1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ----------------------
Commission file number 0-17999
ImmunoGen, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2726691
- ------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
333 Providence Highway
Norwood, MA 02062
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(617) 769-4242
------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports,) and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At May 8, 1997 there were 19,023,687 shares of common stock, par value $.01
per share, of the registrant outstanding.
2
IMMUNOGEN, INC.
TABLE OF CONTENTS
-----------------
Page
----
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of
June 30, 1996 and March 31, 1997 .................... 3
Consolidated Statements of Operations
for the three months and the nine months ended
March 31, 1996 and 1997 ............................. 4
Consolidated Statements of Stockholders'
Equity for the year ended June 30, 1996 and for
the nine months ended March 31, 1997 ................ 5
Consolidated Statements of Cash Flows
for the nine months ended March 31, 1996
and 1997 ............................................ 6
Notes to Consolidated Financial Statements .......... 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations ....... 10
PART II - OTHER INFORMATION
Item 2 Changes in Securities................................ 17
Item 6 Exhibits and Reports on Form 8-K .................... 18
Signatures ............................................................... 19
3
IMMUNOGEN, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 1996 and March 31, 1997
June 30, March 31,
-------- ---------
1996 1997
- -------------------------------------------------------------------------------------------------------------
(Restated Note E)
ASSETS
Cash and cash equivalents $ 2,796,636 $ 2,469,275
Prepaids and other current assets 163,280 491,540
------------- -------------
Total current assets 2,959,916 2,960,815
------------- -------------
Property and equipment, net of accumulated
depreciation 4,163,416 3,213,484
Note receivable 1,338,929 1,097,943
Other assets 43,700 43,700
------------- -------------
Total assets $ 8,505,961 $ 7,315,942
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 733,446 708,085
Accrued compensation 233,515 176,660
Other accrued liabilities 832,573 897,368
Current portion of capital lease obligations 141,533 73,449
Current portion of deferred lease -- 89,160
------------- -------------
Total current liabilities 1,941,067 1,944,722
------------- -------------
Capital lease obligations 37,068 --
Deferred lease -- 81,726
Convertible debentures 5,750,443 --
Commitments
Stockholders' equity :
Preferred stock; $.01 par value; authorized 5,000,000
as of March 31, 1997:
Convertible preferred stock, Series A, $.01 par
value; issued and outstanding 2,500 shares
as of March 31, 1997 (liquidation
preference - stated value plus accrued but unpaid
dividends per share; excludes interest) -- 25
Convertible preferred stock, Series C, $.01
par value; issued and outstanding 3,000 shares
as of March 31, 1997 (liquidation preference -
stated value plus accrued but unpaid dividends -- 30
per share; excludes interest)
Common stock, $.01 par value; authorized
30,000,000 shares as of June 30, 1996 and
March 31, 1997, respectively; Issued and
outstanding 16,599,855 and 18,390,984
shares as of June 30, 1996 and
March 31, 1997, respectively 165,999 183,909
Additional paid-in capital 128,525,884 143,144,689
------------- -------------
128,691,883 143,328,653
Accumulated deficit (127,914,500) (138,039,159)
------------- -------------
Total stockholders' equity 777,383 5,289,494
------------- -------------
Total liabilities and stockholders' equity $ 8,505,961 $ 7,315,942
============= =============
The accompanying notes are an integral part of the financial statements.
3
4
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and nine months ended March 31, 1996 and 1997
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------------------------------
1996 1997 1996 1997
- --------------------------------------------------------------------------- ------------------------------
Revenues:
Development fees $ 82,768 $ 64,487 $ 305,930 $ 217,719
Interest 4,340 30,689 60,954 67,288
Licensing 3,333 4,573 10,833 11,145
Other -- 30,310 27,857 89,014
------------ ------------ ------------ ------------
Total revenues 90,441 130,059 405,574 385,166
------------ ------------ ------------ ------------
Expenses:
Research and development 2,024,209 1,842,053 7,670,047 5,819,874
General and administrative 487,469 625,997 1,449,423 1,611,841
Interest 302,838 3,513 895,110 76,237
Loss on disposal of assets -- -- 1,652,014 --
------------ ------------ ------------ ------------
Total expenses 2,814,516 2,471,563 11,666,594 7,507,952
------------ ------------ ------------ ------------
Loss before income taxes (2,724,075) (2,341,504) (11,261,020) (7,122,786)
Income tax expense 57 200 805 888
------------ ------------ ------------ ------------
Net loss (2,724,132) (2,341,704) (11,261,825) (7,123,674)
------------ ------------ ------------ ------------
Dividends on convertible preferred stock -- 1,829,226 -- 3,000,985
------------ ------------ ------------ ------------
Net loss to common shareholders $ (2,724,132) $ (4,170,930) $(11,261,825) $(10,124,659)
============ ============ ============ ============
Loss per common share $ (0.18) $ (0.23) $ (0.81) $ (0.58)
============ ============ ============ ============
Shares used in computing loss
per share amounts 15,379,297 18,068,402 13,900,850 17,309,973
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
4
5
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the year ended June 30, 1996 and for
the nine months ended March 31, 1997
Common Stock
----------------------------------------------------
Additional
Paid-in
Shares Amount Capital
---------- -------- ------------
Balance at June 30, 1995 12,578,606 $125,786 $118,988,736
---------- -------- ------------
Stock options exercised 168,500 1,685 120,900
Conversion of convertible debentures 3,852,749 38,528 6,722,763
Issuance of common stock warrants -- -- 2,693,485
Net loss -- -- --
---------- -------- ------------
Balance at June 30, 1996 16,599,855 $165,999 $128,525,884
========== ======== ============
Stock options exercised 54,644 545 87,310
Conversion of convertible debentures
into common stock 351,662 3,517 1,315,217
Exchange of convertible debentures for
series A preferred stock -- -- --
Conversion of Series B preferred stock into common stock 1,384,823 13,848 3,539,221
Issuance of Series C convertible preferred stock
Dividends payable -- -- --
Net loss for the nine months ended March 31, 1997 -- -- --
---------- -------- ------------
Balance at March 31, 1997 18,390,984 $183,909 $133,467,632
========== ======== ============
Preferred Stock
----------------------------------
Additional Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ---------- ------------- ------------
Balance at June 30, 1995 -- -- -- $(108,991,363) $ 10,123,159
------ ------ ---------- ------------- ------------
Stock options exercised -- -- -- -- 122,585
Conversion of convertible debentures -- -- -- -- 6,761,291
Issuance of common stock warrants -- -- -- -- 2,693,485
Net loss -- -- -- (18,923,137) (18,923,137)
------ ------ ---------- ------------- ------------
Balance at June 30, 1996 -- -- -- $(127,914,500) $ 777,383
====== ====== ========== ============= ============
Stock options exercised -- -- -- -- 87,855
Conversion of convertible debentures
into common stock -- -- -- -- 1,318,734
Exchange of convertible debentures for
Series A preferred stock 2,500 $ 25 $4,749,586 -- 4,749,611
Conversion of Series B preferred stock
into common stock -- -- -- -- 3,553,069
Issuance of Series C convertible
preferred stock 3,000 30 4,620,732 -- 4,620,762
Compensation for put right -- -- 306,739 -- 306,739
Dividends payable -- -- -- (3,000,985) (3,000,985)
Net loss for the nine months ended
March 31, 1997 -- -- -- (7,123,674) (7,123,674)
------ ------ ---------- ------------- ------------
Balance at March 31, 1997 5,500 $ 55 $9,677,057 $(138,039,159) $ 5,289,494
====== ====== ========== ============= ============
The accompanying notes are an integral part of the financial statements.
5
6
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended March 31, 1996 and 1997
March 31,
------------------------------------------
1996 1997
------------- -------------
Cash flows from operating activities:
Net loss $ (11,261,825) $ (10,124,659)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 2,053,394 1,149,737
Loss on disposal of facility 1,652,014 --
Non-cash charge for issuance of common
stock warrants and payment of
interest expense on convertible
subordinated debenture 265,707 --
Other 34,199 5,790
Loss on sale of property and equipment -- 2,934
Accretion of interest on note receivable -- (89,014)
Dividends payable -- 3,000,985
Amortization of deferred lease -- (44,579)
Changes in operating assets and liabilities:
Other current assets 48,386 1,740
Accounts payable 206,131 (25,361)
Accrued compensation 79,276 (56,855)
Other non-current liabilities (27,856) --
Other accrued liabilities (162,459) (95,019)
------------- -------------
Net cash used for operating activities (7,113,033) (6,274,301)
------------- -------------
Cash flows from investing activities:
Capital expenditures (20,216) (4,458)
Proceeds from sale of property and equipment -- 17,183
------------- -------------
Net cash (used for) provided by
investing activities (20,216) 12,725
------------- -------------
Cash flows from financing activities:
Proceeds from subordinated convertible debentures 3,600,000 --
Proceeds from convertible debentures 2,500,000 --
Proceeds from convertible preferred stock -- 5,990,000
Stock issuances, net 77,853 87,855
Principal payments on capital lease obligations (421,783) (105,152)
Financing costs -- (38,488)
Proceeds from sale of facility 786,595 --
------------- -------------
Net cash provided by (used for)
financing activities 6,542,665 5,934,215
------------- -------------
Net change in cash and cash equivalents (590,584) (327,361)
------------- -------------
Cash and cash equivalents, beginning balance 3,047,236 2,796,636
------------- -------------
Cash and cash equivalents, ending balance $ 2,456,652 $ 2,469,275
============= =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 620,876 $ 8,582
============= =============
Cash paid (refunded) for income taxes $ 5,000 $ 1,197
============= =============
Supplemental disclosure of noncash financing
activities:
Conversion of convertible debentures including
accrued interest $ -- $ 1,318,734
============== =============
Conversion of convertible debentures to preferred
stock $ -- $ 2,500,000
============== =============
Deferred lease of leasehold improvements $ -- $ 215,465
============== =============
The accompanying notes are an integral part of the financial statements.
6
7
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. In the opinion of management, the accompanying financial statements include
all adjustments, consisting of only normal recurring accruals, necessary to
present fairly the consolidated financial position, results of operations and
cash flows of ImmunoGen, Inc. (the "Company"), which include those of its
wholly-owned subsidiary, ImmunoGen Securities Corp., and its 72%-owned
subsidiary, Apoptosis Technology, Inc. ("ATI"). The financial disclosures herein
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended June 30, 1996.
The Company has been unprofitable since inception and expects to incur net
losses over the next several years, assuming it is able to raise sufficient
working capital to continue operations. The Company's cash resources at March
31, 1997 were $2.5 million. The Company continues actively to seek additional
capital by pursuing one or more financing transactions and/or strategic
partnering arrangements. While the Company remains hopeful that it will be able
to consummate an additional financing transaction in the near term, no assurance
can be given that such financing will be available to the Company on acceptable
terms, if at all. If the Company is unable to obtain financing on acceptable
terms in order to maintain operations, it could be forced to curtail further or
discontinue operations.
B. In October 1996, the Company's $2.5 million debenture issued in June 1996 was
converted into 2,500 shares of the Company's Series A Convertible Preferred
Stock, with a stated value of $1,000 per share (the "Series A Stock"). Holders
of the Series A Stock are entitled to receive, when and as declared by the Board
of Directors, cumulative dividends at a rate per share equal to 9% per annum in
cash or, at the Company's option, in shares of the Company's Common Stock in
arrears on the conversion date. The 2,500 shares of Series A Stock are
convertible into the same number of shares of Common Stock as the $2.5 million
debenture. Each share of Series A Stock is convertible into a number of shares
of Common Stock determined by dividing the $1,000 stated value per share by the
lesser of (i) 85% of the average of the closing bid prices for the Common Stock
for the five consecutive trading days prior to the conversion date, and (ii)
$2.50 (subject to certain adjustments). In addition, holders of the Series A
Stock are entitled to receive, on conversion of the Series A Stock, a number of
warrants equal to 50% of the number of shares of Common Stock issued on
conversion. As of May 8, 1997, 200 shares of Series A Stock and accumulated
dividends thereon had been converted into 164,546 shares of the Company's Common
Stock. In connection with that conversion, warrants to purchase 82,273 shares of
Common Stock were issued. These warrants have an exercise price of $4 per share
and expire in 2002.
7
8
C. In October 1996 and January 1997, respectively, the Company sold 3,000 shares
each of its Series B and Series C Convertible Preferred Stock, with a stated
value of $1,000 per share (the "Series B Stock" and the "Series C Stock") for a
total of $6.0 million to an institutional investor pursuant to a financing
agreement between the Company and the investor entered in October 1996 (the
"October 1996 Financing Agreement"). Pursuant to this agreement, the Company had
the right to require the investor to purchase up to $12.0 million of convertible
preferred stock from the Company in a series of private placements, subject to
certain conditions. However, because minimum stock price and minimum market
capitalization requirements have not been maintained, the investor is no longer
obligated to fund the remaining $6.0 million which had been available to the
Company under this agreement. In discussions with the Company, the investor has
indicated a willingness to make additional investments in the Company to the
extent required to fund the Company's operations, if necessary, subject to
certain conditions to be agreed upon. Consequently, the Company believes that
funds will be available to it, when and if necessary, to finance its ongoing
operations in the near term. In addition, the Company continues actively to
pursue other potential sources of financing. However, there can be no assurance
that the investor will provide such funding to the Company on acceptable terms,
if at all, or that the Company will be able to secure financing from other
investors.
Holders of the Series B Stock and Series C Stock are entitled to receive, when
and as declared by the Board of Directors, cumulative dividends at a rate per
share equal to an annual rate of 9% of the stated value in cash, or at the
Company's option, shares of Common Stock, in arrears on the conversion date. As
of March 31, 1997, all 3,000 shares of the Series B Stock plus accrued interest
thereon had been converted into 1,384,823 shares of the Company's Common Stock.
Each share of Series C Stock is convertible into a number of shares of the
Company's Common Stock determined by dividing the $1,000 stated value per share
by the lesser of (i) $2.61 (the average closing bid price of the Company's
Common Stock on the Nasdaq National Market for the five consecutive trading days
prior to the January 24, 1997 original issuance date of the Series C Preferred
Stock), and (ii) 85% of the average closing bid price of the Company's Common
Stock for the five consecutive trading days prior to the conversion date
(subject to certain adjustments). As of May 8, 1997, 600 shares of the Series C
Stock plus accrued interest thereon had been converted into 468,157 shares of
Common Stock.
Pursuant to the October 1996 Financing Agreement, the Company initially issued
warrants to the investor to purchase 187,500 shares of the Company's Common
Stock. Warrants to purchase 62,500 shares of the Company's Common Stock were
also issued to a third party pursuant to an arrangement between the investor and
that party. These warrants have an exercise price of $5.49 and expire in October
2001. Additionally, because conversion of the Series B Stock did not occur until
after the eightieth day following its issue date, warrants to purchase 250,000
shares of the Company's Common Stock (of which 62,500 were subsequently
transferred to a third party pursuant to an agreement between the investor and
that party) were issued with an exercise price of $3.68 per share. These
warrants expire in January 2002. Because conversion of the Series C Stock into
shares of the Company's Common Stock did not occur until after the eightieth day
following its issue date, warrants to acquire 1,147,754 shares of the Company's
Common Stock were issued to the investor in April 1997 with an exercise price
of $2.31 per share. These warrants expire in April 2002.
8
9
D. In January 1997, the Company exercised its option to extend the
lease on its Norwood, Massachusetts facility to June 2000.
E. In March 1997, the Securities and Exchange Commission issued a Staff
Interpretation related to the accounting for convertible preferred stock and
convertible preferred debt instruments issued with provisions providing for
conversion into common stock at a discount from the market price of the common
stock.
This Staff Interpretation provides that assured incremental yield embedded in
the preferred stock conversion term's discount from fair market value should be
accounted for as a dividend to preferred shareholders. For the quarter ended
March 31, 1997, this interpretation, together with the value of warrants to be
issued to the preferred shareholders, resulted in non-cash dividends to
preferred shareholders of $1,714,034, or $.09 per share. This SEC Staff
Interpretation also resulted in the restatement of the Company's June 30, 1996
Form 10-K and its reports on Form 10-Q for the quarters ended September 30 and
December 31, 1996.
In 1997, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." SFAS
128 specifies the computation, presentation and disclosure requirements for
earnings per share and is substantially similar to the standards recently issued
by the International Accounting Standards (IAS 33), "Earnings Per Share." SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. SFAS 128 requires restatement of
all prior-period earnings per share data presented. Management has not yet
determined the impact, if any, of SFAS 128 on the Company's financial
statements.
9
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since inception, ImmunoGen has been primarily engaged in research and
development of immunoconjugate products which the Company believes have
significant commercial potential as human therapeutics. The major sources of the
Company's working capital have been the proceeds of equity and convertible debt
financings, license fees and income earned on investment of those funds. The
Company expects no revenues to be derived from product sales for the foreseeable
future.
Since December 1994, the Company has aggressively pursued a cost cutting
and control program, beginning with a restructuring plan which included halting
operations at two of its facilities, reducing or eliminating certain areas of
research and focusing its clinical efforts on its lead products. In addition,
the Company assigned the facility and equipment leases related to two facilities
in Canton and Cambridge, Massachusetts to other biotechnology companies, and
pursues an overall strategy of minimizing costs.
The Company has been unprofitable since inception and expects to incur net
losses over the next several years. The Company's cash resources at March 31,
1997 were approximately $2.5 million. The Company continues actively to seek
additional capital by pursuing one or more financing transactions and/or
strategic partnering arrangements. See "Liquidity and Capital Resources."
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 and 1997
The Company's revenues increased approximately 44% from approximately
$90,000 for the three months ended March 31, 1996 to approximately $130,000 for
the three months ended March 31, 1997. Interest income totalled approximately
$4,300, or 5% of revenues, for the three months ended March 31, 1996, increasing
approximately 607% to approximately $31,000, or 24% of revenues, for the three
months ended March 31, 1997, reflecting the increase in cash balances available
for investment in the 1997 period. Revenues for the three months ended March 31,
1996 and 1997 include approximately $83,000 and $64,000, respectively, of
development revenue, which represents revenue earned under the Small Business
Innovation Research Program of the U.S. National Science Foundation. Other
income for the three months ended March 31, 1997 represents accretion of
interest on a note receivable related to the assignment of the Company's leases
on its Canton facility and equipment, and both periods include smaller amounts
received under a licensing agreement.
10
11
The Company's total expenses, excluding interest, remained constant at
approximately $2.5 million in both periods. Research and development costs
constituted the primary component of the Company's total ongoing expenses
excluding interest (81% and 75% in the three month periods ended March 31, 1996
and 1997, respectively), decreasing from approximately $2.0 million for the
three months ended March 31, 1996 to approximately $1.8 million for the three
months ended March 31, 1997. This 9% decrease is principally the result of the
savings associated with the Company's restructuring and other cost reduction
efforts begun in fiscal 1995.
General and administrative expenses increased approximately 28% from
approximately $487,000 for the three months ended March 31, 1996 to
approximately $626,000 for the three months ended March 31, 1997. This increase
represents costs associated with the Company's financing efforts.
Interest expense decreased from approximately $303,000 for the three months
ended March 31, 1996 to approximately $4,000 for the three months ended March
31, 1997. The fiscal 1996 costs are primarily due to the interest costs
associated with the Company's debenture financings entered into in fiscal 1996,
and both periods include interest costs on the remaining principal balances of
the Company's capital lease agreements. In October 1996, the Company converted a
$2.5 million convertible debenture issued in June 1996 into 2,500 shares of the
Company's Series A Convertible Preferred Stock (the "Series A Stock"). Also, in
October 1996 and January 1997, the Company issued 3,000 shares each of its
Series B Convertible Preferred Stock (the "Series B Stock") and Series C
Convertible Preferred Stock (the "Series C Stock"), respectively, pursuant to a
financing agreement entered into in October 1996. See "Liquidity and Capital
Resources" for descriptions of both series. Holders of both series of stock are
entitled to receive cumulative dividends at a rate per share equal to 9% per
annum in arrears on the conversion date. In addition, the Securities and
Exchange Commission Staff issued an interpretation in March 1997 relating to the
accounting for convertible preferred stock and convertible debt instruments
issued with provisions providing for conversion into common stock at a discount
from the market price of the common stock. This interpretation, together with
the value of warrants to be issued to the preferred shareholders, resulted in
additional, non-cash dividends to preferred shareholders of $1,714,034. The 100%
increase in dividends on convertible preferred stock is comprised of all
dividends on all series of convertible preferred stock for the three months
ended March 31, 1997.
Nine Months Ended March 31, 1996 and 1997
The Company's revenues decreased 5% from approximately $406,000 for the
nine months ended March 31, 1996 to approximately $385,000 for the nine months
ended March 31, 1997. The major component of revenues in both years is
development revenue earned under the Small Business Innovation Research Program
of the U.S. National Science Foundation, which decreased by approximately 29%
from approximately $306,000 for the three months ended March 31, 1996
11
12
to approximately $218,000 for the three months ended March 31, 1997. As in the
three months ended March 31, 1996 and 1997, other revenues for the nine month
periods include interest earned on the Company's cash balances available for
investment, amounts received pursuant to a licensing agreement, and accretion of
interest on a note receivable related to the assignment of the Company's leases
on its Canton facility and equipment.
Total expenses, excluding interest, decreased approximately 30% from
approximately $10.8 million for the nine months ended March 31, 1996 to
approximately $7.5 million for the nine months ended March 31, 1997. A
significant component of this decrease is a charge in the nine months ended
March 31, 1996 for disposal of the Canton facility and equipment amounting to
approximately $1.7 million.
For the nine months ended March 31, 1996 and 1997, research and development
costs constituted the primary component of the Company's total ongoing expenses
excluding interest (71% and 78%, respectively), decreasing 24% from
approximately $7.7 million for the 1996 period to approximately $5.8 million for
the 1997 period. As in the three months ended March 31, 1996, this decrease is
principally the result of the savings associated with the Company's
restructuring and other cost reduction efforts begun in fiscal 1995.
General and administrative expenses increased approximately 11% from
approximately $1.4 million for the nine months ended March 31, 1996 to
approximately $1.6 million for the nine months ended March 31, 1997. This
increase is attributable to the Company's ongoing financing efforts.
Interest expense decreased approximately 91% from approximately $900,000
for the nine months ended March 31, 1996 to approximately $76,000 for the nine
months ended March 31, 1997. As in three months ended March 31, the costs in the
earlier period are primarily due to interest, financing costs and warrant costs
charged to interest on the Company's debenture financings, and both periods
include interest costs on the remaining principal balances of the Company's
capital lease agreements. Additionally, in October 1996, the Company converted a
$2.5 million convertible debenture issued in June 1996 into 2,500 shares of the
Company's Series A Stock. Also in October 1996 and January 1997, the Company
issued 3,000 shares each of its Series B Stock and Series C Stock. See
"Liquidity and Capital Resources" for descriptions of all series. Holders of
these series of stock are entitled to receive cumulative dividends at a rate per
share equal to 9% per annum in arrears on the conversion date. In addition, the
Securities and Exchange Commission Staff issued an interpretation in March 1997
relating to accounting for convertible preferred stock and convertible debt
instruments issued with provisions providing for conversion into common stock
at a discount from the market price of the common stock. This interpretation,
together with the value of warrants to be issued to preferred shareholders,
resulted in additional, non-cash dividends to preferred shareholders of
$2,774,884. The 100% increase in dividends on convertible preferred stock is
comprised of all dividends on all series of convertible preferred stock for the
nine months ended March 31, 1997.
12
13
LIQUIDITY AND CAPITAL RESOURCES
Since July 1, 1994 the Company has financed its operating deficit of
approximately $44.3 million from various sources, including issuances in fiscal
1996 and fiscal 1997 of convertible debentures and convertible preferred stock,
proceeds from the assignment of leases in fiscal year 1996 and from the exercise
of stock options. Since July 1, 1994 the Company has earned approximately $0.6
million of interest income. At March 31, 1997, approximately $2.5 million of
cash and cash equivalents remained available. In October 1996, the Company's
$2.5 million debenture issued in June 1996 was converted into 2,500 shares of
the Company's Series A Stock, with a stated value of $1,000 per share. Holders
of the Series A Stock are entitled to receive, when and as declared by the Board
of Directors, cumulative dividends at a rate per share equal to 9% per annum in
cash or, at the Company's option, in shares of the Company's Common Stock, in
arrears on the conversion date. The 2,500 shares of Series A Stock are
convertible into the same number of shares of Common Stock as the $2.5 million
debenture. Each share of Series A Stock is convertible into a number of shares
of Common Stock determined by dividing the $1,000 stated value per share plus
accrued dividends by the lesser of (i) 85% of the average of the closing bid
prices for the Common Stock for the five consecutive trading days prior to the
conversion date, and (ii) $2.50 (subject to certain adjustments). As of May 8,
1997, 200 shares of Series A Stock and accumulated dividends thereon had been
converted into 164,546 shares of the Company's Common Stock. In connection with
that conversion, warrants to purchase 82,273 shares of Common Stock were issued.
These warrants have an exercise price of $4 per share and expire in 2002.
In October 1996 and January 1997, respectively, the Company sold 3,000
shares each of its Series B Stock and its Series C Stock, with a stated value of
$1,000 per share, for a total of $6.0 million to an institutional investor
pursuant to the October 1996 Financing Agreement.
13
14
Holders of the Series B Stock and Series C Stock are entitled to receive, when
and as declared by the Board of Directors, cumulative dividends at a rate per
share equal to an annual rate of 9% of the stated value in cash, or at the
Company's option, shares of Common Stock, in arrears on the conversion date.
Each share of the Series B Stock is convertible into a number of shares of the
Company's Common Stock determined by dividing the $1,000 stated value per share
by the lesser of (i) $3.60 (the average closing bid price of the Company's
Common Stock on the Nasdaq National Market for the five consecutive trading days
prior to the October 16, 1996 original issuance date of the Series B Stock), and
(ii) 85% of the average closing bid price of the Company's Common Stock for the
five consecutive trading days prior to the conversion date (subject to certain
adjustments). Each share of Series C Stock is convertible into a number of
shares of the Company's Common Stock determined by dividing the $1,000 stated
value per share by the lesser of (i) $2.61 (the average closing bid price of the
Company's Common Stock on the Nasdaq National Market for the five consecutive
trading days prior to the January 24, 1997 original issue date of the Series C
Stock), and (ii) 85% of the average closing bid price of the Company's Common
Stock for the five consecutive trading days prior to the conversion date
(subject to certain adjustments). At the Company's option, accrued dividends
payable on shares of Series B Stock or Series C Stock being converted may be
paid in Common Stock in lieu of cash. As of March 31, 1997, all 3,000 shares of
the Series B Stock plus accrued dividends thereon had been converted into
1,384,823 shares of the Company's Common Stock. As of May 8, 1997, 600 shares of
the Series C Stock plus accrued interest thereon had been converted into 468,157
shares of Common Stock.
In connection with the October 1996 Financing Agreement, the Company
initially issued warrants to the investor to purchase 187,500 shares of the
Company's Common Stock. Warrants to purchase 62,500 shares of the Company's
Common Stock were also issued to a third party pursuant to an arrangement
between the investor and that party. The warrants have an exercise price of
$5.49 and expire in October 2001. Additionally, because conversion of the Series
B Stock into shares of the Company's Common Stock occurred after the eightieth
day following issuance of the Series B Stock, warrants to acquire an additional
250,000 shares of the Company's Common Stock (of which 62,500 were subsequently
transferred to a third party pursuant to an agreement between the investor and
that party) were issued to the investor with an exercise price of $3.68 per
share and expire in January 2002. Because conversion of the Series C Stock into
shares of the Company's Common Stock did not occur until after the eightieth day
following its issue date, warrants to acquire 1,147,754 shares of the Company's
Common Stock were issued to the investor in April 1997 with an exercise price of
$2.31 per share. These warrants expire in April 2002.
14
15
In the period since July 1, 1994 approximately $0.7 million was expended on
property and equipment. Of this amount, approximately $0.2 million was
reimbursed to the Company by a sublessee as part of an amendment to a sublease
agreement which became effective in fiscal 1997. No significant amounts are
expected to be expended on property and equipment throughout the remainder of
fiscal 1997.
ImmunoGen was committed under its agreements with ATI to provide ATI with
$3.0 million in research and development services and $2.0 million in cash
equity contributions over a three-year period. At June 30, 1995 these
obligations had been fulfilled by the Company. ImmunoGen has also agreed to
obtain or furnish an additional $3.0 million in equity for ATI on such terms and
conditions as may be mutually agreed to by ATI and the providers of such equity.
As of March 31, 1997 amounts owed by ATI to ImmunoGen approximated $13.2
million. The Company intends to convert a majority of this amount into equity of
ATI, thereby satisfying the agreement to provide an additional $3.0 million in
equity.
The Company anticipates that its capital resources existing at March 31,
1997 will enable it to maintain its current and planned operations through
approximately June 1997. Because of its continuing losses from operations and
working capital deficit, the Company will be required to obtain additional
capital to satisfy its ongoing capital needs and to continue its operations
beyond June 1997. The October 1996 Financing Agreement granted the Company the
right to require the investor to purchase up to $12.0 million of convertible
preferred stock from the Company in a series of private placements, of which an
aggregate of $6.0 million was received in October 1996 and January 1997.
However, because minimum stock price and minimum market capitalization
requirements have not been maintained, the investor is no longer obligated to
fund the remaining $6.0 million which had been available to the Company under
this agreement. In discussions with the Company, the investor has indicated a
willingness to make additional investments in the Company to the extent required
to fund the Company's operations, if necessary, subject to certain conditions to
be agreed upon. Consequently, the Company believes that funds will be available
to it, when and if necessary, to finance its ongoing operations in the near
term. In addition, the Company continues actively to pursue other potential
sources of financing and/or strategic partnering arrangements. However, there
can be no assurance that the investor will provide such funding to the Company
on acceptable terms, if at all, or that the Company will be able to secure
financing from other investors. If the Company is unable to obtain financing on
acceptable terms in order to maintain operations, it could be forced to curtail
further or discontinue its operations.
CERTAIN FACTS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
This report contains certain forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are based on management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to differ materially
from those projected or suggested in such forward-looking statements as a result
of various factors, including, but not limited to, the following: the
uncertainties associated with preclinical studies and clinical trials; the early
stage of the Company's initial product development and lack of product revenues;
the Company's history of operating losses and accumulated deficit; the Company's
limited financial resources and uncertainty as to the availability of additional
capital to fund its development on acceptable terms, if at all; the Company's
lack of commercial manufacturing experience and commercial sales, distribution
and marketing capabilities; reliance on suppliers of ricin and antibodies
necessary for production of the products and technologies; the potential
development by competitors of competing products and technologies; the Company's
dependence on potential collaborative partners, and the lack of
15
16
assurance that the Company will receive any funding under such relationships to
develop and maintain strategic alliances; the lack of assurance regarding patent
and other protection for the Company's proprietary technology; governmental
regulation of the Company's activities, facilities, products and personnel; the
dependence on key personnel; uncertainties as to the extent of reimbursement for
the costs of the Company's potential products and related treatment by
government and private health insurers and other organizations; the potential
adverse impact of government-directed health care reform; the risk of product
liability claims; and general economic conditions. As a result, the Company's
future development efforts involve a high degree of risk.
16
17
IMMUNOGEN, INC.
PART II - OTHER INFORMATION
---------------------------
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
On January 6, 1997 and April 14, 1997, the Company issued warrants to
purchase to 250,000 shares and 1,147,754 shares, respectively, of its Common
Stock to the holder of its Series B and Series C Convertible Preferred Stock
(the "Series B Stock" and the "Series C Stock"). The Series B Stock provided
that if conversion of the preferred shares did not occur on or before the
eightieth day following their issuance, on the eighty-first day the investor
would receive warrants to purchase 250,000 shares of the Company's Common Stock
at a price equal to the average closing price of the Common Stock for the five
trading days preceding the eighty-first day. These warrants were issued on
January 6, 1997 with an exercise price of $3.68 per common share and expire in
January 2002. Similarly, the Series C Stock provided that if conversion of the
Series C Stock did not occur on or before the eightieth day after their
issuance, the investor would receive warrants to purchase a number of shares of
the Company's Common Stock equal to one-half of the number of common shares into
which the Series C Stock would be converted on the eighty-first day. In
connection with that provision, the Company issued warrants to purchase
1,147,754 shares of the Company's Common Stock on April 14, 1997 with an
exercise price of $2.31 per share. These warrants expire in April 2002.
Also on April 14, 1997, the Company issued warrants to purchase 82,273
shares of its Common Stock to the holder of its Series A Convertible Preferred
Stock (the "Series A Stock") in connection with the conversion of 200 shares of
Series A Stock. The Series A Stock provided that if conversion did not occur on
or before the eighty-first day after its issuance, the investor would receive
warrants to purchase shares of the Company's Common Stock equal to 50% of the
number of shares issued on each conversion of the Series A Stock. These warrants
have an exercise price of $4 per share and are exercisable for five years from
the date of issuance.
All of the warrants issued pursuant to the terms of the Series A Stock,
Series B Stock and Series C Stock were issued in a private placement pursuant to
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
17
18
ITEM 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on March 18, 1997
reporting the filing of a press release on the same date
announcing that development of its drug candidate, Oncolysin B,
was being discontinued.
The Company filed a report on Form 8-K on April 15, 1997
announcing the death of Frank J. Pocher, Executive Vice
President, Operations, Chief Financial Officer and a Director.
18
19
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMMUNOGEN, INC.
Date: May 15, 1997 By: /s/ Mitchel Sayare
-------------------------------------
Mitchel Sayare
Chief Executive Officer
(principal executive officer)
Date: May 15, 1997 By: /s/ Kathleen A. Carroll
-------------------------------------
Kathleen A. Carroll
Vice President,
Finance and Administration
(principal financial officer)
19
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
EXHIBIT 27
5
9-MOS
JUN-30-1997
MAR-31-1997
2,469,275
0
0
0
0
2,960,815
14,755,087
11,541,603
7,315,942
1,944,722
0
0
9,677,112
133,651,541
0
7,315,942
0
385,166
0
0
7,431,715
0
76,237
(7,122,786)
888
0
0
0
0
(10,124,659)
(0.58)
(0.58)
