Table of
Contents
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 December 31, 2009
OR
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 0-17999
ImmunoGen, Inc.
Massachusetts
|
|
04-2726691
|
(State or other jurisdiction of incorporation or
organization)
|
|
(I.R.S. Employer Identification No.)
|
830 Winter Street, Waltham, MA 02451
(Address of principal executive offices, including zip code)
(781) 895-0600
(Registrants telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
x
Yes
o
No
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, 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).
o
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
|
|
Accelerated filer
x
|
|
|
|
Non-accelerated filer
o
(Do not check
if a smaller reporting company)
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|
Smaller reporting company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
o
Yes
x
No
Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.
Shares
of common stock, par value $.01 per share: 57,360,914 shares outstanding
as of January 25, 2010.
Table of Contents
ITEM 1.
Financial Statements
IMMUNOGEN,
INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
In
thousands, except per share amounts
|
|
December 31,
2009
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June 30,
2009
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
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|
Cash and cash equivalents
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$
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51,220
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$
|
69,639
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|
Marketable securities
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|
1,213
|
|
1,486
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|
Accounts receivable
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|
1,981
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|
1,746
|
|
Unbilled revenue
|
|
1,150
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561
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|
Inventory
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1,234
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|
1,836
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|
Restricted cash
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574
|
|
366
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|
Prepaid and other current assets
|
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1,161
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|
1,232
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|
Total current assets
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58,533
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76,866
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|
|
|
|
|
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Property and equipment, net of accumulated
depreciation
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18,081
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19,671
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|
Long-term restricted cash
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|
3,887
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|
4,142
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|
Other assets
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|
36
|
|
25
|
|
|
|
|
|
|
|
Total assets
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$
|
80,537
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|
$
|
100,704
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|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
|
|
|
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Accounts payable
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$
|
1,981
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|
$
|
1,244
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|
Accrued compensation
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|
2,181
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|
4,140
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|
Other accrued liabilities
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|
2,665
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|
1,566
|
|
Current portion of deferred lease incentive
|
|
979
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|
979
|
|
Current portion of deferred revenue
|
|
3,769
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|
3,199
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|
Total current liabilities
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|
11,575
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|
11,128
|
|
|
|
|
|
|
|
Deferred lease incentive, net of current portion
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|
9,051
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|
9,540
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|
Deferred revenue, net of current portion
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|
9,782
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|
9,543
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|
Other long-term liabilities
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|
3,810
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|
3,636
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|
Total liabilities
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34,218
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|
33,847
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|
Commitments and contingencies (Note E)
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|
|
|
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|
Shareholders equity:
|
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|
|
|
|
Preferred stock, $.01 par value; authorized 5,000
shares; no shares issued and outstanding
|
|
|
|
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|
Common stock, $.01 par value; authorized 100,000
shares; issued and outstanding 57,310 and 56,947 shares as of
December 31, 2009 and June 30, 2009, respectively
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573
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|
569
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|
Additional paid-in capital
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|
392,433
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|
387,947
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|
Accumulated deficit
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|
(346,834
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)
|
(321,451
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)
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Accumulated other comprehensive income (loss)
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|
147
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|
(208
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)
|
Total shareholders equity
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|
46,319
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|
66,857
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|
Total liabilities and shareholders equity
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$
|
80,537
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|
$
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100,704
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|
The accompanying
notes are an integral part of the consolidated financial statements.
3
Table of Contents
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
In thousands, except per share amounts
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Three Months Ended
December 31,
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Six Months Ended
December 31,
|
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2009
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2008
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|
2009
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2008
|
|
|
|
|
|
|
|
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|
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|
Revenues:
|
|
|
|
|
|
|
|
|
|
Research and development support
|
|
$
|
1,283
|
|
$
|
2,283
|
|
$
|
2,065
|
|
$
|
5,490
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|
License and milestone fees
|
|
827
|
|
4,766
|
|
2,658
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|
6,989
|
|
Clinical materials reimbursement
|
|
998
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|
2,285
|
|
1,484
|
|
2,981
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
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|
3,108
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|
9,334
|
|
6,207
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|
15,460
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|
|
|
|
|
|
|
|
|
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|
Operating Expenses:
|
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|
|
|
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|
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Research and development
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12,211
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|
12,888
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|
24,399
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|
24,748
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|
General and administrative
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3,886
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|
3,521
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|
7,478
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7,199
|
|
|
|
|
|
|
|
|
|
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|
Total operating expenses
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|
16,097
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|
16,409
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|
31,877
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|
31,947
|
|
|
|
|
|
|
|
|
|
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|
Loss from operations
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|
(12,989
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)
|
(7,075
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)
|
(25,670
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)
|
(16,487
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)
|
|
|
|
|
|
|
|
|
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|
Other (expense) income, net
|
|
(19
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)
|
(129
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)
|
125
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|
(113
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)
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit for income taxes
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|
(13,008
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)
|
(7,204
|
)
|
(25,545
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)
|
(16,600
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)
|
|
|
|
|
|
|
|
|
|
|
Benefit for income taxes
|
|
|
|
(101
|
)
|
(162
|
)
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
Net loss
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|
$
|
(13,008
|
)
|
$
|
(7,103
|
)
|
$
|
(25,383
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)
|
$
|
(16,500
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
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|
$
|
(0.23
|
)
|
$
|
(0.14
|
)
|
$
|
(0.44
|
)
|
$
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares
outstanding
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|
57,156
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|
50,822
|
|
57,094
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|
50,802
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|
The accompanying notes are an integral part of the consolidated
financial statements.
4
Table of Contents
IMMUNOGEN, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
In thousands, except per share
amounts
|
|
Six months ended December 31,
|
|
|
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2009
|
|
2008
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net loss
|
|
$
|
(25,383
|
)
|
$
|
(16,500
|
)
|
Adjustments to reconcile net loss to net cash used
for operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
2,472
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|
2,491
|
|
Loss on sale/disposal of fixed assets
|
|
6
|
|
2
|
|
Amortization of deferred lease incentive
|
|
(489
|
)
|
(486
|
)
|
Loss on sale of marketable securities
|
|
|
|
33
|
|
Other-than-temporary impairment of marketable
securities
|
|
|
|
402
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|
Loss on forward contracts
|
|
33
|
|
182
|
|
Stock and deferred share unit compensation
|
|
2,345
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|
2,226
|
|
Deferred rent
|
|
33
|
|
1,057
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
(235
|
)
|
(1,489
|
)
|
Unbilled revenue
|
|
(589
|
)
|
2,091
|
|
Inventory
|
|
602
|
|
1,636
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|
Prepaid and other current assets
|
|
67
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|
(1,033
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)
|
Restricted cash
|
|
47
|
|
48
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|
Other assets
|
|
(11
|
)
|
12
|
|
Accounts payable
|
|
737
|
|
991
|
|
Accrued compensation
|
|
(1,959
|
)
|
2,061
|
|
Other accrued liabilities
|
|
1,249
|
|
(1,473
|
)
|
Deferred revenue
|
|
809
|
|
6,622
|
|
Proceeds from landlord for tenant improvements
|
|
|
|
750
|
|
Net cash used for operating activities
|
|
(20,266
|
)
|
(377
|
)
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Proceeds from maturities or sales of marketable
securities
|
|
628
|
|
7,232
|
|
Purchases of property and equipment, net
|
|
(888
|
)
|
(1,037
|
)
|
Payments from settlement of forward contracts
|
|
(26
|
)
|
(279
|
)
|
Net cash (used for) provided by investing
activities
|
|
(286
|
)
|
5,916
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from stock options exercised
|
|
2,133
|
|
268
|
|
Net cash provided by financing activities
|
|
2,133
|
|
268
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
(18,419
|
)
|
5,807
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning balance
|
|
69,639
|
|
31,619
|
|
|
|
|
|
|
|
Cash and cash equivalents, ending balance
|
|
$
|
51,220
|
|
$
|
37,426
|
|
The accompanying notes are an integral part of the
consolidated financial statements.
5
Table of
Contents
IMMUNOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31,
2009
A. Summary of
Significant Accounting Policies
Basis of Presentation
The accompanying
unaudited consolidated financial statements at December 31, 2009 and June 30,
2009 and for the three and six months ended December 31, 2009, and 2008
include the accounts of ImmunoGen, Inc., or the Company, and its
wholly-owned subsidiaries, ImmunoGen Securities Corp. and ImmunoGen Europe
Limited. The consolidated financial statements include all of the adjustments,
consisting only of normal recurring adjustments, which management considers
necessary for a fair presentation of the Companys financial position in
accordance with accounting principles generally accepted in the U.S. for
interim financial information. Certain information and footnote disclosures
normally included in the Companys annual financial statements have been
condensed or omitted. The preparation of interim financial statements requires
the use of managements estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the interim financial statements and the reported
amounts of revenues and expenditures during the reported period. The results of
the interim periods are not necessarily indicative of the results for the
entire year. Accordingly, the interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Companys Annual Report on Form 10-K for the year ended June 30,
2009.
Subsequent Events
The Company has evaluated all events or transactions
that occurred after December 31, 2009 up through January 29, 2010, the
date the Company issued these financial statements. During this period the Company did not have
any material recognizable or unrecognizable subsequent events.
Other-than-Temporary Impairments
An other-than-temporary impairment must be recognized through earnings
if an investor has the intent to sell the debt security or if it is more likely
than not that the investor will be required to sell the debt security before
recovery of its amortized cost basis. In the event of a credit loss, only the
amount associated with the credit loss is recognized in net loss. The amount of
loss relating to other factors is recorded in accumulated other comprehensive
loss.
The Company adopted certain provisions of FASBs Accounting Standards
Codification
(ASC)
Topic 820, Investments Debt and Equity Securities,
on April 1,
2009. As a result of the adoption, $54,000 of previously recognized
other-than-temporary impairment charges was reclassified to other comprehensive
loss as a cumulative effect adjustment.
The Company conducts periodic reviews to identify and evaluate each
investment that has an unrealized loss, which exists when the current fair
value of an individual security is less than its amortized cost basis.
Unrealized losses on available-for-sale securities that are determined to be
temporary, and not related to credit loss, are recorded in accumulated other
comprehensive loss.
For available-for-sale debt securities with unrealized losses,
management performs an analysis to assess whether it intends to sell or whether
it would more likely than not be required to sell the security before the
expected recovery of the amortized cost basis. Where the Company intends to
sell a security, or may be required to do so, the securitys decline in fair
value is deemed to be other-than-temporary and the full amount of the
unrealized loss is recorded in the statement of operations as an
other-than-temporary impairment charge. When this is not the case, the Company
performs additional analysis on all securities with unrealized losses to
evaluate losses associated with the creditworthiness of the security. Credit
losses are identified where the Company does not expect to receive cash flows,
based on using a single best estimate, sufficient to recover the amortized cost
basis of a security and these are recognized in other income (expense), net.
Fair Value of Financial Instruments
Fair
value is defined under ASC Topic 820 as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.
Valuation techniques used to measure fair value under Topic 820 must maximize
the use of observable inputs and minimize the use of unobservable inputs.
The topic describes a fair value hierarchy to measure fair value which is based
on three levels of inputs, of which the first two are considered observable and
the last unobservable, as follows:
6
Table of Contents
·
Level 1 - Quoted prices in active markets
for identical assets or liabilities.
·
Level 2 - Inputs other than Level 1 that
are observable, either directly or indirectly, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
·
Level 3 - Unobservable inputs that are
supported by little or no market activity and that are significant to the fair
value of the assets or liabilities.
As of December 31,
2009, the Company held certain assets that are required to be measured at fair
value on a recurring basis, including our cash equivalents and marketable
securities. In accordance with Topic 820, the following table represents
the fair value hierarchy for our financial assets measured at fair value on a
recurring basis as of December 31, 2009 (in thousands):
|
|
Fair Value Measurements at December 31, 2009 Using
|
|
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Cash, cash equivalents and restricted cash
|
|
$
|
55,681
|
|
$
|
55,681
|
|
$
|
|
|
$
|
|
|
Available-for-sale marketable securities
|
|
1,213
|
|
|
|
1,213
|
|
|
|
|
|
$
|
56,894
|
|
$
|
55,681
|
|
$
|
1,213
|
|
$
|
|
|
The
fair value of the Companys investments is generally determined from market
prices based upon either quoted prices from active markets or other significant
observable market transactions at fair value.
The carrying amounts reflected in the consolidated
balance sheets for accounts receivable, unbilled revenue, restricted cash,
prepaid and other current assets, accounts payable, accrued compensation, and
other accrued liabilities approximate fair value due to their short-term
nature.
Unbilled Revenue
The
majority of the Companys unbilled revenue at December 31, 2009 and June 30,
2009 represents research funding earned based on actual resources utilized
under the Companys agreements with various collaborators.
Inventory
Inventory
costs primarily relate to clinical trial materials being manufactured for sale
to the Companys collaborators. Inventory is stated at the lower of cost or
market as determined on a first-in, first-out (FIFO) basis.
Inventory
at December 31, 2009 and June 30, 2009 is summarized below (in
thousands):
|
|
December 31,
2009
|
|
June 30,
2009
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
1,234
|
|
$
|
952
|
|
Work in process
|
|
|
|
884
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,234
|
|
$
|
1,836
|
|
All
Targeted Antibody Payload, or TAP, product candidates currently in preclinical
and clinical testing through ImmunoGen or its collaborators include either DM1
or DM4 as a cell-killing agent. Raw materials inventory consists entirely of
DM1 and DM4, collectively referred to as DMx.
Inventory
cost is stated net of write-downs of $1.7 million and $1.8 million as of December 31,
2009 and June 30, 2009, respectively. The write-downs represent the cost
of raw materials that the Company considers to be in excess of a twelve-month
supply based on firm, fixed orders and projections from its collaborators as of
the respective balance sheet date. The Company recorded $530,000 of expense
related to excess inventory during the three-month period ended December 31,
2009. No similar charges were recorded during the three or six-month period
ended December 31, 2008.
7
Table of Contents
Computation of Net Loss per
Common Share
Basic and diluted net loss
per share is calculated based upon the weighted average number of common shares
outstanding during the period. The Companys common stock equivalents, as
calculated in accordance with the treasury-stock accounting method, are shown
in the following table (in thousands):
|
|
Three Months Ended
December 31,
|
|
Six Months Ended
December 31,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Options to purchase common stock
|
|
6,489
|
|
5,629
|
|
6,489
|
|
5,629
|
|
|
|
|
|
|
|
|
|
|
|
Common stock equivalents under treasury stock
method
|
|
1,910
|
|
312
|
|
1,956
|
|
516
|
|
The Companys common stock equivalents have not been
included in the net loss per share calculation because their effect is
anti-dilutive due to the Companys net loss position.
Comprehensive Loss
For the three and six months ended December 31,
2009, total comprehensive loss equaled $12.9 million and $25.2 million,
respectively. For the three and six months ended December 31, 2008, total
comprehensive loss equaled $7.3 million and $16.6 million, respectively.
Comprehensive loss is comprised of the Companys net loss for the period and
unrealized gains and losses recognized on available-for-sale marketable
securities.
Stock-Based Compensation
As of December 31,
2009, the Company is authorized to grant future awards under one employee
share-based compensation plan, which is the ImmunoGen, Inc. 2006 Employee,
Director and Consultant Equity Incentive Plan, or the 2006 Plan. As amended,
the 2006 Plan provides for the issuance of Stock Grants, the grant of Options
and the grant of Stock-Based Awards for up to 4,500,000 shares of the Companys
common stock, as well as any shares of common stock that are represented by
awards granted under the previous stock option plan, the ImmunoGen, Inc.
Restated Stock Option Plan, or the Former Plan, that are forfeited, expire or
are cancelled without delivery of shares of common stock; provided, however,
that no more than 5,900,000 shares shall be added to the Plan from the Former
Plan, pursuant to this provision. Option awards are granted with an exercise
price equal to the market price of the Companys stock at the date of grant.
Options vest at various periods of up to four years and may be exercised within
ten years of the date of grant.
The fair value of each stock
option is estimated on the date of grant using the Black-Scholes option-pricing
model with the assumptions noted in the following table. As the Company has not
paid dividends since inception, nor does it expect to pay any dividends for the
foreseeable future, the expected dividend yield assumption is zero. Expected
volatility is based exclusively on historical volatility data of the Companys
stock. The expected term of stock options granted is based exclusively on
historical data and represents the period of time that stock options granted
are expected to be outstanding. The expected term is calculated for and applied
to one group of stock options as the Company does not expect substantially
different exercise or post-vesting termination behavior among its employee
population. The risk-free rate of the stock options is based on the U.S.
Treasury rate in effect at the time of grant for the expected term of the stock
options.
|
|
Three
Months Ended December
31,
|
|
Six
Months Ended
December 31,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Dividend
|
|
None
|
|
None
|
|
None
|
|
None
|
|
Volatility
|
|
59.32%
|
|
63.39%
|
|
59.95%
|
|
63.33%
|
|
Risk-free
interest rate
|
|
2.95%
|
|
3.11%
|
|
3.21%
|
|
3.14%
|
|
Expected
life (years)
|
|
7.1
|
|
7.1
|
|
6.9
|
|
7.1
|
|
8
Table of Contents
Using the Black-Scholes option-pricing model, the
weighted average grant date fair values of options granted during the three
months ended December 31, 2009 and 2008 were $4.89 and $2.65 per share,
respectively, and $5.87 and $2.71 for options granted during the six months
ended December 31, 2009 and 2008, respectively.
Stock
compensation expense incurred during the three and six months ended December 31,
2009 was $1.2 million and $2.1 million, respectively. Stock compensation expense incurred during
the three and six months ended December 31, 2008 was $838,000 and $2.1
million, respectively.
As of December 31,
2009, the estimated fair value of unvested employee awards was $7.1 million,
net of estimated forfeitures. The weighted-average remaining vesting period for
these awards is approximately three years.
During the six months
ended December 31, 2009, holders of options issued under the Companys
equity plans exercised their rights to acquire an aggregate of 363,000 shares
of common stock
at prices ranging from $2.03 to $8.57 per share
. The total proceeds to the Company
from these option exercises were approximately $2.1 million.
Financial Instruments and Concentration of Credit
Risk
The Companys cash and cash equivalents consist principally of U.S.
Government and agency-backed money market funds which are maintained with two
financial institutions in the U.S. Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
marketable securities. Marketable securities at December 31, 2009
generally consist of high-grade corporate bonds and asset-backed securities.
The Company has classified its marketable securities as available-for-sale
and, accordingly, carries such securities at aggregate fair value. The cost of
securities sold is based on the specific identification method. The Companys
investment policy, approved by the Board of Directors, limits the amount it may
invest in any one type of investment, thereby reducing credit risk
concentrations.
Derivative instruments
include a portfolio of short duration foreign currency forward contracts
intended to mitigate the risk of exchange fluctuations for existing or
anticipated receivable and payable balances denominated in foreign currency.
Derivatives are estimated at fair value and classified as other current assets
or liabilities. The fair value of these instruments represent the present value
of estimated future cash flows under the contracts, which are a function of
underlying interest rates, currency rates, related volatility, counterparty
creditworthiness and duration of the contracts. Changes in these factors or a
combination thereof may affect the fair value of these instruments.
The
Company does not designate foreign currency forward contracts as hedges for
accounting purposes, and changes in the fair value of these instruments are
recognized in earnings during the period of change. Because the Company enters into forward
contracts only as an economic hedge, any gain or loss on the underlying
foreign-denominated existing or anticipated receivable or payable balance would
be offset by the loss or gain on the forward contract. For the three and six
months ended December 31, 2009, net losses recognized on forward contracts
were $49,000 and $33,000, respectively, and are included in the accompanying
consolidated statement of operations as other income (expense), net. As of December 31,
2009, the Company had outstanding forward contracts with amounts equivalent to
approximately $1.2 million (815,000 in Euros), all maturing on or before January 29,
2010. As of June 30, 2009, the Company had outstanding forward contracts
with amounts equivalent to approximately $517,000 (371,000 in Euros). For the
three and six months ended December 31, 2008, net losses recognized on
forward contracts were $79,000 and $182,000, respectively. The Company does not
anticipate using derivative instruments for any purpose other than hedging our
exchange rate exposure.
Segment
Information
During the three
and six months ended December 31, 2009, the Company continued to operate
in one reportable business segment which is the business of discovery of
monoclonal antibody-based anticancer therapeutics.
9
Table of Contents
The percentages of revenues recognized from significant customers of
the Company in the three and six months ended December 31, 2009 and 2008
are included in the following table:
|
|
Three
Months Ended
December 31,
|
|
Six
Months Ended
December 31,
|
|
Collaborative
Partner:
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Amgen
|
|
30%
|
|
1%
|
|
18%
|
|
2%
|
|
Bayer
|
|
5%
|
|
2%
|
|
23%
|
|
1%
|
|
Biogen
Idec
|
|
23%
|
|
2%
|
|
13%
|
|
7%
|
|
Biotest
|
|
11%
|
|
13%
|
|
13%
|
|
15%
|
|
sanofi-aventis
|
|
25%
|
|
80%
|
|
26%
|
|
68%
|
|
There were no other customers of the Company with significant revenues
in the three and six months ended December 31, 2009 and 2008.
Recent Accounting Pronouncements
In October 2009,
the FASB issued Accounting Standards Update 2009-13, Multiple-Deliverable
Revenue Arrangements, which establishes the accounting and reporting guidance
for arrangements under which a vendor will perform multiple revenue-generating
activities. This statement becomes effective for the Companys fiscal
year 2011. The Company is evaluating the impact this statement will have on its
financial statements.
In August 2009, the FASB issued Accounting Standards Update No. 2009-05,
Measuring Liabilities at Fair Value, which provides clarification that in
circumstances where a quoted market price in an active market for an identical
liability is not available, a reporting entity must measure fair value of the
liability using one of the following techniques: 1) the quoted price of the
identical liability when traded as an asset; 2) quoted prices for similar
liabilities or similar liabilities when traded as assets; or 3) another
valuation technique, such as a present value technique or the amount that the
reporting entity would pay to transfer the identical liability or would receive
to enter into the identical liability that is consistent with the provisions of
the standard. This standard was adopted by the Company during the first quarter
of fiscal 2010 and it did not have a material effect on the Companys financial
position or results of operations.
The provisions of ASC Topic 810, Consolidations, related to the changes
to how a reporting entity determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated will be effective for fiscal years beginning after November 15,
2009 (the Companys fiscal year 2011). Early application is not permitted. The
Company does not expect the adoption of these provisions to have a significant
impact on its financial position or results of operations.
Certain provisions of ASC Topic 860, Transfers and Servicing, require
enhanced information reported to users of financial statements by providing greater
transparency about transfers of financial assets and an entitys continuing
involvement in transferred financial assets. The provisions are effective for
fiscal years beginning after November 15, 2009 (the Companys fiscal year
2011). The Company does not expect the adoption of these provisions to have a
significant impact on its financial position or results of operations.
In January 2010, the FASB issued Accounting Standards Update No. 2010-01, Accounting for Distributions to Shareholders with Components of Stock and Cash, a consensus of the FASB Emerging Issues Task Force. The amendments in this Update clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend for purposes of applying ASC Topics 505 and 260 (Equity and Earnings per Share). Update No. 2010-01 is generally effective for interim and fiscal periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The adoption of this statement did not have an impact on the financial position or results of operations of the Company.
B.
Significant
Collaborative Agreements
sanofi-aventis
In August 2006, sanofi-aventis exercised its
final remaining option to extend the term of the research collaboration with
the Company until August 31, 2008, and committed to pay the Company a
minimum of $10.4 million in research support over the twelve months beginning September 1,
2007. The two companies subsequently agreed to extend the date of payment
through October 31, 2008 to enable completion of previously agreed-upon
research. The Company recorded the research funding as it was earned based
10
Table of Contents
upon
its actual resources utilized in the collaboration. The Company earned $81.5
million of committed funding over the duration of the research program and is
now compensated for research performed for sanofi-aventis on a mutually
agreed-upon basis.
In
October 2006, sanofi-aventis licensed non-exclusive rights to use the
Companys proprietary resurfacing technology to humanize antibodies to targets
not included in the collaboration, including antibodies for non-cancer
applications. Under the terms of the license, the Company received a $1 million
license fee, half of which was paid upon contract signing and the second half
was paid in August 2008. The Company has deferred the $1 million upfront
payment and is recognizing this amount as revenue over the five-year term of
the agreement.
In August 2008,
sanofi-aventis exercised its option under a 2006 agreement for expanded access
to the Companys TAP technology. The Company received $3.5 million with
the exercise of this option in August 2008, in addition to the $500,000
the Company received in December 2006 with the signing of the option
agreement. The agreement has a three-year term from the date of the exercise of
the option and can be renewed by sanofi-aventis for one additional three-year
term by payment of a $2 million fee. The Company has deferred the $3.5
million exercise fee and is recognizing this amount as revenue over the initial
three-year option term.
Genentech (a wholly owned member of the Roche
Group)
In
May 2000, the Company entered into a license agreement with Genentech that
granted Genentech exclusive rights to use our maytansinoid TAP technology with
antibodies, such as trastuzumab, that target HER2. We received a $2 million
upfront payment from Genentech upon execution of the agreement. We also are
entitled to up to $44 million in milestone payments from Genentech under this
agreement, as amended in May 2006, in addition to royalties on the net
sales of any resulting product. Through December 31, 2009, the Company has
received $13.5 million in milestone payments.
In
May 2000, the Company also entered into a right-to-test agreement with
Genentech that granted Genentech the right to test the Companys maytansinoid
TAP technology with Genentech antibodies to a defined number of targets on an
exclusive basis for specified option periods and to take exclusive licenses for
individual targets on agreed-upon terms to use the Companys maytansinoid TAP
technology to develop products. Under this agreement, Genentech licensed
exclusive rights to use the Companys maytansinoid TAP technology with
antibodies to four undisclosed targets. The most recent license was taken in December 2008.
For each license taken, we received a $1 million license fee and may receive up
to $38 million in milestone payments.
Bayer HealthCare AG
In
October 2008, the Company entered into a development and license agreement
with Bayer HealthCare AG. The Company received a $4 million upfront payment
upon execution of the agreement, which the Company has deferred and is
recognizing as revenue ratably over the estimated period of substantial
involvement. In September 2009, Bayer reached a preclinical milestone
which triggered a $1 million payment to the Company. This milestone is included
in license and milestone fees for the six months ended December 31, 2009.
Amgen, Inc.
In September 2009 and November 2009, the
Company entered into two development and license agreements with Amgen Inc.
granting Amgen the exclusive right to use the Companys maytansinoid TAP
technology to develop anticancer therapeutics to specific targets. These
licenses were taken under an agreement established in 2000 between ImmunoGen
and Abgenix, Inc., which later was acquired by Amgen. Under the terms of
the licenses, the Company received a $1 million upfront payment with each
license taken.
The Company has deferred the $1 million upfront
payments and is recognizing these amounts as revenue ratably over the estimated
periods of substantial involvement.
Additional information on the agreements the Company
has with these and other companies is described elsewhere in this Quarterly
Report and in its 2009 Annual Report on Form 10-K.
C. Capital Stock
2001 Non-Employee Director Stock Plan
During the three and six months ended December 31,
2009, the Company recorded approximately $(4,000) and $(12,000) in expense
reduction, respectively, related to stock units outstanding under the Companys
2001 Non-Employee Director Stock Plan. The value of the stock units is adjusted
to market value at each reporting period as the redemption amount of stock
units for this plan will be paid in cash. No stock units have been issued under
the 2001 Plan subsequent to June 30, 2004. During the three and six months
ended December 31, 2008, the Company recorded approximately $(9,000) and
$19,000 in (expense reduction) or compensation expense, respectively.
11
Table of Contents
2004 Non-Employee Director
Compensation and Deferred Share Unit Plan
The
2004 Non-Employee Director Compensation and Deferred Share Unit Plan, or 2004
Director Plan, was amended on September 5, 2006. Under the terms of the
amended 2004 Director Plan, the redemption amount of deferred share units will
be paid in shares of common stock of the Company. In addition, the vesting for
annual retainers was to take place quarterly over the three years after the
award and the number of deferred share units awarded for all compensation is
now based on the market value of the Companys common stock on the date of the
award.
On September 16,
2009, the Board adopted a new Compensation Policy for Non-Employee Directors,
which superseded the 2004 Plan and made certain changes to the compensation of
its non-employee directors. The policy
was amended on November 11, 2009 to provide that, whenever the Board has a
non-employee Chairman in lieu of a Lead Director, the cash payment for the
non-employee Chairman of the Board shall be the same as the cash compensation
that would otherwise have been payable to the Lead Director. Effective November 12,
2009, non-employee directors became entitled to receive annual meeting fees and
committee fees under the new policy. The new policy made changes to the equity
portion of the non-employee director compensation, but left the cash portion
unchanged. Effective November 11, 2009, non-employee directors became
entitled to receive deferred stock units under the new policy as follows.
·
New non-employee directors will be initially awarded a
number of deferred stock units having an aggregate market value of $65,000,
based on the closing price of our common stock on the date of their initial
election to the Board. These awards will
vest quarterly over three years from the date of grant, contingent upon the
individual remaining a director of ImmunoGen as of each vesting date.
·
On the first anniversary of a non-employee directors
initial election to the Board, such non-employee director will be awarded a
number of deferred stock units having an aggregate market value of $30,000,
based on the closing price of our common stock on such date of grant and
pro-rated based on the number of whole months remaining between the first day
of the month in which such grant date occurs and the first October 31
following the grant date. These awards
will generally vest quarterly over approximately the period from the grant date
to the first November 1 following the grant date, contingent upon the
individual remaining a director of ImmunoGen as of each vesting date.
·
Thereafter, non-employee directors in general will be
annually awarded a number of deferred stock units having an aggregate market
value of $30,000, based on the closing price of our common stock on the date of
our annual meeting of shareholders.
These awards will vest quarterly over approximately one year from the
date of grant, contingent upon the individual remaining a director of ImmunoGen
as of each vesting date.
As
with the 2004 Plan, vested deferred stock units are redeemed on the date a
director ceases to be a member of the Board, at which time such directors
deferred stock units will be settled in shares of our common stock issued under
our 2006 Plan at a rate of one share for each vested deferred stock unit then
held. Any deferred stock units that
remain unvested at that time will be forfeited.
The new policy provides that all unvested deferred stock units will
automatically vest immediately prior to the occurrence of a change of control,
as defined in the 2006 Plan.
In
connection with the adoption of the new compensation policy, the Board also
amended the 2004 Plan as follows:
·
All unvested deferred stock awards (other than any
unvested initial awards) were vested in full on September 16, 2009 unless
the date such deferred stock units were credited to the non-employee director
was less than one year prior to September 16, 2009, in which case such
unvested deferred stock units will vest on the first anniversary of the date
such deferred stock units were credited to the non-employee director.
·
All unvested deferred stock awards will automatically
vest prior to the occurrence of a change of control.
During the three and six months ended December 31,
2009,
the Company recorded approximately
$75,000 and $292,000 in compensation expense, respectively, related to deferred
share units issued and outstanding under the amended 2004 Director Plan. During
the three and six months ended December 31, 2008, the Company
recorded approximately $37,000 and $71,000 in compensation expense,
respectively.
12
Table of Contents
D. Marketable Securities
As of December 31, 2009, $51.2 million in cash and money
market funds were classified as cash and cash equivalents. The Companys cash,
cash equivalents and marketable securities as of December 31, 2009 are as
follows (in thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Cash and money market funds
|
|
$
|
51,220
|
|
$
|
|
|
$
|
|
|
$
|
51,220
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
Current
|
|
119
|
|
16
|
|
(2
|
)
|
133
|
|
Non-current
|
|
922
|
|
183
|
|
(50
|
)
|
1,055
|
|
Corporate notes
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
25
|
|
|
|
|
|
25
|
|
Total
|
|
$
|
52,286
|
|
$
|
199
|
|
$
|
(52
|
)
|
$
|
52,433
|
|
Less amounts classified as cash and cash
equivalents
|
|
(51,220
|
)
|
|
|
|
|
(51,220
|
)
|
Total marketable securities
|
|
$
|
1,066
|
|
$
|
199
|
|
$
|
(52
|
)
|
$
|
1,213
|
|
As of June 30, 2009, $69.6 million in cash and money market
funds were classified as cash and cash equivalents. The Companys cash, cash
equivalents and marketable securities as of June 30, 2009 are as follows
(in thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Cash and money market funds
|
|
$
|
69,639
|
|
$
|
|
|
$
|
|
|
$
|
69,639
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
Current
|
|
395
|
|
25
|
|
(25
|
)
|
395
|
|
Non-current
|
|
1,024
|
|
201
|
|
(410
|
)
|
815
|
|
Corporate notes
|
|
|
|
|
|
|
|
|
|
Current
|
|
250
|
|
|
|
|
|
250
|
|
Non-current
|
|
25
|
|
1
|
|
|
|
26
|
|
Total
|
|
$
|
71,333
|
|
$
|
227
|
|
$
|
(435
|
)
|
$
|
71,125
|
|
Less amounts classified as cash and cash
equivalents
|
|
(69,639
|
)
|
|
|
|
|
(69,639
|
)
|
Total marketable securities
|
|
$
|
1,694
|
|
$
|
227
|
|
$
|
(435
|
)
|
$
|
1,486
|
|
During the six month period ended December 31, 2009, the Company
had no realized gains or losses on the sale of investments, compared to
realized losses of $33,000 during the same period last year.
As of December 31, 2009, the Company had 14 individual securities
in its investment portfolio, of which six were in an unrealized loss position.
The aggregate fair value of investments with unrealized losses was
approximately $561,000, of which $244,000 had been in an unrealized loss
position for more than one year, as of December 31, 2009. All such other
investments as of December 31, 2009 were either not in a loss position or
have been or were in an unrealized loss position for less than a year. As of June 30,
2009, the Company had 19 individual securities in its investment portfolio, of
which seven were in an unrealized loss position. The aggregate fair value of
investments with unrealized losses was approximately $705,000 as of June 30,
2009, of which $332,000 had been in an unrealized loss position for more than a
year, as of June 30, 2009. See Note A
Other-than-Temporary Impairments.
The Company reviewed its
investments with unrealized losses and as a result recorded $266,000 and
$402,000 as other-than-temporary impairment charges during the three and six
months ended December 31, 2008, respectively. No similar charges were recorded
during the three or six months ended December 31, 2009.
E. Commitments and
Contingencies
Effective
July 27, 2007, the Company entered into a lease agreement with
Intercontinental Fund III for the rental of approximately 89,000 square feet of
laboratory and office space at 830 Winter Street, Waltham, MA. The Company uses
this space for its corporate headquarters, research and other operations. The
initial term of the lease is for twelve years with an option for the Company to
extend the lease for two additional terms of five years. The Company is required to pay certain
operating expenses for the leased premises subject to escalation charges for
certain expense increases over a base amount.
The Company entered into a sublease in December 2009 for
14,100 square feet of this space in Waltham through January 2015.
As part of the lease agreement, the Company
received a construction allowance of up to approximately $13.3 million to build
out laboratory and office space to the Companys specifications. After
completion, the Company had recorded $12 million of leasehold
13
Table of Contents
improvements
under the construction allowance. The Company received $10.8 million from the
landlord and paid out the same amount towards these leasehold improvements. The
remaining balance of the improvements was paid directly by the landlord. The
lease term began on October 1, 2007, when the Company obtained physical
control of the space in order to begin construction.
Under the terms of the agreement, any remaining
construction allowance was to be applied evenly as a credit to rent for the
first year. The final balance of the construction allowance was determined in August 2008,
resulting in a credit of $1.3 million to the Company from the landlord during
fiscal year 2009 relating to the first year of occupancy, of which $1.0 million
was accounted for during the six-month period ended December 31, 2008.
At
December 31, 2009, the Company also leases facilities in Norwood and
Cambridge, MA under agreements through 2011. The Company is required to pay
certain operating expenses for the leased premises subject to escalation
charges for certain expense increases over a base amount. The Company entered
into a sub-sublease in May 2008 for the entire space in Cambridge, MA
through October 2010, the remainder of the sublease.
The
minimum rental commitments, including real estate taxes and other expenses, for
the next five fiscal years and thereafter under the non-cancelable operating
lease agreements discussed above are as follows (in thousands):
2010 (six months remaining)
|
|
$
|
3,135
|
|
2011
|
|
5,887
|
|
2012
|
|
4,859
|
|
2013
|
|
4,859
|
|
2014
|
|
4,925
|
|
Thereafter
|
|
30,248
|
|
Total minimum lease payments
|
|
$
|
53,913
|
|
Total minimum rental payments from subleases
|
|
(3,687
|
)
|
Total minimum lease payments, net
|
|
$
|
50,226
|
|
F. Income Taxes
During
the six months ended December 31, 2009, the Company recognized $162,000 of
tax benefit associated with U.S. research and development tax credits against
which the Company had previously provided a full valuation allowance, but which
became refundable as a result of federal legislation passed in
2009.
Due to the degree of uncertainty related to the
ultimate use of loss carryforwards and tax credits, the Company has established
a valuation allowance to fully reserve its remaining tax benefits.
ITEM 2.
Managements Discussion
and Analysis of Financial Condition and Results of Operations
OVERVIEW
Since
our inception, we have been principally engaged in the development of novel,
targeted therapeutics for the treatment of cancer using our expertise in cancer
biology, monoclonal antibodies, and small-molecule cytotoxic, or cell-killing,
agents. Our Targeted Antibody Payload, or TAP, technology uses antibodies
to deliver a potent cytotoxic agent specifically to cancer cells, and consists
of a tumor-targeting monoclonal antibody with one of our proprietary
cell-killing agents attached using one of our engineered linkers. The antibody
component enables a TAP compound to bind specifically to cancer cells that
express a particular target antigen, the highly potent cytotoxic agent serves
to kill the cancer cell, and the engineered linker controls the release of the
cytotoxic agent inside the cancer cell. Our TAP technology is designed to
enable the creation of highly effective, well-tolerated anticancer products.
All of our and our collaborative partners TAP compounds currently in
preclinical and clinical testing contain either DM1 or DM4 as the cytotoxic
agent. Both DM1 and DM4 are our proprietary derivatives of a naturally
occurring substance called maytansine. We also use our expertise in antibodies
and cancer biology to develop naked, or non-conjugated, antibody anticancer
product candidates.
We
have entered into collaborative agreements that enable companies to use our TAP
technology to develop commercial product candidates to specified targets. We
have also used our proprietary TAP technology in conjunction with our in-house
antibody expertise to develop our own anticancer product candidates. Under
the terms of our collaborative agreements, we are generally entitled to upfront
fees, milestone payments and royalties on any commercial product sales. In
addition, under certain agreements we are entitled to research and development
funding based on activities performed at our collaborative partners request.
We are reimbursed for our direct and a portion of overhead costs to manufacture
preclinical and clinical materials and, under certain collaborative agreements,
the reimbursement includes a profit margin. Currently, our collaborative
partners include Amgen, Bayer HealthCare, Biogen Idec, Biotest, Genentech (a
wholly owned member of the Roche Group) and sanofi-aventis. We expect that
substantially all of our revenue for the foreseeable future will result from
payments under our collaborative arrangements.
Details for some of our major and recent collaborative agreements
follow.
14
Table of
Contents
sanofi
-
aventis
In July 2003, we entered into a discovery,
development and commercialization collaboration with
sanofi-aventis. Inclusive of its extensions, the agreement entitled
us to receive committed research funding totaling $79.3 million over the
five years of the research collaboration. The two companies subsequently agreed
to extend the date of payment through October 31, 2008 to enable
completion of previously agreed-upon research. We earned $81.5 million of
committed research funding for activities performed under the completed
research term of this agreement, and are now compensated for research performed
for sanofi-aventis on a mutually agreed-upon basis.
The collaboration
agreement also provides for certain other payments based on the achievement of
product candidate milestones and royalties on sales of any resulting products,
if and when such sales commence. For the targets included in the collaboration
at this time, we are entitled to milestone payments potentially totaling $21.5
million for each product candidate developed under this agreement. Through December 31,
2009, we have earned and received an aggregate of $10.5 million in milestone
payments under this agreement for compounds covered under this agreement now or
in the past.
Additionally, in October 2006,
sanofi-aventis licensed non-exclusive rights to use our proprietary
humanization technology, which enables antibodies of murine origin to avoid
detection by the human immune system. Under the terms of the license, we
received a $1 million license fee, half of which was paid upon contract signing
and the second half was paid in August 2008. We have deferred the $1
million upfront payment and are recognizing this amount as revenue over the
five-year term of the agreement.
In August 2008, sanofi-aventis exercised its option under a 2006
agreement for expanded access to our TAP technology. We received
$3.5 million with the exercise of this option in August 2008, in
addition to the $500,000 we received in December 2006 with the signing of
the option agreement. The agreement has a three-year term from the date of the
exercise of the option and can be renewed by sanofi-aventis for one additional
three-year term by payment of a $2 million fee. We have deferred the $3.5 million
exercise fee and are recognizing this amount as revenue over the initial
three-year option term.
Genentech
In
May 2000, we entered into a license agreement with Genentech that granted
Genentech exclusive rights to use our maytansinoid TAP technology with
antibodies, such as trastuzumab, that target HER2. We received a $2 million
upfront payment from Genentech upon execution of the agreement. We also are
entitled to up to $44 million in milestone payments from Genentech under this
agreement, as amended in May 2006, in addition to royalties on the net
sales of any resulting product. Through December 31, 2009, we have
received $13.5 million in milestone payments.
In May 2000, we
also entered into a right-to-test agreement with Genentech that granted
Genentech the right to test our maytansinoid TAP technology with Genentech
antibodies to a defined number of targets on an exclusive basis for specified
option periods and to take exclusive licenses for individual targets on
agreed-upon terms to use our maytansinoid TAP technology to develop products.
Under this agreement, Genentech licensed exclusive rights to use our
maytansinoid TAP technology with antibodies to four undisclosed targets. The
most recent license was taken in December 2008. For each license taken, we
received a $1 million license fee and may receive up to $38 million in
milestone payments.
Bayer HealthCare
In
October 2008, we entered into a development and license agreement with
Bayer HealthCare AG. The agreement grants Bayer HealthCare exclusive rights to
use our maytansinoid TAP technology to develop and commercialize therapeutic
compounds to a specific target. We received a $4 million upfront payment upon
execution of the agreement, andfor each compound developed and marketed by
Bayer HealthCare under this collaborationwe could potentially receive up to
$170.5 million in milestone payments; additionally, we are entitled to receive
royalties on the sales of any resulting products. We will be compensated by
Bayer HealthCare at a stipulated rate for work performed on behalf of Bayer
HealthCare under a mutually agreed-upon research plan and budget which may be
amended from time to time during the term of the agreement. We also are
entitled to receive payments for manufacturing any preclinical and clinical
materials made at the request of Bayer HealthCare as well as for any related
process development activities. We have deferred the $4 million upfront payment
and are recognizing this amount as revenue over the estimated period of
substantial involvement. In September 2009,
Bayer reached a preclinical milestone which triggered a $1.0 million payment to
us. This milestone is included in license and milestone fees for the six-month
period ended December 31, 2009.
Amgen, Inc.
In
September 2009 and November 2009, we entered into two development and
license agreements with Amgen Inc. granting Amgen the exclusive right to use
our maytansinoid TAP technology to develop anticancer therapeutics to specific
targets. These licenses were taken under an agreement established in 2000
between ImmunoGen and Abgenix, Inc., which later was acquired by Amgen.
The agreement grants Amgen certain rights to test our maytansinoid TAP
technology with antibodies and to license on agreed-upon terms the right to
use the technology with antibodies to individual targets to develop products.
Under the terms of the licenses, we received a $1 million upfront payment with
each license taken. We have deferred the $1 million upfront payments and are
recognizing these amounts as revenue ratably over the estimated periods of
substantial involvement. We also are entitled to receive milestone payments
potentially totaling $34 million plus royalties on the sales of any resulting
products. When milestone fees are specifically tied to a separate earnings
process and are deemed to be substantive and at risk, revenue will be
recognized when such milestones are achieved. Amgen is responsible for the
development, manufacturing, and marketing of any products resulting from this
license.
15
Table of Contents
To date, we have not
generated revenues from commercial product sales and we expect to incur
significant operating losses for the foreseeable future. As of December 31,
2009, we had approximately $52.4 million in cash and marketable securities
compared to $71.1 million in cash and marketable securities as of June 30,
2009.
We anticipate that
future cash expenditures will be partially offset by collaboration-derived
proceeds, including milestone payments, clinical material reimbursements and
upfront fees. Accordingly, period-to-period operational results may fluctuate
dramatically based upon the timing of receipt of the proceeds. We believe that
our established collaborative agreements, while subject to specified milestone
achievements, will provide funding to assist us in meeting obligations under
our collaborative agreements while also assisting in providing funding for
the development of internal product candidates and technologies. However, we
can give no assurances that such collaborative agreement funding will, in fact,
be realized in the time frames we expect, or at all. Should we or our partners
not meet some or all of the terms and conditions of our various collaboration
agreements, we may be required to pursue additional strategic partners, secure
alternative financing arrangements, and/or defer or limit some or all of our
research, development and/or clinical projects. However, we cannot provide
assurance that any such opportunities presented by additional strategic
partners or alternative financing arrangements will be entirely available to
us, if at all.
Critical
Accounting Policies
We
prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the U.S. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to our collaborative agreements and
inventory. We base our estimates on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Actual
results may differ from these estimates.
Certain
provisions of
ASC
Topic 820, Investments Debt and Equity Securities,
related to
other non-financial assets and liabilities was adopted for the Company on July 1,
2009 and did not have a material impact on our financial position or results of
operations upon adoption; however, this standard may impact us in subsequent
periods and require additional disclosures. Refer to
Note A
Fair Value of Financial Instruments
to our unaudited consolidated
financial statements included in Item 1 of this Quarterly Report for a
discussion of our adoption of this standard.
There
were no other significant changes to our critical accounting policies from
those disclosed in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2009.
RESULTS OF OPERATIONS
Comparison of Three Months ended December 31,
2009 and 2008
Revenues
Our
total revenues for the three months ended December 31, 2009 and 2008 were
$3.1 million and $9.3 million, respectively.
The $6.2 million decrease in revenues in the three
months ended December 31, 2009 from the same period in the prior year is
attributable to a decrease in research and development support revenue, license
and milestone fees and clinical materials reimbursement revenue, all of which
are discussed below.
Research
and development support was $1.3 million for the three months ended December 31,
2009 compared with $2.3 million for the three months ended December 31,
2008. These amounts primarily represent research funding earned based on actual
resources utilized under our agreements with our collaborators shown in the
table below. The decreased research and development support fees in the current
period compared to the prior year period is primarily due to a reduction in the
amount earned from sanofi-aventis with the conclusion of its committed funding
obligations in the first half of fiscal 2009, partially offset by revenues
earned under or development and collaborations agreements with Amgen. Also
included in research and development support revenue are development fees
charged for reimbursement of our direct and overhead costs incurred in
producing and delivering research-grade materials to our collaborators and for
developing antibody-specific conjugation processes on behalf of our
collaborators and potential collaborators during the early evaluation and
preclinical testing stages of drug development. The amount of development fees
we earn is directly related to the number of our collaborators and potential
collaborators, the stage of development of our collaborators product
candidates and the resources our collaborators allocate to the development
effort. As such, the amount of development fees may vary widely from quarter to
quarter and year to year. Total revenue recognized from research and
development support from each of our collaborative partners in the three-month
periods ended December 31, 2009 and 2008 is included in the following
table (in thousands):
16
Table of
Contents
|
|
Three months ended December 31,
|
|
Research
and Development Support
|
|
2009
|
|
2008
|
|
Collaborative Partner:
|
|
|
|
|
|
Amgen
|
|
$
|
717
|
|
$
|
|
|
Bayer HealthCare
|
|
|
|
90
|
|
Biogen Idec
|
|
74
|
|
169
|
|
Biotest
|
|
300
|
|
429
|
|
Genentech
|
|
157
|
|
|
|
sanofi-aventis
|
|
35
|
|
1,595
|
|
Total
|
|
$
|
1,283
|
|
$
|
2,283
|
|
Revenues
from license and milestone fees for the three months ended December 31,
2009 decreased $3.9 million to $827,000 from $4.8 million in the same period
ended December 31, 2008. Included in license and milestone fees for the
three months ended December 31, 2008 was a $4 million milestone related to
the initiation of Phase II clinical testing of AVE1642 by sanofi-aventis. Total
revenue from license and milestone fees recognized from each of our
collaborative partners in the three-month periods ended December 31, 2009
and 2008 is included in the following table (in thousands):
|
|
Three months ended December 31,
|
|
License
and Milestone Fees
|
|
2009
|
|
2008
|
|
Collaborative Partner:
|
|
|
|
|
|
Amgen
|
|
$
|
180
|
|
$
|
128
|
|
Bayer HealthCare
|
|
154
|
|
103
|
|
Biogen Idec
|
|
57
|
|
57
|
|
Biotest
|
|
42
|
|
42
|
|
Centocor
|
|
35
|
|
34
|
|
Genentech
|
|
|
|
43
|
|
sanofi-aventis
|
|
359
|
|
4,359
|
|
Total
|
|
$
|
827
|
|
$
|
4,766
|
|
Deferred revenue of $13.6
million as of December 31, 2009 primarily represents payments received
from our collaborators pursuant to our license agreements, which we have yet to
earn pursuant to our revenue recognition policy.
Clinical
materials reimbursement decreased by approximately $1.3 million in the three
months ended December 31, 2009, to $998,000 from $2.3 million in the three
months ended December 31, 2008. We are reimbursed for certain of our
direct and overhead costs to produce clinical materials plus, for certain
programs, a profit margin. The amount of clinical materials reimbursement we
earn, and the related cost of clinical materials charged to research and
development expense, is directly related to the number of clinical trials our
collaborators are preparing or have underway, the speed of enrollment in those
trials, the dosage schedule of each clinical trial and the time period, if any,
during which patients in the trial receive clinical benefit from the clinical
materials, and the supply of clinical
grade material to our collaborators for process development and
analytical purposes. As such, the amount of clinical materials reimbursement
revenue and the related cost of clinical materials charged to research and
development expense may vary significantly from quarter to quarter and year to
year.
Research and Development Expenses
Our
net research and development expenses relate to (i) research to evaluate
new targets and to develop and evaluate new antibodies, linkers and cytotoxic
agents, (ii) preclinical testing of our own and, in certain instances, our
collaborators product candidates, and the cost of our own clinical trials, (iii) development
related to clinical and commercial manufacturing processes and (iv) manufacturing
operations which also includes raw material and process improvement efforts.
Research
and development expense for the three months ended December 31, 2009
decreased $677,000 to $12.2 million from $12.9 million for the three months
ended December 31, 2008. The decrease was primarily due to decreased
contract service expense, lower cost of clinical materials reimbursed and lower
antibody development and supply costs, partially offset by increased salaries
and related expenses, greater clinical trial costs and lower overhead
utilization.
We
are unable to accurately estimate which potential product candidates, if any,
will eventually move into our internal preclinical research program. We are
unable to reliably estimate the costs to develop these products as a result of
the uncertainties related to discovery research efforts as well as preclinical
and clinical testing. Our decision to move a product candidate into the
clinical development phase is predicated upon the results of preclinical tests.
We cannot accurately predict which, if any, of the discovery stage product
candidates will advance from preclinical testing and move into our internal
clinical development program. The clinical trial and regulatory approval
processes for our product candidates that have advanced or that we intend to
advance to clinical testing
17
Table of Contents
are lengthy, expensive
and uncertain in both timing and outcome. As a result, the pace and timing of
the clinical development of our product candidates is highly uncertain and may
not ever result in approved products. Completion dates and development costs
will vary significantly for each product candidate and are difficult to
predict. A variety of factors, many of which are outside our control, could
cause or contribute to the prevention or delay of the successful completion of
our clinical trials, or delay or prevent our obtaining necessary regulatory
approvals. The costs to take a product through clinical trials are dependent
upon, among other factors, the clinical indications, the timing, size and
design of each clinical trial, the number of patients enrolled in each trial,
and the speed at which patients are enrolled and treated. Product candidates
may be found to be ineffective or to cause unacceptable side effects during
clinical trials, may take longer to progress through clinical trials than
anticipated, may fail to receive necessary regulatory approvals or may prove
impractical to manufacture in commercial quantities at reasonable cost or with
acceptable quality.
The
lengthy process of securing FDA approvals for new drugs requires the
expenditure of substantial resources. Any failure by us to obtain, or any delay
in obtaining, regulatory approvals would materially adversely affect our
product development efforts and our business overall. Accordingly, we cannot
currently estimate, with any degree of certainty, the amount of time or money that
we will be required to expend in the future on our product candidates prior to
their regulatory approval, if such approval is ever granted. As a result of
these uncertainties surrounding the timing and outcome of our clinical trials,
we are currently unable to estimate when, if ever, our product candidates that
have advanced into clinical testing will generate revenues and cash flows.
We
do not track our research and development costs by project. Since we use our
research and development resources across multiple research and development
projects, we manage our research and development expenses within each of the
categories listed in the following table and described in more detail below (in
thousands):
|
|
Three Months Ended December 31,
|
|
Research and Development
Expense
|
|
2009
|
|
2008
|
|
Research
|
|
$
|
3,492
|
|
$
|
3,470
|
|
Preclinical and Clinical Testing
|
|
2,978
|
|
2,671
|
|
Process and Product Development
|
|
1,453
|
|
1,467
|
|
Manufacturing Operations
|
|
4,288
|
|
5,280
|
|
Total Research and Development Expense
|
|
$
|
12,211
|
|
$
|
12,888
|
|
Research
:
Research includes expenses associated with activities to identify and evaluate
new targets and to develop and evaluate new antibodies, linkers and cytotoxic
agents for our products and in support of our collaborators. Such expenses
primarily include personnel, fees to in-license certain technology, facilities
and lab supplies.
Research
expenses for the three months ended December 31, 2009 increased $22,000
compared to the three months ended December 31, 2008.
Preclinical and Clinical Testing
:
Preclinical and
clinical testing includes expenses related to preclinical testing of our own
and, in certain instances, our collaborators product candidates, regulatory
activities, and the cost of our own clinical trials. Such expenses include personnel,
patient enrollment at our clinical testing sites, consultant fees, contract
services, and facility expenses.
Preclinical and clinical
testing expenses for the three months ended December 31, 2009 increased
$307,000 to $3.0 million compared to $2.7 million for the three months ended December 31,
2008. This increase is primarily the result of an increase in clinical trial
costs resulting from increased patient enrollment and increased data
managements costs and an increase in s
alaries and related expenses due to the addition of an
executive officer and higher salary levels.
Process and Product Development
:
Process and product development expenses
include costs for development of clinical and commercial manufacturing
processes for our own and collaborator compounds. Such expenses include the
costs of personnel, contract services and facility expenses.
For the three months ended December 31,
2009, total development expenses decreased $14,000 compared to the three months
ended December 31, 2008.
Manufacturing Operations:
Manufacturing
operations expense includes costs to manufacture preclinical and clinical
materials for our own and our collaborators product candidates, and quality
control and quality assurance activities and costs to support the operation and
maintenance of our conjugate manufacturing facility. Such expenses include
personnel, raw materials for our and our collaborators preclinical studies and
clinical trials, development costs with contract manufacturing organizations,
manufacturing supplies, and facilities expense. For the three months ended December 31, 2009, manufacturing operations expense
decreased $992,000 to $4.3 million compared to $5.3 million in the same period
last year. The decrease in the three months ended December 31, 2009
as compared to the three months ended December 31, 2008 is primarily the
result of a decrease in contract service expense, a decrease in cost of
clinical materials reimbursed and a decrease in antibody development and supply
costs due to timing of supply requirements. Partially offsetting these
decreases, overhead utilization from the manufacture of clinical materials on
behalf of our collaborators decreased during the current period.
18
Table of Contents
General and Administrative Expenses
General
and administrative expenses for the three months ended December 31, 2009
increased $365,000 to $3.9 million compared to $3.5 million for the three
months ended December 31, 2008. This increase is primarily due to an
increase in patent expenses, an increase in consulting fees and an increase in
directors fees, partially offset by a decrease in salaries and related
expenses.
Other
(Expense) Income, net
Other (expense) income, net for the three months ended
December 31
, 2009 and 2008
is included in the following table (in thousands):
|
|
Three Months Ended December 31,
|
|
Other (Expense)
Income, net
|
|
2009
|
|
2008
|
|
Interest Income
|
|
$
|
45
|
|
$
|
142
|
|
Other than Temporary Impairment
|
|
|
|
(266
|
)
|
Other Income (Expense)
|
|
(64
|
)
|
(5
|
)
|
Total Other (Expense) Income, net
|
|
$
|
(19
|
)
|
$
|
(129
|
)
|
Interest Income
Interest income for the
three months ended
December 31
, 2009
decreased $97,000 to $45,000 from $142,000 for the three months ended
December 31
, 2008. The
decrease in interest income is primarily the result of lower yields on
investments reflecting lower market rates.
Other than Temporary Impairment
During the three months ended
December 31
, 2008, we recognized
$266,000 in charges for the impairment of available-for-sale securities that
were determined to be other-than-temporary following a decline in value. There were no such charges for the three
months ended December 31, 2009.
Other Income (Expense)
Other expense for the three months ended December 31,
2009 and 2008 was $64,000 and $5,000, respectively. During the three months
ended
December 31
, 2009 we
recorded net losses on forward contracts of $49,000 compared to net losses on
forward contracts of $79,000 for the three months ended
December 31
, 2008. We
incurred $(9,000) and $67,000 in foreign currency translation (losses) gains
related to obligations with non-U.S. dollar-based suppliers during the three
months ended
December 31
, 2009 and
2008, respectively.
Comparison of Six Months ended December 31, 2009 and 2008
Revenues
Our
total revenues for the six months ended December 31, 2009 and 2008 were
$6.2 million and $15.5 million, respectively.
The $9.3 million decrease in revenues in the six months
ended December 31, 2009 from the same period in the prior year is
attributable to a decrease in research and development support revenue, license
and milestone fees and clinical materials reimbursement revenue, all of which
are discussed below.
Research
and development support was $2.1 million for the six months ended December 31,
2009 compared with $5.5 million for the six months ended December 31,
2008. These amounts primarily represent research funding earned based on actual
resources utilized under our agreements with our collaborators as shown in the
table below. The decreased research and development support fees in the current
period compared to the prior year period is primarily due to a reduction in the
amount earned from sanofi-aventis with the conclusion of its committed funding
obligations in the first half of fiscal 2009. Also included in research and
development support revenue are development fees charged for reimbursement of
our direct and overhead costs incurred in producing and delivering
research-grade materials to our collaborators and for developing
antibody-specific conjugation processes on behalf of our collaborators and
potential collaborators during the early evaluation and preclinical testing
stages of drug development. The amount of development fees we earn is directly
related to the number of our collaborators and potential collaborators, the
stage of development of our collaborators product candidates and the resources
our collaborators allocate to the development effort. As such, the amount of
development fees may vary widely from quarter to quarter and year to year.
Total revenue recognized from research and development
19
Table of Contents
support from each of our
collaborative partners in the six-month periods ended December 31, 2009
and 2008 is included in the following table (in thousands):
|
|
Six months ended December 31,
|
|
Research
and Development Support
|
|
2009
|
|
2008
|
|
Collaborative Partner:
|
|
|
|
|
|
Amgen
|
|
$
|
750
|
|
$
|
3
|
|
Bayer HealthCare
|
|
|
|
122
|
|
Biogen Idec
|
|
82
|
|
407
|
|
Biotest
|
|
728
|
|
954
|
|
Genentech
|
|
352
|
|
9
|
|
sanofi-aventis
|
|
153
|
|
3,945
|
|
Other
|
|
|
|
50
|
|
Total
|
|
$
|
2,065
|
|
$
|
5,490
|
|
Revenues
from license and milestone fees for the six months ended December 31, 2009
decreased $4.3 million to $2.7 million from $7.0 million in the same period
ended December 31, 2008. Included in license and milestone fees for
the six months ended December 31, 2009 was a $1 million preclinical
milestone earned pursuant to our development and license agreement with Bayer.
Included in license and milestone fees for the six months ended December 31,
2008 was a $4 million milestone related to the initiation of Phase II clinical
testing of AVE1642 by sanofi-aventis and a $500,000 milestone related to the
initiation of Phase I clinical testing of BT-062 by Biotest. Also in the prior period, Millennium
Pharmaceuticals and Boehringer Ingelheim agreed to terminate their licenses
with us that were no longer being used to develop products and as a result, we
recognized as license and milestone fees $361,000 and $486,000, respectively,
of upfront fees previously deferred. Total revenue from license and milestone
fees recognized from each of our collaborative partners in the six-month
periods ended December 31, 2009 and 2008 is included in the following
table (in thousands):
|
|
Six months ended December 31,
|
|
License
and Milestone Fees
|
|
2009
|
|
2008
|
|
Collaborative Partner:
|
|
|
|
|
|
Amgen
|
|
$
|
327
|
|
$
|
253
|
|
Bayer HealthCare
|
|
1,308
|
|
103
|
|
Biogen Idec
|
|
114
|
|
114
|
|
Biotest
|
|
84
|
|
584
|
|
Boehringer Ingelheim
|
|
|
|
486
|
|
Centocor
|
|
69
|
|
69
|
|
Genentech
|
|
39
|
|
74
|
|
Millennium Pharmaceuticals
|
|
|
|
361
|
|
sanofi-aventis
|
|
717
|
|
4,945
|
|
Total
|
|
$
|
2,658
|
|
$
|
6,989
|
|
Clinical
materials reimbursement decreased by approximately $1.5 million in the six
months ended December 31, 2009, to $1.5 million from $3.0 million in the
six months ended December 31, 2008. We are reimbursed for certain of our
direct and overhead costs to produce clinical materials plus, for certain
programs, a profit margin. The amount of clinical materials reimbursement we
earn, and the related cost of clinical materials charged to research and
development expense, is directly related to the number of clinical trials our
collaborators are preparing or have underway, the speed of enrollment in those
trials, the dosage schedule of each clinical trial and the time period, if any,
during which patients in the trial receive clinical benefit from the clinical
materials, and the supply of clinical
grade material to our collaborators for process development and
analytical purposes. As such, the amount of clinical materials reimbursement
revenue and the related cost of clinical materials charged to research and
development expense may vary significantly from quarter to quarter and year to
year.
Research and Development Expenses
Research
and development expense for the six months ended December 31, 2009
decreased $349,000 to $24.4 million from $24.7 million for the six months ended
December 31, 2008.
20
Table of Contents
Our
categories of research and development expenses are listed in the following
table and described in more detail below (in thousands):
|
|
Six Months Ended December 31,
|
|
Research and Development
Expense
|
|
2009
|
|
2008
|
|
Research
|
|
$
|
7,108
|
|
$
|
7,073
|
|
Preclinical and Clinical Testing
|
|
6,212
|
|
4,913
|
|
Process and Product Development
|
|
2,929
|
|
3,055
|
|
Manufacturing Operations
|
|
8,150
|
|
9,707
|
|
Total Research and Development Expense
|
|
$
|
24,399
|
|
$
|
24,748
|
|
Research
:
Research includes expenses associated with activities to identify and evaluate
new targets and to develop and evaluate new antibodies, linkers and cytotoxic
agents for our products and in support of our collaborators. Such expenses
primarily include personnel, fees to in-license certain technology, facilities
and lab supplies.
Research
expenses for the six months ended December 31, 2009 increased $35,000
compared to the six months ended December 31, 2008.
Preclinical and Clinical Testing
:
Preclinical and
clinical testing includes expenses related to preclinical testing of our own
and, in certain instances, our collaborators product candidates, regulatory
activities, and the cost of our own clinical trials. Such expenses include
personnel, patient enrollment at our clinical testing sites, consultant fees,
contract services, and facility expenses.
Preclinical and clinical
testing expenses for the six months ended December 31, 2009 increased $1.3
million to $6.2 million compared to $4.9 million for the six months ended December 31,
2008. This increase is primarily the result of an increase in clinical trial
costs resulting from additional sites opened, increased patient enrollment and
increased data management costs and an increase in s
alaries and related expenses due to the addition of an
executive officer and higher salary levels.
Process and Product Development
:
Process and product development expenses
include costs for development of clinical and commercial manufacturing
processes for our own and collaborator compounds. Such expenses include the
costs of personnel, contract services and facility expenses.
For the six months ended December 31,
2009, total development expenses decreased $126,000 to $2.9 million, compared
to $3.1 million for the six months ended December 31, 2008.
Manufacturing Operations:
Manufacturing
operations expense includes costs to manufacture preclinical and clinical
materials for our own and our collaborators product candidates, and quality
control and quality assurance activities and costs to support the operation and
maintenance of our conjugate manufacturing facility. Such expenses include
personnel, raw materials for our and our collaborators preclinical studies and
clinical trials, development costs with contract manufacturing organizations,
manufacturing supplies, and facilities expense. For the six months ended December 31, 2009, manufacturing operations expense decreased $1.5 million to $8.2
million compared to $9.7 million in the same period last year. The
decrease in the six months ended December 31, 2009 as compared to the six
months ended December 31, 2008 is primarily the result of a decrease in
contract service expense, a decrease in cost of clinical materials reimbursed
and a decrease in antibody development and supply costs due to timing of supply
requirements. Partially offsetting these decreases, overhead utilization from
the manufacture of clinical materials on behalf of our collaborators decreased
during the current period.
General and Administrative Expenses
General
and administrative expenses for the six months ended December 31, 2009
increased $279,000 to $7.5 million compared to $7.2 million for the six months
ended December 31, 2008. This increase is primarily due to an increase in
patent expenses, an increase in consulting fees, an increase in directors fees
and an increase in other general corporate expenses, partially offset by a
decrease in salaries and related expenses.
Other
(Expense) Income, net
Other (expense) income, net for the six months ended
December 31
, 2009 and 2008
is included in the following table (in thousands):
|
|
Six Months Ended December 31,
|
|
Other (Expense)
Income, net
|
|
2009
|
|
2008
|
|
Interest Income
|
|
$
|
102
|
|
$
|
445
|
|
Net Realized Losses on Investments
|
|
|
|
(33
|
)
|
Other than Temporary Impairment
|
|
|
|
(402
|
)
|
Other Income (Expense)
|
|
23
|
|
(123
|
)
|
Total Other (Expense) Income, net
|
|
$
|
125
|
|
$
|
(113
|
)
|
21
Table of
Contents
Interest Income
Interest income for the six
months ended
December 31
, 2009
decreased $343,000 to $102,000 from $445,000 for the six months ended
December 31
, 2008. The
decrease in interest income is primarily the result of lower yields on
investments reflecting lower market rates.
Net Realized Losses on
Investments
Net realized losses on investments were $33,000 for
the six months ended December 31, 2008. There were no losses recognized in
the six months ended December 31, 2009. The difference is attributable to
market conditions and to the timing of investment sales.
Other than Temporary Impairment
During the six months ended
December 31
, 2008, we recognized
$402,000 in charges for the impairment of available-for-sale securities that
were determined to be other-than-temporary following a decline in value. There were no such charges for the six months
ended December 31, 2009.
Other Income (Expense)
Other income (expense) for the six months ended December 31,
2009 and 2008 was $23,000 and $(123,000), respectively. During the six months
ended
December 31
, 2009 we
recorded net losses on forward contracts of $33,000 compared to net losses on
forward contracts of $182,000 for the six months ended
December 31
, 2008. We
incurred $61,000 and $51,000 in foreign currency translation gains related to
obligations with non-U.S. dollar-based suppliers during the six months ended
December 31
, 2009 and
2008, respectively.
LIQUIDITY AND CAPITAL
RESOURCES
|
|
December 31,
|
|
June 30,
|
|
|
|
2009
|
|
2009
|
|
|
|
(In thousands)
|
|
Cash, cash equivalents and short-term investments
|
|
$
|
52,433
|
|
$
|
71,125
|
|
Working capital
|
|
46,958
|
|
65,738
|
|
Shareholders equity
|
|
46,319
|
|
66,857
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
|
|
(In thousands)
|
|
Cash used for operating activities
|
|
$
|
(20,266
|
)
|
$
|
(377
|
)
|
Cash (used for) provided by investing activities
|
|
(286
|
)
|
5,916
|
|
Cash provided by financing activities
|
|
2,133
|
|
268
|
|
|
|
|
|
|
|
|
|
Cash
Flows
We
require cash to fund our operating expenses, including the advancement of our
own clinical programs, and to make capital expenditures. Historically, we have
funded our cash requirements primarily through equity financings in public
markets and payments from our collaborators, including equity investments,
license fees and research funding. As of December 31, 2009, we had
approximately $52.4 million in cash and marketable securities. Net cash used in
operations was $20.3 million and $377,000 for the six months ended December 31,
2009 and 2008, respectively. The principal use of cash in operating activities
for all periods presented was to fund our net loss.
Net
cash (used for) provided by investing activities was $(286,000) and $5.9
million for the six months ended December 31, 2009 and 2008, respectively,
and substantially represents cash inflows from the sales and maturities of
marketable securities partially offset by capital expenditures. Capital
expenditures, primarily for the purchase of new equipment, were $888,000 and
$1.0 million for the six-month periods ended December 31, 2009 and 2008,
respectively.
Net cash provided by financing activities was $2.1 million and $268,000
for the six months ended December 31, 2009 and 2008, respectively, which
represents proceeds from the exercise of approximately 363,000 and 109,000
stock options, respectively.
We
anticipate that our current capital resources and future collaborator payments
will enable us to meet our operational expenses and capital expenditures for
the balance of fiscal 2010 and fiscal year 2011. However, we cannot provide
assurance that such collaborative agreement funding will, in fact, be received.
Should we or our partners not meet some or all of the terms and conditions of
our various collaboration agreements, we may be required to pursue additional strategic
partners, secure alternative financing arrangements, and/or defer or limit some
or all of our research, development and/or clinical projects.
22
Table of Contents
Contractual Obligations
Effective
July 2007, we entered into a lease agreement with Intercontinental Fund
III for the rental of approximately 89,000 square feet of laboratory and office
space at 830 Winter Street, Waltham, MA which we use for our corporate
headquarters, research and other operations. In December 2009, we entered
into a sublease for 14,100 square feet of our office and laboratory space at
830 Winter Street, Waltham, MA through January 2015. There have been no
other material changes to our contractual obligations outside the ordinary
course of business from those disclosed in our Annual Report on Form 10-K
for the fiscal year ended June 30, 2009.
Recent Accounting Pronouncements
In October 2009,
the FASB issued Accounting Standards Update 2009-13, Multiple-Deliverable
Revenue Arrangements, which establishes the accounting and reporting guidance
for arrangements under which a vendor will perform multiple revenue-generating
activities. This statement becomes effective for our fiscal year 2011. We
are evaluating this statement and the effect it will have on our financial
statements.
In August 2009, the FASB issued Accounting
Standards Update No. 2009-05, Measuring Liabilities at Fair Value, which
provides clarification that in circumstances where a quoted market price in an
active market for an identical liability is not available, a reporting entity
must measure fair value of the liability using one of the following techniques:
1) the quoted price of the identical liability when traded as an asset; 2)
quoted prices for similar liabilities or similar liabilities when traded as
assets; or 3) another valuation technique, such as a present value technique or
the amount that the reporting entity would pay to transfer the identical
liability or would receive to enter into the identical liability that is
consistent with the provisions of the standard. This standard becomes effective
for the first reporting period (including interim periods) beginning after issuance.
We adopted this standard in the current period and do not expect it to have a
material effect on our financial position or results of operations.
The provisions of ASC Topic 810, Consolidations,
related to the changes to how a reporting entity determines when an entity that
is insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated will be effective for fiscal years beginning
after November 15, 2009 (our fiscal year 2011). Early application is not
permitted. We do not expect the adoption of these provisions to have a
significant impact on our financial position or results of operations.
Certain provisions of ASC Topic 860, Transfers and
Servicing, require enhanced information reported to users of financial
statements by providing greater transparency about transfers of financial
assets and an entitys continuing involvement in transferred financial
assets. The provisions are effective for
fiscal years beginning after November 15, 2009 (our fiscal year 2011). We
do not expect the adoption of the provisions to have a significant impact on
our financial position or results of operations.
In January 2010, the FASB issued Accounting
Standards Update No. 2010-01, Accounting for Distributions to Shareholders
with Components of Stock and Cash, a consensus of the FASB Emerging Issues Task
Force. The amendments in this Update clarify that the stock portion of a
distribution to shareholders that allows them to elect to receive cash or stock
with a potential limitation on the total amount of cash that all shareholders
can elect to receive in the aggregate is considered a share issuance that is
reflected in earnings per share prospectively and is not a stock dividend for
purposes of applying ASC Topics 505 and 260 (Equity and Earnings per Share).
Update No. 2010-01 is generally effective for interim and fiscal periods
ending on or after December 15, 2009, and should be applied on a
retrospective basis. The adoption of this statement did not have an impact on
the financial position or results of operations of the Company.
Forward-Looking Statements
This
quarterly report includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements relate to analyses
and other information which are based on forecasts of future results and
estimates of amounts that are not yet determinable. There are a number of
factors that could cause actual events or results to be significantly different
from those described in the forward-looking statements. Forward-looking
statements might include, but are not limited to, one or more of the following
subjects:
·
future products revenues, expenses, liquidity
and cash needs;
·
anticipated redemptions from an investment
fund;
·
anticipated agreements with collaboration
partners;
·
anticipated clinical trial timelines or
results;
·
anticipated research and product development
results;
·
projected regulatory timelines;
·
descriptions of plans or objectives of
management for future operations, products or services;
·
forecasts of future economic performance; and
·
descriptions or assumptions underlying or
relating to any of the above items.
23
Table of
Contents
Forward-looking
statements can be identified by the fact that they do not relate to historical
or current facts. They use words such as anticipate, estimate, expect, project,
intend, opportunity, plan, potential, believe or words of similar
meaning. They may also use words such as will, would, should, could or may.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements, which speak only as of the date of this report. You
should review carefully the risks and uncertainties identified in this
Quarterly Report on Form 10-Q, including the cautionary information set
forth under Part II, Item 1A., Risk Factors, and our Annual Report on Form 10-K
for the year ended June 30, 2009. We may not revise these forward-looking
statements to reflect events or circumstances after the date of this report or
to reflect the occurrence of unanticipated events.
OFF-BALANCE SHEET ARRANGEMENTS
None.
ITEM 3.
Quantitative and
Qualitative Disclosure about Market Risk
Our market risks,
and the ways we manage them, are summarized in Part II, Item 7A, Quantitative
and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K
for the fiscal year ended June 30, 2009. Since then there have been no
material changes to our market risks or to our management of such risks.
ITEM 4.
Controls and Procedures
(a)
Disclosure Controls and Procedures
The
Companys management, with the participation of its principal executive officer
and principal financial officer, has evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on such evaluation, the Companys principal executive officer and
principal financial officer have concluded that, as of the end of such period,
the Companys disclosure controls and procedures were adequate and effective.
(b)
Changes in Internal Controls
There
have not been any changes in the Companys internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the quarter ended December 31, 2009 that have
materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.
24
Table of
Contents
PART II. OTHER INFORMATION
ITEM 1A.
Risk Factors
You should carefully
review and consider the information regarding certain factors that could
materially affect our business, financial condition or future results set forth
under Item 1A. (Risk Factors) in our Annual Report on Form 10-K for
the fiscal year ended June 30, 2009. There have been no material changes
from the factors disclosed in our 2009 Annual Report on Form 10-K,
although we may disclose changes to such factors or disclose additional factors
from time to time in our future filings with the Securities and Exchange
Commission.
ITEM 4.
Submission of Matters to a Vote of Security Holders
Our 2009 Annual Meeting of
Shareholders was held on November 11, 2009 (the Meeting). At the
Meeting, shareholders fixed the number of Directors constituting the full Board
of Directors at nine. The voting results were as follows:
For:
|
|
41,800,872
|
|
Against:
|
|
1,198,104
|
|
Abstain:
|
|
121,731
|
|
At the Meeting, the shareholders
elected nine Directors as follows:
|
|
FOR
|
|
WITHHELD
|
|
Mitchel
Sayare, Ph.D.
|
|
41,776,321
|
|
1,344,387
|
|
Daniel
M. Junius
|
|
42,059,978
|
|
1,060,730
|
|
David
W. Carter
|
|
42,167,197
|
|
953,511
|
|
Stephen
C. McCluski
|
|
41,419,143
|
|
1,701,565
|
|
Nicole
Onetto, MD
|
|
42,266,132
|
|
854,576
|
|
Howard
Pien
|
|
41,725,754
|
|
1,394,954
|
|
Mark
Skaletsky
|
|
41,902,946
|
|
1,217,762
|
|
Joseph
J. Villafranca, Ph.D.
|
|
42,091,163
|
|
1,029,545
|
|
Richard
J. Wallace
|
|
42,092,070
|
|
1,028,638
|
|
At the Meeting, shareholders
approved an amendment to our Restated Articles of Organization to increase the
number of authorized shares of common stock from 75,000,000 to
100,000,000. The voting results were as
follows:
For:
|
|
37,900,606
|
|
Against:
|
|
4,960,611
|
|
Abstain:
|
|
259,490
|
|
ITEM 6.
Exhibits
10.1
Compensation Policy for Non-Employee
Directors, as amended
10.2
Severance Agreement dated as of December 17,
2009 between the Registrant and Suzanne Cadden
10.3
Employment offer letter between the
Registrant and Suzanne Cadden
31.1
Certification of Principal Executive
Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial
Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certifications of Principal Executive Officer
and Principal Financial Officer under Section 906 of the Sarbanes- Oxley
Act of 2002.
25
Table
of Contents
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
ImmunoGen, Inc.
|
|
|
Date: January
29, 2010
|
By:
|
/s/ Daniel M. Junius
|
|
|
Daniel M. Junius
|
|
|
President, Chief Executive Officer
(Principal Executive Officer)
|
|
|
Date: January
29, 2010
|
By:
|
/s/ Gregory D. Perry
|
|
|
Gregory D. Perry
|
|
|
Senior Vice President, Chief Financial Officer
(Principal Financial and Accounting
Officer)
|
26
Table
of Contents
INDEX TO EXHIBITS
Exhibit No
.
|
|
Description
|
10.1
|
|
Compensation Policy for
Non-Employee Directors, as amended
|
10.2
|
|
Severance Agreement
dated as of December 17, 2009 between the Registrant and Suzanne Cadden
|
10.3
|
|
Employment offer letter
between the Registrant and Suzanne Cadden
|
31.1
|
|
Certification of
Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act
of 2002.
|
31.2
|
|
Certification of
Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act
of 2002.
|
32
|
|
Certifications of
Principal Executive Officer and Principal Financial Officer under
Section 906 of the Sarbanes-Oxley Act of 2002.
|
27
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