IMMUNOMEDICS, INC. Cautionary Note Regarding Forward-Looking Statements
The Securities and Exchange Commission (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 Quarterly Report on Form 10-Q 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 Quarterly Report, and they may also be made a part of this Quarterly Report by reference to other documents filed with theSEC , 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. These risks and uncertainties include, among other things: expectations for the timing of the commercial launch of Trodelvy and the development of Trodelvy for additional indications, the success of our clinical trials (including the funding therefor, anticipated patient enrollment, trial outcomes, interpretation of those data by regulators, timing or associated costs), regulatory applications and related timelines, including the filing and approval timelines for BLAs and BLA supplements, achieving full FDA approval based on our confirmatory data for TRODELVY, 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 post-approval compliance obligations (on topics including but not limited to product quality, product distribution and supply chain requirements, and promotional and marketing compliance); imposition of significant post-approval regulatory requirements on our products, including a requirement for a post-approval confirmatory clinical study, or failure to maintain or obtain full regulatory approval for the Company's products and 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 products and 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 relating to the COVID-19 pandemic in theU.S. and around the world; 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 theSEC . 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" in this Quarterly Report on Form 10-Q for more information. In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q or the date of the document incorporated by reference in this Quarterly Report on Form 10-Q, 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. 23
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Risks and Uncertainties - There are many uncertainties regarding the novel coronavirus (COVID-19) pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic will impact its patients, employees, suppliers, vendors, business partners and distribution channels. While the pandemic did not materially affect the Company's financial results and business operations in the Company's quarter endedJune 30, 2020 , the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary. OverviewImmunomedics, Inc. , aDelaware corporation, together with its subsidiaries (collectively "we," "our," "us," "Immunomedics ," or the "Company"), is a leader in next-generation antibody-drug conjugate ("ADC") technology, committed to help transform the lives of people with hard-to-treat cancers. Our portfolio of ADCs is 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. Trodelvy™ (sacituzumab govitecan-hziy) (previously referred to as "IMMU-132") is our lead product and most advanced program in our unique ADC platform. OnApril 22, 2020 , theU.S. Food and Drug Administration ("FDA") granted accelerated approval to Trodelvy for the treatment of adult patients with metastatic triple-negative breast cancer ("mTNBC") based on the objective response rate of 33.3 percent and duration of response of 7.7 months observed in a single-arm, multicenter Phase 2 study in 108 adult mTNBC patients who had previously received a median of three prior systemic therapies in the metastatic setting. Continued approval is contingent upon verification of clinical benefit in the confirmatory Phase 3 ASCENT study and patients must have received at least two prior therapies before taking Trodelvy. OnApril 29, 2020 , the first mTNBC patient was treated with commercial product, which is available through major specialty distributors inthe United States . OnJuly 6, 2020 , we announced that the ASCENT study met its primary endpoint of progression-free survival ("PFS"), as well as key secondary endpoints, including overall survival and objective response rate, in brain metastasis negative patients with mTNBC who have previously received at least two prior therapies for metastatic disease. Specifically, Trodelvy demonstrated a statistically significant improvement in PFS compared to chemotherapy, with a hazard ratio of 0.41 (95% confidence interval ("CI"), 0.32-0.52). The median PFS for patients treated with Trodelvy was 5.6 months (95% CI, 4.3-6.3), compared to 1.7 months (95% CI, 1.5-2.6) for chemotherapy (p<0.0001). The safety profile of Trodelvy observed in the ASCENT study remained consistent with the FDA-approved label, with neutropenia and diarrhea as the most common Grade 3 or 4 adverse events and no new safety signals were observed. Our current focus is to present full ASCENT data at a major medical conference and to submit a supplemental Biologics License Application to the FDA seeking full approval of Trodelvy. Historically, the Company has funded its operations through public offerings of equity securities and debt financings. The Company commenced commercial shipments inApril 2020 . The Company expects to continue to incur operating losses while funding commercial launch efforts for Trodelvy, research and development activities, regulatory submissions, and selling, general and administrative expenses. The Company expects its future cash requirements to be substantial due to commercialization of Trodelvy and additional clinical trials related to Trodelvy. The source, timing and availability of any future financing or other transaction will depend principally upon continued progress in the Company's commercial, regulatory and development activities. Any equity or debt financing will also be contingent upon equity and debt market conditions and interest rates at the time. If the Company is unable to obtain sufficient additional funds when required, the Company may be forced to delay, restrict or eliminate all or a portion of its development programs or commercialization efforts. The Company believes it currently has sufficient funds to meet its financial needs for at least the next 12 months. OnMay 1, 2020 , we closed an underwritten public offering of 16,947,389 shares of common stock at a public offering price of$28.50 per share. We received gross proceeds of$483.0 million and net proceeds of$464.6 million after deducting the underwriting discounts and commissions and other expenses related to the offering. We intend to use the net proceeds from this offering primarily to support the commercial launch of Trodelvy inthe United States in mTNBC, continue to expand the clinical development programs for Trodelvy, invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), continue scale-up manufacturing and manufacturing process improvements, as well as for working capital and general corporate purposes.
On
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programmed death-ligand 1 ("PD-L1") inhibitor, and a platinum containing chemotherapy in the neoadjuvant/adjuvant, locally advanced or metastatic setting, including patients who are platinum ineligible and have previously received a PD-1 or PD-L1 inhibitor in the neoadjuvant/adjuvant, locally advanced, or metastatic setting.
OnApril 4, 2020 , upon recommendation from the Compensation Committee of the Board of Directors (the "Board") and approval by the Board, the Company appointedHarout Semerjian as the Company's President and Chief Executive Officer, effectiveApril 16, 2020 .Mr. Semerjian was also appointed as a member of the Board. With the appointment ofMr. Semerjian and effective as of the commencement date ofMr. Semerjian's employment, Mr.Scott Canute stepped down from his role as Executive Director but continued to serve as a Board member, whileDr. Aghazadeh remained as Executive Chairman focusing on corporate strategy and business development and, during a transition period, will continue to interface with the investment community on behalf of the Company. OnMay 27, 2020 ,Harout Semerjian resigned as Chief Executive Officer and President of the Company, and as a member of the Board, effective immediately. In connection withMr. Semerjian's resignation onMay 27, 2020 , the Company andMr. Semerjian entered into a Separation Agreement, pursuant to whichMr. Semerjian will receive (i) cash payments totaling$1,067,828 , (ii) continued health coverage for 18 months, (iii) a release from the post-employment non-competition provisions set forth inMr. Semerjian's employment agreement with the Company, and (iv) senior executive-level outplacement services for six (6) months.Mr. Semerjian also released the Company from any and all claims with respect to all matters arising out of or related toMr. Semerjian's employment by the Company and his resignation.Dr. Aghazadeh continues to support the Company in an executive leadership role. As ofJune 30, 2020 , we had$975.5 million in cash, cash equivalents and marketable securities. We believe our projected financial resources are adequate to (i) support commercial launch of Trodelvy inthe United States in mTNBC, (ii) continue to expand the clinical development programs for developing Trodelvy in mTNBC, metastatic urothelial cancer ("mUC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), and other indications of high medical need, (iii) invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), (iv) continue scale-up manufacturing and manufacturing process improvements, and (v) general working capital requirements. 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 inthe United States and globally, and (ii) potential private and public capital markets financing. Refer to "Note 8 - Stockholders' Equity" for additional information. OnApril 29, 2019 , we entered into a license agreement (the "License Agreement") withEverest Medicines II Limited , aChina limited company ("Everest"). Pursuant to the License Agreement, we granted Everest an exclusive license to develop and commercialize Trodelvy inthe People's Republic of China ,Taiwan ,Hong Kong ,Macao ,Indonesia ,Philippines ,Vietnam ,Thailand ,South Korea ,Malaysia ,Singapore andMongolia (the "Territory"). In consideration for entering into the License Agreement, Everest made a one-time, non-refundable upfront payment to us in the aggregate amount of$65.0 million which was recorded as deferred revenue on the condensed consolidated balance sheets. OnApril 22, 2020 , the FDA granted accelerated approval to Trodelvy for the treatment of adult patients with mTNBC. The License Agreement contains a development milestone payment of$60.0 million based upon our achievement of FDA approval for Trodelvy. This was received inJune 2020 and also recorded as deferred revenue on the condensed consolidated balance sheets. In addition, we recognized$1.2 million of deferred revenue relating to product for clinical supply during the three months endedJune 30, 2020 . The License Agreement also contains additional development milestone payments in a total amount of up to$180.0 million based upon the achievement of certain other development milestones. In addition, the License Agreement contains sales milestone payments in a total amount of up to$530.0 million based upon the achievement of certain sales milestones. Everest will make royalty payments to us based upon percentages of net sales of Trodelvy, ranging from 14% to 20%. Refer to "Note 2 - Revenue Recognition" for additional information. Also, onApril 22, 2020 , Everest announced theChina National Medical Products Administration has approved the Clinical Trial Application for a pivotal Phase 3 study of Trodelvy for the treatment of mTNBC inChina . OnJuly 1, 2020 , a single arm, multicenter Phase 2b study of Trodelvy in mTNBC patients inChina who are refractory or relapsing after at least 2 prior standard chemotherapy regimens was posted by Everest on clinicaltrials.gov with the identifier: NCT04454437. To accelerate the clinical and preclinical development of Trodelvy, we have entered into the following clinical collaborations: with Clovis Oncology, Inc. to combine Trodelvy with its poly (ADP-ribose) polymerase (PARP) inhibitor, rucaparib (Rubraca®), in mTNBC, advanced UC and ovarian cancer; and with Roche to initiate a Phase 1b/2 study (MORPHEUS) comparing the safety and efficacy of the combination of atezolizumab (Tecentriq®) and Trodelvy as a frontline treatment for patients with metastatic or inoperable locally advanced mTNBC versus atezolizumab plus nab-paclitaxel as standard of care. We extended our clinical collaboration with Roche in patients with mUC and mNSCLC. Additionally, we have entered into a collaboration with theGerman Breast Group to conduct a multinational, post-neoadjuvant registrational 25
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Phase 3 study (SASCIA) that will evaluate Trodelvy as a treatment for newly-diagnosed breast cancer patients who do not achieve a pathological complete response ("pCR") following standard neoadjuvant therapy.
We are also working with (i)Dana-Farber Cancer Institute ("DFCI") to conduct two Phase 2 studies to evaluate the safety and efficacy of combining Trodelvy with pembrolizumab (Keytruda®), Merck's anti-PD-1 antibody, in patients with (i) PD-L1-negative mTNBC and (ii) PD-L1-positive HR+/HER2- mBC. Primary endpoint for both studies is progression-free survival. Other clinical outcome measures, including overall survival, objective response rate by RECIST 1.1, duration of response, and clinical benefit rate, will be used as secondary endpoints; (ii)Massachusetts General Hospital ("MGH") on a Phase 2 NeoSTAR study to evaluate Trodelvy in patients with localized TNBC using pCR rate as the primary endpoint, with disease-free survival and overall survival serving as secondary endpoints. This multicenter study is sponsored by Dana-Farber/Partners CancerCare, the adult oncology collaboration of DFCI,Brigham and Women's Hospital , and theMGH Cancer Center ; (iii)MGM on a Phase 1b/2 study of Trodelvy combining with Pfizer's PARP inhibitor, talazoparib (TALZENNA®), in patients with mTNBC previously treated with no more than one prior therapeutic regimen for metastatic disease; (iv)Yale University on a Phase 2 study of Trodelvy in patients with persistent and recurrent endometrial cancer; and (v) theUniversity of Wisconsin in patients with metastatic castration-resistant prostate cancer who have progressed on second generation androgen receptor-directed therapy on a Phase 2 study. 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 IMMU-130, which binds the CEACAM5 antigen expressed on CRC and other solid cancers, and IMMU-140, which 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, product candidates and technologies.
The development and commercialization of successful therapeutic products is subject to numerous risks and uncertainties including, without limitation, the following:
•the time and expense 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 (which receipt is uncertain);
•the time and expense required for us to establish and maintain compliant operations for commercial manufacturing, sale, and distribution of products under FDA and healthcare law requirements, and risks of non-compliance;
•we may be unable to obtain additional capital through strategic collaborations, licensing, or potential private and public capital markets financings, including the use of the ATM Agreement, in order to continue our research and secure regulatory approval of and market our lead drug candidate;
•challenges based on 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, including as a result of any impacts to current or future trials due to COVID-19 pandemic;
•the ability to provide and maintain an adequate clinical and commercial supply, including through contract manufacturer and vendor relationships;
•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.
See Risk Factors in Item 1A of this Quarterly Report.
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.
For a description of our significant accounting policies, refer to "Part II,
Item 8. Financial Statements and Supplementary Data, Note 1 - Business Overview
and Summary of Significant Accounting Policies" in our 2019 Annual Report
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on Form 10-K, and refer to Note 1 in this Quarterly Report on Form 10-Q for significant accounting policies due to commercialization for revenue recognition, gross-to-net sales adjustments, accounts receivable, inventory, and cost of sales. Of these policies, the following are considered critical to an understanding of our Unaudited Condensed Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments: stock-based compensation expenses, and fair value for the liability related to sale of future royalties and related interest expense. Refer to "Note 5 - Debt", "Note 6 - Stock-based Compensation" and "Note 7 - Estimated Fair Value of Financial Instruments", respectively, for more information.
Recent Accounting Pronouncements
Refer to "Note 1 - Business Overview, Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements" in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and their expected impact on our financial position and results of operations. Results of Operations Our results for any interim period, such as those described in the following analysis, are not necessarily indicative of the results for the entire year or any other future period.
Three-Month Period Ended
Revenues
We began to record product revenue, net in the second quarter of 2020 following the approval of Trodelvy by the FDA inApril 2020 and its subsequent commercial launch inthe United States . We did not generate any revenue from product sales prior to the three months endedJune 30, 2020 . Total product revenue, net for the three months endedJune 30, 2020 was$20.1 million . Costs and Expenses ($ in thousands) Increase/(Decrease) Three Months Ended June 30, 2020 2019 2020 vs 2019 Costs of goods sold$ 1,669 $ - $ 1,669 nm Research and development 42,561 52,923 (10,362) (19.6)% Sales and marketing 12,883 6,346 6,537 nm General and administrative 15,973 7,899 8,074 nm Total costs and expenses$ 73,086 $ 67,168 $ 5,918 8.8%
nm - not meaningful
Total costs and expenses for the three months endedJune 30, 2020 increased$5.9 million compared to the three months endedJune 30, 2019 , primarily due to an increase in general and administrative expenses of$8.1 million , an increase in sales and marketing expenses of$6.5 million , and an increase in costs of goods sold of$1.7 million , partially offset by a decrease in research and development expenses of$10.4 million . Cost of Goods Sold Cost of product revenues consist primarily of direct and indirect costs related to the manufacturing of Trodelvy sold, including third-party manufacturing costs, packaging services, freight, allocation of overhead costs, and inventory adjustment charges, in addition to royalty expenses. We began capitalizing inventory upon FDA approval of Trodelvy. Cost of product revenues was$1.7 million for the three months endedJune 30, 2020 . All product costs incurred prior to FDA approval of Trodelvy inApril 2020 were expensed as research and development expenses. 27
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Research and Development
We do not track expenses on the basis of each individual compound under investigation and therefore we do not provide a breakdown of such historical information in that format. We evaluate projects under development from an operational perspective, including such factors as results of individual compounds from laboratory/animal testing, patient results and enrollment statistics in clinical trials. It is important to note that multiple product candidates are often tested simultaneously. It is not possible to calculate each antibody's supply costs. There are many different development processes and test methods that examine multiple product candidates at the same time. We have, historically, tracked our costs in the categories discussed below, specifically "research costs" and "product development costs" and by the types of costs outlined below. Our research costs consist of outside costs associated with animal studies and costs associated with research and testing of our product candidates prior to reaching the clinical stage. Such research costs primarily include personnel costs, facilities, including depreciation, lab supplies, funding of outside contracted research and license fees. Our product development costs consist of costs from preclinical development (including manufacturing), conducting and administering clinical trials and patent expenses. The following table summarizes our research and development costs for the three months endedJune 30, 2020 , compared to the three months endedJune 30, 2019 : ($ in thousands) (Decrease)/Increase Three Months Ended June 30, 2020 2019 2020 vs 2019 Labor$ 20,285 $ 12,317 $ 7,968 64.7% Manufacturing and quality costs 3,463 27,136 (23,673) (87.2)% Clinical development and operations 15,078 11,294 3,784 33.5% Other 3,735 2,176 1,559 71.6% Total research and development costs$ 42,561 $ 52,923 $ (10,362) (19.6)% nm - not meaningful Research and development costs decreased for the three months endedJune 30, 2020 by approximately$10.4 million to$42.6 million compared to the three months endedJune 30, 2019 , primarily due to a decrease in manufacturing and quality costs as all costs were expensed to research and development in the prior period and a portion of such costs are capitalized in the current period due to FDA approval of Trodelvy. The decrease is partially offset by an increase in labor costs due to higher headcount, incentive and stock-based compensation expense recognized upon FDA approval, and an increase in clinical development and operational costs due to the expansion of clinical trials with increased enrollment. Completion of clinical trials may take several years or more. The length of time varies according to the type, complexity and the disease indication of the product candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following periods: Estimated Completion Period Clinical Phase (Years) I 0-1 II 1-2 III 1-4 The duration and cost of clinical trials through each of the clinical phases may vary significantly over the life of a particular project as a result of, among other things, the following factors:
•the length of time required to recruit qualified patients for clinical trials; •the duration of patient follow-up in light of trial results; •the number of clinical sites required for trials; and •the number of patients that ultimately participate.
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Table of Contents Sales and Marketing The following table summarizes our sales and marketing expenses for the three months endedJune 30, 2020 , compared to the three months endedJune 30, 2019 : ($ in thousands) Increase
Three Months Ended June 30, 2020 2019 2020 vs 2019
Labor costs $ 8,415 $ 5,322 $ 3,093 58.1%
Marketing and promotions 3,057 347
2,710 nm
Consulting services 333 73 260 nm
Other 1,078 604 474 78.5%
Total sales and marketing
nm
nm- not meaningful
Sales and marketing expenses for the three months ended June 30, 2020 increased
by approximately $6.5 million compared to the three months ended June 30, 2019 ,
primarily due to increased labor costs due to incentive and stock-based
compensation related to our sales force recognized upon FDA approval, and an
increase in marketing and promotional costs in connection with the launch of
Trodelvy in the United States for patients with mTNBC.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the three months endedJune 30, 2020 , compared to the three months endedJune 30, 2019 : ($ in thousands) Increase/(Decrease) Three Months Ended June 30, 2020 2019 2020 vs 2019 Labor costs$ 9,455 $ 2,393 $ 7,062 nm Legal and advisory fees 1,561 2,856 (1,295) (45.3)% Consulting services 1,086 1,066 20 1.9% Other 3,871 1,584 2,287 nm
Total general and administrative
8,074 nm nm - not meaningful
General and administrative expenses for the three months ended
Interest Expense Interest expense for the three months endedJune 30, 2020 was$14.2 million , compared to$10.6 million for the three months endedJune 30, 2019 . The$3.6 million increase was due primarily to changes in the fair value of our debt balances as a result of the RPI agreement. Refer to "Note 5 - Debt" for more information. Income Tax Expense
There was no income tax expense for the three months ended
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Six-Month Period Ended
Revenues We began to record product revenue, net in the second quarter of 2020 following the approval of Trodelvy by the FDA inApril 2020 and its subsequent commercial launch inthe United States . We did not generate any revenue from product sales prior to the three months endedJune 30, 2020 . Total product revenue, net for the six months endedJune 30, 2020 was$20.1 million . Costs and Expenses ($ in thousands) Increase/(Decrease) Six Months Ended June 30, 2020 2019
2020 vs 2019
Cost of goods sold$ 1,669 $ - $ 1,669 nm Research and development 104,989 111,095
(6,106) (5.5)%
Sales and marketing 20,950 14,227
6,723 47.3%
General and administrative 27,446 21,494
5,952 27.7%
Total costs and expenses
8,238 5.6%
nm - not meaningful
Total costs and expenses for the six months endedJune 30, 2020 increased$8.2 million compared to the six months endedJune 30, 2019 , primarily due to an increase in sales and marketing expenses of$6.7 million , an increase in general and administrative expenses of$6.0 million , and an increase in costs of goods sold of$1.7 million , partially offset by a decrease in research and development expenses of$6.1 million . Cost of Goods Sold Cost of product revenues consist primarily of direct and indirect costs related to the manufacturing of Trodelvy sold, including third-party manufacturing costs, packaging services, freight, allocation of overhead costs, and inventory adjustment charges, in addition to royalty expenses. We began capitalizing inventory upon FDA approval of Trodelvy. Cost of product revenues was$1.7 million for the six months endedJune 30, 2020 . All product costs incurred prior to FDA approval of Trodelvy inApril 2020 were expensed as research and development expenses.
Research and Development
The following table summarizes our research and development costs for the six
months ended
($ in thousands)
(Decrease)/Increase
Six Months Ended June 30, 2020 2019 2020 vs 2019
Labor $ 35,192 $ 23,871 $ 11,321 47.4%
Manufacturing and quality costs 36,348 66,794 (30,446) (45.6)%
Clinical development and operations 25,504 15,949 9,555 59.9%
Other 7,945 4,481 3,464 nm
Total research and development costs $ 104,989 $ 111,095 $ (6,106) (5.5)%
nm - not meaningful
Research and development costs decreased for the six months ended June 30, 2020
by approximately $6.1 million to $105.0 million compared to the six months ended
June 30, 2019 . The decrease is primarily due to a decrease in manufacturing and
quality costs as all costs were expensed to research and development in the
prior period and a portion of such costs are capitalized in the current period
due to FDA approval of Trodelvy. The decrease is partially offset by an
increased clinical development and operational costs due to the expansion of
clinical trials with increased enrollment and an increase in labor costs due to
higher headcount, incentive and stock-based compensation expense recognized upon
FDA approval.
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Table of Contents Sales and Marketing
The following table summarizes our sales and marketing expenses for the six
months ended
($ in thousands)
Increase
Six Months Ended June 30, 2020 2019 2020 vs 2019
Labor costs $ 13,661 $ 12,009 $ 1,652 13.8%
Marketing and promotions 4,565 1,004
3,561 nm
Consulting services 635 73 562 nm
Other 2,089 1,141 948 83.1%
Total sales and marketing
nm- not meaningful
Sales and marketing expenses for the six months ended June 30, 2020 increased by
approximately $6.7 million compared to the six months ended June 30, 2019 ,
primarily due to an increase in marketing and promotional costs in connection
with the launch of Trodelvy in the United States for patients with mTNBC, and an
increase in labor costs due to incentive and stock-based compensation related to
our sales force recognized upon FDA approval.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the six months endedJune 30, 2020 , compared to the six months endedJune 30, 2019 : ($ in thousands) Increase/(Decrease) Six Months Ended June 30, 2020 2019 2020 vs 2019 Labor costs$ 14,298 $ 9,206 $ 5,092 55.3 % Legal and advisory fees 3,310 3,910 (600) (15.3) % Consulting services 2,204 3,212 (1,008) (31.4) % Other 7,634 5,166 2,468 47.8 % Total general and administrative$ 27,446 $ 21,494 $
5,952 27.7 %
General and administrative expenses for the six months endedJune 30, 2020 increased by approximately$6.0 million compared to the six months endedJune 30, 2019 , primarily due to increased labor costs due to incentive and stock-based compensation recognized upon FDA approval of Trodelvy, partially offset by a decrease in both consulting services and legal and advisory fees due to decreased reliance on outside legal counsel and consultants. Interest Expense Interest expense for the six months endedJune 30, 2020 was$27.8 million , compared to$20.6 million for the six months endedJune 30, 2019 . The$7.2 million increase was due primarily to changes in the fair value of our debt balances as a result of the RPI agreement. Refer to "Note 5 - Debt" for more information. Income Tax Expense
There was no income tax expense for the six months ended
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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 June 30, 2020 , we had $975.5 million in cash, cash equivalents and
marketable securities. We believe our projected financial resources are adequate
to (i) support commercial launch of Trodelvy in the United States in mTNBC, (ii)
continue to expand the clinical development programs for developing Trodelvy in
mTNBC, metastatic urothelial cancer ("mUC"), hormone receptor-positive
("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic
breast cancer ("mBC"), and other indications of high medical need, (iii) invest
in the broader clinical development of the platform (including IMMU-130 and
IMMU-140), (iv) continue scale-up manufacturing and manufacturing process
improvements, and (v) general working capital requirements. 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 public capital markets financing. Refer to "Note 8 -
Stockholders' Equity" for additional information.
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, "Risks Relating to Our Business, Operations and Product
Development," and elsewhere in this Quarterly Report on Form 10-Q. 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
factors 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 six months endedJune 30, 2020 and 2019: ($ in thousands) Six Months Ended June 30, 2020 2019 Net cash used in operating activities$ (102,694) $ (67,173) Net cash used in investing activities$ (1,324) $ (5,699) Net cash provided by financing activities$ 466,588 $ 7,935 Net cash used in operating activities. Net cash used in operating activities during the six months endedJune 30, 2020 was approximately$102.7 million , compared to$67.2 million during the six months endedJune 30, 2019 , an increase in cash used in operating activities of$35.5 million . The increase in cash used in operating activities for the period was primarily due to changes in working capital due to commercialization efforts and clinical trial expenses. Net cash used in investing activities. Net cash used in investing activities during the six months endedJune 30, 2020 was$1.3 million , compared to$5.7 million during the six months endedJune 30, 2019 . The decrease of$4.4 million was due to a decrease in purchases of property and equipment. Net cash provided by financing activities. Net cash provided by financing activities during the six months endedJune 30, 2020 was$466.6 million , compared to$7.9 million during the six months endedJune 30, 2019 . The increase of$458.7 million was primarily due to receipt of approximately$464.6 million in net proceeds from a public offering of our common stock onMay 1, 2020 . 32
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Working Capital and Cash Requirements
Working capital was
We expect to continue to fund our operations with our current financial resources. However, if we do require additional funding in the future, 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 Trodelvy as a third-line therapy for mTNBC inthe United States , 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 Trodelvy as a third-line therapy for mTNBC inthe United States , 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, "Risks Relating to Our Business, Operations and Product Development" and elsewhere in our Quarterly Report on Form 10-Q. 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 factors 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.
Off-Balance Sheet Arrangements
We did not have during the periods presented in this quarterly report on Form
10-Q, and we do not currently have, any off-balance sheet arrangements, as
defined in the rules and regulations of the
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