2018 Annual ReportManagement TeamUsama Malik, M.B.A. Chief Financial Officer & Chief Business OfficerRobert Iannone, M.D., M.S.C.E. Head of R&D and Chief Medical OfficerMorris Rosenberg, Ph.D. Chief Technology OfficerBrendan P. Delaney, M.B.A. Chief Commercial OfficerKurt Andrews, M.A.Chief Human Resources OfficerBryan Ball, M.Sc., M.B.A. Chief Quality OfficerJared Freedberg, J.D. General Counsel & SecretaryBoard of DirectorsBehzad Aghazadeh, Ph.D. Chairman of the BoardManaging Partner & Portfolio Manager, venBio Select Advisor LLCCharles Baum, M.D., Ph.D.(1)(3) President & Chief Executive Officer, Mirati Therapeutics, Inc.Scott Canute, M.B.A. Principal and Founder of Magis Consulting LLC.Standing Committees of the Board of Directors (1) Audit Committee(2) Compensation Committee(3) Governance & Nominating CommitteeBarbara G. Duncan, M.B.A.(1)(2)Former Chief Financial Officer & Treasurer, Intercept Pharmaceuticals, Inc.Peter Barton Hutt, LL.M.(2)(3) Senior Counsel, Covington & Burling LLPKhalid Islam, Ph.D.(1)(2)(3) Managing Director, Life Sciences Management GmbHIndependent Registered Public Accounting Firm KPMG LLP51 John F. Kennedy ParkwayShort Hills, NJ 07078Transfer AgentPhiladelphia Stock Transfer, Inc.2320 Haverford Rd.Ardmore, PA 19003Corporate HeadquartersImmunomedics, Inc.300 The American RoadMorris Plains, NJ 07950Telephone: 973-605-8200Fax: 973-605-8282https://immunomedics.com Annual Meeting Time: 10:00 a.m. Date: Friday, June 7, 2019Location: Immunomedics, Inc.410 The American RoadMorris Plains, NJ 07950 The Common Stock of Immunomedics, Inc. (IMMU) is traded on the NASDAQ Global Market.This annual report, in addition to historical information, contains certain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Such statements may involve significant risks and uncertainties and actual results could differ materially from those expressed or implied herein. Factors that could cause such differences include, but are not limited to, risks associated with new product development (including clinical trials outcome, regulatory requirement/actions), competitive risks to marketed products and availability of financing and other sources of capital as well as the risks discussed in the Company’s Transition Report on Form 10-K for the year ended December 31, 2018. Dear Stockholders,2018 marked a transformational year where we made significant progress across the business. In less than fifteen months from receiving your overwhelming support at the 2016 Annual Meeting to assume control and change the mission of the Company, we submitted our first ever Biologics License Application (BLA) to the United States Food and Drug Administration (FDA) for sacituzumab govitecan in metastatic triple-negative breast cancer (mTNBC). Since that time, we have invested in our capabilities across manufacturing and clinical development and built out our commercial infrastructure, while also providing that the Company is well capitalized to continue towards our goal of becoming a fully-integrated biopharmaceutical company and a leader in the field of antibody-drug conjugate. We recognize work remains to be done, but we are steadfast in our determination to meet our objectives.All of us were disappointed to receive the complete response letter (CRL) earlier this year from the FDA. We have since doubled down on our efforts to modernize and upgrade our manufacturing and quality capabilities at Morris Plains to ensure all FDA requirements are met for a timely BLA resubmission. To that end, my co-board member, Scott Canute, and I have assumed executive roles at the Company to provide oversight and streamline communications to the Board of Directors during this critical period. Furthermore, we have augmented our teams with external consultants who specialize in helping organizations navigate the transition from a development-stage company to a fully-integrated manufacturing and commercial operation. We remain fully committed to successfully securing FDA approval for sacituzumab govitecan.Despite the CRL setback, Immunomedics has been transformed into a biotech enterprise with growing capabilities and a market capitalization exceeding $3 billion, while delivering a strong return to our stockholders. To continue on this growth trajectory, we will be unyielding in our efforts to unlock the full potential of sacituzumab govitecan for the benefits of cancer patients across indications and geographies around the world.A significant potential new opportunity highlighted during the past year is in hormone receptor-positive (HR+)/human epidermal growth factor receptor 2-negative (HER2–) metastatic breast cancer (mBC), which accounts for more than 70% of all breast cancers. As presented at an oral breast cancer session at the 2018 ASCO Annual Meeting, sacituzumab govitecan produced a confirmed overall response rate (ORR) of 31 percent in 54 heavily pre-treated patients, with a six-month clinical benefit rate of 48 percent. Responses were durable, estimated median duration of response (DoR) and progression-free survival (PFS) was 7.4 months and 6.8 months, respectively.Encouraged by these promising results, we have launched a registrational Phase 3 study (TROPICS-02) in late-line HR+/HER2‒ mBC. Recognizing the unmet need, in agreement with the FDA, we have included an interim analysis for ORR and DoR, which could support a potential accelerated approval submission should the results warrant it. Our objective is to establish sacituzumab govitecan as a foundational therapy for mBC and we have taken the first step by publishing the Phase 2 data in mTNBC in the New England Journal of Medicine in February 2019.For metastatic urothelial cancer (mUC), we have initiated a single-arm, pivotal Phase 2 TROPHY U-01 study for approximately 100 patients who have received prior platinum-based and immune checkpoint inhibitor treatments. Primary endpoint will be ORR, with DoR, PFS, and overall survival (OS) serving as secondary endpoints. An interim analysis is planned for mid-2019 for a potential Breakthrough Therapy Designation application. This study builds on the Phase 1 reported results of 31 percent confirmed ORR and 12.9 months median DoR in 45 patients. As in mTNBC, survival benefits were meaningful with median PFS of 7.3 months and 16.3 months for OS.In addition to breast and urothelial cancers, our focus in 2019 will be to further characterize the utility of sacituzumab govitecan in other cancer patients with late-stage disease as part of a Trop-2-enriched basket study to be initiated in the second half of this year. We also expect to continue to further our combination approaches, in earlier lines, across indications.While our work to gain U.S. approval of sacituzumab govitecan in mTNBC continues, we have entered into a creative arrangement with Janssen that not only allows us to maintain our salesforce, but also provides the team a valuable opportunity to gain first-hand experience working with oncologists specialized in UC and building closer relationships with community oncologists. For territories outside the United States, we are excited to be partnering with Everest Medicines to help us commercialize sacituzumab govitecan in Greater China and other Asian countries to address critical unmet medical needs for patients in these important markets.As we seek to expand sacituzumab govitecan’s global footprint and broaden it to a multitude of cancer indications, we have taken critical steps to ensure we have sufficient long-term supply of the drug to meet the anticipated increased demand. The agreement we have established with Samsung BioLogics, and the partnership expansions with Johnson Matthey and BSP are clear manifestation of our commitment to improve our cost-structure by scaling our global supply capacity with world-class partners in each component of our supply chain.The Company is well capitalized to execute on our aggressive development plan for sacituzumab govitecan. We are grateful to the investors who supported us in our June 2018 $300 million public equity offering and to our long-term stockholders for their continued confidence and trust. The company entered 2019 with a strong balance sheet, with $500M in cash, and having converted the majority of our debt outstanding from $20 million at the beginning of 2018 to $7 million.Finally, we are honored to have Barbara Duncan and Dr. Charles Baum join our Board of Directors. The addition of these two distinguished biotech executives enhances our Board’s expertise in the areas of finance and drug development. Immunomedics is at an inflection point with tremendous opportunities for growth, and, importantly, a new paradigm for treating complex cancers and delivering breakthrough therapies that will transform patients’ lives. I want to thank our employees for their dedication and commitment in helping us reach our full potential. In the name of the Board of Directors and the employees at Immunomedics, I thank you for your continued support.Behzad Aghazadeh, Ph.D.Executive Chairman (Mark one)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[x] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from July 1, 2018 to December 31, 2018.
Commission file number: 0-12104
IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
300 The American Road, Morris Plains, New Jersey
(Address of principal executive offices)
61-1009366
(I.R.S. Employer Identification No.)
07950
(Zip Code)
Registrant's telephone number, including area code: (973) 605-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Name of each exchange on which registered
Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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. Yes
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 requirement for
the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§299.405 of this chapter) is not contained herein, and will not
be contained, to the best of the 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.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large Accelerated Filer
Non-Accelerated Filer
Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Act). Yes
No
The aggregate market value of the registrant’s common stock held by non-affiliates computed by reference to the price at which the common stock was last sold
as of June 30, 2018 was $4,420,761,493. The number of shares of the registrant’s common stock outstanding as of February 20, 2019 was 190,959,948.
Documents Incorporated by Reference:
Certain information required in Part III of this Transition Report on Form 10-K will be set forth in, and incorporated from the registrant’s definitive proxy statement
for the 2019 annual meeting of stockholders, or an amendment to this Transition Report on Form 10-K, which will be filed by the registrant with the Securities
and Exchange Commission not later than 120 days after the end of the transition period ended at December 31, 2018.
In this Form 10-K, we use the words "Immunomedics, Inc." to refer to Immunomedics, Inc., a Delaware corporation, and we use the words "Company,"
"Immunomedics," "Immunomedics, Inc.," "we," "us" and "our" to refer to Immunomedics, Inc. and its subsidiaries.
PART I
Item 1. BUSINESS
Transition Period
On December 14, 2018, the Company's Board of Directors approved a change in the Company's fiscal year end from
June 30 to December 31, effective immediately. The reporting period for this Transition Report on Form 10-K is for the six months
ended December 31, 2018 (which we sometimes refer to in the Transition Report as the "Transition Period"). In this Transition
Report, our fiscal years are identified according to the calendar year in which they historically ended (e.g., the fiscal years ended
June 30, 2018 is referred to as “fiscal 2018,” June 30, 2017 is referred to as "fiscal 2017" and June 30, 2016 is referred to as "fiscal
2016," as if we had not changed our fiscal year to a calendar year on December 14, 2018. References in this Transition Report to
"fiscal 2019" refer to the year ending December 31, 2019.
Overview
Immunomedics is a clinical-stage biopharmaceutical company developing monoclonal antibody-based products for the
targeted treatment of cancer. Our advanced proprietary technologies allow us to create humanized antibodies that can be used
either alone in unlabeled or “naked” form, or conjugated with chemotherapeutics, cytokines or toxins. Our most advanced product
candidate is sacituzumab govitecan (IMMU-132), an antibody-drug conjugate (“ADC”) that has received Breakthrough Therapy
Designation (“BTD”) from the United States Food and Drug Administration (the “FDA”) for the treatment of patients with
metastatic triple-negative breast cancer (“mTNBC”) who previously received at least two prior therapies for metastatic disease.
Our current focus is to commercialize sacituzumab govitecan as a third-line therapy for patients with mTNBC in the
United States. On May 21, 2018, we submitted a Biologics License Application (“BLA”) to the FDA for sacituzumab govitecan
for the treatment of patients with mTNBC who have received at least two prior therapies for metastatic disease. On July 18, 2018,
we received notification from the FDA that the BLA was accepted for filing and the original application was granted Priority
Review with a PDUFA target action date of January 18, 2019. On January 17, 2019, we received a Complete Response Letter
("CRL") from the FDA for the BLA. On February 4, 2019, we received a written communication from the FDA enclosing the
Establishment Inspection Report (“EIR”) from the chemistry, manufacturing and controls BLA pre-approval inspection conducted
by the FDA at the Company’s Morris Plains, New Jersey antibody manufacturing facility for our ADC product candidate
sacituzumab govitecan, which took place from August 6, 2018 through August 14, 2018. The FDA also notified the Company
that the FDA will be conducting a re-inspection of the Company’s Morris Plains, New Jersey manufacturing facility as part of the
BLA resubmission process. The Company is finalizing its plans with respect to the matters raised in the CRL received from FDA
on January 17, 2019 and the EIR, and subsequently expects to request a meeting with the FDA in the near term.
As of December 31, 2018, we had $497.8 million in cash, cash equivalents and marketable securities. On January 7,
2018, we announced that we sold tiered, sales-based royalty rights on global net sales of sacituzumab govitecan to RPI Finance
Trust (“RPI”) for $175.0 million. RPI also purchased $75.0 million of our common stock at $17.15 per share, which represented
a more than 15% premium over the stock’s 15-day trailing average closing price at that time. On June 15, 2018, we announced
the closing of a public offering of 11,500,000 shares of our common stock at a price of $24.00 per share. On June 22, 2018, pursuant
to the underwriter's full exercise of the over-allotment option, we closed the sale of an additional 1,725,000 shares of our common
stock. The total net proceeds from the offering, including the exercise of the over-allotment option, were approximately $300
million, after deducting underwriting discounts and commissions and other offering expenses payable by us. We believe our
projected financial resources are adequate to (i) support our clinical development plan for developing sacituzumab govitecan in
mTNBC, advanced urothelial cancer ("UC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-
negative ("HER2-") metastatic breast cancer ("mBC"), non-small cell lung cancer ("NSCLC") and other indications of high medical
need, (ii) further build our clinical and manufacturing infrastructure, and (iii) fund operations through 2020. However, in case of
regulatory delays or other unforeseen events, we may require additional funding. Potential sources of funding in such a case could
include (i) the entrance into potential development and commercial partnerships to advance and maximize our full pipeline for
mTNBC and beyond in the United States and globally, and (ii) potential private and capital markets financing.
For 2019, our strategic priorities for sacituzumab govitecan include:
1. BLA resubmission for the treatment of patients with mTNBC who have received at least two prior therapies for
metastatic disease;
2
2. Execution of our clinical development plan, which includes:
a. Launch a registrational Phase 3 study in HR+/HER2- mBC;
b. Conduct interim analysis and complete patient enrollment into the pivotal Phase 2 TROPHY U-01
study in metastatic UC; and
c. Launch a Trop-2-enriched Phase 2 basket study in refractory non-small cell and small cell lung cancers,
head & neck cancer, endometrial and hepatocellular cancers.
Our Clinical and Preclinical Programs
We believe that our antibodies have therapeutic potential, in some cases as a naked antibody or when conjugated with
chemotherapeutics, cytokines or other toxins to create unique and potentially more effective treatment options. The attachment
of effective anti-tumor compounds to antibodies is intended to allow the delivery of these therapeutic agents to tumor sites with
better specificity than conventional chemotherapy. This treatment method is designed to optimize the therapeutic window through
reducing the systemic exposure of the patient to the therapeutic agents, which ideally minimizes debilitating side effects while
maximizing the concentration of the therapeutic agent at the tumor, potentially leading to better efficacy.
Our portfolio of investigational products includes ADCs that are designed to deliver a specific payload of a
chemotherapeutic directly to the tumor while reducing overall toxicities that are usually associated with conventional administration
of these chemotherapeutic agents. Our most advanced ADCs are sacituzumab govitecan (IMMU-132) and labetuzumab govitecan
(IMMU-130), which are in advanced trials for a number of solid tumors. Sacituzumab govitecan is our lead product candidate and
has received Breakthrough Therapy Designation from the FDA for the treatment of patients with mTNBC who have received at
least two prior therapies for metastatic disease.
To accelerate the clinical and preclinical development of sacituzumab govitecan, we have entered into clinical
collaborations with AstraZeneca to investigate the ADC in earlier lines of therapy for mTNBC, advanced UC and metastatic non-
small cell lung cancer ("NSCLC") in combination with its checkpoint inhibitor, and with Clovis to combine with its PARP inhibitor
in mTNBC, advanced UC and ovarian cancer. We are also working with the University of Wisconsin on a clinical study in prostate
cancer. Refer to "Corporate Collaboration" and "Other Collaborations" below for additional information.
We also have a number of other product candidates that target solid tumors and hematologic malignancies, in various
stages of clinical and preclinical development. They include other ADCs such as labetuzumab govitecan, which binds the
CEACAM5 antigen expressed on colorectal cancer ("CRC") and other solid cancers, and IMMU-140 that targets HLA-DR for
the potential treatment of hematologic malignancies. We believe that our portfolio of intellectual property provides commercially
reasonable protection for our product candidates and technologies.
Below is our broad pipeline of ADC therapies:
3
Antibody-Drug Conjugates
Our first ADC program, sacituzumab govitecan, is an anti-Trop-2-SN-38 ADC currently being clinically evaluated in
patients with a variety of solid tumors, including Phase 3 ASCENT trial for patients with mTNBC who have received at least two
prior therapies and the pivotal Phase 2 TROPHY-U01 study for patients with advanced UC. Labetuzumab govitecan, the second
agent from our ADC program, is an anti-CEACAM5-SN-38 ADC which has been evaluated in a Phase 1/2 trial for the treatment
of metastatic CRC. Our third ADC, IMMU-140, targets the HLA-DR antigen and is in preclinical development.
Sacituzumab Govitecan/IMMU-132
Sacituzumab govitecan has been studied in over 900 cancer patients in more than 15 types of solid cancers, with the dose
of 10 mg/kg given on days 1 and 8 of repeated 21-day cycles being the established dose regimen. Sacituzumab govitecan received
BTD from the FDA for the treatment of patients with mTNBC who have received at least two prior therapies for metastatic disease.
The FDA has also granted sacituzumab govitecan Fast Track designation for the treatment of patients with mTNBC and for patients
with small-cell lung cancer ("SCLC"), or NSCLC. Sacituzumab govitecan has also been designated an orphan drug by the FDA
for the treatment of patients with SCLC or pancreatic cancer in the United States and by the European Medicines Agency (“EMA”)
for the treatment of patients with pancreatic cancer in the European Union.
Clinical development of sacituzumab govitecan has focused on a number of select types of solid cancers including
mTNBC, UC, HR+/HER2- mBC, NSCLC, and certain other cancers.
The confirmatory Phase 3 ASCENT study continues to enroll patients with mTNBC with at least two prior therapies for
metastatic disease at the expected rate.
Another breast cancer indication that is a key strategic focus for the Company is HR+/HER2- mBC. Phase 2 results of
sacituzumab govitecan in treatment-refractory patients, a population with the distinct need for better treatment options, showed a
confirmed overall response rate of 31 percent. Median duration of response was 7.4 months, the clinical benefit rate was 48 percent
and median progression-free survival was 6.8 months.
In an oral presentation at the 2019 Genitourinary Cancers Symposium, the Company reported updated results from a
Phase 1/2 study of sacituzumab govitecan in patients with previously treated metastatic urothelial cancer, showing an overall
response rate of 31 percent and a median duration of response of 12.9 months in 45 relapsed/refractory patients.
In February 2019, updated data from our Phase 2 trial of sacituzumab govitecan in patients with mTNBC were published
in the New England Journal of Medicine. We believe these data (from 108 subjects with mTNBC) further support a favorable
benefit/risk profile of the ADC for mTNBC, and the data provide additional information on safety from 420 patients with a variety
of epithelial cancers, with safety results generally consistent with those observed at earlier stages.
The Company’s strategy to broaden the development of sacituzumab govitecan beyond mTNBC by launching a Trop-2-
enriched Phase 2 basket study in refractory NSCLC and SCLC, head and neck cancer, endometrial and hepatocelloar cancers.
We have an extensive intellectual property portfolio protecting sacituzumab govitecan. Specifically, 47 patents were
issued in the United States and 30 foreign patents were issued covering composition of matter, synthesis and uses. Certain patents
relating to the protein sequence of the hRS7 antibody used in sacituzumab govitecan expired in 2017 in the United States and will
expire in 2023 overseas. Patents to compositions and use of the CL2A linker incorporated in sacituzumab govitecan expire between
2023 and 2029 in the United States and overseas. Other patents relating to methods of cancer therapy with the SN-38 conjugated
form of hRS7 used in sacituzumab govitecan extend to 2033. Additionally, we are entitled to extend the term of our key patent
for up to 5 more years in the United States and certain foreign countries. Outside the United States, patents were issued in Australia,
Canada, China, Europe, Israel, Japan, Mexico, South Korea and other key global markets.
Labetuzumab Govitecan/IMMU-130
Our second investigational solid-tumor ADC involves our anti-CEACAM5 antibody labetuzumab, conjugated to SN-38.
The agent has been studied in patients with metastatic CRC who had received at least one prior irinotecan-containing regimen and
had an elevated blood titer of carcinoembryonic antigen.
Labetuzumab govitecan was well-tolerated, with a manageable toxicity profile. Major toxicities (Grade >3) among all
cohorts were neutropenia (16%), leukopenia (11%), anemia (9%), and diarrhea (7%). Anti-drug or anti-antibody antibodies were
not detected.
4
Although certain patents relating to labetuzumab used in labetuzumab govitecan expired in 2015 to 2016, other patents
relating to use of labetuzumab for cancer therapy, including the SN-38 conjugated form of labetuzumab used in labetuzumab
govitecan, extend to 2033.
IMMU-140
IMMU-140 is our third ADC that is a SN-38 conjugated form of IMMU-114. The latter is a novel humanized antibody
directed against an immune response target, HLA-DR. As such, IMMU-140 is a dual-therapeutic, combining the signaling functions
of the parental antibody, IMMU-114, with the cytotoxicity of SN-38. In preclinical studies, IMMU-140 demonstrated higher
potency than naked IMMU-114 in acute lymphoblastic leukemia and acute myelocytic leukemia, a disease that despite having
high expression levels of HLA-DR, has proved to be resistant to the antitumor effects of IMMU-114 in vitro, and thus warrants
further clinical development.
Other Product Candidates
We have additional compounds for the treatment of cancer and autoimmune diseases including veltuzumab, our anti-
CD20 antibody; milatuzumab, our anti-CD74 antibody; and IMMU-114, a humanized anti-HLA-DR antibody. We are evaluating
various options, including licensing arrangements and collaborations with outside study groups, for further clinical development
of these assets in oncology and autoimmune disease indications, including pemphigus.
Our Platform Technologies
In our drive to improve targeted therapies of diseases, we have built significant expertise in antibody engineering,
particularly proprietary CDR-grafting methods, antibody production and formulation, immunochemistry, molecular biology,
antibody conjugation, peptide chemistry, synthetic organic chemistry, and protein engineering.
Beginning with our unique grafting technique to engineer humanized antibodies, our antibody humanization platform
has produced a diverse portfolio of therapeutic agents that are in multiple stages of clinical trials for the therapy of cancer, as
detailed above. These humanized antibodies are well tolerated and also have a low incidence of immunogenicity.
With the successful humanized antibody platform as a foundation, we have built a robust ADC program using our own
proprietary ADC linker technology. Finally, our protein engineering platform technology called DOCK-AND-LOCK® combines
conjugation chemistry and genetic engineering to produce bioactive molecules of increasing complexity.
ADC Linker Technology
We developed a novel ADC platform using our proprietary linker, CL2A, which was designed with targeted delivery of
SN-38 in mind. SN-38 is about 3 orders of magnitude (100 to 1,000 times) more potent than irinotecan, its parent drug, but it
cannot be administered systemically to patients because of its poor water solubility and toxicity. Our linker, CL2A, allows us to
produce SN-38 conjugates that are soluble in water with excellent yields while preserving antibody binding and drug activity.
CL2A contains an antibody coupling group on one end and a chemical group on the other for binding with a drug. We
have also added a short polyethylene glycol to improve the solubility of CL2A.
5
Furthermore, because SN-38 can be converted from its active lactone form to the inactive carboxylate form, CL2A was
designed to attach close to the lactone ring to prevent it from opening up, thereby maintaining the activity of SN-38. Another key
feature of our ADC platform is that the linkage between CL2A and SN-38 is sensitive to both acidic and alkaline conditions and
will allow the detachment of SN-38 at a rate of about 50% per day in vivo.
The final structure of our ADC is depicted below, with the pH-sensitive cleavable linkage highlighted. What differentiates
our ADC platform from other companies is the high drug-to-antibody ratio of about seven to eight molecules of drug per antibody.
That is to say, when our ADCs bind to their targets on cancer cells, they are delivering up to eight molecules of SN-38 per antibody
molecule into the blood or at the vicinity of the tumor, which may explain why our ADCs can deliver more than 120-times the
amount of SN-38 to the tumor when studied in an animal model, as compared to irinotecan, the parent compound. We can deliver
this drug concentration because our drug is not supertoxic, thus permitting us to give higher antibody doses, in repeated therapy
cycles, that we believe provide a better therapeutic index.
6
DOCK-AND-LOCK® Platform Technology
We developed a platform technology, called DOCK-AND-LOCK® ("DNL®"), which has the potential for making a
considerable number of bioactive molecules of increasing complexity. DNL® utilizes the natural interaction between two human
proteins, cyclic AMP-dependent protein kinase A (“PKA”) and A-kinase anchoring proteins (“AKAPs”). The region that is involved
in such interaction for PKA is called the dimerization and docking domain, (“DDD”), which always is produced in pairs. Its binding
partner in AKAPs is the anchoring domain (“AD”). When mixed together, DDD and AD will bind with each other spontaneously
to form a binary complex, a process termed docking. Once “docked,” certain amino acid residues incorporated into DDD and AD
will react with each other to “lock” them into a stably-tethered structure. The outcome of the DNL® technology is the exclusive
generation of a stable complex, in a quantitative manner that retains the full biological activities of its individual components.
DNL® combines conjugation chemistry and genetic engineering to enable the creation of novel human therapeutics, and
the potential construction of improved recombinant products over those currently on the market. Diverse drugs, chemical polymers,
proteins, peptides, and nucleic acids are among suitable components that can be linked to either DDD or AD. Since the invention
of DNL®, we have created multivalent, mono- or multi-specific antibodies, DNL-PEGylated cytokines; cytokine-antibody
conjugates and other complex antibody-based products.
We have employed DNL® to create bispecific antibodies targeting cancers as a T-cell redirecting immunotherapy. This is
one of several new methods of cancer immunotherapy being studied both clinically and preclinically by many other commercial
and academic groups. In contrast to hematological tumors, little progress has been made in this approach to treat the more challenging
solid cancers, including pancreatic and gastric cancers, two malignancies with very high rates of mortality.
In this regard, we are developing a novel investigational T-cell redirecting bispecific antibody, (E1)-3s, created using
DNL® for the potential treatment of pancreatic and gastric cancers. These and various other solid cancers express high-levels of
Trop-2, a target recognized by the bispecific (E1)-3s, which also binds to the CD3 antigen on T cells. (E1)-3s effectively induced
a potent and specific T-cell-mediated killing of human pancreatic and gastric cancer cell lines.
7
Furthermore, in animal models of human pancreatic or gastric cancer, treatment with (E1)-3s significantly inhibited tumor
growth, which resulted in improved survival compared with the control groups. Adding IFN enhanced the tumor-growth-inhibition
activity of (E1)-3s.
As with all candidate therapeutic molecules developed by us, the safety and potential efficacy cannot be predicted until
sufficient trials in humans have been conducted.
Diagnostic Imaging Products
We transitioned away from the development and commercialization of new diagnostic imaging products in order to
accelerate the development of our therapeutic product candidates. The Company discontinued the sale of LeukoScan® during
February 2018 to focus on its ADC business.
Research and Development Expense
We have historically invested heavily in our research and development programs, spending approximately $93.9 million
and $42.8 million for these programs during the Transition Period and the comparable period ended December 31, 2017. The
increase in research and development costs in the Transition Period compared to the comparable period ended December 31, 2017,
relate primarily to preparations for the approval and launch of sacituzumab govitecan in the United States for patients with mTNBC.
Additionally, there were increases in outside manufacturers' organizations services costs as we ramped-up manufacturing of
sacituzumab govitecan for the Phase 3 clinical trial ADC as well as an increase in outside consulting services to improve our
manufacturing and regulatory functions associated with fulfilling the FDA requirements for the Phase 3 clinical trial of sacituzumab
govitecan in patients with mTNBC.
Research and development costs increased for the fiscal year ended June 30, 2018 approximately $47.5 million to $99.3
million compared to fiscal 2017. Research and development costs decreased approximately $1.7 million to $51.8 million for the
fiscal year ended June 30, 2017 compared to fiscal 2016. The increase in research and development costs for the fiscal year ended
June 30, 2018 compared to fiscal 2017 relate primarily to increases in clinical trial costs as well as increases in lab supplies and
chemical reagents and personnel costs in connection with preparations for the approval and launch of sacituzumab govitecan in
the United States for patients with mTNBC. Additionally, there were increases in outside manufacturers' organizations services
costs as we ramped-up manufacturing of sacituzumab govitecan for the Phase 3 clinical trial ADC as well as an increase in outside
consulting services to improve our manufacturing and regulatory functions associated with fulfilling the FDA requirements for
the Phase 3 clinical trial of sacituzumab govitecan in patients with mTNBC.
The reduction in research and development costs for the fiscal year ended June 30, 2017 compared to fiscal 2016 relate
primarily to a decrease in clinical trial expenses due to the closure of the Phase 3 PANCRIT-1 clinical trial in 2016 which resulted
in the redeployment of employees from basic research to product development in fiscal 2017 and a reduction in lab supplies and
chemical reagents in fiscal 2017 compared to the same period in fiscal 2016, offset partly by an increase in product development
costs due to an increase in outside manufacturers' organizations services costs as we ramped-up manufacturing of sacituzumab
govitecan for the Phase 3 clinical trial ADC, and an increase in outside consulting services to improve our manufacturing and
regulatory functions associated with fulfilling the FDA requirements for the Phase 3 clinical trial of sacituzumab govitecan in
patients with mTNBC.
Patents and Proprietary Rights
Our Patents
We have accumulated a sizeable portfolio of patents and patent applications in the course of our research, which we
believe constitutes a valuable business asset. Our key patents relate primarily to our therapeutic product candidates as well as our
technologies and other discoveries for which no product candidate has yet been identified. As of December 31, 2018, our portfolio
included approximately 316 active United States patents. In addition, as of such date, the portfolio included more than 400 foreign
patents, with a number of United States and foreign patent applications pending.
The chart below highlights our material patents and product groups as of December 31, 2018, the major jurisdictions,
and relevant expiration periods. Additional patents have been filed to extend the patent life on some of these products, but there
can be no assurance that these will be issued as filed.
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Program & Product Group
Antibody-Drug Conjugates
Subcutaneous Formulation
Epratuzumab
Veltuzumab
Milatuzumab
IMMU-114
DNL® Program - (E1)-3s
+ pending in Europe
Our Licenses
Targeted
Antigen/Description
Patent
Expiration
Major
Jurisdictions
Trop-2, CEA/CEACAM5 and HLA-DR
2023-2033 U.S., Europe, Japan
All Antibodies
CD22
CD20
CD74
HLA-DR
Trop-2
2032
2020
U.S., Japan+
U.S., Europe, Japan
2023-2029 U.S., Europe, Japan
2019-2032 U.S., Europe, Japan
2026-2027 U.S., Europe, Japan
2033
U.S., Japan+
We have obtained licenses from various parties for rights to use, develop and commercialize proprietary technologies
and compounds. Currently, we have the following licenses:
Medical Research Council (“MRC”) - We entered into a license agreement with MRC in May 1994, whereby we have
obtained a license for certain patent rights with respect to the genetic engineering on monoclonal antibodies. Our agreement does
not require any milestone payments, nor have we made any payments to MRC to date. Our agreement with MRC, which expires
at the expiration of the last of the licensed patents in 2020, provides for future royalty payments in the low single digits based on
a percentage of product sales.
Center for Molecular Medicine and Immunology (“CMMI”) - We entered into a license agreement with CMMI in
December 2004, whereby we have licensed certain rights with respect to patents and patent applications owned by CMMI. Dr.
Goldenberg, our former Chief Scientific Officer and Chief Patent Officer and Chairman of our Board of Directors, founded and
was the President and member of the Board of Trustees of CMMI. No license or milestone payments are required under this
agreement. Under the license agreement, which expires at the expiration of the last of the licensed patents in 2031, CMMI will
receive future royalty payments in the low single digits based on a percentage of sales of products that are derived from the CMMI
patents. Inventions made independently of us by CMMI are the property of CMMI. CMMI has ceased operations and is in the
process of dissolution. Refer to “Other Collaborations” below for more information.
On April 4, 2018, we entered into a license agreement with The Scripps Research Institute ("TSRI"). Pursuant to the
license agreement, TSRI granted to us an exclusive, worldwide, sub-licensable, royalty-bearing license to use certain patent rights
relating to our ADC sacituzumab govitecan. The license agreement expires on a country-by-country basis on the expiration date
of the last to expire licensed patent rights in such country covering a licensed product. The license agreement may be terminated
by the mutual written consent of us and TSRI, and TSRI may terminate the license agreement upon the occurrence of certain
events, including but not limited to if we do not make a payment due pursuant to the license agreement and fail to cure such non-
payment within 30 days after the date of TSRI's written notice of such non-payment. As consideration for the license granted, we
made a cash payment of $250,000 to TSRI. Additionally, we will pay TRSI (i) product development milestone payments that range
from the mid-six digit dollar figure to the low-seven digit dollar figure and (ii) royalties on net sales of licensed products in the
low-single digit percentage figure range capped at an annual amount. We have agreed to use reasonable efforts to develop and
market the licensed products.
Our Trademarks
The mark “IMMUNOMEDICS” is registered in the United States and 21 foreign countries and a European Community
Trademark has been granted. Our logo is also registered in the United States and in one foreign country. The mark “IMMUSTRIP”
is registered in the United States and Canada. The mark “LEUKOSCAN” is registered in eight foreign countries, and a European
Community Trademark has been granted. In addition, we have applied for registration in the United States for several other
trademarks for use on products now in development or testing, and for corresponding foreign and/or European Community
Trademarks for certain of those marks. The marks “EPRATUCYN,” “VELTUCYN” and “MILATUCYN” have been registered
in the United States and International Trademark Registrations which claim priority to the respective United States applications
have been filed for “EPRATUCYN” and “VELTUCYN.” The International Registrations request registration in China, Japan and
the European Union. The marks “DOCK-AND-LOCK,” “DNL,” and “PANCRIT” have been registered in the United States.
Registrations for “SCIGOVI,” “TRODELVY” and “HUMANLY” have been filed in the United States and internationally and the
U.S. Patent and Trademark Office has issued a Notice of Allowance for the mark “TRODELVY”.
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Our Trade Secrets
We also rely upon unpatented trade secrets, and there is no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such
technology, or that such rights can be meaningfully protected. We require our employees, consultants, outside scientific
collaborators, sponsored researchers and other advisers to execute confidentiality agreements upon the commencement of
employment or consulting relationships with us. These agreements provide that all confidential information developed or made
known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to
third parties except in specific circumstances. In the case of our employees, the agreement provides that all inventions conceived
by such employees shall be our exclusive property. There can be no assurance, however, that these agreements will provide
meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.
Third Party Rights
Our success also depends in part on our ability to gain access to third party patent and proprietary rights and to operate
our business without infringing on third party patent rights. We may be required to obtain licenses to patents or other proprietary
rights from third parties to develop, manufacture and commercialize our product candidates. Licenses required under third-party
patents or proprietary rights may not be available on terms acceptable to us, if at all. If we do not obtain the required licenses, we
could encounter delays in product development while we attempt to redesign products or methods or we could be unable to develop,
manufacture or sell products requiring these licenses at all.
Corporate Collaboration
AstraZeneca/MedImmune
In June 2018, the Company entered into a clinical collaboration with AstraZeneca and its global biologics research and
development arm, MedImmune, to evaluate in Phase 1/2 studies the safety and efficacy of combining AstraZeneca’s Imfinzi®
(durvalumab), a human monoclonal antibody directed against PD-L1, with sacituzumab govitecan as a treatment of patients with
triple-negative breast cancer (“TNBC”) and UC, which was broadened in October 2018 to include second-line metastatic non-
small cell lung cancer.
Part one of the two-part Phase 1/2 studies will be co-funded by the two companies. Immunomedics will supply the study
drug and AstraZeneca will utilize its existing clinical trial infrastructure to accelerate the enrollment of the sacituzumab govitecan
and durvalumab combination. The trial design allows for rapid transition into randomized Phase 2 studies should the first part of
these studies show promising data and the companies agree to proceed based on efficacy and safety results obtained. The Company
did not incur costs associated with the clinical collaboration during the Transition Period.
The collaboration terminates thirty days following the expiration of the study periods end-date. Either party may terminate
the collaboration earlier by providing thirty days written notice.
Clovis Oncology
In June 2018, the Company signed a letter of intent to enter into a clinical collaboration with Clovis Oncology, Inc. to
investigate the combination of Clovis’ Rubraca® (rucaparib), a poly (ADP ribose) polymerase inhibitor (PARPi), and sacituzumab
govitecan as a second-line treatment of patients with mTNBC and metastatic urothelial cancer ("mUC"). The planned phase 1/2
study will include an initial safety cohort followed by expansion cohorts in each of mTNBC and mUC. In July 2018, ovarian
cancer was added to the study collaboration.
The Bayer Group (formerly Algeta ASA)
In fiscal year 2013, the Company entered into a collaboration agreement, referred to herein as the Collaboration Agreement,
with Algeta ASA (subsequently acquired by The Bayer Group “Bayer”), for the development of epratuzumab to be conjugated
with Algeta’s proprietary thorium-227 alpha-pharmaceutical payload. Under the terms of the Collaboration Agreement, the
Company manufactured and supplied clinical-grade epratuzumab to Bayer, which had rights to evaluate the potential of a Targeted
Thorium Conjugate ("TTC"), linking thorium-227 to epratuzumab, for the treatment of patients with cancer. Bayer funded all non-
clinical and clinical development costs up to the end of Phase 1 clinical testing. Under the terms of the Collaboration Agreement,
as amended, Immunomedics received an upfront cash payment and other payments aggregating $6.0 million, which have been
recognized in prior periods upon the Company fulfilling its obligations under the Collaboration Agreement. This agreement expired
in accordance with its terms during the Transition Period.
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Other Collaborations
The Company, through an agreement with The Prostate Cancer Clinical Trials Consortium, is collaborating with the
University of Wisconsin Carbone Cancer Center to investigate sacituzumab govitecan in an investigator-sponsored Phase 2 trial
to assess whether targeting Trop-2 with sacituzumab govitecan is promising in prostate cancer patients. Approximately 55-60 male
patients with castrate-resistant prostate cancer ("CRPC") progressing on enzalutamide or abiraterone, objectively or based on
prostate-specific antigen level, in either hormone naïve or CRPC settings are being enrolled into the multi-center study, which
will be funded by the Company. In addition to the Phase 2 trial, Dr. Lang, the lead investigator at the University of Wisconsin, is
also leading a broad translational program integrated into the clinical study to further validate the expression and importance of
Trop-2 as a therapeutic target in various stages of prostate cancer.
A separate research collaboration was also established between the Company and Fred Hutchinson Cancer Research
Center to investigate sacituzumab govitecan and labetuzumab govitecan (IMMU-130) as single agent and in combination in
prostate cancer xenograft models.
Government Regulation
Regulatory Compliance
Our research and development activities, including testing in laboratory animals and in humans, our manufacture of
antibodies and oversight of suppliers and contract manufacturers involved in the production of our product candidates, as well as
the design, manufacturing, safety, efficacy, handling, labeling, storage, record-keeping, advertising, promotion and marketing of
the product candidates that we are developing, are all subject to stringent regulation, primarily by the FDA in the United States
under the Federal Food, Drug, and Cosmetic Act (the "FDCA") and its implementing regulations, and the Public Health Service
Act ("PHS Act") and its implementing regulations, and by comparable authorities under similar laws and regulations in other
countries. If for any reason we do not comply with applicable requirements, such noncompliance can result in various adverse
consequences, including one or more delays in approval of, or even the refusal to approve, product licenses or other applications,
the suspension or termination of clinical investigations, the revocation of approvals previously granted, as well as fines, criminal
prosecution, recall or seizure of products, injunctions against shipping products and total or partial suspension of production and/
or refusal to allow us to enter into governmental supply contracts.
Product Approval
In the United States, our product candidates are regulated as biologic pharmaceuticals, or biologics. The FDA's regulatory
authority for the approval of biologics resides in the PHS Act. However, biologics are also subject to regulation under the FDCA
because most biological products also meet the FDCA's definition of "drugs." Most pharmaceuticals or "conventional drugs"
consist of pure chemical substances and their structures are known. Most biologics, however, are complex mixtures that are not
easily identified or characterized. Biological products differ from conventional drugs in that they tend to be heat-sensitive and
susceptible to microbial contamination, thus requiring sterile manufacturing processes. The process required by the FDA before
biologic product candidates may be marketed in the United States generally involves the following:
•
•
•
•
•
•
•
completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good
Laboratory Practices regulations;
submission to the FDA of an Investigational New Drug Application (“IND”) which must become effective before human
clinical trials may begin and must be updated annually;
approval by an independent Institutional Review Board (“IRB”) ethics committee at each clinical site before the trial is
initiated;
performance of adequate and well-controlled clinical trials to establish the safety, purity and potency of the proposed
biologic, and its safety and efficacy for each indication;
preparation of and submission to the FDA of a BLA for a new biologic, after completion of all pivotal clinical trials;
satisfactory completion of an FDA Advisory Committee review, if applicable;
a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;
11
•
•
satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities to assess compliance with
current Good Manufacturing Practice (“cGMP”) regulations; and
FDA review and approval of a BLA for a new biologic, prior to any commercial marketing or sale of the product in the
United States.
Preclinical tests assess the potential safety and efficacy of a product candidate in animal models. Clinical trials involve
the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance
with current Good Clinical Practices (“cGCPs”), which include the requirement that all research subjects provide their informed
consent for their participation in any clinical trial. A protocol for each clinical trial and any subsequent protocol amendments must
be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial site’s IRB before
the trials may be initiated, and the IRB must monitor the study until completed. There are also requirements governing the reporting
of ongoing clinical trials and clinical trial results to public registries.
The clinical investigation of a pharmaceutical, including a biologic, is generally divided into three phases. Although the
phases are usually conducted sequentially, they may overlap or be combined.
•
•
•
Phase 1 studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the
investigational product in humans, the side effects associated with increasing doses, and if possible, to gain early evidence
on effectiveness.
Phase 2 includes controlled clinical trials conducted to preliminarily or further evaluate the effectiveness of the
investigational product for a particular indication(s) in patients with the disease or condition under study, to determine
dosage tolerance and optimal dosage, and to identify possible adverse side effects and safety risks associated with the
product.
Phase 3 clinical trials are generally controlled clinical trials conducted in an expanded patient population generally at
geographically dispersed clinical trial sites, and are intended to further evaluate dosage, clinical effectiveness and safety,
to establish the overall benefit-risk relationship of the investigational product, and to provide an adequate basis for product
approval.
The FDA may place clinical trials on hold at any point in this process if, among other reasons, it concludes that clinical
subjects are being exposed to an unacceptable health risk. Trials may also be terminated by IRBs, which must review and approve
all research involving human subjects. Side effects or adverse events that are reported during clinical trials can delay, impede or
prevent marketing authorization.
The results of the preclinical and clinical testing, along with information regarding the manufacturing of the product and
proposed product labeling, are evaluated and, if determined appropriate, submitted to the FDA through a BLA. The application
includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as well
as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed
labeling, among other things. Once the BLA submission has been accepted for filing, the FDA’s standard goal is to review
applications within ten months of the filing date or, if the application relates to a drug that treats a serious condition and would
provide a significant improvement in safety or effectiveness qualifying for Priority Review, six months from the filing date. The
review process is often significantly extended by FDA requests for additional information or clarification.
The FDA offers certain programs, such as BTD and Fast Track designation, designed to expedite the development and
review of applications for products intended for the treatment of a serious or life-threatening disease or condition. For BTD,
preliminary clinical evidence of the product indicates that it may demonstrate substantial improvement over existing therapies on
one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If BTD
or Fast Track designation is obtained, the FDA may initiate review of sections of a BLA before the application is complete, and
the product may be eligible for accelerated approval. However, receipt of BTD or Fast Track designation for a product candidate
does not ensure that a product will be developed or approved on an expedited basis, and such designation may be rescinded if the
product candidate is found to no longer meet the qualifying criteria.
The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, pure and potent,
which includes determining whether it is effective for its intended use, and whether the product is being manufactured in accordance
with cGMP, to assure and preserve the product’s identity, strength, quality, potency and purity. The FDA may refer an application
to an advisory committee for review, evaluation and recommendation as to whether the application should be approved, and
applications for new molecular entities and original BLAs are generally discussed at advisory committee meetings unless the FDA
12
determines that this type of consultation is not needed under the circumstances. The FDA is not bound by the recommendation of
an advisory committee, but it typically follows such recommendations.
After the FDA evaluates the BLA and conducts inspections of manufacturing facilities, it may issue an approval letter or
a CRL. An approval letter authorizes commercial marketing of the biologic with specific prescribing information for specific
indications. A CRL indicates that the review cycle of the application is complete and the application is not ready for approval. A
CRL may require additional inspections, and/or other significant, expensive and time-consuming requirements related to clinical
trials, preclinical studies or manufacturing. Even if such additional information is submitted, the FDA may ultimately decide that
the BLA does not satisfy the criteria for approval. The FDA could approve the BLA with a Risk Evaluation and Mitigation Strategy
("REMS") plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure
safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition
approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a
commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase 4 clinical
trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.
The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created an abbreviated pathway for the approval
of biosimilar and interchangeable biologic products. The abbreviated pathway establishes legal authority for the FDA to review
and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity
to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12
years after the original branded product was approved under a BLA. In March 2015, the FDA approved Novartis’s Zarxio as a
biosimilar product to Amgen’s Neupogen. Since then, as of January 2019, eleven biosimilar drugs have received FDA approval.
Expedited Review and Approval
The FDA has four program designations/approval pathways — Fast Track, BTD, Accelerated Approval, and Priority
Review — to facilitate and expedite development and review of new drugs and biologics to address unmet medical needs in the
treatment of serious or life-threatening conditions. The Fast Track designation provides pharmaceutical manufacturers with
opportunities for frequent interactions with FDA reviewers during the product’s development and the ability for the manufacturer
to do a rolling submission of the BLA. A rolling submission allows completed portions of the application to be submitted and
reviewed by the FDA on an ongoing basis. The BTD provides manufacturers with all of the features of the Fast Track designation
as well as intensive guidance on implementing an efficient development program for the product and a commitment by the FDA
to involve senior managers and experienced review staff in the review. The Accelerated Approval designation allows the FDA to
approve a product based on an effect on a surrogate or intermediate endpoint that is reasonably likely to predict a product’s clinical
benefit and generally requires the manufacturer to conduct required post-approval confirmatory trials to verify the clinical benefit.
The Priority Review designation means that the FDA’s goal is to take action on the BLA within six months, compared to ten
months under standard review. The BLA submitted in 2018 for sacituzumab govitecan in patients with mTNBC was accepted by
the FDA and the original application was granted Priority Review. On January 17, 2019, we received a CRL from the FDA for
the sacituzumab govitecan BLA. We have requested a meeting with the FDA to gain a full understanding of its requirements and
the resulting timelines for preparation of the resubmission, agency review, and an agency decision on the resubmission. Refer to
"Overview" above for additional information.
Post-Approval Requirements
Any products manufactured or distributed by us or on our behalf pursuant to FDA approvals are subject to continuing
regulation by the FDA and certain state agencies, including requirements for record-keeping, reporting of adverse experiences
with the biologic, submitting biological product deviation reports to notify the FDA of unanticipated changes in distributed products,
establishment registration, compliance with cGMP standards (including investigation and correction of any deviations from cGMP),
and certain state licensing requirements. Additionally, any significant change in the approved product or in how it is manufactured,
including changes in formulation or the site of manufacture, generally require prior FDA approval, and even changes that may
seem less significant must be evaluated under change control procedures to assess their potential impact on product quality and
relative to the specifications on file with the FDA, and whether they trigger notification or approval requirements. The packaging
and labeling of all products developed by us are also subject to FDA approval and ongoing regulation. Noncompliance with any
regulatory requirements can result in, among other things, issuance of warning letters, civil and criminal penalties, seizures, and
injunctive action. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain compliance with cGMP and other aspects of regulatory compliance.
The distribution of prescription drugs is subject to the Drug Supply Chain Security Act ("DSCSA"), which regulates the
distribution of the products at the federal level, and sets certain standards for federal or state registration and compliance of entities
in the supply chain (manufacturers and repackagers, wholesale distributors, third-party logistics providers, and dispensers). The
13
DSCSA preempts previously enacted state laws and the pedigree requirements of the Prescription Drug Marketing Act ("PDMA").
Trading partners within the drug supply chain must now ensure certain product tracing requirements are met, and are required to
exchange transaction information, transaction history, and transaction statements. Further, the DSCSA limits the distribution of
prescription pharmaceutical products and imposes requirements to ensure overall accountability and security in the drug supply
chain. The distribution of product samples continues to be regulated under the PDMA.
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. In addition to new legislation,
FDA regulations, guidance documents, and policies are often revised or reinterpreted by the agency in ways that may significantly
affect our business and our product candidates. It is impossible to predict whether further legislative or FDA regulation or policy
changes will be enacted or implemented and what the impact of such changes, if any, may be.
Orphan Drug Act
To date, we have successfully obtained Orphan Drug designation by the FDA under the Orphan Drug Act of 1983 for
epratuzumab for NHL, yttrium-90-labeled clivatuzumab tetraxetan for pancreatic cancer, sacituzumab govitecan for SCLC and
pancreatic cancer, labetuzumab for ovarian, pancreatic and SCLCs, milatuzumab for multiple myeloma and chronic lymphocytic
leukemia ("CLL"), and veltuzumab for immune thrombocytopenia ("ITP") and pemphigus. Under the Orphan Drug Act, the FDA
may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease
or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before
submitting a BLA. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for
grant funding towards clinical trial costs, tax advantages, and user-fee waivers. Orphan drug designation does not convey any
advantage in, or shorten the duration of, the regulatory review and approval process. The first BLA applicant to receive FDA
approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-
year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period,
the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited
circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or where the manufacturer of the
approved product cannot assure sufficient quantities. As a result, there can be no assurance that our competitors will not receive
approval of drugs or biologics that have a different active ingredient for treatment of the diseases for which our products and
product candidates are targeted.
Foreign Regulation
In addition to regulations in the United States, we are subject to a variety of foreign regulations governing clinical trials
and commercial sales and distribution of our product candidates being developed, and products being marketed outside of the
United States. We must obtain approval by the comparable regulatory authorities of foreign countries before we can commence
clinical trials or marketing of our products in those countries. The approval process varies from country to country, and the time
may be longer or shorter than that required by the FDA for BLA licensure. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary greatly from country to country. As in the United States, we are subject
to post-approval regulatory requirements, such as those regarding product manufacturing, marketing, or distribution.
Other Regulatory Considerations
We are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act, The Clean Air Act, New Jersey Department of Environmental Protection and other
current and potential future federal, state, or local regulations. Our research and development activities involve the controlled use
of hazardous materials, chemicals, biological materials and various radioactive compounds. We believe that our procedures comply
with the standards prescribed by state and federal regulations; however, the risk of injury or accidental contamination cannot be
completely eliminated.
We may also be subject to healthcare regulation and enforcement by the federal government and the states and foreign
governments where we may market our products and product candidates, if approved. These laws include, without limitation, state
and federal anti-kickback, fraud and abuse, false claims, privacy, and security and physician sunshine laws and regulations.
The federal Anti-Kickback Statute, which prohibits, among other things, persons and entities including pharmaceutical
manufacturers from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, overtly
or covertly, in case or in kind, to induce or reward, or in return for, or either the referral of an individual for, or the purchase, lease
or order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as
the Medicare and Medicaid programs. This statute has been interpreted broadly to apply to, among other things, arrangements
14
between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other hand.
The term “remuneration” expressly includes kickbacks, bribes or rebates and also has been broadly interpreted to include anything
of value. There are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from
prosecution or other regulatory sanctions, however, the exceptions and safe harbors are drawn narrowly, and practices that do not
fit squarely within an exception or safe harbor may be subject to scrutiny. The failure to meet all of the requirements of a particular
applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback
Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of
its facts and circumstances. Our practices may not meet all of the criteria for safe harbor protection from federal Anti-Kickback
Statute liability in all cases. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or
specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or
services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the
False Claims Act.
The False Claims Act prohibits individuals or entities from, among other things, knowingly presenting or causing the
presentation of a claims payment to, or approval by, the federal government that are false, fictitious or fraudulent, or knowingly
making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim to avoid, decrease
or conceal an obligation to pay money to the federal government. As a result of a modification made by the Fraud Enforcement
and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the federal government.
Although we do not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed to
"cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to
customers, promoting a product off-label, marketing products of sub-standard quality, or, as noted above, paying a kickback that
results in a claim for items or services. In addition, our activities relating to the reporting of wholesaler or estimated retail prices
for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal,
state and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under
this law. For example, several pharmaceutical and other healthcare companies have faced enforcement actions under these laws
for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and
Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers
would bill federal programs for the product. The False Claims Act also permits a private individual acting as a "whistleblower"
to bring actions on behalf of the federal government alleging violations of the False Claims Act and to share in any monetary
recovery. In addition, federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion,
may also implicate the False Claims Act. Although the False Claims Act is a civil statute, conduct that results in a False Claims
Act violation may also implicate various federal criminal statutes.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes criminal and civil liability
for knowingly and willfully executing, or attempting to execute, a scheme to defraud or obtain, by any means of false or fraudulent
pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit
program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up by trick, scheme
or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or
payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need
to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
There has also been a recent trend of increased federal and state regulation of payments made to physicians and other
healthcare providers. The federal physician payment transparency requirements, sometimes referred to as the “Physician Payments
Sunshine Act,” created under the United States Patient Protection and Affordable Care Act of 2010, as amended or the ACA, and
its implementing regulations, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies
for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program (with certain exceptions)
to annually report to the United States Department of Health and Human Services, or HHS, information related to certain payments
or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of,
or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests held by physicians
and their immediate family members. Under recent legislation, the Sunshine Act will extend to payments and transfers of value
to physician assistants, nurse practitioners, and other mid-level healthcare providers (with reporting requirements going into effect
in 2022 for payments and transfers made in 2021). CMS has the potential to impose penalties of up to $1.15 million per year for
violations of the Sunshine Act, depending on the circumstances, and payments reported under the Sunshine Act also have the
potential to draw scrutiny on payments to and relationships with physicians, which may have implications under the Anti-Kickback
Statute and other healthcare laws.
We may also be subject to data privacy and security regulation by both the federal government and the states in which
we conduct our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act of 2009 ("HITECH")
and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, imposes, among
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other things, obligations, including mandatory contractual terms with respect to safeguarding the privacy, security and transmission
of individually identifiable health information held by certain healthcare providers, health plans and healthcare clearinghouses,
known as covered entities, and business associates. Among other things, HITECH made certain aspects of HIPAA’s rules (notably
the Security Rule) directly applicable to business associates, defined as independent contractors or agents of covered entities that
receive or obtain individually identifiable health information in connection with providing a service for or on behalf of a covered
entity. HITECH created four tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly
applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions
in federal court to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.
The Department of Health and Human Services Office of Civil Rights, ("OCR"), has increased its focus on compliance and
continues to train state attorneys general for enforcement purposes. The OCR has recently increased both its efforts to audit HIPAA
compliance and its level of enforcement, with one recent penalty exceeding $5 million.
Even where HIPAA does not apply, according to the United States Federal Trade Commission ("FTC"), failing to take
appropriate steps to keep consumers' personal information secure constitutes unfair acts or practices in or affecting commerce in
violation of Section 5(a) of the Federal Trade Commission Act ("FTCA"), 15 United States C § 45(a). The FTC expects a company's
data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds,
the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data
is considered sensitive data that merits stronger safeguards. The FTC's guidance for appropriately securing consumers' personal
information is similar to what is required by the HIPAA Security Rule.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy
and security concerns, and some state privacy laws apply in broader circumstances than HIPAA. California recently enacted
legislation – the California Consumer Privacy Act, or CCPA, which goes into effect January 1, 2020. The CCPA, among other
things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents,
including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with
statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Legislators have
stated that they intend to propose amendments to the CCPA before it goes into effect, and the California Attorney General will
issue clarifying regulations. Although the law includes certain limited exceptions, including for information collected as part of
clinical trials as specified in the law, it remains unclear what, if any, modifications will be made to this legislation or how it will
be interpreted.
We are subject to the United States Foreign Corrupt Practices Act ("FCPA"), which prohibits corporations and individuals
from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. Under this
act, it is illegal to pay, offer to pay, or authorize the payment of anything of value to any foreign government official, government
staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person
working in an official capacity. Our present and future business has been and will continue to be subject to various other laws and
regulations.
Marketing, Sales and Distribution
As noted above, we intend to bring sacituzumab govitecan to the United States market on our own for patients with
mTNBC. In anticipation of bringing sacituzumab govitecan to market, we have built a commercial operation with a total sales
force of approximately 50 agents along with seven field-based medical affairs agents. At present, we have limited marketing and
sales capabilities as we focus on developing our therapeutic product candidates. On January 1, 2018, we terminated agreements
with third parties to market and provide distribution and customer support services for LeukoScan®. The Company discontinued
the sale of LeukoScan® during February 2018 to focus on its ADC business.
Our European operations are headquartered in Rodermark, Germany. Our distribution agreement with Logosys Logistik
GmbH to package and distribute LeukoScan® in the EU was terminated January 1, 2018.
Manufacturing
We operate a recombinant monoclonal antibody research manufacturing facility at our Morris Plains, New Jersey location.
This facility is used for the research production of all of our therapeutic product candidates for clinical trials, and potentially for
commercial production as well.
For the commercial-scale manufacturing of sacituzumab govitecan (IMMU-132) we have contracted with two outside
contract manufacturing organizations to provide drug for the Phase 2 and Phase 3 clinical trials and to support the commercial
launch of sacituzumab govitecan in the United States. Accordingly, we have agreements with Johnson Matthey Pharma Services
16
of Devens, Massachusetts for the manufacture of the linker-drug payload, and BSP Pharmaceuticals of Latina Scalo, Italy for the
conjugation of the antibody with the linker-drug and fill/finish of the sacituzumab govitecan drug product. Presently, we have the
capacity at our Morris Plains facility to manufacture sufficient quantities of the anti-Trop-2 antibody to support the commercial
launch of sacituzumab govitecan in the United States. Together with our contract manufacturing organization ("CMO") partners,
we have already manufactured sufficient quantities of the drug product to complete the TROPHU U-01 study in advanced urothelial
cancer, the upcoming Phase 3 study in hormone receptor-positive/human epidermal growth factor receptor 2-negative metastatic
breast cancer, and the confirmatory Phase 3 clinical trial of sacituzumab govitecan as a third-line therapy for patients with mTNBC,
as well as the commercial launch of sacituzumab govitecan in the United States. Additionally, we have contracted with Samsung
Biologics Co., Ltd. to support our longer term needs for commercial-scale antibody production.
Manufacturing Regulatory Considerations
In addition to regulating and auditing human clinical trials, the FDA regulates and inspects equipment, facilities and
processes used in the manufacturing of such products prior to providing approval to market a product. If, after receiving approval
from the FDA, a material change is made in manufacturing equipment, location, or process related to an approved product,
additional regulatory review may be required. We must also adhere to cGMP and product-specific regulations enforced by the
FDA through its facilities inspection program. The FDA also conducts regular, periodic visits to re-inspect equipment, facilities,
and processes following the initial approval. If, as a result of these inspections, the FDA determines that our equipment, facilities
or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may seek civil, criminal
or administrative sanctions and/or remedies against us, including the suspension of our manufacturing operations.
Employees
As of December 31, 2018, we employed 346 persons on a full-time basis, 65 of whom were engaged in research, clinical
research and regulatory affairs, 130 of whom were engaged in operations and manufacturing and quality control, and 80 of whom
were engaged in finance, administration, sales and marketing. We believe that while we have been successful to date in attracting
skilled and experienced scientific personnel, competition for such personnel continues to be intense and there can be no assurance
that we will continue to be able to attract and retain the professionals we will need to grow our business. Our employees are not
covered by a collective bargaining agreement and we believe that our relationship with our employees is excellent.
Corporate Information
We were incorporated in Delaware in 1982. Our principal offices are located at 300 The American Road, Morris Plains,
New Jersey 07950 and 410 The American Road, Morris Plains, New Jersey 07950. Our telephone number is (973) 605-8200. We
have one foreign subsidiary, Immunomedics GmbH in Rodermark, Germany, to assist us in managing sales and coordinating
clinical trials in Europe. In addition, we have a majority-owned subsidiary, IBC Pharmaceuticals, Inc. (“IBC”). Immunomedics
has incurred expenses on behalf of the IBC operations, including interest, over the past fourteen years. As of December 31, 2018,
IBC has a liability to Immunomedics Inc. of approximately $17.6 million, which is eliminated in consolidation. Our web address
is www.immunomedics.com. We have not incorporated by reference into this Transition Report on Form 10-K the information on
our website and you should not consider it to be a part of this document.
Our reports that have been filed with the Securities and Exchange Commission (“SEC”), are available on our website
free of charge, including this transition report on Form 10-K, annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to such reports
filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Copies of this
Transition Report on Form 10-K may also be obtained without charge electronically or by paper by contacting Investor Relations,
Immunomedics, Inc., 300 The American Road, Morris Plains, New Jersey 07950 or by calling (973) 605-8200.
In addition, we make available on our website (i) the charters for the committees of the Board of Directors, including the
Audit Committee, Compensation Committee and Governance and Nominating Committee, and (ii) the Company’s Code of
Business Conduct (the “Code of Conduct”) governing its directors, officers and employees. Within the time period required by
the SEC, we will post on our website any modifications to the Code of Conduct, as required by the Sarbanes-Oxley Act of 2002,
(“Sarbanes-Oxley Act”).
The SEC maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other
information regarding companies that file electronically with the SEC.
17
Item 1A.
RISK FACTORS
Factors That May Affect Our Business and Results of Operations
Our business is subject to certain risks and uncertainties, each of which could materially adversely affect our business,
financial condition, cash flows and results of operations.
Risks Relating to Our Business, Operations and Product Development
We have a long history of operating losses and it is likely that our operating expenses will continue to exceed our
revenues for the foreseeable future.
We have incurred significant operating losses since our formation in 1982. We continue to spend our cash resources to
fund our research and development programs and, subject to adequate funding, we expect these expenses to increase for the
foreseeable future. Our only significant sources of revenue in recent years have been derived from collaboration agreements and
sales of our LeukoScan® product in certain European countries. Additionally, the only product sales we have earned to date have
come from the limited sales of our LeukoScan® diagnostic imaging product for which our (i) patent protection has expired and
(ii) future sales were discontinued during the third quarter of fiscal year 2018. There can be no assurance that we will be profitable
in future quarters or other periods. Further, we have made the strategic decision to focus on our therapeutic pipeline. We have
never had product sales of any therapeutic product. We expect to experience significant operating losses as we invest further in
our research and development activities while simultaneously attempting to develop and commercialize our other therapeutic
product candidates. Even if we are able to develop commercially viable therapeutic products, certain obligations the Company
has to third parties, including, without limitation, our obligation to pay RPI royalties on certain sacituzumab govitecan revenues
pursuant to the Royalty Agreement may erode profitability of such products. If we are unable to develop commercially viable
therapeutic products or to license them to third parties, it is likely that we will never achieve significant revenues or become
profitable, either of which would jeopardize our ability to continue as a going concern.
We have significant future capital needs and may be unable to raise capital when needed, which could force us to
delay or reduce our clinical development efforts.
We believe our projected financial resources are adequate to (i) support our clinical development plan for developing
sacituzumab govitecan in mTNBC, advanced urothelial cancer ("UC"), hormone receptor-positive ("HR+")/human epidermal
growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), non-small cell lung cancer ("NSCLC") and other
indications of high medical need, (ii) further build our clinical and manufacturing infrastructure, and (iii) fund operations through
2020. However, in case of regulatory delays or other unforeseen events, we may require additional funding.
We may require additional funding in the future to complete our clinical trials currently planned or underway, continue
research and new development programs, and continue operations. Potential sources of funding include (i) the entrance into various
potential strategic partnerships targeted at advancing and maximizing our full pipeline for mTNBC and beyond, (ii) the sales and
marketing of sacituzumab govitecan as a third-line therapy for mTNBC in the United States (pending FDA approval), and (iii)
potential equity and debt financing transactions.
Until we can generate significant cash through (i) the entrance into various potential strategic partnerships towards
advancing and maximizing our full pipeline for mTNBC and beyond, or (ii) the sales and marketing of sacituzumab govitecan as
a third-line therapy for mTNBC in the United States (pending FDA approval), we expect to continue to fund our operations with
our current financial resources. In the future, if we cannot obtain sufficient funding through the above methods, we could be
required to finance future cash needs through the sale of additional equity and/or debt securities in capital markets. However, there
can be no assurance that we will be able to raise the additional capital needed to complete our pipeline of research and development
programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has
resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. Our existing
debt may also negatively impact our ability to raise additional capital. If we are unable to raise capital on acceptable terms, our
ability to continue our business would be materially and adversely affected.
Other than our pending BLA for sacituzumab govitecan for patients with metastatic triple-negative breast cancer, our
other most advanced therapeutic product candidates are still only in the clinical development stage, and may require us to raise
capital in the future in order to fund further expensive and time-consuming studies before they can even be submitted for final
regulatory approval. A failure of a clinical trial could severely harm our business and results of operations.
18
Clinical trials involve the administration of a product candidate to patients who are already extremely ill, making patient
enrollment often difficult and expensive. Moreover, even in ideal circumstances where the patients can be enrolled and then
followed for the several months or more required to complete the study, the trials can be suspended, terminated, delayed or otherwise
fail for any number of reasons, including:
•
•
later-stage clinical trials may raise safety or efficacy concerns not readily apparent in earlier trials or fail to meet the
primary endpoint;
unforeseen difficulties in manufacturing the product candidate in compliance with all regulatory requirements and in the
quantities needed to complete the trial which may become cost-prohibitive;
• we or any of our collaboration partners may experience delays in obtaining, or be unable to obtain, agreement for the
conduct of our clinical trials from the FDA, IRBs, or other reviewing entities at clinical sites selected for participation
in our clinical trials;
• while underway, the continuation of clinical trials may be delayed, suspended or terminated due to modifications to the
clinical trial’s protocols based on interim results obtained or changes required or conditions imposed by the FDA, an
IRB, a data and safety monitoring board (“DSMB”), or any other regulatory authority;
•
•
our third-party contractors may fail to meet their contractual obligations to us in a timely manner;
the FDA or other regulatory authorities may impose a clinical hold, for example based on an inspection of the clinical
trial operations or trial sites;
• we or any of our collaboration partners may suspend or cease trials in our or their sole discretion;
•
•
during the long trial process alternative therapies may become available which make further development of the product
candidate impracticable; and
if we are unable to obtain the additional capital we need to fund all of the clinical trials we foresee, we may be forced to
cancel or otherwise curtail such trials and other studies.
Any substantial delay in successfully completing clinical trials for our product candidates, sacituzumab govitecan and
labetuzumab govitecan, could severely harm our business and results of operations.
Moreover, principal investigators for our clinical trials may serve as scientific advisers or consultants to us from time to
time and receive compensation in connection with such services. Under certain circumstances, the Company may be required to
report some of these relationships to the FDA. The FDA may conclude that a financial relationship between the company and a
principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA may therefore
question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be
jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately
lead to the denial of regulatory approval of one or more of our product candidates.
Our clinical trials may not adequately show that our drugs are safe or effective, and a failure to achieve the planned
endpoints could result in termination of product development.
Progression of our drug products through the clinical development process is dependent upon our trials indicating our
drugs have adequate safety and efficacy in the patients being treated by achieving pre-determined safety and efficacy endpoints
according to the trial protocols. Failure to achieve either of these endpoints could result in delays in our trials; require the performance
of additional unplanned trials or require termination of any further development of the product for the intended indication.
These factors could result in delays in the development of our product candidates and could result in significant unexpected
costs or the termination of programs.
19
Should the clinical development process be successfully completed, our ability to derive revenues from the sale of
therapeutics will depend upon our first obtaining FDA as well as foreign regulatory approvals, all of which are subject to a
number of unique risks and uncertainties.
Even if we are able to demonstrate the safety and efficacy of our product candidates in clinical trials, if we fail to gain
timely approval to commercialize our product candidates from the FDA and other foreign regulatory authorities, we will be unable
to generate the revenues we will need to build our business. The FDA or comparable regulatory authorities in other countries may
delay, limit or deny approval of our product candidates for various reasons. For example, such authorities may disagree with the
design, scope or implementation of our clinical trials; or with our interpretation of data from our preclinical studies or clinical
trials; or may otherwise take the position that our product candidates fail to meet the requirements and standards for regulatory
approval. There is limited FDA precedent or guidance on ADCs, and ADC product candidates may present more complex review
considerations than conventional drugs, given their biologic (antibody), drug, and linker components. There are numerous FDA
personnel assigned to review different aspects of a BLA, and uncertainties can be presented by their ability to exercise judgment
and discretion during the review process. During the course of review, the FDA may request or require additional preclinical,
clinical, chemistry, manufacturing, and control ("CMC"), or other data and information, and the development and provision of
these data and information may be time consuming and expensive. Regulatory approvals may not be granted on a timely basis,
if at all, and even if and when they are granted, they may not cover all the indications for which we seek approval. On May 21,
2018, we submitted a Biologics License Application (“BLA”) to the FDA for sacituzumab govitecan for the treatment of patients
with mTNBC who have received at least two prior therapies for metastatic disease. On July 18, 2018, we received notification
from the FDA that the BLA was accepted for filing and the original application was granted Priority Review with a PDUFA target
action date of January 18, 2019. On January 17, 2019, we received a Complete Response Letter ("CRL") from the FDA for the
BLA. On February 4, 2019, we received a written communication from the FDA enclosing the Establishment Inspection Report
(“EIR”) from the chemistry, manufacturing and controls BLA pre-approval inspection conducted by the FDA at the Company’s
Morris Plains, New Jersey antibody manufacturing facility for our ADC product candidate sacituzumab govitecan, which took
place from August 6, 2018 through August 14, 2018. The FDA also notified the Company that the FDA will be conducting a re-
inspection of the Company’s Morris Plains, New Jersey manufacturing facility as part of the BLA resubmission process. The
Company is finalizing its plans with respect to the matters raised in the CRL received from FDA on January 17, 2019 and the EIR,
and subsequently expects to request a meeting with the FDA in the near term. Further, while we may develop a product candidate
with the intention of addressing a large, unmet medical need, the FDA may only approve the use of the drug for indications affecting
a relatively small number of patients, thus greatly reducing the market size and our potential revenues. The approvals may also
contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use, which
could further narrow the size of the market. In certain countries, even if the health regulatory authorities approve a drug, it cannot
be marketed until pricing for the drug is also approved. Finally, even after approval can be obtained, we may be required to recall
or withdraw a product as a result of newly discovered safety or efficacy concerns, either of which would have a materially adverse
effect on our business and results of operations.
In order to fund future operations, we will need to raise significant amounts of additional capital. Because it can be
difficult for a mid-cap company like ours to raise equity capital on acceptable terms, we cannot assure you that we will be able
to obtain the necessary capital when we need it, or on acceptable terms, if at all.
Even if our technologies and product candidates are superior, if we lack the capital needed to bring our future products
to market, we will never be successful. We have obtained the capital necessary to fund our research and development programs
to date primarily from the following sources:
•
•
•
upfront payments, milestone payments, and payments for limited amounts of our antibodies received from licensing
partners;
proceeds from the public and private sale of our equity or debt securities; and
limited product sales of LeukoScan® (which were discontinued during February 2018), licenses, grants and interest income
from our investments.
Over the long term, we expect to commercialize sacituzumab govitecan in mTNBC in the United States and globally, to
expand sacituzumab govitecan to treat patients with other solid tumors, including UC, HR+/HER2- mBC, NSCLC and other
serious cancers, to expand research and development activities to continue to expand and we do not believe we will have adequate
cash to continue commercial expansion and development of sacituzumab govitecan, or to complete development of product
candidates in line with our pipeline included in our long term corporate strategy. Our capital requirements are dependent on
numerous factors, including:
20
•
•
•
•
•
•
•
the rate of progress of commercialization of sacituzumab govitecan in mTNBC and our ability to develop it for other
cancers;
the rate at which we progress our research programs and the number of product candidates we have in preclinical and
clinical development at any one time;
the cost of conducting clinical trials involving patients in the United States, Europe and possibly elsewhere;
our need to establish the manufacturing capabilities necessary to produce the quantities of our product candidates we
project we will need;
the time and costs involved in obtaining FDA and foreign regulatory approvals;
the cost of first obtaining, and then defending, our patent claims and other intellectual property rights; and
our ability to enter into licensing and other collaborative agreements to help offset some of these costs.
There may be additional cash requirements for many reasons, including, but not limited to, changes in our commercial
expansion plans, our research and development plans, the need for unexpected capital expenditures or costs associated with any
acquisitions of other businesses, assets or technologies that we may choose to undertake and marketing and commercialization of
our product candidates. If we deplete our existing capital resources, we will be required to either obtain additional capital quickly,
or significantly reduce our operating expenses and capital expenditures, either of which could have a material adverse effect on
us.
Until we can generate significant cash through either (i) the entrance into various potential strategic partnerships targeted
at advancing and maximizing the Company’s full pipeline for mTNBC and beyond, or (ii) the sales and marketing of sacituzumab
govitecan as a third-line therapy for mTNBC in the United States (pending FDA approval), we expect to continue to fund our
operations with our current financial resources. We believe our projected financial resources are adequate to (i) support our clinical
development plan for developing sacituzumab govitecan in mTNBC, advanced urothelial cancer ("UC"), hormone receptor-positive
("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), non-small cell lung
cancer ("NSCLC") and other indications of high medical need, (ii) further build our clinical and manufacturing infrastructure, and
(iii) fund operations through 2020. However, in case of regulatory delays or other unforeseen events, we may require additional
funding. If, however, we cannot obtain sufficient funding through the entrance into various potential strategic partnerships targeted
at advancing and maximizing the Company’s full pipeline for mTNBC and beyond, we could be required to finance future cash
needs through the sale of additional equity and/or debt securities in capital markets. However, there can be no assurance that we
will be able to raise the additional capital needed to complete our pipeline of research and development programs on commercially
acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with
respect to availability of capital and hence the timing to meet an entity’s liquidity needs. The Company’s existing debt will also
negatively impact the Company’s ability to raise additional capital. If the Company is unable to raise capital on acceptable terms,
its ability to continue its business would be materially and adversely affected. Having insufficient funds may require us to delay,
scale-back, or eliminate some or all of our programs, or renegotiate less favorable terms than we would otherwise choose. Failure
to obtain adequate financing also may adversely affect our ability to operate as a going concern.
Additionally, if we raise funds by issuing equity securities, dilution to existing stockholders would result; and if we raise
funds by incurring additional debt financing, the terms of the debt may involve future cash payment obligations and/or conversion
to equity as well as restrictions that may limit our ability to operate our business.
If we, or any of our collaboration partners, or our or their contract manufacturers, cannot successfully and efficiently
manufacture the compounds that make up our products and product candidates, our ability, and the ability of our collaboration
partners, to sell products and conduct clinical trials will be impaired.
Our ability to conduct our preclinical and clinical research and development programs depends, in large part, upon our
ability to manufacture our proprietary compounds in accordance with the FDA and other regulatory requirements. We have limited
historical experience in manufacturing these compounds in significant quantities, and we may not be able to do so in the quantities
required to commercialize these products. Any interruption in manufacturing at this site, whether by natural acts or otherwise,
could significantly and adversely affect our operations, and delay our research and development programs.
We and our collaboration partners also depend on third parties to provide certain raw materials, and contract manufacturing
and processing services. All manufacturers of biopharmaceutical products must comply with current cGMPs, required by the FDA
and other regulatory agencies. Such regulations address, among other matters, controls in manufacturing processes, quality control
21
and quality assurance requirements and the maintenance of proper records and documentation. The FDA and other regulatory
agencies routinely inspect manufacturing facilities, including in connection with the review of a BLA. The FDA generally will
issue a notice on Form 483 if it finds issues with respect to its inspections, to which the facility must adequately respond in order
to avoid escalated regulatory concerns. If our manufacturing facility or those facilities of our collaboration partners and our
respective contract manufacturers or processors do not comply with applicable cGMPs and other regulatory requirements, in
addition to regulatory enforcement, we may be subject to product liability claims, we may be unable to meet clinical demand for
our products, and we could suffer delays in the progress of clinical trials for products under development and of potential approval
and commercialization.
Although historically we have been a research and development company, we currently plan to commercialize our
lead product candidate internally rather than license such asset. There can be no assurance that we will be successful in
developing and expanding commercial operations or balancing our research and development activities with our
commercialization activities.
We have historically been engaged primarily in research and development activities, but plan to commercialize our lead
product candidate, sacituzumab govitecan, ourselves. There can be no assurance that we will be able to successfully manage the
balance of our research and development operations with our planned commercialization activities. Potential investors should be
aware of the problems, delays, expenses and difficulties frequently encountered by companies balancing development of product
candidates, which can include problems such as unanticipated issues relating to clinical trials and receipt of approvals from the
FDA and foreign regulatory bodies, with commercialization efforts, which can include problems relating to managing
manufacturing and supply, reimbursement, marketing problems and additional costs. Our product candidates will require significant
additional research and clinical trials, and we will need to overcome significant regulatory burdens prior to commercialization in
the United States and other countries. In addition, we may be required to spend significant funds on building out our commercial
operations. If we are unable to develop commercially viable therapeutic products, certain obligations the Company has to third
parties, including, without limitation, our obligation to pay RPI royalties on certain sacituzumab govitecan revenues pursuant to
the funding agreement may also erode profitability of this product. There can be no assurance that after the expenditure of substantial
funds and efforts, we will successfully develop and commercialize any of our product candidates, generate any significant revenues
or ever achieve and maintain a substantial level of sales of our products.
We may not successfully establish and maintain collaborative and licensing arrangements, which could adversely
affect our ability to develop and commercialize certain of our product candidates. Any of our collaboration partners may not
adequately perform their responsibilities under our agreements, which could adversely affect our development and
commercialization program.
A key element of our business strategy has been to develop, market and commercialize our product candidates through
collaborations with more established pharmaceutical companies. To the extent we continue to rely on this business strategy, we
may not be able to maintain or expand these licenses and collaborations or establish additional licensing and collaboration
arrangements necessary to develop and commercialize any of our product candidates. Even if we are able to maintain or establish
licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will
restrict our ability to develop, test and market our product candidates. Any failure to maintain or establish licensing or collaboration
arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and
commercialize our product candidates.
We expect to rely at least in part on third party collaborators to perform a number of activities relating to the development
and commercialization of certain of our product candidates, including the manufacturing of product materials, the design and
conduct of clinical trials for certain of our product candidates, and potentially the obtaining of regulatory approvals and marketing
and distribution of any successfully developed products. Our collaborative partners may also have or acquire rights to control
aspects of our product development and clinical programs. As a result, we may not be able to conduct these programs in the manner
or on the time schedule we currently contemplate. In addition, if any of these collaborative partners withdraw support for our
programs or product candidates or otherwise impair their development, our business could be negatively affected. Our expenses
may also increase as a result of our plan to undertake these activities internally to commercialize sacituzumab govitecan.
In addition, our success depends on the performance of our collaborators of their responsibilities under these
arrangements. Some potential collaborators may not perform their obligations in a timely fashion or in a manner satisfactory to
us. Because such agreements may be exclusive, we may not be able to enter into a collaboration agreement with any other company
covering the same product field during the applicable collaborative period. In addition, our collaborators’ competitors may not
wish to do business with us at all due to our relationship with our collaborators. If we are unable to enter into additional product
discovery and development collaborations, our ability to sustain or expand our business will be significantly diminished.
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Our future success will depend upon our ability to first obtain and then adequately protect our patent and other
intellectual property rights, as well as avoiding the infringement of the rights of others.
Our future success will be highly dependent upon our ability to first obtain and then defend the patent and other intellectual
property rights necessary for the commercialization of our product candidates. We have filed numerous patent applications on the
technologies and processes that we use in the United States and certain foreign countries. Although we have obtained a number
of issued United States patents to date, the patent applications owned or licensed by us may not result in additional patents being
issued. Moreover, these patents may not afford us the protection we need against competitors with similar technologies or products.
A number of jurisdictions where we have sought, or may in the future choose to seek, intellectual property protection, have
intellectual property laws and patent offices which are still developing. Accordingly, we may have difficulty obtaining intellectual
property protection in these markets, and any intellectual property protections which we do obtain may be less protective than in
the United States, which could have an adverse effect on our operations and financial prospects.
The successful development of therapeutic products frequently requires the application of multiple technologies that may
be subject to the patent or other intellectual property rights of third parties. Although we believe it is likely we will need to license
technologies and processes from third parties in the ordinary course of our business, we are not currently aware of any material
conflict involving our technologies and processes with any valid patents or other intellectual property rights owned or licensed
by others that would affect commercial sales of sacituzumab govitecan or other products starting in 2020. In the event that a third
party was to claim such a conflict existed, they could sue us for damages as well as seek to prevent us from commercializing our
product candidates. It is possible that a third party could successfully claim that our products infringe on their intellectual property
rights. Uncertainties resulting from the litigation and continuation of patent litigation or other proceedings could have a material
adverse effect on our ability to compete in the marketplace. Any patent litigation or other proceeding, even if resolved in our favor,
would require significant financial resources and management time.
Some of our competitors may be able to sustain these costs more effectively than we can because of their substantially
greater financial and managerial resources. If a patent litigation or other proceeding is resolved unfavorably to us, we may be
enjoined from manufacturing or selling our products without a license from the other party, in addition to being held liable for
significant damages. We may not be able to obtain any such license on commercially acceptable terms, if at all.
In addition to our reliance on patents, we attempt to protect our proprietary technologies and processes by relying on
trade secret laws, nondisclosure and confidentiality agreements and licensing arrangements with our employees and other persons
who have access to our proprietary information. These agreements and arrangements may not provide meaningful protection for
our proprietary technologies and processes in the event of unauthorized use or disclosure of such information. In addition, our
competitors may independently develop substantially equivalent technologies and processes or otherwise gain access to our trade
secrets or technology, either of which could materially and adversely affect our competitive position.
Expiry of our intellectual property rights could lead to increased competition.
Even where we are able to obtain and then defend patent and other intellectual property rights necessary for research,
development and commercialization of our product candidates, such intellectual property rights will be for a limited term. Where
patents which we own or license expire, the technology the subject of the patent may be utilized by third parties in research and
development or competing products (for example, biosimilars of a patented product may be manufactured by third parties once
the patent expires). While we endeavor to maintain robust intellectual property protection, as our existing issued patents expire,
it may materially and adversely affect our competitive position.
We face substantial competition in the biotechnology industry and may not be able to compete successfully against
one or more of our competitors.
The biotechnology industry is highly competitive, particularly in the area of therapeutic oncology products. In recent
years, there have been extensive technological innovations achieved in short periods of time, and it is possible that future
technological changes and discoveries by others could result in our products and product candidates quickly becoming
uncompetitive or obsolete. A number of companies, including Amgen, AstraZeneca, Bayer Healthcare Pharmaceuticals, Biogen
Idec, Bristol-Myers Squibb, Celgene, Eli Lilly, Genmab, GlaxoSmithKline, Immunogen, Johnson & Johnson, Merck, Merck
Serono, Novartis, Pfizer, Roche, and Seattle Genetics, are engaged in the development of therapeutic oncology products. Many
of these companies have significantly greater financial, technical and marketing resources than we do. In addition, many of these
companies have more established positions in the pharmaceutical industry and are therefore better equipped to develop,
commercialize and market oncology products. Even some smaller competitors may obtain a significant competitive advantage
over us if they are able to discover or otherwise acquire patentable inventions, form collaborative arrangements or merge with
larger pharmaceutical companies. Further, even if we are able to successfully develop and commercialize products, other
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manufacturers operating in emerging markets may also have a competitive advantage over us with respect to competing products
due to their ability to manufacture with a lower cost base.
We expect to face increasing competition from universities and other non-profit research organizations. These institutions
carry out a significant amount of research and development in the field of antibody-based technologies and they are increasingly
aware of the commercial value of their findings. As a result, they are demanding greater patent and other proprietary rights, as
well as licensing and future royalty revenues. It is possible that such competition could come from universities with which we
have, or have previously had, collaborative research and development relationships, notwithstanding our efforts to protect our
intellectual property in the course of such relationships.
We may be liable for contamination or other harm caused by hazardous materials that we use in the operations of our
business.
In addition to laws and regulations enforced by the FDA, we are also subject to regulation under various other foreign,
federal, state and local laws and regulations. Our manufacturing and research and development programs involve the controlled
use of viruses, hazardous materials, chemicals and various radioactive compounds. The risk of accidental contamination or injury
from these materials can never be completely eliminated, and if an accident occurs we could be held liable for any damages that
result, which could exceed our available resources.
The nature of our business exposes us to significant liability claims, and our insurance coverage may not be adequate
to cover any future claims.
The use of our compounds in clinical trials and any future sale exposes us to liability claims that could be substantial.
These claims might be made directly by healthcare providers, medical personnel, patients, consumers, pharmaceutical companies,
and others selling or distributing our compounds. While we currently have product liability insurance that we consider adequate
for our current needs, we may not be able to continue to obtain comparable insurance in the future at an acceptable cost, if at all.
If for any reason we cannot maintain our existing or comparable liability insurance, our ability to clinically test and market products
could be significantly impaired. Moreover, the amount and scope of our insurance coverage, as well as the indemnification
arrangements with third parties upon which we rely, may be inadequate to protect us in the event of a successful product liability
claim. Any successful claim in excess of our insurance coverage could materially and adversely affect our financial condition and
operating results.
Certain potential for conflicts of interest, both real and perceived, exist which could result in expensive and time-
consuming litigation.
Certain of our former officers and directors have relationships and agreements, both with us as well as among themselves
and their respective affiliates, which create the potential for both real, as well as perceived, conflicts of interest. These include Dr.
David M. Goldenberg, our former Chairman of our Board of Directors, our former Chief Scientific Officer and our former Chief
Patent Officer, and Ms. Cynthia L. Sullivan, a former director and our former President and Chief Executive Officer (who is also
the wife of Dr. Goldenberg). Dr. Goldenberg is also a minority stockholder, of our majority-owned subsidiary, IBC. Dr. Goldenberg
was the primary inventor of new intellectual property for Immunomedics and IBC and was largely responsible for allocating
ownership between the two companies. Immunomedics has incurred expenses on behalf of the IBC operations, including interest,
over the past thirteen years. As of December 31, 2018, IBC has a liability to Immunomedics Inc. which is eliminated in consolidation.
On January 8, 2018, Morris Rosenberg joined the Company as Chief Technology Officer and became a full-time employee
and was permitted to continue to provide certain limited outside consulting services through M Rosenberg BioPharma Consulting
LLC.
As a result of these and other relationships, the potential for both real and perceived conflicts of interest exists and disputes
could arise over the allocation of funds, research projects and ownership of intellectual property rights. In addition, in the event
that we become involved in stockholder litigation regarding these potential conflicts, we might be required to devote significant
resources and management time defending the company from these claims, which could adversely affect our results of operations.
The commercial success of our product candidates depends on the availability and sufficiency of third-party payor
coverage and reimbursement. Given that recent cancer therapeutics for solid cancers such as the ones we are developing can
cost approximately in excess of $12,500 a month, even if our product candidates become available for sale it is likely that federal
and state governments, insurance companies and other payors of health care costs will try to first limit the use of these drugs
to certain patients, and may be reluctant to provide a level of reimbursement that permits us to earn a significant profit on our
investment, if any.
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Our ability to successfully commercialize therapeutic products will depend, in significant part, on the extent to which
hospitals and physicians can obtain appropriate reimbursement levels for the cost of our products and related treatment. Third-
party payors are increasingly challenging the prices charged for diagnostic and therapeutic products and related services. In addition,
legislative proposals to reform health care or reduce government insurance programs may result in lower prices or the actual
inability of prospective customers to purchase our products. Furthermore, even if reimbursement is available, it may not be available
at price levels sufficient for us to realize a positive return on our investment.
The United States government, state legislatures and foreign governmental entities have shown significant interest in
implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls,
restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs.
Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and
measures, could exclude or limit our product candidates from coverage and limit payments for pharmaceuticals.
In addition, we expect that increased emphasis on managed care and cost containment measures in the United States by
third-party payors and government authorities to continue and will place pressure on pharmaceutical pricing and coverage. Coverage
policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is
attained for one or more product candidates for which we receive regulatory approval, less favorable coverage policies and
reimbursement rates may be implemented in the future.
If we are unable to obtain and maintain sufficient third-party coverage and adequate reimbursement for our product
candidates, the commercial success of our product candidates may be greatly hindered and our financial condition and results of
operations may be materially and adversely affected.
Our products may not achieve market acceptance.
If any of our product candidates fail to achieve sufficient market acceptance, we may not be able to generate sufficient
revenue to become profitable. The degree of market acceptance of our product candidates, if and when they are approved for
commercial sale, will depend on a number of factors, including but not limited to:
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the timing of our receipt of marketing approvals, the terms of such approvals and the countries in which such
approvals are obtained;
the safety, efficacy, reliability and ease of administration of our product candidates;
the prevalence and severity of undesirable side effects and adverse events;
the extent of the limitations or warnings required by the FDA or comparable regulatory authorities in other countries to
be contained in the labeling of our product candidates;
the clinical indications for which our product candidates are approved;
the availability and perceived advantages of alternative therapies;
any publicity related to our product candidates or those of our competitors;
the quality and price of competing products;
our ability to obtain third-party payor coverage and sufficient reimbursement;
the willingness of patients to pay out of pocket in the absence of third-party payor coverage; and
the selling efforts and commitment of our commercialization collaborators.
If our approved product candidates fail to receive a sufficient level of market acceptance, our ability to generate revenue
from sales of our product candidates will be limited, and our business and results of operations may be materially and adversely
affected.
A portion of our funding has come from federal government grants and research contracts. Due to reductions in
funding, we may not be able to rely on these grants or contracts as a continuing source of funds.
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During the last few years, we have generated revenues from awards made to us by the National Institutes of Health and
the Department of Defense to partially fund some of our programs. We cannot rely on grants or additional contracts as a continuing
source of funds. Funds available under these grants and contracts must be applied by us toward the research and development
programs specified by the government rather than for all our programs generally. The government’s obligation to make payments
under these grants and contracts is subject to appropriation by the United States Congress for funding in each year. It is possible
that Congress or the government agencies that administer these government research programs will continue to scale back these
programs or terminate them due to their own budgetary constraints, as they have recently been doing. Additionally, these grants
and research contracts are subject to adjustment based upon the results of periodic audits performed on behalf of the granting
authority. Consequently, the government may not award grants or research contracts to us in the future, and any amounts that we
derive from existing awards may be less than those received to date. In those circumstances, we would need to provide funding
on our own, obtain other funding, or scale back or terminate the affected program. In particular, we cannot assure you that any
currently-contemplated or future efforts to obtain funding for our product candidate programs through government grants or
contracts will be successful, or that any such arrangements which we do conclude will supply us with sufficient funds to complete
our development programs without providing additional funding on our own or obtaining other funding. Where funding is obtained
from government agencies or research bodies, our intellectual property rights in the research or technology funded by the grant
are typically subject to certain licenses to such agencies or bodies, which could have an impact on our utilization of such intellectual
property in the future.
We face a number of risks relating to the maintenance of our information systems and our use of information relating
to clinical trials.
In managing our operations, we rely on computer systems and electronic communications, including systems relating to
record keeping, financial information, sourcing, and back-up and the Internet (“Information Systems”). Our Information Systems
include the electronic storage of financial, operational, research, patient and other data. Our Information Systems may be subject
to interruption or damage from a variety of causes, including power outages, computer and communications failures, system
capacity constraints, catastrophic events (such as fires, tornadoes and other natural disasters), cyber risks, computer viruses and
security breaches. If our Information Systems cease to function properly, are damaged or are subject to unauthorized access, we
may suffer interruptions in our operations, be required to make significant investments to fix or replace systems and/or be subject
to fines, penalties, lawsuits, or government action. The realization of any of these risks could have a material adverse effect on
our business, financial condition and results of operations. Our clinical trials information and patient data (which may include
personally identifiable information) is part of our Information Systems and is therefore subject to all of the risks set forth above,
notwithstanding our efforts to code and protect such information.
Risks Related to Government Regulation of our Industry
Legislative or regulatory reform of the healthcare system may affect our ability to sell our products profitably.
In recent years, there have been numerous initiatives on the federal and state levels in the United States for comprehensive
reforms affecting the payment for, the availability of, and reimbursement for, healthcare services. There have been a number of
federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products,
limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare
system in the United States. For example, the Patient Protection and Affordable Care Act (“ACA”) and the Health Care and
Education Reconciliation Act of 2010, which amends the ACA, collectively, the United States Health Reform Laws, were signed
into law in the United States in March 2010.
Among the provisions of the ACA of importance to the pharmaceutical industry are the following:
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the Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national
rebate agreement with the Secretary of the Department of Health and Human Services as a condition of Medicare Part
B and Medicaid coverage of the manufacturer's outpatient drugs furnished to Medicaid patients. Effective in 2010, the
ACA made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers'
rebate liability by raising the minimum basic Medicaid rebate on most branded prescription drugs from 15.1% of average
manufacturer price, or AMP, to 23.1% of AMP, establishing new methodologies by which AMP is calculated and rebates
owed by manufacturers under the Medicaid Drug Rebate Program are collected for drugs that are inhaled, infused, instilled,
implanted or injected, adding a new rebate calculation for "line extensions" (i.e., new formulations, such as extended
release formulations) of solid oral dosage forms of branded products, expanding the universe of Medicaid utilization
subject to drug rebates to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations,
and expanding the population potentially eligible for Medicaid drug benefits;
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the expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid
coverage to additional individuals beginning in April 2010 and by adding new mandatory eligibility categories for certain
individuals with income at or below 133.0% of the federal poverty level beginning in 2014, thereby potentially increasing
both the volume of sales and manufacturers' Medicaid rebate liability;
in order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs
or to be sold directly to United States government agencies, the manufacturer must extend discounts to entities eligible
to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on
the AMP and Medicaid rebate amounts reported by the manufacturer. Effective in 2010, the ACA expanded the types of
entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of
children's hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs
when used for the orphan indication. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate
data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B
discount to increase. Recent proposed guidance from the United States Department of Health and Human Services Health
Resources and Services Administration, if adopted in its current form, may affect manufacturers' rights and liabilities in
conducting audits and resolving disputes under the 340B program;
the ACA imposed a requirement on manufacturers of branded drugs to provide a 50% (and 70% commencing on January
1, 2019) discount off the negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap
(i.e., the donut hole);
the ACA imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription
drugs, apportioned among these entities according to their market share in certain government healthcare programs,
although this fee would not apply to sales of certain products approved exclusively for orphan indications;
the ACA implemented the Physician Payments Sunshine Act;
the ACA requires annual reporting of drug samples that manufacturers and distributors provide to physicians;
the ACA expanded healthcare fraud and abuse laws in the United States, including the False Claims Act and the federal
Anti-Kickback Statute, new government investigative powers and enhanced penalties for non-compliance;
the ACA established a licensing framework for follow-on biologics;
the ACA established the Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research, along with the funding for such research. The research conducted by the
Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products by influencing
decisions relating to coverage and reimbursement rates; and
the ACA established the Center for Medicare and Medicaid Innovation within the Centers for Medicare & Medicaid
Center, or Innovation Center, to test innovative payment and service delivery models to lower Medicare and Medicaid
spending, potentially including prescription drug spending. The Innovation Center has been funded through 2019, and
funding will be automatically renewed for each 10-year budget window thereafter.
Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges
to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA.
Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation
of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.
Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress
has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been
signed into law. The Tax Cuts and Jobs Act of 2017 ("TCJA"), includes a provision repealing, effective January 1, 2019, the tax-
based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage
for all or part of a year that is commonly referred to as the "individual mandate". Additionally, on January 22, 2018, President
Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-
mandated fees, including the so-called "Cadillac" tax on certain high cost employer-sponsored insurance plans, the annual fee
imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical
devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019,
to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole". In July 2018, CMS published
a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers
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under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS
uses to determine this risk adjustment. Congress may consider additional legislation to repeal or repeal and replace other elements
of the ACA. More recently, the United States District Court for the Northern District of Texas struck down the ACA, deeming it
unconstitutional given that Congress repealed the individual mandate in 2017. The decision has been stayed pending outcome of
an appeal to the Fifth Circuit Court of Appeals. Although there is no immediate impact on the ACA, we will continue to evaluate
the effect that the ACA and its possible repeal and replacement, or potential total revocation by the Supreme Court of the United
States, has on our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, in August
2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013
through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government
programs. This includes aggregate reductions to Medicare payments to providers of up to 2.0% per fiscal year, which went into
effect in 2013, and due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027
unless additional Congressional action is taken. In January 2013, then-President Barack Obama signed into law the American
Taxpayer Relief Act of 2012 ("ATRA"), which, among others, delayed for another two months the budget cuts mandated by these
sequestration provisions of the Budget Control Act of 2011. The ATRA also reduced Medicare payments to several providers,
including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government
to recover over-payments to providers from three to five years. Moreover, CMS has promulgated or amended a number of cost
containment and value based reimbursement measures in the ordinary course of business, and it is expected to continue revising
its regulations and policies in response to market conditions and administration directives. These new laws may result in additional
reductions in Medicare and other healthcare funding, which could have a material and adverse effect on our customers and
accordingly, our financial operations.
Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug
pricing practices. Specifically, there have been several recent United States Congressional inquiries and proposed and enacted
federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription
drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for drugs. At the federal level, the Trump administration's budget proposal for fiscal year 2019
contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation,
including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B,
to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income
patients. Additionally, on May 11, 2018, President Trump laid out his administration's "Blueprint" to lower drug prices and reduce
out of pocket costs of drugs, as well as additional proposals to increase drug manufacturer competition, increase the negotiating
power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the
out of pocket costs of product candidates paid by consumers. Although most of these, and other, proposals will require authorization
through additional legislation to become effective, the United States Congress and the Trump administration have each indicated
that it will continue to seek new legislative and administrative measures to control drug costs, including by addressing the role of
pharmacy benefit managers in the supply chain. HHS has already started the process of soliciting feedback on some of these
measures and, at the same time, is immediately implementing others under its existing authority. For example, in September 2018,
CMS announced that it will allow Medicare Advantage Plans to use step therapy for Part B drugs beginning January 1, 2019 in
October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs
and biological products, for which payment is available through or under Medicare or Medicaid to include in the advertisement
that Wholesale Acquisition Cost, or list price, of that drug or biological product and a February 6, 2019 proposed rule aims to
eliminate certain Anti-Kickback safe harbor protections for drug rebates. At the state level, legislatures have increasingly passed
legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or
patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
More recently, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to
Try Act of 2017, or Right to Try Act, was signed into law. The law, among other things, provides a federal framework for patients
to access certain investigational new product candidates that have completed a Phase I clinical trial. Under certain circumstances,
eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA approval under the FDA expanded
access program. The Right to Try Act did not establish any new entitlement or positive right to any party or individual, nor did it
create any new mandates, directives, or additional regulations requiring a manufacturer or sponsor of an eligible investigational
new product candidates to provide expanded access.
We are unable to predict the future course of federal or state healthcare legislation in the United States directed at
broadening the availability of healthcare and containing or lowering the cost of healthcare. The United States Health Reform Laws
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and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material
and adverse effect on our business, financial condition and results of operations.
Healthcare laws and regulations may affect the pricing of our product candidates and may affect our profitability.
In certain countries, the government may provide healthcare at a subsidized cost to consumers and regulate prices, patient
eligibility or third-party payor reimbursement policies to control the cost of product candidates. Such a system may lead to
inconsistent pricing of our product candidates from one country to another. The availability of our product candidates at lower
prices in certain countries may undermine our sales in other countries where our product candidates are more expensive. In addition,
certain countries may set prices by reference to the prices of our product candidates in other countries. Our inability to secure
adequate prices in a particular country may adversely affect our ability to obtain an acceptable price for our product candidates
in existing and potential markets. If we are unable to obtain a price for our product candidates that provides an appropriate return
on our investment, our profitability may be materially and adversely affected.
Our industry and we are subject to intense regulation from the United States Government and such other governments
and quasi-official regulatory bodies where our products are and product candidates may be sold.
Both before and after regulatory approval to market a particular product candidate, including our biologic product
candidates, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and
record keeping related to the product are subject to extensive, ongoing regulatory requirements, including, without limitation,
submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP
requirements and good clinical practice requirements for any clinical trials that we conduct post-approval. As a result, we are
subject to a number of governmental and other regulatory risks, which include:
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clinical development is a long, expensive and uncertain process; delay and failure can occur at any stage of our clinical
trials;
our clinical trials are dependent on patient enrollment and regulatory approvals; we do not know whether our planned
trials will begin on time, or at all, or will be completed on schedule, or at all;
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the FDA or other regulatory authorities may not approve a clinical trial protocol or may place a clinical trial on hold;
• we rely on third parties, such as consultants, contract research organizations, medical institutions, and clinical investigators,
to conduct clinical trials for our drug candidates and if we or any of our third-party contractors fail to comply with
applicable regulatory requirements, such as cGCP requirements, the clinical data generated in our clinical trials may be
deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform
additional clinical trials;
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if the clinical development process is completed successfully, our ability to derive revenues from the sale of therapeutics
will depend on our first obtaining FDA or other comparable foreign regulatory approvals, each of which are subject to
unique risks and uncertainties;
there is no assurance that we will receive FDA or corollary foreign approval for any of our product candidates for any
indication; we are subject to government regulation for the commercialization of our product candidates;
• we have not received regulatory approval in the United States for the commercial sale of any of our biologic product
candidates;
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even if one or more of our product candidates does obtain approval, regulatory authorities may approve such product
candidate for fewer or more limited indications than we request, may not approve the price we intend to charge for our
products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve with
a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product
candidate;
undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or
halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or
other comparable foreign authorities;
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later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with the regulatory
requirements of FDA and other applicable United States and foreign regulatory authorities could subject us to
administrative or judicially imposed sanctions;
although several of our product candidates have received orphan drug designation in the United States and the EU for
particular indications, we may not receive orphan drug exclusivity for any or all of those product candidates or indications
upon approval, and even if we do obtain orphan drug exclusivity, that exclusivity may not effectively protect the product
from competition; and
even if one or more of our product candidates is approved in the United States, it may not obtain the 12 years of exclusivity
from biosimilars for which innovator biologics are eligible, and even if it does obtain such exclusivity, that exclusivity
may not effectively protect the product from competition; the FDA’s policies may change and additional government
regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates, and if we are
slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are
not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained; and we
may be liable for contamination or other harm caused by hazardous materials used in the operations of our business.
Healthcare providers, physicians and third-party payors often play a primary role in the recommendation and prescription
of any currently marketed products and product candidates for which we may obtain marketing approval. Our current and future
arrangements with healthcare providers, physicians, third-party payors and customers, and our sales, marketing and educational
activities, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations (at the federal and state
level) that may constrain our business or financial arrangements and relationships through which we market, sell and distribute
our products for which we obtain marketing approval. In addition, our operations are also subject to various federal and state fraud
and abuse, physician payment transparency and privacy and security laws, including, without limitation:
• The federal Anti-Kickback Statute, which prohibits, among other things, persons and entities including pharmaceutical
manufacturers from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly,
overtly or covertly, in case or in kind, to induce or reward, or in return for, or either the referral of an individual for, or
the purchase, lease, order or recommendation of, an item or service reimbursable, in whole or in part, under a federal
healthcare program, such as the Medicare or Medicaid programs. This statute has interpreted broadly to apply to, among
other things, arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and
formulary managers on the other hand. The term "remuneration" expressly includes kickbacks, bribes or rebates and also
has been broadly interpreted to include anything of value, including, for example, gifts, discounts, waivers of payment,
ownership interest and providing anything at less than its fair market value. There are a number of statutory exceptions
and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, however,
the exceptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exception or safe
harbor may be subject to scrutiny. The failure to meet all of the requirements of a particular applicable statutory exception
or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the
legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and
circumstances. Our practices may not meet all of the criteria for safe harbor protection from federal Anti-Kickback Statute
liability in all cases. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or
specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including
items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim
for purposes of the False Claims Act.
• The federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which
prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented, claims for
payment to, or approval by, the federal government that are false, fictitious or fraudulent or knowingly making, using or
causing to be made or used, a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal
an obligation to pay money to the federal government. As a result of a modification made by the Fraud Enforcement and
Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the federal government.
Although we do not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed
to "cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information
to customers, promoting a product off-label, marketing products of sub-standard quality, or, as noted above, paying a
kickback that results in a claim for items or services. In addition, our activities relating to the reporting of wholesaler or
estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other
information affecting federal, state and third-party reimbursement for our products, and the sale and marketing of our
products, are subject to scrutiny under this law. For example, several pharmaceutical and other healthcare companies
have faced enforcement actions under these laws for allegedly inflating drug prices they report to pricing services, which
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in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free
product to customers with the expectation that the customers would bill federal programs for the product. The False
Claims Act also permits a private individual acting as a "whistleblower" to bring actions on behalf of the federal government
alleging violations of the False Claims Act and to share in any monetary recovery. In addition, federal Anti-Kickback
Statute violations and certain marketing practices, including off-label promotion, may also implicate the False Claims
Act. Although the False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate
various federal criminal statutes.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal
and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by
means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control
or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying,
concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal
Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate
it to have committed a violation.
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH,
and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, impose,
among other things, obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security
and transmission of individually identifiable health information held by certain healthcare providers, health plans and
healthcare clearinghouses, known as covered entities, and business associates. Among other things, HITECH made certain
aspects of HIPAA's rules (notably the Security Rule) directly applicable to business associates - independent contractors
or agents of covered entities that receive or obtain individually identifiable health information in connection with providing
a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA
to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new
authority to file civil actions for damages or injunctions in federal court to enforce the federal HIPAA laws and seek
attorney's fees and costs associated with pursuing federal civil actions. The Department of Health and Human Services
Office of Civil Rights, or the OCR, has increased its focus on compliance and continues to train state attorneys general
for enforcement purposes. The OCR has recently increased both its efforts to audit HIPAA compliance and its level of
enforcement, with one recent penalty exceeding $5 million.
• The federal physician payment transparency requirements, sometimes referred to as the "Physician Payments Sunshine
Act," created under the United States Patient Protection and Affordable Care Act of 2010, as amended, or the ACA, and
its implementing regulations, which requires applicable manufacturers of covered drugs, devices, biologics and medical
supplies for which payment is available under Medicare, Medicaid or the State Children's Health Insurance Program
(with certain exceptions) to annually report to the United States Department of Health and Human Services, or HHS,
information related to certain payments or other transfers of value made or distributed to physicians (defined to include
doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, or to entities or individuals at the
request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests
held by physicians and their immediate family members.
• On October 25, 2018, President Trump signed into law the “Substance Use-Disorder Prevention that Promoted Opioid
Recovery and Treatment for Patients and Communities Act.” This law, in part (under a provision entitled “Fighting the
Opioid Epidemic with Sunshine”), will extend the Sunshine Act to payments and transfers of value to physician assistants,
nurse practitioners, and other mid-level healthcare providers (with reporting requirements going into effect in 2022 for
payments made in 2021.
• According to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to keep consumers'
personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of
the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a). The FTC expects a company's data security measures
to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and
complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is
considered sensitive data that merits stronger safeguards. The FTC's guidance for appropriately securing consumers'
personal information is similar to what is required by the HIPAA Security Rule.
• Analogous state laws and regulations, such as state anti-kickback and false claims laws, which may apply to items or
services reimbursed by any third-party payor, including commercial insurers, some state laws require pharmaceutical
companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance
31
guidance promulgated by the federal government in addition to requiring drug manufacturers to report pricing and
marketing information, including, among other things, information related to payments to physicians and other healthcare
providers or marketing expenditures, state and local laws that require the registration of pharmaceutical sales
representatives, and state laws governing the privacy and security of health information and the use of prescriber-
identifiable data in certain circumstances, many of which differ from each other in significant ways and may not have
the same effect, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under
such laws, it is possible that certain business activities could be subject to challenge under one or more of such laws. The scope
and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform,
especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased
their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations,
prosecutions, convictions and settlements in the healthcare industry. Ensuring that business arrangements with third parties comply
with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and
resource-consuming and can divert management's attention from the business.
If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that
apply to us, we may be subject to penalties, including, but not limited to, criminal, civil and administrative penalties, damages,
fines, disgorgement, individual imprisonment, possible exclusion from participation in government healthcare programs,
injunctions, private qui tam actions brought by individual whistleblowers in the name of the government and the curtailment or
restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate
integrity agreement or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely
affect our ability to operate our business and our results of operations.
Our failure to comply with data protection laws and regulations could lead to government enforcement actions and
significant penalties against us, and adversely impact our operating results.
European Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws
and regulations which impose significant compliance obligations. Moreover, the collection and use of personal health data in the
European Union, which was formerly governed by the provisions of the European Union Data Protection Directive, was replaced
with the European Union General Data Protection Regulation, or the GDPR, in May 2018. The GDPR, which is wide-ranging in
scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information
provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third party
processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data
out of the European Union to the United States, provides an enforcement authority and imposes large penalties for noncompliance,
including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever
is greater. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that
we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure
compliance with the GDPR, which could divert management's attention and increase our cost of doing business. In addition, new
regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase
our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry
standards relating to privacy and data protection in the United States, the European Union and other jurisdictions, and we cannot
determine the impact such future laws, regulations and standards may have on our business.
Our employees and our independent contractors, principal investigators, consultants or commercial collaborators, as
well as their respective sub-contractors, if any, may engage in misconduct or fail to comply with certain regulatory standards
and requirements, which could expose us to liability and adversely affect our reputation.
Our employees and our independent contractors, principal investigators, consultants or commercial collaborators, as well
as their respective sub-contractors, if any, may engage in fraudulent conduct or other illegal activity, which may include intentional,
reckless or negligent conduct that violates, among others, (a) FDA laws and regulations, or those of comparable regulatory
authorities in other countries, including those laws that require the reporting of true, complete and accurate information to the
FDA, (b) manufacturing standards, (c) healthcare fraud and abuse laws (d) anti-bribery and anti-corruption laws, including the
FCPA, or (e) laws that require the true, complete and accurate reporting of financial information or data. For example, such persons
may improperly use or misrepresent information obtained in the course of our clinical trials, create fraudulent data in our preclinical
studies or clinical trials or misappropriate our drug products, which could result in regulatory sanctions being imposed on us and
cause serious harm to our reputation. It is not always possible for us to identify or deter misconduct by our employees and third
parties, and any precautions we may take to detect or prevent such misconduct may not be effective. Any misconduct or failure
by our employees and our independent contractors, principal investigators, consultants or commercial collaborators, as well as
32
their respective sub-contractors, if any, to comply with the applicable laws or regulations may expose us to governmental
investigations, other regulatory action or lawsuits. If any action is instituted against us as a result of the alleged misconduct of our
employees or other third parties, regardless of the final outcome, our reputation may be adversely affected and our business may
suffer as a result. If we are unsuccessful in defending against any such action, we may also be liable to significant fines or other
sanctions, which could have a material and adverse effect on us.
Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain
key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely
manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business
may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government
budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory,
and policy changes. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding
of the SEC and other government agencies on which our operations may rely, including those that fund research and development
activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved
by necessary government agencies, which would adversely affect our business. For example, over the last several years, including
from December 22, 2018 until January 25, 2019, the U.S. government has shut down several times and certain regulatory agencies,
such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities.
If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our
regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company,
future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly
capitalize and continue our operations.
Risks Related to Our Securities
Conversion of the Convertible Senior Notes will dilute the ownership interest of existing stockholders and could
adversely affect the market price of our common stock.
The conversion of some or all of the Convertible Senior Notes will dilute the ownership interests of existing stockholders.
Any sales in the public market of the common stock issuable upon such conversion and exercise could adversely affect prevailing
market prices of our common stock. In addition, the existence of the Convertible Senior Notes may encourage short selling by
market participants.
Our indebtedness and debt service obligations may adversely affect our cash flow.
We intend to fulfill our current debt service obligations, including repayment of the principal from our existing cash and
investments, as well as the proceeds from potential licensing agreements and any additional financing from equity or debt
transactions. However, our ability to make scheduled payments of the principal of, to pay interest on, or to refinance, our
indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond
our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary
capital expenditures. If we are unable to generate such cash flow to meet these obligations, we may be required to adopt one or
more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or
highly dilutive, or delaying or curtailing research and development programs. Our ability to refinance our indebtedness will depend
on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage
in these activities on desirable terms, which could result in a default on our debt obligations.
We may add lease lines to finance capital expenditures and may obtain additional long term debt and lines of
credit. If we issue other debt securities in the future, our debt service obligations will increase further.
Our indebtedness could have significant additional negative consequences, including, but not limited to:
•
requiring the dedication of a substantial portion of our existing cash and marketable securities balances and, if available,
future cash flow from operations to service our indebtedness, thereby reducing the amount of our expected cash flow
available for other purposes, including capital expenditures;
•
increasing our vulnerability to general adverse economic and industry conditions;
33
•
•
•
•
limiting our ability to obtain additional financing;
limiting our ability to sell assets if deemed necessary;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and
placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access
to capital resources.
We may not have the ability to raise funds necessary to purchase the Convertible Senior Notes upon a fundamental
change and our future debt may contain limitations on our ability to repurchase the Convertible Senior Notes.
Following a fundamental change (which includes matters such as a change in control of the Company, approval by the
Company’s stockholders of a plan of dissolution or liquidation of the Company, and the cessation of listing of the Company’s
common stock on Nasdaq or The New York Stock Exchange, among others as further described in the indenture), holders of
Convertible Senior Notes will have the right to require the Company to purchase their Convertible Senior Notes for cash. A
fundamental change may also constitute an event of default or require prepayment under, and result in the acceleration of the
maturity of, our other then-existing indebtedness. We cannot assure you that we will have sufficient financial resources, or will
be able to arrange financing, to pay the fundamental change purchase price in cash with respect to any Convertible Senior Notes
surrendered by holders for purchase upon a fundamental change. In addition, restrictions in the agreements governing our then-
outstanding indebtedness, if any, may not allow us to purchase the Convertible Senior Notes upon a fundamental change. Our
failure to purchase the Convertible Senior Notes upon a fundamental change when required would result in an event of default
with respect to the Convertible Senior Notes which could, in turn, constitute a default under the terms of our other indebtedness,
if any. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may
not have sufficient funds to repay the indebtedness and purchase the Convertible Senior Notes, which could have a material and
adverse impact on our financial condition and results of operations.
Shares eligible for future sale may adversely affect our ability to sell equity securities.
Sales of our common stock (including the issuance of shares upon conversion of convertible debt) in the public market
could materially and adversely affect the market price of shares. As of December 31, 2018 we had 190,445,795 shares of common
stock issued, plus (1) outstanding options to purchase 4,757,213 shares of common stock with a weighted-average exercise price
of $14.30 per share, (2) 15,396 outstanding restricted stock units held by certain executive officers of the Company, (3) 537,501
outstanding performance stock options held by certain executive officers of the Company, (4) 7,295,934 shares of common stock
reserved for potential future grant under the Plan, and (5) $7.1 million of principal amount of Convertible Senior Notes convertible
into approximately 1,393,160 shares of common stock at the conversion rate of $5.11 subject to adjustment as described in the
indenture. Of the 250,000,000 shares of common stock authorized under our Certificate of Incorporation, there are 45,555,001
shares of common stock that remain available for future issuance.
Our outstanding Convertible Senior Notes, options and warrants may adversely affect our ability to consummate future
equity based financings due to the dilution potential to future investors.
Due to the number of shares of common stock we are obligated to issue pursuant to outstanding Convertible Senior Notes,
options and warrants, potential investors may not purchase our future equity offerings at market price because of the potential
dilution such investors may suffer as a result of the exercise of the outstanding options and warrants or conversion of the outstanding
Convertible Senior Notes.
The market price of our common stock has fluctuated widely in the past, and is likely to continue to fluctuate widely
based on a number of factors, many of which are beyond our control.
The market price of our common stock has been, and is likely to continue to be, highly volatile. Furthermore, the stock
market and the market for stocks of comparable biopharmaceutical companies like ours have from time to time experienced, and
likely will again experience, significant price and volume fluctuations that are unrelated to actual operating performance.
From time to time, stock market analysts publish research reports or otherwise comment upon our business and future
prospects. Due to a number of factors, we may fail to meet the expectations of securities analysts or investors and our stock price
would likely decline as a result. These factors include:
34
• Announcements by us, any collaboration partners, any future alliance partners or our competitors of pre-clinical studies
and clinical trial results, regulatory developments, technological innovations or new therapeutic products, product sales,
new products or product candidates and product development timelines;
• The formation or termination of corporate alliances;
• Developments in patent or other proprietary rights by us or our respective competitors, including litigation;
• Developments or disputes concerning our patent or other proprietary rights, and the issuance of patents in our field of
business to others;
• Government regulatory action;
•
Period-to-period fluctuations in the results of our operations; and
• Developments and market conditions for emerging growth companies and biopharmaceutical companies, in general.
In addition, Internet “chat rooms” have provided forums where investors make predictions about our business and
prospects, oftentimes without any real basis in fact, that readers may trade on.
In the past, following periods of volatility in the market prices of the securities of companies in our industry, securities
class action litigation has often been instituted against those companies. Refer to “Legal Proceedings” for more information. If
we face such litigation in the future, it would result in substantial costs and a diversion of management’s attention and resources,
which could negatively impact our business.
Our principal stockholders can significantly influence all matters requiring the approval by our stockholders.
As of December 31, 2018, venBio Select Advisor LLC, (“venBio”) is the beneficial owner of approximately 9.5% of
our outstanding common stock. venBio is our largest stockholder, and Dr. Behzad Aghazadeh, the Managing Partner and portfolio
manager of the venBio Select Fund, serves as Chairman of our Board of Directors.
As a result of this voting power, venBio has the ability to significantly influence the outcome of substantially all matters
that may be put to a vote of our stockholders, including the election of our directors.
There are limitations on the liability of our directors, and we may have to indemnify our officers and directors in
certain instances.
Our certificate of incorporation limits, to the maximum extent permitted under Delaware law, the personal liability of
our directors for monetary damages for breach of their fiduciary duties as directors. Our bylaws provide that we will indemnify
our officers and directors and may indemnify our employees and other agents to the fullest extent permitted by law. These provisions
may be in some respects broader than the specific indemnification provisions under Delaware law. The indemnification provisions
may require us, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of certain proceedings against them as to which they could be indemnified and to obtain directors’
and officers’ insurance. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify a
director, officer, employee or agent made or threatened to be made a party to an action by reason of the fact that he or she was a
director, officer, employee or agent of the corporation or was serving at the request of the corporation, against expenses actually
and reasonably incurred in connection with such action if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful. Delaware law does not permit a corporation to eliminate a
director’s duty of care and the provisions of our certificate of incorporation have no effect on the availability of equitable remedies,
such as injunction or rescission, for a director’s breach of the duty of care.
We believe that our limitation of officer and director liability assists us to attract and retain qualified employees and
directors. However, in the event an officer, a director or the board of directors commits an act that may legally be indemnified
under Delaware law, we will be responsible to pay for such officer(s) or director(s) legal defense and potentially any damages
resulting there from. Furthermore, the limitation on director liability may reduce the likelihood of derivative litigation against
directors and may discourage or deter stockholders from instituting litigation against directors for breach of their fiduciary duties,
even though such an action, if successful, might benefit our stockholders and us. Given the difficult environment and potential
for incurring liabilities currently facing directors of publicly-held corporations, we believe that director indemnification is in our
35
and our stockholders’ best interests because it enhances our ability to attract and retain highly qualified directors and reduce a
possible deterrent to entrepreneurial decision-making.
Nevertheless, limitations of director liability may be viewed as limiting the rights of stockholders, and the broad scope
of the indemnification provisions contained in our certificate of incorporation and bylaws could result in increased expenses. Our
board of directors believes, however, that these provisions will provide a better balancing of the legal obligations of, and protections
for, directors and will contribute positively to the quality and stability of our corporate governance. Our board of directors has
concluded that the benefit to stockholders of improved corporate governance outweighs any possible adverse effects on stockholders
of reducing the exposure of directors to liability and broadened indemnification rights.
We are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the
Sarbanes-Oxley Act.
The Sarbanes-Oxley Act requires that we maintain effective internal controls over financial reporting and disclosure
controls and procedures. Among other things, we must perform system and process evaluation and testing of our internal controls
over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, our
internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act (“Section 404”). Compliance with
Section 404 requires substantial accounting expense and significant management efforts. Our testing, or the subsequent review
by our independent registered public accounting firm, may reveal deficiencies in our internal controls that would require us to
remediate in a timely manner so as to be able to comply with the requirements of Section 404 each year. If we are not able to
comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by
the SEC, the Nasdaq Stock Market or other regulatory authorities that would require additional financial and management resources
and could adversely affect the market price of our common stock.
We do not intend to pay dividends on our common stock. Until such time as we pay cash dividends, our stockholders,
must rely on increases in our stock price for appreciation.
We have never declared or paid dividends on our common stock. We intend to retain future earnings to develop and
commercialize our product candidates and therefore we do not intend to pay cash dividends in the foreseeable future. Until such
time as we determine to pay cash dividends on our common stock, our stockholders must rely on increases in the market price of
our common stock for appreciation of their investment.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters are located in Morris Plains, New Jersey. Summarized below are the locations, primary usage
and approximate square footage of the facilities we lease. Under these lease agreements, we may be required to reimburse the
lessors for real estate taxes, insurance, utilities, maintenance and other operating costs. All leases are with unaffiliated parties.
Location
Primary Usage
Approximate Square Feet
300 The American Road, Morris Plains,
New Jersey
400 The American Road, Morris Plains,
New Jersey
100 The American Road, Morris Plains,
New Jersey
Office space, research, manufacturing and clinical
trial management
Office space, warehouse
Office space
85,000
45,700
5,800
The lease for the 400 The American Road, Morris Plains, New Jersey location will enable us to expand our research and
clinical trial operations at the 300 The American Road, Morris Plains, New Jersey location.
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Item 3. Legal Proceedings
The following is a summary of legal matters that are outstanding.
Patent litigation:
Immunomedics filed a first amended complaint on October 22, 2015 and a second amended complaint on January 14,
2016, in the United States District Court for the District of New Jersey, against Roger Williams Medical Center (“RWMC”),
Richard P. Junghans, M.D., Ph.D. and Steven C. Katz, M.D. seeking lost profits, unjust enrichment damages and compensatory
damages resulting from the infringement of its patents. The second amended complaint alleges that RWMC and Dr. Junghans
breached a Material Transfer Agreement (“MTA”) through which it provided to them a monoclonal antibody known as MN-14
and related materials. Defendants are alleged to have breached the MTA and to have been negligent by, among other things, using
the materials beyond the agreed-upon Research Project, sharing confidential information, failing to provide Immunomedics with
a right of first refusal, failing to notify Immunomedics of intended publications prior to publishing, and refusing to return the
materials upon request. Immunomedics also asserted against defendants: claims of conversion, tortious interference, unjust
enrichment, and infringement of three patents owned by Immunomedics. On January 28, 2016, defendants filed an Answer to the
Second Amended Complaint. On October 12, 2016, Immunomedics filed a Third Amended Complaint, and further added as
defendants Sorrento Therapeutics, Inc. and its subsidiaries TNK Therapeutics, Inc., BDL Products, Inc., and CARgenix Holdings,
LLC. Defendants Junghans, Katz, and RWMC subsequently moved to dismiss for failure to state a claim on November 14, 2016,
but this motion was denied on January 4, 2017. On December 2, 2016, Sorrento, TNK, BDL, and CARgenix moved to dismiss
for lack of personal jurisdiction over them in New Jersey. The court granted this motion on January 25, 2017. On January 20,
2017, the court held a Markman hearing to construe the claims in the patents in suit. On February 28, 2017, the court issued an
opinion and order finding, inter alia, that the term “effective amount” in the patents in suit is not indefinite and should be given
its plain and order meaning, as proposed by Immunomedics, of “an amount capable of producing the claimed result.” On May 11,
2017, the court entered an order referring the matter to mediation and designating Garrett E. Brown, Jr. (ret.) as the mediator. The
mediation did not result in a settlement. On October 25, 2018, the Company entered into a Settlement Agreement with all defendants
in this action, agreeing to dismiss all claims with prejudice in exchange for a settlement payment from the defendants of $2.4
million.
Stockholder complaints:
Class Action Stockholder Federal Securities Cases
Two purported class action cases were filed in the United States District Court for the District of New Jersey; namely,
Fergus v. Immunomedics, Inc., et al., No. 2:16-cv-03335, filed June 9, 2016; and Becker v. Immunomedics, Inc., et al., No. 2:16-
cv-03374, filed June 10, 2016. These cases arise from the same alleged facts and circumstances, and seek class certification on
behalf of purchasers of our common stock between April 20, 2016 and June 2, 2016 (with respect to the Fergus matter) and between
April 20, 2016 and June 3, 2016 (with respect to the Becker matter). These cases concern the Company’s statements in press
releases, investor conference calls, and SEC filings beginning in April 2016 that the Company would present updated information
regarding its IMMU-132 breast cancer drug at the 2016 American Society of Clinical Oncology (“ASCO”) conference in Chicago,
Illinois. The complaints allege that these statements were false and misleading in light of June 2, 2016 reports that ASCO had
canceled the presentation because it contained previously reported information. The complaints further allege that these statements
resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are thus liable under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. An order of voluntary dismissal without prejudice was entered
on November 10, 2016 in the Becker matter. An order granting motion to consolidate cases, appoint lead plaintiff, and approve
lead and liaison counsel was entered on February 7, 2017 in the Fergus matter. A consolidated complaint was filed on October 4,
2017. The Company filed a motion to dismiss the consolidated complaint on January 26, 2018 and the motion was fully briefed
as of April 4, 2018. Oral arguments have not yet been scheduled.
A third purported class action case was filed in the United States District Court for the District of New Jersey; namely,
Odeh v. Immunomedics, Inc., et al., No. Case 2:18-cv-17645-MCA-LDW, filed December 27, 2018. This case concerns the
Company’s decision to not disclose the results of observations made by FDA during its inspection of the Company’s manufacturing
facility in Morris Plains, New Jersey in August, 2018. The complaint alleges that Immunomedics misled investors by failing to
disclose the Form 483 inspection report document issued by the FDA which set forth the observations of the FDA inspector during
the inspection. Such observations included, inter alia, manipulated bioburden samples, misrepresentation of an integrity test
procedure in the batch record, and backdating of batch records. The complaint further alleges that the Company’s failure to disclose
the Form 483 resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are
thus liable under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Consistent with court rules, the Company has
not yet filed a responsive pleading to this complaint.
37
On February 8, 2019, a purported class action case was filed in the United States District Court for the District of New
Jersey; namely, Choi v. Immunomedics, Inc., et al., No. Case 2:19-cv-05151-MCA-LDW. The complaint asserts violations of
the federal securities laws based on claims that that the Company violated the federal securities laws by making alleged
misstatements in various press releases and securities filings from February 8, 2018 to November 7, 2018 and by failing to disclose
the substance of its interactions with FDA during the Immunomedics’ Biologic License Application for sacituzumab govitecan.
Stockholder Claim in the Court of Chancery of the State of Delaware
On February 13, 2017, venBio commenced an action captioned venBio Select Advisor LLC v. Goldenberg, et al., C.A.
No. 2017-0108-VCL (Del. Ch.) (the “venBio Action”), alleging that Company’s Board breached their fiduciary duties when the
Board (i) amended the Company’s Amended and Restated By-laws (the “By-Laws”) to call for a plurality voting regime for the
election of directors instead of majority voting, and providing for mandatory advancement of attorneys’ fees and costs for the
Company’s directors and officers, (ii) rescheduled the Company’s 2016 Annual Meeting of Stockholders (the “2016 Annual
Meeting”) from December 14, 2016 to February 16, 2017, and then again to March 3, 2017, and (iii) agreed to the proposed
Licensing Transaction with Seattle Genetics. venBio also named Seattle Genetics as a defendant and sought an injunction preventing
the Company from closing the licensing transaction with Seattle Genetics. On March 6, 2017, venBio amended its complaint,
adding further allegations. The Court of Chancery entered a temporary restraining order on March 9, 2017, enjoining the closing
of the Licensing Transaction. venBio amended its complaint a second time on April 19, 2017, this time adding Greenhill & Co.
Inc. and Greenhill & Co. LLC (together “Greenhill”), the Company’s financial advisor on the Licensing Transaction, as an additional
defendant. On May 3, 2017, venBio and the Company and individual defendants Dr. Goldenberg, Ms. Sullivan and Mr. Brian A.
Markison, a director of the Company (collectively, the “Individual Defendants”) entered into the Initial Term Sheet. On June 8,
2017, venBio the Company and Greenhill entered into the Greenhill Term Sheet. On February 9, 2018, the Court of Chancery
approved the Settlement, and entered an order and partial judgment releasing all claims that were asserted by venBio against the
Individual Defendents and Greenhill in the venBio Action and awarding venBio fees and expenses. On May 24, 2018 the remaining
parties to the venBio Action participated in a mediation of the claims against Geoff Cox, Robert Forrester, Bob Oliver, and Jason
Aryeh. The mediation was unsuccessful. Geoff Cox, Robert Forrester, Bob Oliver, and Jason Aryeh have submitted motions to
dismiss the claims against them in the venBio Action, which remain pending in the Court of Chancery.
Arbitration of Disputed Matters
On January 15, 2019, the Company received an Arbitrator’s Findings of Fact and Conclusions of Law and Final Award
(the “Final Award”) in the arbitration matter in which Dr. David M. Goldenberg, the Company’s former Chief Scientific Officer,
Chief Patent Officer and Chairman of the Company’s Board of Directors, claimed entitlement to certain equity awards and severance
payments, and Dr. Goldenberg and Ms. Cynthia Sullivan, a former director of the Company and former President and Chief
Executive Officer, claimed rights to certain bonus payments. The Final Award (i) denied Dr. Goldenberg’s claim that he was entitled
to an award of 1.5 million restricted stock units, (ii) denied each of Dr. Goldenberg’s and Ms. Sullivan’s claims that they were
entitled to certain discretionary cash bonuses relating to the Company’s 2017 fiscal year, and (iii) granted Dr. Goldenberg an award
of approximately $998,000 relating to certain claimed severance payments. The arbitration took place pursuant to the Delaware
Rapid Arbitration Act. Although the Delaware Rapid Arbitration Act permits challenges to arbitration awards in limited
circumstances, pursuant to that certain stipulation and agreement of settlement, compromise, and release dated November 2, 2017,
the Company, Dr. Goldenberg and Ms. Sullivan agreed that the Final Award would be the sole and exclusive final and binding
remedy between and among the parties with respect to the matters disputed in the arbitration.
Breach of Contract
On November 16, 2018, Kapil Dhingra filed a complaint against Immunomedics, Inc., in the Superior Court of New
Jersey, Law Division, Morris County, alleging breach of contract and breach of the implied covenant of good faith and fair dealing.
In the complaint, Dhingra alleges that Immunomedics breached agreements with Dhingra entered into in 2012 and 2013 that
purportedly give him the right to purchase 50,000 shares of Common Stock of Immunomedics for a strike price stated in the
agreements. Immunomedics disputes the allegations and will seek expedited disposition of the matter.
Other matters:
Immunomedics is also a party to various claims and litigation arising in the normal course of business, which includes
some or all of certain of its patents.
38
Item 4. Mine Safety Disclosures
Not applicable.
39
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Price and Dividend Information
Our common stock is quoted on the Nasdaq Global Market under the symbol “IMMU.” As of February 20, 2019, the
closing sales price of our common stock on the Nasdaq Global Market was $14.36 and there were approximately 343 stockholders
of record of our common stock. We have not paid dividends on our common stock since inception and do not plan to pay cash
dividends in the foreseeable future.
STOCK PERFORMANCE GRAPH
This graph is not “soliciting material,” and is not deemed filed with the SEC and not to be incorporated by reference in
any filing by our Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the
date hereof and irrespective of any general incorporation language in any such filing. The total return values data is prepared by
the Nasdaq OMX Global Index Group. Total Return Indexes are posted on Nasdaq Online on a monthly basis.
The following graph compares the yearly change in cumulative total stockholder return on the Company’s common stock
for the prior five years with the total cumulative return of the Nasdaq Composite Index and the Nasdaq Pharmaceutical Index. The
returns are indexed to a value of $100 at December 31, 2013.
Indexed Returns (years ending)
12/31/15
67
113
128
12/31/16
80
128
127
12/31/14
104
112
122
12/31/17
351
155
151
12/31/18
310
147
163
Company/Index
Immunomedics
Nasdaq Composite
Nasdaq Pharmaceutical
12/31/13
100
100
100
40
Item 6. Selected Financial Data
The following table sets forth our consolidated financial data for the Transition Period as well as for each of the five
fiscal years ended June 30, 2018, which has been derived from our audited consolidated financial statements. The audited
consolidated financial statements for the Transition Period as well as of June 30, 2018 and 2017, and for the three-year period
ended June 30, 2018, are included elsewhere in this Transition Report on Form 10-K. The information below should be read in
conjunction with the consolidated financial statements (and notes thereon) and Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
($ in thousands, except per share
amounts)
For the
Transition
Period
Ended
December
31, 2018
Fiscal Year Ended June 30,
2018
2017
2016
2015
2014
Total revenues
$
— $
2,156
$
3,091
$
3,233
$
5,653
$
144,535
(144,535)
143,203
(141,047)
82,241
(79,150)
62,241
(59,008)
51,873
(46,220)
1,404
—
(20,017)
6,106
(897)
—
190
—
(108,636)
(61,074)
—
(23,255)
5,493
(13,005)
—
6,638
81
(7,649)
(5,480)
431
—
(347)
—
23
—
—
—
—
(5,480)
(2,091)
246
—
—
—
(1)
338
—
—
—
(40)
(64,190)
5,054
(59,136)
Loss before income tax
(157,749)
(273,731)
(153,246)
Income tax (expense) benefit
—
(156)
(20)
(157,749)
(273,887)
(153,266)
(48,066)
(35,523)
(58)
(8)
(48,124)
(35,531)
9,042
44,622
(35,580)
—
—
—
56
—
—
—
1
(81)
(50)
(60)
(99)
(122)
(105)
(157,668)
(273,837)
(153,206)
(59,037)
(48,002)
(35,426)
$
(0.84) $
(1.78) $
(1.47) $
(0.62) $
(0.51) $
(0.42)
188,554
153,475
104,536
94,770
93,315
84,632
For the
Transition
Period As of
December
31, 2018
As of June 30,
2018
2017
2016
2015
2014
Total costs and expenses
Operating loss
Changes in fair market value of
warrant liabilities
Warrant related expenses
Interest expense (1)
Interest and other income
Loss on induced exchanges of debt
Other financing expenses
Insurance reimbursement
Foreign currency transaction gain
(loss), net
Net loss
Net loss attributable to
noncontrolling interest
Net loss attributable to
Immunomedics, Inc. stockholders
Loss per common share attributable
to Immunomedics, Inc. stockholders
(basic and diluted):
Weighted average shares used to
calculated loss per common share
(basic and diluted)
($ in thousands)
Total cash, cash equivalents and
marketable securities
$
497,801
$
638,802
$
154,902
$
50,628
$
99,618
$
Total assets
528,040
664,173
162,573
56,950
105,780
Liability related to sale of future
royalties
Convertible senior notes, net
Warrant liabilities
221,295
7,055
—
Total stockholders' equity (deficit)
265,849
—
98,084
90,706
—
97,354
—
(59,464)
(57,527)
—
96,625
—
(4,525)
202,007
19,763
8,973
399,686
41
41,833
47,486
—
—
—
38,859
(1) Interest expense represents interest on liability related to sale of future royalties of $19.3 million for the Transition Period,
$19.8 million for fiscal 2018, the Convertible Senior Notes interest expense ($0.3 million, $1.8 million, $4.8 million and $4.8
million for the Transition Period, fiscal 2018, fiscal 2017 and fiscal 2016, respectively) and amortized debt issuance costs
($0.2 million, $1.7 million, $0.7 million and $0.7 million for the Transition Period, fiscal 2018, fiscal 2017 and fiscal 2016,
respectively).
(2) We have never paid cash dividends on our common stock. Stockholders’ equity (deficit) represents Immunomedics, Inc.
stockholders' equity and the non-controlling interest in our subsidiary.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The SEC encourages companies to disclose forward-looking information so that investors can better understand a
company’s future prospects and make informed investment decisions. This Transition Report on Form 10-K contains such “forward-
looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made
directly in this Transition Report on Form 10-K, and they may also be made a part of this Transition Report on Form 10-K by
reference to other documents filed with the SEC, which is known as “incorporation by reference”.
Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms
of similar substance used in connection with any discussion of future operating or financial performance, are intended to identify
forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject
to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-
looking statements. This Transition Report on Form 10-K, in addition to historical information, may contain forward-looking
statements made pursuant to the Private Securities Litigation Reform Act of 1995. Such statements, including statements regarding
expectations for the timing or outcome of our anticipated meeting with the FDA to discuss the CRL received in response to our
BLA for sacituzumab govitecan for the treatment of patients with mTNBC who have received at least two prior therapies for
metastatic disease, and expectations for the related resubmission, the FDA re-inspection of the Company’s manufacturing facility
where we manufacture the monoclonal antibody for further manufacture into our antibody-drug-conjugate candidate sacituzumab
govitecan, potential approval and commercial launch of sacituzumab govitecan for that indication and the Company’s development
of sacituzumab govitecan for additional indications, clinical trials (including the funding therefor, anticipated patient enrollment,
trial outcomes, timing or associated costs), regulatory applications and related timelines, including the filing and approval timelines
for BLAs, BLA resubmissions, and BLA supplements, out-licensing arrangements, forecasts of future operating results, potential
collaborations, capital raising activities, and the timing for bringing any product candidate to market, involve significant risks and
uncertainties and actual results could differ materially from those expressed or implied herein. Factors that could cause such
differences include, but are not limited to, the Company’s reliance on third-party relationships and outsourcing arrangements (for
example in connection with manufacturing, logistics and distribution, and sales and marketing) over which it may not always have
full control, including the failure of third parties on which the Company is dependent to meet the Company’s business and operational
needs for investigational or commercial products and, or to comply with the Company’s agreements or laws and regulations that
impact the Company’s business? the Company’s ability to meet pre-or post-approval compliance obligations; imposition of
significant post-approval regulatory requirements on our product candidates, including a requirement for a post-approval
confirmatory clinical study, or failure to maintain or obtain full regulatory approval for the Company’s product candidates, if
received, due to a failure to satisfy post-approval regulatory requirements, such as the submission of sufficient data from a
confirmatory clinical study? the uncertainties inherent in research and development; safety and efficacy concerns related to the
Company’s products and product candidates? uncertainties in the rate and degree of market acceptance of products and product
candidates, if approved? inability to create an effective direct sales and marketing infrastructure or to partner with third parties that
offer such an infrastructure for distribution of the Company’s product candidates, if approved? inaccuracies in the Company’s
estimates of the size of the potential markets for the Company’s product candidates or limitations by regulators on the proposed
treatment population for the Company’s products and product candidates? decisions by regulatory authorities regarding labeling
and other matters that could affect the availability or commercial potential of the Company’s products and product candidates; the
Company’s dependence on business collaborations or availability of required financing from capital markets, or other sources on
acceptable terms, if at all, in order to further develop our products and finance our operations; new product development (including
clinical trials outcome and regulatory requirements/actions); the risk that we or any of our collaborators may be unable to secure
regulatory approval of and market our drug candidates; risks associated with litigation to which the Company is or may become
a party, including the cost and potential reputational damage resulting from such litigation; loss of key personnel; competitive risks
to marketed products; and the Company’s ability to repay its outstanding indebtedness, if and when required, as well as the risks
discussed in the Company’s filings with the SEC. The Company is not under any obligation, and the Company expressly disclaims
any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or
otherwise. Refer to Item 1A. Risk Factors “Factors That May Affect Our Business and Results of Operations” in this Transition
Report on Form 10-K for more information.
42
In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements
contained in this Transition Report on Form 10-K or in any document incorporated by reference might not occur. Stockholders
are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Transition
Report on Form 10-K or the date of the document incorporated by reference in this Transition Report on Form 10-K, as applicable.
We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise except as may be required by applicable law. All subsequent
forward-looking statements attributable to the Company or to any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
Historically, our fiscal years ended on June 30. On December 14, 2018, the Company's Board of Directors approved a
change in the Company's fiscal year from June 30 to December 31, effective December 31, 2018. In this transition report, our
fiscal years are identified according to the calendar year in which they historically ended (e.g., the fiscal year ended June 30, 2018
is referred to as “fiscal 2018,” June 30, 2017 as "fiscal 2017" and June 30, 2016 as "fiscal 2016"). The transition period is for the
six months ended December 31, 2018.
The following Management’s Discussion and Analysis (“MD&A”) provides a narrative of our results of operations for
the Transition Period and the comparable period ended December 31, 2017, and the fiscal years ended June 30, 2018, 2017, and
2016, respectively, and our financial position as of December 31, 2018, June 30, 2017, and June 30, 2016, respectively. The MD&A
should be read together with our consolidated financial statements and related notes included in Item 8 in this Transition Report
on Form 10-K.
Overview
We are a clinical-stage biopharmaceutical company that develops monoclonal antibody-based products for the targeted
treatment of cancer. Our advanced proprietary technologies allow us to create humanized antibodies that can be used either alone
in unlabeled or “naked” form, or conjugated with chemotherapeutics, cytokines or toxins.
We believe that our antibodies have therapeutic potential, in some cases as a naked antibody or when conjugated with
chemotherapeutics, cytokines or other toxins to create unique and potentially more effective treatment options. The attachment
of effective anti-tumor compounds to antibodies is intended to allow the delivery of these therapeutic agents to tumor sites with
better specificity than conventional chemotherapy. This treatment method is designed to optimize the therapeutic window through
reducing the systemic exposure of the patient to the therapeutic agents, which ideally minimizes debilitating side effects while
maximizing the concentration of the therapeutic agent at the tumor, potentially leading to better efficacy.
Our portfolio of investigational products includes ADCs that are designed to deliver a specific payload of a
chemotherapeutic directly to the tumor while reducing overall toxicities that are usually associated with conventional administration
of these chemotherapeutic agents. Our most advanced ADCs are sacituzumab govitecan (IMMU-132) and labetuzumab govitecan
(IMMU-130), which are in advanced trials for a number of solid tumors. Sacituzumab govitecan is our lead product candidate and
has received Breakthrough Therapy Designation from the FDA for the treatment of patients with mTNBC who have received at
least two prior therapies for metastatic disease.
Our corporate strategy is to commercialize sacituzumab govitecan on our own in the United States for the benefit of
patients with mTNBC and the creation of value for our stockholders. On May 21, 2018, we submitted a Biologics License
Application (“BLA”) to the FDA for sacituzumab govitecan for the treatment of patients with mTNBC who have received at least
two prior therapies for metastatic disease. On July 18, 2018, we received notification from the FDA that the BLA was accepted
for filing and the original application was granted Priority Review with a PDUFA target action date of January 18, 2019. On
January 17, 2019, we received a Complete Response Letter ("CRL") from the FDA for the BLA. On February 4, 2019, we received
a written communication from the FDA enclosing the Establishment Inspection Report (“EIR”) from the chemistry, manufacturing
and controls BLA pre-approval inspection conducted by the FDA at the Company’s Morris Plains, New Jersey antibody
manufacturing facility for our ADC product candidate sacituzumab govitecan, which took place from August 6, 2018 through
August 14, 2018. The FDA also notified the Company that the FDA will be conducting a re-inspection of the Company’s Morris
Plains, New Jersey manufacturing facility as part of the BLA resubmission process. The Company is finalizing its plans with
respect to the matters raised in the CRL received from FDA on January 17, 2019 and the EIR, and subsequently expects to request
a meeting with the FDA in the near term.
As of December 31, 2018, we had $497.8 million in cash, cash equivalents and marketable securities. On January 7,
2018, we announced that we sold tiered, sales-based royalty rights on global net sales of sacituzumab govitecan to RPI for $175.0
million. RPI also purchased $75.0 million of our common stock at $17.15 per share, which represented a more than 15% premium
over the stock’s 15-day trailing average closing price at that time. On June 15, 2018, we announced the closing of a public offering
43
of 11,500,000 shares of our common stock at a price of $24.00 per share. On June 22, 2018, pursuant to the underwriter's full
exercise of the over-allotment option, we closed the sale of an additional 1,725,000 shares of our common stock. The total net
proceeds from the offering, including the exercise of the over-allotment option, were approximately $300 million, after deducting
underwriting discounts and commissions and other offering expenses payable by us. We believe our projected financial resources
are adequate to (i) support our clinical development plan for developing sacituzumab govitecan in mTNBC, advanced urothelial
cancer ("UC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic
breast cancer ("mBC"), non-small cell lung cancer ("NSCLC") and other indications of high medical need, (ii) further build our
clinical and manufacturing infrastructure, and (iii) fund operations through 2020. However, in case of regulatory delays or other
unforeseen events, we may require additional funding. Potential sources of funding in such a case could include (i) the entrance
into potential development and commercial partnerships to advance and maximize our full pipeline for mTNBC and beyond in
the United States and globally, and (ii) potential private and capital markets financing.
As part of our commitment to invest in and scale our global supply capacity with world-class partners in each component
of its supply-chain, on September 11, 2018, we entered into a Master Services Agreement (the “MSA”) with Samsung BioLogics
Co., Ltd. (“Samsung”), pursuant to which Samsung will provide the Company with certain biologics manufacturing and
development services in accordance with one or more product specific agreements. In connection with the MSA, on September 11,
2018, we also entered into a product specific agreement with Samsung for the production of hRS7, the antibody used in the
Company’s lead antibody drug conjugate candidate, sacituzumab govitecan. In addition, on December 26, 2018, we expanded our
long-term master supply agreement with Johnson Matthey who will continue to scale the manufacturing of CL2A-SN-38, the
drug-linker that is a key component of sacituzumab govitecan.
To accelerate the clinical and preclinical development of sacituzumab govitecan, we have entered into clinical
collaborations with AstraZeneca to investigate the ADC in earlier lines of therapy for mTNBC, advanced UC and metastatic
NSCLC in combination with its checkpoint inhibitor, and with Clovis to combine with its PARP inhibitor in mTNBC, advanced
UC and ovarian cancer. We are also working with the University of Wisconsin on a clinical study in prostate cancer.
We also have a number of other product candidates, which target solid tumors and hematologic malignancies in various
stages of clinical and preclinical development. They include other ADCs such as labetuzumab govitecan, which binds the
CEACAM5 antigen expressed on CRC and other solid cancers, and IMMU-140 that targets HLA-DR for the potential treatment
of hematologic malignancies. We believe that our portfolio of intellectual property provides commercially reasonable protection
for our product candidates and technologies.
The development and commercialization of successful therapeutic products is subject to numerous risks and uncertainties
including, without limitation, the following:
• we may be unable to obtain additional capital through strategic collaborations, licensing, issuance of convertible debt
securities or equity financing in order to continue our research and secure regulatory approval of and market our drug;
•
•
•
the type of therapeutic compound under investigation and nature of the disease in connection with which the compound
is being studied;
our ability, as well as the ability of our partners, to conduct and complete clinical trials on a timely basis;
the time required for us to comply with all applicable federal, state and foreign legal requirements, including, without
limitation, our receipt of the necessary approvals of the FDA, if at all;
•
the financial resources available to us during any particular period; and
• many other factors associated with the commercial development of therapeutic products outside of our control.
(Refer to "Risk Factors" under Item 1A in this Transition Report on Form 10-K for more information.)
Critical Accounting Policies and Accounting Estimates
A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation
and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain.
44
Our critical accounting estimates and assumptions impacting the consolidated financial statements relate to stock
compensation expenses, interest expense on liability related to sale of future royalties, and determination of fair value of warrants.
Refer to "Note 2 - Summary of Significant Accounting Policies", "Note 5 - Debt", and "Note 7 - Estimated Fair Value of Financial
Instruments", respectively, for more information.
Results of Operations
Revenues
The following table summarizes our revenues for the Transition Period and the comparable six-month period ended
December 31, 2017:
For the Transition Period Ended December 31,
2018
(unaudited)
2017
($ in thousands)
(Decrease)/Increase
2018 vs (unaudited) 2017
Product sales
License fee and other revenues
Research and development
Total revenues
nm - not meaningful
$
$
— $
1,050
$
(1,050)
—
—
65
172
(65)
(172)
— $
1,287
$
(1,287)
nm
nm
nm
nm
Total revenue for the Transition Period decreased compared to the comparable period ended December 31, 2017, primarily
due to a decrease in product sales, license fee and other revenues, and grant revenue. Product sales for the Transition Period
decreased compared to the comparable period ended December 31, 2017, due to the discontinued sale of LeukoScan® during the
third quarter of fiscal 2018 to focus on our ADC business.
The following table summarizes our consolidated statements of comprehensive loss for fiscal 2018, 2017 and 2016:
($ in thousands)
(Decrease)/Increase
Fiscal Years Ended June 30,
2018
2017
2016
2018 vs 2017
2017 vs 2016
Product sales
License fee and other revenues
Research and development
Total revenues
$
$
1,501
$
2,443
$
2,261
$
(942)
(38.6)% $
330
325
284
364
387
585
46
(39)
16.2 %
(10.7)%
2,156
$
3,091
$
3,233
$
(935)
(30.2)% $
182
(103)
(221)
(142)
8.0 %
(26.6)%
(37.8)%
(4.4)%
Total revenue for the fiscal year ended June 30, 2018, decreased compared to fiscal June 30, 2017, primarily due to a
decrease in product sales, and to a lesser extent a decrease in grant revenue offset partially by an increase in license fee and other
revenues. Product sales for the fiscal year ended June 30, 2018, decreased compared to fiscal June 30, 2017, due to the discontinued
sale of LeukoScan® during the third quarter of fiscal 2018 to focus on our ADC business.
Total revenue for the fiscal year ended June 30, 2017, decreased compared to fiscal June 30, 2016, primarily due to a
$0.2 million decrease in grant revenue offset partially by a $0.1 million increase in LeukoScan® sales.
45
Costs and Expenses
The following table summarizes our costs and expenses for the Transition Period and the comparable period ended
December 31, 2017:
For the Transition Period Ended December 31,
2018
(unaudited)
2017
($ in thousands)
(Decrease)/Increase
2018 vs (unaudited) 2017
Costs of goods sold
Research and development
Sales and marketing
General and administrative
Total costs and expenses
nm - not meaningful
$
$
— $
567
$
(567)
93,887
19,834
30,814
144,535
$
42,837
1,416
7,493
52,313
$
51,050
18,418
23,321
92,222
nm
nm
nm
nm
nm
Total costs and expenses for the Transition Period increased compared to the comparable period ended December 31,
2017, primarily due to an increase in research and development expenses, an increase in general and administrative expenses, and
an increase in sales and marketing expenses attributed primarily to preparations to launch sacituzumab govitecan for commercial
sales in the United States for patients with at least two prior lines of treatment for metastatic TNBC, and to expand clinical
development of sacituzumab govitecan into other indications.
The following table summarizes our costs and expenses for fiscal 2018, 2017 and 2016:
Years Ended June 30,
Costs of goods sold
Research and development
Sales and marketing
General and administrative
2018
2017
2016
2018 vs 2017
2017 vs 2016
($ in thousands)
(Decrease)/Increase
$
613
$
483
$
1,159
$
130
26.9% $
(676)
99,283
6,822
36,485
51,776
873
29,109
53,492
1,027
6,563
47,507
5,949
7,376
91.8%
nm
25.3%
(1,716)
(154)
22,546
(58.3)%
(3.2)%
(15.0)%
nm
32.1 %
Total costs and expenses
$ 143,203
$
82,241
$
62,241
$
60,962
74.1% $
20,000
nm - not meaningful
Total costs and expenses for the fiscal year ended June 30, 2018, increased compared to fiscal 2017 primarily due to an
increase in research and development expenses, an increase in general and administrative expenses, and an increase in sales and
marketing expenses attributed primarily to preparations to launch sacituzumab govitecan for commercial sales in the United States
for patients with at least two prior lines of treatment for metastatic TNBC, and to expand clinical development of sacituzumab
govitecan into other indications.
Total costs and expenses for the fiscal year ended June 30, 2017, increased compared to fiscal 2016 primarily due to an
increase in general and administrative costs during fiscal 2017 including a $9.0 million increase in legal and advisory fees associated
with the proxy contest and professional services in connection with the Licensing Agreement with Seattle Genetics (which was
subsequently terminated), $6.9 million for executive severance, $4.5 million to reimburse venBio Select LLC for proxy related
costs, $2.0 million for consulting services for strategic planning, and a $1.8 million increase in legal fees, partially offset by the
elimination of $1.7 million in deferred unearned executive bonuses from fiscal 2016 and 2015.
Cost of Goods Sold
The cost of goods sold for the Transition Period decreased compared to the comparable period ended December 31, 2017,
primarily due to the discontinued sale of LeukoScan® during the third quarter of fiscal 2018.
The cost of goods sold for the fiscal year ended June 30, 2018, increased compared to fiscal June 30, 2017, primarily due
to a $0.6 million write down relating to LeukoScan® inventories resulting from the discontinued sale of LeukoScan® during the
third quarter of fiscal 2018.
46
Cost of goods sold for the LeukoScan® product was $0.5 million for the fiscal year ended June 30, 2017, a $0.7 million
reduction, or approximately 58.3%, compared to fiscal 2016. The reduction was due primarily to a $0.6 million increase during
fiscal 2016 as a result of the write-down of certain work-in-process inventory of LeukoScan® which was deemed to be unsaleable.
Research and Development
We do not track expenses on the basis of each individual compound under investigation and therefore we do not provide
a breakdown of such historical information in that format. We evaluate projects under development from an operational perspective,
including such factors as results of individual compounds from laboratory/animal testing, patient results and enrollment statistics
in clinical trials. It is important to note that multiple product candidates are often tested simultaneously. It is not possible to calculate
each antibody’s supply costs. There are many different development processes and test methods that examine multiple product
candidates at the same time. We have, historically, tracked our costs in the categories discussed below, specifically “research costs”
and “product development costs” and by the types of costs outlined below.
Our research costs consist of outside costs associated with animal studies and costs associated with research and testing
of our product candidates prior to reaching the clinical stage. Such research costs primarily include personnel costs, facilities,
including depreciation, lab supplies, funding of outside contracted research and license fees. Our product development costs consist
of costs from preclinical development (including manufacturing), conducting and administering clinical trials and patent expenses.
The following table summarizes our research and development costs for the Transition Period and the comparable period
ended December 31, 2017:
For the Transition Period Ended December 31,
2018
(unaudited)
2017
($ in thousands)
(Decrease)/Increase
2018 vs (unaudited) 2017
Labor
Manufacturing and quality costs
Clinical development and operations
Other
Total research and development costs
nm - not meaningful
$
$
16,695
$
7,369
$
44,556
19,131
13,505
19,207
9,406
6,855
93,887
$
42,837
$
9,326
25,349
9,725
6,650
51,050
nm
nm
nm
97.0%
nm
Research and development costs increased for the Transition Period approximately $51.1 million to $93.9 million
compared to the comparable period ended December 31, 2017. The increase in research and development costs in the Transition
Period compared to the comparable period ended December 31, 2017, relate primarily to preparations for the approval and launch
of sacituzumab govitecan in the United States for patients with mTNBC. Additionally, there were increases in outside manufacturers'
organizations services costs as we ramped-up manufacturing of sacituzumab govitecan for the Phase 3 clinical trial ADC as well
as an increase in outside consulting services to improve our manufacturing and regulatory functions associated with fulfilling the
FDA requirements for the Phase 3 clinical trial of sacituzumab govitecan in patients with mTNBC.
Research and development costs increased for the fiscal year ended June 30, 2018 approximately $47.5 million to $99.3
million compared to fiscal 2017. Research and development costs decreased approximately $1.7 million to $51.8 million for the
fiscal year ended June 30, 2017 compared to fiscal 2016. The increase in research and development costs for the fiscal year ended
June 30, 2018 compared to fiscal 2017 relate primarily to increases in clinical trial costs as well as increases in lab supplies and
chemical reagents and personnel costs in connection with preparations for the approval and launch of sacituzumab govitecan in
the United States for patients with mTNBC. Additionally, there were increases in outside manufacturers' organizations services
costs as we ramped-up manufacturing of sacituzumab govitecan for the Phase 3 clinical trial ADC as well as an increase in outside
consulting services to improve our manufacturing and regulatory functions associated with fulfilling the FDA requirements for
the Phase 3 clinical trial of sacituzumab govitecan in patients with mTNBC.
The reduction in research and development costs for the fiscal year ended June 30, 2017 compared to fiscal 2016 relate
primarily to a decrease in clinical trial expenses due to the closure of the Phase 3 PANCRIT-1 clinical trial in 2016 which resulted
in the redeployment of employees from basic research to product development in fiscal 2017 and a reduction in lab supplies and
chemical reagents in fiscal 2017 compared to the same period in fiscal 2016, offset partly by an increase in product development
costs due to an increase in outside manufacturers' organizations services costs as we ramped-up manufacturing of sacituzumab
govitecan for the Phase 3 clinical trial ADC, and an increase in outside consulting services to improve our manufacturing and
47
regulatory functions associated with fulfilling the FDA requirements for the Phase 3 clinical trial of sacituzumab govitecan in
patients with mTNBC.
Completion of clinical trials may take several years or more. The length of time varies according to the type, complexity
and the disease indication of the product candidate. We estimate that clinical trials of the type we generally conduct are typically
completed over the following periods:
Clinical Phase
I
II
III
Estimated Completion Period
(Years)
0-1
1-2
1-4
The duration and cost of clinical trials through each of the clinical phases may vary significantly over the life of a particular
project as a result of, among other things, the following factors:
•
•
•
•
the length of time required to recruit qualified patients for clinical trials;
the duration of patient follow-up in light of trial results;
the number of clinical sites required for trials; and
the number of patients that ultimately participate.
Sales and Marketing
Sales and marketing expenses increased during the Transition Period compared to the comparable period ended December
31, 2017, primarily due to commercial launch preparation activities including increases in labor costs and consulting services.
Sales and marketing expenses increased during the fiscal year ended June 30, 2018, compared to fiscal 2017 primarily
due to commercial launch preparation activities. Sales and marketing expenses during the fiscal year ended June 30, 2017, decreased
compared to fiscal 2016.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the Transition Period and the comparable
period ended December 31, 2017:
For the Transition Period Ended December 31,
2018
Labor costs
Legal and advisory fees
Consulting services
Other
Total general and administrative
nm- not meaningful
$
$
(unaudited)
2017
6,746
$
2,797
$
8,909
5,964
9,195
3,070
540
1,086
($ in thousands)
(Decrease)/Increase
2018 vs (unaudited) 2017
3,949
5,839
5,424
8,109
30,814
$
7,493
$
23,321
nm
nm
nm
nm
nm
General and administrative expenses for the Transition Period increased compared to the comparable period ended
December 31, 2017, primarily due to increased legal and advisory expenses, consulting services, and increased labor costs associated
with the anticipated launch of sacituzumab govitecan in the United States for patients with mTNBC.
48
The following table summarizes our general and administrative expenses for fiscal 2018, 2017 and 2016:
Years Ended June 30,
2018
2017
2016
2018 vs 2017
2017 vs 2016
($ in thousands)
(Decrease)/Increase
Labor costs
Legal and advisory fees
Consulting services
Other
$
15,648
$
8,665
$
3,883
$
6,983
80.6 % $
4,782
13,204
2,635
4,998
17,594
1,029
1,821
1,045
68
1,567
(4,390)
(25.0)%
16,549
1,606
3,177
7,376
nm
nm
961
254
25.3 % $
22,546
nm
nm
nm
16.2%
nm
Total general and administrative
$
36,485
$
29,109
$
6,563
$
nm- not meaningful
General and administrative expenses for the fiscal year ended June 30, 2018, increased compared to fiscal 2017 primarily
due to increased labor costs associated with the anticipated launch of sacituzumab govitecan in the United States for patients with
mTNBC, offset partly by decreased legal and advisory expenses due to increased costs in the prior year related to the proxy contest.
General and administrative expenses for the fiscal year ended June 30, 2017, increased compared to fiscal 2016 primarily
due to increased legal and advisory fees associated with the proxy contest as well as executive severance costs.
Changes in fair market value of warrant liabilities
We recognized $1.4 million in non-cash income for the Transition Period as a result of the net appreciation in the fair
value of the outstanding warrants throughout the Transition Period compared to a non-cash expense of $59.6 million in the
comparable period ended December 31, 2017. During the Transition Period there were warrant exercises of approximately 0.5
million for which we received $1.7 million in cash. There were no warrants outstanding as of December 31, 2018. Refer to "Note
10 - Stockholders' Equity (Deficit)" for more information.
We recognized $108.6 million in non-cash expense for the year ending June 30, 2018, as a result of the net appreciation
in the fair value of the outstanding warrants throughout the year compared to non-cash expense of $61.1 million in fiscal 2017.
During fiscal 2018 there were warrant exercises of approximately 18.2 million for which we received $78.2 million in cash. Refer
to "Note 10 - Stockholders' Equity (Deficit)" for more information.
We recognized a $61.1 million non-cash expense for the year ending June 30, 2017, arising from the $47.6 million increase
in warrant liability from the increase in the fair value of the public offering warrants issued in October 11, 2016, and a $13.5
million increase in warrant liability from the increase in the fair market value of the warrant issued to Seattle Genetics on February
10, 2017 (the “SGEN Warrant”), resulting from the increase in the share price of our common stock from the date of inception of
each warrant through June 30, 2017. There was no warrant liability in fiscal 2016.
Warrant related expenses
We recognized a $7.6 million non-cash warrant related expense during the year ended June 30, 2017 representing the
excess of fair value of the SGEN Warrant issued on February 10, 2017, over proceeds received for the issuance of common stock
and such Warrant. There was no warrant related expense in fiscal 2016.
Loss on induced exchanges of debt
On October 2, 2018, the Company entered into privately negotiated exchange agreements (the "October 2018 Exchange
Agreements"), with a limited number of holders of the Convertible Senior Notes. As a result of the October 2018 Exchange
Agreements, the Company recognized a non-cash loss on induced exchanges of debt of $0.9 million representing the fair value
of the incremental consideration paid to induce the holders to exchange their Convertible Senior Notes for equity (i.e., 0.1 million
shares of common stock), based on the closing market price of the Company's Common Stock on the date of the October 2018
Exchange Agreements. Refer to "Note 5 - Debt" for more information.
On September 21, 2017, we entered into separate, privately negotiated Exchange Agreements with certain holders of the
Convertible Senior Notes. As a result of the Agreements, we recognized a non-cash loss on induced exchanges of debt of
approximately $13.0 million, representing the fair value of the incremental consideration (1.1 million common shares) paid to
induce the holders to exchange their Convertible Senior Notes for equity, based on the closing market price of our Common Stock
on the date of the Exchange Agreements. Refer to "Note 5 - Debt" for more information.
49
Other financing expenses
Other financing expense of $0.3 million for the fiscal year ended June 30, 2017, related to expenses incurred in connection
with the public offering we consummated on October 11, 2016, that were attributable to the warrant liability.
Interest expense
Interest expense for the Transition Period was $20.0 million, compared to $2.9 million for the comparable period ended
December 31, 2017. The $17.1 million increase was due primarily to increased debt balances as a result of the RPI agreement.
Refer to "Note 5 - Debt" for more information.
Interest expense for the year ended June 30, 2018, was $23.3 million, compared to $5.5 million for fiscal 2017. The $17.8
million increase was due primarily to increased debt balances as a result of the RPI agreement. Refer to "Note 5 - Debt" for more
information.
Interest expense related to the 4.75% Convertible Senior Notes due 2020 was $5.5 million for both fiscal years ended
June 30, 2017, and 2016, including the amortization of $0.7 million debt issuance costs.
Insurance reimbursement
During the Transition Period we received $0.2 million in insurance reimbursements related to legal costs incurred during
our proxy contest during fiscal 2017. Refer to "Note 15 - Commitments and Contingencies" for more information.
For the fiscal year ended June 30, 2018, we received $6.6 million in insurance reimbursements related to legal costs
incurred during our proxy contest during fiscal 2017. Refer to "Note 15 - Commitments and Contingencies" for more information.
Income tax (expense) benefit
There was no income tax expense for the Transition Period worldwide. In the comparable period ended December 31,
2017, foreign operations had net income and associated income tax expense of $154 thousand. There was no federal income tax
expense for domestic operations in either period due to losses. We did not receive an income tax benefit during the Transition
Period or the comparable period ended December 31, 2017, because we had reached the maximum amount permissible under the
New Jersey Business Tax Certificate Transfer Program.
The income tax expense for the year ended June 30, 2018,was $156 thousand worldwide. In fiscal 2018, foreign operations
had net income and associated income tax expense of $154 thousand. There was no federal income tax expense for domestic
operations in either period due to losses. In fiscal 2016, we were able to participate in the New Jersey Business Tax Certificate
Transfer Program and sell New Jersey State Tax NOLs and R&D tax credits. We did not receive an income tax benefit during the
years ended June 30, 2018 or 2017, because we had reached the maximum amount permissible under the New Jersey Business
Tax Certificate Transfer Program.
Net loss attributable to Immunomedics, Inc. stockholders
Net loss attributable to Immunomedics, Inc. common stockholders for the Transition Period was $157.7 million, or $0.84
per share, compared to a net loss of approximately $121.3 million, or $0.88 per share, for the comparable period ended December
31, 2017, an increase in the loss of $36.4 million due primarily to a $92.2 million increase in costs and expenses related to
preparations for the approval and launch of sacituzumab govitecan in the United States for patients with mTNBC, a decrease in
the expense from the change in fair value of warrant liabilities of $61.0 million, a $17.1 million increase in interest expense as a
result of the RPI agreement, and a $12.1 decrease in loss on induced exchanges of debt, offset partially by the receipt of $4.4
million in non-recurring insurance reimbursement related to the proxy contest in the comparable period ended December 31, 2017.
Net loss attributable to Immunomedics, Inc. common stockholders for the fiscal year ended June 30, 2018, was $273.8
million, or $1.78 per share, compared to a net loss of approximately $153.2 million, or $1.47 per share, for fiscal 2017, an increase
in the loss of $120.6 million due primarily to a $61.0 million increase in costs and expenses related to preparations for the approval
and launch of sacituzumab govitecan in the United States for patients with mTNBC, an increase in the expense from the change
in fair value of warrant liabilities of $47.6 million, a $17.8 million increase in interest expense as a result of the RPI agreement,
and a $13.0 million increase in loss on induced exchange of debt, offset partially by the receipt of $6.6 million in non-recurring
insurance reimbursement related to the proxy contest in fiscal 2017.
50
Net loss attributable to Immunomedics, Inc., common stockholders for the fiscal year ended June 30, 2017, was $153.2
million, or approximately $1.47 per share, compared to a net loss of approximately $59.0 million, or $0.62 per share, for 2016,
an increase of $94.2 million, or approximately 159.5%. The increase was due primarily to the $61.1 million increase in the expense
from the increase in fair value of warrant liabilities, the $22.5 million increase in general and administrative expenses, the $7.6
million increase in non-cash expense in excess of fair value of the SGEN Warrant, and the receipt of $5.1 million in proceeds from
the sale of non-recurring tax credits in 2016, offset partially by the $1.7 million decrease in research and development expenses.
Liquidity and Capital Resources
Since its inception in 1982, Immunomedics’ principal sources of funds have been the private and public sale of equity
and debt securities, and revenues from licensing agreements, including up-front and milestone payments, funding of development
programs, and other forms of funding from collaborations.
As of December 31, 2018, we had $497.8 million in cash, cash equivalents and marketable securities. We believe our
projected financial resources are adequate to (i) support our clinical development plan for developing sacituzumab govitecan in
mTNBC, advanced urothelial cancer ("UC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-
negative ("HER2-") metastatic breast cancer ("mBC"), non-small cell lung cancer ("NSCLC") and other indications of high medical
need, (ii) further build our clinical and manufacturing infrastructure, and (iii) fund operations through 2020. However, in case of
regulatory delays or other unforeseen events, we may require additional funding. Potential sources of funding in such a case could
include (i) the entrance into potential development and commercial partnerships to advance and maximize our full pipeline for
mTNBC and beyond in the United States and globally, and (ii) potential private and capital markets financing.
Actual results could differ materially from our expectations as a result of a number of risks and uncertainties, including
the risks described in Item 1A Risk Factors, “Factors That May Affect Our Business and Results of Operations,” and elsewhere
in this Transition Report on Form 10-K. Our working capital and working capital requirements are affected by numerous factors
and such factors may have a negative impact on our liquidity. Principal among these are the success of product commercialization
and marketing products, the technological advantages and pricing of our products, the impact of the regulatory requirements
applicable to us, and access to capital markets that can provide us with the resources, when necessary, to fund our strategic priorities.
Discussion of Cash Flows
The following table summarizes our cash flows for the Transition Period:
Net cash used in operating activities
Net cash provided by investing activities
Net cash provided by financing activities
($ in thousands)
For the Transition Period Ended
December 31, 2018
$
(130,664)
10,605
1,672
The following table summarizes our cash flows for the fiscal periods ended 2018, 2017 and 2016:
Net cash used in operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
Cash flows used in operating activities.
($ in thousands)
Years Ended June 30,
2018
2017
2016
$
(133,426) $
(62,250) $
(48,462)
74,757
627,903
(76,264)
168,804
45,875
2,364
Net cash used in operating activities during the Transition Period was approximately $130.7 million. The increase in cash used
in operating for the period was primarily due to increased research and development expenses in clinical trial costs as well as
increases in labor related costs in connection with preparations for the approval and launch of sacituzumab govitecan in the United
States for patients with mTNBC.
Net cash used in operating activities during the fiscal year ended June 30, 2018, was approximately $133.4 million, compared
to $62.3 million during the fiscal year ended June 30, 2017, an increase in cash used in operating activities of $71.1 million. The
51
increase in cash used in operating for the period was primarily due to increased research and development expenses in clinical
trial costs as well as increases in labor related costs in connection with preparations for the approval and launch of sacituzumab
govitecan in the United States for patients with mTNBC.
Cash flows provided by (used in) investing activities.
Net cash provided by investing activities during the Transition Period was $10.6 million, due primarily to an increase of $21.8
million in proceeds from sales or maturities of marketable securities, partially offset by purchases of property and equipment of
$11.2 million.
Net cash provided by investing activities during the fiscal year ended June 30, 2018, was $74.8 million, compared to cash
used in investing activities of $76.3 million during the fiscal year ended June 30, 2017; an increase of approximately $151.0
million, due primarily to an increase of $37.9 million in proceeds from sales or maturities of marketable securities as well as a
$121.2 million decrease in purchases of marketable securities.
Cash flows provided by financing activities.
Net cash provided by financing activities during the Transition Period was $1.7 million.
Net cash provided by financing activities during the fiscal year ended June 30, 2018, was $627.9 million, compared to $168.8
million of cash provided by financing activities during the fiscal year ended June 30, 2017. The increase of $459.1 million was
due primarily due to our receipt of approximately $300.0 million in net proceeds from the issuance and sale of our common stock
and the $250.0 million in funding received from RPI. Refer to "Note 5 - Debt, 'Liability related to sale of future royalties'" for
additional information.
Working Capital and Cash Requirements
Working capital was $472.8 million as of the Transition Period compared to $604.6 million as of June 30, 2018, a $131.8
million decrease. The decrease in cash was primarily due to increased research and development expenses in clinical trial costs
as well as increases in labor related costs in connection with preparations for the approval and launch of sacituzumab govitecan
in the United States for patients with mTNBC.
Working capital was $604.6 million as of June 30, 2018, compared to $35.1 million as of June 30, 2017, a $569.5 million
increase. The increase in cash was primarily due to our receipt of approximately $300 million in proceeds from the issuance and
sale of our common stock and the $250.0 million in funding received from RPI. The $300 million cash proceeds received from
the sale of common shares were offset by $134.0 million cash used in operations.
We expect to continue to fund our operations with our current financial resources. Potential sources of funding include
(i) the entrance into various potential strategic partnerships targeted at advancing and maximizing our full pipeline for mTNBC
and beyond, (ii) the sales and marketing of sacituzumab govitecan as a third-line therapy for mTNBC in the United States (pending
FDA approval), and (iii) potential equity and debt financing transactions.
Until we can generate significant cash through (i) the entrance into various potential strategic partnerships towards
advancing and maximizing our full pipeline for mTNBC and beyond, or (ii) the sales and marketing of sacituzumab govitecan as
a third-line therapy for mTNBC in the United States (pending FDA approval), we expect to continue to fund our operations with
our current financial resources. In the future, if we cannot obtain sufficient funding through the above methods, we could be
required to finance future cash needs through the sale of additional equity and/or debt securities in capital markets. However, there
can be no assurance that we will be able to raise the additional capital needed to complete our pipeline of research and development
programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has
resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. Our existing
debt may also negatively impact our ability to raise additional capital. If we are unable to raise capital on acceptable terms, our
ability to continue our business would be materially and adversely affected. Actual results could differ materially from our
expectations as a result of a number of risks and uncertainties, including the risks described in Item 1A Risk Factors, “Factors
That May Affect Our Business and Results of Operations,” and elsewhere in our Transition Report on Form 10-K. Our working
capital and working capital requirements are affected by numerous factors and such factors may have a negative impact on our
liquidity. Principal among these are the success of product commercialization and marketing products, the technological advantages
and pricing of our products, the impact of the regulatory requirements applicable to us, and access to capital markets that can
provide us with the resources, when necessary, to fund our strategic priorities.
52
Contractual Commitments
The following table summarizes our outstanding contractual obligations as of the Transition Period ended December 31,
2018:
Contractual Obligations
2019
2020
2021
2023
Thereafter
Total
Payments Due by Period
($ in thousands)
2022
Convertible senior notes
$
— $
7,055
$
— $
— $
— $
— $
Interest on long-term debt
Total long-term debt
Purchase obligations (1)
Operating lease (2)
338
338
72,247
3,022
42
7,097
58,789
1,593
—
—
—
—
—
—
52,175
1,545
12,488
1,566
12,488
1,554
—
—
—
12,947
7,055
380
7,435
208,187
22,227
Total
$
75,607
$
67,479
$
53,720
$
14,054
$
14,042
$
12,947
$
237,849
(1) Purchase obligations are primarily to purchase commercial manufacturing services including minimum purchase commitments
related to product supply contracts, medical consultancy services and e-sourcing software.
(2) Operating leases primarily relate to the 100 The American Road, Morris Plains, NJ 07950 building, the 300 The American
Road, Morris Plains, NJ 07950 building, the 400 The American Road, Morris Plains, NJ 07950 building, office space in
Bellevue, Washington, vehicles and printers.
The above amounts exclude potential payments related to the sale of future royalties pursuant to our agreement with RPI,
under which we are required to make certain royalty payments based on estimated future sales of sacituzumab govitecan. Due to
the nature of this arrangement, the future potential payments related to the attainment of regulatory approval and sales-based
milestones over a period of several years are inherently uncertain, and accordingly, no amounts have been presented for these
future potential payments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our exposure to market risk of financial instruments contains forward-looking statements
under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those described due to a
number of factors, including uncertainties associated with general economic conditions and conditions impacting our industry.
As of the Transition Period ended December 31, 2018, we had $497.8 million in cash, cash equivalents and marketable
securities. Such interest-earning instruments carry a degree of interest rate risk. We do not invest for trading or speculative purposes.
We do not have any derivative financial instruments to manage our interest rate risk exposure. A hypothetical 10% change in
interest rates at December 31, 2018, would not result in a significant change in the fair market value of our portfolio.
We may be exposed to fluctuations in foreign currencies with regard to certain agreements with service providers.
Depending on the strengthening or weakening of the United States dollar, realized and unrealized currency fluctuations could be
significant.
53
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Immunomedics, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Immunomedics, Inc. and subsidiaries (the Company) as of
December 31, 2018, June 30, 2018 and 2017, the related consolidated statements of comprehensive loss, changes in
stockholders’ equity (deficit), and cash flows for the six month transition period ended December 31, 2018 and each of the
years in the three-year period ended June 30, 2018, and the related notes (collectively, the consolidated financial statements). In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2018, June 30, 2018 and 2017, and the results of its operations and its cash flows for the six month
transition period ended December 31, 2018 and each of the years in the three-year period ended June 30, 2018, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 25, 2019 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/KPMG LLP
We have served as the Company’s auditor since 2013.
New York, NY
February 25, 2019
54
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Immunomedics, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Immunomedics, Inc.’s and subsidiaries (the Company) internal control over financial reporting as of
December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company and subsidiaries as of December 31, 2018, June 30, 2018 and 2017,
and the related consolidated statements of comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the
six months ended December 31, 2018 and each of the years in the three-year period ended June 30, 2018, (collectively, the
consolidated financial statements), and our report dated February 25, 2019 expressed an unqualified opinion on those
consolidated financial statements.
Basis for Opinion
The Company’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
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 are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
New York, NY
February 25, 2019
55
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
Current Assets:
Cash and cash equivalents
ASSETS
Marketable securities
Accounts receivable, net of allowances of $0, $0 and $9 at December 31, 2018,
June 30, 2018, and 2017, respectively
Inventory
Prepaid expenses
Other current assets
Total current assets
Property and equipment, net of accumulated depreciation of $4,316, $30,858 and
$29,561 at December 31, 2018, June 30, 2018 and 2017, respectively
Other long-term assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses
Liability related to sale of future royalties - current
Warrant liabilities
Deferred revenues
Total current liabilities
Convertible senior notes, net
Liability related to sale of future royalties - non-current
Other long-term liabilities
Total Liabilities
Commitments and Contingencies (Note 15)
Stockholders' Equity (Deficit):
December 31,
2018
June 30,
2018
2017
$
492,860
$
612,057
$
4,941
26,745
—
—
5,354
1,348
504,503
23,469
68
46
—
3,803
5,729
648,380
15,733
60
43,394
111,508
489
580
891
436
157,298
5,245
30
$
$
528,040
$
664,173
$
162,573
31,722
$
31,664
$
—
—
—
31,722
7,055
221,295
2,119
262,191
3,009
8,973
94
43,740
19,763
198,998
1,986
264,487
31,367
—
90,706
171
122,244
98,084
—
1,709
222,037
Convertible preferred stock, $0.1 par value; authorized 10,000,000 shares; no
shares issued and outstanding at December 31, 2018, June 30, 2018 and 1,000,000
shares issued and outstanding at June 30, 2017
Common stock, $0.1 par value; authorized 250,000,000 shares; issued 190,445,795
shares and outstanding 190,411,070 shares at December 31, 2018; issued
186,801,159 shares and outstanding 186,766,434 shares at June 30, 2018; shares
issued 110,344,643 shares and outstanding 110,309,918 shares at June 30, 2017
Capital contributed in excess of par
Treasury stock, at cost: 34,725 shares at December 31, 2018, June 30, 2018 and
2017
Accumulated deficit
Accumulated other comprehensive loss
Total Immunomedics, Inc. stockholders' equity (deficit)
Noncontrolling interest in subsidiary
Total stockholders' equity (deficit)
Total Liabilities and Stockholders' Equity
—
—
10
1,905
1,868
1,219,237
1,194,998
(824)
(953,216)
(351)
266,751
(902)
265,849
(458)
(795,548)
(353)
400,507
(821)
399,686
$
528,040
$
664,173
$
1,103
462,666
(458)
(521,711)
(303)
(58,693)
(771)
(59,464)
162,573
See accompanying notes to consolidated financial statements.
56
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
($ in thousands, except per share amounts)
For the
Transition
Period Ended
December 31,
2018
Year Ended June 30,
2018
2017
2016
$
— $
1,501
$
2,443
$
Revenues:
Product sales
License fee and other revenues
Research and development
Total revenues
Costs and Expenses:
Costs of goods sold
Research and development
Sales and marketing
General and administrative
Total costs and expenses
Operating loss
Changes in fair market value of warrant liabilities
Warrant related expenses
Interest expense
Interest and other income
Loss on induced exchanges of debt
Other financing expenses
Insurance reimbursement
Foreign currency transaction gain (loss), net
Loss before income tax
Income tax (expense) benefit
Net loss
Net loss attributable to noncontrolling interest
Net loss attributable to Immunomedics, Inc. stockholders
Loss per common share attributable to Immunomedics, Inc.
stockholders (basic and diluted):
$
$
Weighted average shares used to calculated loss per common
share (basic and diluted)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Unrealized gain (loss) on securities available for sale
Other comprehensive income (loss), net of tax:
—
—
—
—
93,887
19,834
30,814
144,535
(144,535)
1,404
—
(20,017)
6,106
(897)
—
190
—
330
325
2,156
613
99,283
6,822
36,485
143,203
(141,047)
(108,636)
—
(23,255)
5,493
(13,005)
—
6,638
81
284
364
3,091
483
51,776
873
29,109
82,241
(79,150)
(61,074)
(7,649)
(5,480)
431
—
(347)
—
23
(157,749)
(273,731)
(153,246)
—
(156)
(20)
(157,749)
(273,887)
(153,266)
(81)
(50)
(60)
(157,668) $
(273,837) $
(153,206) $
(59,037)
(0.84) $
(1.78) $
(1.47) $
(0.62)
188,554
153,475
104,536
94,770
(8)
10
2
(105)
55
(50)
(62)
(109)
(171)
2,261
387
585
3,233
1,159
53,492
1,027
6,563
62,241
(59,008)
—
—
(5,480)
338
—
—
—
(40)
(64,190)
5,054
(59,136)
(99)
1
28
29
(59,107)
(99)
Comprehensive loss
(157,747)
(273,937)
(153,437)
Comprehensive loss attributable to noncontrolling interest
(81)
(50)
(60)
Comprehensive loss attributable to Immunomedics, Inc.
stockholders
$
(157,666) $
(273,887) $
(153,377) $
(59,008)
See accompanying notes to consolidated financial statements.
57
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C
IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating
activities:
Changes in fair value of warrant liabilities
Warrant related expense
Depreciation and amortization
Interest on non-recourse debt
Loss on induced exchanges of debt
Amortization of deferred revenue
Amortization of bond premiums
Amortization of debt issuance costs
Amortization of deferred rent
Loss (gain) on sale of marketable securities
(Decrease) increase in allowance for doubtful accounts
Non-cash expense related to stock-based compensation
Non-cash decrease in value of life insurance policy
Non-cash financing expenses
Changes in operating assets and liabilities
Accounts receivable - net of reserve
Inventories - net of reserve
Other receivables
Prepaid expenses
Other current assets
Accounts payable and accrued expenses
Net cash used in operating activities
Cash flows from investing activities:
Purchases of marketable securities
Proceeds from sales/maturities of marketable securities
Purchases of property and equipment
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Exercise of stock options, net
Exercise of warrants
Sale of preferred stock, net of related expenses
Proceeds from public offering of common stock
Proceeds from private offering of common stock
Proceeds from the issuance of non-recourse debt
Debt conversion fees
Tax withholding payments for stock-based compensation
Net cash provided by financing activities
Effect of changes in exchange rates on cash, cash equivalents and
restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents, and restricted cash beginning of period
Cash, cash equivalents, and restricted cash end of period
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid
Schedule of non-cash investing and financing activities:
Issuance of common shares for debt conversion
Accrued capital expenditures
Non-cash component of warrant exercise
Shares received in cashless exercise
For the
Transition
Period Ended
December 31,
2018
Years ended June 30,
2018
2017
2016
$
(157,749) $
(273,887) $
(153,266) $
(59,136)
108,636
—
1,297
19,791
13,005
(77)
31
1,679
279
—
(9)
4,024
—
—
452
580
(30)
(2,911)
(4,768)
(1,518)
(133,426)
(10,380)
95,112
(9,975)
74,757
2,261
78,226
—
299,467
67,784
182,216
(530)
(1,521)
627,903
(46)
569,188
43,394
612,582
$
2,850
$
— $
92,307
2,173
$
$
— $
— $
61,074
7,649
923
—
—
(64)
218
730
10
16
(62)
4,333
—
347
103
(196)
223
147
(244)
15,809
(62,250)
(131,610)
57,183
(1,837)
(76,264)
4,290
—
121,782
28,578
14,700
—
—
(546)
168,804
(100)
30,190
13,204
43,394
4,750
24
$
$
$
— $
— $
— $
— $
—
—
738
—
—
(36)
670
730
100
(2)
20
3,741
21
—
(190)
256
620
98
762
3,146
(48,462)
(2,749)
50,850
(2,226)
45,875
2,733
—
—
—
—
—
(369)
2,364
(26)
(249)
13,453
13,204
4,803
29
—
—
—
—
(1,404)
—
2,099
19,288
897
(94)
3
179
132
—
—
886
—
—
46
—
—
(1,552)
5,169
1,436
(130,664)
—
21,818
(11,213)
10,605
176
1,688
—
—
—
—
—
(192)
1,672
(22)
(118,409)
612,582
494,173
$
475
$
— $
13,757
795
7,569
2,450
$
$
$
$
$
$
$
$
$
$
$
59
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our consolidated balance sheets that sum to the total of
the same amounts shown in the consolidated statements of cash flows (dollars in thousands):
Cash and cash equivalents
Restricted cash in other current assets
Total cash, cash equivalents and restricted cash
$
$
492,860
1,313
494,173
$
$
612,057
525
612,582
For the Transition Period Ended
December 31, 2018
Year Ended June 30, 2018
See accompanying notes to consolidated financial statements.
60
IMMUNOMEDICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1.
Business Overview
Immunomedics, Inc., a Delaware corporation, together with its subsidiaries (collectively "we," "our," "us,"
"Immunomedics", or the "Company"), is a clinical-stage biopharmaceutical company that develops monoclonal antibody-based
products for the targeted treatment of cancer. Immunomedics manages its operations as one line of business of researching,
developing, manufacturing and marketing biopharmaceutical products, particularly antibody-based products for patients with
difficult to treat solid tumor and blood cancers. The Company currently reports as a single industry segment with substantially all
business conducted in the United States ("United States"). Immunomedics conducts its research activities in the United States and
runs its development studies in the United States and selected European countries. Our corporate objective is to become a fully-
integrated biopharmaceutical company and a leader in the field of antibody-drug conjugates (“ADCs”). To that end, our immediate
priority is to commercialize our most advanced ADC product candidate, sacituzumab govitecan (IMMU-132), beginning in the
United States, with metastatic triple-negative breast cancer (“mTNBC”) as the first indication. On May 21, 2018, we submitted a
Biologics License Application (“BLA”) to the FDA for sacituzumab govitecan for the treatment of patients with mTNBC who
have received at least two prior therapies for metastatic disease. On July 18, 2018, we received notification from the FDA that the
BLA was accepted for filing and the original application was granted Priority Review with a PDUFA target action date of January
18, 2019. On January 17, 2019, we received a Complete Response Letter ("CRL") from the FDA for the BLA. On February 4,
2019, we received a written communication from the FDA enclosing the Establishment Inspection Report (“EIR”) from the
chemistry, manufacturing and controls BLA pre-approval inspection conducted by the FDA at the Company’s Morris Plains, New
Jersey antibody manufacturing facility for our ADC product candidate sacituzumab govitecan, which took place from August 6,
2018 through August 14, 2018. The FDA also notified the Company that the FDA will be conducting a re-inspection of the
Company’s Morris Plains, New Jersey manufacturing facility as part of the BLA resubmission process. The Company is finalizing
its plans with respect to the matters raised in the CRL received from FDA on January 17, 2019 and the EIR, and subsequently
expects to request a meeting with the FDA in the near term.
The Company has a foreign subsidiary, Immunomedics GmbH in Rodermark, Germany, that assists the Company in
clinical trials in Europe. The accompanying consolidated financial statements include results for its foreign subsidiary and its
majority-owned United States subsidiary, IBC Pharmaceuticals, Inc. ("IBC"). During the Transition Period, the Company liquidated
Immunomedics B.V. in the Netherlands.
Immunomedics is subject to significant risks and uncertainties, including, without limitation, the Company's inability to
further identify, develop and achieve commercial success for new products and technologies; the possibility of delays in the
research and development necessary to select drug development candidates and delays in clinical trials; the risk that clinical trials
may not result in marketable products; the risk that the Company may be unable to secure regulatory approval of and market its
drug candidates; the development or regulatory approval of competing products; the Company's ability to protect its proprietary
technologies; patent infringement claims; and risks of new, changing and competitive technologies, and regulations in the United
States and internationally.
Since its inception in 1982, Immunomedics’ principal sources of funds have been the private and public sale of equity
and debt securities, and revenues from licensing agreements, including up-front and milestone payments, funding of development
programs, and other forms of funding from collaborations. Historically, sources of revenue have included sales of LeukoScan®,
grants, and license fees and other revenue, however, in order to focus on its ADC business, the Company discontinued the sale of
LeukoScan® during February 2018.
As of December 31, 2018, we had $497.8 million in cash, cash equivalents and marketable securities. On June 15, 2018,
we announced the closing of our public offering of 11,500,000 shares of our common stock at a price of $24.00 per share. Pursuant
to the underwriter's full exercise of the over-allotment option granted by us, on June 22, 2018, we closed the sale of an additional
1,725,000 shares of our common stock. The total net proceeds from the offering, including the exercise of the over-allotment
option, were $299.5 million, after deducting $17.4 million in underwriting discounts and commissions and other offering expenses
payable by the Company. This funding will be used primarily to accelerate the clinical development program of sacituzumab
govitecan, manufacturing process improvements as well as for working capital and general corporate purposes.
On January 7, 2018, we announced that we sold tiered, sales-based royalty rights on global net sales of sacituzumab
govitecan to RPI Finance Trust (“RPI”) for $175.0 million. RPI also purchased $75.0 million in our common stock at $17.15 per
share, which represented a more than 15% premium over the stock’s 15-day trailing average closing price at that time. The total
$250.0 million funding provided us with the resources required to support our next phase of growth as we focus on developing
sacituzumab govitecan in mTNBC, advanced urothelial cancer ("UC"), hormone receptor positive ("HR+")/human epidermal
61
growth factor receptor 2 - negative ("HER2-") metastatic breast cancer ("mBC"), non-small cell lung cancer ("NSCLC") and other
indications of high medical need and on further building its clinical, medical affairs, commercial and manufacturing infrastructure,
and to fund operations.
The Company expects to continue to fund its operations with its current financial resources.
2.
Summary of Significant Accounting Policies
Principles of Consolidation and Presentation
The consolidated financial statements include the accounts of Immunomedics and its subsidiaries. Noncontrolling interests
in consolidated subsidiaries in the Consolidated Balance Sheets represent minority stockholders' proportionate share of the equity
(deficit) in such subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with United States generally accepted accounting
principles 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 consolidated financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ from those estimates. The Company’s significant
estimates and assumptions relate to stock-based compensation expenses, interest expense on liability related to sale of future
royalties, and determination of fair value of warrant liabilities.
Interest Expense on Liability Related to Sale of Future Royalties
The Company accounts for the liability related to the sale of future royalties as a debt financing. The Company has a
significant continuing involvement in the generation of related royalty streams. The Company accretes this liability and recognizes
expected interest expense using the effective interest rate method over the life of the related royalty stream, based on our current
estimates of future royalty payments. These estimates include projections the Company makes and projections from outside the
Company, and involves significant judgment and inherent uncertainties. The Company periodically re-assesses the projections
and, to the extent our future projections are greater or less than its previous estimates or the estimated timing of such payments is
materially different than its previous estimates, the Company will adjust the effective interest calculation.
Foreign Currencies
For our German subsidiary which operates in a local currency environment, income and expense items are translated to
United States dollars at the monthly average rates of exchange prevailing during the year, assets and liabilities are translated at
year-end exchange rates and equity accounts are translated at historical exchange rates. Translation adjustments are accumulated
in a separate component of stockholders' equity in the Consolidated Balance Sheets and the Consolidated Statements of Changes
in Stockholders’ Equity (Deficit) and are included in the determination of comprehensive (loss) income in the Consolidated
Statements of Comprehensive Loss. Transaction gains and losses are included in the determination of net loss in the Consolidated
Statements of Comprehensive Loss.
Financial Instruments
The carrying amount of cash and cash equivalents, prepaid expenses, other current assets and current liabilities approximate
fair value due to the short-term maturity of these instruments. The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Marketable Securities
Marketable securities, all of which are available-for-sale, consist of corporate debt securities, United States bonds, United
States sponsored agencies and municipal bonds. Corporate debt securities include Eurodollar issues of United States corporations,
and United States dollar denominated issues of foreign corporations. United States sponsored agencies securities are carried at
fair value, with unrealized gains and losses, net of related income taxes, reported as accumulated other comprehensive loss, except
for losses from impairments which are determined to be other-than-temporary. Realized gains and losses, and declines in value
judged to be other-than-temporary on available-for-sale securities are included in the determination of net loss and are included
in interest and other income (net), at which time the average cost basis of these securities are adjusted to fair value. Fair values
62
are based on quoted market prices at the reporting date. Interest and dividends on available-for-sale securities are included in
interest and other income (net).
Concentration of Credit Risk
Cash, cash equivalents, and marketable securities are financial instruments that potentially subject the Company to
concentration of credit risk. Our investment policy is to invest only in institutions that meet high credit quality standards and
establishes limits on the amount and time to maturity of investments with any individual counterparty. The policy also requires
that investments are only entered into with corporate and financial institutions that meet high credit quality standards. Restricted
cash represents funds the Company is required to set aside to cover vehicle operating leases and other purposes.
Revenue Recognition
Pursuant to Topic 606, we recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve
this core principle, Topic 606 includes provisions within a five step model that includes i) identifying the contract with a customer,
ii) identifying the performance obligations in the contract, iii) determining the transaction price, iv) allocating the transaction price
to the performance obligations, and v) recognizing revenue when, or as, an entity satisfies a performance obligation.
At contract inception, we assess the goods or services promised within each contract and assess whether each promised
good or service is distinct and determine those that are performance obligations. We then recognize as revenue the amount of the
transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.
Research and Development Costs
Research and development costs are expensed as incurred. Costs incurred for clinical trials for patients and investigators
are expensed as services are performed in accordance with the agreements in place with the institutions. Research and development
costs include salaries and benefits, costs associated with producing biopharmaceutical compounds, laboratory supplies, the costs
of conducting clinical trials, and facilities costs. In addition, the Company uses clinical research organizations ("CRO") and contract
manufacturing operations ("CMO") to outsource portions of our research and development activities.
Common Stock Warrants
In connection with certain financing transactions in October 2016 and February 2017, the Company issued warrants and
recorded them as liabilities due to certain net cash settlement provisions. The warrants were recorded at fair value using the Black-
Scholes valuation model. The Black-Scholes valuation model takes into account, as of the valuation date, factors including the
current exercise price, the term of the warrant, the current price of the underlying stock and its expected volatility, expected
dividends on the stock, and the risk-free interest rate for the term of the warrant. These warrants are subject to re-measurement at
each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change in the
fair value of warrant liability” in the consolidated statements of comprehensive loss. As of December 31, 2018, there were no
warrants outstanding.
Treasury Shares
The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of Stockholders’
Equity. In determining the cost of the treasury shares when either sold or issued, the Company uses the first-in, first-out method
("FIFO"). If the proceeds from the sale of the treasury shares are greater than the cost of the shares sold, the excess proceeds are
recorded as additional paid-in capital. If the proceeds from the sale of the treasury shares are less than the original cost of the
shares sold, the excess cost reduces any additional paid-in capital arising from previous sales of treasury shares for that class
of stock.
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a three-level fair value hierarchy that
prioritizes the inputs used in determining the fair value of the asset or liability. The three levels of the fair value hierarchy are as
follows:
63
•
•
•
Level 1 - Financial instruments whose values are based on unadjusted quoted prices for identical assets or liabilities
in an active market which the company has the ability to access at the measurement date (examples include active
exchange-traded securities and most United States Government and agency securities).
Level 2 - Financial instruments whose value are based on quoted market prices in markets where trading occurs
infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.
Level 3 - Financial instruments whose values are based on prices or valuation techniques that require inputs that are
both unobservable and significant to the overall fair value measurement. These inputs reflect management's own
assumptions about the assumptions a market participant would use in pricing the asset.
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable,
prepaid expenses, other current assets, accounts payable and accrued expenses, warrant liability, liabilities related to the sale of
future royalties and Convertible Senior Notes. The carrying amount of accounts receivable, prepaid expenses, other current assets,
accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the
short-term nature of those instruments as of the Transition Period and for the fiscal years ended June 30, 2018 and 2017.
Income Taxes
The Company uses the asset and liability method to account for income taxes, including the recognition of deferred tax
assets and deferred tax liabilities for the anticipated future tax consequences attributable to differences between financial statements
amounts and their respective tax bases. The Company reviews its deferred tax assets for recovery. A valuation allowance is
established when the Company believes that it is more likely than not that its deferred tax assets will not be realized. Changes in
valuation allowances from period to period are included in the Company’s tax provision in the period of change. The Company
has recorded a full valuation allowance against its net deferred tax assets as of December 31, 2018.
The Tax Cuts and Jobs Act (the "Act") was signed into law on December 22, 2017. Among its numerous changes to the
Internal Revenue Code, the Act reduces United States corporate rates from 35% to 21%. Additionally, the Act limits the use of
net operating loss carry backs, however any future net operating losses will instead be carried forward indefinitely. Only 80% of
current income will be able to be offset with a net operating loss carryforward, with the remainder of the net operating loss
continuing to carry forward. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting
Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed the Company to record provisional amounts during a
measurement period not to extend beyond one year of the enactment date. As a result of the reduction in the U.S. corporate income
tax rate, the Company revalued its ending net deferred tax assets as of June 30, 2018 which resulted in a provisional expense of
$59.5 million which was offset by an associated change in valuation allowance. In the second quarter of the Transition Period,
the Company completed its analysis to determine the effect of the Tax Act and recorded no further adjustments.
Net Loss Per Share Allocable to Common Stockholders
Net loss per basic and diluted common share allocable to common stockholders is based on the net loss for the relevant
period, divided by the weighted-average number of common shares outstanding during the period. For purposes of the diluted net
loss per common share calculations, the exercise or exchange of all potential common shares is not included because their effect
would have been anti-dilutive, due to the net loss recorded for the Transition Period and fiscal years ended June 2018, 2017, and
2016, respectively. The common stock equivalents excluded from the earnings per share calculation are 6.7 million, 10.0 million,
66.1 million and 26.7 million for the Transition Period and the fiscal years ended June 2018, 2017, and 2016, respectively.
Net Comprehensive Loss
Net comprehensive loss consists of net loss, unrealized gain (loss) on available for sale securities and foreign exchange
translation adjustments and is presented in the consolidated statements of comprehensive loss.
Stock-Based Compensation
The Company utilizes stock-based compensation in the form of stock options, stock appreciation rights, stock awards,
stock unit awards, performance shares, cash-based performance units and other stock-based awards, each of which may be granted
separately or in tandem with other awards.
The grant-date fair value of stock awards is based upon the underlying price of the stock on the date of grant. The grant-
date fair value of stock option awards must be determined using an option pricing model. Option pricing models require the use
64
of estimates and assumptions as to (a) the expected term of the option, (b) the expected volatility of the price of the underlying
stock and (c) the risk-free interest rate for the expected term of the option. The Company uses the Black-Scholes option pricing
formula for determining the grant-date fair value of such awards. The fair value of option awards that vest based on achievement
of certain market conditions are determined using a Monte Carlo simulation technique.
The expected term of the option is based upon the contractual term and expected employee exercise and expected post-
vesting employment termination behavior. The expected volatility of the price of the underlying stock is based upon the historical
volatility of the Company’s stock computed over a period of time equal to the expected term of the option. The risk free interest
rate is based upon the implied yields currently available from the United States Treasury yield curve in effect at the time of the
grant. Forfeitures are recorded as incurred.
Recently Issued Accounting Pronouncements
Accounting Pronouncements adopted during the year:
In November 2016, the FASB issued Accounting Standards Update ("ASU") 2016-18 "Statement of Cash Flows (Topic
230): Restricted Cash.” The amendments in this update require that cash and cash equivalent balances in a statement of cash flows
include those amounts deemed to be restricted cash and restricted cash equivalents. ASU 2016-18 is effective for annual reporting
periods beginning after December 15, 2017, and early adoption is permitted. We adopted the amendments in this accounting
standard update in the Transition Period on a retrospective basis resulting in an immaterial impact to our consolidated financial
statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Clarification of Certain Cash Receipts and
Cash Payments,” which eliminates the diversity in practice related to the classification of certain cash receipts and payments in
the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. ASU 2016-15 is effective for
annual and interim reporting periods beginning after December 15, 2017, and early adoption is permitted. ASU 2016-15 provides
for retrospective application for all periods presented. We adopted ASU 2016-15 in the Transition Period and the adoption did not
result in any changes to the presentation of our Consolidated Statement of Cash Flows.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and has
subsequently issued a number of amendments to Topic 606. During the Transition Period we adopted Topic 606 using the modified
retrospective method. The adoption of Topic 606 did not have a material impact to our consolidated financial statements.
Accounting Pronouncements yet to be adopted:
In November 2018, the FASB issued ASU 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction
between Topic 808 and Topic 606," to clarify when ASC 606 should be used for collaborative arrangements when the counterparty
is a customer. The guidance precludes an entity from presenting consideration from a transaction in a collaborative arrangement
as revenue from contracts with customers if the counterparty is not a customer for that transaction. The guidance is effective for
public business entities in fiscal years beginning after December 15, 2019, and interim periods therein. Early adoption is permitted
to entities that have adopted ASC 606. We are currently assessing the impact of ASU 2018-18.
In August 2018, the FASB issued ASU 2018-13, "Fair Value measurement (Topic 820): Disclosure Framework - Changes
to the Disclosure Requirements for Fair Value Measurement," to no longer require public companies to disclose transfers between
Level 1 and Level 2 of the fair value hierarchy, and to require disclosure about the range and weighted average used to develop
significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for fiscal years beginning after
December 15, 2019, and for interim periods within those fiscal years. Entities are permitted to early adopt either the entire standard
or only the provisions that eliminate or modify the requirements. We are currently assessing the impact of ASU 2018-13.
In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation," to improve the usefulness of
information provided to users of financial statements while reducing cost and complexity in financial reporting and provide
guidance aligning the measurement and classification for share-based payments to nonemployees with the guidance for share-
based payments to employees. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the
grant date. This standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual
periods. Early adoption is permitted, but no earlier than an entity's adoption date of Topic 606. We are currently assessing the
impact of ASU 2018-07.
In February 2016, the FASB issued ASU 2016-02, “Leases,” and issued subsequent amendments to the initial guidance
contained within ASU 2017-13. This standard requires a lessee to record the assets and liabilities for the rights and obligations
65
created by lease terms of more than 12 months on the balance sheet. The amendments in this update are effective for fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted. We
will adopt the standard using the modified retrospective method and intend to elect the available practical expedients on adoption.
We anticipate adoption of the new standard will increase total assets by approximately $9.0 million, with an offsetting increase
to total liabilities of approximately $9.0 million on our consolidated balance sheet and result in additional lease-related disclosures
in the footnotes to our consolidated financial statements. Adoption of the standard has required changes to our business processes
and controls to comply with the provisions of the standard.
3. Marketable Securities
Immunomedics considers all of its current investments to be available-for-sale. Marketable securities at the Transition
Period ended December 31, 2018 consist of the following (in thousands):
U.S. Government Sponsored Agencies
$
4,941
$
— $
— $
4,941
Amortized Cost
Gross Unrealized
Gain
Gross Unrealized
(Loss)
Fair Value
Maturities of debt securities classified as available-for-sale were as follows at the Transition Period ended December 31,
2018 (in thousands):
Due after one year through five years
$
4,941
$
4,954
Fair Value
Net Carrying Amount
Immunomedics considers all of its current investments to be available-for-sale. Marketable securities at June 30, 2018
consisted of the following (in thousands):
U.S. Treasury Bonds
Certificate of Deposits
U.S. Government Sponsored Agencies
Corporate Debt Securities
Commercial Paper
Amortized Cost
Gross Unrealized
Gain
Gross Unrealized
(Loss)
Fair Value
$
$
9,641
$
— $
(9) $
5,610
6,751
4,510
249
—
—
—
—
—
(2)
(5)
—
9,632
5,610
6,749
4,505
249
26,761
$
— $
(16) $
26,745
Maturities of debt securities classified as available-for-sale was as follows at June 30, 2018 (in thousands):
Due within one year
Due after one year through five years
$
$
21,745
5,000
26,745
$
$
21,860
5,009
26,869
Fair Value
Net Carrying Amount
Marketable securities at June 30, 2017 consist of the following (in thousands):
Amortized Cost
Gross Unrealized
Gain
Gross Unrealized
(Loss)
Fair Value
35,086
$
— $
(24) $
U.S. Treasury Bonds
Certificate of Deposits
U.S. Government Sponsored Agencies
Corporate Debt Securities
Commercial Paper
$
$
—
(13)
(33)
—
35,062
15,298
18,344
32,659
10,145
$
(70) $
111,508
—
—
—
1
1
15,298
18,357
32,692
10,144
111,577
$
66
4.
Inventory
There was no inventory at the Transition Period ended December 31, 2018, and June 30, 2018, and $0.6 million of
inventory at June 30, 2017. Inventory was related to Leukoscan, for which the Company discontinued sales as of February 2018.
5. Debt
Liability related to sale of future royalties:
On January 7, 2018, the Company entered into a funding agreement (the "Funding Agreement") with RPI Finance Trust,
a Delaware statutory trust ("RPI"). Pursuant to the Funding Agreement, the Company issued to RPI the right to receive certain
royalty amounts, subject to certain reductions, based on the net sales of the ADC sacituzumab govitecan (the "Product"), for each
calendar quarter during the term of the Funding Agreement ("Revenue Participation Right"), in exchange for $175.0 million in
cash (the "Purchase Price"). Specifically, the royalty rate commences at 4.15 percent on net annual sales of up to $2.0 billion,
declining step-wise based on sales tiers to 1.75 percent on net global annual sales exceeding $6.0 billion.
On January 7, 2018, in connection with the Funding Agreement, the Company entered into a common stock purchase
agreement (the "Purchase Agreement") with RPI, pursuant to which the Company, in a private placement, issued and sold to RPI
4,373,178 unregistered shares (the "Shares") of the Company's Common Stock, at a price of $17.15 per share for gross proceeds
to the Company of $75.0 million before deducting fees and expenses (the "Financing").
The Company concluded that there were two units of accounting in the transaction. The Company allocated the transaction
consideration on a relative fair value to the liability and common stock in accordance with ASC 470-10 as follows (in thousands):
Units of Accounting:
Liability related to sale of future royalties
Common stock
Allocated Consideration
$
$
182,216
67,784
250,000
Interest will be recognized using the effective interest method over a period of 20 years. The effective interest rate under
the Funding Agreement, including issuance costs, is approximately 18.0%. During the Transition Period, the Company recognized
$19.3 million in interest expense.
The following table shows the activity within liability related to sale of future royalties during the Transition Period and
at the fiscal year ended June 30, 2018 (in thousands):
Liability related to sale of future royalties at January 7, 2018
Interest expense recognized
Carrying value of liability related to sale of future royalties at June 30, 2018
Interest expense recognized
Carrying value of liability related to sale of future royalties at December 31, 2018
Convertible Senior Notes:
$
$
$
182,216
19,791
202,007
19,288
221,295
In February 2015, the Company issued $100.0 million of Convertible Senior Notes (the "Convertible Senior Notes") (net
proceeds of approximately $96.3 million after deducting the initial purchasers’ fees and offering expenses) in a private offering
exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Rule 144A under
the Securities Act. The Convertible Senior Notes will mature on February 15, 2020, unless earlier purchased or converted. The
debt issuance costs of approximately $3.7 million, primarily consisting of underwriting, legal and other professional fees, are
amortized over the term of the Convertible Senior Notes. The Convertible Senior Notes are senior unsecured obligations of the
Company. Interest at 4.75% is payable semiannually on February 15 and August 15 of each year. The effective interest rate on the
Convertible Senior Notes was 5.48% for the period from the date of issuance through the Transition Period ended December 31,
2018.
67
The Convertible Senior Notes are convertible at the option of holders into approximately 19.6 million shares of common
stock at any time prior to the close of business on the day immediately preceding the maturity date. The exchange rate will initially
be 195.8336 shares of common stock per $1,000 principal amount of Convertible Senior Notes (equivalent to an initial conversion
price of approximately $5.11 per share of common stock).
If the Company undergoes a fundamental change (as defined in the indenture governing the Convertible Senior Notes),
holders may require Immunomedics to purchase for cash all or part of the Convertible Senior Notes at a purchase price equal to
100% of the principal amount of the Convertible Senior Notes to be purchased, plus accrued and unpaid interest, if any, to, but
excluding, the fundamental change purchase date, subject to certain exceptions. In addition, if certain make-whole fundamental
changes (as defined in the indenture governing the Convertible Senior Notes) occur, Immunomedics will, in certain circumstances,
increase the conversion rate for any Convertible Note converted in connection with such make-whole fundamental change.
The indenture does not limit the amount of debt which may be issued by the Company under the indenture or otherwise,
does not contain any financial covenants or restrict the Company from paying dividends, selling or disposing of assets, or issuing
or repurchasing its other securities, provided that such event is not deemed to be a fundamental change (as defined in the indenture
governing the Convertible Senior Notes). The indenture contains customary terms and covenants and events of default.
If an event of default with respect to the Convertible Senior Notes occurs, holders may, upon satisfaction of certain
conditions, accelerate the principal amount of the Convertible Senior Notes plus premium, if any, and accrued and unpaid interest,
if any. In addition, the principal amount of the Convertible Senior Notes plus premium, if any, and accrued and unpaid interest, if
any, will automatically become due and payable in the case of certain types of bankruptcy or insolvency events of default involving
the Company.
On September 21, 2017, the Company entered into separate, privately negotiated exchange agreements, (the "September
Exchange Agreements") with certain holders of the Convertible Senior Notes. Under the Exchange Agreements, such holders
agreed to convert an aggregate $80.0 million of Convertible Senior Notes held by them. In total, the Company issued an aggregate
16.8 million shares of common stock in the September Exchange Agreements. The shares represent an aggregate of 1.1 million
shares more than the number of shares into which the exchanged Convertible Senior Notes were convertible under their original
terms. As a result of the September Exchange Agreements, the Company recognized a loss on induced exchanges of debt of $13.0
million representing the fair value of the incremental consideration paid to induce the holders to exchange their Convertible Senior
Notes for equity (i.e., 1.1 million shares of common stock), based on the closing market price of the Company's Common Stock
on the date of the September 2017 Exchange Agreements.
On October 2, 2018, the Company entered into privately negotiated exchange agreements (the "October 2018 Exchange
Agreements"), with a limited number of holders of the Convertible Senior Notes. Under the Exchange Agreements, such holders
agreed to convert an aggregate $12.9 million of Convertible Senior Notes held by them. In total, the Company issued an aggregate
2.6 million shares of common stock in the October 2018 Exchange Agreements. The shares represent an aggregate of 0.1 million
shares more than the number of shares into which the exchanged Convertible Senior Notes were convertible under their original
terms. As a result of the October 2018 Exchange Agreements, the Company recognized a loss on induced exchanges of debt of
$0.9 million representing the fair value of the incremental consideration paid to induce the holders to exchange their Convertible
Senior Notes for equity (i.e., 0.1 million shares of common stock), based on the closing market price of the Company's Common
Stock on the date of the October 2018 Exchange Agreements. As a result of the October 2018 Exchange Agreements, the balance
of the outstanding Convertible Senior Notes was $7.1 million at December 31, 2018.
Total interest expense for the Convertible Senior Notes were $0.5 million, $3.5 million, $5.5 million and $5.5 million,
for the Transition Period and the fiscal periods ended 2018, 2017 and 2016, respectively. Included in interest expense is the
amortization of debt issuance costs of $0.2 million in the Transition Period ($0.1 million of which related to the accelerated
amortization of debt issuance costs associated with the October 2018 Exchange Agreements), $1.7 million in fiscal 2018 ($1.4
million of which related to the accelerated amortization of debt issuance costs associated with the September Exchange
Agreements), $0.7 million in fiscal 2017 and $0.7 million in the fiscal 2016.
68
6.
Stock-Based Compensation
Stock Incentive Plan
The Company has a stock incentive plan, the Immunomedics, Inc. 2014 Long-Term Incentive Plan (the “Plan”). The Plan
was established to promote the long-term financial interests and growth of the Company, by attracting and retaining management
and other personnel and key service providers with the training, experience and ability to enable them to make a substantial
contribution to the success of the Company's business. The Plan is designed to motivate management personnel by means of
growth-related incentives to achieve long-range goals and further the alignment of interests with those of the stockholders of the
Company through opportunities for increased stock or stock-based ownership in the Company. Toward these objectives, the
Company may grant stock options, stock appreciation rights, stock awards, stock units, performance shares, performance units,
and other stock-based awards to eligible individuals on the terms and subject to the conditions set forth in the Plan. There have
been no significant modifications to the Plan during the Transition Period or fiscal years ended 2018, 2017 or 2016.
Stock-based compensation expense was $0.9 million, $4.0 million, $4.3 million and $3.7 million in the Transition Period
and fiscal years ended June 30, 2018, 2017 and 2016, respectively. The Company received a final award finding from an arbitrator
that denied Dr. Goldenberg 1.5 million of RSU's. As a result, during the Transition Period, $3.4 million of the stock-based
compensation expense was reversed. Refer to "Note 15 - Commitments and Contingencies" for more information.
Stock Options
Stock option grants provide the right to purchase a specified number of shares of Common Stock from the Company at
a specified price during a specified period of time. The stock option exercise price per share is the fair market value of one share
of Common Stock on the date of the grant of the stock option and generally have a vesting period of four years.
As of December 31, 2018, there was $32.4 million of total unrecognized compensation cost related to non-vested stock-
based compensation arrangements granted under the plan. That cost is being recognized over a weighted-average period of 3.5
years.
The weighted average grant date fair value of the stock options granted during the Transition Period and fiscal years
ended June 30, 2018, 2017 and 2016 was $22.54 per share, $8.76 per share, $2.21 per share and $1.08 per share, respectively. The
weighted average grant date fair value of the performance-based stock options granted during the fiscal year ended June 30, 2018
was $7.29 per share. There were no performance-based stock options granted during the Transition Period, or for fiscal years
ended June 30, 2017 or 2016.
We estimated the fair value of options granted using a Black-Scholes option pricing model with the following assumptions:
Expected dividend yield
Expected option term (years)
Expected stock price volatility
Risk-free interest rate
Transition Period
December 31, 2018
—%
4.76
69%
2018
—%
4.84
70%
Years Ended June 30,
2017
—%
5.04
63%
2016
—%
5.03
58%
2.69% - 3.06%
1.72% - 2.89%
1.16% - 2.15%
1.00% - 1.64%
The following table summarizes all stock option activity for the transition period ended December 31, 2018:
Options
(in thousands)
Weighted Average
Exercise Price Per
Option
Weighted Average
Remaining
Contractual Term
(Years)
Aggregate Intrinsic
Value (in thousands)
Options outstanding, July 1, 2018
Changes during the year:
Granted
Exercised
Expired or forfeited
Options outstanding, end of year
Vested as of December 31, 2018
3,549
$
2,002
(706)
(88)
4,757
1,504
$
$
69
7.58
22.54
3.71
15.57
14.30
4.23
4.43
$
57,123
5.42
3.41
$
$
18,618
15,098
The following table summarizes all stock option activity for the fiscal year ended June 30, 2018:
Options
(in thousands)
Weighted Average
Exercise Price Per
Option
Weighted Average
Remaining
Contractual Term
(Years)
Aggregate Intrinsic
Value (in thousands)
Options outstanding, beginning of year
2,893
$
Changes during the year:
Granted
Exercised
Expired or forfeited
Options outstanding, end of year
Vested as of June 30, 2018
1,370
(586)
(128)
3,549
1,852
$
$
3.48
14.90
3.86
10.19
7.58
3.47
3.96
$
15,490
4.43
2.90
$
$
57,123
37,420
The total fair value of shares vested during the Transition Period and fiscal years ended June 30, 2018, 2017 and 2016
was $21.5 million, $43.8 million, $17.0 million and $6.3 million, respectively. The total intrinsic value of stock options exercised
during the Transition Period and the fiscal years ended June 30, 2018, 2017 and 2016 was $13.3 million, $7.8 million, $2.6 million
and $1.2 million, respectively.
Restricted stock units ("RSU's")
The Company may grant awards of RSU's to eligible individuals. An RSU represents a contractual obligation by the
Company to deliver a number of shares of Common Stock equal to the fair market value of the specified number of shares subject
to the award, or a combination of shares of Common Stock and cash. Vesting requirements may include performance goals, the
attainment of performance goals with continued service, or both.
Information regarding the Company's RSU's for the transition period ended December 31, 2018 is as follows:
Non-Vested Restricted Stock Units
Non-vested at July 1, 2018
Changes during the period:
Restricted Units Granted
Vested/Exercised
Forfeited
Non-vested at December 31, 2018
Share Equivalent
(in thousands)
Weighted Average Grant Date Fair
Value
1,535
$
15
(35)
(1,500)
15
$
2.83
14.29
8.46
2.28
14.29
As of the transition period ended December 31, 2018, there was $0.3 million of total unrecognized compensation costs
related to the awards. The cost is being recognized over a weighted-average period of 1.18 years. During the Transition Period,
the Company received a final award finding from an arbitrator that denied Dr. Goldenberg 1.5 million of RSU's that are included
as forfeited in the table above. Refer to "Note 15 - Commitments and Contingencies" for more information.
Information regarding the Company's RSU's for the fiscal year ended June 30, 2018 is as follows:
Non-Vested Restricted Stock Units
Non-vested at June 30, 2017
Changes during the period:
Restricted Units Granted
Vested/Exercised
Non-vested at June 30, 2018
Share Equivalent
(in thousands)
Weighted Average Grant Date Fair
Value
1,500
$
35
—
1,535
$
2.28
8.46
—
2.83
70
Performance Stock Options ("PSO's")
The Company may grant awards of PSO's to eligible individuals. PSO's are shares of Common Stock that vest based on
performance measured against predetermined objectives that could include performance goals, continued employment, or a
combination of both over a specified performance period. PSO's may be settled in shares of Common Stock, cash, or both as
determined on the settlement date.
The following table summarizes the Company's performance-based stock option activity for the transition period ended
December 31, 2018 is presented below:
Options
(in thousands)
Weighted Average
Exercise Price Per
Option
Weighted Average
Remaining
Contractual Term
(Years)
Aggregate Intrinsic
Value (in thousands)
Options outstanding, July 1, 2018
538
$
13.09
6.54
$
5,688
Changes during the year:
Granted
Exercised
Expired or forfeited
Options outstanding, end of year
Vested as of December 31, 2018
—
—
—
538
38
$
$
—
—
—
13.09
11.86
6.04
5.94
$
$
772
91
The following table summarizes the Company's performance-based stock option activity for the fiscal year ended June
30, 2018 is presented below:
Options
(in thousands)
Weighted Average
Exercise Price Per
Option
Weighted Average
Remaining
Contractual Term
(Years)
Aggregate Intrinsic
Value (in thousands)
0
$
—
Options outstanding, July 1, 2017
Changes during the year:
Granted
Exercised
Expired or forfeited
Options outstanding, end of year
Vested as of June 30, 2018
— $
538
—
—
538
$
— $
—
13.09
—
—
13.09
—
6.54
0
$
$
5,688
—
During fiscal 2018, performance stock options were granted to certain key senior officers that are subject to vesting only
upon the market price of our underlying public stock closing above certain price targets that range between $23.72 and $47.04
within four years of the date of grant. The target price must be maintained for a 15-day consecutive trading period. These non-
qualified stock options with market related vesting conditions were valued using a Monte Carlo simulation model. Stock-based
compensation expense for each grant is recognized regardless of the number of awards that are earned based on the market condition
and is recognized on a straight-line basis over the service period of four years. There were no performance stock options granted
during the Transition period.
As of the transition period ended December 31, 2018, there was $3.0 million of total unrecognized compensation costs
related to the awards. The cost is being recognized over a remaining weighted-average period of 3.05 years.
71
7.
Estimated Fair Value of Financial Instruments
Cash equivalents and marketable securities:
Transition period ended
December 31, 2018
Money Market Funds Note (a)
Marketable Securities:
U.S. Government Sponsored Agencies
Total
Fiscal year ended
June 30, 2018
Money Market Funds Note (a)
Marketable Securities:
U.S. Treasury Bonds
Certificate of Deposits
U.S. Government Sponsored Agencies
Corporate Debt Securities
Commercial Paper
Total
Fiscal year ended
June 30, 2017
($ in thousands)
Level 1
Level 2
Level 3
Total
$
326,239
$
— $
— $
326,239
4,941
$
331,180
$
—
— $
—
4,941
— $
331,180
($ in thousands)
Level 1
Level 2
Level 3
Total
$
300,865
$
— $
— $
300,865
9,632
5,610
6,749
4,505
249
—
—
—
—
—
—
—
—
—
—
9,632
5,610
6,749
4,505
249
$
327,610
$
— $
— $
327,610
($ in thousands)
Level 1
Level 2
Level 3
Total
Money Market Funds Note (a)
$
36,776
$
— $
— $
36,776
Marketable Securities:
U.S. Treasury Bonds
Certificate of Deposits
U.S. Government Sponsored Agencies
Corporate Debt Securities
Commercial Paper
Total
35,062
15,298
18,344
32,659
10,145
—
—
—
—
—
—
—
—
—
—
35,062
15,298
18,344
32,659
10,145
$
148,284
$
— $
— $
148,284
(a)
The money market funds noted above are included in cash and cash equivalents.
Convertible Senior Notes
The carrying amounts and estimated fair values (Level 2) of debt instruments are as follows (in thousands):
Transition period ended
December 31, 2018
As of June 30, 2018
As of June 30, 2017
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Convertible Senior Notes
$
7,055
$
20,100
$
19,763
$
89,436
$
98,084
$
180,950
The fair value of the Convertible Senior Notes, which differs from their carrying values, is influenced by interest rates,
the Company’s stock price and stock price volatility and is determined by prices for the Convertible Senior Notes observed in
market trading which are Level 2 inputs.
72
Warrant Liabilities
The Company has determined its warrant liabilities to be a Level 2 fair value measurement and used the Black Scholes
valuation model to calculate the fair value. At the measurement dates, the Company estimated the fair value for the warrants based
on Black-Scholes valuation model and using the following assumptions:
Risk-free interest rate
Expected remaining term
Expected volatility
Dividend yield
June 30,
2018 (2)
June 30,
2017 (1)
June 30,
2017 (2)
February 10,
2017
1.95%
1.14%
1.38%
0.28 years
0.5 years
1.3 years
60.00%
—%
69.34%
73.85%
—%
—%
1.47%
3.0 years
71.42%
—%
October
11, 2016
0.87%
2.0 years
75.00%
—%
(1)
(2)
Represents the fair value assumptions for the warrants issued in connection with February 10, 2017 stock purchase
agreement.
Represents the fair value assumptions for the warrants issued in connection with October 11, 2016 public offering.
The following table sets forth the warrant activity for the fiscal year ended June 30, 2018 and for the Transition Period
(in thousands):
(in thousands)
Fair value - 6/30/2017
Reclassification of warrant liability to equity
Changes in fair market value of warrant liabilities
Fair value - 6/30/2018
Reclassification of warrant liability to equity
Changes in fair market value of warrant liabilities
Fair value - 12/31/2018
Number of Warrants
Estimated Fair Value
Level 2
18,656
$
(18,206)
—
450
$
(450)
—
— $
90,706
(190,369)
108,636
8,973
(7,569)
(1,404)
—
During October 2018, the Company's remaining warrants were exercised. No warrants remain outstanding as of December
31, 2018.
For the Transition Period and at June 30, 2018, the fair value of the liability related to the sale of future royalties is based
on the Company’s current estimates of future royalties expected to be paid to RPI Finance Trust (“RPI”), over the life of the
arrangement, which are considered Level 3 (See Note 5 – “Debt”).
There were no transfers between Level 1, Level 2, and Level 3 during the periods presented.
8.
Property and Equipment
Property and equipment consisted of the following at the transition period ended December 31, (in thousands):
Machinery and equipment
Leasehold improvements
Furniture and fixtures
Computer equipment
Construction in progress
Accumulated depreciation and amortization
73
Lives
(Years)
5-10
7-10
10
5
2018
$
16,048
6,365
291
1,850
3,231
27,785
(4,316)
23,469
$
Property and equipment consisted of the following at the fiscal year ended June 30, in thousands:
Machinery and equipment
Leasehold improvements
Furniture and fixtures
Computer equipment
Accumulated depreciation and amortization
Lives
(Years)
5-10
7-10
10
5
2018
2017
$
11,216
$
30,657
1,070
3,648
46,591
(30,858)
$
15,733
$
9,353
21,602
976
2,875
34,806
(29,561)
5,245
Depreciation and amortization expense for the Transition Period and the fiscal years ended June 30, 2018, 2017, and
2016 was $2.1 million, $1.3 million, $0.9 million, and $0.7 million, respectively.
9.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following at the transition period ended December 31 (in
thousands):
Trade accounts payable
Clinical trial accruals
Executive severance liabilities
Miscellaneous other current liabilities
2018
20,125
5,114
2,198
4,285
31,722
$
$
Accounts payable and accrued expenses consisted of the following at the fiscal year ended June 30 (in thousands):
Trade accounts payable
Clinical trial accruals
Executive severance liabilities
Reimbursement for proxy expenses
Contract manufacture organization expenses
Proxy defense-related expenses
Miscellaneous other current liabilities
10.
Stockholders’ Equity (Deficit)
2018
2017
$
24,818
$
2,110
2,388
484
—
—
1,864
5,222
2,865
5,542
4,505
3,769
6,967
2,497
$
31,664
$
31,367
At the June 29, 2017 Special Meeting, the Company’s stockholders approved the amendment and restatement of the
Company’s Certificate of Incorporation to increase the maximum number of shares of the Company’s stock authorized up to
260,000,000 shares of stock consisting of 250,000,000 shares of common stock and 10,000,000 shares of preferred stock. Previously
the Company’s Certificate of Incorporation authorized up to 165,000,000 shares of capital stock, consisting of 155,000,000 shares
of common stock and 10,000,000 shares of preferred stock.
Preferred Stock
The Certificate of Incorporation of the Company authorizes 10,000,000 shares of preferred stock, $.01 par value per
share. The preferred stock may be issued from time to time in one or more series, with such distinctive serial designations, rights
and preferences as shall be determined by the Board of Directors.
On May 10, 2017, the Company issued in a private placement 1,000,000 shares (the “Preferred Shares”) of the Company’s
Series A-1 Convertible Preferred Stock at a price of $125 per share for gross proceeds to the Company of $125.0 million, before
deducting fees and expenses (the “Financing”). Each Preferred Share will be convertible into 23.10536 shares of common stock
74
(or an aggregate of 23,105,348 shares of common stock). The conversion price per share of common stock is $5.41. For the
Transition Period ended December 31, 2018 the Company had no preferred stock outstanding.
Following the June 29, 2017 Special Meeting and filing the Charter Amendment with the State of Delaware, the Company
had authorized a sufficient number of unreserved shares of common stock to permit the exchange of the Preferred Shares. On July
31, 2017, the Company filed a registration statement on Form S-3 to register for resale the 23,105,348 shares of the Company's
common stock issuable upon the exchange of the Series A-1 Convertible Preferred Stock. The Preferred Shares converted to shares
of common stock on August 24, 2017. The registration statement was declared effective on September 19, 2017.
Common Stock
During June 2018, the Company announced that it had closed on a public offering of 13,225,000 shares of the Company's
common stock. Refer to "Note 1 - Business Overview" for additional information.
On February 10, 2017, in connection with the execution of a License Agreement, the Company entered into the Securities
Purchase Agreement (“SPA”) with Seattle Genetics. Under the SPA, Seattle Genetics purchased 3,000,000 shares (the “Common
Shares”) of the Company’s common stock at a price of $4.90 per share, for aggregate proceeds of $14.7 million. Concurrently
with the sale of the Common Shares, pursuant to the SPA, the Company also agreed to issue the three-year warrant to purchase
an aggregate of 8,655,804 shares of common stock. On July 31, 2017, the Company filed a registration statement on Form S-3 to
register the 3,000,000 shares of Company’s common stock and 8,655,804 shares of common stock issuable upon the exercise of
the warrants (in addition to the shares issuable upon the conversion of our Series A-1 Convertible Preferred Stock, as discussed
above). The warrant became exercisable for cash on February 16, 2017, and expired on January 31, 2018. The warrant was issued
on February 16, 2017 and was originally exercisable until February 10, 2020. On the date of issuance, the fair value of these
warrants was determined to be $22.3 million. The difference between such fair value and the proceeds of $14.7 million has been
recognized as an expense and presented in the consolidated statements of comprehensive loss as a “warrant related expense.” On
May 4, 2017, the Company and Seattle Genetics entered into the Termination Agreement, pursuant to which the Company and
Seattle Genetics relinquished their respective rights under the License Agreement and agreed to amend the terms of the warrant
to amend the expiration date from February 10, 2020 to December 31, 2017. On December 5, 2017, Seattle Genetics exercised
the Warrants they held in full to acquire 8,655,804 shares of Common Stock for an aggregate purchase price of $42.4 million.
On October 11, 2016, the Company completed an underwritten public offering of 10,000,000 shares of its common stock
and accompanying warrants to purchase 10,000,000 shares of common stock at a purchase price of $3.00 per unit, comprising of
one share of common stock and one warrant. The Company received gross and net proceeds of $30.0 million and approximately
$28.6 million, respectively after deducting the underwriting discounts and commissions and estimated expenses related to the
offering payable. The warrants became exercisable nine months following the date of issuance, and will expire on the second
anniversary of the date of issuance and have an exercise price of $3.75. On the date of issuance, the fair value of these warrants
was determined to be $7.3 million and recognized as a liability. The warrants under certain situations require cash settlement by
the Company. During fiscal 2018 there were 9,550,000 warrants exercised. The fair value of the 9,550,000 exercised warrants
increased $102.1 million from June 30, 2017 to the dates of exercise which has been recognized in the accompanying consolidated
statements of comprehensive loss. As of the fiscal year ended June 30, 2018, there were 450,000 warrants outstanding. During
the transition period ended December 31, 2018, the remaining 450,000 warrants were exercised for which we received $1.7 million
in cash. As of the transition period ended December 31, 2018, there were no warrants outstanding.
Treasury Stock
During the Transition Period there were 105,959 treasury shares received in connection with a non-cash equity transaction
related to the Company's Plan. The shares were subsequently retired by the Company.
75
11.
Accumulated Other Comprehensive (Loss) Income
The components of accumulated other comprehensive (loss) income were as follows (in thousands):
Currency
Translation
Adjustments
Net Unrealized
Gains (Losses) on
Available-for-
Sale Securities
Accumulated
Other
Comprehensive
(Loss) Income
Balance at June 30, 2015
$
(173) $
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive (loss)(a)
Net other comprehensive income for the year
Balance at June 30, 2016
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive income(a)
Net other comprehensive loss for the year
Balance at June 30, 2017
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income
(loss)(a)
Net other comprehensive (loss) income for the year
Balance at June 30, 2018
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income
(loss)(a)
Net other comprehensive (loss) income for the year
1
—
1
(172)
(62)
—
(62)
(234)
(105)
—
(105)
(339)
(8)
—
(8)
$
12
30
(2)
28
40
(125)
16
(109)
(69)
55
—
55
(14)
10
—
10
(161)
31
(2)
29
(132)
(187)
16
(171)
(303)
(50)
—
(50)
(353)
2
—
2
Balance at December 31, 2018
$
(347) $
(4) $
(351)
(a)
For the Transition Period ended December 31, 2018 and the fiscal years ended June 30, 2018, 2017 and 2016, $0, $0,
$16 thousand and $2 thousand, respectively, were reclassified from accumulated other comprehensive (loss) income to
interest and other income, respectively.
All components of accumulated other comprehensive (loss) income are net of tax, except currency translation adjustments,
which exclude income taxes related to indefinite investments in foreign subsidiaries.
76
12.
Income Taxes
The expense (benefit) for income taxes is as follows (in thousands):
Federal
Current
Deferred
Total Federal
State
Current
Deferred
Total State
Foreign
Current
Deferred
Total Foreign
Transition Period
Ended
December 31, 2018
Fiscal Year Ended June,
2018
2017
2016
$
— $
— $
— $
—
—
—
—
—
—
—
—
—
—
2
—
2
154
—
154
156
$
—
—
1
—
1
19
—
19
20
—
—
—
(5,054)
—
(5,054)
—
—
—
Total income tax expense (benefit)
$
— $
$
(5,054)
A reconciliation of the statutory tax rates and the effective tax rates for each of the transition period ended December 31,
2018 and fiscal years ended June 30 is as follows:
Transition Period
Ended
December 31, 2018
Fiscal Year Ended
2018
2017
2016
Statutory rate
Foreign income tax
Change in valuation allowance
State income taxes, (net of federal tax benefit)
Permanent differences, (primarily warrant-
related expenses)
Other
Effective rate
(21.0)%
— %
34.4 %
(8.8)%
(4.2)%
(0.4)%
— %
(28.0)%
— %
21.1 %
(4.3)%
11.3 %
— %
0.1 %
(34.0)%
— %
21.9 %
(4.8)%
15.3 %
1.6 %
— %
(34.0)%
— %
30.4 %
(2.8)%
— %
(1.6)%
(8.0)%
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and
liabilities as of the transition period ended December 31, 2018 and the fiscal periods ended June 30, 2018 and 2017 are presented
below (in thousands):
Deferred tax assets:
NOL carry forwards
Research and development credits
Property and equipment
Liability related to sale of future royalties
Other
Total
Valuation allowance
Net deferred assets
Deferred tax liabilities:
Property and equipment
Net deferred assets and liabilities
Transition Period
Ended December
31, 2018
Fiscal Year Ended
2018
2017
$
132,841
$
90,931
$
134,476
23,118
—
49,217
3,088
208,264
(206,397)
17,730
—
49,235
3,489
161,385
(160,540)
1,867
$
845
$
(1,867) $
— $
(845) $
— $
14,357
3,406
—
7,335
159,574
(159,574)
—
—
—
$
$
$
77
A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will
not be realized. The valuation allowances for the Transition Period and the fiscal years 2018 and 2017 have been applied to offset
the deferred tax assets in recognition of the uncertainty that such tax benefits will be realized as the Company continues to incur
losses. The differences between book income and tax income primarily relate to the temporary differences from depreciation and
stock compensation expenses, and deferred book income that is realized for tax.
At the transition period ended December 31, 2018 and the fiscal year ended June 30, 2018, the Company has available
net operating loss carry forwards for federal income tax reporting purposes of approximately $516.6 million and $370.4 million
for state income tax reporting purposes of approximately $343.0 million and $184.9 million, respectively, which expire at various
dates between fiscal 2019 and 2037.
The Company accounts for uncertain tax benefits in accordance with the provisions of section 740-10 of the Accounting
for Uncertainty in Income Taxes Topic of the FASB ASC. Of the total unrecognized tax benefits at December 31, 2018,
approximately $2.5 million was recorded as a reduction to deferred tax assets, which caused a corresponding reduction in the
Company’s valuation allowance of $2.5 million. The Company does not anticipate that the amount of unrecognized tax benefits
as of December 31, 2018 will change materially within the 12-month period following December 31, 2018. The change in
unrecognized tax benefits are presented below (in thousands):
Change in unrecognized tax benefits
Balance at beginning of year
Gross increases related to current period tax positions
Gross increases related to prior periods tax positions
Gross decreases in tax positions
Expiration of the statute of limitations
Balance at end of year
Transition Period
Ended December
31, 2018
Fiscal Year Ended
2018
2017
$
$
— $
— $
—
2,521
—
—
—
—
—
—
2,521
$
— $
—
—
—
—
—
—
The Company will recognize potential interest and penalties related to income tax positions as a component of the provision
for income taxes on the Consolidated Statements of Comprehensive Loss in any future periods in which the Company must record
a liability. The Company is subject to examination for United States Federal and Foreign tax purposes for 2013 and forward and
for New Jersey 2014 and forward. The Company conducts business and files tax returns in New Jersey.
For fiscal year 2016, the Company sold certain State of New Jersey State Net Operating Losses (“NOL”) and Research
and Development (“R&D”) tax credits through the New Jersey Economic Development Authority Technology Business Tax
Certificate Transfer Program. Pursuant to such sale, for the year ended June 30, 2016, the Company recorded a tax benefit of $5.1
million, as a result of its sale of approximately $66.2 million, of New Jersey State NOL and $1.5 million of New Jersey R&D tax
credits. There were no sales of NOL or R&D for the 2018 Transition Period or 2018 or 2017 fiscal years.
The Global Intangible Low-tax Income ("GILTI") provisions of the 2017 Tax Act require the Company to include in its
United States income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible
assets. The Company expects that it may be subject to incremental United States tax on GILTI income in the future but not for the
transition period ended December 31, 2018. The Company has elected to account for GILTI tax in the period in which it is incurred,
and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements.
As a result of U.S. tax reform legislation, distributions of profits from non-U.S. subsidiaries are not expected to cause a
significant incremental U.S. tax impact in the future. However, distributions may be subject to non-U.S. withholding taxes if
profits are distributed from certain jurisdictions. U.S. federal income taxes have not been provided on undistributed earnings of
our international subsidiaries as it is our intention to reinvest any earnings into the respective subsidiaries. It is not practicable to
estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated due to the legal structure
and complexity of U.S. and local tax laws. As of December 31, 2018 and December 31, 2017 there are no undistributed earnings.
In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the
Tax Cuts and Jobs Act (SAB 118), which allowed the Company to record provisional amounts during a measurement period not
to extend beyond one year of the enactment date. As a result of the reduction in the U.S. corporate income tax rate, the Company
revalued its ending net deferred tax assets as of June 30, 2018 which resulted in a provisional expense of $59.5 million which was
offset by an associated change in valuation allowance. In the second quarter of the Transition Period, the Company completed its
analysis to determine the effect of the Tax Act and recorded no further adjustments.
78
13. Related Party Transactions
On January 8, 2018, Morris Rosenberg joined the Company as Chief Technology Officer and became a full-time employee.
Between May 5, 2017, and January 7, 2018, Mr. Rosenberg was engaged by the Company as an independent consultant pursuant
to a consulting agreement between the Company and Mr. Rosenberg’s consulting company, M Rosenberg BioPharma Consulting
LLC. The Company paid M Rosenberg BioPharma Consulting LLC $0.6 million during this time and Morris Rosenberg was also
granted stock options to purchase 45,000 shares of the Company's common stock pursuant to the Immunomedics, Inc. 2014 Long-
Term Incentive Plan. From January 8, 2018, through June 30, 2018, the Company paid M Rosenberg BioPharma $0.8 million, and
from July 1, 2018, through the transition period ending December 31, 2018 the Company paid M Rosenberg BioPharma $0.3
million for services agreed upon prior to Mr. Rosenberg becoming a full-time employee. As part of his employment contract, 50%
of the 45,000 shares granted to Mr. Rosenberg as a consultant were forfeited, the remaining 50% continue to vest. Mr. Rosenberg
received 104,389 stock options and was permitted to continue to provide certain limited outside consulting services through M
Rosenberg BioPharma Consulting LLC based on certain restrictions outlined in the contract. Additionally, during his employment
period, except with the prior written consent of the Board of Directors, Mr. Rosenberg is not permitted to enter into any contract,
agreement or other transaction arrangement to provide goods and/or services to the Company through M Rosenberg BioPharma
Consulting LLC.
14. Collaboration Agreements
AstraZeneca/MedImmune
In June 2018, the Company entered into a clinical collaboration with AstraZeneca and its global biologics research and
development arm, MedImmune, to evaluate in Phase 1/2 studies the safety and efficacy of combining AstraZeneca’s Imfinzi®
(durvalumab), a human monoclonal antibody directed against PD-L1, with sacituzumab govitecan as a treatment of patients with
triple-negative breast cancer (“TNBC”) and UC, which was broadened in October 2018 to include second-line metastatic non-
small cell lung cancer.
Part one of the two-part Phase 1/2 studies will be co-funded by the two companies. Immunomedics will supply the study
drug and AstraZeneca will utilize its existing clinical trial infrastructure to accelerate the enrollment of the sacituzumab govitecan
and durvalumab combination. The trial design allows for rapid transition into randomized Phase 2 studies should the first part of
these studies show promising data and the companies agree to proceed based on efficacy and safety results obtained. The Company
did not incur costs associated with the clinical collaboration during the Transition Period.
The collaboration terminates thirty days following the expiration of the study periods end-date. Either party may terminate
the collaboration earlier by providing thirty days written notice.
The Bayer Group (formerly Algeta ASA)
In fiscal year 2013 the Company entered into a collaboration agreement, referred to herein as the Collaboration Agreement,
with Algeta ASA (subsequently acquired by The Bayer Group “Bayer”), for the development of epratuzumab to be conjugated
with Algeta’s proprietary thorium-227 alpha-pharmaceutical payload. Under the terms of the Collaboration Agreement, the
Company manufactured and supplied clinical-grade epratuzumab to Bayer, which had rights to evaluate the potential of a Targeted
Thorium Conjugate (TTC), linking thorium-227 to epratuzumab, for the treatment of patients with cancer. Bayer funded all non-
clinical and clinical development costs up to the end of Phase 1 clinical testing. Under the terms of the Collaboration Agreement,
as amended, Immunomedics received an upfront cash payment and other payments aggregating $6.0 million, which have been
recognized in prior periods upon the Company fulfilling its obligations under the Collaboration Agreement. This agreement
terminated during the Transition Period.
15. Commitments and Contingencies
a. Legal Matters
Arbitration of Disputed Matters:
On January 15, 2019, the Company received an Arbitrator’s Findings of Fact and Conclusions of Law and Final Award
(the “Final Award”) in the arbitration matter in which Dr. David M. Goldenberg, the Company’s former Chief Scientific Officer,
Chief Patent Officer and Chairman of the Company’s Board of Directors, claimed entitlement to certain equity awards and severance
payments, and Dr. Goldenberg and Ms. Cynthia Sullivan, a former director of the Company and former President and Chief
Executive Officer, claimed rights to certain bonus payments. The Final Award (i) denied Dr. Goldenberg’s claim that he was entitled
79
to an award of 1.5 million restricted stock units, (ii) denied each of Dr. Goldenberg’s and Ms. Sullivan’s claims that they were
entitled to certain discretionary cash bonuses relating to the Company’s 2017 fiscal year, and (iii) granted Dr. Goldenberg an award
of approximately $998,000 relating to certain claimed severance payments which we have accrued for. The arbitration took place
pursuant to the Delaware Rapid Arbitration Act. Although the Delaware Rapid Arbitration Act permits challenges to arbitration
awards in limited circumstances, pursuant to that certain stipulation and agreement of settlement, compromise, and release dated
November 2, 2017, the Company, Dr. Goldenberg and Ms. Sullivan agreed that the Final Award would be the sole and exclusive
final and binding remedy between and among the parties with respect to the matters disputed in the arbitration.
Patent litigation:
Immunomedics filed a first amended complaint on October 22, 2015 and a second amended complaint on January 14,
2016, in the United States District Court for the District of New Jersey, against Roger Williams Medical Center (“RWMC”),
Richard P. Junghans, M.D., Ph.D. and Steven C. Katz, M.D. seeking lost profits, unjust enrichment damages and compensatory
damages resulting from the infringement of its patents. The second amended complaint alleges that RWMC and Dr. Junghans
breached a Material Transfer Agreement (“MTA”) through which it provided to them a monoclonal antibody known as MN-14
and related materials. Defendants are alleged to have breached the MTA and to have been negligent by, among other things, using
the materials beyond the agreed-upon Research Project, sharing confidential information, failing to provide Immunomedics with
a right of first refusal, failing to notify Immunomedics of intended publications prior to publishing, and refusing to return the
materials upon request. Immunomedics also asserted against defendants: claims of conversion, tortious interference, unjust
enrichment, and infringement of three patents owned by Immunomedics. On January 28, 2016, defendants filed an Answer to the
Second Amended Complaint. On October 12, 2016, Immunomedics filed a Third Amended Complaint, and further added as
defendants Sorrento Therapeutics, Inc. and its subsidiaries TNK Therapeutics, Inc., BDL Products, Inc., and CARgenix Holdings,
LLC. Defendants Junghans, Katz, and RWMC subsequently moved to dismiss for failure to state a claim on November 14, 2016,
but this motion was denied on January 4, 2017. On December 2, 2016, Sorrento, TNK, BDL, and CARgenix moved to dismiss
for lack of personal jurisdiction over them in New Jersey. The court granted this motion on January 25, 2017. On January 20,
2017, the court held a Markman hearing to construe the claims in the patents in suit. On February 28, 2017, the court issued an
opinion and order finding, inter alia, that the term “effective amount” in the patents in suit is not indefinite and should be given
its plain and order meaning, as proposed by Immunomedics, of “an amount capable of producing the claimed result.” On May 11,
2017, the court entered an order referring the matter to mediation and designating Garrett E. Brown, Jr. (ret.) as the mediator. On
October 25, 2018, the Company entered into a Settlement Agreement with all defendants in this action, agreeing to dismiss all
claims with prejudice in exchange for a settlement payment from the defendants of $2.4 million.
Stockholder complaints:
Class Action Stockholder Federal Securities Cases
Two purported class action cases were filed in the United States District Court for the District of New Jersey; namely,
Fergus v. Immunomedics, Inc., et al., No. 2:16-cv-03335, filed June 9, 2016; and Becker v. Immunomedics, Inc., et al., No. 2:16-
cv-03374, filed June 10, 2016. These cases arise from the same alleged facts and circumstances, and seek class certification on
behalf of purchasers of our common stock between April 20, 2016 and June 2, 2016 (with respect to the Fergus matter) and between
April 20, 2016 and June 3, 2016 (with respect to the Becker matter). These cases concern the Company’s statements in press
releases, investor conference calls, and SEC filings beginning in April 2016 that the Company would present updated information
regarding its IMMU-132 breast cancer drug at the 2016 American Society of Clinical Oncology (“ASCO”) conference in Chicago,
Illinois. The complaints allege that these statements were false and misleading in light of June 2, 2016 reports that ASCO had
canceled the presentation because it contained previously reported information. The complaints further allege that these statements
resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are thus liable under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. An order of voluntary dismissal without prejudice was entered
on November 10, 2016 in the Becker matter. An order granting motion to consolidate cases, appoint lead plaintiff, and approve
lead and liaison counsel was entered on February 7, 2017 in the Fergus matter. A consolidated complaint was filed on October 4,
2017. The Company filed a motion to dismiss the consolidated complaint on January 26, 2018 and the motion was fully briefed
as of April 4, 2018. Oral arguments have not yet been scheduled.
A third purported class action case was filed in the United States District Court for the District of New Jersey; namely,
Odeh v. Immunomedics, Inc., et al., No. Case 2:18-cv-17645-MCA-LDW, filed December 27, 2018. This case concerns the
Company’s decision to not disclose the results of observations made by FDA during its inspection of the Company’s manufacturing
facility in Morris Plains, New Jersey in August, 2018. The complaint alleges that Immunomedics misled investors by failing to
disclose the Form 483 inspection report document issued by the FDA which set forth the observations of the FDA inspector during
the inspection. Such observations included, inter alia, manipulated bioburden samples, misrepresentation of an integrity test
procedure in the batch record, and backdating of batch records. The complaint further alleges that the Company’s failure to disclose
80
the Form 483 resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are
thus liable under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Consistent with court rules, the Company has
not yet filed a responsive pleading to this complaint.
On February 8, 2019, a purported class action case was filed in the United States District Court for the District of New
Jersey; namely, Choi v. Immunomedics, Inc., et al., No. Case 2:19-cv-05151-MCA-LDW. The complaint asserts violations of
the federal securities laws based on claims that that the Company violated the federal securities laws by making alleged
misstatements in various press releases and securities filings from February 8, 2018 to November 7, 2018 and by failing to disclose
the substance of its interactions with FDA during the Immunomedics’ Biologic License Application for sacituzumab govitecan.
Stockholder Claim in the Court of Chancery of the State of Delaware
On February 13, 2017, venBio commenced an action captioned venBio Select Advisor LLC v. Goldenberg, et al., C.A.
No. 2017-0108-VCL (Del. Ch.) (the “venBio Action”), alleging that Company’s Board breached their fiduciary duties when the
Board (i) amended the Company’s Amended and Restated By-laws (the “By-Laws”) to call for a plurality voting regime for the
election of directors instead of majority voting, and providing for mandatory advancement of attorneys’ fees and costs for the
Company’s directors and officers, (ii) rescheduled the Company’s 2016 Annual Meeting of Stockholders (the “2016 Annual
Meeting”) from December 14, 2016 to February 16, 2017, and then again to March 3, 2017, and (iii) agreed to the proposed
Licensing Transaction with Seattle Genetics. venBio also named Seattle Genetics as a defendant and sought an injunction preventing
the Company from closing the licensing transaction with Seattle Genetics. On March 6, 2017, venBio amended its complaint,
adding further allegations. The Court of Chancery entered a temporary restraining order on March 9, 2017, enjoining the closing
of the Licensing Transaction. venBio amended its complaint a second time on April 19, 2017, this time adding Greenhill & Co.
Inc. and Greenhill & Co. LLC (together “Greenhill”), the Company’s financial advisor on the Licensing Transaction, as an additional
defendant. On May 3, 2017, venBio and the Company and individual defendants Dr. Goldenberg, Ms. Sullivan and Mr. Brian A.
Markison, a director of the Company (collectively, the “Individual Defendants”) entered into the Initial Term Sheet. On June 8,
2017, venBio the Company and Greenhill entered into the Greenhill Term Sheet. On February 9, 2018, the Court of Chancery
approved the Settlement, and entered an order and partial judgment releasing all claims that were asserted by venBio against the
Individual Defendents and Greenhill in the venBio Action and awarding venBio fees and expenses. On May 24, 2018 the remaining
parties to the venBio Action participated in a mediation of the claims against Geoff Cox, Robert Forrester, Bob Oliver, and Jason
Aryeh. The mediation was unsuccessful. Geoff Cox, Robert Forrester, Bob Oliver, and Jason Aryeh have submitted motions to
dismiss the claims against them in the venBio Action, which remain pending in the Court of Chancery.
Breach of Contract
On November 16, 2018, Kapil Dhingra filed a complaint against Immunomedics, Inc., in the Superior Court of New
Jersey, Law Division, Morris County, alleging breach of contract and breach of the implied covenant of good faith and fair dealing.
In the complaint, Dhingra alleges that Immunomedics breached agreements with Dhingra entered into in 2012 and 2013 that
purportedly give him the right to purchase 50,000 shares of Common Stock of Immunomedics for a strike price stated in the
agreements. Immunomedics disputes the allegations and will seek expedited disposition of the matter.
b. Other matters
Immunomedics is also a party to various claims and litigation arising in the normal course of business, which includes
some or all of certain of its patents.
c. Operating Leases
As of December 31, 2018, future minimum noncancelable operating lease commitments were as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
$
$
$
$
$
$
3,022
1,593
1,545
1,566
1,554
12,947
81
Operating leases primarily relate to the 100 The American Road, Morris Plains, NJ 07950 building, the 300 The American
Road, Morris Plains, NJ 07950 building, the 400 The American Road, Morris Plains, NJ 07950 building, office space in Bellevue,
Washington, vehicles and printers.
Rental expense was approximately $0.7 million, $1.3 million, $0.9 million and $0.8 million for the transition period
ended December 31, 2018 and fiscal years ended June 30, 2018, 2017, and 2016, respectively.
d. Purchase Obligations
We have several commitments primarily to purchase commercial manufacturing services including minimum purchase
commitments related to product supply contracts, medical consultancy services and e-sourcing software totaling $72.2 million in
2019, $58.8 million in 2020, $52.2 million in 2021, $12.5 million in 2022 and $12.5 million in 2023.
e. Our Licenses
We have obtained licenses from various parties for rights to use, develop and commercialize proprietary technologies
and compounds. Currently, we have the following licenses:
Medical Research Council (“MRC”) - We entered into a license agreement with MRC in May 1994, whereby we have
obtained a license for certain patent rights with respect to the genetic engineering on monoclonal antibodies. Our agreement does
not require any milestone payments, nor have we made any payments to MRC to date. Our agreement with MRC, which expires
at the expiration of the last of the licensed patents in 2020, provides for future royalty payments in the low single digits based on
a percentage of product sales.
Center for Molecular Medicine and Immunology (“CMMI”) - We entered into a license agreement with CMMI in
December 2004, whereby we have licensed certain rights with respect to patents and patent applications owned by CMMI. Dr.
Goldenberg, our former Chief Scientific Officer and Chief Patent Officer and Chairman of our Board of Directors, founded and
was the President and member of the Board of Trustees of CMMI. No license or milestone payments are required under this
agreement. Under the license agreement, which expires at the expiration of the last of the licensed patents in 2031, CMMI will
receive future royalty payments in the low single digits based on a percentage of sales of products that are derived from the CMMI
patents. Inventions made independently of us by CMMI are the property of CMMI. CMMI has ceased operations and is in the
process of dissolution. Refer to “Other Collaborations” below for more information.
On April 4, 2018, we entered into a license agreement with The Scripps Research Institute ("TSRI"). Pursuant to the
license agreement, TSRI granted to us an exclusive, worldwide, sub-licensable, royalty-bearing license to use certain patent rights
relating to our ADC sacituzumab govitecan. The license agreement expires on a country-by-country basis on the expiration date
of the last to expire licensed patent rights in such country covering a licensed product. The license agreement may be terminated
by the mutual written consent of us and TSRI, and TSRI may terminate the license agreement upon the occurrence of certain
events, including but not limited to if we do not make a payment due pursuant to the license agreement and fail to cure such non-
payment within 30 days after the date of TSRI's written notice of such non-payment. As consideration for the license granted, we
made a cash payment of $250,000 to TSRI. Additionally, we will pay TRSI (i) product development milestone payments that range
from the mid-six digit dollar figure to the low-seven digit dollar figure and (ii) royalties on net sales of licensed products in the
low-single digit percentage figure range capped at an annual amount. We have agreed to use reasonable efforts to develop and
market the licensed products.
16.
Defined Contribution Plans
United States employees are eligible to participate in the Company’s 401(k) plan, while employees in international
locations are eligible to participate in other defined contribution plans. Aggregate Company contributions to its benefit plans
totaled approximately $134,000, $120,000, $104,000 and $99,000 for the transition period ended December 31, 2018 and the
fiscal years ended June 30, 2018, 2017 and 2016, respectively.
82
17. Quarterly Results of Operations (Unaudited)
The following table present summarized unaudited quarterly financial data:
Three Months Ended
($ in thousands, except
for per share amounts)
December 31,
2018
September 30,
2018
June 30, 2018
March 31,
2018
December 31,
2017
September 30,
2017
Consolidated Statements of
Comprehensive Loss Data:
Revenues
Net loss attributable to
Immunomedics, Inc.
stockholders
Loss per common share
attributable to
Immunomedics Inc.
stockholders – (basic and
diluted)
Weighted average shares
used to calculate loss per
common share – (basic and
diluted)
$
$
$
— $
— $
387
$
482
$
597
$
690
(93,499) $
(64,169) $
(117,032) $
(35,546) $
(2,514) $
(118,745)
(0.50) $
(0.34) $
(0.68) $
(0.21) $
(0.02) $
(0.97)
190,171
186,937
171,124
166,054
154,487
122,550
($ in thousands, except for per share amounts)
June 30, 2017
Three Months Ended
March 31,
2017
December 31,
2016
September 30,
2016
Consolidated Statements of Comprehensive Loss Data:
Revenues
Net loss attributable to Immunomedics, Inc. stockholders
Loss per common share attributable to Immunomedics Inc.
stockholders – (basic and diluted)
Weighted average shares used to calculate loss per common
share – (basic and diluted)
$
$
$
642
$
1,323
$
384
$
742
(53,255) $
(59,306) $
(24,447) $
(16,198)
(0.48) $
(0.56) $
(0.25) $
(0.18)
109,891
107,840
104,657
95,884
83
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures:
Disclosure Controls and Procedures: We maintain controls and procedures designed to ensure that we are able to collect
the information we are required to disclose in the reports we file with the SEC, and to record, process, summarize and disclose
this information within the time periods specified in the rules promulgated by the SEC. Our Principal Executive Officer and Chief
Financial Officer are responsible for establishing and maintaining these disclosure controls and procedures and as required by the
rules of the SEC, to evaluate their effectiveness. Based on their evaluation of our disclosure controls and procedures as of the end
of the period covered by this Transition Report on Form 10-K, our Principal Executive Officer and Chief Financial Officer believe
that these procedures are functioning effectively to provide reasonable assurance that the information required to be disclosed by
us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Principal
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosures.
Management’s Report on Internal Control Over Financial Reporting: Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. Our internal control over financial reporting is 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. Our internal control over financial reporting includes those policies and procedures that: (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of Immunomedics; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our 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.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In
making this assessment, management used the criteria in the Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its assessment and those criteria, our
management has concluded we maintained effective internal control over financial reporting as of December 31, 2018.
Our independent registered public accounting firm has issued an attestation report on the effectiveness of Immunomedics’
internal control over financial reporting.
Changes in internal controls over financial reporting: There were no changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), identified in connection with the evaluation of
such internal control that occurred during our last fiscal quarter, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. Other Information
None.
84
Item 10. Directors, Executive Officers, and Corporate Governance
PART III
Information required by this item is incorporated in this Transition Report on Form 10-K by reference from the sections
entitled “Directors,” “Executive Officers,” “Director Experience, Qualifications, Attributes and Skills,” “Section 16(a) Beneficial
Ownership Reporting Compliance,” “Business Ethics and Compliance,” and “Audit Committee,” contained in our definitive proxy
statement for our 2019 annual meeting of stockholders, or an amendment to this Transition Report on Form 10-K, to be filed within
120 days of the end of the transition period covered by this Transition Report on Form 10-K.
The text of our Code of Business Conduct, which applies to our directors and employees (including our principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) is posted in
the “Corporate Governance” section of our website, www.immunomedics.com. A copy of the Code of Business Conduct can be
obtained free of charge on our website. We intend to disclose on our website any amendments to, or waivers from, our Code of
Business Conduct that are required to be disclosed pursuant to the rules of the SEC and Nasdaq.
Item 11. Executive Compensation
Information required to be disclosed by this Item is incorporated in this Transition Report on Form 10-K by reference
from the sections entitled “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Summary
Compensation Table,” "CEO Pay Ratio," “Grants of Plan Based Awards in Fiscal Year 2018,” “Outstanding Equity Awards at
Fiscal Year-End 2018 Table,” “Fiscal Year 2018 Option Exercises and Stock Vested Table,” “Employment Agreements, Transition
Services Agreements, and Change in Control Arrangements” contained in our definitive proxy statement for our 2019 annual
meeting of stockholders, or an amendment to this Transition Report on Form 10-K, to be filed within 120 days of the end of the
transition period covered by this Transition Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information with respect to our compensation plans under which equity compensation is
authorized as of December 31, 2018 (in thousands):
Plan Category
Equity compensation plans approved by
security holders(1)
Equity compensation plans not approved
by security holders
Total
Number of securities to be
issued upon vesting of
restricted shares and
exercise of outstanding
options and rights
Weighted-average exercise
price of outstanding
options and rights
Number of securities
remaining available for
future grant under
equity compensation plans
5,310
$
—
5,310
$
14.14
—
14.14
7,296
—
7,296
(1) Refers to Immunomedics, Inc. 2014 Long-Term Incentive Plan.
Other information required by this item is incorporated in this Transition Report on Form 10-K by reference contained
in our definitive proxy statement for our 2019 annual meeting of stockholders, or an amendment to this Transition Report on Form
10-K, to be filed within 120 days of the end of the transition period covered by this Transition Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required to be disclosed by this Item is incorporated in this Transition Report on Form 10-K by reference
from the section(s) entitled “Certain Relationships and Related Transactions,” “Our Corporate Governance,” “Compensation for
Executive Officers,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” and
“Compensation Committee Report” contained in our definitive proxy statement for our 2019 annual meeting of stockholders, or
an amendment to this Transition Report on Form 10-K, which we intend to be filed within 120 days of the end of the transition
period covered by this Transition Report on Form 10-K.
85
Item 14. Principal Accounting Fees and Services.
This information required to be disclosed by this Item is incorporated in this Transition Report on Form 10-K by reference
from the section entitled “Independent Registered Public Accounting Firm” contained in our definitive proxy statement for our
2019 annual meeting of stockholders, or an amendment to this Transition Report on Form 10-K, to be filed within 120 days of the
end of the transition period covered by this Transition Report on Form 10-K.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as part of this Report:
1.
Consolidated Financial Statements:
Consolidated Balance Sheets – for the Transition Period Ended December 31, 2018 and Fiscal Years Ended
June 30, 2018 and 2017
Consolidated Statements of Comprehensive Loss for the Transition Period Ended December 31, 2018 and the
Fiscal Years Ended June 30, 2018, 2017 and 2016
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Transition Period Ended
December 31, 2018 and Fiscal Years Ended June 30, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the Transition Period Ended December 31, 2018 and Fiscal Years
Ended June 30, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm – KPMG LLP
2.
3.
Financial Statement Schedule:
none.
List of Exhibits
Exhibit No.
3.(i).1
3.(i).2
3.(iii).1
3.(iii).2
Amended and Restated Certificate of Incorporation, incorporated by reference from Exhibit 3.1 to the
Company’s Current Report on Form 8-K as filed with the Commission on June 29, 2017.
Description
Form of Certificate of Designation of Series A-1 Convertible Preferred Stock, incorporated by
reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the
Commission on May 5, 2017.
Second Amended and Restated By-Laws of the Company, incorporated by reference from the
Exhibits to the Company’s Current Report on Form 8-K as filed with the Commission on August 27,
2007.
Amendment to Second Amended and Restated By-Laws of Immunomedics, Inc., incorporated by
reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the
Commission on November 28, 2016.
86
3.(iii).3
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
10.4
10.6
10.7
10.8
10.9
10.10
10.11
Second Amendment to Second Amended and Restated By-Laws of Immunomedics, Inc.,
incorporated by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K, as filed
with the Commission on February 16, 2017.
Indenture, dated as of February 11, 2015, by and between the Company and Wells Fargo Bank,
National Association, incorporated by reference from Exhibit 4.1 to the Company’s Current Report
on Form 8-K as filed with the Commission on February 12, 2015.
Form of 4.75% Convertible Senior Note due 2020 incorporated by reference from Exhibit 4.1 to the
Company’s Current Report on Form 8-K as filed with the Commission on February 12, 2015.
Warrant Agreement, dated as of October 11, 2016, between the Company and Broadridge Financial
Solutions, Inc., as warrant agent , incorporated by reference to exhibit 4.1 to the Company’s current
report on Form 8-K, as filed with the Commission on October 12, 2016.
Warrant Agreement, dated as of February 16, 2017, between the Company and Broadridge Financial
Solutions, Inc., as warrant agent, incorporated by reference to exhibit 4.1 to the Company’s Current
Report on Form 8-K, as filed with the Commission on February 16, 2017.
Registration Rights Agreement, dated as of February 10, 2017, between the Company and Seattle
Genetics, Inc., incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on
Form S-3, as filed with the Commission on July 31, 2017 (Commission File No. 333-219594).
Amended and Restated License Agreement among the Company, David M. Goldenberg and the
Center for Molecular Medicine and Immunology, Inc., dated December 11, 1990, incorporated by
reference from the Exhibits to the Company’s Registration Statement on Form S-2 effective July 24,
1991 (Commission File No. 33-41053). (P)
Amendment, dated March 13, 1995, to the Amended and Restated License Agreement among the
Company, David M. Goldenberg and the Center for Molecular Medicine and Immunology, Inc.,
dated December 11, 1990, incorporated by reference from the Exhibits to the Company’s Annual
Report on Form 10-K for the fiscal year ended June 30, 1995.
License Agreement, dated as of January 21, 1997, between the Company and the Center for
Molecular Medicine and Immunology, Inc., incorporated by reference from Exhibit 10.25 to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1996.
License Agreement, dated March 5, 1999, between the Company and IBC Pharmaceuticals,
incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed
with the Commission on March 24, 1999.
Lease Agreement with Baker Properties Limited Partnership, dated January 16, 1992, incorporated
by reference from the Exhibits to the Company’s Registration Statement on Form S-2 (Commission
File No. 33-44750), effective January 30, 1992. (P)
First Addendum, dated May 5, 1993, of the Lease Agreement with Baker Properties Limited
Partnership, dated January 16, 1992, incorporated by reference from Exhibit 10.31 to the Company’s
Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
Second Addendum, dated March 29, 1995, of the Lease Agreement with Baker Properties Limited
Partnership, dated January 16, 1992, incorporated by reference from Exhibit 10.32 to the Company’s
Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
Letter Amendment, dated October 5, 1998, of the Lease Agreement with Baker Properties Limited
Partnership, dated January 16, 1992, incorporated by reference from Exhibit 10.33 to the Company’s
Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
Fourth Amendment Expansion/Extension Agreement dated August 15, 2001, of the Lease Agreement
with Baker Properties Limited Partnership, dated January 16, 1992, incorporated by reference from
Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30,
2007.
Fifth Amendment Expansion Agreement dated June 18, 2009 of the Lease with WU/LH 300
American L.L.C. a successor-in-interest to Baker Properties Limited Partnership, incorporated by
reference from Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the fiscal year
ended June 30, 2009.
87
10.12
10.13#
10.14#
10.15#
10.16#
10.17#
10.18#
10.19#
10.20#
10.21#
10.22#
10.23#
10.24#
10.25#
10.26#
10.27#
10.28#
10.32#
Sixth Amendment Extension Agreement dated February 11, 2011 of the Lease with WU/LH 300
American L.L.C. a successor-in-interest to Baker Properties Limited Partnership, incorporated by
reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2011.
Immunomedics, Inc. 2006 Stock Incentive Plan, incorporated by reference from Exhibit 99.1 to the
Company’s Registration Statement on Form S-8 (Commission File Number 333-143420), as filed
with the Commission on May 31, 2007.
Amendment 2007-1 to the Immunomedics, Inc. 2006 Stock Incentive Plan, incorporated by reference
from Exhibit 99.2 to the Company’s Registration Statement on Form S-8 (Commission File Number
333-143420), as filed with the Commission on May 31, 2007.
Form of Stock Option Agreement under the Immunomedics, Inc. 2006 Stock Incentive Plan, as
amended, incorporated by reference from Exhibit 10.24 to the Company’s Annual Report on Form
10-K for the fiscal year ended June 30, 2007.
Form of Change of Control Addendum to the Stock Option Agreement under the Immunomedics,
Inc. 2006 Stock Incentive Plan, as amended, incorporated by reference from Exhibit 10.25 to the
Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
Form of Notice of Grant of Stock Option under the Immunomedics, Inc. 2006 Stock Incentive Plan,
as amended, incorporated by reference from Exhibit 10.26 to the Company’s Annual Report on Form
10-K for the fiscal year ended June 30, 2007.
Form of RSU Issuance Agreement under the Immunomedics, Inc. 2006 Stock Incentive Plan, as
amended, incorporated by reference from Exhibit 10.27 to the Company’s Annual Report on Form
10-K for the fiscal year ended June 30, 2007.
Form of Change of Control Addendum to RSU Agreement under the Immunomedics, Inc. 2006
Stock Incentive Plan, as amended, incorporated by reference from Exhibit 10.28 to the Company’s
Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
Form of Initial Director RSU Issuance Agreement under the Immunomedics, Inc. 2006 Stock
Incentive Plan, as amended, incorporated by reference from Exhibit 10.29 to the Company’s Annual
Report on Form 10-K for the fiscal year ended June 30, 2007.
Form of Annual Director RSU Issuance Agreement under the Immunomedics, Inc. 2006 Stock
Incentive Plan, as amended, incorporated by reference from Exhibit 10.30 to the Company’s Annual
Report on Form 10-K for the fiscal year ended June 30, 2007.
Form of Restricted Stock Unit Issuance Agreement under the Immunomedics, Inc. 2006 Stock
Incentive Plan, as amended, incorporated by reference from Exhibit 10.1 to the Company’s current
report on Form 8-K, as filed with the Commission on August 22, 2013.
Form of Performance-Based Restricted Stock Unit Issuance Agreement under the Immunomedics,
Inc. 2006 Stock Incentive Plan, as amended, incorporated by reference from Exhibit 10.2 to the
Company’s current report on Form 8-K, as filed with the Commission on August 22, 2013.
Immunomedics, Inc. 2014 Long-Term Incentive Plan, incorporated by reference from Exhibit 99.1 to
the Company’s Registration Statement on Form S-8 (Commission File Number 333-201470), as filed
with the Commission on January 13, 2015.
Forms of Incentive Stock Option Notice and Incentive Stock Option Agreement under the
Immunomedics, Inc. 2014 Long-Term Incentive Plan, incorporated by reference from Exhibit 99.2 to
the Company’s Registration Statement on Form S-8 (Commission File Number 333-201470), as
filed with the Commission on January 13, 2015.
Forms of Nonqualified Stock Option Notice and Nonqualified Stock Option Agreement under the
Immunomedics, Inc. 2014 Long-Term Incentive Plan, incorporated by reference from Exhibit 99.3 to
the Company’s Registration Statement on Form S-8 as filed with the Commission on January 13,
2015.
Forms of Restricted Stock Units Notice and Restricted Stock Units Agreement (for Officers/
Employees) under the Immunomedics, Inc. 2014 Long-Term Incentive Plan, incorporated by
reference from Exhibit 99.4 to the Company’s Registration Statement on Form S-8 as filed with the
Commission on January 13, 2015.
Forms of Restricted Stock Units Notice and Restricted Stock Units Agreement (for Directors) under
the Immunomedics, Inc. 2014 Long-Term Incentive Plan, incorporated by reference from Exhibit
99.5 to the Company’s Registration Statement on Form S-8 as filed with the Commission on January
13, 2015.
Fifth Amended and Restated Employment Agreement, dated July 1, 2011, between the Company and
Cynthia L. Sullivan, incorporated by reference from Exhibit 10.1 to the Company’s Current Report
on Form 8-K, as filed with the Commission on June 25, 2014.
88
10.33†
10.34
10.35
10.36
10.37 †
10.38
10.39 †
10.40 †
10.41 †
10.42
10.43
10.44 #
10.45 #
10.46 #
10.47 #
10.48 #
10.49 †
Development and License Agreement, dated as of February 10, 2017, by and between the Company
and Seattle Genetics, Inc., incorporated by reference from Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2017.
Stock Purchase Agreement, dated as of February 10, 2017, by and between the Company and Seattle
Genetics, Inc., incorporated by reference from Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2017.
Form of Indemnification Agreement by and between the Company and each of its directors,
executive officers, and certain of its former directors and executive officers, incorporated by
reference to exhibit 10.1 to the Company’s current report on Form 8-K, as filed with the Commission
on February 16, 2017.
Securities Purchase Agreement between the Company and the Purchasers, dated as of May 4, 2017,
incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-3, as
filed with the Commission on July 31, 2017 (Commission File No. 333-219594).
Termination Agreement, dated May 4, 2017, between the Company and Seattle Genetics, Inc.
Form of Exchange Agreement, incorporated by reference to Exhibit 10.1 to the Company’s current
report on Form 8-K, as filed with the Commission on September 15, 2017.
Development and License Agreement, dated as of February 10, 2017, by and between the Company
and Seattle Genetics, Inc., incorporated by reference to Exhibit 10.1 to the Company’s quarterly
report on Form 10-Q/A, as filed with the Commission on September 18, 2017.
Master Services Agreement, dated as of July 3, 2017, by and between the Company and Covance,
Inc., incorporated by reference to Exhibit 10.2 to the Company’s quarterly report on Form 10-Q, as
filed with the Commission on November 9, 2017.
Work Order, dated as of July 3, 2017, by and between the Company and Covance, Inc., incorporated
by reference to Exhibit 10.3 to the Company’s quarterly report on Form 10-Q, as filed with the
Commission on November 9, 2017.
Stipulation and Agreement of Settlement, Compromise, and Release, dated November 2, 2017, by
and among the Company, venBio Select Advisor LLC, Dr. David M. Goldenberg, Cynthia L.
Sullivan, Brian A. Markison, Greenhill & Co., Inc., and Greenhill & Co., LLC., incorporated by
reference to Exhibit 10.1 to the Company’s current report on Form 8-K, as filed with the Commission
on November 8, 2017.
Form of Indemnification Agreement, incorporated by reference to Exhibit 10.1 to the Company’s
current report on Form 8-K, as filed with the Commission on December 6, 2017.
Executive Employment Agreement, dated as of November 8, 2017, between the Company and
Michael Pehl, incorporated by reference to Exhibit 10.2 to the Company’s quarterly report on Form
10-Q, as filed with the Commission on February 8, 2018.
Incentive Stock Option Grant, dated as of December 7, 2017, between the Company and Michael
Pehl, incorporated by reference to Exhibit 10.3 to the Company’s quarterly report on Form 10-Q, as
filed with the Commission on February 8, 2018.
Nonqualified Stock Option Grant, dated as of December 7, 2017, between the Company and Michael
Pehl, incorporated by reference to Exhibit 10.4 to the Company’s quarterly report on Form 10-Q, as
filed with the Commission on February 8, 2018.
Executive Employment Agreement, dated as of November 8, 2017, between the Company and
Brendan Delaney, incorporated by reference to Exhibit 10.5 to the Company’s quarterly report on
Form 10-Q, as filed with the Commission on February 8, 2018.
Incentive Stock Option Grant, dated as of November 10, 2017, between the Company and Brendan
Delaney, incorporated by reference to Exhibit 10.6 to the Company’s quarterly report on Form 10-Q,
as filed with the Commission on February 8, 2018.
Funding Agreement, dated as of January 7, 2018, between the Company and RPI Finance Trust,
incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q, as filed
with the Commission on May 9, 2018.
89
10.50
10.51 #
10.52 #
10.53 #
10.54 #
10.55 †
10.56 †
10.57
10.58
10.59 †
10.60 †
10.61
10.62
10.63
10.64
10.65
Common Stock Purchase Agreement, dated as of January 7, 2018, between the Company and RPI
Finance Trust, incorporated by reference to Exhibit 10.2 to the Company’s quarterly report on Form
10-Q, as filed with the Commission on May 9, 2018.
Executive Employment Agreement, dated as of March 27, 2018, between the Company and Robert
Iannone, incorporated by reference to Exhibit 10.3 to the Company’s quarterly report on Form 10-Q,
as filed with the Commission on May 9, 2018.
Incentive Stock Option Grant, dated as of April 9, 2018, between the Company and Robert Iannone,
incorporated by reference to Exhibit 10.4 to the Company’s quarterly report on Form 10-Q, as filed
with the Commission on May 9, 2018.
Nonqualified Stock Option Grant, dated as of April 9, 2018, between the Company and Robert
Iannone, incorporated by reference to Exhibit 10.5 to the Company’s quarterly report on Form 10-Q,
as filed with the Commission on May 9, 2018.
Nonqualified Stock Option Grant, dated as of April 9, 2018, between the Company and Robert
Iannone, incorporated by reference to Exhibit 10.6 to the Company’s quarterly report on Form 10-Q,
as filed with the Commission on May 9, 2018.
Letter Agreement, dated as of July 6, 2018, by and between the Company and BSP Pharmaceuticals
S.p.A., incorporated by reference to Exhibit 10.55 to the Company’s annual report on Form 10K/A,
as filed with the Commission on December 6, 2018.
License Agreement, dated as of April 4, 2018, by and between the Company and The Scripps
Research Institute, incorporated by reference to Exhibit 10.56 to the Company’s annual report on
Form 10-K/A, as filed with the Commission on December 6, 2018.
Form of Exchange Agreement, dated October 2, 2018, between the Company and certain of the
Company's noteholders, incorporated by reference to Exhibit 10.57 to the Company’s quarterly report
on Form 10-Q, as filed with the Commission on November 7, 2018.
Transition Agreement, dated as of August 23, 2018, between the Company and Michael Garone,
incorporated by reference to Exhibit 10.58 to the Company’s quarterly report on Form 10Q, as filed
with the Commission on November 7, 2018.
Master Services Agreement, dated as of September 11, 2018, between the Company and Samsung
BioLogics Co., Ltd, incorporated by reference to Exhibit 10.59 to the Company’s quarterly report on
Form 10-Q, as filed with the Commission on November 7, 2018.
Product Specific Agreement, dated as of September 11, 2018, between the Company and Samsung
BioLogics Co., Ltd, incorporated by reference to Exhibit 10.60 to the Company’s quarterly report on
Form 10-Q, as filed with the Commission on November 7, 2018.
Executive Employment Agreement, dated as of September 24, 2018, between the Company and Jared
Freedberg, incorporated by reference to Exhibit 10.61 to the Company’s quarterly report on Form 10-
Q, as filed with the Commission on November 7, 2018.
Nonqualified Stock Option Grant, dated as of September 24, 2018, between the Company and Jared
Freedberg.
Executive Employment Agreement, dated as of September 26, 2018, between the Company and Kurt
Andrews, incorporated by reference to Exhibit 10.63 to the Company’s quarterly report on Form 10-
Q, as filed with the Commission on November 7, 2018.
Nonqualified Stock Option Grant, dated as of July 11, 2018, between the Company and Kurt
Andrews, incorporated by reference to Exhibit 10.64 to the Company’s quarterly report on Form 10-
Q, as filed with the Commission on November 7, 2018.
Immunomedics, Inc. Annual Cash Bonus Plan, incorporated by reference to Exhibit 10.65 to the
Company’s quarterly report on Form 10-Q, as filed with the Commission on November 7, 2018.
10.66*±
Manufacturing Services Agreement, dated as of December 17, 2018, by and between the Company
and Johnson Matthey Pharmaceutical Materials, Inc.
21.1*
Subsidiaries of the Company.
90
23.1*
31.1*
31.2*
32.1*
32.2*
101*
Consent of Independent Registered Public Accounting Firm – KPMG LLP.
Certification of the Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
of 2002.
Certification of the Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
of 2002.
Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
The following financial information from the Transition Report on Form 10-K for the transition
period ended December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language)
and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated
Statements of Comprehensive Loss; (iii) the Consolidated Statements of Changes in Stockholders’
Equity (Deficit); (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated
Financial Statements.
*
# Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Transition Report on Form 10-
Filed herewith.
†
±
P
K pursuant to Item 15(a)(3) of Form 10-K.
Confidential treatment has been granted for certain portions of this exhibit.
Confidential treatment has been requested for certain portions of this exhibit. The confidential portions of this exhibit have been
omitted and filed separately with the Securities and Exchange Commission.
Paper copy only.
(Exhibits available upon request)
91
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
Date: February 25, 2019
IMMUNOMEDICS, INC.
By:
/s/Usama Malik
Usama Malik
Chief Financial Officer
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 and in the capacities and on the dates indicated.
Signature
Title
Date
/s/Dr. Behzad Aghazadeh
Chairman of the Board, Director
February 25, 2019
Dr. Behzad Aghazadeh
/s/Charles M. Baum
Director
Charles M. Baum, M.D., Ph.D.
February 25, 2019
/s/Dr. Khalid Islam
Director
February 25, 2019
Dr. Khalid Islam
/s/Scott Canute
Scott Canute
Director
February 25, 2019
/s/Peter Barton Hutt
Director
February 25, 2019
Peter Barton Hutt
/s/Usama Malik
Usama Malik
Chief Financial Officer
February 25, 2019
(Principal Executive Officer and Principal Financial
Officer)
/s/William Fricker
Corporate Controller
William Fricker
(Principal Accounting Officer)
February 25, 2019
92
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY AS OF DECEMBER 31, 2018
Immunomedics GmbH (Germany)
Wholly owned subsidiary of Immunomedics, Inc.
IBC Pharmaceuticals, Inc. (Delaware)
Majority owned subsidiary of Immunomedics, Inc.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Immunomedics, Inc.
We consent to the incorporation by reference in the Registration Statements Nos. 333-219594, 333-198766,
333-184377, 333-128310, 333-114810, 333-90338 and 333-225550 on Form S-3 and the Registration Statements
Nos. 333-201470, 333-143420 and 333-53224 on Form S-8 of Immunomedics, Inc. of our reports dated
February 25, 2019, with respect to the consolidated balance sheets of Immunomedics, Inc. and subsidiaries as of
December 31, 2018, June 30, 2018 and 2017, the related consolidated statements of comprehensive loss, changes in
stockholders’ equity (deficit) and cash flows for the six month transition period ended December 31, 2018 and each
of the years in the three-year period ended June 30, 2018, and the effectiveness of internal control over financial
reporting as of December 31, 2018, which reports appear in the December 31, 2018 transition report on Form 10-K
of Immunomedics, Inc.
/s/ KPMG LLP
New York, New York
February 25, 2019
Exhibit 32.2
Certification
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)
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), the undersigned officer of Immunomedics. Inc., a Delaware corporation (the “Company”), does
hereby certify, to such officer’s knowledge, that:
The Transition Report on Form 10-K for the transition period ended December 31, 2018 (the “Transition Report on
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 Transition Report on Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Dated: February 25, 2019
/s/Usama Malik
Usama Malik
Chief Financial 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.
Exhibit 31.1
I, Usama Malik, Principal Executive Officer of Immunomedics, Inc., certify that:
1.
I have reviewed the Transition Report on Form 10-K of Immunomedics, Inc.;
CERTIFICATION
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 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) 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
(b) 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: February 25, 2019
/s/Usama Malik
Usama Malik
Principal Executive Officer
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)
Certification
Exhibit 32.1
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), the undersigned officer of Immunomedics. Inc., a Delaware corporation (the “Company”), does
hereby certify, to such officer’s knowledge, that:
The Transition Report on Form 10-K for the transition period ended December 31, 2018 (the “Transition Report on
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 Transition Report on Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Dated: February 25, 2019
/s/Usama Malik
Usama Malik
Principal Executive 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.
Exhibit 31.2
I, Usama Malik, Chief Financial Officer of Immunomedics, Inc., certify that:
1.
I have reviewed the Transition Report on Form 10-K of Immunomedics, Inc.;
CERTIFICATION
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 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) 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
(b) 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: February 25, 2019
/s/Usama Malik
Usama Malik
Chief Financial Officer
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2018 Annual ReportManagement TeamUsama Malik, M.B.A. Chief Financial Officer & Chief Business OfficerRobert Iannone, M.D., M.S.C.E. Head of R&D and Chief Medical OfficerMorris Rosenberg, Ph.D. Chief Technology OfficerBrendan P. Delaney, M.B.A. Chief Commercial OfficerKurt Andrews, M.A.Chief Human Resources OfficerBryan Ball, M.Sc., M.B.A. Chief Quality OfficerJared Freedberg, J.D. General Counsel & SecretaryBoard of DirectorsBehzad Aghazadeh, Ph.D. Chairman of the BoardManaging Partner & Portfolio Manager, venBio Select Advisor LLCCharles Baum, M.D., Ph.D.(1)(3) President & Chief Executive Officer, Mirati Therapeutics, Inc.Scott Canute, M.B.A. Principal and Founder of Magis Consulting LLC.Standing Committees of the Board of Directors (1) Audit Committee(2) Compensation Committee(3) Governance & Nominating CommitteeBarbara G. Duncan, M.B.A.(1)(2)Former Chief Financial Officer & Treasurer, Intercept Pharmaceuticals, Inc.Peter Barton Hutt, LL.M.(2)(3) Senior Counsel, Covington & Burling LLPKhalid Islam, Ph.D.(1)(2)(3) Managing Director, Life Sciences Management GmbHIndependent Registered Public Accounting Firm KPMG LLP51 John F. Kennedy ParkwayShort Hills, NJ 07078Transfer AgentPhiladelphia Stock Transfer, Inc.2320 Haverford Rd.Ardmore, PA 19003Corporate HeadquartersImmunomedics, Inc.300 The American RoadMorris Plains, NJ 07950Telephone: 973-605-8200Fax: 973-605-8282https://immunomedics.com Annual Meeting Time: 10:00 a.m. Date: Friday, June 7, 2019Location: Immunomedics, Inc.410 The American RoadMorris Plains, NJ 07950 The Common Stock of Immunomedics, Inc. (IMMU) is traded on the NASDAQ Global Market.This annual report, in addition to historical information, contains certain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Such statements may involve significant risks and uncertainties and actual results could differ materially from those expressed or implied herein. Factors that could cause such differences include, but are not limited to, risks associated with new product development (including clinical trials outcome, regulatory requirement/actions), competitive risks to marketed products and availability of financing and other sources of capital as well as the risks discussed in the Company’s Transition Report on Form 10-K for the six-month period ended December 31, 2018.