying the space in late March 2008, as well as $799,000 of move-related expenses, classifying
such as general and administrative expenses.
Other Income (Expense), net
Other income (expense), net for the years ended June 30, 2010, 2009, and 2008 is included in the
following table (in thousands):
Other Income (Expense), net
Year Ended June 30,
2010
2009
2008
Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Realized (Losses) Gains on Investments . . . . . . . . . . . . . . . . . .
Other-Than-Temporary Impairment . . . . . . . . . . . . . . . . . . . . . . . . .
Other (Expense) Income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 583
$ 176
—
(33)
— (516)
(255)
(118)
$2,152
39
(535)
463
Total Other Income (Expense), net . . . . . . . . . . . . . . . . . . . . . . . . .
$ 58
$(221) $2,119
Investment Income, net
Investment income for the years ended June 30, 2010, 2009 and 2008 was $176,000, $583,000 and
$2.2 million, respectively. The decrease in investment income in fiscal year 2010 and fiscal year 2009
from fiscal year 2008 is primarily the result of lower yields on investments reflecting lower market rates
and lower average investable balances.
54
Net Realized (Losses) Gains on Investments
Net realized (losses) gains on investments were ($33,000) and $39,000, for the years ended
June 30, 2009 and 2008, respectively. There were no gains or losses recognized during the year ended
June 30, 2010.
Other than Temporary Impairment
During the years ended June 30, 2009 and 2008, we recognized $516,000 and $535,000,
respectively, in charges for the impairment of available-for-sale securities that were determined to be
other-than-temporary following a decline in value. No similar charges were recognized during the year
ended June 30, 2010.
Other (Expense) Income, net
Other (expense) income, net for the years ended June 30, 2010, 2009 and 2008 was $(118,000),
($255,000) and $463,000, respectively. During the years ended June 30, 2010, 2009 and 2008, we
recorded net (losses) gains on forward contracts of $(219,000), $(234,000) and $699,000, respectively.
We incurred $104,000, $(29,000) and $(243,000) in foreign currency translation income (expenses)
related to obligations with non-U.S. dollar-based suppliers during the years ended June 30, 2010, 2009
and 2008, respectively.
Liquidity and Capital Resources
June 30,
2010
2009
(In thousands)
Cash, cash equivalents and marketable securities . . . . . . . . . . . . . . . . .
Working capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used for operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used for) provided by investing activities . . . . . . . . . . . . . . . . . . .
Cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
$110,298
103,296
102,048
(40,584)
(882)
80,983
$ 71,125
65,738
66,857
(13,334)
11,995
39,359
Cash Flows
We require cash to fund our operating expenses, including the advancement of our own clinical
programs, and to make capital expenditures. Historically, we have funded our cash requirements
primarily through equity financings in public markets and payments from our collaborators, including
equity investments, license fees, milestones and research funding. As of June 30, 2010, we had
approximately $110.3 million in cash, cash equivalents and marketable securities. Net cash used for
operations was $40.6 million, $13.3 million and $20.1 million during the years ended June 30, 2010,
2009 and 2008, respectively. The principal use of cash in operating activities for all periods presented
was to fund our net loss.
Net cash (used for) provided by investing activities was $(882,000), $12.0 million and $15.2 million
for the years ended June 30, 2010, 2009 and 2008, respectively, and substantially represents cash inflows
from the sales and maturities of marketable securities partially offset by capital expenditures. Capital
expenditures were $1.5 million, $1.9 million and $18.0 million for the fiscal years ended June 30, 2010,
2009 and 2008, respectively. The significant capital expenditures for fiscal 2008 were primarily leasehold
improvements made to our Waltham, MA facility related to the construction allowance received from
the landlord to build out laboratory and office space to our specifications, as well as expansion and
improvements of our manufacturing plant in Norwood, MA. The leasehold improvements made to the
Waltham, MA facility were paid by the landlord, with such reimbursement recorded as a benefit to cash
55
used in operations. Capital expenditures for the years ended June 30, 2010 and 2009 consisted primarily
of laboratory equipment and computer software applications.
Net cash provided by financing activities was $81.0 million, $39.4 million and $26.0 million for the
years ended June 30, 2010, 2009 and 2008, respectively, which includes the proceeds from the exercise
of 634,000, 416,000 and 619,000 stock options, respectively. Also, in May 2010, pursuant to a public
offering, we issued and sold 10,350,000 shares of our common stock resulting in net proceeds of
$77.5 million. The shares of common stock offered were registered under our existing shelf registration
statement on Form S-3 which was filed with the Securities and Exchange Commission in April 2010. In
June 2009, pursuant to a public offering, we issued and sold 5,750,000 shares of our common stock
resulting in net proceeds of $38 million. In June 2008, pursuant to a securities purchase agreement with
a private investor, we issued and sold 7,812,500 shares of our common stock resulting in net proceeds
of $24.9 million.
We anticipate that our current capital resources and expected future collaborator payments will
enable us to meet our operational expenses and capital expenditures for fiscal year 2011 and
approximately the first half of fiscal 2012. However, we cannot provide assurance that such
collaborative agreement funding will, in fact, be received. Should we or our partners 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.
As mentioned above, on April 9, 2010, we filed a Registration Statement on Form S-3
(Registration No. 333-144488) with the Securities and Exchange Commission. The Securities and
Exchange Commission declared the Registration Statement effective on April 22, 2010. Subject to our
ongoing obligations under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, the Registration Statement permits us to offer and sell up to an aggregate of
$125 million of our common stock, $82.8 million of which we sold in the transaction discussed above.
Contractual Obligations
Below is a table that presents our contractual obligations and commercial commitments as of
June 30, 2010 (in thousands):
Payments Due by Period
Total
Less than
One Year
1-3
Years
4-5
Years
More than
5 Years
Waltham lease obligation(1) . . . . . . . . . . . . .
Other operating lease obligations(2)
. . . . . . .
$49,263
1,198
$4,631
1,198
$9,662
—
$9,996
—
$24,974
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$50,461
$5,829
$9,662
$9,996
$24,974
(1) Lease agreement was signed on July 27, 2007. In December 2009, we entered into a sublease for
14,100 square feet of our office and laboratory space at 830 Winter Street, Waltham, MA through
January 2015. We will receive approximately $2.8 million in minimum rental payments over the
remaining term of the sublease, which is not included in the table above.
(2) The Company entered into a sub-sublease in May 2008 for the entire space at 148 Sidney Street,
Cambridge, MA through October 2010, the remainder of the sublease. Both the sublease and
sub-sublease for the 148 Sidney Street facility were terminated as of July 31, 2010. Included in the
table above is $233,000 in minimum rental payments owed by the Company through October 2010,
however, only approximately $58,000 was paid by the Company for the month of July 2010. The
Company was reimbursed this amount pursuant to the sub-sublease.
56
In addition to the above table, we are contractually obligated to make potential future success-
based regulatory milestone payments in conjunction with certain collaborative agreements. These
payments are contingent upon the occurrence of certain future events and, given the nature of these
events, it is unclear when, if ever, we may be required to pay such amounts. As a result, these
contingent payments have not been included in the table above or recorded in our consolidated
financial statements. Further, the timing of any future payment is not reasonably estimable. As of
June 30, 2010, the maximum amount that may be payable in the future under such arrangements is
approximately $43.2 million.
Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-13, Multiple-
Deliverable Revenue Arrangements (ASU No. 2009-13). ASU No. 2009-13, which amends existing
revenue recognition accounting pronouncements and provides accounting principles and application
guidance on whether multiple deliverables exist, how the arrangement should be separated, and the
consideration allocated. This guidance eliminates the requirement to establish the fair value of
undelivered products and services and instead provides for separate revenue recognition based upon
management’s estimate of the selling price for an undelivered item when there is no other means to
determine the fair value of that undelivered item. Previous accounting principles required that the fair
value of the undelivered item be the price of the item either sold in a separate transaction between
unrelated third parties or the price charged for each item when the item is sold separately by the
vendor. This was difficult to determine when the product was not individually sold because of its
unique features. If the fair value of all of the elements in the arrangement was not determinable, then
revenue was deferred until all of the items were delivered or fair value was determined. This new
approach is effective prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010 (our fiscal year 2011). While we do not expect the
adoption of this standard to have a material impact on our financial position and results of operations,
this standard may impact us in the event we complete future transactions or modify existing
collaborative relationships.
The provisions of ASC Topic 810, ‘‘Consolidation’’, related to the changes to how a reporting
entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated will be effective for fiscal years beginning after November 15,
2009 (our fiscal year 2011). Early application is not permitted. We do not expect the adoption of these
provisions to have a significant impact on our financial position or results of operations.
In March 2010, the FASB issued guidance related to the milestone method of revenue recognition,
which will codify a method of revenue recognition that has been common practice. Under this method,
contingent consideration from research and development activities that is earned upon the achievement
of a substantive milestone is recognized in its entirety in the period in which the milestone is achieved.
This guidance is effective for annual periods beginning on or after June 15, 2010 but may be adopted
as of the beginning of an annual period. Because our current revenue recognition policy for milestone
payments is consistent with the FASB’s guidance, we do not expect the adoption of this standard will
have a material effect on our consolidated financial position, results of operations and cash flows.
Off-Balance Sheet Arrangements
None.
57
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
We maintain an investment portfolio in accordance with our investment policy. The primary
objectives of our investment policy are to preserve principal, maintain proper liquidity to meet
operating needs and maximize yields. Although our investments are subject to credit risk, our
investment policy specifies credit quality standards for our investments and limits the amount of credit
exposure from any single issue, issuer or type of investment. Our investments are also subject to
interest rate risk and will decrease in value if market interest rates increase. However, due to the
conservative nature of our investments and relatively short duration, interest rate risk is mitigated. We
do not own derivative financial instruments in our investment portfolio. Accordingly, we do not believe
that there is any material market risk exposure with respect to derivative or other financial instruments
that would require disclosure under this item.
Our foreign currency hedging program uses forward contracts to manage the foreign currency
exposures that exist as part of our ongoing business operations. The contracts are denominated in
Euros and have maturities of less than one year. Our foreign currency risk management strategy is
principally designed to mitigate the future potential financial impact of changes in the value of
transactions, anticipated transactions and balances denominated in foreign currency, resulting from
changes in foreign currency exchange rates.
Our market risks associated with changes in foreign currency exchange rates are concentrated
primarily in a portfolio of short duration foreign currency forward contracts. Generally, these contracts
provide that we receive certain foreign currencies and pay U.S. dollars at specified exchange rates at
specified future dates. Although we are exposed to credit and market risk in the event of future
nonperformance by a counterparty, management has no reason to believe that such an event will occur.
58
Item 8. Financial Statements and Supplementary Data
IMMUNOGEN, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended June 30, 2010, 2009, and 2008 . . .
Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2010, 2009,
and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended June 30, 2010, 2009, and 2008 . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
60
61
62
63
64
65
59
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of ImmunoGen, Inc.
We have audited the accompanying consolidated balance sheets of ImmunoGen, Inc. as of June 30,
2010 and 2009, and the related consolidated statements of operations, shareholders’ equity, and cash
flows for each of the three years in the period ended June 30, 2010. Our audits also included the
financial statement schedule listed in the Index at Item 15. These financial statements and schedule are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of ImmunoGen, Inc. at June 30, 2010 and 2009, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended
June 30, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of ImmunoGen, Inc.’s internal control over financial
reporting as of June 30, 2010, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated August 27, 2010 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
August 27, 2010
60
IMMUNOGEN, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2010 AND JUNE 30, 2009
In thousands, except per share amounts
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net of accumulated depreciation . . . . . . . . . . . . . . . .
Long-term restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30,
2010
June 30,
2009
$ 109,156
1,142
1,795
1,595
1,242
574
1,614
117,118
16,326
3,568
196
$ 69,639
1,486
1,746
561
1,836
366
1,232
76,866
19,671
4,142
25
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 137,208
$ 100,704
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred lease incentive . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred lease incentive, net of current portion . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note H)
Shareholders’ equity:
Preferred stock, $.01 par value; authorized 5,000 shares; no shares issued and
3,064
4,201
2,404
979
3,174
13,822
8,562
8,488
4,288
35,160
$
1,244
4,140
1,566
979
3,199
11,128
9,540
9,543
3,636
33,847
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common stock, $.01 par value; authorized 100,000 shares; issued and
outstanding 67,931 and 56,947 shares as of June 30, 2010 and 2009,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . .
679
473,450
(372,363)
282
569
387,947
(321,451)
(208)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102,048
66,857
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
$ 137,208
$ 100,704
The accompanying notes are an integral part of the consolidated financial statements.
61
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share amounts
Year Ended June 30,
2010
2009
2008
Revenues:
Research and development support . . . . . . . . . . . . . . . . . . . . . . . .
License and milestone fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clinical materials reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,365
5,698
2,880
$ 7,566
15,117
5,305
$ 15,035
13,156
12,058
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,943
27,988
40,249
Operating Expenses:
Research and development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other-than-temporary impairment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (expense) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before (benefit) provision for income taxes . . . . . . . . . . . . . . . . .
(Benefit) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
50,280
14,898
65,178
(51,235)
176
—
(118)
(51,177)
(265)
45,904
13,900
59,804
(31,816)
583
(516)
(288)
(32,037)
(100)
60,013
14,348
74,361
(34,112)
2,191
(535)
463
(31,993)
27
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(50,912) $(31,937) $(32,020)
Basic and diluted net loss per common share . . . . . . . . . . . . . . . . . . .
$
(0.87) $ (0.63) $ (0.75)
Basic and diluted weighted average common shares outstanding . . . . .
58,845
51,068
42,969
The accompanying notes are an integral part of the consolidated financial statements.
62
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
IMMUNOGEN, INC.
In thousands
Common Stock
Shares Amount
Additional
Paid-In
Capital
Accumulated
Other
Total
Accumulated Comprehensive Shareholders’ Comprehensive
Deficit
Income (Loss)
Equity
(Loss)
Balance at June 30, 2007 . . . . . . . . . . . . . . . . . . 42,346
—
. . . . . . .
Unrealized losses on marketable securities
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
619
Stock options exercised . . . . . . . . . . . . . . . . . . .
—
Stock-based compensation expense . . . . . . . . . . . .
Directors’ stock-based compensation . . . . . . . . . . .
—
Issuance of common stock in a private offering, net of
financing costs . . . . . . . . . . . . . . . . . . . . . . .
7,813
$423
—
—
6
—
—
$315,621
—
—
1,087
2,861
92
$(257,548)
—
(32,020)
—
—
—
$ (95)
(44)
—
—
—
—
$ 58,401
(44)
(32,020)
1,093
2,861
92
(44)
(32,020)
—
—
—
79
24,837
—
—
24,916
—
Balance at June 30, 2008 . . . . . . . . . . . . . . . . . . 50,778
$508
$344,498
$(289,568)
$(139)
$ 55,299
$(32,064)
(15)
(15)
—
(31,937)
—
—
—
—
—
$(31,952)
490
(50,912)
—
—
—
—
$(50,422)
Comprehensive loss . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
Unrealized losses on marketable securities
Cumulative effect adjustment relating to the adoption
of ASC Topic 718 . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . .
Restricted stock issued . . . . . . . . . . . . . . . . . . .
Issuance of common stock in a public offering, net of
financing costs . . . . . . . . . . . . . . . . . . . . . . .
Directors’ stock-based compensation . . . . . . . . . . .
—
—
—
416
—
3
5,750
—
—
—
—
4
—
—
57
—
—
—
—
—
1,310
3,956
20
37,988
175
54
(31,937)
—
—
—
—
—
(15)
(54)
—
—
—
—
—
—
—
(31,937)
1,314
3,956
20
38,045
175
Balance at June 30, 2009 . . . . . . . . . . . . . . . . . . 56,947
$569
$387,947
$(321,451)
$(208)
$ 66,857
Comprehensive loss . . . . . . . . . . . . . . . . . . . . .
Unrealized gains on marketable securities . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . .
Issuance of common stock in a public offering, net of
—
—
634
—
—
—
6
—
—
—
3,455
4,170
—
(50,912)
—
—
financing costs . . . . . . . . . . . . . . . . . . . . . . . 10,350
—
Directors’ stock-based compensation . . . . . . . . . . .
104
—
77,418
460
—
—
490
—
—
—
—
—
490
(50,912)
3,461
4,170
77,522
460
Balance at June 30, 2010 . . . . . . . . . . . . . . . . . . 67,931
$679
$473,450
$(372,363)
$ 282
$ 102,048
Comprehensive loss . . . . . . . . . . . . . . . . . . . . .
The accompanying notes are an integral part of the consolidated financial statements.
63
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash used for operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale/disposal of fixed assets . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred lease incentive obligation . . . . . . . . . . . . .
Loss (gain) on sale of marketable securities . . . . . . . . . . . . . . . . . .
Other-than-temporary impairment of investments . . . . . . . . . . . . . .
Loss (gain) on forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock and deferred share unit compensation . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from landlord for tenant improvements . . . . . . . . . . . .
Year Ended June 30,
2010
2009
2008
$ (50,912) $(31,937) $(32,020)
4,838
41
(979)
—
—
219
4,640
55
(49)
(1,034)
594
(386)
366
(171)
1,820
61
1,393
(1,080)
—
4,995
18
(975)
33
516
234
4,235
1,450
(1,350)
2,911
280
312
366
13
(167)
2,976
(2,871)
4,877
750
4,445
103
(512)
(39)
535
(699)
2,915
1,816
1,140
2,508
1,151
(241)
(4,511)
37
(815)
(49)
(44)
(5,910)
10,041
Net cash used for operating activities . . . . . . . . . . . . . . . . . . .
(40,584)
(13,334)
(20,149)
Cash flows from investing activities:
Proceeds from maturities or sales of marketable securities . . . . . .
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of cash equivalent balance to marketable
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment, net
. . . . . . . . . . . . . . . . .
Proceeds from settlement of forward contracts . . . . . . . . . . . . . .
834
—
14,227
(25)
45,908
—
—
(1,534)
(182)
— (13,605)
(17,995)
846
(1,896)
(311)
Net cash (used for) provided by investing activities . . . . . . . . .
(882)
11,995
15,154
Cash flows from financing activities:
Proceeds from stock options exercised . . . . . . . . . . . . . . . . . . . .
Proceeds from common stock issuance, net . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . .
Net change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning balance . . . . . . . . . . . . . . . . . .
3,462
77,521
80,983
39,517
69,639
1,314
38,045
39,359
38,020
31,619
1,093
24,916
26,009
21,014
10,605
Cash and cash equivalents, ending balance . . . . . . . . . . . . . . . . . . . .
$109,156
$ 69,639
$ 31,619
Supplemental disclosure:
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1
$
1
$
27
The accompanying notes are an integral part of the consolidated financial statements.
64
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2010
A. Nature of Business and Plan of Operations
ImmunoGen, Inc. (the Company) was incorporated in Massachusetts in 1981 and is focused on the
development of antibody-based anticancer therapeutics. The Company has incurred operating losses
and negative cash flows from operations since inception, incurred a net loss of approximately
$50.9 million during the fiscal year ended June 30, 2010, and has an accumulated deficit of
approximately $372.4 million as of June 30, 2010. The Company has primarily funded these losses
through payments received from its collaborations and equity financings. To date, the Company has no
product revenue and management expects operating losses to continue for the foreseeable future. The
Company believes that its existing cash, cash equivalents and marketable securities as of June 30, 2010
together with milestone payments and research and development funding that the Company expects to
receive under its existing collaborations, will be sufficient to allow it to fund its current operating plan
through approximately the first half of fiscal 2012.
The Company may raise additional funds through equity or debt financings or generate revenues
from collaborative partners through a combination of upfront license payments, milestone payments,
research funding, and clinical material reimbursement. There can be no assurance that the Company
will be able to obtain additional debt or equity financing or generate revenues from collaborative
partners, on terms acceptable to the Company, or at all. The failure of the Company to obtain
sufficient funds on acceptable terms when needed could have a material adverse effect on the
Company’s business, results of operations and financial condition and require the Company 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 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.
B. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries, ImmunoGen Securities Corp. (established in December 1989), and ImmunoGen Europe
Limited (established in October 2005). All intercompany transactions and balances have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States (U.S.) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
65
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
Subsequent Events
The Company has evaluated all events or transactions that occurred after June 30, 2010 up
through the date the Company issued these financial statements. In July 2010, the Company sold
$1.1 million of the remaining securities in its investment portfolio, resulting in a net realized gain of
$339,000. The Company did not have any other material recognizable or unrecognizable subsequent
events during this period.
Revenue Recognition
The Company enters into licensing and development agreements with collaborative partners for
the development of monoclonal antibody-based anticancer therapeutics. The Company follows the
provisions of Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic
605, ‘‘Revenue Recognition.’’ Accordingly, the Company recognizes revenue related to research
activities as they are performed, as long as there is persuasive evidence of an arrangement, the fee is
fixed or determinable, and collection of the related receivable is probable. The terms of the Company’s
agreements contain multiple elements which typically include non-refundable license fees, payments
based upon the achievement of certain milestones and royalties on product sales. The Company
evaluates such arrangements to determine if the deliverables are separable into units of accounting and
then applies applicable revenue recognition criteria to each unit of accounting. Agreements containing
multiple elements are divided into separate units of accounting if certain criteria are met, including
whether the delivered element has stand-alone value to the collaborator and whether there is objective
and reliable evidence of the fair value of the undelivered obligation(s). The consideration received is
allocated among the separate units either on the basis of each unit’s fair value or using the residual
method, and the applicable revenue recognition criteria are applied to each of the separate units.
In October 2009 a new accounting standard for the recognition of revenue arrangements with
multiple deliverables was issued. This standard provides accounting principles and application guidance
on whether multiple deliverables exist, how the arrangement should be separated, and how the
consideration should be allocated. This new approach is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010
(our fiscal year 2011). While the Company does not expect the adoption of this standard to have a
material impact on its financial position and results of operations, this standard may impact the
Company in the event it completes future transactions or modifies existing collaborative relationships.
Refer to Note B, Recent Accounting Pronouncements to the Consolidated Financial Statements for
additional discussion of this standard and its impact on the Company.
66
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
At June 30, 2010, the Company had the following three types of collaborative contracts with the
parties identified below:
(cid:129) Exclusive license to use the Company’s TAP technology and/or certain other intellectual property
to develop compounds to a single antigen:
Amgen (multiple single-target licenses)
Bayer Schering Pharma (single-target license)
Biogen Idec (single-target license)
Biotest (single-target license)
Genentech, a member of the Roche Group (multiple single-target licenses)
sanofi-aventis (license to multiple individual targets)
(cid:129) Option agreement for a defined period of time to secure licenses to use the Company’s TAP
technology to develop anticancer compounds to a limited number of targets on established terms
(broad option agreement):
Amgen
sanofi-aventis
(cid:129) Non-exclusive license to the Company’s humanization technology:
sanofi-aventis
Generally, the foregoing collaboration agreements provide that the Company will (i) at the
collaborator’s request, manufacture and provide to them preclinical and clinical materials reimbursed at
the Company’s cost, or, in some cases, cost plus a margin, (ii) earn payments upon the collaborators’
achievements of certain milestones and (iii) earn royalty payments, generally until the later of the last
applicable patent expiration or 10 to 12 years after product launch. Royalty rates may vary over the
royalty term depending on certain intellectual property rights. The Company is required to provide
technical training and to share any process improvements and know-how with its collaborators during
the research term of the collaboration agreements.
Generally, upfront payments on single-target licenses are deferred over the period of the
Company’s substantial involvement during development. The determination of the length of this period
is subject to judgment and estimation and can have an impact on the amount of revenue recognized in
a given period. The Company’s employees are available to assist the Company’s collaborators during
the development of their products. The Company estimates this development phase to begin at the
inception of the collaboration agreement and conclude at the end of non-pivotal Phase II testing. The
Company believes this period of involvement is, depending on the nature of the license, on average six
and one-half years. Quarterly, the Company reassesses its periods of substantial involvement over which
the Company amortizes its upfront license fees and makes adjustments as appropriate. In the event that
a single-target license were to be terminated, the Company would recognize as revenue any portion of
the upfront fee that had not previously been recorded as revenue, but was classified as deferred
revenue at the date of such termination.
67
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
The Company defers upfront payments received from its broad option agreements over the period
during which the collaborator may elect to receive a license. These periods are specific to each
collaboration agreement, but are between three and 12 years. If a collaborator selects an option to
acquire a license under these agreements, any option fee is deferred and recorded over the life of the
option, generally 12 to 18 months. If a collaborator exercises an option and the Company grants a
single-target license to the collaborator, the Company defers the license fee and accounts for the fee as
it would an upfront payment on a single-target license, as discussed above. Upon exercise of an option
to acquire a license, the Company would recognize any remaining deferred option fee over the period
of the Company’s substantial involvement under the license acquired. In the event that a broad option
agreement were to be terminated, the Company would recognize as revenue any portion of the upfront
fee that had not previously been recorded as revenue, but was classified as deferred revenue at the date
of such termination. In the event a collaborator elects to discontinue development of a specific product
candidate under a single-target license, but retains its right to use the Company’s technology to develop
an alternative product candidate to the same target or a target substitute, the Company would cease
amortization of any remaining portion of the upfront fee until there is substantial preclinical activity on
another product candidate and the Company’s remaining period of substantial involvement can be
estimated.
When milestone fees are specifically tied to a separate earnings process and are deemed to be
substantive and at risk, revenue is recognized when such milestones are achieved. In addition, the
Company recognizes research and development support revenue from certain collaboration and
development agreements based upon the level of research services performed during the period of the
relevant research agreement. Deferred revenue substantially represents amounts received under
collaborative agreements and not yet earned pursuant to these policies. Where the Company has no
continuing involvement, the Company will record non-refundable license fees as revenue upon receipt
and will record revenue upon achievement of milestones by its collaborative partners.
The Company produces preclinical and clinical materials for its collaborators. The Company is
reimbursed for its direct costs and a portion of its overhead costs to produce clinical materials. The
Company recognizes revenue on preclinical and clinical materials when the materials have passed all
quality testing required for collaborator acceptance and title and risk of loss have transferred to the
collaborator.
The Company also produces research material for potential collaborators under material transfer
agreements. Additionally, the Company performs research activities, including developing antibody-
specific conjugation processes, on behalf of its collaborators and potential collaborators during the early
evaluation and preclinical testing stages of drug development. Generally, the Company is reimbursed
for certain of its direct and overhead costs of producing these materials or providing these services.
The Company records the amounts received for the preclinical materials produced or services
performed as a component of research and development support. The Company also develops
conjugation processes for materials for later stage testing and commercialization for certain
collaborators. The Company is reimbursed for certain of its direct and overhead costs and may receive
milestone payments for developing these processes which are recorded as a component of research and
development support.
68
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
Inventory
Inventory costs primarily relate to clinical trial materials being manufactured for sale to the
Company’s collaborators. Inventory is stated at the lower of cost or market as determined on a first-in,
first-out (FIFO) basis.
Inventory at June 30, 2010 and 2009 is summarized below (in thousands):
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,242
—
$ 952
884
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,242
$1,836
June 30,
2010
2009
Raw materials inventory consists entirely of DM1 or DM4 , our proprietary cell-killing agents,
which are included in all Targeted Antibody Payload, or TAP, product candidates currently in preclinical
and clinical testing with our collaborators. All raw materials inventory is currently procured from a
single supplier.
Inventory cost is stated net of write-downs of $939,000 and $1.8 million as of June 30, 2010 and
June 30, 2009, respectively. The write-downs represent the cost of raw materials that the Company
considers to be in excess of a twelve-month supply based on firm, fixed orders and projections from its
collaborators as of the respective balance sheet date.
Due to yield fluctuations, the actual amount of raw materials that will be produced in future
periods under supply agreements is highly uncertain. As such, the amount of raw materials produced
could be more than is required to support the development of the Company’s and its collaborators’
product candidates. Such excess supply, as determined under the Company’s inventory reserve policy, is
charged to research and development expense.
The Company produces preclinical and clinical materials for its collaborators either in anticipation
of or in support of preclinical studies and clinical trials, or for process development and analytical
purposes. Under the terms of supply agreements with its collaborators, the Company generally receives
rolling six-month firm, fixed orders for conjugate that the Company is required to manufacture, and
rolling twelve-month manufacturing projections for the quantity of conjugate the collaborator expects to
need in any given twelve-month period. The amount of clinical material produced is directly related to
the number of Company and collaborator anticipated or on-going clinical trials for which the Company
is producing clinical material, the speed of enrollment in those trials, the dosage schedule of each
clinical trial and the time period, if any, during which patients in the trial receive clinical benefit from
the clinical materials. Because these elements are difficult to estimate over the course of a trial,
substantial differences between collaborators’ actual manufacturing orders and their projections could
result in usage of raw materials varying significantly from estimated usage at an earlier reporting
period. To the extent that a collaborator has provided the Company with a firm, fixed order, the
collaborator is required by contract to reimburse the Company the full cost of the conjugate and any
agreed margin thereon, even if the collaborator subsequently cancels the manufacturing run.
69
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
The Company accounts for the raw material inventory as follows:
a)
b)
c)
d)
raw material is capitalized as inventory upon receipt of the materials. The portion of the raw
material the Company uses in the production of its own products is recorded as research and
development expense as consumed;
to the extent that the Company has up to twelve months of firm, fixed orders and/or
projections from its collaborators, the Company capitalizes the value of raw materials that will
be used in the production of conjugate subject to these firm, fixed orders and/or projections;
the Company considers more than a twelve month supply of raw materials that is not
supported by firm, fixed orders or projections from its collaborators to be excess and
establishes a reserve to reduce to zero the value of any such excess raw material inventory
with a corresponding charge to research and development expense; and
the Company also considers any other external factors and information of which it becomes
aware and assesses the impact of such factors or information on the net realizable value of the
raw material inventory at each reporting period.
During the year ended June 30, 2008, the Company obtained additional amounts of DM1 and
DM4 from a new supplier. Due to the need to evaluate the process which was developed to prepare
such material from this new supplier across multiple batches, the Company had committed to a level of
production which yielded more material than would be required by its collaborators over the next
twelve months. As a result, the Company recorded a $2.1 million charge to research and development
expense related to excess inventory during the year ended June 30, 2008. The Company also recorded
$1.6 million as research and development expense to write down this material to its net realizable
value. During fiscal 2010, we obtained additional amounts of DMx from our supplier which yielded
more material than would be required by our collaborators over the next twelve months and as a result,
we recorded $900,000 of charges to research and development expense related to raw material
inventory identified as excess. The Company also recorded $28,000 as research and development
expense to write down certain raw material inventory to its net realizable value. No similar costs were
recorded during the year ended June 30, 2009. Increases in the Company’s on-hand supply of raw
materials, or a reduction to the Company’s collaborators’ projections, could result in significant changes
in the Company’s estimate of the net realizable value of such raw material inventory. Reductions in
collaborators’ projections could indicate that the Company has additional excess raw material inventory
and the Company would then evaluate the need to record further write-downs as charges to research
and development expense.
Unbilled Revenue
The majority of the Company’s unbilled revenue at June 30, 2010 and 2009 represents research
funding earned based on actual resources utilized under the Company’s various collaborator
agreements.
70
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
Restricted Cash
Restricted cash at June 30, 2010 and 2009 are cash balances securing irrevocable letters of credit
required for the Company to receive value added tax reimbursements related to payments to foreign
vendors for activities performed in fiscal 2008 and 2007 and as security deposits for the Company’s
leased facilities.
Other Accrued Liabilities
Other accrued liabilities consisted of the following at June 30, 2010 and 2009 (in thousands):
Accrued contract payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued clinical trial costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued public reporting charges . . . . . . . . . . . . . . . . . . . . . . . . .
Other current accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30,
2010
2009
$ 324
537
709
233
111
490
$ 130
160
722
306
113
135
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,404
$1,566
Research and Development Expenses
The Company’s research and development expenses are charged to expense as incurred and relate
to (i) research to evaluate new targets and to develop and evaluate new antibodies, linkers and
cytotoxic agents, (ii) preclinical testing of its own and, in certain instances, its collaborators’ product
candidates, and the cost of its own clinical trials, (iii) development related to clinical and commercial
manufacturing processes and (iv) manufacturing operations.
Income Taxes
The Company uses the liability method to account for income taxes. Deferred tax assets and
liabilities are determined based on differences between the financial reporting and income tax basis of
assets and liabilities, as well as net operating loss carry forwards and tax credits and are measured using
the enacted tax rates and laws that will be in effect when the differences reverse. A valuation allowance
against net deferred tax assets is recorded if, based on the available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized.
Financial Instruments and Concentration of Credit Risk
Cash and cash equivalents are primarily maintained with three financial institutions in the U.S.
Deposits with banks may exceed the amount of insurance provided on such deposits. Generally, these
deposits may be redeemed upon demand and, therefore, bear minimal risk. Financial instruments that
potentially subject the Company to concentrations of credit risk consist principally of marketable
securities. Marketable securities at June 30, 2010 generally consist of high-grade corporate bonds and
71
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
asset-backed securities. The Company’s investment policy, approved by the Board of Directors, limits
the amount it may invest in any one type of investment, thereby reducing credit risk concentrations.
Derivative instruments include a portfolio of short duration foreign currency forward contracts
intended to mitigate the risk of exchange fluctuations for existing or anticipated receivable and payable
balances denominated in foreign currency. Derivatives are estimated at fair value and classified as other
current assets or liabilities. The fair value of these instruments represents the present value of
estimated future cash flows under the contracts, which are a function of underlying interest rates,
currency rates, related volatility, counterparty creditworthiness and duration of the contracts. Changes
in these factors or a combination thereof may affect the fair value of these instruments.
The Company does not designate foreign currency forward contracts as hedges for accounting
purposes, and changes in the fair value of these instruments are recognized in earnings during the
period of change. Because the Company enters into forward contracts only as an economic hedge, any
gain or loss on the underlying foreign-denominated existing or anticipated receivable or payable
balance would be offset by the loss or gain on the forward contract. Net (losses) gains on forward
contracts for the years ended June 30, 2010, 2009 and 2008 were ($219,000), ($234,000) and $699,000,
respectively, and are included in the accompanying Consolidated Statement of Operations as other
(expense) income, net. As of June 30, 2010, we had outstanding forward contracts with amounts
equivalent to approximately $1.6 million (A1.3 million), all maturing on or before January 4, 2011. As
of June 30, 2009, we had outstanding forward contracts with amounts equivalent to approximately
$517,000 (A371,000). The Company does not anticipate using derivative instruments for any purpose
other than hedging exchange rate exposure.
Cash Equivalents
Cash equivalents consist principally of money market funds and other investments with original
maturities of three months or less at the date of purchase.
Marketable Securities
The Company invests in marketable securities of highly rated financial institutions and investment-
grade debt instruments and limits the amount of credit exposure with any one entity. The Company has
classified its marketable securities as ‘‘available-for-sale’’ and, accordingly, carries such securities at
aggregate fair value. Unrealized gains and losses, if any, are reported as other comprehensive income
(loss) in shareholders’ equity. The amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such amortization and accretions are
included in investment income, net, as well as interest and dividends. Realized gains and losses on
available-for-sale securities are also included in other (expense) income, net. Charges for the
impairment of available-for-sale securities that were determined to be other-than-temporary and related
to a credit loss are included in the accompanying Consolidated Statement of Operations as
other-than-temporary impairment. The cost of securities sold is based on the specific identification
method.
72
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
Other-than-Temporary Impairments
In April 2009, the Company implemented a newly issued accounting standard which provides
guidance for the recognition, measurement and presentation of other-than-temporary impairments.
Under this standard, an other-than-temporary impairment must be recognized through earnings if an
investor has the intent to sell the debt security or if it is more likely than not that the investor will be
required to sell the debt security before recovery of its amortized cost basis. In the event of a credit
loss, only the amount associated with the credit loss is recognized in net income (loss). The amount of
loss relating to other factors is recorded in accumulated other comprehensive income (loss). As a result
of the adoption, $54,000 of previously recognized other-than-temporary impairment charges was
reclassified to other comprehensive loss as a cumulative effect adjustment.
The Company conducts periodic reviews to identify and evaluate each investment that has an
unrealized loss, which exists when the current fair value of an individual security is less than its
amortized cost basis. Unrealized losses on available-for-sale securities that are determined to be
temporary, and not related to credit loss, are recorded in accumulated other comprehensive loss.
For available-for-sale debt securities with unrealized losses, management performs an analysis to
assess whether it intends to sell or whether it would more likely than not be required to sell the
security before the expected recovery of the amortized cost basis. Where the Company intends to sell a
security, or may be required to do so, the security’s decline in fair value is deemed to be
other-than-temporary and the full amount of the unrealized loss is recorded in the statement of
operations as an other-than-temporary impairment charge. When this is not the case, the Company
performs additional analysis on all securities with unrealized losses to evaluate losses associated with
the creditworthiness of the security. Credit losses are identified where the Company does not expect to
receive cash flows, based on using a single best estimate, sufficient to recover the amortized cost basis
of a security and these are recognized as other-than-temporary impairment.
Fair Value of Financial Instruments
As of July 1, 2008, the Company partially adopted the provisions of ASC Topic 820, ‘‘Fair Value
Measurements and Disclosures,’’ for financial assets and liabilities recognized at fair value on a
recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in
accordance with accounting principles generally accepted in the U.S., and expands disclosures about fair
value measurements. Certain provisions of ASC Topic 820 related to other non-financial assets and
liabilities were adopted by the Company on July 1, 2009 and did not have a material impact on its
financial position or results of operations upon adoption; however, this standard may impact the
Company in subsequent periods and require additional disclosures.
Fair value is defined under ASC Topic 820 as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and
minimize the use of unobservable inputs. The standard describes a fair value hierarchy to measure fair
73
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
value which is based on three levels of inputs, of which the first two are considered observable and the
last unobservable, as follows:
(cid:129) Level 1—Quoted prices in active markets for identical assets or liabilities.
(cid:129) Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as
quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
(cid:129) Level 3—Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
As of June 30, 2010, the Company held certain assets that are required to be measured at fair
value on a recurring basis, including cash equivalents and marketable securities. The following table
represents the fair value hierarchy for the Company’s financial assets measured at fair value on a
recurring basis as of June 30, 2010 (in thousands):
Cash, cash equivalents and restricted cash .
Available-for-sale marketable securities . . .
Fair Value Measurements at June 30, 2010 Using
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable Inputs
Significant
Unobservable
Inputs
Total
$113,298
1,142
$114,440
(Level 1)
$113,298
—
$113,298
(Level 2)
(Level 3)
$ —
1,142
$1,142
$—
—
$—
The fair value of the Company’s investments is generally determined from market prices based
upon either quoted prices from active markets or other significant observable market transactions at
fair value.
Property and Equipment
Property and equipment are stated at cost. The Company provides for depreciation based upon
expected useful lives using the straight-line method over the following estimated useful lives:
Machinery and equipment . . . . . . . . . .
Computer hardware and software . . . . .
Furniture and fixtures . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . .
5 years
3 years
5 years
Shorter of remaining lease term or 7 years
Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost of
disposed assets and the related accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the statement of operations. The Company recorded $41,000,
$18,000 and $103,000 of losses on the sale/disposal of certain furniture and equipment during the years
ended June 30, 2010, 2009, and 2008, respectively.
74
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
Impairment of Long-Lived Assets
In accordance with ASC Topic 360, ‘‘Property, Plant, and Equipment,’’ the Company continually
evaluates whether events or circumstances have occurred that indicate that the estimated remaining
useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be
impaired. The Company evaluates the realizability of its long-lived assets based on cash flow
expectations for the related asset. Any write-downs are treated as permanent reductions in the carrying
amount of the assets. Based on this evaluation, the Company believes that, as of each of the balance
sheet dates presented, none of the Company’s long-lived assets were impaired.
Computation of Net Loss Per Common Share
Basic and diluted net loss per common share is calculated based upon the weighted average
number of common shares outstanding during the period. The Company’s common stock equivalents,
as calculated in accordance with the treasury-stock accounting method, are shown in the following table
(in thousands):
June 30,
2010
2009
2008
Options to purchase common stock . . . . . . . . . . . . . . . . . . .
Common stock equivalents under treasury stock method . . . .
6,065
1,853
5,529
848
5,678
483
The Company’s common stock equivalents have not been included in the net loss per share
calculation because their effect is anti-dilutive due to the Company’s net loss position.
Stock-Based Compensation
As of June 30, 2010, the Company is authorized to grant future awards under one employee share-
based compensation plan, which is the ImmunoGen, Inc. 2006 Employee, Director and Consultant
Equity Incentive Plan, or the 2006 Plan. At the annual meeting of shareholders on November 12, 2008,
an amendment to the 2006 Plan was approved and an additional 2,000,000 shares were authorized for
issuance under this plan. As amended, the 2006 Plan provides for the issuance of Stock Grants, the
grant of Options and the grant of Stock-Based Awards for up to 4,500,000 shares of the Company’s
common stock, as well as any shares of common stock that are represented by awards granted under
the previous stock option plan, the ImmunoGen, Inc. Restated Stock Option Plan, or the Former Plan,
that are forfeited, expire or are cancelled without delivery of shares of common stock; provided,
however, that no more than 5,900,000 shares shall be added to the Plan from the Former Plan,
pursuant to this provision. Option awards are granted with an exercise price equal to the market price
of the Company’s stock at the date of grant. Options vest at various periods of up to four years and
may be exercised within ten years of the date of grant.
The stock-based awards are accounted for under ASC Topic 718, ‘‘Compensation—Stock
Compensation,’’ using the modified prospective transition method. Under this methodology, the
estimated fair value of awards is charged to the statement of operations over the requisite service
period, which is the vesting period. Such amounts have been reduced by our estimate of forfeitures of
all unvested awards. The fair value of each stock option is estimated on the date of grant using the
75
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
Black-Scholes option-pricing model with the assumptions noted in the following table. As the Company
has not paid dividends since inception, nor does it expect to pay any dividends for the foreseeable
future, the expected dividend yield assumption is zero. Expected volatility is based exclusively on
historical volatility data of the Company’s stock. The expected term of stock options granted is based
exclusively on historical data and represents the period of time that stock options granted are expected
to be outstanding. The expected term is calculated for and applied to one group of stock options as the
Company does not expect substantially different exercise or post-vesting termination behavior amongst
its employee population. The risk-free rate of the stock options is based on the U.S. Treasury rate in
effect at the time of grant for the expected term of the stock options.
Year Ended June 30,
2010
2009
2008
Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . .
None
None
None
59.90% 63.11% 66.60%
3.19% 2.40% 3.72%
7.2
7.0
7.1
Using the Black-Scholes option-pricing model, the weighted average grant date fair values of
options granted during fiscal 2010, 2009 and 2008 were $5.83, $2.73, and $2.38 per share, respectively.
A summary of option activity under the Plan as of June 30, 2010, and changes during the twelve
month period then ended is presented below (in thousands, except weighted-average data):
Number of
Stock
Options
Weighted- Weighted-
Average
Average
Remaining
Exercise
Life in Yrs
Price
Aggregate
Intrinsic
Value
Outstanding at June 30, 2009 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Canceled . . . . . . . . . . . . . . . . .
5,529
1,461
(634)
(291)
Outstanding at June 30, 2010 . . . . . . . . .
6,065
Outstanding at June 30, 2010—vested or
unvested and expected to vest . . . . . . .
Exercisable at June 30, 2010 . . . . . . . . . .
5,483
4,011
$6.36
$9.46
$5.46
$8.66
$7.09
$7.14
$6.88
6.24
$20,014
5.99
4.96
$16,187
$15,678
As of June 30, 2010, the estimated fair value of unvested employee awards was $5.1 million, net of
estimated forfeitures. The weighted-average remaining vesting period for these awards is approximately
three years.
76
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
A summary of option activity for shares vested during the fiscal years ended June 30, 2010, 2009
and 2008 is presented below (in thousands):
Year Ended June 30,
2010
2009
2008
Total fair value of shares vested . . . . . . . . . . . . . . . . . . . .
Total intrinsic value of options exercised . . . . . . . . . . . . .
Cash received for exercise of stock options . . . . . . . . . . . .
$2,410
1,888
3,461
$2,838
920
1,314
$2,817
1,749
1,093
During the year ended June 30, 2009, the Company recorded approximately $843,000 of stock-
based compensation expense related to certain stock options previously granted to the former Chief
Executive Officer of the Company that were modified in accordance with the succession plan approved
by the Company’s Board of Directors in September 2008. No similar charges were recorded during the
years ended June 30, 2010 and 2008.
Comprehensive Loss
The Company presents comprehensive loss in accordance with ASC Topic 220, Comprehensive
Income. Comprehensive loss is comprised of the Company’s net loss for the period and unrealized gains
and losses recognized on available-for-sale marketable securities.
Segment Information
During the three fiscal years ended June 30, 2010, the Company continued to operate in one
reportable business segment under the management approach of ASC Topic 280, Segments Reporting,
which is the business of discovery of monoclonal antibody-based anticancer therapeutics.
The percentages of revenues recognized from significant customers of the Company in the years
ended June 30, 2010, 2009 and 2008 are included in the following table:
Collaborative Partner:
Amgen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
sanofi-aventis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bayer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Biogen Idec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Biotest
Genentech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
June 30,
2010
2009
2008
32% 2% 1%
28% 45% 48%
15% 2% —
13% 7% 8%
9% 13% 8%
3% 26% 34%
There were no other customers of the Company with significant revenues in the years ended
June 30, 2010, 2009 and 2008.
77
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
B. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-13, ‘‘Multiple-
Deliverable Revenue Arrangements’’ (ASU No. 2009-13). ASU No. 2009-13, which amends existing
revenue recognition accounting pronouncements and provides accounting principles and application
guidance on whether multiple deliverables exist, how the arrangement should be separated, and the
consideration allocated. This guidance eliminates the requirement to establish the fair value of
undelivered products and services and instead provides for separate revenue recognition based upon
management’s estimate of the selling price for an undelivered item when there is no other means to
determine the fair value of that undelivered item. Previous accounting principles required that the fair
value of the undelivered item be the price of the item either sold in a separate transaction between
unrelated third parties or the price charged for each item when the item is sold separately by the
vendor. This was difficult to determine when the product was not individually sold because of its
unique features. If the fair value of all of the elements in the arrangement was not determinable, then
revenue was deferred until all of the items were delivered or fair value was determined. This new
approach is effective prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010 (the Company’s fiscal year 2011). While the Company
does not expect the adoption of this standard to have a material impact on its financial position and
results of operations, this standard may impact the Company in the event it completes future
transactions or modifies existing collaborative relationships.
The provisions of ASC Topic 810, ‘‘Consolidation’’, related to the changes to how a reporting
entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated will be effective for fiscal years beginning after November 15,
2009 (our fiscal year 2011). Early application is not permitted. We do not expect the adoption of these
provisions to have a significant impact on our financial position or results of operations.
In March 2010, the FASB issued guidance related to the milestone method of revenue recognition,
which will codify a method of revenue recognition that has been common practice. Under this method,
contingent consideration from research and development activities that is earned upon the achievement
of a substantive milestone is recognized in its entirety in the period in which the milestone is achieved.
This guidance is effective for annual periods beginning on or after June 15, 2010 but may be adopted
as of the beginning of an annual period. Because the Company’s current revenue recognition policy for
milestone payments is consistent with the FASB’s guidance, the Company does not expect the adoption
of this standard will have a material effect on the Company’s consolidated financial position, results of
operations and cash flows.
78
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
C. Agreements
Significant Collaborative Agreements
sanofi-aventis
In July 2003, the Company entered into a broad collaboration agreement with sanofi-aventis to
discover, develop and commercialize antibody-based anticancer therapeutics.
The agreement provides sanofi-aventis with worldwide commercialization rights to new anticancer
therapeutics developed to targets that were included in the collaboration, including the right to use the
Company’s TAP technology and humanization technology in the creation of therapeutics to these
targets. The product candidates (targets) as of June 30, 2010 in the collaboration include SAR3419
(CD19), SAR566658 (CA6), SAR650984 (CD38) and additional compounds at earlier stages of
development that have yet to be disclosed.
The collaboration agreement entitles the Company to receive milestone payments potentially
totaling $21.5 million for each therapeutic developed under the collaboration agreement. Through
June 30, 2010, the Company has earned a total of $4 million in milestone payments related to the three
product candidates noted above and one target not yet disclosed. The Company also earned an
aggregate of $8 million of milestone payments related to two product candidates previously in the
collaboration that have been returned to us along with the rights to the respective targets.
The agreement also entitles the Company to royalties on the commercial sales of any resulting
products if and when such sales commence. Sanofi-aventis is responsible for the cost of the
development, manufacturing and marketing of any products created through the collaboration. The
Company is reimbursed for any preclinical and clinical materials that it makes under the agreement.
The collaboration agreement also provides the Company an option to certain co-promotion rights in
the U.S. on a product-by-product basis. The terms of the collaboration agreement allow sanofi-aventis
to terminate the Company’s co-promotion rights if there is a change of control of the company.
The overall term of the agreement extends to the later of the latest patent to expire or twelve
years after the latest launch of any product discovered, developed and/or commercialized under the
agreement. Sanofi-aventis paid the Company an upfront fee of $12 million in August 2003. Inclusive of
all of its allowed extensions, the agreement enabled the Company to receive committed research
funding totaling $79.3 million over the five years of the research collaboration. The two companies
subsequently agreed to extend the date of research funding through October 31, 2008 to enable
completion of previously agreed-upon research. The Company recorded the research funding as it was
earned based upon its actual resources utilized in the collaboration. The Company earned $81.5 million
of committed funding over the duration of the research program, of which $2.7 million and
$10.8 million were recognized during fiscal years 2009 and 2008, respectively. The Company is now
compensated for research performed for sanofi-aventis on a mutually agreed-upon basis.
In October 2006, sanofi-aventis licensed non-exclusive rights to use the Company’s proprietary
resurfacing technology to humanize antibodies to targets not included in the collaboration, including
antibodies for non-cancer applications. This license provides sanofi-aventis with the non-exclusive right
to use the Company’s proprietary humanization technology through August 31, 2011 with the right to
extend for one or more additional periods of three years each by providing the Company with written
notice prior to expiration of the then-current license term. Under the terms of the license, the
79
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
C. Agreements (Continued)
Company is entitled to a $1 million license fee, half of which was paid upon contract signing and the
second half was paid in August 2008, and in addition, the Company is entitled to receive milestone
payments potentially totaling $4.5 million for each antibody humanized under this agreement and also
royalties on commercial sales, if any.
In August 2008, sanofi-aventis exercised its option under a 2006 agreement for expanded access to
ImmunoGen’s TAP technology. The exercise of this option enables sanofi-aventis to evaluate, with
certain restrictions, the Company’s maytansinoid TAP technology with antibodies to targets that were
not included in the existing research collaboration between the companies and to license the exclusive
right to use the technology to develop products to specific targets on the terms in the 2006 agreement.
ImmunoGen is entitled to earn upfront and milestone payments potentially totaling $32 million per
target for each compound developed under the 2006 agreement, as well as royalties on the commercial
sales of any resulting products. ImmunoGen also is entitled to manufacturing payments for any
materials made on behalf of sanofi-aventis. The Company received $3.5 million with the exercise of this
option in August 2008, in addition to the $500,000 ImmunoGen received in December 2006 with the
signing of the option agreement. The agreement has a three-year term from the date of the exercise of
the option and can be renewed by sanofi-aventis for one additional three-year term by payment of a
$2 million fee.
Genentech
In May 2000, the Company entered into two separate agreements with Genentech. The first
agreement grants Genentech an exclusive license to the Company’s maytansinoid TAP technology for
use with antibodies, such as trastuzumab, that target HER2. Under the terms of this agreement,
Genentech has exclusive worldwide rights to develop and commercialize maytansinoid TAP compounds
with antibodies that target HER2. Genentech is responsible for the manufacturing, product
development and marketing of any products resulting from the agreement. The Company received a
$2 million non-refundable payment from Genentech upon execution of the agreement. The Company is
also entitled to up to $44 million in milestone payments from Genentech under this agreement, as
amended in May 2006, in addition to royalties on the net sales of any resulting products. Genentech
began Phase II evaluation of T-DM1 in July 2007 and the Company earned a $5 million milestone
payment with this event, which is included in license and milestone fees for the fiscal year ended
June 30, 2008. Genentech and Roche began Phase III evaluation of T-DM1 in February 2009 and the
company earned a $6.5 million milestone payment with this event. This milestone is included in license
and milestone fees for the fiscal year ended June 30, 2009. Through June 30, 2010, the Company has
received $13.5 million in milestone payments.
In May 2000 the Company also entered into a ‘‘right-to-test’’ agreement with Genentech. This
agreement provided Genentech with the right to test the Company’s maytansinoid TAP technology with
Genentech antibodies to a defined number of targets on an exclusive basis for specified option periods
and to take exclusive licenses for individual targets on agreed-upon terms to use the Company’s
maytansinoid TAP technology to develop products. The Company received a non-refundable technology
access fee of $3 million when the Company entered into this five-year agreement in May 2000, and an
additional technology access fee of $2 million when Genentech renewed this agreement in April 2005
for the one additional three-year period allowed. The upfront fees were deferred and recognized
80
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
C. Agreements (Continued)
ratably over the period during which Genentech could elect to obtain product licenses. Genentech no
longer has the right to designate new targets under this ‘‘right-to-test’’ agreement.
Under this agreement, Genentech licensed exclusive rights to use the Company’s maytansinoid
TAP technology with antibodies to four undisclosed targets. The most recent license was taken in
December 2008. Under the terms defined in the 2000 ‘‘right-to-test’’ agreement, for each license the
Company received a $1 million license fee and may receive up to $38 million in milestone payments.
The Company is also entitled to receive royalties on the sales of any resulting products. Genentech is
responsible for the development, manufacturing, and marketing of any products resulting from these
licenses.
Biogen Idec
In October 2004, the Company entered into a development and license agreement with Biogen
Idec. The agreement grants Biogen Idec exclusive rights to use the Company’s maytansinoid TAP
technology to develop and commercialize therapeutic compounds to the target Cripto. Biogen Idec is
responsible for the research, development, manufacturing, and marketing of any products resulting
from the license. The Company received a $1 million upfront payment upon execution of the
agreement. In January 2008, Biogen Idec submitted an IND to the FDA for BIIB015, which was
created under this agreement. This event triggered a $1.5 million milestone payment to the Company.
Assuming all benchmarks are met, the Company could receive up to $42 million in milestone payments
under this agreement. The Company is also entitled to receive royalties on net sales of resulting
products. The Company also receives compensation from Biogen Idec for any product development
research done on its behalf, as well as for the production of preclinical and clinical materials.
Biotest
In July 2006, the Company entered into a development and license agreement with Biotest AG.
The agreement grants Biotest exclusive rights to use our maytansinoid TAP technology to develop and
commercialize therapeutic compounds to the target CD138. The Company received a $1 million
upfront payment upon execution of the agreement and could potentially receive up to $35.5 million in
milestone payments, as well as royalties on the sales of any resulting products. The Company receives
payments for manufacturing any preclinical and clinical materials made at the request of Biotest. In
September 2008, Biotest began Phase I evaluation of BT062 which triggered a $500,000 milestone
payment to the Company. This milestone is included in license and milestone fees for the fiscal year
ended June 30, 2009.
The agreement also provides the Company with the right to elect at specific stages during the
clinical evaluation of any compound created under this agreement, to participate in the U.S.
development and commercialization of that compound in lieu of receiving royalties on U.S. sales of
that product and the milestone payments not yet earned. The Company can exercise this right by
making a payment to Biotest of an agreed-upon fee of $5 million or $15 million, depending on the
stage of development. Upon exercise of this right, the Company would share equally with Biotest the
associated costs of product development and commercialization in the U.S. along with the profit, if any,
from U.S. product sales.
81
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
C. Agreements (Continued)
Bayer Schering Pharma
In October 2008, the Company entered into a development and license agreement with Bayer
Schering Pharma AG. The agreement grants Bayer Schering Pharma exclusive rights to use the
Company’s maytansinoid TAP technology to develop and commercialize therapeutic compounds to a
specific target. Bayer Schering Pharma is responsible for the research, development, manufacturing and
marketing of any products resulting from the license. The Company received a $4 million upfront
payment upon execution of the agreement, and—for each compound developed and marketed by Bayer
Schering Pharma under this collaboration—the Company could potentially receive up to $170.5 million
in milestone payments; additionally, the Company is entitled to receive royalties on the sales of any
resulting products. The Company will be compensated by Bayer Schering Pharma at a stipulated rate
for work performed on behalf of Bayer Schering Pharma under a mutually agreed-upon research plan
and budget which may be amended from time to time during the term of the agreement. The Company
also is entitled to receive payments for manufacturing any preclinical and clinical materials at the
request of Bayer Schering Pharma as well as for any related process development activities. The
Company has deferred the $4 million upfront payment and is recognizing this amount as revenue
ratably over the estimated period of substantial involvement. In September 2009, Bayer Schering
Pharma reached a preclinical milestone which triggered a $1 million payment to the Company. This
milestone is included in license and milestone fees for the fiscal year ended June 30, 2010.
Amgen
In September 2009 and November 2009, the Company entered into two development and license
agreements with Amgen Inc. granting Amgen the exclusive right to use the Company’s maytansinoid
TAP technology to develop anticancer therapeutics to specific targets. These licenses were taken under
an agreement established in 2000 between ImmunoGen and Abgenix, Inc., which later was acquired by
Amgen. Under the terms of the licenses, the Company received a $1 million upfront payment with each
license taken. In addition to the $1 million upfront payment, the Company is entitled to earn milestone
payments potentially totaling $34 million per target for each compound developed under the
‘‘right-to-test’’ agreement, as well as royalties on the commercial sales of any resulting products. The
Company has deferred the $1 million upfront payments and is recognizing these amounts as revenue
ratably over the estimated period of substantial involvement.
Other Collaborative Agreements
In December 2004, the Company entered into a development and license agreement with a
predecessor to Centocor Ortho Biotech, a wholly owned subsidiary of Johnson & Johnson. Under the
terms of this agreement, Centocor was granted exclusive worldwide rights to develop and commercialize
anticancer therapeutics that consist of the Company’s maytansinoid cell-killing agent attached to an (cid:2)v
integrin-targeting antibody that was developed by Centocor. Under the terms of the agreement, the
Company received an upfront payment of $1 million upon execution of the agreement.
In December 2007, the Company licensed from Centocor the exclusive, worldwide right to develop
and commercialize a TAP compound, IMGN388, that consists of an (cid:2)v integrin-targeting antibody
developed by them and one of the Company’s maytansinoid cell-killing agents. This license reallocates
the parties’ respective responsibilities and financial obligations from the license referenced above.
82
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
C. Agreements (Continued)
Centocor has the right to opt-in on future development and commercialization of IMGN388 at an
agreed-upon stage in early clinical testing. Should Centocor not exercise this right, Centocor would be
entitled to receive milestone payments potentially totaling $30 million, with the first payment due upon
the completion of a successful Phase III trial, and also royalties on IMGN388 sales, if any. In this
event, ImmunoGen has the right to obtain a new partner for IMGN388, with certain restrictions.
Should Centocor exercise its opt-in right, ImmunoGen would receive an opt-in fee and be released
from its obligation to pay Centocor any milestone payments or royalties on sales. Both companies
would contribute to the costs of developing the compound. The two companies would share equally any
profits on the sales of the compound in the U.S. and ImmunoGen would receive royalties on any
international sales. The companies have agreed to share certain third-party payments. In June 2008, the
FDA approved the IND application for IMGN388. This event triggered a $1 million milestone payment
to a third-party, half of which was paid by ImmunoGen. As of June 30, 2010, the maximum amount
that may be payable in the future to such third-parties under this agreement is $11 million.
In July 2008, the Company received notice of Millennium Pharmaceuticals Inc.’s election to
terminate its exclusive license to the Company’s TAP technology to develop and commercialize
antibody-based cytotoxic products directed to the prostate specific membrane antigen (PSMA) target.
This license was granted pursuant to the Access, Option and License Agreement between the Company
and Millennium dated March 30, 2001. As a result of the termination, the Company recognized the
remaining $361,000 of the $1 million upfront fee received from Millennium upon execution of the
license which had been previously deferred, and is included in license and milestone fees for the fiscal
year ended June 30, 2009.
In August 2008, the Company received notice of Boehringer Ingelheim’s election to terminate its
exclusive license to use the Company’s technology to develop and commercialize TAP compounds to
CD44 or the alternative target selected. This license was granted pursuant to the Development and
License Agreement between the Company and Boehringer Ingelheim dated November 27, 2001. As a
result of the termination, the Company recognized the remaining $486,000 of the $1 million upfront fee
received from Boehringer Ingelheim upon execution of the license agreement which had been
previously deferred, and is included in license and milestone fees for the fiscal year ended June 30,
2009.
83
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
D. Marketable Securities
As of June 30, 2010, $109.2 million in cash and money market funds were classified as cash and
cash equivalents. The Company’s cash, cash equivalents and marketable securities as of June 30, 2010
are as follows (in thousands):
Cash and money market funds . . . . . .
Asset-backed securities
Current . . . . . . . . . . . . . . . . . . . . .
Non-current . . . . . . . . . . . . . . . . . .
Corporate notes
Current . . . . . . . . . . . . . . . . . . . . .
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
$ 109,156
$ —
$ —
$ 109,156
25
810
25
8
291
—
—
(17)
—
33
1,084
25
Total
. . . . . . . . . . . . . . . . . . . . .
$ 110,016
$299
$(17)
$ 110,298
Less amounts classified as cash and
cash equivalents . . . . . . . . . . . . . . .
(109,156)
—
—
(109,156)
Total marketable securities . . . . .
$
860
$299
$(17)
$
1,142
As of June 30, 2009, $69.6 million in cash and money market funds were classified as cash and
cash equivalents. The Company’s cash, cash equivalents and marketable securities as of June 30, 2009
are as follows (in thousands):
Cash and money market funds . . . . . . . .
Asset-backed securities
. . . . . . . . . . . . . . . . . . . . . .
Current
Non-current . . . . . . . . . . . . . . . . . . .
Corporate notes
Current
. . . . . . . . . . . . . . . . . . . . . .
Non-current . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
Less amounts classified as cash and cash
equivalents . . . . . . . . . . . . . . . . . . . .
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
$ 69,639
$ —
$ — $ 69,639
395
1,024
250
25
25
201
—
1
(25)
(410)
—
—
395
815
250
26
$ 71,333
$227
$(435)
$ 71,125
(69,639)
—
—
(69,639)
Total marketable securities . . . . . . .
$ 1,694
$227
$(435)
$ 1,486
In 2010, the Company had no realized losses or gains. In 2009, the Company realized losses of
$33,000 and had no realized gains. In 2008, the Company realized losses of $42,000 and realized gains
of $3,000.
84
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
D. Marketable Securities (Continued)
As of June 30, 2010, the Company had 13 individual securities in its investment portfolio, of which
four were in an unrealized loss position. The aggregate fair value of investments with unrealized losses
was approximately $348,000 as of June 30, 2010, and all of which had been in an unrealized loss
position for a year or more, as of June 30, 2010. As of June 30, 2009, the Company had 19 individual
securities in its investment portfolio, of which seven were in an unrealized loss position. The aggregate
fair value of investments with unrealized losses was approximately $705,000 as of June 30, 2009, of
which $332,000 had been in an unrealized loss position for more than a year. See Note B
Other-than-Temporary Impairments. The Company reviewed its investments with unrealized losses and as
a result recorded $516,000 and $535,000, respectively, as an other-than-temporary impairment charge
during the years ended June 30, 2009 and 2008. No similar charges were incurred during the fiscal year
ended June 30, 2010.
In July 2010, the Company sold the remaining securities in its investment portfolio, resulting in a
net realized gain of approximately $339,000.
E. Property and Equipment
Property and equipment consisted of the following at June 30, 2010 and 2009 (in thousands):
June 30,
2010
2009
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 25,272
12,083
2,072
1,273
1,235
$ 25,189
11,910
1,635
1,361
766
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . .
$ 41,935
(25,609)
$ 40,861
(21,190)
Property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . .
$ 16,326
$ 19,671
Depreciation expense was approximately $4.8 million, $5.0 million and $4.4 million for the years
ended June 30, 2010, 2009 and 2008, respectively.
85
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
F.
Income Taxes
The difference between the Company’s expected tax benefit, as computed by applying the U.S.
federal corporate tax rate of 34% to loss before the(benefit) provision for income taxes, and actual tax
is reconciled in the following chart (in thousands):
Loss before income tax expense . . . . . . . . . . . . . . .
$(51,177) $(32,037) $(31,993)
Year Ended June 30,
2010
2009
2008
Expected tax benefit at 34% . . . . . . . . . . . . . . . . . .
State tax benefit net of federal benefit
. . . . . . . . . .
Increase in valuation allowance, net . . . . . . . . . . . .
Expired loss and credit carryforwards . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(17,400) $(10,893) $(10,888)
(394)
4,538
6,235
536
(2,002)
11,991
6,858
288
(677)
1,531
7,924
2,015
(Benefit) provision for income taxes . . . . . . . . . . . .
$
(265) $
(100) $
27
At June 30, 2010, the Company has net operating loss carryforwards of approximately
$229.1 million available to reduce federal taxable income, if any, that expire in 2011 through 2030 and
$143.1 million available to reduce state taxable income, if any, that expire in fiscal 2011 through fiscal
2015. A portion of such carryforwards related to the exercise of stock options and the related tax
benefit will result in an increase in additional paid-in capital if and when realized. The Company also
has federal and state research tax credits of approximately $9.4 million available to offset federal and
state income taxes, which expire beginning in fiscal 2011. Due to the degree of uncertainty related to
the ultimate use of the loss carryforwards and tax credits, the Company has established a valuation
allowance to fully reserve these tax benefits.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company’s deferred tax assets as of June 30, 2010 and 2009
are as follows (in thousands):
June 30,
2010
2009
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . .
Research and development tax credit carryforwards . . . . . . . .
Property and other intangible assets . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred lease incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 85,459
7,986
197
4,581
1,510
3,747
2,444
$ 74,626
8,081
(745)
5,005
879
4,132
2,148
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 105,924
(105,924)
$ 94,126
(94,126)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
—
86
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
F.
Income Taxes (Continued)
The valuation allowance increased by $11.8 million during 2010 due primarily to the greater net
loss recognized during the year compared to last and deferred revenue timing differences.
Utilization of the NOL and R&D credit carryforwards may be subject to a substantial annual
limitation due to ownership change limitations that have occurred previously or that could occur in the
future as provided by Section 382 of the Internal Revenue Code of 1986, as well as similar state and
foreign provisions. These ownership changes may limit the amount of NOL and R&D credit carry
forwards that can be utilized annually to offset future taxable income and tax, respectively. In general,
an ownership change, as defined by Section 382, results from transactions increasing the ownership of
certain shareholders or public groups in the stock of a corporation by more than 50 percentage points
over a three-year period. Since the Company’s formation, it has raised capital through the issuance of
capital stock on several occasions (both pre and post initial public offering) which, combined with the
purchasing shareholders’ subsequent disposition of those shares, may have resulted in a change of
control, as defined by Section 382, or could result in a change of control in the future upon subsequent
disposition. The Company has not currently completed a study to assess whether a change of control
has occurred or whether there have been multiple changes of control since its formation due to the
significant complexity and cost associated with such study and the possibility that there could be
additional changes in control in the future. If the Company has experienced a change of control at any
time since its formation, utilization of its NOL or R&D credit carry forwards would be subject to an
annual limitation under Section 382 which is determined by first multiplying the value of the
Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and
then could be subject to additional adjustments, as required. Any limitation may result in expiration of
a portion of the NOL or R&D credit carry forwards before utilization. Further, until a study is
completed and any limitation known, no amounts are being presented as an uncertain tax position. The
Company does not expect to have any taxable income for at least the next several years.
The Company did not recognize any interest and penalties associated with unrecognized tax
benefits in the accompanying consolidated financial statements. The Company does not expect any
material changes to the unrecognized benefits within 12 months of the reporting date. Due to existence
of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective
tax rate. The Company’s loss carryforwards are subject to adjustment by state and federal taxing
authorities, commencing when those losses are utilized to reduce taxable income.
G. Capital Stock
Sale of Common Stock
On April 9, 2010, the Company filed a Registration Statement on Form S-3 with the Securities and
Exchange Commission. The Securities and Exchange Commission declared the Registration Statement
effective on April 22, 2010. Subject to the Company’s ongoing obligations under the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, the Registration Statement
permits the Company to offer and sell up to an aggregate of $125 million of its common stock.
Pursuant to the shelf registration statement, in May 2010, the Company issued and sold 10,350,000
shares of its common stock at $8.00 per share through a public offering resulting in gross proceeds of
$82.8 million.
87
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
G. Capital Stock (Continued)
On July 11, 2007, the Company filed a Registration Statement on Form S-3 with the Securities and
Exchange Commission. The Registration Statement permitted the Company to offer and sell up to an
aggregate of $75 million of its common stock. Pursuant to the shelf registration statement, in June
2009, the Company issued and sold 5,750,000 shares of its common stock at $7.00 per share through a
public offering resulting in gross proceeds of $40.3 million, and in June 2008, a private investor
purchased 7,812,500 shares of its common stock at $3.20 per share resulting in gross proceeds of
$25 million.
Common Stock Reserved
At June 30, 2010, the Company has reserved 7.81 million shares of authorized common stock for
the future issuance of shares under the 2006 Plan. See ‘‘Stock-Based Compensation’’ in Note B for a
description of the 2006 Plan and the Former Plan.
Stock Options
As of June 30, 2010, the 2006 Plan was the only employee share-based compensation plan of the
Company. During the year ended June 30, 2010, holders of options issued under the 2006 Plan and the
Former Plan exercised their rights to acquire an aggregate of 634,178 shares of common stock at prices
ranging from $2.03 to $8.57 per share. The total proceeds to the Company from these option exercises
were approximately $3.5 million.
The Company has granted options at the fair market value of the common stock on the date of
such grant. The following options and their respective weighted-average exercise prices per share were
exercisable at June 30, 2010, 2009 and 2008:
Exercisable
(in thousands)
Weighted-
Average
Exercise Price
June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,011
3,906
3,430
$6.88
$7.25
$7.57
2001 Non-Employee Director Stock Plan
In November 2001, the Company’s shareholders approved the establishment of the 2001
Non-Employee Director Stock Plan, or the 2001 Director Plan, and 50,000 shares of common stock to
be reserved for grant thereunder. The 2001 Director Plan provided for the granting of awards to
Non-Employee Directors and, at the election of Non-Employee Directors, to have all or a portion of
their awards in the form of cash, stock, or stock units. All stock or stock units are immediately vested.
The number of stock or stock units issued was determined by the market value of the Company’s
common stock on the last date of the Company’s fiscal quarter for which the services are rendered.
The 2001 Director Plan was administered by the Board of Directors which was authorized to interpret
the provisions of the 2001 Director Plan, determine which Non-Employee Directors would be granted
awards, and determine the number of shares of stock for which a stock right will be granted. The 2001
Director Plan was replaced in 2004 by the 2004 Non-Employee Director Compensation and Deferred
Share Unit Plan.
88
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
G. Capital Stock (Continued)
During the years ended June 30, 2010, 2009 and 2008, the Company recorded approximately
$10,000, $84,000, and ($38,000) in compensation expense (expense reduction), respectively, related to
approximately 15,000 stock units outstanding under the 2001 Director Plan. The value of the stock units
is adjusted to market value at each reporting period. No stock units have been issued under the 2001
Plan subsequent to June 30, 2004.
2004 Non-Employee Director Compensation and Deferred Share Unit Plan
In June 2004, the Board of Directors approved the establishment of the 2004 Non-Employee
Director Compensation and Deferred Share Unit Plan, or the 2004 Director Plan. The 2004 Director
Plan provided for the compensation to Non-Employee Directors, awarding their annual retainers in the
form of deferred share units, and, at their discretion, to have all or a portion of their other
compensation such as meeting fees in the form of cash or deferred share units. The deferred share
units for annual retainers vested one-twelfth monthly over the next year after the award; other deferred
share units vested immediately upon issuance. The number of deferred share units issued was
determined by the market value of the Company’s common stock on the last date of the Company’s
fiscal year prior to the fiscal year for which services were rendered. The deferred share units were to be
paid out in cash to each non-employee director based upon the market value of the Company’s
common stock on the date of such director’s retirement from the Board of Directors of the Company.
The 2004 Director Plan was administered by the Board of Directors.
The 2004 Director Plan was amended on September 5, 2006. Under the terms of the amended
2004 Director Plan, the redemption amount of deferred share units will be paid in shares of common
stock of the Company under the 2006 Plan in lieu of cash. As a result of the change in payout
structure, the value of the vested awards was transferred to additional paid-in capital as of the
modification date and the total value of the awards, as calculated on the modification date, was
expensed over the remainder of the vesting period. Accordingly, the value of the share units is fixed
and will no longer be adjusted to market value at each reporting period. In addition, the amended 2004
Director Plan changed the vesting for annual retainers to take place quarterly over the three years after
the award and the number of deferred share units awarded for all compensation is now based on the
market value of the Company’s common stock on the date of the award.
On September 16, 2009, the Board adopted a new Compensation Policy for Non-Employee
Directors, which superseded the 2004 Plan and made certain changes to the compensation of its
non-employee directors. The policy was amended on November 11, 2009 to provide that, whenever the
Board has a non-employee Chairman in lieu of a Lead Director, the cash payment for the
non-employee Chairman of the Board shall be the same as the cash compensation that would otherwise
have been payable to the Lead Director. Effective November 12, 2009, non-employee directors became
entitled to receive annual meeting fees and committee fees under the new policy. The new policy made
changes to the equity portion of the non-employee director compensation, but left the cash portion
unchanged. Effective November 11, 2009, non-employee directors became entitled to receive deferred
stock units under the new policy as follows.
(cid:129) New non-employee directors will be initially awarded a number of deferred stock units having an
aggregate market value of $65,000, based on the closing price of our common stock on the date
of their initial election to the Board. These awards will vest quarterly over three years from the
89
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
G. Capital Stock (Continued)
date of grant, contingent upon the individual remaining a director of ImmunoGen as of each
vesting date.
(cid:129) On the first anniversary of a non-employee director’s initial election to the Board, such
non-employee director will be awarded a number of deferred stock units having an aggregate
market value of $30,000, based on the closing price of our common stock on such date of grant
and pro-rated based on the number of whole months remaining between the first day of the
month in which such grant date occurs and the first October 31 following the grant date. These
awards will generally vest quarterly over approximately the period from the grant date to the
first November 1 following the grant date, contingent upon the individual remaining a director
of ImmunoGen as of each vesting date.
(cid:129) Thereafter, non-employee directors in general will be annually awarded a number of deferred
stock units having an aggregate market value of $30,000, based on the closing price of our
common stock on the date of our annual meeting of shareholders. These awards will vest
quarterly over approximately one year from the date of grant, contingent upon the individual
remaining a director of ImmunoGen as of each vesting date.
As with the 2004 Plan, vested deferred stock units are redeemed on the date a director ceases to
be a member of the Board, at which time such director’s deferred stock units will be settled in shares
of our common stock issued under our 2006 Plan at a rate of one share for each vested deferred stock
unit then held. Any deferred stock units that remain unvested at that time will be forfeited. The new
policy provides that all unvested deferred stock units will automatically vest immediately prior to the
occurrence of a change of control, as defined in the 2006 Plan.
In connection with the adoption of the new compensation policy, the Board also amended the
2004 Plan as follows:
(cid:129) All unvested deferred stock awards (other than any unvested initial awards) were vested in full
on September 16, 2009 unless the date such deferred stock units were credited to the
non-employee director was less than one year prior to September 16, 2009, in which case such
unvested deferred stock units will vest on the first anniversary of the date such deferred stock
units were credited to the non-employee director.
(cid:129) All unvested deferred stock awards will automatically vest immediately prior to the occurrence
of a change of control.
Pursuant to the Compensation Policy for Non-Employee Directors and the 2004 Director Plan, as
amended, the Company recorded approximately $460,000 in compensation expense during the year
ended June 30, 2010 related to the issuance of 42,000 deferred share units and 183,000 deferred share
units previously issued under the 2004 Director Plan. Pursuant to the 2004 Director Plan, as amended,
the Company recorded approximately $175,000 in compensation expense during the year ended
June 30, 2009 related to the issuance of 54,000 deferred share units and 129,000 deferred share units
previously issued under the 2004 Director Plan. The Company recorded approximately $92,000 in
compensation expense during the year ended June 30, 2008 related to the issuance of 49,000 deferred
share units and 108,000 deferred share units previously issued under the 2004 Director Plan.
90
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
H. Commitments and Contingencies
Leases
Effective July 27, 2007, the Company entered into a lease agreement with Intercontinental Fund
III for the rental of approximately 89,000 square feet of laboratory and office space at 830 Winter
Street, Waltham, MA. The Company uses this space for its corporate headquarters and other
operations. The initial term of the lease is for twelve years with an option for the Company to extend
the lease for two additional terms of five years. The Company is required to pay certain operating
expenses for the leased premises subject to escalation charges for certain expense increases over a base
amount. The Company entered into a sublease in December 2009 for 14,100 square feet of this space
in Waltham through January 2015, with the sublessee having an option to extend the term for an
additional two years.
As part of the lease agreement, the Company received a construction allowance of up to
approximately $13.3 million to build out laboratory and office space to the Company’s specifications.
After completion, the Company had recorded $12.0 million of leasehold improvements under the
construction allowance. The Company received $10.8 million from the landlord and paid out the same
amount towards these leasehold improvements. The remaining balance of the improvements was paid
directly by the landlord. The lease term began on October 1, 2007, when the Company obtained
physical control of the space in order to begin construction.
Under the terms of the agreement, any remaining construction allowance was to be applied evenly
as a credit to rent for the first year. The final balance of the construction allowance was determined in
August 2008, resulting in a credit of $1.3 million to the Company from the landlord during the fiscal
year 2009 relating to the first year of occupancy.
At June 30, 2010, the Company also leases facilities in Norwood and Cambridge, MA under
agreements through 2011. The Company is required to pay certain operating expenses for the leased
premises subject to escalation charges for certain expense increases over a base amount. The Company
entered into a sub-sublease in May 2008 for the entire space in Cambridge, MA through October 2010,
the remainder of the sublease. Both the lease and sub-sublease for the Cambridge facility were
terminated as of July 31, 2010.
Facilities rent expense, net of sublease income, was approximately $5.4 million, $5.0 million and
$5.3 million during fiscal years 2010, 2009 and 2008, respectively. During fiscal 2008, the Company
recorded $1.8 million of rent expense related to the Waltham, MA facility for the period prior to
occupancy, which has been classified as general and administrative expense in the accompanying
Consolidated Statement of Operations for the year ended June 30, 2008.
91
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
H. Commitments and Contingencies (Continued)
As of June 30, 2010, the minimum rental commitments, including real estate taxes and other
expenses, for the next five fiscal years and thereafter under the non-cancelable operating lease
agreements discussed above are as follows (in thousands):
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,829
4,831
4,831
4,898
5,098
24,974
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum rental income from subleases . . . . . . . . . . . . . . . . . . . . . .
$50,461
(3,063)
Total minimum lease payments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$47,398
Collaborations
The Company is contractually obligated to make potential future success-based regulatory
milestone payments in conjunction with certain collaborative agreements. These payments are
contingent upon the occurrence of certain future events and, given the nature of these events, it is
unclear when, if ever, the Company may be required to pay such amounts. Further, the timing of any
future payment is not reasonably estimable. As of June 30, 2010, the maximum amount that may be
payable in the future under such arrangements is approximately $43.2 million.
Litigation
The Company is not party to any material litigation.
I.
Employee Benefit Plans
The Company has a deferred compensation plan under Section 401(k) of the Internal Revenue
Code (the 401(k) Plan). Under the 401(k) Plan, eligible employees are permitted to contribute, subject
to certain limitations, up to 100% of their gross salary. Effective February 1, 2008, the Company
increased its matching contribution to 50% of the first 6% of the eligible employees’ contributions,
compared to 20% of the first 7% of the eligible employees’ contributions previously. In fiscal years
2010, 2009 and 2008, the Company’s contributions to the 401(k) Plan totaled approximately $450,000,
$429,000, and $268,000, respectively.
92
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
J. Quarterly Financial Information (Unaudited)
Fiscal Year 2010
First Quarter
Ended
Second Quarter
Ended
Third Quarter
Ended
September 30, 2009 December 31, 2009 March 31, 2010
Fourth Quarter
Ended
June 30, 2010
(In thousands, except per share data)
Revenues:
Research and development support . . .
License and milestone fees . . . . . . . . .
Clinical materials reimbursement . . . .
Total revenues . . . . . . . . . . . . . . . .
$
782
1,831
486
3,099
Expenses:
Research and development . . . . . . . . .
General and administrative . . . . . . . .
Total expenses . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . .
. . . . . . .
Other income (expense), net
Loss before income tax benefit
. . . . . . .
Income tax benefit . . . . . . . . . . . . . . .
12,188
3,592
15,780
(12,681)
144
(12,537)
(162)
$ 1,283
827
998
3,108
12,211
3,886
16,097
(12,989)
(19)
(13,008)
—
$ 1,805
1,266
243
3,314
12,091
3,447
15,538
(12,224)
(3)
(12,227)
(103)
$ 1,495
1,774
1,153
4,422
13,790
3,973
17,763
(13,341)
(64)
(13,405)
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . .
$(12,375)
$(13,008)
$(12,124)
$(13,405)
Basic and diluted net loss per
common share . . . . . . . . . . . . . . . .
$
(0.22)
$
(0.23)
$
(0.21)
$ (0.21)
93
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF JUNE 30, 2010
J. Quarterly Financial Information (Unaudited) (Continued)
Fiscal Year 2009
First Quarter
Ended
Second Quarter
Ended
Ended
Third Quarter Fourth Quarter
September 30, 2008 December 31, 2008 March 31, 2009
(In thousands, except per share data)
Revenues:
Research and development support . . . .
License and milestone fees . . . . . . . . . .
Clinical materials reimbursement . . . . . .
Total revenues . . . . . . . . . . . . . . . . .
Expenses:
Research and development . . . . . . . . . .
General and administrative . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . .
Loss before income tax expense (benefit) .
Income tax expense (benefit) . . . . . . . .
$ 3,207
2,223
696
6,126
11,860
3,678
15,538
(9,412)
16
(9,396)
1
$ 2,283
4,766
2,285
9,334
12,888
3,521
16,409
(7,075)
(129)
(7,204)
(101)
$
908
7,314
4
8,226
9,493
3,243
12,736
(4,510)
(100)
(4,610)
—
Ended
June 30, 2009
$ 1,168
814
2,320
4,302
11,663
3,458
15,121
(10,819)
(8)
(10,827)
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
$ (9,397)
$ (7,103)
$ (4,610)
$(10,827)
Basic and diluted net loss per common
share . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.19)
$ (0.14)
$ (0.09)
$ (0.21)
94
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
1. Disclosure Controls and Procedures
The Company’s management, with the participation of its principal executive officer and principal
financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures
(as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) as
of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, the
Company’s principal executive officer and principal financial officer have concluded that, as of the end
of such period, the Company’s disclosure controls and procedures were adequate and effective.
2.
Internal Control Over Financial Reporting
(a) Management’s Annual Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the
Company’s principal executive and principal financial officers and effected by the Company’s board of
directors, management and other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles in the U.S. and includes those policies and procedures that:
(cid:129) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
(cid:129) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(cid:129) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the
risks that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting
as of June 30, 2010. In making this assessment, management used the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, or COSO.
Based on this assessment, management has concluded that, as of June 30, 2010 the Company’s
internal control over financial reporting is effective.
Ernst & Young LLP, the Company’s independent registered public accounting firm, has issued a
report on the effectiveness of the Company’s internal control over financial reporting, as of June 30,
2010. This report appears immediately below.
95
(b) Attestation Report of the Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of ImmunoGen, Inc.
We have audited ImmunoGen, Inc.’s internal control over financial reporting as of June 30, 2010,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). ImmunoGen, Inc.’s
management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, ImmunoGen, Inc. maintained, in all material respects, effective internal control
over financial reporting as of June 30, 2010 based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of ImmunoGen, Inc. as of June 30,
2010 and 2009, and the related consolidated statements of operations, shareholders’ equity, and cash
flows for each of the three years in the period ended June 30, 2010 and our report dated August 27,
2010 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
August 27, 2010
96
(c) Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter
ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
3. Limitations on the Effectiveness of Controls
The Company’s management, including its principal executive officer and principal financial officer,
does not expect that the Company’s disclosure controls and procedures or its internal control over
financial reporting will prevent all error and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within an organization have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of
two or more people, or by management override of the control. The design of any system of controls
also is based in part upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving our stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information
None.
97
PART III
The information called for by Part III of Form 10-K (Item 10—Directors, Executive Officers and
Corporate Governance of the Registrant, Item 11—Executive Compensation, Item 12—Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Item 13—
Certain Relationships and Related Transactions, and Director Independence, and Item 14—Principal
Accounting Fees and Services) is incorporated by reference from our proxy statement related to our
2010 annual meeting of shareholders, which will be filed with the Securities and Exchange Commission
not later than October 28, 2010 (120 days after the end of the fiscal year covered by this Annual
Report on Form 10-K), except that information required by Item 10 concerning our executive officers
appears in Part I, Item 3.1 of this Annual Report on Form 10-K.
98
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements:
PART IV
(1) See ‘‘Index to Consolidated Financial Statements’’ at Item 8 of this Annual Report on
Form 10-K. Schedules not included herein are omitted because they are not applicable or the
required information appears in the accompanying Consolidated Financial Statements or Notes
thereto.
(2) The following schedule is filed as part of this Annual Report on Form 10-K:
Schedule II—Valuation and Qualifying Accounts for the years ended June 30, 2010, 2009 and 2008.
(3) See Exhibit Index following the signature page to this Annual Report on Form 10-K.
99
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
IMMUNOGEN, INC.
By:
/s/ DANIEL M. JUNIUS
Daniel M. Junius
President and
Chief Executive Officer
(Principal Executive Officer)
Dated: August 27, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ DANIEL M. JUNIUS
Daniel M. Junius
/s/ GREGORY D. PERRY
Gregory D. Perry
/s/ STEPHEN MCCLUSKI
Stephen McCluski
/s/ MITCHEL SAYARE
Mitchel Sayare
/s/ DAVID W. CARTER
David W. Carter
/s/ NICOLE ONETTO, M.D.
Nicole Onetto
/s/ MARK SKALETSKY
Mark Skaletsky
/s/ JOSEPH VILLAFRANCA
Joseph Villafranca
/s/ RICHARD WALLACE
Richard Wallace
/s/ HOWARD PIEN
Howard Pien
President, Chief Executive Officer and Director
(Principal Executive Officer)
August 27, 2010
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
August 27, 2010
Chairman of the Board of Directors
August 27, 2010
Director
Director
Director
Director
Director
Director
Director
100
August 27, 2010
August 27, 2010
August 27, 2010
August 27, 2010
August 27, 2010
August 27, 2010
August 27, 2010
EXHIBIT INDEX
Exhibit
Number
3.1
3.2
4.1
4.2
10.1
10.1(a)
10.1(b)
10.1(c)
10.1(d)
10.1(e)
10.1(f)
10.1(g)
10.1(h)
10.2
10.3
Exhibit Description
Restated Articles of Organization, as amended
Amended and Restated By-Laws
Article 4 of Restated Articles of Organization, as
amended (see Exhibit 3.1)
Form of Common Stock certificate
Leases dated as of December 1, 1986 and June 21,
1988 by and between James H. Mitchell, Trustee of
New Providence Realty Trust, lessor, and Charles
River Biotechnical Services, Inc. (‘‘Lessee’’),
together with Assignment of Leases dated June 29,
1989 between Lessee and the Registrant
First Amendment to Lease dated May 9, 1991 by
and between James H. Mitchell, Trustee of New
Providence Realty Trust, lessor, and the Registrant
Confirmatory Second Amendment to Lease dated
September 17, 1997 by and between James H.
Mitchell, Trustee of New Providence Realty Trust,
lessor, and the Registrant
Third Amendment and Partial Termination of Lease
dated as of August 8, 2000 by and between James
H. Mitchell, Trustee of New Providence Realty
Trust, lessor, and the Registrant
Fourth Amendment to Lease dated as of October 3,
2000 by and between James H. Mitchell, Trustee of
New Providence Realty Trust, lessor, and the
Registrant
Fifth Amendment to Lease dated as of June 7, 2001
by and between James H. Mitchell, Trustee of New
Providence Realty Trust, lessor, and the Registrant
Sixth Amendment to Lease dated as of April 30,
2002 by and between Bobson 333 L.L.C., lessor, and
the Registrant
Seventh Amendment to Lease dated as of
October 20, 2005 by and between Bobson 333
L.L.C., lessor, and the Registrant
Eighth Amendment to Lease dated as of
February 21, 2007 by and between Bobson 333
L.L.C., lessor, and the Registrant
Lease Agreement, dated as of July 27, 2007, by and
between Intercontinental Fund III 830 Winter
Street LLC, landlord, and the Registrant
Research and License Agreement dated as of
May 22, 1981 by and between the Registrant and
Sidney Farber Cancer Institute, Inc. (now
Dana-Farber Cancer Institute, Inc.), with addenda
dated as of August 13, 1987 and August 22, 1989
101
Filed
with this
Form 10-K Form
Incorporated by Reference
Filing Date
with SEC
Exhibit
Number
10-Q
8-K
April 30, 2010
April 6, 2007
S-1 November 15, 1989
(File No. 33-31219)
3.1
3.1
4.2
S-1 September 22, 1989
(File No. 33-31219)
10.10
S-1 November 6, 1991 10.10a
(File No. 33-43725)
10-K September 26, 1997
10.10
10-K September 2, 2008
10.1(c)
10-K September 2, 2008 10.1(d)
10-K September 2, 2008 10.1(e)
10-K September 2, 2008
10.1(f)
10-K September 2, 2008 10.1(g)
10-K September 2, 2008 10.1(h)
10-Q November 7, 2007
10.2
S-1 September 22, 1989
(File No. 33-31219)
10.1
Exhibit
Number
10.4*
10.4(a)
Exhibit Description
License Agreement dated as of June 1, 1998 by and
between the Registrant and Pharmacia & Upjohn
AB
Amendment to License Agreement dated as of
October 23, 1998 by and between the Registrant and
Pharmacia & Upjohn AB
Filed
with this
Form 10-K Form
Incorporated by Reference
Filing Date
with SEC
Exhibit
Number
10-K September 29, 1998
10.48
10-K September 2, 2008 10.4(a)
10.5*
License Agreement dated effective May 2, 2000 by
and between the Registrant and Genentech, Inc.
10-K September 27, 2000
10.51
10.5(a)* Amendment to License Agreement for Anti-HER2
10-K
August 28, 2006
10.32
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
Antibodies, dated as of May 3, 2006, between the
Registrant and Genentech, Inc.
License Agreement executed November 13, 2006,
effective as of July 22, 2005, between the Registrant
and Genentech, Inc.
License Agreement executed February 21, 2007,
effective as of April 27, 2005, between the
Registrant and Genentech, Inc.
License Agreement executed February 21, 2007,
effective as of December 12, 2005, between the
Registrant and Genentech, Inc.
Amendment to License Agreements made effective
as of March 11, 2009, between the Registrant and
Genentech, Inc.
Option and License Agreement dated September 5,
2000 by and between the Registrant and Amgen Inc.
(as successor-in-interest to Abgenix, Inc.)
Collaboration and License Agreement dated as of
July 30, 2003 by and between the Registrant and
sanofi-aventis U.S. LLC (as successor-in-interest to
Aventis Pharmaceuticals Inc.)
10-Q
February 8, 2007
10.3
10-Q
May 9, 2007
10.1
10-Q
May 9, 2007
10.2
10-Q
May 7, 2009
10.1
8-K/A
October 10, 2000
10.1
10-Q November 14, 2003
10.1
10.11(a)* Amendment No. 1, dated as of August 31, 2006, to
the Collaboration and License Agreement between
the Registrant and sanofi-aventis U.S. LLC
10-Q November 3, 2006
10.1
10.11(b)* Amendment No. 2, dated as of October 11, 2007, to
10-Q
February 7, 2008
10.4
the Collaboration and License Agreement between
the Registrant and sanofi-aventis U.S. LLC
10.11(c)* Amendment No. 3, dated as of August 31, 2008, to
the Collaboration and License Agreement between
the Registrant and sanofi-aventis U.S. LLC
10.12*
10.13*
10.14*
License Agreement dated as of October 5, 2006 by
and between the Registrant and sanofi-aventis
U.S. LLC
Option and License Agreement dated as of
December 21, 2006 by and between the Registrant
and sanofi-aventis U.S. LLC
Development and License Agreement dated as of
October 1, 2004 by and between the Registrant and
Biogen Idec MA Inc.
102
10-Q
February 6, 2009
10.7
10-Q
February 8, 2007
10.1
10-Q
February 8, 2007
10.2
10-Q
February 9, 2005
10.1
Exhibit
Number
10.15*
Exhibit Description
Collaborative Development and License Agreement
dated as of July 7, 2006 by and between the
Registrant and Biotest AG
Filed
with this
Form 10-K Form
Incorporated by Reference
Filing Date
with SEC
Exhibit
Number
10-Q November 3, 2006
10.2
10.15(a)* Amendment No. 1, dated August 23, 2006, to
10-Q November 3, 2006
10.3
10.16
Collaborative Development and License Agreement
by and between the Registrant and Biotest AG
Registration Rights Agreement dated as of June 20,
2008 by and between the Registrant and Ziff Asset
Management, L.P.
10.17†
Restated Stock Option Plan
10.17(a)† Form of Incentive Stock Option Agreement
10.17(b)† Form of Non-Qualified Stock Option Agreement
10.18†
2006 Employee, Director and Consultant Equity
Incentive Plan, as amended and restated through
November 12, 2008
8-K
June 23, 2008
10.2
8-K
8-K
8-K
February 7, 2006
February 7, 2006
February 7, 2006
8-K November 14, 2008
10.1
10.2
10.3
10.1
10.18(a)† Form of Incentive Stock Option Agreement for
S-8 November 15, 2006
99.4
Executives
10.18(b)† Form of Non-Qualified Stock Option Agreement for
S-8 November 15, 2006
99.5
Executives
10.18(c)† Form of Non-Qualified Stock Option Agreement for
S-8 November 15, 2006
99.6
Directors
10.18(d)† Form of Restricted Stock Agreement for Executives
10.18(e)† Form of Restricted Stock Agreement for Directors
10.19†
10.20†
10.21†
10.22†
10.23†
10.24†
10.25†
10.26†
10.27†
10.28†
10.29†
2001 Non-Employee Director Stock Plan
2004 Non-Employee Director Compensation and
Deferred Stock Unit Plan, as amended through
September 16, 2009
Form of Proprietary Information, Inventions and
Competition Agreement between the Registrant and
each of its executive officers
Amendment to Stock Option Agreements dated as
of September 24, 2008 between the Registrant and
Mitchel Sayare
Severance Agreement dated as of December 1, 2008
between the Registrant and Daniel M. Junius
Severance Agreement dated as of December 1, 2008
between the Registrant and John M. Lambert
Severance Agreement dated as of December 1, 2008
between the Registrant and James J. O’Leary
Severance Agreement dated as of January 9, 2009
between the Registrant and Gregory D. Perry
Severance Agreement dated as of August 17, 2009
between the Registrant and Peter Williams
Employment offer letter between the Registrant and
Gregory D. Perry
Employment offer letter between the Registrant and
James J. O’Leary
103
S-8 November 15, 2006
S-8 November 15, 2006
S-8 December 18, 2001
10-Q November 4, 2009
99.9
99.8
99
10.1
10-Q
February 8, 2007
10.15
10-Q
October 31, 2008
10.1
10-Q
February 6, 2009
10.1
10-Q
February 6, 2009
10.3
10-Q
February 6, 2009
10.4
10-Q
February 6, 2009
10.5
10-K
August 28, 2010
10.30
10-Q
February 6, 2009
10.6
10-K
August 28, 2010
10.32
Filed
with this
Form 10-K Form
Incorporated by Reference
Filing Date
with SEC
Exhibit
Number
10-Q
January 29, 2010
10.1
10-Q November 7, 2007
10-K
August 30, 2007
10.1
21
Exhibit
Number
10.30†
Exhibit Description
Compensation Policy for Non-Employee Directors,
as amended through November 11, 2009
10.31†
Summary of Annual Executive Bonus Program
21
23
31.1
31.2
32
Subsidiaries of the Registrant
Consent of Ernst & Young LLP
Certification of the Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes- Oxley Act of 2002
X
X
X
X
*
†
Portions of this Exhibit were omitted, as indicated by [***], and have been filed separately with the Secretary
of the Commission pursuant to the Registrant’s application requesting confidential treatment.
Exhibit is a management contract or compensatory plan, contract or arrangement required to be filed as an
exhibit to the annual report on Form 10-K.
104
IMMUNOGEN, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
COLUMN A—DESCRIPTION
Inventory Valuation Allowance
Year End June 30, 2010 . . . . . . . . . . . . . . . . . . .
Year End June 30, 2009 . . . . . . . . . . . . . . . . . . .
Year End June 30, 2008 . . . . . . . . . . . . . . . . . . .
COLUMN B
COLUMN C—
ADDITIONS
COLUMN D
COLUMN E
Balance At
Beginning
of Period
$1,784
$2,534
$1,430
Charged
to Costs
and
Expenses
927
—
3,732
Use of
Zero
Value
Inventory
(1,772)
(750)
(2,628)
Balance at
End of
Period
$ 939
$1,784
$2,534
105
EXHIBIT 31.1
CERTIFICATIONS UNDER SECTION 302
I, Daniel M. Junius, certify that:
1.
I have reviewed this Annual Report on Form 10-K of ImmunoGen, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: August 27, 2010
/s/ DANIEL M. JUNIUS
Daniel M. Junius
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATIONS UNDER SECTION 302
I, Gregory D. Perry, certify that:
1.
I have reviewed this Annual Report on Form 10-K of ImmunoGen, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: August 27, 2010
/s/ GREGORY D. PERRY
Gregory D. Perry
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT 32
CERTIFICATIONS UNDER SECTION 906
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of
section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of
ImmunoGen, Inc., a Massachusetts corporation (the ‘‘Company’’), does hereby certify, to such officer’s
knowledge, that:
The Annual Report for the year ended June 30, 2010 (the ‘‘Form 10-K’’) of the Company fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
the information contained in the Form 10-K fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Dated: August 27, 2010
/s/ DANIEL M. JUNIUS
Daniel M. Junius
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 27, 2010
/s/ GREGORY D. PERRY
Gregory D. Perry
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
A signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
Our Targeted Antibody Payload (TAP) technology uses tumor-targeting antibodies to
deliver one of our potent cancer-cell killing agents specifically to tumor cells. Multiple
TAP compounds are in clinical testing today, with 3-4 more expected to enter the clinic
by the end of 2011.
Clinical-Stage Pipeline Today
Compound
Partner
Indication
Stage
3rd-line in advanced HER2+
Phase II
breast cancer
(completed)
2nd-line in advanced HER2+
breast cancer
Phase III
Trastuzumab-DM1
(T-DM1)
Genentech/
Roche
1st-line in advanced HER2+
breast cancer
Phase III
Adjuvant use in HER2+
breast cancer
Phase II expected
to start 4Q10
Use in combination with other
anticancer agents
Multiple trials
Merkel cell carcinoma
Decision in 4Q10 about
initiating pivotal testing
Small-cell lung cancer (SCLC)
Phase I/II expected
– combination
to start 4Q10
Lorvotuzumab
mertansine
(IMGN901)
Wholly
owned
SCLC, Merkel cell carcinoma,
ovarian cancer – single agent
Phase I
Multiple myeloma
– single agent
Multiple myeloma
– combination
IMGN388
Solid tumors – single agent
Phase I
Wholly
owned*
SAR3419
sanofi-aventis
Non-Hodgkin’s lymphoma
– single agent
BT-062
Biotest*
BIIB015
Biogen Idec
Multiple myeloma
– single agent
Cripto+ solid tumors
– single agent
SAR650984**
sanofi-aventis
Hematologic malignancies
– single agent
SAR566658
sanofi-aventis
CA6+ solid tumors
– single agent
Phase I
Phase I
Phase I
Phase I
Phase I
Phase I
Phase I
Corporate Information
Directors
Chairman of the Board
Stephen C. McCluski
Former Senior Vice President
and Chief Financial Officer,
Baush & Lomb, Inc.
David W. Carter
Former Chairman and
Chief Executive Officer,
Xenogen Corporation
Daniel M. Junius
President and
Chief Executive Officer,
ImmunoGen, Inc.
Nicole Onetto, M.D.
Deputy Director,
Ontario Institute for Cancer
Research
Howard Pien
Former Chairman of the Board
and Chief Executive Officer,
Medarex, Inc.
Mitchel Sayare, Ph.D.
Former President and
Chief Executive Officer,
ImmunoGen, Inc.
Mark Skaletsky
Chairman and
Chief Executive Officer,
Fenway Pharmaceuticals
Joseph J. Villafranca, Ph.D.
Senior Vice President,
Life Sciences,
Business Development,
Tunnell Consulting
Richard J. Wallace
Former Senior Vice President,
Research and Development,
GlaxoSmithKline plc.
Executive Management
Corporate Headquarters
Daniel M. Junius
President and
Chief Executive Officer
John M. Lambert, Ph.D.
Executive Vice President and
Chief Scientific Officer
Gregory D. Perry
Senior Vice President and
Chief Financial Officer
Craig Barrows
Vice President, General Counsel
and Secretary
James J. O’Leary, M.D.
Vice President and
Chief Medical Officer
Peter J. Williams
Vice President,
Business Development
ImmunoGen, Inc.
830 Winter Street
Waltham, MA 02451
781.895.0600
www.immunogen.com
Annual Meeting
11:00 AM on November 16, 2010
at the offices of the Company
830 Winter Street
Waltham, MA 02451
Stock Transfer Agent and
Registrar
BNY Mellon Shareowner Services
Newport Office Center VII
480 Washington Boulevard
Jersey City, NJ 07310
www.bnymellon.com/shareowners/
isd
Toll-Free Number: 888.810.7458
Auditors
Ernst & Young LLP
Boston, Massachusetts
Shareholder Inquiries
Information about ImmunoGen can
be found at www.immunogen.com.
Inquiries related to the Company
may be directed to the Investor
Relations department at our
headquarters. Communications
related to stock and transfer
requirements, including lost stock
certificates and change of name or
address, should be directed to the
Transfer Agent.
This annual report includes forward-looking statements based on management’s current expectations. These statements include,
but are not limited to, ImmunoGen’s expectations related to the advancement of new Company and partner compounds into clinical
testing, the initiation of new clinical trials, the timing of go/no go clinical decisions, and the timing and occurrence of the
presentation of new preclinical and clinical data, of potential business development events, and of potential future regulatory
submissions. For these statements, ImmunoGen claims the protection of the safe harbor for forward-looking statements provided
by the Private Securities Litigation Reform Act of 1995. Various factors could cause ImmunoGen’s actual results to differ materially
from those discussed or implied in the forward-looking statements, and you are cautioned not to place undue reliance on these
forward-looking statements, which are current only as of the date of this annual report. Factors that could cause future results to
differ materially from such expectations include, but are not limited to: the timing and outcome of ImmunoGen’s and the Company’s
partners’ research and clinical development processes; the difficulties inherent in the development of novel pharmaceuticals,
including uncertainties as to the timing, expense and results of preclinical studies, clinical trials and regulatory processes;
ImmunoGen’s ability to financially support its product programs; ImmunoGen’s dependence on collaborative partners; industry
merger and acquisition activity; and other factors more fully described in ImmunoGen’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2010 and other reports filed with the Securities and Exchange Commission.
*Centocor Ortho Biotech (J&J) has opt-in rights to IMGN388; ImmunoGen has opt-in rights to BT-062
**Therapeutic antibody (non-TAP) compound
Revlimid® is a registered trademark of Celgene Corporation.
ImmunoGen, Inc.
830 Winter Street
Waltham, MA 02451
781-895-0600
www.immunogen.com