Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2017

or

 

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____

 

Commission File Number:  0-12104

Immunomedics, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

61-1009366

(I.R.S. Employer Identification No.)

 

300 The American Road, Morris Plains, New Jersey 07950

(Address of principal executive offices) (Zip Code)

 

(973) 605-8200

(Registrant’s Telephone Number, Including Area Code)

 

Former Name, Former Address and Former Fiscal Year,

If Changed Since Last Report:  Not Applicable

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☑  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 the registrant was required to submit and post such files).  ☑  Yes  ☐  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 definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer ☐ Accelerated Filer ☑

Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ◻

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☑

 

The number of shares of the registrant’s common stock outstanding as of May 8, 2017 was 109,604,145.

 

 

 


 

Table of Contents

IMMUNOMEDICS, INC.

 

T ABLE OF CONTENTS

 

PART I:

FINANCIAL INFORMATION

   

 

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS:

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2017 and June 30, 2016

 

1

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended March 31, 2017 and 2016

 

2

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2017 and 2016

 

3

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

4

 

 

 

 

ITEM 2.  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

29

 

 

 

 

ITEM 3.  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

47

 

 

 

 

ITEM 4.  

CONTROLS AND PROCEDURES

 

47

 

 

 

 

PART II :

OTHER INFORMATION

 

 

 

 

 

 

ITEM 1.  

LEGAL PROCEEDINGS

 

48

 

 

 

 

ITEM 1A.  

RISK FACTORS

 

51

 

 

 

 

ITEM 6.  

EXHIBITS

 

70

 

 

 

 

SIGNATURES  

 

71

 

 

 

 

EXHIBIT INDEX  

 

72

 

 

 

 


 

Table of Contents

IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET S

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

June 30, 

 

 

    

2017

    

2016

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,898,468

 

$

13,203,625

 

Marketable securities

 

 

24,071,004

 

 

37,424,221

 

Accounts receivable, net of allowance for doubtful accounts of $21,985 at March 31, 2017 and $74,546 at June 30, 2016

 

 

820,787

 

 

513,992

 

Inventory

 

 

685,615

 

 

350,524

 

Other receivables

 

 

111,190

 

 

236,768

 

Prepaid expenses

 

 

763,640

 

 

1,038,155

 

Other current assets

 

 

140,353

 

 

183,820

 

Total current assets

 

 

48,491,057

 

 

52,951,105

 

Property and equipment, net of accumulated depreciation of  $29,268,601 and $28,637,606 at March 31, 2017 and June 30, 2016, respectively

 

 

4,168,465

 

 

3,969,163

 

Other long-term assets

 

 

30,000

 

 

30,000

 

Total Assets

 

$

52,689,522

 

$

56,950,268

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

19,597,698

 

$

15,188,189

 

Warrant liabilities

 

 

65,199,603

 

 

 —

 

Deferred revenues

 

 

192,142

 

 

235,372

 

Total current liabilities

 

 

84,989,443

 

 

15,423,561

 

Convertible senior notes – net of unamortized debt issuance costs of  $2,098,236 at March 31, 2017 and $2,645,602 at June 30, 2016

 

 

97,901,764

 

 

97,354,398

 

Other liabilities

 

 

1,717,338

 

 

1,699,276

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

Stockholders’ Deficit:

 

 

 

 

 

 

 

Preferred stock, $.01 par value; authorized 10,000,000 shares; no shares issued and outstanding at March 31, 2017 and June 30, 2016

 

 

 

 

 

Common stock, $.01 par value; authorized 155,000,000 shares; issued 109,604,620 shares and outstanding 109,569,895 shares at March 31, 2017; issued 95,867,298 shares and outstanding 95,832,573 shares at June 30, 2016

 

 

1,096,045

 

 

958,672

 

Capital contributed in excess of par

 

 

336,782,556

 

 

311,320,651

 

Treasury stock, at cost: 34,725 shares at March 31, 2017 and at June 30, 2016

 

 

(458,370)

 

 

(458,370)

 

Accumulated deficit

 

 

(468,456,204)

 

 

(368,504,954)

 

Accumulated other comprehensive loss

 

 

(126,146)

 

 

(132,226)

 

Total Immunomedics, Inc. stockholders’ deficit

 

 

(131,162,119)

 

 

(56,816,227)

 

Noncontrolling interest in subsidiary

 

 

(756,904)

 

 

(710,740)

 

Total stockholders’ deficit

 

 

(131,919,023)

 

 

(57,526,967)

 

Total Liabilities and Stockholders' Deficit

 

$

52,689,522

 

$

56,950,268

 

 

See accompanying notes to unaudited condensed consolidated financial statements

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IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE LOSS  

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

 

March 31, 

 

March 31, 

 

 

    

2017

    

2016

    

2017

    

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

921,675

 

$

543,145

 

$

1,836,157

 

$

1,714,340

 

License fee and other revenues

    

 

257,442

    

 

266,096

 

 

282,556

    

 

302,324

 

Research and development

 

 

144,322

 

 

89,838

 

 

330,702

 

 

284,397

 

Total revenues

 

 

1,323,439

 

 

899,079

 

 

2,449,415

 

 

2,301,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of goods sold

 

 

135,585

 

 

337,675

 

 

437,452

 

 

460,458

 

Research and development

 

 

12,491,290

 

 

13,298,860

 

 

39,765,180

 

 

40,473,666

 

Sales and marketing

 

 

302,509

 

 

248,425

 

 

703,440

 

 

778,642

 

General and administrative

 

 

10,514,243

 

 

1,580,824

 

 

13,969,783

 

 

4,960,959

 

Total costs and expenses

 

 

23,443,627

 

 

15,465,784

 

 

54,875,855

 

 

46,673,725

 

Operating loss

 

 

(22,120,188)

 

 

(14,566,705)

 

 

(52,426,440)

 

 

(44,372,664)

 

Changes in fair market value of warrant liabilities

 

 

(28,336,865)

 

 

 —

 

 

(35,567,205)

 

 

 

Warrant related expenses

 

 

(7,649,395)

 

 

 —

 

 

(7,649,395)

 

 

 

Interest expense

 

 

(1,369,955)

 

 

(1,369,955)

 

 

(4,109,866)

 

 

(4,109,866)

 

Interest and other income, net

 

 

64,574

 

 

81,911

 

 

219,536

 

 

257,631

 

Other financing expenses

 

 

 —

 

 

 —

 

 

(346,568)

 

 

 

Foreign currency transaction gain (loss), net

 

 

91,471

 

 

(38,699)

 

 

(117,476)

 

 

(42,210)

 

Loss before income tax benefit

 

 

(59,320,358)

 

 

(15,893,448)

 

 

(99,997,414)

 

 

(48,267,109)

 

Income tax benefit

 

 

 —

 

 

1,871,772

 

 

 —

 

 

5,056,772

 

Net loss

 

 

(59,320,358)

 

 

(14,021,676)

 

 

(99,997,414)

 

 

(43,210,337)

 

Less: Net loss attributable to noncontrolling interest

 

 

(14,340)

 

 

(25,631)

 

 

(46,164)

 

 

(74,420)

 

Net loss attributable to Immunomedics, Inc. stockholders

 

$

(59,306,018)

 

$

(13,996,045)

 

$

(99,951,250)

 

$

(43,135,917)

 

Loss per common share attributable to Immunomedics, Inc. stockholders (basic and diluted):

 

$

(0.55)

 

$

(0.15)

 

$

(0.97)

 

$

(0.46)

 

Weighted average shares used to calculate loss per common share (basic and diluted)

 

 

107,839,947

 

 

94,748,252

 

 

102,756,818

 

 

94,669,326

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(52,247)

 

 

72,837

 

 

58,569

 

 

35,566

 

Unrealized gain (loss) on securities available for sale

 

 

5,467

 

 

90,925

 

 

(52,489)

 

 

11,658

 

Other comprehensive income (loss), net of tax:

 

 

(46,780)

 

 

163,762

 

 

6,080

 

 

47,224

 

Comprehensive loss

 

 

(59,367,138)

 

 

(13,857,914)

 

 

(99,991,334)

 

 

(43,163,113)

 

Less comprehensive loss attributable to noncontrolling interest

 

 

(14,340)

 

 

(25,631)

 

 

(46,164)

 

 

(74,420)

 

Comprehensive loss attributable to Immunomedics, Inc. stockholders

 

$

(59,352,798)

 

$

(13,832,283)

 

$

(99,945,170)

 

$

(43,088,693)

 

 

See accompanying notes to unaudited condensed consolidated financial statements

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IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW S

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

March 31, 

 

 

    

2017

    

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

    

$

(99,997,414)

    

$

(43,210,337)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

35,567,205

 

 

 —

 

Warrant related expense

 

 

7,649,395

 

 

 —

 

Depreciation and amortization

 

 

633,079

 

 

504,780

 

Amortization of deferred revenue

 

 

(43,230)

 

 

(5,975)

 

Amortization of bond premiums

 

 

205,071

 

 

538,200

 

Amortization of debt issuance costs

 

 

547,366

 

 

547,366

 

Amortization of deferred rent

 

 

18,062

 

 

74,637

 

Loss (gain) on sale of marketable securities

 

 

15,682

 

 

(1,844)

 

Increase (decrease) in allowance for doubtful accounts

 

 

(52,561)

 

 

31,077

 

Non-cash expense related to stock compensation

 

 

2,593,085

 

 

2,840,560

 

Non-cash decrease in value of life insurance policy

 

 

 —

 

 

20,566

 

Other

 

 

346,568

 

 

 —

 

Changes in operating assets and liabilities

 

 

4,331,955

 

 

2,742,797

 

Net cash used in operating activities

 

 

(48,185,737)

 

 

(35,918,173)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(29,160,546)

 

 

(2,749,117)

 

Proceeds from sales/maturities of marketable securities

 

 

42,240,521

 

 

38,020,088

 

Purchases of property and equipment

 

 

(829,325)

 

 

(1,430,759)

 

Net cash provided by investing activities

 

 

12,250,650

 

 

33,840,212

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Sale of common stock and warrants, net of related expenses

 

 

43,278,473

 

 

 —

 

Exercise of stock options

 

 

1,812,780

 

 

158,079

 

Tax withholding payments for stock compensation

 

 

(448,625)

 

 

(317,390)

 

Net cash provided by (used in) financing activities

 

 

44,642,628

 

 

(159,311)

 

Effect of changes in exchange rates on cash and cash equivalents

 

 

(12,698)

 

 

(6,194)

 

Net (decrease) increase in cash and cash equivalents

 

 

8,694,843

 

 

(2,243,466)

 

Cash and cash equivalents beginning of period

 

 

13,203,625

 

 

13,452,775

 

Cash and cash equivalents end of period

 

$

21,898,468

 

$

11,209,309

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Interest paid

 

$

4,750,000

 

$

4,802,778

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

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IMMUNOMEDICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATE D

FINANCIAL STATEMENTS

 

Reference is made to the Annual Report on Form 10-K of Immunomedics, Inc., a Delaware corporation (“Immunomedics,” the “Company,” “we,” “our” or “us”), for the fiscal year ended June 30, 2016, which contains our audited consolidated financial statements and the notes thereto.

1. Business Overview and Basis of Presentatio n

Immunomedics is a clinical-stage biopharmaceutical company that develops monoclonal antibody-based products for the targeted treatment of cancer, autoimmune and other serious diseases. The Company has continued to transition its focus away from the development and commercialization of diagnostic imaging products in order to accelerate the development of its therapeutic product candidates, although the Company still manufactures and commercializes its LeukoScan ® product in territories where regulatory approvals have previously been granted in Europe, Canada and in other markets outside the U.S. LeukoScan ® is indicated for diagnostic imaging for determining the location and extent of infection and inflammation in bone of patients with suspected osteomyelitis, including patients with diabetic foot ulcers. 

The Company has two foreign subsidiaries, Immunomedics B.V. in the Netherlands and Immunomedics GmbH in Rodermark, Germany, that assist the Company in managing sales efforts and coordinating clinical trials in Europe.   In addition, included in the accompanying condensed financial statements is the majority-owned U.S. subsidiary, IBC Pharmaceuticals, Inc. (“IBC”), which works on the development of novel cancer radiotherapeutics using patented pre-targeting technologies with proprietary, bispecific antibodies.

The accompanying unaudited condensed consolidated financial statements of Immunomedics, which incorporate our subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), for interim financial information and the instructions to the Quarterly Report on Form 10‑Q and Regulation S‑X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete annual financial statements. With respect to the financial information for the interim periods included in this Quarterly Report on Form 10-Q, which is unaudited, management believes that all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation of the results for such interim periods have been included. Operating results for the three and nine-month periods ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2017, or any other period.

Immunomedics is subject to significant risks and uncertainties, including, without limitation, the risk that the Company may be unable to successfully obtain financing for product development; the Company’s inability to further identify, develop and achieve commercial success for new products and technologies; the possibility of delays in the research and development necessary to select drug development candidates and delays in clinical trials; the risk that clinical trials may not result in marketable products; the risk that the Company may be unable to secure regulatory approval of and market its drug candidates; the development or regulatory approval of competing products; the Company’s ability to protect its proprietary technologies; patent-infringement claims; and risks of new, changing and competitive technologies and regulations in the United States and internationally.

Since its inception in 1982, Immunomedics’ principal sources of funds have been the private and public sale of equity and debt securities, and revenues from licensing agreements, including up-front and milestone payments, funding of development programs, and other forms of funding from collaborations.

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As of March 31, 2017 the Company had $46.0 million in cash, cash equivalents and marketable securities. On May 4, 2017, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with a select group of institutional purchasers, (the “Purchasers”), including venBio Select Advisor LLC (“venBio”), pursuant to which the Company, in a private placement, agreed to issue and sell to the Purchasers 1,000,000 shares (the “Preferred Shares”) of the Company’s newly-designated Series A-1 Convertible Preferred Stock, par value $0.01 per share (the “Series A-1 Convertible Preferred Stock”), at a price of $125 per share for gross proceeds to the Company of $125 million, before deducting fees and expenses (the “Financing”). The Financing closed on May 10, 2017.

The Company expects to use the net proceeds from the $125 million private placement to support the development of IMMU-132, including the goal of filing a Biologics License Applications (“BLA”) for Accelerated Approval of IMMU-132 in mTNBC from the U.S. Food and Drug Administration (the “FDA”). The capital will also fund general corporate and operational enhancements. With this new capital and the Company’s current cash on hand, Immunomedics expects to have sufficient operating funds through the third quarter of 2018.

The Immunomedics Board of Directors (the “Board”), as recently seated, has conducted a review of the strategy of the Company, including a review of the projected timeline for submission of a BLA for IMMU-132. These efforts to date have resulted in an updated timeline for the execution of delivering IMMU-132 to market, as well as the assessment of various deal structures and partnerships towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond. The Company is targeting to file the BLA with FDA for accelerated approval of IMMU-132 for the use of patients with mTNBC between late fourth quarter 2017 and the first quarter 2018, subject to FDA input on the acceptance of the Company’s chemistry, manufacturing and controls filing plan.

The Company may require additional funding after the third quarter of 2018 to secure regulatory approval from the FDA, complete commercial preparations to market IMMU-132 to mTNBC patients in the United States, complete its clinical trials currently underway or planned, continue research and new development programs, and continue operations. Potential sources of funding include the exercise of outstanding warrants, potential various strategic partnership transactions towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, and equity and potential debt financing.

Until the Company can generate significant cash through the exercise of outstanding warrants, various strategic partnership transactions towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, or commercial operations, it expects to continue to fund its operations with its current financial resources. These financial resources are adequate to sustain the Company’s operations at a level of activity sufficient to support the filing of the BLA with the FDA for accelerated approval of IMMU-132 for patients with mTNBC; to continue manufacturing IMMU-132 at large scale to prepare for commercial operations in the U.S. marketplace; to initiate a Phase 3 clinical trial of IMMU-132 for mTNBC patients to support the filing of the BLA, to initiate preparations to market IMMU-132 to mTNBC patients in the U.S. and, subject to meeting all standards, completing review and final determination of the FDA, to secure accelerated regulatory approval to market IMMU-132 for the use of patients with mTNBC in the U.S.. After the third quarter 2018, if the Company cannot obtain sufficient funding through the exercise of outstanding Warrants, various strategic partnership transactions towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, it could be required to finance future cash needs through the sale of additional equity and/or debt securities in capital markets. However, there can be no assurance that the Company will be able to raise the additional capital needed to complete its pipeline of research and development programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with respect to availability of capital and hence the

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timing to meet an entity’s liquidity needs. The Company’s existing debt may also negatively impact the Company’s ability to raise additional capital. If the Company is unable to raise capital on acceptable terms, its ability to continue its business would be materially and adversely affected.

2. Summary of Significant Accounting Policies

These unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2016. The Company adheres to the same accounting policies in preparation of its interim financial statements.

Principles of Consolidation and Presentation

            The condensed consolidated financial statements include the accounts of Immunomedics and its subsidiaries. Noncontrolling interests in consolidated subsidiaries in the condensed consolidated balance sheets represent minority stockholders’ proportionate share of the deficit in such subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Financial Instruments

            The carrying amounts of cash and cash equivalents, other current assets and current liabilities approximate fair value due to the short-term maturity of these instruments. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Marketable Securities

            Marketable securities, all of which are available-for-sale, consists of corporate debt securities, U.S. bonds, U.S. sponsored agencies and municipal bonds. Corporate debt securities include Eurodollar issues of U.S. corporations, and U.S. dollar denominated issues of foreign corporations. Marketable securities are carried at fair value, with unrealized gains and losses, net of related income taxes, reported as accumulated other comprehensive loss, except for losses from impairments which are determined to be other-than-temporary. Realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in the determination of net loss and are included in interest and other income (net), at which time the average cost basis of these securities are adjusted to fair value. Fair values are based on quoted market prices at the reporting date. Interest and dividends on available-for-sale securities are included in interest and other income (net).

Inventory

Inventory, which consists of the raw materials, work-in-process and finished product of LeukoScan ® , is stated at the lower of cost (which approximates first-in, first-out) or market, and includes materials, labor and manufacturing overhead.

Revenue Recognition

            The Company has accounted for revenue arrangements that include multiple deliverables as a separate unit of accounting if both of the following criteria are met: a) the delivered item has value to the customer on a standalone basis, and b) if the right of return exists, delivery of the undelivered items is considered probable and substantially in the control of the vendor. If these criteria are not met, the revenue elements must be considered a single unit of accounting for purposes of revenue recognition. The Company allocates revenue

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consideration, excluding contingent consideration, based on the relative selling prices of the separate units of accounting contained within an arrangement containing multiple deliverables. Relative selling prices are determined using vendor specific objective evidence, if it exists; otherwise third-party evidence or the Company’s best estimate of selling price is used for each deliverable. 

            Payments received under contracts to fund certain research activities are recognized as revenue in the period in which the research activities are performed. Payments received in advance that are related to future performance are deferred and recognized as revenue when the research projects are performed. Upfront nonrefundable fees associated with license and development agreements where the Company has continuing involvement in the agreement are recorded as deferred revenue and recognized over the estimated service period. The Company estimates the period of continuing involvement based on the best evidential matter available at each reporting period. If the estimated service period is subsequently modified, the period over which the upfront fee is recognized is modified accordingly on a prospective basis.

            In order to determine the revenue recognition for contingent milestones, the Company evaluates the contingent milestones using the criteria as provided by the Financial Accounting Standards Boards (“FASB”) guidance on the milestone method of revenue recognition, as explained in ASU 2010-17, “ Milestone Method of Revenue Recognition,” at the inception of a collaboration agreement. The criteria requires that (i) the Company determines if the milestone is commensurate with either its performance to achieve the milestone or the enhancement of value resulting from the Company’s activities to achieve the milestone, (ii) the milestone be related to past performance, and (iii) the milestone be reasonable relative to all deliverable and payment terms of the collaboration arrangement. If these criteria are met then the contingent milestones can be considered as substantive milestones and will be recognized as revenue in the period that the milestone is achieved. Royalties are recognized as earned in accordance with the terms of various research and collaboration agreements.

            Revenue from the sale of diagnostic products is recorded when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable or collectability is reasonably assured. Allowances, if any, are established for uncollectible amounts, estimated product returns and discounts. Since allowances are recorded based on management’s estimates, actual amounts may be different in the future.

Research and Development Costs

            Research and development costs are expensed as incurred. Costs incurred for clinical trials for patients and investigators are expensed as services are performed in accordance with the agreements in place with the institutions.

Reimbursement of Research & Development Costs

            Research and development costs that are reimbursable under collaboration agreements are included as a reduction of research and development expenses. The Company records these reimbursements as a reduction of research and development expenses as the Company’s partner in the collaboration agreement has the financial risks and responsibility for conducting these research and development activities.

Stock-Based Compensation

            The Company utilizes stock-based compensation in the form of stock options, stock appreciation rights, stock awards, stock unit awards, performance shares, cash-based performance units and other stock-based awards, each of which may be granted separately or in tandem with other awards.

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             The grant-date fair value of stock awards is based upon the underlying price of the stock on the date of grant. The grant-date fair value of stock option awards must be determined using an option pricing model. Option pricing models require the use of estimates and assumptions as to (a) the expected term of the option, (b) the expected volatility of the price of the underlying stock and (c) the risk-free interest rate for the expected term of the option. The Company uses the Black-Scholes-Merton option pricing formula for determining the grant-date fair value of such awards.

             The expected term of the option is based upon the contractual term and expected employee exercise and expected post-vesting employment termination behavior. The expected volatility of the price of the underlying stock is based upon the historical volatility of the Company’s stock computed over a period of time equal to the expected term of the option. The risk free interest rate is based upon the implied yields currently available from the U.S. Treasury yield curve in effect at the time of the grant. Pre-vesting forfeiture rates are estimated based upon past voluntary termination behavior and past option forfeitures.

             The following table sets forth the weighted-average assumptions used to calculate the fair value of options granted for the nine -month periods ended March 31, 2017 and 2016:

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

March 31, 

 

 

    

2017

    

2016

 

Expected dividend yield

 

0%

 

0%

 

Expected option term (years)

 

5.05

 

5.03

 

Expected stock price volatility

 

63%

 

56%

 

Risk-free interest rate

 

1.16% - 2.15%

 

1.25% - 1.64%

 

 

            The Company uses historical data to estimate forfeitures. The expected term of options granted represents the period of time that options granted are expected to be outstanding. Expected stock price volatility was calculated based on the Company’s daily stock trading history. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

            Changes in any of these assumptions could impact, potentially materially, the amount of expense recorded in future periods related to stock-based awards.

Common Stock Warrants

 

In connection with certain financing transactions in October 2016 and February 2017, the Company issued warrants and recorded them as liabilities due to certain net cash settlement provisions or due to the fact that the Company will need stockholder approval to increase its authorized capital before the related warrants may be exercised. The warrants were recorded at fair value using the Black-Scholes valuation model. The Black-Scholes valuation model takes into account, as of the valuation date, factors including the current exercise price, the term of the warrant, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the term of the warrant. These warrants are subject to re-measurement at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change in the fair value of warrant liability” in the consolidated statements of operations.

Income Taxes 

            The Company uses the asset and liability method to account for income taxes, including the recognition of deferred tax assets and deferred tax liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax bases. The Company

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reviews its deferred tax assets for recovery. A valuation allowance is established when the Company believes that it is more likely than not that its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change. The Company has recorded a full valuation allowance against its net deferred tax assets as of March 31, 2017.

            At June 30, 2016, the Company has available net operating loss carry forwards for federal income tax reporting purposes of approximately $288.7 million and for state income tax reporting purposes of approximately $108.5 million, which expire at various dates between fiscal 2017 and 2036. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the annual utilization of a company’s net operating loss and research credit carry forwards may be limited if the Company experiences a change in ownership as defined in Section 382 of the Internal Revenue Code. The Company’s net operating loss carry forwards available to offset future federal taxable income arising before such ownership changes may be limited. Similarly, the Company may be restricted in using its research credit carry forwards arising before such ownership changes to offset future federal income tax expense.

            The Company’s U.S. operations and foreign jurisdictions reported a net loss for the three and nine-month periods ended March 31, 2017 and 2016, resulting in a tax benefit that was fully offset by a valuation allowance.

During the prior fiscal year the Company sold certain State of New Jersey State Net Operating Losses (“NOL”) and Research and Development (“R&D”) tax credits through the New Jersey Economic Development Authority Technology Business Tax Certificate Transfer Program. Pursuant to such sale, during the three and nine -month periods ended March 31, 2016, the Company recorded a tax benefit of $1.9 million and $5.1 million, respectively, as a result of its sale of approximately $30.3 million and $66.2 million, respectively, of New Jersey State NOL and $0.2 million and $1.5 million, respectively, of New Jersey R&D tax credits. There were no such sales during the current fiscal year.

             The Company has no liability for uncertain tax positions as of March 31, 2017.

Net Loss Per Share Allocable to Common Stockholders

            Net loss per basic and diluted common share allocable to common stockholders is based on the net loss for the relevant period, divided by the weighted-average number of common shares outstanding during the period. For purposes of the diluted net loss per common share calculations, the exercise or conversion of all potential common shares is not included because their effect would have been anti-dilutive, due to the net loss recorded for the three and nine-month periods ended March 31, 2017 and 2016. The common stock equivalents excluded from the diluted per share calculation are 31,893,172 and 27,668,571 shares at March 31, 2017 and 2016, respectively.

Net Comprehensive Loss

            Net comprehensive loss consists of net loss, unrealized loss on available for sale securities and foreign exchange translation adjustments and is presented in the condensed consolidated statements of comprehensive loss.

Recently Issued Accounting Pronouncements

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments”, which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight

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specific cash flow issues. ASU 2016-15 is effective for annual and interim reporting periods beginning after December 15, 2017 and early adoption is permitted. ASU 2016-15 provides for retrospective application for all periods presented. The Company is assessing ASU 2016-15’s impact and will adopt it when effective.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” which simplified several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Public companies will be required to adopt this standard in annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period provided that the entire standard is adopted. The Company does not expect ASU 2016-09 to have a material impact on the consolidated financial statement presentation.

In February 2016, the FASB issued ASU 2016-02, “ Leases ”. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted. The Company is assessing ASU 2016-02’s impact and will adopt it when effective.  

In August 2014, the FASB issued ASU 2014-15, “ Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ”. This guidance clarifies that an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments in this update are effective for annual reporting periods ending after December 15, 2016, and annual and interim periods thereafter, and early application is permitted. The Company is assessing ASU 2014-15’s impact and will adopt it when effective.  

On May 28, 2014, the FASB issued ASU 2014-09, “ Revenue from Contracts with Customers, ” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, with the issuance of ASU 2015-14, the FASB amended the effective date of this ASU to fiscal years beginning after December 15, 2017, and early adoption is permitted only for fiscal years beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is assessing ASU 2014-09’s impact and will adopt it when effective.

 

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3.          Marketable Securities

Marketable securities at March 31, 2017 consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Gross

    

Gross

    

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

 

 

 

Cost

 

Gain

 

(Loss)

 

Fair Value

 

U.S. Treasury Bonds

 

$

5,034

 

$

 —

 

$

(3)

 

$

5,031

 

Certificate of Deposits

 

 

4,239

 

 

 —

 

 

 —

 

 

4,239

 

U.S. Government Sponsored Agencies

 

 

3,217

 

 

 —

 

 

(3)

 

 

3,214

 

Corporate Debt Securities

 

 

7,822

 

 

 —

 

 

(8)

 

 

7,814

 

Commercial Paper

 

 

3,773

 

 

 —

 

 

 —

 

 

3,773

 

 

 

$

24,085

 

$

 —

 

$

(14)

 

$

24,071

 

 

Maturities of debt securities classified as available-for-sale were as follows at March 31, 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Carrying

 

 

    

Fair Value

    

Amount

 

Due within one year

 

$

24,071

 

$

24,156

 

Due after one year through five years

 

 

 —

 

 

 —

 

 

 

$

24,071

 

$

24,156

 

 

Marketable securities at June 30, 2016 consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Gross

    

Gross

    

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

 

 

 

Cost

 

Gain

 

(Loss)

 

Fair Value

 

U.S. Treasury Bonds

 

$

5,059

 

$

 6

 

$

 —

 

$

5,065

 

Certificate of Deposits

 

 

3,000

 

 

 3

 

 

 —

 

 

3,003

 

U.S. Government Sponsored Agencies

 

 

14,311

 

 

31

 

 

 —

 

 

14,342

 

Corporate Debt Securities

 

 

15,014

 

 

 2

 

 

(2)

 

 

15,014

 

 

 

$

37,384

 

$

42

 

$

(2)

 

$

37,424

 

 

Maturities of debt securities classified as available-for-sale were as follows at June 30, 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Carrying

 

 

    

Fair Value

    

Amount

 

Due within one year

 

$

37,424

 

$

37,601

 

Due after one year through five years

 

 

 —

 

 

 —

 

 

 

$

37,424

 

$

37,601

 

 

 

4. Convertible Senior Notes

In February 2015, the Company issued $100.0 million of Convertible Senior Notes (net proceeds of approximately $96.3 million after deducting the initial purchasers’ fees and offering expenses) in a private offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Rule 144A under the Securities Act (the “Convertible Senior Notes”). The Convertible Senior Notes will mature on February 15, 2020, unless earlier purchased or converted. The debt issuance costs of approximately $3.7 million, primarily consisting of underwriting, legal and other professional fees, are amortized over the term of the Convertible Senior Notes. The Convertible Senior Notes are senior unsecured obligations of the Company. Interest at 4.75% is payable semiannually on February 15 and August 15 of each

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year. The effective interest rate on the Convertible Senior Note was 5.48% for the period from the date of issuance through March 31, 2017.  

The Convertible Senior Notes are convertible at the option of holders into approximately 19.6 million shares of Common Stock at any time prior to the close of business on the day immediately preceding the maturity date. The conversion rate will initially be 195.8336 shares of Common Stock per $1,000 principal amount of Convertible Senior Notes (equivalent to an initial conversion price of approximately $5.11 per share of Common Stock).

If the Company undergoes a fundamental change (as defined in the indenture governing the Convertible Senior Notes), holders may require Immunomedics to purchase for cash all or part of the Convertible Senior Notes at a purchase price equal to 100% of the principal amount of the Convertible Senior Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change purchase date, subject to certain exceptions. In addition, if certain make-whole fundamental changes (as defined in the indenture governing the Convertible Senior Notes) occur, Immunomedics will, in certain circumstances, increase the conversion rate for any Convertible Note converted in connection with such make-whole fundamental change.

The indenture does not limit the amount of debt which may be issued by the Company under the indenture or otherwise, does not contain any financial covenants or restrict the Company from paying dividends, selling or disposing of assets, or issuing or repurchasing its other securities, provided that such event is not deemed to be a fundamental change (as defined in the indenture governing the Convertible Senior Notes). The indenture contains customary terms and covenants and events of default.

If an event of default with respect to the Convertible Senior Notes occurs, holders may, upon satisfaction of certain conditions, accelerate the principal amount of the Convertible Senior Notes plus premium, if any, and accrued and unpaid interest, if any. In addition, the principal amount of the Convertible Senior Notes plus premium, if any, and accrued and unpaid interest, if any, will automatically become due and payable in the case of certain types of bankruptcy or insolvency events of default involving the Company.

Total interest expense for the Convertible Senior Notes for the three-month periods ended March 31, 2017 and 2016 were $1.4 million and $4.1 million for the nine-month periods ended March 31, 2017 and 2016. Included in interest expense is the amortization of debt issuance costs of $0.2 million for the three-month periods ended March 31, 2017 and 2016, and $0.5 million for the nine-month periods ended March 31, 2017 and 2016.

5.  Warrant Liabilities

In connection with its public offering in October 2016, the Company issued warrants that have net cash settlement provisions. In addition, in connection with a stock purchase agreement in February 2017 the Company issued warrants that may only be exercised, upon receiving stockholder approval to increase its authorized capital. Accordingly, these warrants do not meet the criteria for classification as equity and are recorded as liabilities. The Company recognized these warrants as liabilities at their fair values and re-measures them at fair value on each reporting date.

The Company uses Level 2 inputs for its valuation methodology for the warrant liabilities. The estimated fair value was determined using a Black-Scholes valuation model based on various assumptions. The warrant liabilities are adjusted to reflect estimated fair value at each period end, with any changes in the fair value being recorded in changes in fair value of warrant liabilities.

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The estimated fair value of the warrant liabilities was approximately $65.2 million and $14.5 million, as of March 31, 2017 and December 31, 2016, respectively. The change in fair value of the warrant liabilities for the three and nine month period ended March 31, 2017 was approximately $28.3 million and $35.6 million, respectively.

6. Estimated Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses, warrant liability and Convertible Senior Notes. The carrying amount of accounts receivable, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments as of March 31, 2017 and June 30, 2016.

The Company has categorized its other financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial instruments recorded on the condensed consolidated balance sheets as of March 31, 2017 and June 30, 2016 are categorized based on the inputs to the valuation techniques as follows (in thousands):

·

Level 1 – Financial instruments whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which the company has the ability to access at the measurement date (examples include active exchange-traded equity securities and most U.S. Government and agency securities).

·

Level 2 – Financial instruments whose value are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.

·

Level 3 – Financial instruments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.

Cash equivalents and marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

March 31, 2017

    

Level 1

    

Level 2

    

Level 3

    

Total

 

Money Market Funds Note (a)

 

$

19,248

 

$

 —

 

$

 —

 

$

19,248

 

Marketable Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bonds

 

 

5,031

 

 

 

 

 

 

5,031

 

Certificate of Deposits

 

 

4,239

 

 

 

 

 

 

4,239

 

U.S. Government Sponsored Agencies

 

 

3,214

 

 

 

 

 

 

3,214

 

Corporate Debt Securities

 

 

7,814

 

 

 

 

 

 

7,814

 

Commercial Paper

 

 

3,773

 

 

 

 

 

 

3,773

 

Total

 

$

43,319

 

$

 —

 

$

 —

 

$

43,319

 

 

 

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($ in thousands)

 

June 30, 2016

    

Level 1

    

Level 2

    

Level 3

    

Total

 

Money Market Funds Note (a)

 

$

10,012

 

$

 —

 

$

 —

 

$

10,012

 

Marketable Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bonds

 

 

5,065

 

 

 

 

 

 

5,065

 

Certificate of Deposits

 

 

3,003

 

 

 

 

 

 

3,003

 

U.S. Government Sponsored Agencies

 

 

14,342

 

 

 

 

 

 

14,342

 

Corporate Debt Securities

 

 

15,014

 

 

 

 

 

 

15,014

 

Total

 

$

47,436

 

$

 —

 

$

 —

 

$

47,436

 


(a)

The money market funds noted above are included in cash and cash equivalents.

 

Convertible Senior Notes

The carrying amounts and estimated fair values (Level 2) of debt instruments are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2017

 

As of June 30, 2016

 

 

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

 

 

Amount

 

Fair Value

 

Amount

 

Fair Value

 

 

    

 

    

    

 

    

    

 

    

    

 

    

 

Convertible Senior Notes

 

$

97,902

 

$

139,850

 

$

97,354

 

$

71,359

 

 

The fair value of the Convertible Senior Notes, which differs from their carrying values, is influenced by interest rates, the Company’s stock price and stock price volatility and is determined by prices for the Convertible Senior Notes observed in market trading which are Level 2 inputs.

Warrant Liabilities

 

The Company has determined its warrant liabilities to be a Level 2 fair value measurement and used the Black Scholes valuation model to calculate the fair value as of March 31, 2017, February 10, 2017 (date of issuance of warrant liabilities in connection with stock purchase agreement) and October 11, 2016 (date of issuance of warrants in connection with public offering):

At the measurement dates, the Company estimated the fair value for the warrants based on Black-Scholes valuation model and using the following assumptions:

 

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

March 31,

    

February 10,

    

October 11, 

 

 

 2017 (1)

 

 2017 (2)

 

2017

 

2016

Risk-free interest rate

 

1.50%

 

1.15%

 

1.47%

 

0.87%

Expected remaining term

 

2.87 years

 

1.53 years

 

3.0 years

 

2.0 years

Expected volatility

 

70.77%

 

75.31%

 

71.42%

 

75.00%

Dividend yield

 

0%

 

0%

 

0%

 

0%

 

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(1)

Represents the fair value assumptions for the warrants issued in connection with February 10, 2017 stock purchase agreement.

(2)

Represents the fair value assumptions for the warrants issued in connection with October 11, 2016 on public offering.

 

The following table sets forth the changes in the fair value for the warrant liability during the nine -month period ended March 31, 2017 (in thousands):

 

 

 

 

 

 

    

Level 2

Fair value – July 1, 2016

 

$

 —

Additions, pursuant to October 11, 2016 public offering

 

 

7,313

Additions, pursuant to February 16, 2017 stock purchase agreement

 

 

22,320

Change in fair value

 

 

35,567

Fair value – March 31, 2017

 

$

65,200

 

 

7. Stockholders’ Deficit

 

Common stock

 

On October 11, 2016, the Company completed an underwritten public offering of 10 million shares of its Common Stock and accompanying warrants to purchase 10 million shares of Common Stock at a purchase price of $3.00 per unit, comprising of one share of Common Stock and one warrant. The Company received gross and net proceeds of $30.0 million and approximately $28.6 million, respectively after deducting the underwriting discounts and commissions and estimated expenses related to the offering payable. The warrants became exercisable six months following the date of issuance, and will expire on the second anniversary of the date of issuance and have an exercise price of $3.75. On the date of issuance, the fair value of these warrants was determined to be $7.3 million and recognized as a liability. The shares of common stock were sold pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission (the “SEC”). The warrants under certain situations require cash settlement by the Company.

 

On February 10, 2017, in connection with the execution of the License Agreement, which was terminated by mutual agreement on May 4, 2017, the Company entered into the Securities Purchase Agreement (“SPA”) with Seattle Genetics, Inc., (“SGEN”). Under the SPA, SGEN purchased 3,000,000 shares of the Company’s Common Stock at a price of $4.90 per share, for aggregate proceeds of $14.7 million. Concurrently with the sale of the Common Shares, pursuant to the SPA, the Company also agreed to issue the three-year warrant SGEN Warrant to purchase an aggregate of 8,655,804 shares of Common Stock. The SGEN Warrant will be exercisable for cash only and only upon approval by the Company’s stockholders of an amendment to the Company’s certificate of incorporation, and filing thereof, increasing such number of shares of Common Stock in an amount sufficient to allow for the exercise of the shares being issued upon the exercise of the SGEN Warrant, at an initial exercise price equal to $4.90 per share of Common Stock. The SGEN Warrant was issued on February 16, 2017 and was originally exercisable until February 10, 2020. On the date of issuance, the fair value of these warrants was determined to be $22.3 million. The difference between such fair value and the proceeds of $14.7 million has been recognized as an expense and presented in the consolidated statement operations as a “warrant related expense.” Pursuant to the terms of the Termination Agreement entered on May 4, 2017, the Company and SGEN also agreed to amend the terms of the SGEN Warrant to amend the expiration date from February 10, 2020 to the later of (i) December 31, 2017, and (ii) the date that is six months following the date on which a sufficient number of shares of Common Stock are authorized and reserved for issuance to permit the full exercise of the SGEN Warrant.

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On May 4, 2017, the Company entered into the Purchase Agreement with the Purchasers, pursuant to which the Company, in a private placement, agreed to issue and sell to the Purchasers 1,000,000 shares of Series A-1 Convertible Preferred Stock at a price of $125 per share for gross proceeds to the Company of $125 million, before deducting fees and expenses. Each Preferred Share will be convertible, into 23.10536 shares of Common Stock (or an aggregate of 23,105,360 shares of Common Stock). The effective purchase price per share of Common Stock (assuming conversion) is $5.41, (the closing price per share of Common Stock as listed on NASDAQ on May 4, 2017). The Financing closed on May 10, 2017.

The Company currently does not have a sufficient number of authorized and unreserved shares of Common Stock to permit the conversion of the Preferred Shares. Pursuant to the Purchase Agreement, the Company has agreed to use commercially reasonable efforts to seek stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to increase the number of shares of authorized Common Stock by an aggregate number of shares of Common Stock to enable conversion of all of the Preferred Shares into shares of Common Stock, and to continue, as necessary, to seek such stockholder approval until the Charter Amendment receives the requisite stockholder approval. The Preferred Shares will automatically convert to shares of Common Stock upon stockholder approval of the Charter Amendment and subsequent filing of the Charter Amendment with the Secretary of State of the State of Delaware. To the extent the Company is unsuccessful in obtaining stockholder approval for the Charter Amendment and the increase in authorized shares of Common Stock has not become effective by August 31, 2017, then a cash dividend shall accrue on each share of Series A-1 Convertible Preferred Stock at a rate per annum equal to 1.00% of the initial purchase price per share of Series A-1 Convertible Preferred Stock, with the rate of accrual to increase by an additional 1.00% for each month following August 31, 2017 during which the Preferred Conversion Event (as defined in the Certificate of Designation) has not occurred.

 

8. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

    

Currency

    

Net Unrealized Gains

    

Accumulated Other

 

 

 

Translation

 

 (Losses) on Available-

 

Comprehensive

 

 

 

Adjustments

 

for-Sale Securities

 

(Loss) Income

 

Balance, July 1, 2016

 

$

(172)

 

$

40

 

$

(132)

 

Other comprehensive income (loss) before reclassifications

 

 

59

 

 

(69)

 

 

(10)

 

Amounts reclassified from accumulated other comprehensive  income (l oss) (a)

 

 

 —

 

 

16

 

 

16

 

Net current-period other comprehensive income

 

 

59

 

 

(53)

 

 

 6

 

Balance, March 31, 2017

 

$

(113)

 

$

(13)

 

$

(126)

 

Balance, July 1, 2015

 

$

(173)

 

$

12

 

$

(161)

 

Other comprehensive income before reclassifications

 

 

36

 

 

13

 

 

49

 

Amounts reclassified from accumulated other comprehensive incom e ( a)

 

 

 

 

(2)

 

 

(2)

 

Net current-period other comprehensive income

 

 

36

 

 

11

 

 

47

 

Balance, March 31, 2016

 

$

(137)

 

$

23

 

$

(114)

 

 

 

 

 

 

 

 

 

 

 

 


(a)

For the nine-month periods ended March 31, 2017 and 2016, $16 thousand and $2 thousand was reclassified from accumulated other comprehensive loss to interest and other income, respectively.

All components of accumulated other comprehensive loss are net of tax, except currency translation adjustments, which exclude income taxes related to indefinite investments in foreign subsidiaries.

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9. Stock Incentive Plan

The Company has a stock incentive plan, the Immunomedics, Inc. 2014 Long-Term Incentive Plan (the “Plan”), that includes a discretionary grant program, a stock issuance program and an automatic grant program. The plan was established to promote the interests of the Company, by providing eligible persons with the opportunity to acquire a proprietary interest in the Company as an incentive to remain with the organization and to align the employee’s interest with our stockholders.

Under the Plan option awards are generally granted with an exercise price equal to the closing price of the Company’s Common Stock on the date of grant. Those option awards generally vest based on four years of continuous service and have seven year contractual terms. Option awards that are granted to non-employee Board members under the annual option grant program are granted with an exercise price equal to the closing price of the Company’s  Common Stock on the date of grant, are vested immediately and have seven year contractual terms. At March 31, 2017 there were 15,018,665 shares of Common Stock reserved for possible future issuance under the Plan, both currently outstanding (5,448,498 shares) and those available to be issued for future grants (9,570,167 shares).

The weighted average fair value at the date of grant for options granted during the nine-month periods ended March 31, 2017 and 2016 were $1.85 and $1.00 per share, respectively. The Company uses historical data to estimate employee forfeitures for employees, executive officers and outside directors. The expected term of options granted represents the period of time that options granted are expected to be outstanding and the expected stock price volatility is based on the Company’s daily stock trading history. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Information concerning options for the nine-month period ended March 31, 2017 is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

 

 

Shares

 

Price

 

Life

 

Value

 

 

 

 

 

 

 

 

 

 

(in 000’s)

 

Outstanding, July 1, 2016

 

4,015,895

 

$

3.42

 

 

 

 

 

 

Granted

 

331,032

 

$

3.44

 

 

 

 

 

 

Exercised

 

(559,810)

 

$

3.24

 

 

 

 

 

 

Cancelled or forfeited

 

(204,083)

 

$

4.21

 

 

 

 

 

 

Outstanding, March 31, 2017

 

3,583,034

 

$

3.40

 

3.46

 

$

10,987

 

Exercisable, March 31, 2017

 

2,491,812

 

$

3.61

 

2.57

 

$

7,136

 

 

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A summary of the Company’s non-vested restricted and performance stock units at March 31, 2017, and changes during the nine-month period ended March 31, 2017 are presented below:

 

 

 

 

 

 

 

 

    

 

    

Weighted-Average

 

 

 

 

 

per Share of

 

Outstanding Non-Vested

 

 

 

Market Value on

 

Restricted and Performance Stock Units

 

Number of Awards

 

Grant Date

 

Non-vested at July 1, 2016

 

2,066,041

 

$

2.57

 

Restricted Units Granted (a)

 

106,061

 

$

3.30

 

Vested/Exercised

 

(292,169)

 

$

3.66

 

Cancelled

 

(14,469)

 

$

3.11

 

Non-vested at March 31, 2017

 

1,865,464

 

$

2.43

 


(a)

For the nine-month period ended March 31, 2017, 106,061 restricted stock units were awarded to the Company’s President and Chief Executive Officer.

The Company has 2,956,686 non-vested options, restricted stock units and performance stock units outstanding as of March 31, 2017. As of March 31, 2017, there was $3.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is being recognized over a weighted-average period of 1.94 years. The Company recorded $0.8 million and $2.3 million for total stock-based compensation expense for employees, executive officers and non-employee Board members for the three and nine-month periods ended March 31, 2017, respectively as compared to $0.9 million and $2.8 million for the three and nine-month periods ended March 31, 2016, respectively.

On August 20, 2015, the Company awarded an additional 214,205  restricted stock units to certain executive officers of the Company at the closing price on that date ($1.76 per share). These restricted stock units will vest over a four year period. As of March 31, 2017, there was $0.8 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan for these executive officers, excluding performance stock units. The cost is being recognized over a weighted-average period of 2.33 years. The Company recorded $0.1 million and $0.4 million for stock-based compensation expense for restricted stock units for the three and nine-month periods ended March 31, 2017, respectively, and $0.2 million and $0.5 million for the three and nine-month periods ended March 31, 2016, respectively.

As part of the Amended and Restated Employment Agreement with Dr. Goldenberg, the Company’s Chief Scientific Officer and Chief Patent Officer, which became effective July 1, 2015, (see Note 11), Dr. Goldenberg received a grant of 1,500,000 Restricted Stock Units, which shall vest, if at all, after the three (3) year period commencing on the grant date of July 14, 2015, provided the applicable milestones based on achievement of certain market conditions (stock prices) are met and conditioned upon Dr. Goldenberg's continued employment through the vesting period, subject to the terms and conditions of the Restricted Stock Units Notice and the Restricted Stock Units Agreement and such other terms and conditions as set forth in the grant agreement. The Company recorded $0.3 million and $0.9 million for the stock-based compensation for the three and nine-month periods ended March 31, 2017, respectively, and $0.3 million and $0.8 million for the three and nine-month periods ended March 31, 2016, respectively. There is $1.5 million of total unrecognized compensation cost related to these non-vested Restricted Stock Units granted as March 31, 2017. That cost is being recognized over a remaining weighted-average period of 1.29 years.

During fiscal year 2014 the Company awarded certain executive officers Performance Units (as such term is defined in the Plan) of up to 389,864 units of restricted stock units which are subject to attainment of

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certain performance milestones as well as certain continued service requirements. All or a portion of the Performance Units vest based upon the level of achievement of the milestones set forth in each agreement, which is expected to be achieved within five years of the grant date. The Performance Units that vest based upon attainment of the performance milestone will be exercisable based on a percentage basis on the attainment of anniversary dates. During the nine-month period ended March 31, 2017 and 2016, the Company awarded 97,465 and 58,480 units of restricted stock units, respectively, of these restricted stock units to the executive officers as a result of achieving certain continued service requirements. During the nine-month period ended March 31, 2016, 77,973 units were awarded from achieving the four performance milestones. As of March 31, 2016, all four of the performance milestones have been achieved. There are 38,987 Performance Units available that are based on certain continued service requirements that began on each performance milestone vesting date. The Company recorded $12 thousand and $0.1 million for the stock-based compensation for the three and nine-month periods ended March 31, 2017, respectively, as compared to $0.1 million and $0.3 million for the three and nine-months ended March 31, 2016, respectively. There is $30 thousand of total unrecognized compensation cost related to these non-vested Performance Units granted as of March 31, 2017. That cost is being recognized over a weighted-average period of 0.75 years. The unrecognized compensation cost is based on continued service requirements.

10. Geographic Segments

Immunomedics manages its operations as one line of business of researching, developing, manufacturing and marketing biopharmaceutical products, particularly antibody-based products for cancer, autoimmune and other serious diseases, and it currently reports as a single industry segment. Immunomedics conducts its research and development activities primarily in the United States. Immunomedics markets and sells LeukoScan ® throughout Europe and in certain other countries outside the United States.

The following table presents financial information based on the geographic location of the facilities of Immunomedics as of and for the three and nine-months ended March 31, 2017 and 2016, respectively ($ in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the three months ended

 

 

 

March 31, 2017

 

 

    

United

    

 

 

    

 

 

 

 

 

States

 

Europe

 

Total

 

Total assets

 

$

50,824

 

$

1,866

 

$

52,690

 

Property and equipment, net

 

 

4,088

 

 

80

 

 

4,168

 

Revenues

 

 

401

 

 

922

 

 

1,323

 

(Loss) income before taxes

 

 

(59,378)

 

 

58

 

 

(59,320)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the three months ended

 

 

 

March 31, 2016

 

 

    

United

    

 

    

 

 

 

 

States

 

Europe

 

Total

 

Total assets

 

$

66,324

 

$

1,318

 

$

67,642

 

Property and equipment, net

 

 

3,099

 

 

69

 

 

3,168

 

Revenues

 

 

356

 

 

543

 

 

899

 

Loss before taxes

 

 

(15,789)

 

 

(104)

 

 

(15,893)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended

 

 

  

March 31, 2017

 

 

    

United

    

 

 

    

 

 

 

 

  

States

 

Europe

 

Total

 

Revenues

 

$

613

 

$

1,836

 

$

2,449

 

Loss before taxes

 

 

(99,812)

 

 

(185)

 

 

(99,997)

 

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For the nine months ended

 

 

 

March 31, 2016

 

 

  

United

 

 

 

 

 

 

 

 

 

States

 

Europe

 

Total

 

Revenues

  

$

587

 

$

1,714

 

$

2,301

 

Loss before taxes

  

 

(47,977)

 

 

(290)

 

 

(48,267)

 

 

 

11 . Related Party Transactions

Certain of the Company’s affiliates, including members of its senior management and Board, as well as their respective family members and other affiliates, have relationships and agreements among themselves as well as with the Company and its affiliates, that create the potential for both real, as well as perceived, conflicts of interest. These include Dr. David M. Goldenberg, Ms. Sullivan, who is the wife of Dr. Goldenberg, and certain companies with which the Company does business, including the Center for Molecular Medicine and Immunology (“CMMI”), which has ceased operations, and IBC Pharmaceuticals, Inc ., a majority-owned subsidiary.

The Company incurred no legal expenses on behalf of CMMI for patent related matters in the three-month period ended March 31, 2017 and $4 thousand of legal expenses for the nine-month period ended March 31, 2017, as compared to $6 thousand and $20 thousand for the three and nine-month periods ended March 31, 2016, respectively. The Company has first rights to license those patents, and may decide whether or not to support them.

For the three and nine-month periods ended March 31, 2017, Dr. Goldenberg received approximately $10 thousand and $31 thousand, respectively, in compensation for his services to IBC. For the three and nine-month periods ended March 31, 2016, such compensation was approximately $22 thousand and $66 thousand, respectively.

12. Collaboration Agreement

The Bayer Group (formerly Algeta ASA)

In fiscal 2013 the Company entered into a collaboration agreement, referred to herein as the Collaboration Agreement, with Algeta ASA (subsequently acquired by The Bayer Group “Bayer”), for the development of epratuzumab to be conjugated with Algeta’s proprietary thorium-227 alpha-pharmaceutical payload. Under the terms of the Collaboration Agreement, the Company manufactured and supplied clinical-grade epratuzumab to Bayer, which has rights to evaluate the potential of a Targeted Thorium Conjugate (TTC), linking thorium-227 to epratuzumab, for the treatment of patients with cancer. Bayer has the right to terminate the Collaboration Agreement with three months prior written notice, subject to certain provisions. Bayer will fund all non-clinical and clinical development costs up to the end of Phase 1 clinical testing. Upon successful completion of Phase 1 testing, the parties shall negotiate terms for a license agreement at Bayer’s request. The Company and Bayer have agreed to certain parameters in the Collaboration Agreement. Under the terms of the Collaboration Agreement, as amended, Immunomedics received an upfront cash payment and other payments aggregating $6.0 million, which have been recognized in prior periods upon the Company fulfilling its obligations under the Collaboration Agreement.

For the year ended June 30, 2015, the Company recognized $1.0 million in license and other revenue for the completion of the clinical development milestone as described in the Collaboration Agreement, which required the shipment of sufficient quantities of clinical grade material to Bayer to complete their Phase 1 clinical trial. In addition, in January 2017 and 2016, the Company recorded revenue of $0.3 million

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representing an anniversary payment under the agreement. The contract, as amended provides for the Company to receive similar payments of $0.3 million, representing “anniversary payments” over the next two fiscal years.

13. Commitments and Contingencies

a. Employment Contracts

Dr. David M. Goldenberg

Effective July 1, 2015, the Company entered into the Amended and Restated Employment Agreement with Dr. Goldenberg pertaining to Dr. Goldenberg’s service to the Company as the Company’s Chairman of the Board, Chief Scientific Officer and Chief Patent Officer (the “Amended and Restated Goldenberg Agreement”). The Amended and Restated Goldenberg Agreement was to continue until July 1, 2020.

On May 3, 2017 Dr. Goldenberg and other parties entered into the Term Sheet, to resolve certain legal actions among the parties as described in Note 14 below. Upon execution of the contemplated Settlement Agreement, Dr. Goldenberg will remain a director of the Company, but has agreed to resign from all officer and other positions of the Company and all director, officer and other positions at any of the Company’s affiliates (other than Dr. Goldenberg’s position as a member of the board  of directors of IBC Pharmaceuticals, the Company’s majority owned U.S. subsidiary), effective as of the date of the Settlement Agreement. The Settlement Agreement will provide that Dr. Goldenberg will abide by all post-termination covenants and obligations contemplated by the Amended and Restated Goldenberg Agreement. In exchange for a release of claims as required by the Amended and Restated Goldenberg Agreement and subject to compliance with the terms of the Settlement Agreement, Dr. Goldenberg will be entitled to (i) termination payments in accordance with the Amended and Restated Goldenberg Agreement for a termination without Good Cause after a Change in Control, (ii) accelerated vesting or extension of exercise period for equity awards already earned, pursuant to the Amended and Restated Goldenberg Agreement, (iii) COBRA payments, and (iv) royalties or payment in accordance with existing agreements. The foregoing cash payments accumulate to approximately $3.6 million (a portion of which remain in dispute). Additionally, the vesting of the grant of 1,500,000 Restricted Stock Units to Dr. Goldenberg under the terms of the Amended and Restated Goldenberg Agreement, are in dispute.

The Parties to the Term Sheet have agreed to arbitrate disputes relating to Dr. Goldenberg’s claimed entitlement to certain equity awards and severance payments, and Dr. Goldenberg’s claimed rights to certain bonus payments, to the extent the Parties cannot reach agreement on such issues before execution of the Settlement Agreement. The Company has agreed to pay in full the arbitrator in such arbitration as well as reasonable attorneys’ fees and expenses incurred by Dr. Goldenberg in connection with any such arbitration, up to a maximum amount of $650,000.

 

 Under the existing agreements, Dr. Goldenberg is eligible to receive royalty payments on royalties received by the Company. For each fiscal year the Company shall pay Dr. Goldenberg a sum equal to a percentage of the annual royalties the Company receives on each of the products for which Dr. Goldenberg is an Inventor, and all products using, related to or derived from products for which Dr. Goldenberg is an Inventor. The percentage of royalties that the Company will pay to Dr. Goldenberg on each patented product will be determined based on the percentage of royalties that the Company must pay to external third parties. 

  

Dr. Goldenberg is also eligible to receive minimum payments of $150 thousand during each of the fiscal years, payable in equal quarterly payments, as an advance against the amounts due as additional incentive compensation, royalty payments and dispositions of undeveloped assets. In the event the Company

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completes a disposition of the Company’s undeveloped assets for which Dr. Goldenberg was an Inventor, the Company will pay Dr. Goldenberg a sum equal to at least twenty percent or more of the consideration the Company receives from each disposition. The Company’s obligation to compensate Dr. Goldenberg upon dispositions of undeveloped assets applies to all dispositions of such assets completed within the contract term or within three years thereafter. 

  

For the 2016, 2015 and 2014 fiscal years, Dr. Goldenberg received the minimum payment under the employment agreement. Dr. Goldenberg also is compensated by IBC Pharmaceuticals as discussed in greater detail below.  

Cynthia L. Sullivan

Effective July 1, 2014, the Company entered into the Fifth Amended and Restated Employment Agreement with Cynthia L. Sullivan pertaining to Ms. Sullivan’s service to the Company as the Company’s President and Chief Executive Officer (the “Amended Sullivan Agreement”), which was to terminate on June 30, 2017. Such agreement stipulated that an absence of a successor employment agreement by March 1, 2017, will be considered as a termination without cause before Change in Control of the Amended Sullivan Agreement. As a result of this deemed termination, as of March 31, 2017, Ms. Sullivan would have been entitled to (i) termination payments in accordance with the Amended Sullivan Agreement for a termination without Cause before a Change in Control, and (ii) COBRA payments. Accordingly, as of March 31, 2017, the Company accrued an expense of approximately $2.1 million related to this termination. On May 3, 2017 Ms. Sullivan and other parties entered into the Term Sheet to resolve certain legal actions among the parties as described in Note 14 below. Upon execution of the contemplated Settlement Agreement, Ms. Sullivan has agreed to resign from all director, officer and other positions of the Company and any of its affiliates, effective as of the date of the Settlement Agreement. The Settlement Agreement will provide that Ms. Sullivan will abide by all post-termination covenants and obligations contemplated by the Amended Sullivan Agreement. In exchange for a release of claims as required by the Sullivan Agreement and subject to compliance with the terms of the Settlement Agreement, Ms. Sullivan will be entitled to (i) termination payments in accordance with the Amended Sullivan Agreement for a termination without Good Cause after a Change in Control, (ii) accelerated vesting or extension of the exercise period for equity awards already earned, pursuant to the Amended Sullivan Agreement, and (iii) COBRA payments. The foregoing cash payments accumulate to approximately $3.4 million (a portion of which remain in dispute).

The Parties to the Term Sheet have agreed to arbitrate disputes relating to Ms. Sullivan’s claimed entitlement to certain equity awards and severance payments, and Ms. Sullivan’s claimed rights to certain bonus payments, to the extent the Parties cannot reach agreement on such issues before execution of the Settlement Agreement. The Company has agreed to pay in full the arbitrator in such arbitration as well as reasonable attorneys’ fees and expenses incurred by Ms. Sullivan in connection with any such arbitration, up to a maximum amount of $650,000.

b. Change of Control Agreements 

Certain employees have Change of Control Agreements, whereby if a majority of a new board of directors is constituted by newly elected board members not endorsed by the Company’s current Board of Directors, and if, subsequent to such a change, there is a significant change in the responsibilities or employment status of these executives, then severance provisions included in their Change of Control Agreements could be triggered. These severance provisions could result in accelerated vesting of equity compensation and significant, unbudgeted, cash severance payments.

 

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c. Legal Matters

The following is a summary of legal matters that are outstanding:

Patent litigation:

Immunomedics filed a first amended complaint on October 22, 2015 and a second amended complaint on January 14, 2016 in the United States District Court for the District of New Jersey, against Roger Williams Medical Center (“RWMC”), Richard P. Junghans, M.D., Ph.D. and Steven C. Katz, M.D. The second amended complaint alleges that RWMC and Dr. Junghans breached a Material Transfer Agreement (“MTA”) through which it provided to them a monoclonal antibody known as MN-14 and related materials. Defendants are alleged to have breached the MTA and to have been negligent by, among other things, using the materials beyond the agreed-upon Research Project, sharing confidential information, failing to provide Immunomedics with a right of first refusal, failing to notify Immunomedics of intended publications prior to publishing, and refusing to return the materials upon request. Immunomedics also asserts defendants: claims of conversion, tortious interference, unjust enrichment, and infringement of three patents owned by Immunomedics. On January 28, 2016, defendants filed an Answer to the Second Amended Complaint. On October 12, 2016, Immunomedics filed a Third Amended Complaint, and further added as defendants Sorrento Therapeutics, Inc. and its subsidiaries TNK Therapeutics, Inc., BDL Products, Inc., and CARgenix Holdings, LLC. Defendants Junghans, Katz, and RWMC subsequently moved to dismiss for failure to state a claim on November 14, 2016, but this motion was denied on January 4, 2017. On December 2, 2016, Sorrento, TNK, BDL, and CARgenix moved to dismiss for lack of personal jurisdiction over them in New Jersey. The court granted this motion on January 25, 2017. On January 20, 2017, the court held a Markman hearing to construe the claims in the patents in suit. On February 28, 2017, the court issued an opinion and order finding, inter alia, that the term “effective amount” in the patents in suit is not indefinite and should be given its plain and order meaning, as proposed by Immunomedics, of “an amount capable of producing the claim result.”

Stockholder complaints:

Class Action Stockholder Federal Securities Cases

Two purported class action cases have been filed in the United States District Court for the District of New Jersey; namely, Fergus v. Immunomedics, Inc., et al., No. 2:16-cv-03335, filed June 9, 2016; and Becker v. Immunomedics, Inc., et al., No. 2:16-cv-03374, filed June 10, 2016. These cases arise from the same alleged facts and circumstances, and seek class certification on behalf of purchasers of our common stock between April 20, 2016 and June 2, 2016 (with respect to the Fergus matter) and between April 20, 2016 and June 3, 2016 (with respect to the Becker matter). These cases concern the Company's statements in press releases, investor conference calls, and SEC filings beginning in April 2016 that the Company would present updated information regarding its IMMU-132 breast cancer drug at the 2016 American Society of Clinical Oncology ("ASCO") conference in Chicago, Illinois. The complaints allege that these statements were false and misleading in light of June 2, 2016 reports that ASCO had cancelled the presentation because it contained previously reported information. The complaints further allege that these statements resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are thus liable under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. An order of voluntarily dismissal without prejudice was entered on November 10, 2016 in the Becker matter. An order granting motion to consolidate cases, appoint lead plaintiff, and approve lead and liaison counsel was entered on February 7, 2017 in the Fergus matter. As of the date hereof, service of the initiating papers in the Fergus matter has not been made on the Company.

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Stockholder Derivative Action in the Superior Court of New Jersey  

On October 3, 2016, plaintiff commenced an action captioned Rosenfeld v. Goldenberg, et al., No. L-2200-16, alleging the same underlying facts and circumstances as in the pending federal securities class action, the Fergus matter. Specifically, this action concerns the Company’s statements in press releases, investor conference calls, and SEC filings beginning in April 2016 that the Company would present updated information regarding its IMMU-132 breast cancer drug at the 2016 ASCO conference in Chicago, Illinois. The complaint alleges that these statements were false and misleading in light of the June 2, 2016 reports that ASCO had cancelled the presentation because it contained previously reported information. The complaint further alleges that these statements resulted in artificially inflated prices for our common stock, and that certain directors and officers of the Company breached their fiduciary duties to the Company. In addition to monetary damages, the complaint seeks to require the Company to reform its corporate governance and internal procedures. Service was effectuated on all defendants on April 7, 2017.

Class Action Stockholder Claim in the Court of Chancery of the State of Delaware

On December 13, 2016, plaintiff commenced an action captioned Desanctis v. Goldenberg, C.A. No. 12981-VCL (Del. Ch. Ct.), alleging that the Company's Board of Directors failed to comply with Delaware law and breached their fiduciary duties when it rescheduled the Immunomedics 2016 Annual Meeting of Stockholders from December 14, 2016 to February 16, 2017. On December 22, 2016, the Delaware Court of Chancery refused to schedule an expedited hearing in the action and concluded that plaintiff failed to carry his burden of demonstrating that he had pleaded a colorable claim and that there was a threat of irreparable harm. The Court further stated that the Complaint failed to demonstrate that the Board's actions were unreasonable when it rescheduled the Annual Meeting in response to venBio Select Advisor LLC’s proxy contest.

Stockholder Claim in the Court of Chancery of the State of Delaware

 

On February 13, 2017, venBio commenced an action captioned  venBio Select Advisor LLC v. Goldenberg, et al. , C.A. No. 2017-0108-VCL (Del. Ch.) (the “ venBio Action ”), alleging that Company’s Board breached their fiduciary duties when the Board (i) rescheduled the Company’s 2016 Annual Meeting of Stockholders (the “ 2016 Annual Meeting ”) from December 14, 2016 to February 16, 2017, and then again to March 3, 2017, and (ii) agreed to the proposed Licensing Transaction with Seattle Genetics. venBio also named Seattle Genetics as a defendant and sought an injunction preventing the Company from closing the licensing transaction with Seattle Genetics. On March 6, 2017, venBio amended its complaint, adding further allegations, including that the Company’s Board breached their fiduciary duties when the Board amended the Company’s Amended and Restated By-laws (the “ By-Laws ”) to call for a plurality voting regime for the election of directors instead of majority voting, and providing for mandatory advancement of attorneys’ fees and costs for the Company’s directors and officers. The Court of Chancery entered a temporary restraining order on March 9, 2017, enjoining the closing of the Licensing Transaction. venBio amended its complaint a second time on April 19, 2017, this time adding as an additional defendant the Company’s financial advisor on the Licensing Transaction, Greenhill & Co., LLC. On May 3, 2017, venBio and the Company and individual defendants Goldenberg, Sullivan and Markison (collectively, the “ Individual Defendants ”) entered into the Term Sheet, which will be memorialized in a settlement agreement (“Settlement Agreement”), pursuant to which, among other things, venBio and the Company will release the Individual Defendants from all claims. As to all other claims, the Parties stipulated to stay the venBio Action and submit the remaining claims to non-binding mediation. Once the Parties execute the Settlement Agreement, it will be submitted to the Court of Chancery for approval. As to all other claims, including those asserted against the remaining individual defendants (former directors Robert Forrester, Jason Aryeh, Geoff Cox and Bob Oliver) and

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Greenhill, the parties will stipulate to stay the action and venBio and the Company will submit the remaining claims to non-binding mediation.

 

Lawsuit Against venBio Select Advisor LLC in the U.S. District Court (Delaware)(the “ District Court ”)

 

On February 17, 2017, the Company commenced an action captioned  Immunomedics, Inc. v. venBio Select Advisor LLC , No. 17-176-LPS (D. Del.) (the “ Federal Action ”), seeking for the District Court to invalidate the proxies solicited by venBio in furtherance of its contest for the election of directors of the Company. The Company named as defendants venBio and its then-nominees, Behzad Aghazadeh, Scott Canute, Peter Barton Hutt, and Khalid Islam. The Company alleged that venBio had conducted its proxy contest and solicited proxies in violation the federal securities laws and regulations, namely by failing timely file a Schedule 13D form indicating venBio’s intent to effectuate change at the Company, publishing early voting results of the Company’s annual election of directors, publishing improper statements about the then-incumbent Board, forming a “group” of like-minded stockholders without publicly disclosing the group, and soliciting proxies without disclosing the solicitations to the SEC. On February 21, 2017, the Company sought an injunction preventing, among other things, the venBio nominees from benefiting from allegedly illegal shadow proxy contest, including, but not limited to, by asserting any claimed right to take office as a member of the Board until venBio made corrective disclosures and the stockholders were permitted time to consider them. On March 2, 2017, the District Court denied the Company the requested relief. On April 6, 2017, the District Court entered a stipulation and order pursuant to which the Company’s claims were voluntarily dismissed without prejudice. On April 17, 2017, Dr. Goldenberg, the Company’s Chief Scientific Officer and Chief Patent Officer and director, notified the District Court that he may maintain the claims initially brought by the Company. On May 3, 2017, Goldenberg and venBio entered into the Term Sheet pending the Settlement Agreement, pursuant to which, among other things, the Parties have agreed to submit to the District Court a stipulation and proposed order dismissing all claims in the Federal Action with prejudice, including those against the individual defendants (the then-venBio nominees). The Settlement Agreement will also include a mutual release of claims.

 

Lawsuit Challenging the Results of the 2016 Election of Directors

 

On March 3, 2017, six of the seven then-incumbent members of the Company’s Board commenced an action captioned  Goldenberg, et al. vs Aghazadeh, et al. , C.A. No. 2017-0163-VCL (Del. Ch.) (the “ 225 Action ”), challenging the results of the election of directors at the 2016 Annual Meeting that took place on March 3, 2017, in which all four of venBio’s nominees won seats on the Company’s Board. The director-plaintiffs named as defendants venBio and its then-nominees, Behzad Aghazadeh, Scott Canute, Peter Barton Hutt, and Khalid Islam. The incumbent directors alleged the same underlying facts as the Company alleged in its lawsuit against venBio in federal court. On March 13, 2017, the Court of Chancery entered an order (the “ Status Quo Order ”) seating all four venBio nominees (with the three incumbent directors who also won election (based on the plurality vote standard), the “ Status Quo Board ”) and limiting the Company’s Board to actions within the “ordinary course of business,” unless either waived by the parties on a case-by-case basis or ordered by the Court of Chancery. On March 24, 2017, the defendants, venBio and its four nominees, moved to dismiss the action. The plaintiffs in the action have opposed this motion to dismiss, which remains pending. On April 7, 2017, three of the six plaintiffs voluntarily withdrew their claims, leaving Goldenberg, Sullivan and Markison as plaintiffs. On April 20, 2017, the parties agreed to permit the Status Quo Board to explore a potential financing plan for the Company and negotiate a termination of the Licensing Transaction. On May 3, 2017, the Parties entered into the Term Sheet, pursuant to which, among other things, the Parties agreed to submit to the Court of Chancery a stipulation and proposed order lifting the Status Quo Order . On May 4, 2017, the Parties submitted that stipulation, which confirmed that the Status Quo Board is the lawful Board of the Company. Once the Settlement Agreement is executed, the Parties will submit to the Court of

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Chancery another stipulation and proposed order dismissing the 225 Action with prejudice, including those against the individual defendants (the then-venBio nominees). The Settlement Agreement will also include a mutual release of all claims.

Other matters:

Immunomedics is also a party to various claims and litigation arising in the normal course of business, which includes some or all of certain of its patents. While it is not possible to determine the outcome of these matters, the Company believes that the resolution of all such matters will not have a material adverse effect on its consolidated financial position or liquidity, but could possibly be material to its consolidated results of operations in any one accounting period.

 

14. Subsequent Events

a.

Settlement Term Sheet and Settlement Agreement

 

On May 3, 2017, the Company entered the Term Sheet by and among the Parties in order to resolve certain legal actions among the Parties, as described below. The Parties also agreed to cooperate and use their best efforts to reduce the Term Sheet to a definitive Settlement Agreement and, to the extent necessary, obtain the approval of the Court of Chancery.

 

Resolution of Litigation

 

Pursuant to the Term Sheet, the Parties submitted a stipulation and proposed order to the Court of Chancery lifting the order issued by the Court of Chancery on March 13, 2017 (the “Status Quo Order”) seating all four venBio nominees (with the three incumbent directors who also won election (based on the plurality vote standard), the “Status Quo Board”) and confirming that the Status Quo Board is the lawful Board of the Company (provided however, if the 225 Action is not dismissed, the Parties will be restored to their positions in the 225 Action as of immediately prior to the execution of the Term Sheet). The Court of Chancery entered the proposed order on the afternoon of May 4, 2017. Pursuant to the Term Sheet, the Parties also agreed to submit a stipulation and proposed order to the Court of Chancery staying the venBio Action (as described below) and removing the trial dates from the calendar of the Court of Chancery.

 

The Company has further agreed to reimburse venBio for reasonable fees and expenses it incurred in connection with the proxy contest between venBio and the Company, the venBio Action, the 225 Action (as described below) and the Federal Action (as described below and, together with the venBio Action and the 225 Action, the “Actions”), and Goldenberg and Sullivan have agreed to not object to such reimbursement.

 

The Parties have agreed, immediately upon execution of the Settlement Agreement, to submit stipulations and proposed orders dismissing with prejudice both the 225 Action and the Federal Action. The Settlement Agreement will include (i) a mutual release of all claims that were or could have been asserted in the Federal Action or in the 225 Action and (ii) a comprehensive release of all direct and derivative claims that have been or could be asserted by or on behalf of (a) venBio or the Company, whether known or unknown, against Goldenberg, Sullivan and Markison and their affiliates and related persons, and (b) Goldenberg, Sullivan or Markison, whether known or unknown, against venBio or the Company and their affiliates and related persons, in both cases in connection with the claims alleged in the venBio Action, the Financing, the settlement of the venBio Action, the Licensing Transaction and the Termination Agreement. The settlement of claims against Goldenberg, Sullivan and Markison in the venBio Action will be subject to

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approval of the Court of Chancery. venBio and the Company have agreed to stay the venBio Action and submit the claims asserted against the remaining individual defendants (former directors Robert Forrester, Jason Aryeh, Geoff Cox and Bob Oliver) and the Company’s financial advisor on the Licensing Transaction, Greenhill & Co., LLC (“Greenhill”) to non-binding mediation. As part of the Termination Agreement, which is subject to the approval of the Court of Chancery, venBio will release SGEN from any claims in the venBio Action.

 

Financing and Termination of SGEN Transaction

 

Pursuant to the Term Sheet, Goldenberg and Sullivan have or will (i) vote to support the Financing, (ii) vote to terminate the Licensing Transaction with SGEN, as further discussed below, pursuant to the terms of the Termination Agreement entered into with SGEN, (iii) vote to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to increase the number of shares of authorized Common Stock by an aggregate number of shares of Common Stock to enable conversion of all of the Preferred Shares into shares of Common Stock (the “Charter Amendment”), (iv) approve the submission of a stipulation in the 225 Action to permit the Board to consummate and enter into both the Financing and the Termination Agreement, and (v) agree to not sell any shares of the Company (with certain exceptions) until the date which is the earlier of July 31, 2017 or the date on which the Charter Amendment is approved and the shares of Common Stock issuable upon conversion of the Preferred Shares are registered and issued.

 

Indemnification

 

The Term Sheet provides that the Company will, to the extent not covered by the Company’s insurance policies, (i) indemnify Dr. Goldenberg, Ms. Sullivan and Mr. Markison from attorneys’ fees and expenses or other losses in connection with the Actions, and (ii) reimburse and indemnify Dr. Goldenberg and Ms. Sullivan for legal fees for actions taken with respect to the Actions and negotiation of the Settlement Agreement. The Term Sheet provides that the indemnification agreements entered into between the Company and each of Dr. Goldenberg, Ms. Sullivan and Mr. Markison on or about February 9, 2017 shall be terminated and not apply to acts, transactions, legal fees or expenses incurred after approval of the Settlement Agreement by the Court of Chancery.

 

Intellectual Property Assignments

 

The Settlement Agreement shall provide that Dr. Goldenberg and Ms. Sullivan will assign global intellectual property rights, other than those subject to existing agreements with the Company and Dr. Goldenberg’s patent and related intellectual property relating to cyber space medicine, to the Company, and perform all acts reasonably requested by the Company to perfect title in and to all such assigned intellectual property.

 

Sullivan Resignation

 

Upon execution of the contemplated Settlement Agreement, Ms. Sullivan has agreed to resign from all director, officer and other positions of the Company and any of its affiliates, effective as of the date of the Settlement Agreement. The Settlement Agreement will provide that Ms. Sullivan will abide by all post-termination covenants and obligations contemplated by the Amended Sullivan Agreement. In exchange for a release of claims as required by the Amended Sullivan Agreement and subject to compliance with the terms of the Settlement Agreement, Sullivan will be entitled to (i) termination payments in accordance with the Amended Sullivan Agreement for a termination without Good Cause after a Change in Control, (ii) accelerated vesting or extension of the exercise period for equity awards already earned, pursuant to the

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Amended Sullivan Agreement, and (iii) COBRA payments. The foregoing cash payments accumulate to approximately $3.4 million (a portion of which remain in dispute).

 

Goldenberg Resignation

 

Upon execution of the Settlement Agreement, Dr. Goldenberg will remain a director of the Company, but has agreed to resign from all officer and other positions of the Company and all director, officer and other positions at any of the Company’s affiliates (other than Dr. Goldenberg’s position as a member of the board of directors of IBC Pharmaceuticals, the Company’s majority owned U.S. subsidiary), effective as of the date of the Settlement Agreement. The Settlement Agreement will provide that Dr. Goldenberg will abide by all post-termination covenants and obligations contemplated by the Amended and Restated Goldenberg Agreement. In exchange for a release of claims as required by the Amended and Restated Goldenberg Agreement and subject to compliance with the terms of the Settlement Agreement, Dr. Goldenberg will be entitled to (i) termination payments in accordance with the Amended and Restated Goldenberg Agreement for a termination without Good Cause after a Change in Control, (ii) accelerated vesting or extension of exercise period for equity awards already earned, pursuant to the Amended and Restated Goldenberg Agreement, (iii) COBRA payments, (iv) royalties or payment in accordance with existing agreements. The foregoing cash payments accumulate to approximately $3.6 million (a portion of which remain in dispute). Additionally, the vesting of the grant of 1,500,000 Restricted Stock Units to Dr. Goldenberg under the terms of his Amended and Restated Employment Agreement, are in dispute.

Arbitration of Disputed Matters

 

The Parties have agreed to arbitrate disputes relating to Dr. Goldenberg’s claimed entitlement to certain equity awards and severance payments, and Dr. Goldenberg’s and Ms. Sullivan’s claimed rights to certain bonus payments, to the extent the Parties cannot reach agreement on such issues before execution of the Settlement Agreement. The Company has agreed to pay in full the arbitrator in such arbitration as well as reasonable attorneys’ fees and expenses incurred by Dr. Goldenberg and/or Ms. Sullivan in connection with any such arbitration, up to a maximum amount of $650,000.

 

b.

Termination of the SGEN Licensing Agreement

 

The Company entered into the Licensing Agreement with SGEN, granting SGEN a worldwide, exclusive license, including the right to sublicense subject to the terms and conditions of the License Agreement, to develop, manufacture and commercialize IMMU-132.

 

On May 4, 2017, the Company and SGEN entered into the Termination Agreement, pursuant to which the Company and SGEN relinquished their respective rights under the Licensing Agreement.

 

The Termination Agreement constitutes an agreement to terminate the License Agreement and is not in any way an admission of liability or breach by either the Company or SGEN. The Termination Agreement between the Company and SGEN and the settlement of the venBio lawsuit against SGEN remain subject to court approval of the dismissal of the venBio Action. The termination of the Licensing Transaction will be effective as of the date of the approval by the Court of Chancery. In the event the Court of Chancery declines to dismiss the venBio Action against SGEN, or if the effective date of the Termination Agreement does not occur on or before October 1, 2017, any party to the Termination Agreement may terminate the Termination Agreement upon written notice to such other party.

 

c.

Appointment of Interim Chief Executive Officer

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On May 4, 2017, the Board appointed Michael R. Garone to serve as interim Chief Executive Officer, effective upon the execution and effectiveness of the Settlement Agreement.

 

The Board plans on deciding on a permanent CEO and filling out additional leadership positions within the Company.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCI AL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. Certain statements that we may make from time to time, including, without limitation, statements contained in this Quarterly Report on Form 10-Q, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this Quarterly Report, and they may also be made a part of this Quarterly Report by reference to other documents filed with the Securities and Exchange Commission, which is known as “incorporation by reference.”

Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, are intended to identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, among other things: the risk that we may be unable to obtain additional capital through strategic collaborations, licensing, issuance of convertible debt securities or equity financing in order to continue our research and development activities and secure regulatory approval of and market our drug candidates; our inability to further identify, develop and achieve commercial success for new products and technologies; the possibility of delays in the research and development necessary to select drug development candidates and delays in clinical trials; the risk that clinical trials may not result in marketable products; the risk that we may be unable to secure regulatory approval of and market our drug candidates; our dependence upon pharmaceutical and biotechnology collaborations; uncertainties about our ability to obtain new corporate collaborations and acquire new technologies on satisfactory terms, if at all; the development of competing products; our ability to protect our proprietary technologies; patent-infringement claims and other stockholder litigation; and risks of new, changing and competitive technologies and regulations in the United States and internationally; and other factors discussed under the heading Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report or in any document incorporated by reference might not occur. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report or the date of the document incorporated by reference in this Quarterly Report. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All subsequent forward-looking statements attributable to Immunomedics, Inc. (“Immunomedics,” the “Company,” “we,” “our” or “us”), or to any person authorized to act on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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Overview

Immunomedics is a clinical-stage biopharmaceutical company developing monoclonal antibody-based products for the targeted treatment of cancer, autoimmune disorders and other serious diseases. Our advanced proprietary technologies allow us to create humanized antibodies that can be used either alone in unlabeled or “naked” form, or conjugated with radioactive isotopes, chemotherapeutics, cytokines or toxins. Using these technologies, we have built a pipeline of seven clinical-stage product candidates.

Our portfolio of investigational products includes antibody-drug conjugates (“ADCs”) that are designed to deliver a specific payload of a chemotherapeutic directly to the tumor while reducing overall toxicities that are usually found with conventional administration of these chemotherapeutic agents. Our most advanced ADCs are sacituzumab govitecan (“IMMU-132”) and labetuzumab govitecan (“IMMU-130”), which are in Phase 2 trials for a number of solid tumors and metastatic colorectal cancer (“CRC”), respectively. IMMU-132 is our lead product candidate and has received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (the“FDA”) for the treatment of patients with triple-negative breast cancer (“TNBC”) who have failed at least two prior therapies for metastatic disease.

On May 5, 2017, the Company announced several business and leadership updates and outlined a new strategic plan to drive long-term value for stockholders. These updates include the termination of the previously announced Development and License Agreement with Seattle Genetics (NASDAQ: SGEN, “SGEN”), returning full rights of IMMU-132, the Company’s breakthrough therapy candidate to treat metastatic triple-negative breast cancer mTNBC, to Immunomedics. Immunomedics also announced that it raised $125 million in gross proceeds in a private placement of its Series A-1 Convertible Preferred Stock with institutional investors, and has taken a series of steps to drive positive organizational and operational changes.

As of March 31, 2017 the Company had $46.0 million in cash, cash equivalents and marketable securities. On May 4, 2017, the Company entered into the Purchase Agreement with the Purchasers pursuant to which the Company, in a private placement, agreed to issue and sell to the Purchasers 1,000,000 shares of Series A-1 Convertible Preferred Stock at a price of $125 per share for gross proceeds to the Company of $125 million, before deducting fees and expenses. Each Preferred Share will be convertible, into 23.10536 shares of Common Stock (or an aggregate of 23,105,360 shares of Common Stock). The effective purchase price per share of Common Stock (assuming conversion) is $5.41, (the closing price per share of Common Stock as listed on NASDAQ on May 4, 2017). The Financing closed on May 10, 2017.

The Company expects to use the net proceeds from the $125 million private placement to support the development of IMMU-132, including the goal of filing a Biologics License Applications (“BLA”)for Accelerated Approval in mTNBC from the FDA. The capital will also fund general corporate and operational enhancements. With this new capital and the Company’s current cash on hand, Immunomedics expects to have sufficient operating funds through the third quarter of 2018.

The Immunomedics Board of Directors (the “Board”), as recently seated, has conducted a review of the strategy of the Company, including a review of the projected timeline for submission of a BLA for IMMU-132. These efforts to date have resulted in an updated timeline for the execution of delivering IMMU-132 to market, as well as the assessment of various deal structures and partnerships towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond. The Company is targeting a BLA for IMMU-132 for approval in mTNBC cancer between late fourth quarter 2017 and first quarter 2018, subject to FDA input on the acceptance of the Company’s chemistry, manufacturing and controls filing plan.

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Our financial resources are adequate to sustain the Company’s operations at a level of activity sufficient to support the filing of the BLA with the FDA for accelerated approval of IMMU-132 for patients with mTNBC; to continue manufacturing IMMU-132 at large scale to prepare for commercial operations in the U.S. marketplace; to initiate a Phase 3 clinical trial of IMMU-132 for mTNBC patients to support the filing of the BLA; to initiate preparations to market IMMU-132 to mTNBC patients in the U.S. and, subject to meeting all standards, completing review and final determination of the FDA, to secure accelerated regulatory approval of IMMU-132 for mTNBC patients.

W e also have a research collaboration with Bayer to study epratuzumab as a thorium-227-labeled antibody and an ongoing collaboration in oncology in collaboration with an independent cancer study group.

We also have a number of other product candidates that target solid tumors and hematologic malignancies, as well as other diseases, in various stages of clinical and pre-clinical development. These include combination therapies involving our ADCs, bispecific antibodies targeting cancers and infectious diseases as T-cell redirecting immunotherapies, as well as bispecific antibodies for next-generation cancer and autoimmune disease therapies, created using our patented DOCK-AND-LOCK ® (“DNL ® ”) protein conjugation technology. We believe that our portfolio of intellectual property provides commercially reasonable protection for our product candidates and technologies.

The development and commercialization of successful therapeutic products is subject to numerous risks and uncertainties including, without limitation, the following:

·

we may be unable to obtain additional capital through strategic collaborations, licensing, issuance of convertible debt securities or equity financing in order to continue our research and secure regulatory approval of and market our drug ;

·

the type of therapeutic compound under investigation and nature of the disease in connection with which the compound is being studied;

·

our ability, as well as the ability of our partners, to conduct and complete clinical trials on a timely basis;

·

the time required for us to comply with all applicable federal, state and foreign legal requirements, including, without limitation, our receipt of the necessary approvals of the FDA, if at all;

·

the financial resources available to us during any particular period; and

·

many other factors associated with the commercial development of therapeutic products outside of our control.

See Risk Factors in Item 1A of this Quarterly Report.

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Research and Development

As of March 31, 2017, we employed ten professionals in our research and development departments and 28 professionals in our pre-clinical and clinical research departments. In addition to salaries and benefits, the other costs associated with research and development include the costs associated with producing biopharmaceutical compounds, laboratory equipment and supplies, the costs of conducting clinical trials, legal fees and expenses associated with pursuing patent protection, as well as facilities costs.

At any one time our scientists are engaged in the research and development of multiple therapeutic compounds. Because we do not track expenses on the basis of each individual compound under investigation, but rather aggregate research and development costs for accounting purposes, it is not possible for investors to analyze and compare the expenses associated with unsuccessful research and development efforts for any particular fiscal period, with those associated with compounds that are determined to be worthy of further development. This may make it more difficult for investors to evaluate our business and future prospects.

Clinical Pipeline Update

The following is an update of the status of our clinical trials.

Antibody-Drug Conjugates (ADCs)

We have two product candidates from our proprietary ADC program that are in clinical development, focusing on the treatment of patients with metastatic solid tumors. The first ADC program, sacituzumab govitecan (IMMU-132) is an anti-TROP-2-SN-38 ADC currently being evaluated in patients with a variety of solid tumors. Labetuzumab govitecan (IMMU-130) is an anti-CEACAM5-SN-38 ADC currently in development for the treatment of metastatic CRC.

Sacituzumab Govitecan or IMMU-132

Sacituzumab govitecan has been studied in over 400 diverse cancer patients, with the dose of 10 mg/kg given on days 1 and 8 of repeated 21-day cycles being the established dose regimen. Sacituzumab govitecan   has received Breakthrough Therapy Designation from the FDA for the treatment of patients with TNBC who have failed at least two prior therapies for metastatic disease. The FDA has also granted this ADC Fast Track designation for the treatment of patients with TNBC and for patients with small-cell lung cancer (“SCLC”), or non-small-cell lung cancer (“NSCLC”). Sacituzumab govitecan has also been designated an orphan drug by the FDA for the treatment of patients with SCLC or pancreatic cancer in the U.S. and by the European Medicines Agency (“EMA”) for the treatment of patients with pancreatic cancer in the European Union.

Currently, clinical development for sacituzumab govitecan focuses on a number of select types of solid cancers including TNBC, SCLC, NSCLC, urothelial cancer (“UC”) and certain other cancers. Results from a single-arm Phase 2 study in heavily-pretreated patients with metastatic TNBC were published online in the Journal of Clinical Oncology (Bardia A, Mayer IA, Diamond JR, et al. Efficacy and safety of anti-Trop-2 antibody-drug conjugate, sacituzumab govitecan (IMMU 132), in heavily-pretreated patients with metastatic triple-negative breast cancer. (J Clin Oncol. Epub ahead of print. March 14, 2017).

This study was updated by our clinical investigator at the 2017 Investor R&D Day (“R&D Day”), to show sacituzumab govitecan produced tumor shrinkage from baseline measurements in 81% of 85 assessable patients, with two complete responses (“CRs”) and 23 partial responses (“PRs”). The interim median duration

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of response for those with objective responses was almost 11 months, while the interim median overall survival (“OS”) for all 85 patients has been extended to almost 19 months.

These results will be part of a BLA submission for the accelerated approval of IMMU-132 for patients with mTNBC. In December 2016, we achieved the goal of enrolling 100 mTNBC patients, as requested by FDA for this BLA filing, which the Company plans to make between the fourth quarter 2017 and first quarter 2018, subject to FDA input on the acceptance of the Company’s chemistry, manufacturing and controls filing plan. In addition, the FDA also requires a confirmatory Phase 3 trial to be underway at the time of BLA submission. We plan to launch the Phase 3 confirmatory study in the second half of 2017 which is also a prerequisite for FDA acceptance of the BLA filing.

The Company has sufficient funding to conduct the Phase 3 Clinical Trial of IMMU-132 in mTNBC patients through the third quarter 2018, but will require additional funding in order to complete the Phase 3 clinical trial. Details of this trial can be obtained at the website: clinicaltrials.gov, using the identifier NCT02574455 .

Our financial resources are adequate to sustain the Company’s operations at a level of activity sufficient to support the filing of the BLA with the FDA for accelerated approval of IMMU-132 for patients with mTNBC; to continue manufacturing IMMU-132 at large scale to prepare for commercial operations in the U.S. marketplace; to initiate a Phase 3 clinical trial of IMMU-132 for mTNBC patients to support the filing of the BLA; to initiate preparations to market IMMU-132 to mTNBC patients in the U.S. and, subject to meeting all standards, completing review and final determination of the FDA, to secure accelerated regulatory approval of IMMU-132 for mTNBC patients and to continue operations through the third quarter 2018.

In addition to TNBC, interim results in patients with metastatic NSCLC were also presented at the R&D Day. In over 50 patients that had a median of three prior therapies, about one-fifth of evaluable patients had a partial response. Overall, 64% of patients had tumor shrinkage from baseline measurements when given sacituzumab govitecan. The median duration of response was eight months and median progression-free survival (“PFS”) and OS, on an intention to treat (“ITT”) basis, were five and over nine months, respectively.

In metastatic UC, an objective response rate (“ORR”) of 31%, among 36 assessable patients, was reported at the 2017 Genitourinary Cancers Symposium. They included one confirmed CR and ten confirmed PRs. The median duration of response for these ten patients was 7.5 months, with one patient having a PR for more than 18 months and continuing therapy. For the 41 ITT patients, median PFS was 7.2 months and median OS was 15.5 months. Overall, 69% of patients showed tumor shrinkage from baseline with sacituzumab govitecan therapy, and 14 patients are still under therapy.

Patients received a median of six doses (range, 1 to 50) of sacituzumab govitecan, which was administered at 8 or 10 mg/kg on days 1 and 8 of 3-week cycles. Despite repeated dosing, grade 3 or higher adverse events were limited to neutropenia (30%), febrile neutropenia (11%), fatigue (11%), and diarrhea (3%).

Results in patients with metastatic SCLC were updated at the 2017 Annual Meeting of the American Association for Cancer Research (“AACR”). A total of 53 patients with metastatic SCLC were enrolled into the open-label Phase 2 study after receiving a median of 2 prior lines of therapy (range, 1 to 7). All patients had previously received cisplatin or carboplatin plus etoposide, and were considered chemosensitive (N=27, 51%) or chemoresistant (N=26, 49%) to their platinum-containing frontline therapy, based on a duration of response of more than 3 months or less than 3 months, respectively. Treatments with sacituzumab govitecan were administered at a dose of either 8 or 10 mg/kg on days 1 and 8 of 21-day cycles. The primary endpoints were safety and ORR, with duration of response, PFS, and OS as secondary endpoints.

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Sixty percent of patients showed tumor shrinkage from baseline measurements using computed tomography. On an ITT basis (N= 50), the ORR was 14% (17% for the 10 mg/kg group) and the median response duration was 5.7 months. Clinical benefit rate (CBR) at 4 months was 34%, with median PFS and median OS at 3.7 months and 7.5 months, respectively. There was no statistical difference in ORR, PFS or OS between those patients who were chemosensitive or chemoresistant to first-line chemotherapy, but the CBR was 50% and 26%, respectively. There was a statistically significant higher OS in those patients who received prior topotecan versus no topotecan therapy.

As in the case with UC patients, the safety profile of sacituzumab govitecan in patients with SCLC was also mild and manageable. Grade 3 or higher adverse events included neutropenia (34%), fatigue (13%), diarrhea (9%), and anemia (6%). Trop-2 tumor staining was not required for patient selection, due to 92% (23/25) positivity. No antibodies to the drug conjugate or its components were detected on serial blood collections, despite more than 60 doses being given. These observations are similar to those reported by TNBC and NSCLC patients.

The pharmacokinetics of sacituzumab govitecan in patients with diverse solid tumors was also presented at the same AACR conference. This investigational ADC cleared in a predictable manner based on in-vitro serum stability studies, with no difference between the 8 and 10 mg/kg dose groups studied clinically. While there was a gradual release of SN-38, more than 90% of the SN-38 in the serum at any given time stayed bound to the antibody. Glucuronidated SN-38 concentrations were lower than SN-38, a possible reason for the lower incidence of severe diarrhea as compared to irinotecan. In addition, neither neutropenia nor diarrhea was found to correlate with free SN-38 levels in serum. With no difference in safety and pharmacokinetics, but improved objective response rate and clinical benefit ratio favoring the 10 mg/kg group in TNBC, SCLC, and NSCLC indications, 10 mg/kg is selected as the starting dose for future clinical studies in treating patients with multiple cancer indications.

Certain patents relating to the protein sequence of the hRS7 antibody used in sacituzumab govitecan have a 2017 expiration in the U.S. and 2023 overseas. Other patents relating to use of hRS7 for cancer therapy, including the SN-38 conjugated form of hRS7 used in sacituzumab govitecan, extend to 2033.

Labetuzumab Govitecan (IMMU-130)

Our second investigational solid-tumor ADC involves our anti-CEACAM5 antibody labetuzumab, conjugated to SN-38. The agent is currently being studied in patients with metastatic CRC who had received at least one prior irinotecan-containing regimen and had an elevated blood titer of carcinoembryonic antigen. Several dosing schedules were evaluated in Phase 1 studies.

In the expanded Phase 2 study patients were treated in 3-week cycles, receiving labetuzumab govitecan at 8 or 10 mg/kg once-weekly or twice a week at 4 or 6 mg/kg for the first two weeks followed by one week of rest. Updated results were presented at the April 2016 AACR Annual Meeting.

Since there was no significant difference in safety and efficacy between the two once-weekly dosing schedules, for patient’s convenience, once-a-week dosing was chosen for future studies in metastatic CRC patients. Although certain patents relating to labetuzumab used in labetuzumab govitecan expired in 2014 in the U.S. and in 2015 overseas and others expired in 2016, other patents relating to use labetuzumab for cancer therapy, including the SN-38 conjugated form of labetuzumab used in labetuzumab govitecan, extend to 2033.

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Epratuzumab

We have a research collaboration with Bayer to study epratuzumab as a thorium-227 labeled antibody. We also have a collaboration ongoing in oncology with the IntreALL Inter-European study group who is conducting a large, randomized, Phase 3 trial combining epratuzumab with chemotherapy in children with relapsed acute lymphoblastic leukemia (“ALL”) at clinical sites in Australia, Europe, and Israel . This Phase 3 study, which is partially funded by the European Commission, assesses the efficacy and safety of this combination therapy using event-free survival as the surrogate for survival, the primary endpoint.

As a result of UCB’s termination of the Licensing Agreement for epratuzumab, all rights to the anti-CD22 antibody revert to us and the process of transitioning all materials back to us is continuing .

Although certain patents to the epratuzumab protein sequence expired in 2014 in the U.S. and in 2015 overseas, other issued patents to therapeutic use of epratuzumab extend to 2018-2023 for cancer and 2020 for autoimmune disease. The method of preparing concentrated epratuzumab for subcutaneous administration is covered by another patent family with expiration in the United States in 2032.

Early-Stage Programs

We have additional potential products for the treatment of cancer and autoimmune diseases including IMMU-114, a humanized anti-HLA-DR antibody; milatuzumab, our anti-CD74 antibody; and veltuzumab, our anti-CD20 antibody.

IMMU-114

IMMU-114 is a novel humanized antibody directed against an immune response target, HLA-DR, under development for the treatment of patients with B-cell and other cancers. HLA-DR is a receptor located on the cell surface whose role is to present foreign objects to the immune system for the purpose of eliciting an immune response. Increased presence of HLA-DR in hematologic cancers has made it a prime target for antibody therapy. The anti-HLA-DR antibody is being evaluated as a subcutaneously administered monotherapy for patients with non-Hodgkin lymphoma (“NHL”) or chronic lymphocytic leukemia (“CLL”) in a Phase 1 study. Results from this study were presented at the December 2015 Annual Meeting of the American Society of Hematology and updated at the 2016 Pan Pacific Lymphoma Symposium. IMMU-114 showed early evidence of efficacy in both NHL and CLL and was well tolerated by patients, with only local skin reactions at the injection sites, which were all mild to moderate and transient.

Milatuzumab

Milatuzumab is the first anti-CD74 antibody that has entered into human testing and we have completed initial Phase 1studies in patients with relapsed multiple myeloma, NHL or CLL. It has received orphan drug designation from the FDA for the treatment of patients with multiple myeloma or CLL.

The anti-CD74 antibody is also being studied subcutaneously in a Phase 1b study in patients with active systemic lupus erythematosus supported by a three-year research grant from the Department of Defense with a potential funding of $2 million.  First results from the open-label study were presented at a poster session during the 2016 annual European League Against Rheumatism Congress. Based on early encouraging results, the study has been expanded into a double-blind, placebo-controlled 30-patient trial to confirm the activity of milatuzumab in this population and have received approval from the Department of Defense for an increased budget to support the expansion.

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Veltuzumab

Veltuzumab is a humanized monoclonal antibody targeting CD20 receptors on B lymphocytes currently under development for the treatment of NHL and autoimmune diseases. The Office of Orphan Products Development of the FDA has granted orphan status for the use of veltuzumab for the treatment of patients with immune thrombocytopenia (“ITP”) and pemphigus. We have studied the subcutaneous formulation of veltuzumab in patients with ITP in a Phase 1/2 trial, which was designed to evaluate different dosing schedules. This trial has completed patient accrual and patients are being followed for up to five years. In oncology, we have completed a National Cancer Institute-funded Phase 2 study in patients with aggressive NHL in combination with 90 Y-epratuzumab tetraxetan.

We are currently evaluating various options for further clinical development of veltuzumab in ITP and other autoimmune disease indications, including pemphigus, as well as in oncology, including licensing arrangements and collaborations with outside study groups .

Thorium-227-Labeled Epratuzumab Tetraxetan

Targeted Thorium Conjugates (“TTCs”) represent a new technology directing the power of the alpha-particle selectively towards tumor cells. The high linear energy transfer of the alpha particle generated by decay of the radionuclide thorium-227 induces double-strand DNA breaks causing cell death in targeted tumor cells.

Our corporate partner, Bayer, is enrolling patients with relapsed or refractory CD22-positive NHL into a Phase 1 clinical trial evaluating epratuzumab labeled with thorium-227. This study is focusing on patients with diffuse large B-cell lymphoma and potentially follicular lymphomas who have been previously treated with, or are not considered candidates for available therapies. An overview of the TTC platform and the CD22 TTC program was provided in an oral presentation by Bayer at the 2016 AACR Annual Meeting.

Critical Accounting Policies

For a description of our significant accounting policies, see Notes to Unaudited Condensed Consolidated Financial Statements – Note 2 Summary of Significant Accounting Policies . Of these policies, the following are considered critical to an understanding of the Company’s Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments; (i) Revenue recognition, (ii) Stock-based compensation and (iii) Research and development costs.

Government Regulation

Regulatory Compliance

Our research and development activities, including testing in laboratory animals and in humans, our manufacture of antibodies, as well as the design, manufacturing, safety, efficacy, handling, labeling, storage, record-keeping, advertising, promotion and marketing of the product candidates that we are developing, are all subject to stringent regulation, primarily by the FDA in the U.S. under the Federal Food, Drug, and Cosmetic Act and its implementing regulations, and the Public Health Service Act and its implementing regulations, and by comparable authorities under similar laws and regulations in other countries. If for any reason we do not comply with applicable requirements, such noncompliance can result in various adverse consequences, including one or more delays in approval of, or even the refusal to approve, product licenses or other applications, the suspension or termination of clinical investigations, the revocation of approvals previously granted, as well as fines, criminal prosecution, recall or seizure of products, injunctions against

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shipping products and total or partial suspension of production and/or refusal to allow us to enter into governmental supply contracts.

Product Approval

In the United States, our product candidates are regulated as biologic pharmaceuticals, or biologics. The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:

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completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices regulations;

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submission to the FDA of an Investigational New Drug Application (“IND”) which must become effective before human clinical trials may begin and must be updated annually;

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approval by an independent Institutional Review Board (“IRB”) the ethics committee at each clinical site before the trial is initiated.

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performance of adequate and well-controlled clinical trials to establish the safety, purity and potency of the proposed biologic, and the safety and efficacy of the proposed drug for each indication;

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preparation of and submission to the FDA of a BLA for a new biologic, after completion of all pivotal clinical trials;

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satisfactory completion of an FDA Advisory Committee review, if applicable;

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a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;

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satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities to assess compliance with current Good Manufacturing Practice (“cGMP”) regulations; and

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FDA review and approval of a BLA for a new biologic, prior to any commercial marketing or sale of the product in the United States.

Preclinical tests assess the potential safety and efficacy of a product candidate in animal models. Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with current Good Clinical Practices (“cGCPs”), which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial site’s IRB before the trials may be initiated, and the IRB must monitor the study until completed. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.

The clinical investigation of a pharmaceutical, including a biologic, is generally divided into three phases. Although the phases are usually conducted sequentially, they may overlap or be combined.

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Phase 1 studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the investigational product in humans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness.

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·

Phase 2 includes controlled clinical trials conducted to preliminarily or further evaluate the effectiveness of the investigational product for a particular indication(s) in patients with the disease or condition under study, to determine dosage tolerance and optimal dosage, and to identify possible adverse side effects and safety risks associated with the product.

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Phase 3 clinical trials are generally controlled clinical trials conducted in an expanded patient population generally at geographically dispersed clinical trial sites, and are intended to further evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of the investigational product, and to provide an adequate basis for product approval.

The FDA may place clinical trials on hold at any point in this process if, among other reasons, it concludes that clinical subjects are being exposed to an unacceptable health risk. Trials may also be terminated by IRBs, which must review and approve all research involving human subjects. Side effects or adverse events that are reported during clinical trials can delay, impede or prevent marketing authorization.

The results of the preclinical and clinical testing, along with information regarding the manufacturing of the product and proposed product labeling, are evaluated and, if determined appropriate, submitted to the FDA through a BLA. The application includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Once the BLA submission has been accepted for filing, the FDA’s standard goal is to review applications within ten months of the filing date or, if the application relates to an unmet medical need in a serious or life-threatening indication, six months from the filing date. The review process is often significantly extended by FDA requests for additional information or clarification.

The FDA offers certain programs, such as Breakthrough Therapy designation and Fast Track designation, designed to expedite the development and review of applications for products intended for the treatment of a serious or life-threatening disease or condition. For Breakthrough Therapy designation, preliminary clinical evidence of the product indicates that it may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If Breakthrough Therapy or Fast Track designation is obtained, the FDA may initiate review of sections of a BLA before the application is complete, and the product may be eligible for accelerate approval. However, receipt of Breakthrough Therapy or Fast Track designation for a product candidate does not ensure that a product will be developed or approved on an expedited basis, and such designation may be rescinded if the product candidate is found to no longer meet the qualifying criteria.

The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, pure and potent, which includes determining whether it is effective for its intended use, and whether the product is being manufactured in accordance with cGMP, to assure and preserve the product’s identity, strength, quality, potency and purity. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it typically follows such recommendations.

After the FDA evaluates the BLA and conducts inspections of manufacturing facilities, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the biologic with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. Even if such additional information is submitted, the FDA may ultimately decide

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that the BLA does not satisfy the criteria for approval. The FDA could approve the BLA with a Risk Evaluation and Mitigation Strategy plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created an abbreviated pathway for the approval of biosimilar and interchangeable biologic products. The abbreviated pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product was approved under a BLA. In March 2015, the FDA approved Novartis’s Zarxio as a biosimilar product to Amgen’s Neupogen. The approval, the first biosimilar product approved for distribution in the United States, could usher in more biosimilar products and lower prices for biologic products from increased competition. Indeed, on February 9, 2016, the Arthritis Advisory Committee of the FDA recommended for approval Pfizer’s Inflectra as a biosimilar product to Johnson & Johnson’s Remicade.

Expedited Review and Approval

The FDA has four program designations/approval pathways — Fast Track, Breakthrough Therapy, Accelerated Approval, and Priority Review — to facilitate and expedite development and review of new drugs to address unmet medical needs in the treatment of serious or life-threatening conditions. The Fast Track designation provides pharmaceutical manufacturers with opportunities for frequent interactions with FDA reviewers during the product’s development and the ability for the manufacturer to do a rolling submission of the BLA. A rolling submission allows completed portions of the application to be submitted and reviewed by the FDA on an ongoing basis. The Breakthrough Therapy designation provides manufacturers with all of the features of the Fast Track designation as well as intensive guidance on implementing an efficient development program for the product and a commitment by the FDA to involve senior managers and experienced review staff in the review. The Accelerated Approval designation allows the FDA to approve a product based on an effect on a surrogate or intermediate endpoint that is reasonably likely to predict a product’s clinical benefit and generally requires the manufacturer to conduct required post-approval confirmatory trials to verify the clinical benefit. The Priority Review designation means that the FDA’s goal is to take action on the BLA within six months, compared to ten months under standard review. In February 2016, sacituzumab govitecan was granted Breakthrough Therapy designation from the FDA for the treatment of patients with TNBC who have failed at least two prior therapies for metastatic disease.

Post-Approval Requirements

Any products manufactured or distributed by us or on our behalf pursuant to FDA approvals are subject to continuing regulation by the FDA and certain state agencies, including requirements for record-keeping, reporting of adverse experiences with the biologic, submitting biological product deviation reports to notify the FDA of unanticipated changes in distributed products, establishment registration, compliance with cGMP standards (including investigation and correction of any deviations from cGMP), and certain state chain of distribution pedigree requirements. Additionally, any significant change in the approved product or in how it is manufactured, including changes in formulation or the site of manufacture, generally require prior FDA approval. The packaging and labeling of all products developed by us are also subject to FDA approval and ongoing regulation. Noncompliance with any regulatory requirements can result in, among other things, issuance of warning letters, civil and criminal penalties, seizures, and injunctive action. Accordingly,

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manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. 

Orphan Drug Act

To date, we have successfully obtained Orphan Drug designation by the FDA under the Orphan Drug Act of 1983 for epratuzumab/90-Y-epratuzumab tetraxetan for NHL, yttrium-90-labeled clivatuzumab tetraxetan for pancreatic cancer, IMMU-132 for SCLC and pancreatic cancer, labetuzumab for ovarian, 90— labetuzumab for SCLC and pancreatic, milatuzumab for multiple myeloma and CLL, and veltuzumab for ITP and pemphigus. Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting a BLA. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first BLA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or where the manufacturer of the approved product cannot assure sufficient quantities. As a result, there can be no assurance that our competitors will not receive approval of drugs or biologics that have a different active ingredient for treatment of the diseases for which our products and product candidates are targeted.

Foreign Regulation

In addition to regulations in the United States, we are subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our product candidates being developed, and products being marketed outside of the United States. We must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of our products in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required by the FDA for BLA licensure. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. As in the United States, we are subject to post-approval regulatory requirements, such as those regarding product manufacturing, marketing, or distribution.

Other Regulatory Considerations

We are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, The Clean Air Act, New Jersey Department of Environmental Protection and other current and potential future federal, state, or local regulations. Our research and development activities involve the controlled use of hazardous materials, chemicals, biological materials and various radioactive compounds. We believe that our procedures comply with the standards prescribed by state and federal regulations; however, the risk of injury or accidental contamination cannot be completely eliminated.

We may also be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments where we may market our products and product candidates, if

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approved. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy, and security and physician sunshine laws and regulations.

The federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs. The Anti-Kickback Statute is subject to evolving interpretations. In the past, the government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies, based on sham consulting and other financial arrangements with physicians. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim, including items or services resulting from a violation of the federal Anti-Kickback Statute, constitutes a false or fraudulent claim for purposes of the federal False Claims Act. The majority of states also have anti-kickback laws, which establish similar prohibitions and, in some cases, may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Additionally, the civil False Claims Act prohibits knowingly presenting or causing the presentation of a false, fictitious or fraudulent claim for payment to the U.S. government. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the False Claims Act can result in very significant monetary penalties and treble damages. The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in connection with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-million and multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating compliance of healthcare providers and manufacturers with applicable fraud and abuse laws.

The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) also created new federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

There has also been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The Affordable Care Act (“ACA”) imposes, among other things, new reporting requirements on drug manufacturers for payments made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Drug manufacturers were required to begin collecting data on August 1, 2013 and submit reports to the government by March 31, 2014 and June 30, 2014, and the 90th day of each subsequent calendar year. Certain states also mandate implementation of compliance programs, impose restrictions on

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drug manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians.

We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act (“HITECH”) and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.

We are subject to the U.S. Foreign Corrupt Practices Act, which prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. Under this act, it is illegal to pay, offer to pay, or authorize the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. Our present and future business has been and will continue to be subject to various other laws and regulations.

Results of Operations

Our results for any interim period, such as those described in the following analysis, are not necessarily indicative of the results for the entire fiscal year or any other future period.

Three-Month Period Ended March 31, 2017 Compared to 2016

Revenues

Revenues for the three-month period ended March 31, 2017 were $1.3 million, compared to $0.9 million for the three-month period ended March 31, 2016, an increase of $0.4 million, or approximately 44%. Product sales for the three-month period ended March 31, 2017 were $0.9 million, compared to $0.5 million for the same period in 2016, an increase of $0.4 million, or approximately 80%, due to increased sales volume of LeukoScan ® in Europe. Licensing fees and other revenues from our Collaboration Agreement with Bayer (Algeta) were $0.3 million for the three-month periods ended March 31, 2017 and 2016.

Costs and Expenses

Total costs and expenses for the three-month period ended March 31, 2017 were $23.4 million, compared to $15.5 million for the same period in 2016, an increase of $7.9 million, or approximately 51%. Research and development expenses for the three-month period ended March 31, 2017 were $12.5 million, compared to $13.3 million for the same period in 2016, a decrease of $0.8 million, or approximately 6%; due primarily to a $2.8 million decrease in expenses related the Phase 3 PANCRIT-1 clinical trial, (which was terminated during the third quarter of fiscal 2016), offset partially by a $1.8 million increase in product

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development expenses related to manufacturing the antibody drug-conjugate sacituzumab govitecan (IMMU-132).

The cost of goods sold for the three-month periods ended March 31, 2017 and 2016 was $0.1 million and $0.3 million, respectively, a decrease of $0.2 million, or 67%.

General and administrative expenses were $10.5 million and $1.6 million for the three month periods ended March 31, 2017 and 2016, respectively. The $8.9 million increase was due primarily to a $5.9 million increase in professional fees including legal and advisory fees associated with the proxy contest and the Licensing Agreement with Seattle Genetics (which was terminated subsequently), an accrual of $2.4 million for executive severance compensation, and a $0.6 million increase in corporate legal fees. Sales and marketing expenses for the three-month periods ended March 31, 2017 and 2016 were $0.3 million and $0.2 million, respectively, an increase of $0.1 million, or 50%.

Change in Fair Value of Warrant Liabilities

The Company recognized a $28.3 million non-cash expense during the three-month period ended March 31, 2017 as a result of the increase in fair value of warrant liabilities at March 31, 2017, including a $20.5 million increase in value of the October 2016 Financing Warrants, and a $7.8 million increase in fair market value of the SGEN Warrant issued on February 10, 2017, commensurate with the increase in the price of the Company’s stock during the quarter.

Warrant Related Expense

The Company recognized a $7.6 million non-cash expense during the three-month period ended March 31, 2017 representing the excess of fair value of the SGEN Warrant issued on February 10, 2017 over the proceeds received for the issuance of common stock and such Warrant.

 

Interest Expense

Interest expense for each of the three-month periods ended March 31, 2017 and 2016 were $1.4 million, which are related to the issuance in February 2015 of $100.0 million of 4.75% Convertible Senior Notes due in February 2020 and included amortization of debt issuance costs of $0.2 million for each of the three-month periods ended March 31, 2017 and 2016.

Income Tax Benefit

 

There was no income tax benefit for the three-month period ended March 31, 2017 compared to an income tax benefit of $1.9 million for the same period in 2016. The income tax benefit relates to the sale of a portion of our New Jersey State Tax NOLs and R&D tax credits in 2016.

Net Loss Attributable to Immunomedics, Inc. Stockholders

Net loss attributable to Immunomedics, Inc. common stockholders for the three-month period ended March 31, 2017 was $59.3 million, or $0.55 per share, compared to a net loss of $14.0 million, or $0.15 per share, for the same period in 2016. The $45.3 million increase in net loss in the current period was due primarily to the $28.3 million increase in the fair value of warrant liabilities, the $8.9 million increase in general and administrative expenses, the $7.6 million increase warrant related expense, and the receipt of $1.9 million non-recurring proceeds from the sale of NJ NOLs and R&D tax credits in 2016; offset partially by an $0.8 million decrease in research and development expenses.

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Nine-Month Period Ended March 31, 2017 Compared to 2016

Revenues

Revenues for the nine-month period ended March 31, 2017 were $2.4 million, compared to $2.3 million for the same period in 2016, an increase of $0.1 million, or approximately 4%. LeukoScan ® product sales for the nine-month period ended March 31, 2017 were $1.8 million compared to $1.7 million for the same period in 2016, an increase of $0.1 million, or approximately 6%, due to increased sales volume of LeukoScan ® . Licensing fees and other revenues from our Collaboration Agreement with Bayer (Algeta) were $0.3 million for the nine-month periods ended March 2017 and 2016.

Costs and Expenses

Total costs and expenses for the nine-month period ended March 31, 2017 were $54.9 million compared to $46.7 million for the same period in 2016, an increase of $8.2 million, or approximately 18%. Research and development expenses were $39.8 million, for the nine-month period ended March 31, 2017, compared to $40.5 million for the same period in 2016, a decrease of $0.7 million, or approximately 2%, due to a $10.5 million decrease in clinical trial costs from the closure of the Phase 3 PANCRIT-1 clinical trial, offset partially by a $10.2 million increase in product development expense related to manufacturing IMMU-132.

 

The cost of goods sold was $0.4 million for the nine-month period ended March 31, 2017 compared to $0.5 million for the same period in 2016a decrease of $0.1 million, or 20%.

 

General and administrative costs were $14.0 million for the nine-month period ended March 31, 2017 and $5.0 million for the same period in 2016, an increase of $9.0 million, or approximately 180%; due primarily to a $7.0 million increase in professional fees including legal and advisory fees associated with the proxy contest and the Licensing Agreement with Seattle Genetics (which was terminated subsequently), a $2.4 million accrual for executive severance compensation, and an $1.4 million increase in legal fees, compared to the same period in the prior year; offset partially by a $1.7 million adjustment for deferred unearned executive bonuses compared to the same period in the prior year. Sales and marketing expenses were $0.7 million for the nine-month period ended March 31, 2017, compared to $0.8 million for the nine-month period ended March 31, 2016, a decrease of $0.1 million, or 13%.

 

Change in Fair Value of Warrant Liabilities

The Company recognized a $35.6 million non-cash expense during the nine-month period ended March 31, 2017, from the increase in fair value of warrant liabilities at March 31, 2017, including a$27.8 million increase in value of the October 2016 Financing Warrants, and a $7.8 million increase in fair market value of the SGEN Warrant issued on February 10, 2017, commensurate with the increase in the price of the Company’s stock since the issuance date for each Warrant.

Warrant Related Expense

The Company recognized a $7.6 million non-cash expense during the nine-month period ended March 31, 2017 representing the excess of fair value of the SGEN Warrant issued on February 10, 2017 over the proceeds received for the issuance of common stock and such Warrant.

 

Interest Expense

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Interest expense for both nine-month periods ended March 31, 2017 and 2016 was $4.1 million, which related to the issuance in February 2015 of $100.0 million of 4.75% Convertible Senior Notes, due in February 2020 and included amortization of debt issuance costs of $0.5 million for each of the nine-month periods ended March 31, 2017 and 2016.

Other Financing Expense

Other financing expense of $0.3 million for the nine-month period ended March 31, 2017 relates to expenses incurred in connection with the public offering we consummated on October 11, 2016 public offering, that were attributable to the warrant liability.

Foreign Currency Transaction Loss

Foreign currency transaction loss amounted to $0.1 million and $42 thousand for the nine-month periods ended March 31, 2017 and 2016, respectively, primarily as a result of fluctuations in currency between the U.S dollar and the euro.

Income Tax Benefit

 

There was no income tax benefit for the nine-month period ended March 31, 2017, compared to an income tax benefit of $5.1 million for the same period in 2016. The income tax benefit relates to the sale of a portion of our New Jersey State Tax NOL’s and R&D tax credits in 2016. No NOL’s or R&D tax credits were sold during the nine-month period ended March 31, 2017.

 

Net Loss Attributable to Immunomedics, Inc. Stockholders

Net loss attributable to Immunomedics, Inc. common stockholders for the nine-month period ended March 31, 2017 was $100.0 million, or $0.97 per share, compared to a net loss of $43.1 million, or $0.46 per share, for the same period in 2016. The $56.9 million increase in net loss in the current period was due primarily to the $35.6 million increase in the fair value of warrant liabilities, the $9.0 million increase in general and administrative expenses, the $7.6 million increase warrant related expense, and the receipt of $5.1 million proceeds from the non-recurring sale of NJ NOLs and R&D tax credits in 2016; offset partially by a $0.7 million decrease in research and development expense.

Liquidity and Capital Resources

Discussion of Cash Flows

Cash flows from operating activities. Net cash used in operating activities for the nine month period ended March 31, 2017 was $48.2 million, compared to $35.9 million net cash used in operating activities for the nine month period ended March 31, 2016, an increase of $12.3 million, or approximately 34%; due primarily from the $8.2 million increase in total costs, and the $5.1 million receipt of proceeds from the sale of NJ NOLs and R&D tax credit during 2016.

Cash flows from investing activities. Net cash provided by investing activities for the nine months ended March 31, 2017 was $12.3 million, compared to $33.8 million for the nine-months ended March 31, 2016; a decrease of $21.5 million, or approximately 64%, due primarily from a $26.4 million increase in purchases of marketable securities, offset partially by a $4.2 million increase in proceeds from sales or maturities of marketable securities..

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Cash flows from financing activities. Net cash provided by financing activities during the nine-month period ended March 31, 2017 was $44.6 million, compared to $0.2 million net cash used during the nine months ended March 31, 2016. The increase was due primarily to the receipt of $43.3 million net cash proceeds from the sale by the Company of 10,000,000 shares of common stock and accompanying warrants in October 2016, and the sale of 3,000,000 shares of common stock to Seattle Genetics in February 2017, and a $1.7 million increase in proceeds from the exercise of stock options.

Working Capital and Cash Requirements

The Company had a working capital deficit of $36.5 million as of March 31, 2017, a decrease of $74.0 million, compared to a surplus of $37.5 million as of June 30, 2016, due primarily to a $65.2 million increase in current warrant liability, from the Company’s sale of common stock and warrants in October 2016 and February 2017. The Company had $46.0 million in cash, cash equivalents and marketable securities as of March 31, 2017, a decrease of $4.6 million, compared to $50.6 million as of June 30, 2016. The decrease in cash was due primarily to the use of $48.2 million for operations and $0.8 million for capital expenditures partially offset by the increase of approximately $43.3 million in net proceeds from the Company’s sales of common stock and warrants.

As of March 31, 2017 the Company had $46.0 million in cash, cash equivalents and marketable securities.

On May 4, 2017 the Company entered into the Purchase Agreement with the Purchasers, pursuant to which the Company, in a private placement, agreed to issue and sell to the Purchasers 1,000,000 shares of Series A-1 Convertible Preferred Stock at a price of $125 per share for gross proceeds to the Company of $125 million, before deducting fees and expenses. Each Preferred Share will be convertible, into 23.10536 shares of Common Stock (or an aggregate of 23,105,360 shares of Common Stock). The effective purchase price per share of Common Stock (assuming conversion) is $5.41 (the closing price per share of Common Stock as listed on NASDAQ on May 4, 2017). The Financing closed on May 10, 2017. The Company expects to use the net proceeds from the $125 million private placement to support the development of IMMU-132, including the goal of filing a BLA for Accelerated Approval in mTNBC from the FDA. The capital will also fund general corporate and operational enhancements. With this new capital and the Company’s current cash on hand, Immunomedics expects to have sufficient operating funds through the third quarter of 2018. The Company’s financial resources are adequate to sustain operations at a level of activity sufficient to support the filing of the BLA with the FDA for accelerated approval of IMMU-132 for patients with mTNBC; to continue manufacturing IMMU-132 at large scale to prepare for commercial operations in the U.S. marketplace; to initiate a Phase 3 clinical trial of IMMU-132 for mTNBC patients to support the filing of the BLA, to initiate preparations to market IMMU-132 to mTNBC patients in the U.S. and, subject to meeting all standards, completing review and final determination of the FDA, to secure accelerated regulatory approval to market IMMU-132 for the use of patients with mTNBC in the U.S.

The recently-seated Immunomedics Board has conducted a review of the strategy of the Company, including a review of the projected timeline for submission of a BLA for IMMU-132 in mTNBC. These efforts to date have resulted in an updated timeline for the execution of delivering IMMU-132 to market, as well as the assessment of various deal structures and partnerships towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond. The Company is targeting to file the BLA with FDA for accelerated approval of IMMU-132 for patients with mTNBC between the late fourth quarter 2017 and first quarter 2018, subject to FDA input on the acceptance of the Company’s chemistry, manufacturing and controls filing plan.

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The Company may require additional funding after the third quarter of 2018 to secure regulatory approval from FDA, complete commercial preparations to market IMMU-132 to mTNBC patients in the United States, complete its clinical trials currently underway or planned, continue research and new development programs, and continue operations. Potential sources of funding include the exercise of outstanding Warrants, potential various strategic partnership transaction towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, and equity and potential debt financing.

Until the Company can generate significant cash through the exercise of outstanding warrants, various deal structures and partnerships towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, or commercial operations, it expects to continue to fund its operations with its current financial resources. After the third quarter 2018, if the Company cannot obtain sufficient funding through the settlement of outstanding warrants, various strategic partnership transactions towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, it could be required to finance future cash needs through the sale of additional equity and/or debt securities in capital markets. However, there can be no assurance that the Company will be able to raise the additional capital needed to complete its pipeline of research and development programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. The Company’s existing debt may also negatively impact the Company’s ability to raise additional capital. If the Company is unable to raise capital on acceptable terms, its ability to continue its business would be materially and adversely affected. Actual results could differ materially from our expectations as a result of a number of risks and uncertainties, including the risks described in Item 1A Risk Factors, “Factors That May Affect Our Business and Results of Operations,” and elsewhere in our Annual Report on Form 10-K. Our working capital and working capital requirements are affected by numerous factors and such factors may have a negative impact on our liquidity. Principal among these are the success of product commercialization and marketing products, the technological advantages and pricing of our products, the impact of the regulatory requirements applicable to us, and access to capital markets that can provide us with the resources, when necessary, to fund our strategic priorities.

Effects of Inflation

We do not believe that inflation has had a material impact on our business, sales or operating results during the periods presented.

ITEM 3. QUANTITATIVE AND QUALITATIV E DISCLOSURES ABOUT MARKET RISK

The following discussion about our exposure to market risk of financial instruments contains forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those described due to a number of factors, including uncertainties associated with general economic conditions and conditions impacting our industry.

We may be exposed to fluctuations in foreign currencies with regard to certain agreements with service providers relating to certain clinical trials that are in process. Depending on the strengthening or weakening of the U.S. dollar, realized and unrealized currency fluctuations could be significant.

ITEM 4. CONTROLS AND PROCEDURE S

(a) Disclosure Controls and Procedures: We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to record, process, summarize and disclose this information within the time periods specified in the rules promulgated by the SEC. Our Chief Executive and Chief Financial Officers are responsible for

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establishing and maintaining these disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and, as required by the rules of the SEC, evaluating their effectiveness. Based on their evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive and Chief Financial Officers believe that these procedures are effective to ensure that we are able to collect, process and disclose the information we are required to disclose in the reports we file with the SEC within the required time periods.

(b) Changes in Internal Controls over Financial Reporting:  There were no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATIO N

ITEM 1. LEGAL PROCEEDINGS

Patent litigation:

Immunomedics filed a first amended complaint on October 22, 2015 and a second amended complaint on January 14, 2016 in the United States District Court for the District of New Jersey, against Roger Williams Medical Center (“RWMC”), Richard P. Junghans, M.D., Ph.D., and Steven C. Katz, M.D. The second amended complaint alleges that RWMC and Dr. Junghans breached a Material Transfer Agreement (“MTA”) through which it provided to them a monoclonal antibody known as MN-14 and related materials. Defendants are alleged to have breached the MTA and to have been negligent by, among other things, using the materials beyond the agreed-upon Research Project, sharing confidential information, failing to provide Immunomedics with a right of first refusal, failing to notify Immunomedics of intended publications prior to publishing, and refusing to return the materials upon request. Immunomedics also asserts defendants: claims of conversion, tortious interference, unjust enrichment, and infringement of three patents owned by Immunomedics. On January 28, 2016, defendants filed an Answer to the Second Amended Complaint. On October 12, 2016, Immunomedics filed a Third Amended Complaint, and further added as defendants Sorrento Therapeutics, Inc. and its subsidiaries TNK Therapeutics, Inc., BDL Products, Inc., and CARgenix Holdings, LLC. Defendants Junghans, Katz, and RWMC subsequently moved to dismiss for failure to state a claim on November 14, 2016, but this motion was denied on January 4, 2017. On December 2, 2016, Sorrento, TNK, BDL, and CARgenix moved to dismiss for lack of personal jurisdiction over them in New Jersey. The court granted this motion on January 25, 2017. On January 20, 2017, the court held a Markman hearing to construe the claims in the patents in suit. On February 28, 2017, the court issued an opinion and order finding, inter alia, that the term “effective amount” in the patents in suit is not indefinite and should be given its plain and order meaning, as proposed by Immunomedics, of “an amount capable of producing the claim result.”

Stockholder complaints:

Class Action Stockholder Federal Securities Cases

Two purported class action cases have been filed in the United States District Court for the District of New Jersey; namely, Fergus v. Immunomedics, Inc., et al., No. 2:16-cv-03335, filed June 9, 2016; and Becker v. Immunomedics, Inc., et al., No. 2:16-cv-03374, filed June 10, 2016. These cases arise from the same alleged facts and circumstances, and seek class certification on behalf of purchasers of our common stock

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between April 20, 2016 and June 2, 2016 (with respect to the Fergus matter) and between April 20, 2016 and June 3, 2016 (with respect to the Becker matter). These cases concern the Company's statements in press releases, investor conference calls, and SEC filings beginning in April 2016 that the Company would present updated information regarding its IMMU-132 breast cancer drug at the 2016 American Society of Clinical Oncology ("ASCO") conference in Chicago, Illinois. The complaints allege that these statements were false and misleading in light of June 2, 2016 reports that ASCO had cancelled the presentation because it contained previously reported information. The complaints further allege that these statements resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are thus liable under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. An order of voluntarily dismissal without prejudice was entered on November 10, 2016 in the Becker matter. An order granting motion to consolidate cases, appoint lead plaintiff, and approve lead and liaison counsel was entered on February 7, 2017 in the Fergus matter. As of the date hereof, service of the initiating papers in the Fergus matter has not been made on the Company.

Stockholder Derivative Action in the Superior Court of New Jersey

On October 3, 2016, plaintiff commenced an action captioned Rosenfeld v. Goldenberg, et al., No. L-2200-16, alleging the same underlying facts and circumstances as in the pending federal securities class action, the Fergus matter. Specifically, this action concerns the Company’s statements in press releases, investor conference calls, and SEC filings beginning in April 2016 that the Company would present updated information regarding its IMMU-132 breast cancer drug at the 2016 ASCO conference in Chicago, Illinois. The complaint alleges that these statements were false and misleading in light of the June 2, 2016 reports that ASCO had cancelled the presentation because it contained previously reported information. The complaint further alleges that these statements resulted in artificially inflated prices for our common stock, and that certain directors and officers of the Company breached their fiduciary duties to the Company. In addition to monetary damages, the complaint seeks to require the Company to reform its corporate governance and internal procedures. Service was effectuated on all defendants on April 7, 2017.

Class Action Stockholder Claim in the Court of Chancery of the State of Delaware

On December 13, 2016, plaintiff commenced an action captioned Desanctis v. Goldenberg, C.A. No. 12981-VCL (Del. Ch. Ct.), alleging that the Company's Board of Directors failed to comply with Delaware law and breached their fiduciary duties when it rescheduled the Immunomedics 2016 Annual Meeting of Stockholders from December 14, 2016 to February 16, 2017. On December 22, 2016, the Delaware Court of Chancery refused to schedule an expedited hearing in the action and concluded that plaintiff failed to carry his burden of demonstrating that he had pleaded a colorable claim and that there was a threat of irreparable harm. The Court further stated that the Complaint failed to demonstrate that the Board's actions were unreasonable when it rescheduled the Annual Meeting in response to venBio Select Advisor LLC's proxy contest.

Stockholder Claim in the Court of Chancery of the State of Delaware

 

On February 13, 2017, venBio commenced an action captioned  venBio Select Advisor LLC v. Goldenberg, et al. , C.A. No. 2017-0108-VCL (Del. Ch.) (the “ venBio Action ”), alleging that Company’s Board breached their fiduciary duties when the Board (i) rescheduled the Company’s 2016 Annual Meeting of Stockholders (the “ 2016 Annual Meeting ”) from December 14, 2016 to February 16, 2017, and then again to March 3, 2017, and (ii) agreed to the proposed Licensing Transaction with Seattle Genetics. venBio also named Seattle Genetics as a defendant and sought an injunction preventing the Company from closing the licensing transaction with Seattle Genetics. On March 6, 2017, venBio amended its complaint, adding further allegations, including that the Company’s Board breached their fiduciary duties when the Board amended the Company’s Amended and Restated By-laws (the “ By-Laws ”) to call for a plurality voting regime for the

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election of directors instead of majority voting, and providing for mandatory advancement of attorneys’ fees and costs for the Company’s directors and officers. The Court of Chancery entered a temporary restraining order on March 9, 2017, enjoining the closing of the Licensing Transaction. venBio amended its complaint a second time on April 19, 2017, this time adding as an additional defendant the Company’s financial advisor on the Licensing Transaction, Greenhill & Co., LLC. On May 3, 2017, venBio and the Company and individual defendants Goldenberg, Sullivan and Markison (collectively, the “ Individual Defendants ”) entered into the Term Sheet, which will be memorialized in a settlement agreement (“Settlement Agreement”), pursuant to which, among other things, venBio and the Company will release the Individual Defendants from all claims. As to all other claims, the Parties stipulated to stay the venBio Action and submit the remaining claims to non-binding mediation. Once the Parties execute the Settlement Agreement, it will be submitted to the Court of Chancery for approval. As to all other claims, including those asserted against the remaining individual defendants (former directors Robert Forrester, Jason Aryeh, Geoff Cox and Bob Oliver) and Greenhill, the parties will stipulate to stay the action and venBio and the Company will submit the remaining claims to non-binding mediation.

 

Lawsuit Against venBio Select Advisor LLC in the U.S. District Court (Delaware)(the “ District Court ”)

 

On February 17, 2017, the Company commenced an action captioned  Immunomedics, Inc. v. venBio Select Advisor LLC , No. 17-176-LPS (D. Del.) (the “ Federal Action ”), seeking for the District Court to invalidate the proxies solicited by venBio in furtherance of its contest for the election of directors of the Company. The Company named as defendants venBio and its then-nominees, Behzad Aghazadeh, Scott Canute, Peter Barton Hutt, and Khalid Islam. The Company alleged that venBio had conducted its proxy contest and solicited proxies in violation the federal securities laws and regulations, namely by failing timely file a Schedule 13D form indicating venBio’s intent to effectuate change at the Company, publishing early voting results of the Company’s annual election of directors, publishing improper statements about the then-incumbent Board, forming a “group” of like-minded stockholders without publicly disclosing the group, and soliciting proxies without disclosing the solicitations to the SEC. On February 21, 2017, the Company sought an injunction preventing, among other things, the venBio nominees from benefiting from allegedly illegal shadow proxy contest, including, but not limited to, by asserting any claimed right to take office as a member of the Board until venBio made corrective disclosures and the stockholders were permitted time to consider them. On March 2, 2017, the District Court denied the Company the requested relief. On April 6, 2017, the District Court entered a stipulation and order pursuant to which the Company’s claims were voluntarily dismissed without prejudice. On April 17, 2017, Dr. Goldenberg, the Company’s Chief Scientific Officer and Chief Patent Officer and director, notified the District Court that he may maintain the claims initially brought by the Company. On May 3, 2017, Goldenberg and venBio entered into the Term Sheet pending the Settlement Agreement, pursuant to which, among other things, the Parties have agreed to submit to the District Court a stipulation and proposed order dismissing all claims in the Federal Action with prejudice, including those against the individual defendants (the then-venBio nominees). The Settlement Agreement will also include a mutual release of claims.

 

Lawsuit Challenging the Results of the 2016 Election of Directors

 

On March 3, 2017, six of the seven then-incumbent members of the Company’s Board commenced an action captioned  Goldenberg, et al. vs Aghazadeh, et al. , C.A. No. 2017-0163-VCL (Del. Ch.) (the “ 225 Action ”), challenging the results of the election of directors at the 2016 Annual Meeting that took place on March 3, 2017, in which all four of venBio’s nominees won seats on the Company’s Board. The director-plaintiffs named as defendants venBio and its then-nominees, Behzad Aghazadeh, Scott Canute, Peter Barton Hutt, and Khalid Islam. The incumbent directors alleged the same underlying facts as the Company alleged in its lawsuit against venBio in federal court. On March 13, 2017, the Court of Chancery entered an order (the

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Status Quo Order ”) seating all four venBio nominees (with the three incumbent directors who also won election (based on the plurality vote standard), the “ Status Quo Board ”) and limiting the Company’s Board to actions within the “ordinary course of business,” unless either waived by the parties on a case-by-case basis or ordered by the Court of Chancery. On March 24, 2017, the defendants, venBio and its four nominees, moved to dismiss the action. The plaintiffs in the action have opposed this motion to dismiss, which remains pending. On April 7, 2017, three of the six plaintiffs voluntarily withdrew their claims, leaving Goldenberg, Sullivan and Markison as plaintiffs. On April 20, 2017, the parties agreed to permit the Status Quo Board to explore a potential financing plan for the Company and negotiate a termination of the Licensing Transaction. On May 3, 2017, the Parties entered into the Term Sheet, pursuant to which, among other things, the Parties agreed to submit to the Court of Chancery a stipulation and proposed order lifting the Status Quo Order . On May 4, 2017, the Parties submitted that stipulation, which confirmed that the Status Quo Board is the lawful Board of the Company. Once the Settlement Agreement is executed, the Parties will submit to the Court of Chancery another stipulation and proposed order dismissing the 225 Action with prejudice, including those against the individual defendants (the then-venBio nominees). The Settlement Agreement will also include a mutual release of all claims.

Other matters:

Immunomedics is also a party to various claims and litigation arising in the normal course of business, which includes some or all of certain of its patents. While it is not possible to determine the outcome of these matters, the Company believes that the resolution of all such matters will not have a material adverse effect on its consolidated financial position or liquidity, but could possibly be material to its consolidated results of operations in any one accounting period.

Item 1A. RISK FACTORS  

Factors That May Affect Our Business and Results of Operations

Our business is subject to certain risks and uncertainties, each of which could materially and adversely affect our business, financial condition, cash flows and results of operations.

Risks Relating to Our Business, Operations and Product Development

We have a long history of operating losses and it is likely that our operating expenses will continue to exceed our revenues for the foreseeable future.

We have incurred significant operating losses since our formation in 1982. As of March 31, 2017, we had an accumulated deficit of approximately $468.5 million. We continue to spend our cash resources to fund our research and development programs and, subject to adequate funding, we expect these expenses to increase for the foreseeable future. Our only significant sources of revenue in recent years have been derived from our collaboration agreement with Bayer. There can be no assurance that we will be profitable in future quarters or other periods. Additionally, the only product sales we have earned to date have come from the limited sales of our diagnostic imaging product for which our patent protection has expired (which may leave us vulnerable to increased competition, for example, from biosimilar manufacturers). In addition, we have made the strategic decision to de-emphasize sales of our diagnostic product and focus on our therapeutic pipeline. We have never had product sales of any therapeutic product. Although we may have net income from time to time based on the timing and amount of proceeds received under collaborative or licensing agreements, we expect to experience significant operating losses as we invest further in our research and development activities while simultaneously attempting to develop and commercialize our other therapeutic product candidates. If we are unable to develop commercially viable therapeutic products or to license them to

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third parties, it is likely that we will never achieve significant revenues or become profitable, either of which would jeopardize our ability to continue as a going concern.

We have significant future capital needs and may be unable to raise capital when needed, which could force us to delay or reduce our clinical development efforts.

Although we believe our funds available as of March 31, 2017, in addition to net proceeds from the financing announced on May 5, are sufficient to support operations through the third quarter 2018 including the filing of the BLA with FDA for accelerated approval of IMMU-132 for patients with mTNBC; to continue manufacturing IMMU-132 at large scale to prepare for commercial operations in the U.S. marketplace; to initiate a Phase 3 clinical trial of IMMU-132 for mTNBC patients to support the filing of the BLA, to initiate preparations to market IMMU-132 to mTNBC patients in the U.S. and, subject to meeting all standards, completing review and final determination of FDA, to secure accelerated regulatory approval of IMMU-132 for the use of mTNBC patients in the U.S.. We anticipate we can also continue our other operations and research and development programs, at a reduced spending level, through the third quarter 2018. After the third quarter 2018, if the Company cannot obtain sufficient funding through the exercise of outstanding Warrants, various strategic partnership transactions towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, it could be required to finance future cash needs through the sale of additional equity and/or debt securities in capital markets. However, there can be no assurance that the Company will be able to raise the additional capital needed to complete its pipeline of research and development programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. The Company’s existing debt may also negatively impact the Company’s ability to raise additional capital. If the Company is unable to raise capital on acceptable terms, its ability to continue its business would be materially and adversely affected.

Our most advanced therapeutic product candidates are still only in the clinical development stage, and will require us to raise capital in the future in order to fund further expensive and time-consuming studies before they can even be submitted for final regulatory approval. A failure of a clinical trial could severely harm our business and results of operations.

Clinical trials involve the administration of a product candidate to patients who are already extremely ill, making patient enrollment often difficult and expensive. Moreover, even in ideal circumstances where the patients can be enrolled and then followed for the several months or more required to complete the study, the trials can be suspended, terminated, delayed or otherwise fail for any number of reasons, including:

·

later-stage clinical trials may raise safety or efficacy concerns not readily apparent in earlier trials or fail to meet the primary endpoint;

·

unforeseen difficulties in manufacturing the product candidate in compliance with all regulatory requirements and in the quantities needed to complete the trial which may become cost-prohibitive;

·

we or our collaboration partner may experience delays in obtaining, or be unable to obtain, agreement for the conduct of our clinical trials from the FDA, IRBs, or other reviewing entities at clinical sites selected for participation in our clinical trials;

·

while underway, the continuation of clinical trials may be delayed, suspended or terminated due to modifications to the clinical trial’s protocols based on interim results obtained or changes required or conditions imposed by the FDA, an IRB, a data and safety monitoring board (“DSMB”), or any other regulatory authority;

·

our third-party contractors may fail to meet their contractual obligations to us in a timely manner;

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·

the FDA or other regulatory authorities may impose a clinical hold, for example based an inspection of the clinical trial operations or trial sites;

·

we or our collaboration partner may suspend or cease trials in our or their sole discretion;

·

during the long trial process alternative therapies may become available which make further development of the product candidate impracticable; and

·

if we are unable to obtain the additional capital we need to fund all of the clinical trials we foresee, we may be forced to cancel or otherwise curtail such trials and other studies.

Any substantial delay in successfully completing clinical trials for our product candidates, sacituzumab govitecan and labetuzumab govitecan, could severely harm our business and results of operations.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, the Company may be required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between the company and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of regulatory approval of one or more of our product candidates.

Our clinical trials may not adequately show that our drugs are safe or effective, or a failure to achieve the planned endpoints could result in termination of product development.

Progression of our drug products through the clinical development process is dependent upon our trials indicating our drugs have adequate safety and efficacy in the patients being treated by achieving pre-determined safety and efficacy endpoints according to the trial protocols. Failure to achieve either of these endpoints could result in delays in our trials; require the performance of additional unplanned trials or termination of any further development of the product for the intended indication.

These factors could result in delays in the development of our product candidates and could result in significant unexpected costs or the termination of programs.

Should the clinical development process be successfully completed, our ability to derive revenues from the sale of therapeutics will depend upon our first obtaining FDA as well as foreign regulatory approvals, all of which are subject to a number of unique risks and uncertainties.

Even if we are able to demonstrate the safety and efficacy of our product candidates in clinical trials, if we fail to gain timely approval to commercialize our product candidates from the FDA and other foreign regulatory authorities, we will be unable to generate the revenues we will need to build our business. These approvals may not be granted on a timely basis, if at all, and even if and when they are granted, they may not cover all the indications for which we seek approval. For example, while we may develop a product candidate with the intention of addressing a large, unmet medical need, the FDA may only approve the use of the drug for indications affecting a relatively small number of patients, thus greatly reducing the market size and our potential revenues. The approvals may also contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use, which could further narrow the size of the market. In certain countries, even if the health regulatory authorities approve a drug, it cannot be marketed until pricing for the drug is also approved. Finally, even after approval can be obtained, we may be required to

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recall or withdraw a product as a result of newly discovered safety or efficacy concerns, either of which would have a materially adverse effect on our business and results of operations.

In order to fund future operations, we will need to raise significant amounts of additional capital. Because it can be difficult for a small-cap company like ours to raise equity capital on acceptable terms, we cannot assure you that we will be able to obtain the necessary capital when we need it, or on acceptable terms, if at all.

Even if our technologies and product candidates are superior, if we lack the capital needed to bring our future products to market, we will never be successful. We have obtained the capital necessary to fund our research and development programs to date primarily from the following sources:

·

upfront payments, milestone payments, and payments for limited amounts of our antibodies received from licensing partners;

·

proceeds from the public and private sale of our equity or debt securities; and

·

limited product sales of LeukoScan ® , licenses, grants and interest income from our investments

Over the long term, we expect to commercialize IMMU-132 in mTNBC in the U.S. and globally, to expand IMMU-132 to treat patients with other solid tumors, including urinary bladder cancer, small cell lung cancer, non-small cell lung cancer, and others serious cancers, to expand research and development activities to continue to expand and we do not believe we will have adequate cash to continue commercial expansion and development of IMMU-132, or to complete development of product candidates in line with our pipeline included in our long term corporate strategy. Our capital requirements are dependent on numerous factors, including:

·

the rate of progress of commercialization of IMMU-132 in mTNBC and develop it for other cancers

·

the rate at which we progress our research programs and the number of product candidates we have in pre-clinical and clinical development at any one time;

·

the cost of conducting clinical trials involving patients in the United States, Europe and possibly elsewhere;

·

our need to establish the manufacturing capabilities necessary to produce the quantities of our product candidates we project we will need;

·

the time and costs involved in obtaining FDA and foreign regulatory approvals;

·

the cost of first obtaining, and then defending, our patent claims and other intellectual property rights;

·

the ability and willingness of the holders of our 4.75% Convertible Senior Notes due 2020 (“Convertible Senior Notes”) to convert their Convertible Senior Notes to Immunomedics common stock; and

·

our ability to enter into licensing and other collaborative agreements to help offset some of these costs.

There may be additional cash requirements for many reasons, including, but not limited to, changes in our commercial expansion plans, our research and development plans, the need for unexpected capital expenditures or costs associated with any acquisitions of other businesses, assets or technologies that we may choose to undertake. If we deplete our existing capital resources, we will be required to either obtain additional capital quickly, or significantly reduce our operating expenses and capital expenditures, either of which could have a material adverse effect on us.

Until we can generate significant cash through the exercise of outstanding Warrants, various strategic partnership transactions towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, we expect to continue to fund our operations with our current financial resources. These financial resources will not be adequate to sustain our operations beyond the third quarter 2018. Consequently, if we

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cannot obtain sufficient funding through the exercise of outstanding Warrants, various strategic partnership transactions towards advancing and maximizing the Company’s full pipeline for mTNBC and beyond, we could be required to finance future cash needs through the sale of additional equity and/or debt securities in capital markets. However, there can be no assurance that we will be able to raise the additional capital needed to complete our pipeline of research and development programs on commercially acceptable terms, if at all. The capital markets have experienced volatility in recent years, which has resulted in uncertainty with respect to availability of capital and hence the timing to meet an entity’s liquidity needs. The Company’s existing debt will also negatively impact the Company’s ability to raise additional capital. If the Company is unable to raise capital on acceptable terms, its ability to continue its business would be materially and adversely affected. Having insufficient funds may require us to delay, scale-back, or eliminate some or all of our programs, or renegotiate less favorable terms than we would otherwise choose. Failure to obtain adequate financing also may adversely affect our ability to operate as a going concern.

Additionally, if we raise funds by issuing equity securities, dilution to existing stockholders would result; and if we raise funds by incurring additional debt financing, the terms of the debt may involve future cash payment obligations and/or conversion to equity as well as restrictions that may limit our ability to operate our business.

If we, or our collaboration partner, cannot successfully and efficiently manufacture the compounds that make up our products and product candidates, our ability, and the ability of our collaboration partner, to sell products and conduct clinical trials will be impaired.

Our ability to conduct our pre-clinical and clinical research and development programs depends, in large part, upon our ability to manufacture our proprietary compounds in accordance with the FDA and other regulatory requirements. We have limited historical experience in manufacturing these compounds in significant quantities, and we may not be able to do so in the quantities required to commercialize these products. Any interruption in manufacturing at this site, whether by natural acts or otherwise, could significantly and adversely affect our operations, and delay our research and development programs.

We and our collaboration partner also depend on third parties to provide certain raw materials, manufacturing and processing services. All manufacturers of pharmaceutical products must comply with current Good Manufacturing Practice regulations or cGMPs, required by the FDA and other regulatory agencies. Such regulations address, among other matters, controls in manufacturing processes, quality control and quality assurance requirements and the maintenance of proper records and documentation. The FDA and other regulatory agencies routinely inspect manufacturing facilities. The FDA generally will issue a notice on Form 483 if it finds issues with respect to its inspections. If our manufacturing facility or those facilities of our partner and our respective contract manufacturers or processors do not comply with applicable cGMPs and other regulatory requirements, we may be subject to product liability claims, we may be unable to meet clinical demand for our products, and we could suffer delays in the progress of clinical trials for products under development.

We may not successfully establish and maintain collaborative and licensing arrangements, which could adversely affect our ability to develop and commercialize our product candidates. Our future collaboration partners may not adequately perform their responsibilities under our agreement, which could adversely affect our development and commercialization program.

A key element of our business strategy is to develop, market and commercialize our product candidates through collaborations with more established pharmaceutical companies. We may not be able to maintain or expand these licenses and collaborations or establish additional licensing and collaboration arrangements necessary to develop and commercialize our product candidates. Even if we are able to maintain

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or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will restrict our ability to develop, test and market our product candidates. Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and commercialize our product candidates.

We expect to rely at least in part on third party collaborators to perform a number of activities relating to the development and commercialization of our product candidates, including the manufacturing of product materials, the design and conduct of clinical trials for our product candidates, and potentially the obtaining of regulatory approvals and marketing and distribution of any successfully developed products. Our collaborative partners may also have or acquire rights to control aspects of our product development and clinical programs. As a result, we may not be able to conduct these programs in the manner or on the time schedule we currently contemplate. In addition, if any of these collaborative partners withdraw support for our programs or product candidates or otherwise impair their development, our business could be negatively affected. To the extent we undertake any of these activities internally, our expenses may increase.

In addition, our success depends on the performance of our collaborators of their responsibilities under these arrangements. Some potential collaborators may not perform their obligations in a timely fashion or in a manner satisfactory to us. Because such agreements may be exclusive, we may not be able to enter into a collaboration agreement with any other company covering the same product field during the applicable collaborative period. In addition, our collaborators’ competitors may not wish to do business with us at all due to our relationship with our collaborators. If we are unable to enter into additional product discovery and development collaborations, our ability to sustain or expand our business will be significantly diminished.

Our future success will depend upon our ability to first obtain and then adequately protect our patent and other intellectual property rights, as well as avoiding the infringement of the rights of others.

Our future success will be highly dependent upon our ability to first obtain and then defend the patent and other intellectual property rights necessary for the commercialization of our product candidates. We have filed numerous patent applications on the technologies and processes that we use in the United States and certain foreign countries. Although we have obtained a number of issued U.S. patents to date, the patent applications owned or licensed by us may not result in additional patents being issued. Moreover, these patents may not afford us the protection we need against competitors with similar technologies or products. A number of jurisdictions where we have sought, or may in future choose to seek, intellectual property protection, have intellectual property laws and patent offices which are still developing. Accordingly, we may have difficulty obtaining intellectual property protection in these markets, and any intellectual property protections which we do obtain may be less protective than in the United States, which could have an adverse effect on our operations and financial prospects.

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The successful development of therapeutic products frequently requires the application of multiple technologies that may be subject to the patent or other intellectual property rights of third parties. Although we believe it is likely we will need to license technologies and processes from third parties in the ordinary course of our business, we are not currently aware of any material conflict involving our technologies and processes with any valid patents or other intellectual property rights owned or licensed by others. In the event that a third party was to claim such a conflict existed, they could sue us for damages as well as seek to prevent us from commercializing our product candidates. It is possible that a third party could successfully claim that our products infringe on their intellectual property rights. Uncertainties resulting from the litigation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Any patent litigation or other proceeding, even if resolved in our favor, would require significant financial resources and management time.

Some of our competitors may be able to sustain these costs more effectively than we can because of their substantially greater financial and managerial resources. If a patent litigation or other proceeding is resolved unfavorably to us, we may be enjoined from manufacturing or selling our products without a license from the other party, in addition to being held liable for significant damages. We may not be able to obtain any such license on commercially acceptable terms, if at all.

In addition to our reliance on patents, we attempt to protect our proprietary technologies and processes by relying on trade secret laws, nondisclosure and confidentiality agreements and licensing arrangements with our employees and other persons who have access to our proprietary information. These agreements and arrangements may not provide meaningful protection for our proprietary technologies and processes in the event of unauthorized use or disclosure of such information. In addition, our competitors may independently develop substantially equivalent technologies and processes or otherwise gain access to our trade secrets or technology, either of which could materially and adversely affect our competitive position.

Expiry of our intellectual property rights could lead to increased competition

Even where we are able to obtain and then defend patent and other intellectual property rights necessary for research, development and commercialization of our product candidates, such intellectual property rights will be for a limited term. Where patents which we own or license expire, the technology the subject of the patent may be utilized by third parties in research and development or competing products (for example, biosimilars of a patented product may be manufactured by third parties once the patent expires). While we endeavor to maintain robust intellectual property protection, as our existing issued patents expire it may materially and adversely affect our competitive position.

We face substantial competition in the biotechnology industry and may not be able to compete successfully against one or more of our competitors.

The biotechnology industry is highly competitive, particularly in the area of diagnostic and therapeutic oncology and autoimmune disease products. In recent years, there have been extensive technological innovations achieved in short periods of time, and it is possible that future technological changes and discoveries by others could result in our products and product candidates quickly becoming uncompetitive or obsolete. A number of companies, including Biogen Idec, Roche, GlaxoSmithKline, Seattle Genetics, ImmunoGen, Merck Serono, Genmab, Celgene, Amgen, Bristol-Myers Squibb, Bayer Healthcare Pharmaceuticals, Pfizer, AstraZeneca and Eli Lilly, are engaged in the development of therapeutic oncology products. Many of these companies have significantly greater financial, technical and marketing resources than we do. In addition, many of these companies have more established positions in the pharmaceutical industry and are therefore better equipped to develop, commercialize and market oncology and autoimmune disease products. Even some smaller competitors may obtain a significant competitive advantage over us if

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they are able to discover or otherwise acquire patentable inventions, form collaborative arrangements or merge with larger pharmaceutical companies. Further, even if we are able to successfully develop and commercialize products, other manufacturers operating in emerging markets may also have a competitive advantage over us with respect to competing products due to their ability to manufacture with a lower cost base.

We expect to face increasing competition from universities and other non-profit research organizations. These institutions carry out a significant amount of research and development in the field of antibody-based technologies and they are increasingly aware of the commercial value of their findings. As a result, they are demanding greater patent and other proprietary rights, as well as licensing and future royalty revenues. It is possible that such competition could come from universities with which we have, or have previously had, collaborative research and development relationships, notwithstanding our efforts to protect our intellectual property in the course of such relationships.

We may be liable for contamination or other harm caused by hazardous materials that we use in the operations of our business.

In addition to laws and regulations enforced by the FDA, we are also subject to regulation under various other foreign, federal, state and local laws and regulations. Our manufacturing and research and development programs involve the controlled use of viruses, hazardous materials, chemicals and various radioactive compounds. The risk of accidental contamination or injury from these materials can never be completely eliminated, and if an accident occurs we could be held liable for any damages that result, which could exceed our available resources.

The nature of our business exposes us to significant liability claims, and our insurance coverage may not be adequate to cover any future claims.

The use of our compounds in clinical trials and any future sale exposes us to liability claims that could be substantial. These claims might be made directly by healthcare providers, medical personnel, patients, consumers, pharmaceutical companies, and others selling or distributing our compounds. While we currently have product liability insurance that we consider adequate for our current needs, we may not be able to continue to obtain comparable insurance in the future at an acceptable cost, if at all. If for any reason we cannot maintain our existing or comparable liability insurance, our ability to clinically test and market products could be significantly impaired. Moreover, the amount and scope of our insurance coverage, as well as the indemnification arrangements with third parties upon which we rely, may be inadequate to protect us in the event of a successful product liability claim. Any successful claim in excess of our insurance coverage could materially and adversely affect our financial condition and operating results.

Certain potential for conflicts of interest, both real and perceived, exist which could result in expensive and time-consuming litigation.

Certain members of our senior management and Board of Directors have relationships and agreements, both with us as well as among themselves and their respective affiliates, which create the potential for both real, as well as perceived, conflicts of interest. These include Dr. David M. Goldenberg, our Chairman, Chief Scientific Officer, and Chief Patent Officer, Ms. Cynthia L. Sullivan, our President and Chief Executive Officer (who is also the wife of Dr. Goldenberg), and certain companies with which we do business, including the Center for Molecular Medicine and Immunology and the Garden State Cancer Center (which operated as the clinical arm of CMMI to facilitate the translation of CMMI’s research efforts in the treatment of patients), collectively defined as CMMI. For example, Dr. Goldenberg was the President and a Trustee of CMMI, a not-for-profit cancer research center that we used to conduct certain research activities.

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CMMI has ceased operations. Dr. Goldenberg is also a minority stockholder, director and officer of our majority-owned subsidiary, IBC Pharmaceuticals, Inc. Dr. Goldenberg is the primary inventor of new intellectual property for Immunomedics and IBC and is largely responsible for allocating ownership between the two companies. Dr. Goldenberg also has primary responsibility for monitoring the market for incidences of potential infringement of the Company’s intellectual property by third parties.

As a result of these and other relationships, the potential for both real and perceived conflicts of interest exists and disputes could arise over the allocation of funds, research projects and ownership of intellectual property rights. In addition, in the event that we become involved in stockholder litigation regarding these potential conflicts, we might be required to devote significant resources and management time defending the company from these claims, which could adversely affect our results of operations.

Given that recent cancer therapeutics for solid cancers such as the ones we are developing can cost approximately in excess of $12,500 a month, even if our product candidates become available for sale it is likely that federal and state governments, insurance companies and other payers of health care costs will try to first limit the use of these drugs to certain patients, and may be reluctant to provide a level of reimbursement that permits us to earn a significant profit on our investment, if any.

Our ability to successfully commercialize therapeutic products will depend, in significant part, on the extent to which hospitals and physicians can obtain appropriate reimbursement levels for the cost of our products and related treatment. Third-party payers are increasingly challenging the prices charged for diagnostic and therapeutic products and related services. In addition, legislative proposals to reform health care or reduce government insurance programs may result in lower prices or the actual inability of prospective customers to purchase our products. Furthermore, even if reimbursement is available, it may not be available at price levels sufficient for us to realize a positive return on our investment.

A portion of our funding has come from federal government grants and research contracts. Due to reductions in funding, we may not be able to rely on these grants or contracts as a continuing source of funds.

During the last few years, we have generated revenues from awards made to us by the National Institutes of Health and the Department of Defense to partially fund some of our programs. We cannot rely on grants or additional contracts as a continuing source of funds. Funds available under these grants and contracts must be applied by us toward the research and development programs specified by the government rather than for all our programs generally. The government’s obligation to make payments under these grants and contracts is subject to appropriation by the United States Congress for funding in each year. It is possible that Congress or the government agencies that administer these government research programs will continue to scale back these programs or terminate them due to their own budgetary constraints, as they have recently been doing. Additionally, these grants and research contracts are subject to adjustment based upon the results of periodic audits performed on behalf of the granting authority. Consequently, the government may not award grants or research contracts to us in the future, and any amounts that we derive from existing awards may be less than those received to date. In those circumstances, we would need to provide funding on our own, obtain other funding, or scale back or terminate the affected program. In particular, we cannot assure you that any currently-contemplated or future efforts to obtain funding for our product candidate programs through government grants or contracts will be successful, or that any such arrangements which we do conclude will supply us with sufficient funds to complete our development programs without providing additional funding on our own or obtaining other funding. Where funding is obtained from government agencies or research bodies, our intellectual property rights in the research or technology funded by the grant are typically subject to certain licenses to such agencies or bodies, which could have an impact on our utilization of such intellectual property in future.

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We face a number of risks relating to the maintenance of our information systems and our use of information relating to clinical trials.

In managing our operations, we rely on computer systems and electronic communications, including systems relating to record keeping, financial information, sourcing, and back-up and the internet (“Information Systems”). Our Information Systems include the electronic storage of financial, operational, research, patient and other data. Our Information Systems may be subject to interruption or damage from a variety of causes, including power outages, computer and communications failures, system capacity constraints, catastrophic events (such as fires, tornadoes and other natural disasters), cyber risks, computer viruses and security breaches. If our Information Systems cease to function properly, are damaged or are subject to unauthorized access, we may suffer interruptions in our operations, be required to make significant investments to fix or replace systems and/or be subject to fines, penalties, lawsuits, or government action. The realization of any of these risks could have a material adverse effect on our business, financial condition and results of operations. Our clinical trials information and patient data (which may include personally identifiable information) is part of our Information Systems and is therefore subject to all of the risks set forth above, notwithstanding our efforts to code and protect such information.

Risks Related to Government Regulation of our Industry

Legislative or regulatory reform of the healthcare system may affect our ability to sell our products profitably.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could impact our ability to sell our future products and profitability. On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, “PPACA”), which includes a number of health care reform provisions and requires most United States citizens to have health insurance. The new law, among other things, imposes a significant annual fee on companies that manufacture or import branded prescription drug products, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, and establishes a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D. Substantial new provisions affecting compliance also have been added, which may require modification of business practices with health care practitioners.

In the coming years, additional changes could be made to governmental healthcare programs that could significantly impact the success of our future products, and we could be adversely affected by current and future health care reforms.

Our industry and we are subject to intense regulation from the United States Government and such other governments and quasi-official regulatory bodies where our products are and product candidates may be sold.

Both before and after regulatory approval to market a particular product candidate, including our biologic product candidates, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and record keeping related to the product are subject to extensive,

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ongoing regulatory requirements, including, without limitation, submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP requirements and good clinical practice requirements for any clinical trials that we conduct post-approval. As a result, we are subject to a number of governmental and other regulatory risks, which include:

·

clinical development is a long, expensive and uncertain process; delay and failure can occur at any stage of our clinical trials;

·

our clinical trials are dependent on patient enrollment and regulatory approvals; we do not know whether our planned trials will begin on time, or at all, or will be completed on schedule, or at all;

·

the FDA or other regulatory authorities may not approve a clinical trial protocol or may place a clinical trial on hold;

·

we rely on third parties, such as consultants, contract research organizations, medical institutions, and clinical investigators, to conduct clinical trials for our drug candidates and if we or any of our third-party contractors fail to comply with applicable regulatory requirements, such as cGCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials;

·

if the clinical development process is completed successfully, our ability to derive revenues from the sale of therapeutics will depend on our first obtaining FDA or other comparable foreign regulatory approvals, each of which are subject to unique risks and uncertainties;

·

there is no assurance that we will receive FDA or corollary foreign approval for any of our product candidates for any indication; we are subject to government regulation for the commercialization of our product candidates;

·

we have not received regulatory approval in the United States for the commercial sale of any of our biologic product candidates;

·

even if one or more of our product candidates does obtain approval, regulatory authorities may approve such product candidate for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate;

·

undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities;

·

later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with the regulatory requirements of FDA and other applicable United States and foreign regulatory authorities could subject us to administrative or judicially imposed sanctions;

·

although several of our product candidates have received orphan drug designation in the United States and the EU for particular indications, we may not receive orphan drug exclusivity for any or all of those product candidates or indications upon approval, and even if we do obtain orphan drug exclusivity, that exclusivity may not effectively protect the product from competition;

·

even if one or more of our product candidates is approved in the United States, it may not obtain the 12 years of exclusivity from biosimilars for which innovator biologics are eligible, and even if it does obtain such exclusivity, that exclusivity may not effectively protect the product from competition;

·

the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates, and if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained; and

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·

we may be liable for contamination or other harm caused by hazardous materials used in the operations of our business.

In addition, our operations are also subject to various federal and state fraud and abuse, physician payment transparency and privacy and security laws, including, without limitation:

·

The federal Anti-Kickback Statute, which prohibits, among other things, soliciting, receiving, offering or providing remuneration intended to induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare or Medicaid programs. This statute has been applied to pharmaceutical manufacturer marketing practices, educational programs, pricing policies and relationships with healthcare providers. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation;

·

Federal civil and criminal false claims laws and civil monetary penalty laws, including civil whistleblower or qui tam actions that prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment or approval to the federal government that are false or fraudulent, knowingly making a false statement material to an obligation to pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the federal government. The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statutes;

·

HIPAA and its implementing regulations, which created federal criminal laws that prohibit, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

·

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information;

·

Federal “sunshine” requirements imposed by PPACA on drug manufacturers regarding any “transfer of value” made or distributed to physicians and teaching hospitals, and any ownership and investment interests held by such physicians and their immediate family members. Failure to submit the required information may result in civil monetary penalties of up an aggregate of $150,000 per year (and up to an aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests not reported in an annual submission, and may result in liability under other federal laws or regulations; and

·

State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require drug manufacturers to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of certain health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, it is possible that some of our business activities, including certain sales and

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marketing practices and financial arrangements with physicians, could be subject to challenge under one or more of such laws. Any action against us, even if we successfully defend against it, could result in the commencement of civil and/or criminal proceedings, exclusion from governmental health care programs, substantial fines, penalties, and/or administrative remedies, any of which could have an adverse effect on our financial condition and results of operations.

Risks Related to Our Securities

Conversion of the Convertible Senior Notes will dilute the ownership interest of existing stockholders and could adversely affect the market price of our common stock.

The conversion of some or all of the Convertible Senior Notes will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion and exercise could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Senior Notes may encourage short selling by market participants.

Our indebtedness and debt service obligations may adversely affect our cash flow.

As of March 31, 2017, our total consolidated indebtedness was $119.4 million, including our obligations under our Convertible Senior Notes and other liabilities. We intend to fulfill our current debt service obligations, including repayment of the principal from our existing cash and investments, as well as the proceeds from potential licensing agreements and any additional financing from equity or debt transactions. However, our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Convertible Senior Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow to meet these obligations, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive, or delaying or curtailing research and development programs. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Our common stock may be delisted from the NASDAQ Global Market, or NASDAQ.

If the bid price of our common stock falls below $1.00 for an extended period, or we are unable to continue to meet NASDAQ’s listing maintenance standards for any other reason, our common stock could be delisted from NASDAQ.

If our stock is delisted from NASDAQ, we will make every possible effort to have it listed on the Over the Counter Bulletin Board (the “OTC Bulletin Board”). If our common stock was to be traded on the OTC Bulletin Board, the Securities Exchange Act of 1934, as amended, and related SEC rules would impose additional sales practice requirements on broker-dealers that sell our securities. These rules may adversely affect the ability of stockholders to sell our common stock and otherwise negatively affect the liquidity, trading market and price of our common stock.

If our common stock would not be able to be traded on the OTC Bulletin Board, we would make every effort to have it available for trading on the National Quotation Bureau’s Pink Sheets (“the Pink Sheets”). The Pink Sheets market consists of security firms who act as market makers in the stocks, usually, of very small companies. The bid and asked prices are not quoted electronically, but are quoted daily in “hard

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copy” which is delivered to firms that subscribe. Stocks that trade in the Pink Sheets are usually not as liquid as those that trade in electronic markets and, often time, the difference between the bid and the asked prices are substantial. As a result, if our common stock were traded on the Pink Sheets, there would likely be a further negative affect on the liquidity, trading market and price of our common stock even compared to what we might suffer if we were traded on the OTC Bulletin Board.

As a result of the above, we cannot assure you that our common stock will be listed on a national securities exchange, a national quotation service, the OTC Bulletin Board or the Pink Sheets; or if it is to be listed, whether or not there would be an interruption in the trading of our common stock. We believe that the listing of our stock on a recognized national trading market, such as NASDAQ, is an important part of our business and strategy. Such a listing helps our stockholders by providing a readily available trading market with current quotations. Without that, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult and the trading volume and liquidity of our stock would likely decline. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded it by other parties. In that regard, listing on a recognized national trading market will also affect our ability to benefit from the use of its operations and expansion plans, including for use in licensing agreements, joint ventures, the development of strategic relationships and acquisitions, which are critical to our business and strategy and none of which is currently the subject of any agreement, arrangement or understanding, with respect to any future financing or strategic relationship it may undertake. The delisting from NASDAQ would result in negative publicity and would negatively impact our ability to raise capital in the future.

If we were delisted from NASDAQ, we may become subject to the trading complications experienced by “Penny Stocks” in the over-the-counter market.

Delisting from NASDAQ may depress the price of our common stock such that we may become a penny stock. The SEC generally defines a penny stock as an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. We continue to be listed on NASDAQ. “Penny Stock” rules require, among other things, that any broker engaging in a purchase or sale of our securities provide its customers with: (i) a risk disclosure document; (ii) disclosure of market quotations, if any; (iii) disclosure of the compensation of the broker and its salespersons in the transaction; and (iv) monthly account statements showing the market values of our securities held in the customers’ accounts.

A broker would be required to provide the bid and offer quotations and compensation information before effecting the transaction. This information must be contained on the customers’ confirmation. Generally, brokers are less willing to effect transactions in penny stocks due to these additional delivery requirements. These requirements may make it more difficult for stockholders to purchase or sell our common stock. Because the broker, not us, prepares this information, we would not be able to assure that such information is accurate, complete or current.

We may add lease lines to finance capital expenditures and may obtain additional long‑term debt and lines of credit. If we issue other debt securities in the future, our debt service obligations will increase further.

Our indebtedness could have significant additional negative consequences, including, but not limited to:

·

requiring the dedication of a substantial portion of our existing cash and marketable securities balances and, if available, future cash flow from operations to service our indebtedness, thereby

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reducing the amount of our expected cash flow available for other purposes, including capital expenditures;

·

increasing our vulnerability to general adverse economic and industry conditions;

·

limiting our ability to obtain additional financing;

·

limiting our ability to sell assets if deemed necessary;

·

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

·

placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.

We may not have the ability to raise funds necessary to purchase the Convertible Senior Notes upon a fundamental change and our future debt may contain limitations on our ability to repurchase the Convertible Senior Notes.

Following a fundamental change (which includes matters such as a change in control of the Company, approval by the Company’s stockholders of a plan of dissolution or liquidation of the Company, and the cessation of listing of the Company’s common stock on NASDAQ or The New York Stock Exchange, among others as further described in the indenture), holders of Convertible Senior Notes will have the right to require the Company to purchase their Convertible Senior Notes for cash. A fundamental change may also constitute an event of default or require prepayment under, and result in the acceleration of the maturity of, our other then-existing indebtedness. We cannot assure you that we will have sufficient financial resources, or will be able to arrange financing, to pay the fundamental change purchase price in cash with respect to any Convertible Senior Notes surrendered by holders for purchase upon a fundamental change. In addition, restrictions in the agreements governing our then-outstanding indebtedness, if any, may not allow us to purchase the Convertible Senior Notes upon a fundamental change. Our failure to purchase the Convertible Senior Notes upon a fundamental change when required would result in an event of default with respect to the Convertible Senior Notes which could, in turn, constitute a default under the terms of our other indebtedness, if any. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and purchase the Convertible Senior Notes, which could have a material and adverse impact on our financial condition and results of operations.

Shares eligible for future sale may adversely affect our ability to sell equity securities.

Sales of our common stock (including the issuance of shares upon conversion of convertible debt) in the public market could materially and adversely affect the market price of shares. We have outstanding $100 million principal amount of Convertible Senior Notes that convert to common stock at prices equivalent to $5.11 (subject to adjustment for certain dilutive events). Our obligation to convert the Convertible Senior Notes upon demand by the holders may depress the price of our common stock and also make it more difficult for us to sell equity securities or equity‑related securities in the future at a time and price that we deem appropriate.

As of March 31, 2017 we had 109,604,620 shares of common stock issued, plus (1) $100 million of principal amount of Convertible Senior Notes convertible into up to approximately 19,583,360 shares of common stock at the conversion rate of $5.11 subject to adjustment as described in the indenture, (2) 3,583,034 options to purchase shares of common stock with a weighted‑average exercise price of $3.40 per share, (3) 365,464 restricted stock units, (4) 9,570,167 for potential future grants of options to purchase shares of common stock under the Plan, (5) 1,500,000 of restricted stock units issued to Dr. Goldenberg as part of the Amended and Restated Employment Agreement and (6) warrants to purchase 10,000,000 shares of common stock with an exercise price of $3.75. Of the 160,000,000 shares of common stock authorized under

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our Certificate of Incorporation, there are 793,355 shares of common stock that remain available for future issuance.

Our outstanding Convertible Senior Notes, options and warrants may adversely affect our ability to consummate future equity‑based financings due to the dilution potential to future investors .

Due to the number of shares of common stock we are obligated to issue pursuant to outstanding Convertible Senior Notes, options and warrants, potential investors may not purchase our future equity offerings at market price because of the potential dilution such investors may suffer as a result of the exercise of the outstanding Convertible Senior Notes, options and warrants.

The market price of our common stock has fluctuated widely in the past, and is likely to continue to fluctuate widely based on a number of factors, many of which are beyond our control.

The market price of our common stock has been, and is likely to continue to be, highly volatile. Furthermore, the stock market and the market for stocks of relatively small biopharmaceutical companies like ours have from time to time experienced, and likely will again experience, significant price and volume fluctuations that are unrelated to actual operating performance.

From time to time, stock market analysts publish research reports or otherwise comment upon our business and future prospects. Due to a number of factors, we may fail to meet the expectations of securities analysts or investors and our stock price would likely decline as a result. These factors include:

·

Announcements by us, our current collaboration partner, any future alliance partners or our competitors of pre-clinical studies and clinical trial results, regulatory developments, technological innovations or new therapeutic products, product sales, new products or product candidates and product development timelines;

·

The formation or termination of corporate alliances;

·

Developments in patent or other proprietary rights by us or our respective competitors, including litigation;

·

Developments or disputes concerning our patent or other proprietary rights, and the issuance of patents in our field of business to others;

·

Government regulatory action;

·

Period-to-period fluctuations in the results of our operations; and

·

Developments and market conditions for emerging growth companies and biopharmaceutical companies, in general.

In addition, Internet “chat rooms” have provided forums where investors make predictions about our business and prospects, oftentimes without any real basis in fact, that readers may trade on.

In the past, following periods of volatility in the market prices of the securities of companies in our industry, securities class action litigation has often been instituted against those companies. Please see Item 3 (“Legal Proceedings”) for a description of such litigation. If we face such litigation in the future, it would result in substantial costs and a diversion of management’s attention and resources, which could negatively impact our business.

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Our principal stockholders can significantly influence all matters requiring the approval by our stockholders.

As of March 31, 2017 venBio Select Advisor LLC, (‘venBio”) is the beneficial owner of approximately 9.6% of our outstanding common stock and approximately 7.5% of our fully diluted common stock. VenBio is our largest stockholder, and Dr. Behzad Aghazadeh, the Managing Partner and portfolio manager of the venBio Select Fund, serves on our Board of Directors.

As of March 31, 2017, Dr. David M. Goldenberg, our Chairman of the Board, Chief Scientific Officer and Chief Patent Officer, together with certain members of his family, including Ms. Cynthia L. Sullivan, our President and Chief Executive Officer, who is Dr. Goldenberg’s wife, and other affiliates, controlled the right to vote approximately 7% of our outstanding common stock and approximately 5% of our fully diluted common stock.

As a result of this voting power, venBio and Dr. Goldenberg have the ability to significantly influence the outcome of substantially all matters that may be put to a vote of our stockholders, including the election of our directors.

There are limitations on the liability of our directors, and we may have to indemnify our officers and directors in certain instances.

Our certificate of incorporation limits, to the maximum extent permitted under Delaware law, the personal liability of our directors for monetary damages for breach of their fiduciary duties as directors. Our bylaws provide that we will indemnify our officers and directors and may indemnify our employees and other agents to the fullest extent permitted by law. These provisions may be in some respects broader than the specific indemnification provisions under Delaware law. The indemnification provisions may require us, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers (other than liabilities arising from willful misconduct of a culpable nature), to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified and to obtain directors’ and officers’ insurance. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify a director, officer, employee or agent made or threatened to be made a party to an action by reason of the fact that he or she was a director, officer, employee or agent of the corporation or was serving at the request of the corporation, against expenses actually and reasonably incurred in connection with such action if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Delaware law does not permit a corporation to eliminate a director’s duty of care and the provisions of our certificate of incorporation have no effect on the availability of equitable remedies, such as injunction or rescission, for a director’s breach of the duty of care.

We believe that our limitation of officer and director liability assists us to attract and retain qualified employees and directors. However, in the event an officer, a director or the board of directors commits an act that may legally be indemnified under Delaware law, we will be responsible to pay for such officer(s) or director(s) legal defense and potentially any damages resulting there from. Furthermore, the limitation on director liability may reduce the likelihood of derivative litigation against directors and may discourage or deter stockholders from instituting litigation against directors for breach of their fiduciary duties, even though such an action, if successful, might benefit our stockholders and us. Given the difficult environment and potential for incurring liabilities currently facing directors of publicly-held corporations, we believe that director indemnification is in our and our stockholders’ best interests because it enhances our ability to attract and retain highly qualified directors and reduce a possible deterrent to entrepreneurial decision-making.

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Nevertheless, limitations of director liability may be viewed as limiting the rights of stockholders, and the broad scope of the indemnification provisions contained in our certificate of incorporation and bylaws could result in increased expenses. Our board of directors believes, however, that these provisions will provide a better balancing of the legal obligations of, and protections for, directors and will contribute positively to the quality and stability of our corporate governance. Our board of directors has concluded that the benefit to stockholders of improved corporate governance outweighs any possible adverse effects on stockholders of reducing the exposure of directors to liability and broadened indemnification rights.

We are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act.

The Sarbanes-Oxley Act requires that we maintain effective internal controls over financial reporting and disclosure controls and procedures. Among other things, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act (“Section 404”). Compliance with Section 404 requires substantial accounting expense and significant management efforts. Our testing, or the subsequent review by our independent registered public accounting firm, may reveal deficiencies in our internal controls that would require us to remediate in a timely manner so as to be able to comply with the requirements of Section 404 each year. If we are not able to comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, the NASDAQ Stock Market or other regulatory authorities that would require additional financial and management resources and could adversely affect the market price of our common stock.

We do not intend to pay dividends on our common stock. Until such time as we pay cash dividends our stockholders, must rely on increases in our stock price for appreciation.

We have never declared or paid dividends on our common stock. We intend to retain future earnings to develop and commercialize our product candidates and therefore we do not intend to pay cash dividends in the foreseeable future. Until such time as we determine to pay cash dividends on our common stock, our stockholders must rely on increases in the market price of our common stock for appreciation of their investment.

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

Series A-1 Convertible Preferred Stock

On May 4, 2017, the Company entered into the Purchase Agreement with the Purchasers, pursuant to which the Company, in a private placement, agreed to issue and sell to the Purchasers one million (1,000,000) shares of the Company’s Series A-1 Convertible Preferred Stock), at a price of $125 per share for gross proceeds to the Company of $125 million, before deducting fees and expenses. Each Preferred Share will be convertible, subject to the terms of the Certificate of Designation, into 23.10536 shares of Common Stock (or an aggregate of 23,105,360 shares of Common Stock). The effective purchase price per share of Common Stock (assuming conversion) is $5.41, (the closing price per share of Common Stock as listed on NASDAQ on May 4, 2017).  The Financing closed on May 10, 2017.

The Company currently does not have a sufficient number of authorized and unreserved shares of Common Stock to permit the conversion of the Preferred Shares. Pursuant to the Purchase Agreement, the Company has agreed to use commercially reasonable efforts to seek stockholder approval of the Charter

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Amendment, and to continue, as necessary, to seek such stockholder approval until the Charter Amendment receives the requisite stockholder approval. The Preferred Shares will automatically convert to shares of Common Stock upon stockholder approval of the Charter Amendment and subsequent filing of the Charter Amendment with the Secretary of State of the State of Delaware. To the extent the Company is unsuccessful in obtaining stockholder approval for the Charter Amendment and the increase in authorized shares of Common Stock has not become effective by August 31, 2017, then a cash dividend shall accrue on each share of Series A-1 Convertible Preferred Stock at a rate per annum equal to 1.00% of the initial purchase price per share of Series A-1 Convertible Preferred Stock, with the rate of accrual to increase by an additional 1.00% for each month following August 31, 2017 during which the Preferred Conversion Event (as defined in the Certificate of Designation) has not occurred.

 

Included in the Purchase Agreement are provisions which require the Company to register the resale of the Preferred Shares and the Common Stock underlying the Preferred Shares. The Company is required to prepare and file a registration statement with the SEC within 30 days following approval by the Company’s stockholders of the Charter Amendment and the subsequent effectiveness of the Charter Amendment, and to use commercially reasonable efforts to have the registration statement declared effective within 90 days if there is no review by the SEC, and within 120 days in the event of such review.

 

The Preferred Shares were offered and will be issued and sold in reliance upon the exemption from the registration requirements of the Securities Act, set forth under Section 4(a)(2) of the Securities Act relating to sales by an issuer not involving any public offering and in reliance on similar exemptions under applicable state laws. Each Purchaser represented that it is an accredited investor and that it is acquiring the Preferred Shares for investment purposes only and not with a view to any resale, distribution or other disposition of such securities in violation of the United States federal securities laws.

The Company expects to use the proceeds from the financing towards working capital and general corporate purposes, including the continued development of its lead product candidate, IMMU-132.

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Common Stock Warrants

 

On February 10, 2017, in connection with the execution of the License Agreement , the Company entered into a Stock Purchase Agreement (the “SPA”) with SGEN. Under the SPA, SGEN has purchased, and the Company has sold, in the aggregate, 3,000,000 shares of Common Stock (the “Common Shares”), at a price of $4.90 per share, for aggregate proceeds of $14.7 million. Concurrently with the sale of the Common Shares, pursuant to the SPA, the Company also agreed to issue a three-year warrant (the “SGEN Warrant”) to purchase an aggregate of 8,655,804 shares of Common Stock of the Company (the “Common Stock”). The SGEN Warrant will be exercisable for cash only and only upon approval by the Company’s stockholders of an amendment to the Company’s certificate of incorporation, and filing thereof, increasing such number of shares of Common Stock in an amount sufficient to allow for the exercise of the shares being issued upon the exercise of the SGEN Warrant, at an initial exercise price equal to $4.90 per share of Common Stock. The SGEN Warrant was issued on February 16, 2017 and was originally exercisable until February 10, 2020. The License Agreement was terminated by mutual agreement on May 4, 2017 (the “Termination Agreement”).  Pursuant to the terms of the Termination Agreement, the Company and SGEN also agreed to amend the terms of the SGEN Warrant to amend the expiration date from February 10, 2020 to the later of (i) December 31, 2017, and (ii) the date that is six (6) months following the date on which a sufficient number of shares of Common Stock are authorized and reserved for issuance to permit the full exercise of the SGEN Warrant.

IT EM 6. EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed on the “Exhibit Index” immediately following the Signatures.

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SI GNATURE S

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

IMMUNOMEDICS, INC.

 

 

 

 

 

 

May 10, 2017

By:

/s/  Cynthia L. Sullivan

 

Cynthia L. Sullivan

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 

 

 

 

May 10, 2017

By:

/s/  Michael R. Garone

 

Michael R. Garone

 

Vice President, Finance and Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 

 

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EXHIBI T INDE X

Exhibit Number

    

Description of Document

3(i).1

 

Form of Certificate of Designation of Series A-1 Convertible Preferred Stock. (Incorporated by reference to exhibit 3.1 to the Company’s current report on Form 8-K, as filed with the Commission on May 5, 2017).

 

 

 

3(ii).1

 

 

 

Second Amendment to Second Amended and Restated By-Laws of Immunomedics, Inc. (Incorporated by reference to exhibit 3.3 to the Company’s current report on Form 8-K, as filed with the Commission on February 16, 2017).

 

 

 

4.1

 

Warrant Agreement, dated as of February 16, 2017, between the Company and Broadridge Financial Solutions, Inc., as warrant agent (Incorporated by reference to exhibit 4.1 to the Company’s current report on Form 8-K, as filed with the Commission on February 16, 2017).

 

 

 

10.1

 

Development and License Agreement, dated as of February 10, 2017, by and between the Company and Seattle Genetics, Inc.*±

 

 

 

10.2

 

Stock Purchase Agreement, dated as of February 10, 2017, by and between the Company and Seattle Genetics, Inc. *

 

 

 

10.3

 

Form of Indemnification Agreement by and between the Company and each of its directors, executive officers, and certain of its former directors and executive officers (Incorporated by reference to exhibit 10.1 to the Company’s current report on Form 8-K, as filed with the Commission on February 16, 2017).

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.*

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.*

 

 

 

32.1

 

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

 

 

 

101

 

The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language) filed electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Comprehensive Loss; (iii) the Condensed Consolidated Statements of Cash Flows; and, (iv) the Notes to Unaudited Condensed Consolidated Financial Statements. *


* Filed herewith.

± Confidential treatment has been requested for certain portions of this exhibit. The confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission. 

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Exhibit 10.1

 

EXECUTION VERSION

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

DEVELOPMENT AND LICENSE AGREEMENT

 

THIS DEVELOPMENT AND LICENSE AGREEMENT (the “ Agreement ”) is executed as of February 10, 2017 (the “ Execution Date ”), by and between Immunomedics, Inc. , a Delaware corporation having its principal place of business at 300 The American Road, Morris Plains, New Jersey 07950 (“ Company ”), and Seattle Genetics, Inc. , a Delaware corporation, having a place of business at   21823 30th Drive SE, Bothell, Washington 98021  (“ Licensee ”).  Company and Licensee are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS

 

WHEREAS,   Company has conducted pre-clinical and clinical testing on an antibody-drug conjugate as a therapy for cancer and owns or controls intellectual property relating to such antibody-drug conjugate;

 

WHEREAS,   Licensee is engaged in the research, development and commercialization of pharmaceutical products; and

 

WHEREAS, Licensee desires to obtain, and Company desires to grant to Licensee exclusive license rights under Company’s intellectual property, for the research, development, manufacture and commercialization of such antibody-drug conjugate and other rights specified herein throughout the world, under the terms set forth below.

 

NOW, THEREFORE , the Parties hereby agree as follows:

 

Article 1

 

DEFINITIONS

 

As used in this Agreement, the following capitalized terms shall have the following meanings, and singular forms, plural forms and derivative forms thereof shall be interpreted accordingly:

 

1.1          “Action Date” means, with respect to a legal action in connection with a Product Infringement, the date that is the earlier of (a) *** following receipt or delivery of notice and evidence of Product Infringement pursuant to Section 10.4(a), and (b) *** before the date after which a legal action would be substantively limited or compromised with respect to the remedies available against the alleged Third Party infringer.

 

1.2          “Affiliate” means, with respect to a first Person, a second Person that controls, is controlled by or is under common control with such first Person.  For the purposes of the definition in this Section 1.2, the word “ control ” (including, with correlative meaning, the terms

 

 

 


 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

“controlled by” or “under common control with”) means (a) the direct or indirect ownership of at least fifty percent (50%) of the voting stock of an entity, or (b) the possession of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities or by contract or otherwise.

 

1.3          “Applicable Law” means any and all laws, statutes, ordinances, regulations, permits, orders, decrees, judgments, directives, rulings or rules of any kind whatsoever that are promulgated by a federal, state, or other governmental authority, in each case pertaining to any of the activities contemplated by this Agreement, including any regulations promulgated by any Regulatory Authority in the Territory, all as amended from time to time.

 

1.4          “BLA” means (a) a Biologics License Application in the U.S., as defined in the U.S. Public Health Service Act, and applicable regulations promulgated thereunder by the FDA; or (b) any equivalent approval application filed with any equivalent regulatory authority in a country other than the U.S.

 

1.5          “Breakthrough Therapy Designation” means “breakthrough therapy” designation granted by the FDA.

 

1.6          “Business Day” means each day of the week excluding Saturday, Sunday or a day on which banking institutions in Seattle, Washington, or New York, New York, are closed.

 

1.7          “***Patents” means *** patents of *** including *** and ***, and any (a) patents issuing from divisionals, continuations, or continuations-in-part of any patent application from which *** claims priority, including ***; (b) patents that are reissues, reexaminations, or extension of any of the foregoing; and (c)  any foreign counterparts of any of the foregoing.

 

1.8          “Calendar Quarter” means a three (3) month period beginning on January 1, April 1, July 1, or October 1 of a Calendar Year.

 

1.9          “Calendar Year” means a twelve (12) month period beginning on January 1 of any year during the term of this Agreement.

 

1.10        “Commercialize   means any activities directed to new product planning activities, obtaining pricing and/or reimbursement approvals, marketing, promoting, distributing, importing, offering to sell, and/or selling a Licensed Product or Next Generation Product (including establishing the price for such product), brand marketing, activities relating to managed markets (e.g., payers, physician networks, patient support programs), whether or not Regulatory Approval for such product has been obtained, including related use and importation and commercial Manufacturing.     “Commercializing” has a correlative meaning.

 

1.11        “Commercially Reasonable Efforts” means, with respect to the activities of a Party in the Development or Commercialization of a particular Licensed Product, *** and *** that are *** with the *** and *** a *** company would *** to a *** product of ***, ***, *** and/or ***, taking into account all *** factors including, as *** and without ***, *** of ***, *** of ***, *** and *** to ***, *** approved ***, the *** and *** of *** (including ***, and ***.

2


 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

1.12        “Companion Diagnostic” means an *** diagnostic *** or *** developed test that provides *** that is *** or *** for the *** and ***of a Licensed Molecule, Licensed Product, or Next Generation Product, as applicable.

 

1.13        “Company Know-How” means all Information that is Controlled by Company or its Affiliates as of the Effective Date or any time during the Term and used in, or necessary or useful for, the Development, Manufacture, or Commercialization of Licensed Molecules,  Licensed Products, or Next Generation Products. Company Know-How excludes rights under any Company Patents and Company’s interests in any Joint Patents and Joint Inventions, but includes the Company Know-How listed on Exhibit 1 .  

 

1.14        “Company Matter” means any matter that could be *** by the Company ***.

 

1.15        “Company Patents” means all Patents (other than any Joint Patents) that are Controlled as of the Effective Date or any time during the Term by Company or its Affiliates  that Cover a Licensed Product, Licensed Molecule or Next Generation Product, or the Development, Manufacture, or Commercialization of any of the foregoing, or any other process or method relating to any of the foregoing. For clarity, Company Patents include the Pre-Existing Company Patents.

 

1.16        “Company Proprietary Agent”    means a proprietary agent  of Company, other than a proprietary agent of Company that is used or contemplated to be used in combination with any Licensed Molecule with the express written consent of Company.

 

1.17        “Controlled” means, with respect to an item of Information or an intellectual property right, that a Party or one of its Affiliates (a) owns such item or right, or (b) has a license or sublicense to such item or right and has the ability to disclose to the other Party and grant a license or sublicense under such item or right as provided for in this Agreement without violating the terms of any agreement with any Third Party.

 

1.18        “Cover” means, with respect to any product, process, method or composition, that, in the absence of the licenses granted under this Agreement, the manufacture, use, sale, offer for sale, or importation thereof or the practice thereof would infringe a Valid Claim of a Patent (or in the case of a Patent that is a patent application, would infringe a Valid Claim in such patent application if it were to issue as a patent).  Cognates of “Cover” (including without limitation “Covers,” “Covered” and “Covering”) have a correlative meaning.

 

1.19        “CTA” means a clinical trial authorization, as described in Article 9 of Directive 2001/20/EC of the European Parliament and of the Council.

 

1.20        “Develop” or “Development” means the conduct of research, pre-clinical and clinical drug development activities pertaining to a Licensed Molecule, Licensed Product or Next Generation Product, including ***, ***, ***, ***(including investigator-sponsored clinical trials any post-approval studies required by the relevant Regulatory Authority), regulatory affairs, pharmacovigilance, Regulatory Approval, and clinical study regulatory activities.  For clarity, Development will not include Manufacturing.

3


 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

1.21        “Development Plan” means the plan for conducting the research and development of Licensed Molecules and/or Licensed Products (as further described in Section 5.2), as such plan is amended and modified in accordance with this Agreement.  The initial Development Plan is attached hereto as Exhibit 2 .  

 

1.22        “Dollars” or “$” means U.S. dollars.

 

1.23        “EMA” means the European Medicines Agency, or any successor thereto that is responsible for coordinating the centralized system for Regulatory Approval of pharmaceutical products in the European Union.

 

1.24        “EU” means (a) the member countries of ***and the *** as of the Execution Date, (b) any ***of the ***or ***, and (c) ***.

 

1.25        “European Major Market” means France, Germany, Italy, Spain, and/or the United Kingdom. 

 

1.26         “Executive Officers” means (a) in the case of Company, the Chief Executive Officer of Company (or a designee thereof) and (b) in the case of Licensee, the Chief Executive Officer of Licensee (or a designee thereof).

 

1.27        “Fundamental Breach” means (a) a breach by Company of its obligations *** or (b) a breach of, or inaccuracy in, ***, that, in each case, *** or its *** to *** the *** in accordance with *** contemplated by ***.

 

1.28        “FD&C Act” means the U.S. Federal Food, Drug and Cosmetics Act, as amended.

 

1.29        “FDA” means the U.S. Food and Drug Administration, or any successor federal agency in the U.S. performing similar functions.

 

1.30        “Field”   means all human therapeutic uses in any and all indications.

 

1.31        “First Commercial Sale” means, with respect to a Licensed Product in a particular country, the first commercial sale of such Licensed Product in such country after all needed Regulatory Approvals have been obtained in such country. 

 

1.32        FTE ” means the equivalent of full-time  work of a person, carried out by one or more employees of the Parties, who devotes a portion of his or her full time, consisting of ***, in support of any of the activities contemplated hereunder during any period of ***.

 

1.33        FTE Rate ” means the rate for an FTE to be charged for ***, *** development ***, or *** or other activities, as applicable.  The FTE Rate for clinical development activities shall be ***, the FTE Rate for regulatory and non-clinical development activities shall be ***, and the FTE Rate for all other activities (including manufacturing activities) shall be ***. 

 

1.34        “Fully Burdened Cost” means the ***, ***, *** of the applicable ***, ***or *** plus *** and *** incurred and *** to the provision of ***, *** or *** in accordance with

4


 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

*** applied in a manner consistent with ***.

 

1.35        “GAAP” means generally accepted accounting principles in the United States.

 

1.36        “Generic Product” means, with respect to a particular Licensed Product or Royalty Bearing NGP in a country, an antibody-drug conjugate that (a) contains an antibody that binds or is directed to Trop-2, (b) is approved for use in such country pursuant to a regulatory approval process governing approval of *** based on the then-applicable standards for regulatory approval in such country, *** such regulatory approval was *** upon *** by *** or was *** some other type of *** and (c) is *** in the *** as *** by any *** that is not a *** and did not *** in a *** that *** any of *** or any of ***.

 

1.37        “Good Clinical Practice” or “GCP” means (a) the then-current regulatory requirements for good clinical practices standards for clinical trials for pharmaceuticals applicable FDA regulations contained in title 21, parts 50, 54, 56, 312, 812 and 820 of the Code of Federal Regulations) and ICH guidance, including ICH E6, as amended from time to time; and (b) comparable laws or regulations applicable to the manufacture and testing of pharmaceutical materials elsewhere in the Territory .

 

1.38          “Good Manufacturing Practice” or “GMP” means   (a) the then-current regulatory requirements for good manufacturing practices promulgated by the FDA under the FD&C Act (as set forth at 21 C.F.R. § 210 et seq. ) and under the Public Health Service Act, Biological Products (as set forth at 21 C.F.R. §§ 600-610), as the same may be amended from time to time; and (b) comparable laws or regulations applicable to the manufacture and testing of pharmaceutical materials elsewhere in the Territory .

 

1.39        “Governmental Authority” means any government, any governmental or quasi-governmental entity or municipality or political or other subdivision thereof, department, commission, board, self-regulating authority, bureau, branch, authority, official, agency or instrumentality, and any court, tribunal, arbitrator or judicial body, in each case, whether federal, state, city, county, or local.

 

1.40        “IMMU-132” means Company’s proprietary antibody-drug conjugate known as sacituzumab govitecan or “IMMU-132”, as described more particularly in Exhibit 3 .

 

1.41        “IMMU-132 Product” means a Licensed Product that contains IMMU-132.

 

1.42        “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

1.43        “IND” means an investigational new drug application filed with the FDA for approval to commence human clinical trials, or any equivalent application filed with any equivalent regulatory authority in a country other than the U.S.

 

1.44        “Information” means any data, results, and information of any type whatsoever, in any tangible or intangible form, including, without limitation, Inventions, trade secrets, know-how, skill, knowledge, expertise, technology, practices, techniques, methods,

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

processes, procedures, developments, specifications, formulations, formulae, Materials, software, algorithms, marketing or financial reports, clinical and non-clinical study reports, regulatory submission summaries and regulatory submission documents, test data including pharmacological, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data, and stability data.

 

1.45        “Initiate” and “Initiation” mean, when used to describe clinical trials, the first dosing of the first patient or subject for such clinical trials.

 

1.46        “Interested Parties” means the *** Persons with whom Company has engaged in discussions regarding a possible strategic transaction prior to the Execution Date, and who have executed a confidentiality agreement prior to the Execution Date and whom Company has identified in writing to DLA Piper (Company’s outside counsel) as constituting the “interested parties” hereunder.

 

1.47        “Invention” means any composition of matter, article of manufacture, process, method, or other invention, discovery, or finding (whether or not patentable), including any intellectual property rights therein.

 

1.48        “Joint Steering Committee” or “JSC” means the committee formed by the Parties pursuant to Section 3.1.

 

1.49        “Licensed Molecule” means (a) IMMU-132 and (b) any other antibody-drug conjugate or any next generation antibody-drug conjugate that binds or is directed to Trop-2 and is Controlled by Company or any of its Affiliates as of the Effective Date or at any time during the Term.  Licensed Molecule includes without limitation any antibody-drug conjugate utilizing SN-38 or other chemotypes Controlled by Company or any of its Affiliates that binds or is directed to Trop-2.

 

1.50          “Licensed Product” means any pharmaceutical product that contains a Licensed Molecule, alone or in combination with other agents ***. For clarity, Licensed Product does not include ***.  

 

1.51        “Licensee Know-How” means all Information that is Controlled by Licensee or its Affiliates as of the Effective Date or any time during the Term and used in, or necessary or useful for, the Development, Commercialization, or Manufacture of Licensed Molecules or Licensed Products. Licensee Know-How excludes rights under any Licensee Patents and Licensee’s interests in any Joint Patents and Joint Inventions.

 

1.52        “Licensee Patents” means all Patents (other than any Joint Patents) that are Controlled as of the Effective Date or any time during the Term by Licensee or its Affiliates  that *** a *** or ***, or the *** of any of the foregoing, or any other *** or *** to any of the foregoing.

 

1.53        “Major Market ” means the ***, ***, ***, ***, ***, ***, and/or ***.

 

1.54        “Manufacture” means, with respect to a Licensed Molecule, Licensed Product,

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

or Next Generation Product, those manufacturing-related activities that support the Development (including the seeking and obtaining of Regulatory Approvals) and Commercialization of such Licensed Molecule, Licensed Product, or Next Generation Product, including manufacturing process development and scale-up, test method development, formulation development, delivery system development, and quality control development, validation, qualification and audit of clinical and commercial manufacturing facilities, bulk production, fill/finish work and stability testing, related quality assurance technical support activities and CMC activities, and including, in the case of a clinical or commercial supply of such Licensed Molecule, Licensed Product, or Next Generation Product, the synthesis, manufacturing, processing, formulating, packaging, labeling, holding, shipping, storage, distribution, quality control testing and release of such Licensed Molecule, Licensed Product, or Next Generation Product.  “ Manufacturing ” has a correlative meaning.

 

1.55        “Materials” means any chemical or biological substances including any:  (a) organic or inorganic chemical or compound; (b) gene; (c) vector or construct, whether plasmid, phage, virus or any other type; (d) host organism, including bacteria and eukaryotic cells; (e) eukaryotic or prokaryotic cells, cell line or expression system; (f) protein, including any peptide or amino acid sequence, enzyme, antibody or protein conferring targeting properties and any fragment of a protein or peptide or enzyme; (g) genetic material, including any genetic control element (e.g., promoters); (h) virus; or (i) assay, assay protocol or reagent.

 

1.56        “*** Agreement” means that certain agreement between Company and ***, or any agreement between *** and Licensee relating to ***.

 

1.57        “Net Sales” means, with respect to a given period of time,   the gross invoice amount by Licensee, its Affiliates, and its Sublicensees (other than Sublicensees that are wholesalers or distributors) for sales of Licensed Products or Royalty-Bearing NGPs to Third Parties (including wholesalers and distributors that are also Sublicensees) in bona fide arm’s-length transactions, less the following deductions and offsets that are actually incurred, allowed, accrued and/or taken and are specifically allocated with respect to such sale, but solely to the extent that such deductions or offsets are not otherwise recovered by or reimbursed to Licensee, its Affiliates and its Sublicensees:

 

(a)          ***, *** and ***, *** and *** actually allowed or paid in connection with the sale of Licensed Products or Royalty-Bearing NGPs;

 

(b)          ***, *** or *** granted for *** or *** Licensed Products or Royalty-Bearing NGPs, *** or *** of Licensed Product or Royalty-Bearing NGPs, *** and ***, *** (including *** or ***) in each case *** of the selling price of the Licensed Product or Royalty-Bearing NGPs;

 

(c)          ***, ***, *** and *** (or equivalents thereof), *** or otherwise, based on the *** or *** to Third Party purchasers, granted to managed health care organizations, ***, or ***;

 

(d)          the portion of *** paid during the relevant time period to ***, ***or ***;

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(e)          any *** amounts from a *** which have not been *** and have been *** by Licensee or its Affiliates, including ***, to the extent such amounts have not been previously ***; provided that any such amounts that are ***shall be *** in a *** to the extent ***;  

 

(f)          ***, ***, ***, and other *** to the extent added to the *** and set forth *** in the total amount ***, as well as any *** for *** by *** related to the *** of ***;  

 

(g)          *** and other *** (including ***, but solely to the extent not otherwise creditable or reimbursed) to the extent *** on the *** and *** by the purchaser (but excluding what is commonly known as ***); and

 

(h)          any *** and *** that are ***, but which are *** of *** in ***.

 

The methodology for calculating (a) – (g), on a country-by-country basis, shall conform to GAAP consistently applied by Licensee and its Affiliates across its product lines.

 

Net Sales shall include the *** of *** received by *** in respect of ***, whether such *** is in ***.

 

Sales of Licensed Product or Royalty-Bearing NGPs among *** shall not be included in Net Sales hereunder, but *** shall be included in Net Sales, subject to ***.  Further, the following shall not be included in Net Sales:  (i) Licensed Products or Royalty-Bearing NGPs transferred for *** or distributed ***; (ii) other transfers or dispositions for *** used as samples to ***, in amounts consistent with ***.

 

1.58        “Next Generation Product” means *** *** to ***, that (a) *** is developed by or on *** using an *** owned or controlled by *** or (ii) is acquired or in-licensed by ***and (b) ***.

 

1.59        “New Affiliate” means, with respect to a Party, a Person that becomes an Affiliate of such Party after the Effective Date as a result of a merger or acquisition of such Party (including by virtue of an acquisition of at least 50% of the voting stock of such Party).

 

1.60        “Patents” means (a) unexpired letters patent (including inventor’s certificates) which have not been held invalid or unenforceable by a court of competent jurisdiction from which no appeal can be taken or has been taken within the required time period (and which have not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or been abandoned in accordance with or as permitted by the terms of this Agreement or by mutual written agreement), including any substitution, extension, registration, confirmation, reissue, re-examination, supplementary protection certificates, confirmation patents, patent of additions, renewal or any like filing thereof; (b) pending applications for letters patent which have not been canceled, withdrawn from consideration, finally determined to be unallowable by the applicable governmental authority or court for whatever reason (and from which no appeal is or can be taken), and/or abandoned in accordance with or as permitted by the terms of this Agreement or by mutual written consent, including any continuation, division or continuation-in-part thereof and any provisional applications; and (c) any international or regional counterparts to (a) and (b) above.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

1.61        “Person” means any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government or agency or political subdivision thereof.

 

1.62        “Phase 1 Trial” means that portion of the clinical development program that provides for closely monitored clinical trials of the product in a human population designed to determine the metabolism and pharmacologic actions of the drug in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness of the drug, as more fully defined in 21 C.F.R. § 312.21(a), or its successor regulation, or the equivalent in any foreign country.         

 

1.63        “Phase 2 Trial” means a clinical trial in that portion of the clinical development program for a product after a Phase 1 Trial that provides for the initial evaluation of a product on a limited number of patients in a controlled clinical study, designed to evaluate the effectiveness of a product for a particular indication in patients with the disease or condition under study and to determine a dose that is effective and sufficiently tolerated with respect to the proposed therapeutic indication, as more fully defined in 21 C.F.R. § 312.21(b), or its successor regulation, or the equivalent in any foreign country. 

 

1.64        “Phase 3 Trial” means that portion of the clinical development program that provides for continued trials of a product in an extended human patient population designed to obtain data determining efficacy and safety of the product to support Regulatory Approvals in the proposed therapeutic indication, as more fully defined in 21 C.F.R. § 312.21(c), or its successor regulation, or the equivalent in any foreign country.

 

1.65        “Pre-Approval Inspection” or “ PAI ” means an on-site inspection of a facility by a Regulatory Authority prior to granting approval of the initial BLA and MAA as well as any PAS or Type II Variation to ensure that that the applicable manufacturing process and such facility meet the appropriate requirements and comply with the regulations. As used herein, “PAS” means the supplemental application as defined and required by the FDA for significant changes to the manufacturing process described in the BLA and which will be submitted to the FDA for the licensure of a manufacturing process at the applicable facility and “Type II Variation” means the supplemental application as defined and required by the EMA for significant changes to the manufacturing process described in the marketing authorization and which will be submitted to the EMA for the licensure of a manufacturing process at the applicable facility. 

 

1.66        “Pre-Existing Company Patents” means all Company Patents owned by Company or its Affiliates as of the Effective Date, including as set forth in Exhibit 4 .

 

1.67        “Proposal” means, other than the license contemplated by this Agreement, any offer or proposal for, or any indication of interest in, an exclusive license or acquisition of the Licensed Molecule (and only the Licensed Molecule); provided ,   however , that for purposes of clarity, an offer or proposal that contemplates a Sale of the Company or the license or acquisition of any other assets or securities of Company shall not be considered a Proposal. 

 

1.68        “Regulatory Approval” means any and all approvals (including supplements,

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

amendments, pre- and post-approvals, pricing and reimbursement approvals), licenses, registrations or authorizations of any national, supra-national (e.g., the European Commission or the Council of the European Union), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, that are necessary for the manufacture, distribution, use or sale of a product in the particular regulatory jurisdiction.

 

1.69        “Regulatory Authority” means, in respect of a jurisdiction, any agency, department, bureau or other governmental entity with authority over the development, manufacture, use or sale (including approval of BLAs) with respect to products in the jurisdiction, including FDA, EMA, Health Canada and Swissmedic.

 

1.70        “Regulatory Materials”  means regulatory applications (including BLAs), submissions, notifications, registrations, and/or other filings made to or with a Regulatory Authority that are necessary or reasonably desirable in order to develop, use, import, sell, offer to sell, register, market, manufacture, or otherwise commercialize the Licensed Product in the Field for the Territory, along with any documents related to Regulatory Approval issued by a Regulatory Authority for the Territory.

 

1.71        “Royalty-Bearing NGP” means a Next Generation Product that *** as an ***.

 

1.72        “Sale of the Company” means (a) any merger, consolidation or reorganization approved by the Company’s stockholders, unless securities representing more than *** of the total and combined voting power of the outstanding voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly, by the persons who beneficially owned Company’s outstanding voting securities immediately prior to such transaction; or (b) the sale of all or substantially all of Company’s assets as an entirety or substantially as an entirety to any person, entity, or group of persons acting in concert, other than a sale, transfer or disposition to:  (i) a shareholder of Company in exchange for or with respect to its stock; (ii) an entity, *** or more of the total value or voting power of which is owned, directly or indirectly, by Company; (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, *** or more of the total value or voting power of the outstanding stock of Company; or (iv) an entity, at least *** of the total value or voting power of which is owned by a person described in (iii); or (c) any transaction or series of related transactions pursuant to which any person or any group of persons comprising a “group” within the meaning of Rule 13d- 5(b)(1) under the Securities Exchange Act of 1934, as amended (other than Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with,  Company) becomes directly or indirectly the beneficial owner (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing (or convertible into or exercisable for securities possessing) more than *** of the total combined voting power of Company’s securities outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from Company or the acquisition of outstanding securities held by one or more of Company’s stockholders.

 

1.73        “Superior Proposal” means any Proposal by a Person that the Transaction Committee and the Company Board has determined in good faith, after consultation with an independent financial advisor of national recognition, is (i) more favorable from a financial point

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

of view to Company than the terms of this Agreement (including any adjustment to the terms and conditions thereof proposed in writing by Licensee in response to any such Proposal) ***. For the avoidance of doubt, if the Licensee counter-proposes terms that match the terms contained in any Proposal with respect to ***, the Proposal shall no longer be a Superior Proposal and Company shall not have the right to terminate this Agreement under Section 14.3(b).

 

1.74        Target ” means a protein (including any glyco or lipoprotein) and any unique fragment, peptide or epitope thereof, and any naturally occurring allelic variant or splice variants thereof, that are encoded by the same gene.

 

1.75        “Territory” means the entire world.

 

1.76        “Third Party” means any Person other than (a) Company, (b) Licensee, (c) an Affiliate of Company or (d) an Affiliate of Licensee. 

 

1.77        “Trop-2” means the human tumor-associated calcium signal transducer 2 protein, which is also known as epithelial glycoprotein-1 antigen (EGP-1).

 

1.78        “U.S.” means the United States of America, including its territories, protectorates and possessions. 

 

1.79        “Valid Claim” means (a) a claim (including a process, use, or composition of matter claim) of an issued and unexpired patent, which has not been held invalid or unenforceable by a patent office, court or other governmental agency or an intergovernmental agency of competent jurisdiction, which holding is unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid by the owner through reissue, disclaimer or otherwise and (b) a claim (including a process, use, or composition of matter claim) within a patent application that has not been revoked, cancelled, withdrawn, or affirmatively abandoned, or held invalid, unenforceable, unpatentable, or abandoned by a patent office, court or other governmental agency or an intergovernmental agency of competent jurisdiction, which holding is unappealable or unappealed within the time allowed for appeal; provided ,   however , that Valid Claim will exclude any such pending claim in an application that has not been granted within the later of (i) seven (7) years following the *** for *** and (ii) *** after *** of the *** in response to ***, in either case, unless and until such claim is granted.

 

1.80        Additional Definitions . Each of the following definitions is set forth in the Section of this Agreement, as indicated below.

 

Definition

Reference

Agreement

Preamble

Alliance Manager

Section 3.3(a)

Arbitral Decision

Section 14.2(b)

Claims

Section 12.1

Clinical Agreement

Section 5.4

Commercialization Plan

Section 6.2

Common Stock

Section 8.3

Company

Preamble

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

Definition

Reference

Company Board

Section 11.6(c)

Company Development Activities

Section 5.4

Company Development Expenses

Section 5.7(a)

Company Indemnitees

Section 12.1

Confidential Information

Section 11.1

Co-Promotion Agreement

Section 6.6

Co-Promotion Right

Section 6.6

DoJ

Section 16.19(a)

Effective Date

Section 14.1

Exchange Act

Section 11.4(c)

Execution Date

Preamble

Existing Inventory

Section 7.3(a)

Existing Regulatory Documentation

Section 13.2(k)

Existing Study

Section 5.3(a)

Facility

Section 7.1(b)

***

Section 5.3(a)

FTC

Section 16.19(a)

Generic Market Data

Section 8.7(c)(i(3)

HSR Conditions

Section 16.19(b)

IMMU-132 Information

Section 11.1

Indemnitee

Section 12.3

Indemnitor

Section 12.3

JCC

Section 3.2

JDC

Section 3.2

Joint Inventions

Section 10.1

Joint Patents

Section 10.3(c)

JPC

Section 3.2

JSC

Section 3.1(a)

Legal Proceeding

Section 16.20

Letter Agreement

Section 16.6

Licensee

Preamble

Licensee Indemnitees

Section 12.2

Licensee Mark(s)

Section 14.5(d)

Losses

Section 12.1

Manufacturing Agreements

Section 7.3(d)

Marks

Section 10.8(a)

Match Period

Section 11.6(b)

Milestone Event

Section 8.4

New Affiliate Date

Section 2.11

No-Shop Start Date

Section 11.6(a)

NSCLC

Section 5.3(a)

Other Licensed Molecule

Section 2.10

Other Royalty Term

Section 8.7(b)(ii)

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

Definition

Reference

Parties

Preamble

Party

Preamble

Product Infringement

Section 10.4(a)

Publication

Section 11.5

Purchased Shares

Section 8.3

Qualifying Sublicensee

Section 8.2(a)

***

***

ROFN Election Notice

Section 2.9

ROFN Notice

Section 2.9

ROFN Product

Section 2.9

Sale of the Company Proposal

Section 11.6(c)

SCLC

Section 5.3(a)

Sole Inventions

Section 10.1

 

Article 2

 

LICENSES AND RELATED RIGHTS AND OBLIGATIONS

 

2.1          Grant of Rights to Licensee.

 

(a)          License . Subject to the terms and conditions of this Agreement, Company, on behalf of itself and its Affiliates, hereby grants to Licensee an (i) exclusive (even as to Company and its Affiliates, but subject to Company’s retained rights set forth in Section 2.1(c)), royalty-bearing license, with the right to grant sublicenses in accordance with Sections 2.1(b) and 2.3, under the Company Patents, Company Know-How, and Company’s interest in the Joint Patents and Joint Inventions, to Develop, Manufacture, Commercialize, and otherwise exploit Licensed Molecules, Licensed Products and Next Generation Products in the Field in the Territory; and (ii) a non-exclusive license, with the right to grant sublicenses in accordance with Sections 2.1(b) and 2.3, under the Company Patents, Company Know-How, and Company’s interest in the Joint Patents and Joint Inventions, to Develop, Manufacture, Commercialize and otherwise exploit Companion Diagnostics in the Territory; provided   that ***.

 

(b)          Sublicensing. The licenses granted to Licensee in Section 2.1(a) shall be sublicenseable solely ***, provided ,   however , ***, such sublicense will be subject to the prior written consent of Company, such consent not to be unreasonably withheld or delayed and Company will provide notice of its consent or decision to not consent with reasons therefor no later than *** after it receives a copy of the material terms of each such proposed sublicense in accordance with Section 2.3, provided,   further , Company will not withhold its consent to the grant of such rights if the *** is *** under the proposed sublicense .  For clarity, the grant of a sublicense outside of the United States, Canada and EU will be subject to the payment of the Added Territory Payment in accordance with Section 8.2.

 

(c)          Company Retained Rights .  Notwithstanding Section 2.1(a), Company

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

retains the non-exclusive right under the Company Patents and Company Know-How to undertake, either itself or through Subcontractors, the Company Development Activities or such other obligations that are mutually agreed to in writing by the Parties, including, to the extent applicable, the right to co-promote Licensed Product solely pursuant to the Co-Promotion Right and the Co-Promotion Agreement. Company also retains the non-exclusive right, at its own cost, under Company Patents and Company Know-How in order for Company to make, have made, and use ***. The Parties acknowledge and agree that the foregoing sentence excludes ***. Furthermore, neither Company nor its Affiliates shall publish or publicly present data or other results generated from the activities contemplated in Section 2.1(c)(i) and (ii). For clarity, Company retains all rights under the Company Patents and Company Know-How with respect to compounds and products other than Licensed Molecules, Licensed Products or Next Generation Products.

 

2.2          Grant of Rights to Company.

 

(a)          Licenses.  Subject to the terms and conditions of this Agreement, Licensee, on behalf of itself and its Affiliates, hereby grants to Company the following licenses under the Licensee Patents, Licensee Know-How and Licensee’s interest in the Joint Patents and Joint Inventions: (i) effective on the Effective Date, a non-exclusive, worldwide, royalty-free, fully paid license, with the right to grant sublicenses in accordance with Sections 2.2(b) and 2.3, to undertake the Company Development Activities or such other obligations under this Agreement that are mutually agreed in writing by the Parties; and (ii) effective upon Company’s exercise of the co-promotion right in Section 6.6, a co-exclusive (with Licensee or any Sublicensee of Licensee), royalty-free, fully paid license, with the right to grant sublicenses (subject to Section 2.2(b) and 2.3), to co-promote Licensed Product pursuant to the Co-Promotion Agreement.

 

(b)         Sublicensing.  The licenses granted to Company in Section 2.2(a) shall be sublicenseable solely to ***; provided ,   however , ***.    

 

2.3          Sublicense Requirements .  Each sublicense granted by a Party to a Third Party pursuant to Sections 2.1(b) or 2.2(b) (a “ Sublicense ”) shall (a) be in writing; (b) be subject and subordinate to, and consistent with, the terms and conditions of this Agreement; and (c) require the applicable sublicensee (the “ Sublicensee ”) to comply with all applicable terms of this Agreement.  No Sublicense shall diminish, reduce or eliminate any obligation of either Party under this Agreement. Solely with respect to any proposed Sublicense that requires the prior consent of the other Party, a Party shall provide a summary of the material terms of each such proposed Sublicense and each proposed amendment thereto prior to execution thereof in order to permit the consenting Party to review such Sublicense and/or amendment and to exercise its consent right.  Furthermore, in any Sublicense granted by Licensee hereunder, Licensee shall require that, upon a termination of such Sublicense, the Sublicensee must assign to Licensee, and provide to Licensee full copies of, all Regulatory Approvals and Regulatory Materials that relate to Licensed Products and/or Licensed Molecules and are owned or controlled by such Sublicensee (including as necessary to facilitate compliance with Section 14.5).  In addition, a Party shall ensure that any Sublicense that it grants hereunder explicitly states that such Sublicense will terminate upon termination of the licenses granted to the licensor Party under this Agreement; provided ,   that , such Sublicense may survive to the extent required by the

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Sublicensee for wind down purposes, including as required to preserve any ongoing clinical trials.

 

2.4          Right to Subcontract .  Subject to the licenses granted under Sections 2.1 and 2.2 and each Party’s rights and obligations under Articles 5, 6, and 7, a Party may subcontract the performance of any Development, Commercialization or Manufacturing activities undertaken in accordance with this Agreement, to the extent permitted in the Development Plan, the Commercialization Plan, or as otherwise contemplated by the JSC, to one or more Third Parties (each such Third Party, a “ Subcontracto r”) pursuant to a written agreement (a “ Subcontract ”) which shall be consistent with the terms and conditions of this Agreement. Each Subcontract shall contain confidentiality provisions no less restrictive than those set forth in Article 11. No Subcontract shall diminish, reduce or eliminate any obligation of either Party under this Agreement. For clarity, Licensee’s and its Affiliates’ arrangements with ***, and *** entered into in the ordinary course shall be considered Subcontracts under this Section 2.4, and are not subject to consent for sublicensing pursuant to Section 2.1(b).

 

2.5          No Non-Permitted Use.  Each Party hereby covenants that it shall not, nor shall it cause or permit any Affiliate or Sublicensee to use or practice, any of the other Party’s intellectual property rights licensed to it under this Article 2 except for the purposes expressly permitted in the applicable license grant(s).

 

2.6          No Other Licenses.  No rights or licenses in or to any intellectual property, whether by implication, estoppel, or otherwise, are hereby granted, other than the license rights that are expressly granted under this Agreement.

 

2.7          Existing Third Party Agreements.  Subject to Section 8.7(c), Licensee shall be responsible for *** of payments owed by Company under the *** as a result of the activities of Licensee, its Affiliates, or its Sublicensees in connection with this Agreement.  Promptly after the Execution Date, Company will approach *** to seek a right to sublicense its rights under *** to Licensee and its Affiliates within the scope of this Agreement.

 

2.8          Exclusivity .  During the Term, neither Party nor any of its Affiliates (other than New Affiliates) shall, directly or indirectly (including via a license to a Third Party) Develop or Commercialize any ***, except:

 

(a)          in the case of Licensee, ***; and

 

(b)          in the case of Company, (i) ***, or (ii) as licensed under Section 2.1(c).  

 

For clarity, nothing in this Section 2.8 will constitute a license under either Party’s or its Affiliates’ Information or Patents. In addition, Licensee shall take reasonable action to institute appropriate ethical walls and procedures designed to ensure no personnel of Licensee that is or has been engaged in any material development activities with respect to the Licensed Molecule or Licensed Products will be assigned to any of Licensee’s *** development programs (provided that this will not apply to Development Review Committee or Portfolio Steering Committee members with oversight responsibilities).  For purposes of the foregoing sentence, a development program will be regarded as ***.  

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

2.9          Right of First Negotiation.  If, following the Execution Date, Company intends to start a process to sell, transfer or grant any rights to a Person (other than Licensee) with respect to any of Company’s or its Affiliates’ *** (each, a “ ROFN Product ”), or receives a written offer from a Person (other than Licensee) to enter into negotiations for the sale, transfer, or grant of any rights to an ROFN Product, then, in each case, Company shall provide Licensee with a written notice prior to commencing such processes or responding to such offer, as applicable (the “ ROFN Notice ”).  If Licensee notifies Company of its interest to license such ROFN Product following receipt of the ROFN Notice (the “ ROFN Election Notice ”), Company and Licensee shall enter into good faith negotiations on an exclusive basis for a period of *** to attempt to negotiate a license for such ROFN Product.  If Licensee does not provide a ROFN Election Notice within *** of receiving the ROFN Notice or the parties fail to execute a license for such ROFN Product within *** of the ROFN Election Notice, then Company shall be free to enter into a license or other agreement with such Person with respect to such ROFN Product.

 

2.10        Other Licensed Molecule .  From time to time during the Term of this Agreement, Company will present to the JSC with reasonable information regarding any *** (each, an “ Other Licensed Molecule ”).  At the request of Licensee with *** to be agreed in good faith by the Parties, Company will transfer to Licensee Materials and further Information reasonably required by Licensee in order to evaluate, test, and assess the development and commercial potential of each such Other Licensed Molecule.  Licensee may in its sole discretion at any time during the Term elect to advance such Other Licensed Molecule by written notice to Company, it being understood that Licensee will not *** an *** on an Other Licensed Molecule without first making such election.  Upon such written election, Licensee shall pay to Company *** within *** after such election and such Other Licensed Molecule will be subject to the royalty provisions ***.  Except for the foregoing, and notwithstanding anything to the contrary in this Agreement, Licensee will have no other royalty, upfront, milestone or other payment obligations to Licensee or its Affiliates relating to any Other Licensed Molecule or the Development, Manufacturing or Commercialization thereof.  For clarity, Licensee shall not have any obligation to pay any upfront or milestone payment contemplated in Section 8.1, Section 8.4 or Section 8.5 with respect to any Other Licensed Molecule.

 

2.11        Exclusion of Acquirer IP .  Notwithstanding anything to the contrary in this Agreement, in the event that a Person becomes a New Affiliate of a Party, then any Patents filed or issued, or Information Controlled, by such New Affiliate prior to such Person becoming a New Affiliate of such Party (such date, the “ New Affiliate Date ”) shall be excluded from Company Patents, Company Know-How, Licensee Patents, and Licensee Know-How, as applicable, and shall be excluded from the corresponding licenses granted under such rights in this Agreement, provided   that , such Patents and Information were not previously Controlled by such Party or any Affiliate of such Party prior to the applicable New Affiliate Date. 

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Article 3

 

GOVERNANCE AND MANAGEMENT

 

3.1          Joint Steering Committee

 

(a)          Formation .  Within ten (10) days following the Effective Date, the Parties will form a Joint Steering Committee (the “ JSC ”) comprised of three (3) representatives of each of the Parties, unless otherwise agreed by the Parties.  One representative of Licensee at the JSC will be selected to act as the chairperson of the JSC.  The JSC will meet at least four (4) times per year until the receipt of the first Regulatory Approval with respect to a Licensed Product in a Major Market, and thereafter will meet at least twice per year.  Each Party may also schedule a meeting of the JSC on an ad hoc basis at any time upon *** weeks’ notice to the other Party, subject to the reasonable availability of the JSC members.  Meetings of the JSC may be conducted by videoconference, teleconference or in person, as agreed by the Parties.  The JSC will agree upon the time and location of the meetings.  The chairperson, or his or her designee, will circulate an agenda for each meeting approximately one week before the date scheduled for the meeting, and will include all matters requested to be included on such agenda by either Party, which request must be made at least *** business days prior to one week before the date scheduled for the meeting for inclusion in the agenda.  The chairperson, or his or her designee, will take complete and accurate minutes of all discussions occurring at the JSC meetings and all matters decided upon at the meetings except that matters reflecting legal advice of counsel will not be included in such minutes.  A copy of the draft minutes of each meeting will be provided to each Party by the chairperson, or his or her designee, after each meeting, and such minutes will be reviewed by the JSC members, with  any needed changes discussed and final minutes agreed to and provided to each Party within *** days after the meeting to which such minutes relate unless otherwise agreed.  A reasonable number of additional representatives of a Party may attend meetings of the JSC in a non-voting capacity.  Each Party is responsible for its own travel costs and expenses associated with attending meetings. 

 

(b)          JSC Functions and Powers.  The responsibilities of the JSC will be as follows:

 

(i)          encouraging and facilitating communication between the Parties with respect to the development and commercialization of Licensed Products;

 

(ii)         reviewing and approving the overall strategy for development of Licensed Products in the Field in the Territory;

 

(iii)        reviewing and approving the Development Plan (prepared as described in Section 5.2) and reviewing and approving updates, as appropriate, to the Development Plan;

 

(iv)        monitoring the progress of the development of Licensed Products against the Development Plan and each Party’s diligence in carrying out its responsibilities thereunder;

 

(v)         reviewing and discussing, but not approving, the Commercialization Plan (prepared as described in Section 6.2);

 

(vi)        monitoring the progress of the commercialization of the Licensed Product Commercialization Plan;

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(vii)       coordinating the Parties’ efforts in connection with any co-promotion of Licensed Product undertaken by the Parties pursuant to Section 6.6;

 

(viii)      establishing subcommittees on an as-needed basis (including without limitation those described in Section 3.2), and overseeing the activities of all subcommittees, and attempting to resolve disputes or disagreements arising in all such subcommittees; and

 

(ix)        ***;

 

(x)         ***; and

 

(xi)        carrying out the other duties and responsibilities described for it in this Agreement.

 

For clarity, the JSC shall not have any oversight or authority with respect to any Next Generation Products.

 

(c)          JSC Decision Making.  All decisions of the JSC will be made ***, with each member having one vote.  If after reasonable discussion and consideration of each of the Parties’ views on a particular matter before the JSC, the JSC is unable to reach a decision *** on such matter, then *** shall have the final decision-making authority with respect to such matter, except that if such matter is a Company Matter, then *** shall have the final decision-making authority with respect to such Company Matter. The JSC shall not have any authority other than that expressly set forth in this Agreement and, specifically, shall have no authority (A) to amend this Agreement, (B) to determine whether or not a Party has met its diligence or other obligations under the Agreement, or (C) to determine whether or not a breach of this Agreement has occurred.

 

(d)         Termination of JSC .  The JSC shall continue to exist until the earliest of: (a) the Parties mutually agreeing to disband the JSC; (b) Company providing to Licensee written notice of its intention to disband and no longer participate in the JSC, or (c) termination pursuant to Section 14.3(c).  Thereafter, (x) in the case of clause (a) in the preceding sentence, the JSC shall have no further obligations under this Agreement, and Licensee shall provide annual reports to Company summarizing the Development and Commercialization activities undertaken pursuant to this Agreement and (y) in the case of clauses (b) and (c) of the preceding sentence, all decision-making authority and powers of the JSC prior to its termination pursuant to clause (b) of the preceding sentence shall be assumed by and vest in ***.

 

3.2          Formation of Specific Subcommittees .  The JSC shall form the following subcommittees:  (a) a joint development committee (“ JDC ”) to oversee development of Licensed Products in Territory; (b) a joint commercialization committee (“ JCC ”) to receive updates regarding the commercialization of Licensed Products in the Territory; and (c) a joint patent committee (“ JPC ”) to coordinate patent prosecution and defense, taking into account the interests of Company with respect to claims of Company Patents that are not relevant to Licensed Products.  At the first meeting of the JSC, JSC shall form the JDC, JPC and JCC. Sections 3.1(a), (c), and (d) shall apply, mutatis mutandis , to each of the foregoing

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

subcommittees, except as otherwise specified by the JSC with approval of both Parties’ representatives, and except that if any subcommittee is unable to reach a decision by *** on any matter, then such matter shall be referred to the JSC for resolution in accordance with Section 3.1(c).  For clarity, each subcommittee’s authority shall be derivative of the authority of the JSC, and the JSC shall identify the specific functions and powers listed in Section 3.1(b) that it delegates to each of the subcommittees.

 

3.3          Alliance Managers .

 

(a)          Appointment.  Each of the Parties shall appoint a single individual to act as a single point of contact between the Parties (each, an “ Alliance Manager ”).  Each Party may change its designated Alliance Manager from time to time upon written notice to the other Party.  Any Alliance Manager may designate a substitute to temporarily perform the functions of that Alliance Manager by written notice to the other Party.

 

(b)          Responsibilities.  Alliance Managers shall be nonvoting participants in the JSC meetings, unless they are also appointed members of the JSC pursuant to Section 3.1(a).  An Alliance Manager may bring any matter to the attention of JSC if such Alliance Manager reasonably believes that such matter warrants such attention.  Each Alliance Manager shall be charged with creating and maintaining a collaborative work environment within the JSC.  In addition, each Alliance Manager: (i) will be the point of first referral in all matters of conflict resolution; (ii) will coordinate the relevant functional representatives of the Parties in developing and executing strategies and plans for the Products in an effort to ensure consistency and efficiency throughout the world; (iii) will provide a single point of communication for seeking consensus both internally within the respective Parties’ organizations and between the Parties regarding key strategy and plan issues; (iv) will identify and bring disputes to the attention of the JSC in a timely manner; (v) will plan and coordinate cooperative efforts and internal and external communications; and (vi) will take responsibility for ensuring that governance activities, such as the conduct of JSC meetings and production of meeting minutes, occur as set forth in this Agreement, and that relevant action items resulting from such meetings are appropriately carried out or otherwise addressed.

 

Article 4

 

TRANSFER AND TECHNICAL ASSISTANCE

 

4.1          Transfer of Company Know-How .  Promptly after the Effective Date, ***, Company will transfer to Licensee the Company Know-How listed in Exhibit 1 .  Further, from time to time during the Term at the request of Licensee, ***, Company shall ensure the timely transfer of all other Information, documents, tangible embodiments and reports comprising the Company Know-How necessary or useful for Licensee to assume its responsibilities under the Development Plan or otherwise exercise its rights relating to Development or Manufacturing under this Agreement, which transfer shall occur in a manner and following a reasonable schedule established by the JSC.

 

4.2          Assistance by Company .  To the extent not covered by Section 4.1, at

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Licensee’s reasonable request, Company will provide such further technical assistance as may be requested by Licensee in connection with the transfer to Licensee of the Development and Manufacture of Licensed Products in the Territory to ensure Licensee is fully capable of engaging in the Development and Manufacture of the Licensed Molecules and Licensed Products under this Agreement.  To the extent not covered by Section 4.1, Licensee will compensate Company on an FTE basis at the FTE Rate for such further assistance by making cash payments to Company, based on not-to-exceed estimates provided in advance and written invoices provided by Company from time to time.

 

Article 5

 

DEVELOPMENT

 

5.1          Research and Development Responsibility.  Licensee shall have sole authority and responsibility for the Development of Licensed Products in the Field in the Territory, subject to the oversight of the JSC and subject to Section 5.4.

 

5.2          Development Plan.  The development of Licensed Product shall be governed by a written multi-year, research and development plan that sets forth the anticipated research, pre-clinical and clinical development activities to be performed with respect to such Licensed Product (and, if relevant, any Companion Diagnostic) throughout the Territory, and projected timelines for completion of such activities (the “ Development Plan ”).  The initial Development Plan is attached as Exhibit 2 , which shall be updated by the Parties *** following the formation of the JDC.     On an annual basis ***, or more often as the Parties deem appropriate, the JSC shall, or shall request the JDC to, update and amend, as appropriate, the then-current Development Plan. Such updates and amendments shall reflect any changes, re-prioritization of, or additions to the development activities of the then-current Development Plan, as determined by the JSC. Updates and amendments to the Development Plan shall be approved by the JSC in accordance with the decision-making procedures in Section 3.1(c). Once approved by the JSC, each updated or amended Development Plan shall become effective and supersede the previous Development Plan as of the date of such approval or at such other time as decided by the JSC.  Licensee and Company shall each use Commercially Reasonable Efforts to perform their respective tasks and obligations in conducting all activities ascribed to it in the Development Plan, substantially in accordance with the time schedules set forth therein.  In the event of any inconsistency between the Development Plan and this Agreement, the terms of this Agreement shall prevail.

 

5.3          Indications .

 

(a)          The Parties acknowledge and agree that the initial Development Plan existing on the Execution Date covers four primary indications for Licensed Product, namely Triple-Negative Breast Cancer (“ TNBC ”), Non-Small-Cell Lung Cancer (“ NSCLC ”), Small-Cell Lung Cancer (“ SCLC ”), and Urothelial Cancer (“ UC ”) (the “ First Indications ”).  The initial Development Plan includes the Phase I/II Study of IMMU-132 in Patients With *** (ClinicalTrials.gov Identifier: NCT01631552) (the “ Existing Study ”).

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(b)          On an ongoing basis during the term of the Agreement, while the JSC continues, the Parties shall, via the JSC or the JDC, further review and ***, including both other types of *** approved (for example, ***, etc.) and (ii) ***.

 

(c)          *** may, from time to time, propose additional potential indications and/or potential combination therapies to the JSC, which proposal shall include a reasonably detailed description of (i) the rationale for pursuing such indication or combination therapy and (ii) the clinical trial(s) that *** would recommend undertaking in order to pursue such indication or combination therapy.  The JSC shall consider these proposals in good faith and in a timely manner, ***. The JSC may, in its sole discretion, ***. Notwithstanding the foregoing, the JSC shall not be required to consider, and may in its sole decision decline, any proposal relating to a Terminated Indication.

 

5.4          Company Development Activities .  Company shall be responsible for completing the Existing Study, subject to the Parties entering into a mutually agreeable clinical management agreement with customary terms (“ Clinical Agreement ”), including compensation to Company on an FTE basis at the FTE Rate, plus Company’s cost of materials, requirements that all Development activities are conducted in accordance with GCP, GMP and other applicable standards in the industry and Applicable Law, and other customary terms for agreements of this sort.  Notwithstanding the foregoing, Company will not amend the protocol or enroll in any expansion or phase 2 cohorts other than ***or transition to *** for any *** for any Existing Study, without a decision of the JSC.  To ensure timely submission of data to regulatory authorities, JSC may elect to have Licensee assume some or all of the operational aspects of the Existing Study, including but not limited to ***.  Company may elect, subject to JSC approval and the Parties entering into a Clinical Agreement, to assume responsibility to perform up to two (2) additional *** on *** in ***.  The Licensee shall not unreasonably withhold the approval of its JSC members for such additional ***.  Notwithstanding the foregoing, the JSC shall not be required to consider, and may in its sole decision decline, any proposed election relating to a Terminated Indication.  Following JSC approval of any additional *** to be conducted by Company, the Parties will work together, via the JSC, to incorporate such *** into the then-current Development Plan.  Company’s conduct of the Existing Study and any such additional activities approved by the JSC are referred to herein, collectively, as the “ Company Development Activities .” Company shall use Commercially Reasonable Efforts to perform the Company Development Activities.  For clarity, JSC may not assign a Company Development Activity to Company in the Development Plan without the prior written consent of Company.  The activities of Company’s Affiliates and its permitted Sublicensees shall be attributed to Company for the purposes of evaluating Company’s fulfillment of the obligations set forth in this Section 5.4.  Except for Company Development Activities, neither Company nor its Affiliates shall perform any Development of IMMU-132.

 

5.5          Developmental Diligence.  Licensee shall use Commercially Reasonable Efforts to clinically develop and to obtain Regulatory Approval for IMMU-132 (or, if Licensee ceases development of IMMU-132, an Other Licensed Molecule) in the ***   in ***.  The activities of Licensee’s Affiliates and its permitted Sublicensees shall be attributed to Licensee for the purposes of evaluating Licensee’s fulfillment of the obligations set forth in this Section 5.5.  For clarity, Licensee will not be responsible for delays in clinical development or obtaining

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Regulatory Approval to the extent caused by a failure or delay in the performance by Company of any obligation under Article 4, 5 or 7 or any representation or warranty related thereto. Notwithstanding anything in this Agreement to the contrary, Licensee will have no obligation under this Agreement to Develop, Manufacture or Commercialize or otherwise pursue Next Generation Products. 

 

5.6          Remedy for Termination of Development

 

(a)          In the event Licensee decides not to pursue a Regulatory Approval in the Territory for any of the *** before initiating a pivotal trial for ***, then, subject to *** under Section 5.6(c), Licensee shall have *** to propose a *** for which it will seek Regulatory Approval in the Territory, along with a proposed written development plan for such ***.

 

(b)          Notwithstanding anything to contrary in this Agreement, if during the pursuit of a *** or a *** Licensee reasonably and in good faith determines (and summarizes its reasoning in a written notice delivered by Company) that (i) Licensed Product will not result *** to *** in such ***, (ii) it is no longer ***, or (iii) an *** exists for the Licensed Product in *** (each *** pursuant to clauses (i) or (iii), a “ *** ”), then Licensee will no longer be required to pursue ***under this Agreement (including Section 5.5), but will be, in each case (i) through (iii), required to *** a *** provided that it does not *** of *** under Section 5.6(c).

 

(c)          Notwithstanding Sections 5.6(a) and 5.6(b), Licensee shall not be required to *** more than a total of *** beyond the *** *** pursuant to clauses (a) and (b) of this Section 5.6.

 

(d)          If Licensee fails to comply with its obligation to propose or introduce a *** in accordance with Section 5.6(a) or 5.6(b), as applicable, and Licensee does not cure such failure within *** following written notice by Company thereof, then the royalty rates set forth in Section 8.7 will increase in each tier by *** for each such *** with respect to which Licensee failed to comply with Section 5.6(a) or 5.6(b), up to a maximum of ***

 

5.7          Costs of Development .

 

(a)          Costs.  Licensee shall pay all costs associated with the development, manufacturing, and registration of Licensed Products that are incurred by Licensee or its Affiliates.  In addition, Licensee shall reimburse Company on an FTE basis in connection with the performance by Company of the Company Development Activities (the “ Company Development Expenses ”) subject to applicable budget or caps set forth in the Clinical Agreement or as set forth in the Development Plan. 

 

(b)          Report and Payment of Company Development Expenses.  By the *** (***) day of each Calendar Quarter after the Effective Date, Company shall provide Licensee with an invoice for the actual Company Development Expenses for the preceding Calendar Quarter, if any, accompanied by reasonable supporting documentation.  Licensee shall pay Company the amount in each invoice provided pursuant to this Section 5.7(b) within *** (***) days after receipt thereof.  Licensee shall have the right, at a reasonable time and upon reasonable prior notice, to audit Company’s records to confirm the accuracy of Company’s costs

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

and reports with respect to Company Development Expenses under this Agreement.  ***.

 

5.8          Records; Reports.     Each Party shall prepare and maintain complete and accurate records of all work conducted by it under the Development Plan and all Information resulting from such work.  Such records shall be complete and accurate and shall fully and properly reflect all work done and results achieved in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes.  Each Party shall have the right to review such records maintained by the other Party at reasonable times.  Each Party shall provide the JSC (or the other Party, if the JSC has been terminated) with regular reports summarizing in reasonable detail its work under the Development Plan and the results of such work.  Unless the JSC establishes a different schedule, such Information shall be provided to the JSC reasonably in advance of any regularly scheduled JSC meeting (or to the other Party on semi-annual basis following termination of the JSC).  Each Party shall promptly provide the JSC or the other Party with any additional Information regarding its Licensed Product development activities that is reasonably requested.  Without limiting the forgoing, Licensee shall inform Company promptly following the occurrence of any significant development or regulatory event that occurs relating to Licensed Products (e.g., initiation or completion of a clinical trial, submission of a U.S. or international regulatory filing, receipt of a response to such U.S. or international regulatory filing, or clinical safety event for the Licensed Products).

 

5.9          Regulatory Responsibility .

 

(a)          Licensee, its Affiliates, and Sublicensees shall be the legal and beneficial owner of all Regulatory Approvals and Regulatory Materials for Licensed Product in the Territory, and Regulatory Materials relating to such Regulatory Approvals in the Territory shall be submitted by, and in the name of, Licensee (or its Affiliates or Sublicensees, as the case may be).  All INDs and CTAs for the Existing Study shall be transferred to Licensee within *** days following the completion of the Existing Study, and thereafter the Licensee will be the sponsor under all INDs and CTAs relating to the Licensed Product. As such, Licensee shall be responsible for reporting all adverse drug reactions related to Licensed Products to the appropriate Regulatory Authorities in the relevant countries in the Territory, in accordance with Applicable Law of such countries.  Licensee shall also be responsible for all meetings with Regulatory Authorities and all post-Regulatory Approval commitments to Regulatory Authorities.

 

(b)          During the Term following the Effective Date, Licensee shall keep Company reasonably and regularly informed of the submission to Regulatory Authorities of all material Regulatory Materials, meetings with Regulatory Authorities, and receipt of, or any material changes to existing, Regulatory Approvals, in each case for the applicable Licensed Product in the Territory.  During the Term following the Effective Date, Licensee will use commercially reasonable efforts to provide to Company any Regulatory Materials reasonably in advance of submission to Regulatory Authorities, to the extent practicable, so as to provide Company with an opportunity to review and provide its comments.

 

(c)          In the event Company assumes responsibility for any portion of the Territory, the Parties shall enter into a customary pharmacovigilance agreement.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(d)          Within ***days after the Effective Date or such longer time as may reasonably be necessary not to exceed ***days after the Effective Date, Company shall transfer and deliver all Regulatory Materials to Licensee in the manner and to locations reasonably selected by Licensee. Licensee shall also have the right to access any Company Know-How included or referenced therein and use such Company Know-How in connection with the performance of Licensee’s obligations and exercise of its rights under this Agreement, including inclusion of such information and Company Know-How in Regulatory Materials for any Licensed Products.

 

(e)          Licensee shall promptly provide copies of all material correspondence received from a Regulatory Authority relating to adverse effects and safe use of any Licensed Product, and all safety and adverse event reports submitted by Company to a Regulatory Authority relating to a Licensed Product, all of which will be the Confidential Information of Licensee.

 

(f)          Without limiting Section 5.9(a), Company, on behalf of itself and its Affiliates, hereby grants to Licensee a right of reference to all INDs and CTAs for the Existing Study and any other Regulatory Materials Controlled by Company or its Affiliates with respect to Licensed Products for the purpose of submitting additional INDs and CTAs and obtaining or maintaining the Regulatory Approvals for Licensed Product in the Territory.

 

(g)          Licensee shall have the exclusive right to seek and attempt to obtain pricing and reimbursement approvals for the Licensed Products in the Territory.

 

(h)          Company shall cooperate in good faith with Licensee in obtaining the Regulatory Approvals for IMMU-132 in the indications contemplated by the Development Plan, subject to reimbursement at the applicable FTE Rate for such activities.

 

5.10        Materials; Limited Use .

 

(a)          Transfer of Materials.  In order to facilitate the Development Plan, either Party may provide to the other Party certain Materials Controlled by the supplying Party (“ Transferred Materials ”). 

 

(b)          Limited Use.  The receiving Party shall use the Transferred Materials solely for the activities provided for in this Agreement (including the Development Plan).  Except as reasonably necessary or useful to carry out the activities described in the Development Plan, the receiving Party shall not, without the express prior written consent of the supplying Party, attempt to reverse engineer, reconstruct, synthesize or otherwise modify or copy any Transferred Materials.

 

(c)          Experimental Material.  The Parties acknowledge that the Transferred Materials are experimental in nature and may have unknown characteristics and therefore agrees to use prudence and reasonable care in the use, handling, storage, transportation and disposition and containment of the Transferred Materials.

 

(d)          Compliance with Laws.  Each of the Parties shall use the Transferred

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Materials in compliance with Applicable Laws.

 

Article 6

 

COMMERCIALIZATION

 

6.1          Commercialization of Licensed Products.  Licensee shall have sole authority and responsibility for, and shall use Commercially Reasonable Efforts in, the commercialization of Licensed Products in the Field, subject to Company’s Co-Promotion Right.  Licensee shall have sole discretion with respect to the pricing of the Licensed Products in the Territory sold by Licensee, its Affiliates, its permitted Sublicensees or Company.

 

6.2          Commercialization Plan .  Commercialization of Licensed Product under this Agreement shall be governed by a written Commercialization Plan that describes the anticipated commercialization activities (including promotional, marketing and sales activities) to be performed with respect to Licensed Product in the Territory by Licensee, its Affiliates, or it permitted Sublicensees, as well as projected timelines and annual budgets for such activities (the “Commercialization Plan” ).  The initial Commercialization Plan shall be drafted by Licensee no later than ***.  On an annual basis thereafter (no later than *** of each Calendar Year), or more often as the Parties deem appropriate, the Licensee shall update and amend, as appropriate, the then-current Commercialization Plan.  Such updates and amendments shall reflect any changes, re-prioritization of, or additions to the anticipated commercialization activities.  Once provided to the JSC, each updated or amended Commercialization Plan shall become effective and supersede the previous Commercialization Plan as of the date of such provision or at such other time as decided by the JSC.  In the event of any inconsistency between the Commercialization Plan and this Agreement, the terms of this Agreement shall prevail.

 

6.3          Commercial Diligence .  Licensee shall use Commercially Reasonable Efforts to market, promote and commercialize IMMU-132 Product (or, if Licensee ceases development of IMMU-132 or IMMU-132 Product, an Other Licensed Product) in any indication for which Regulatory Approval is obtained in a Major Market, subject to any Regulatory Approvals that may be necessary in particular Major Market countries prior to conducting certain commercialization activities.  The activities of Licensee’s Affiliates and Sublicensees shall be attributed to Licensee for the purposes of evaluating Licensee’s fulfillment of the obligations set forth in this Section 6.3.   

 

6.4          Commercialization Costs.  Licensee shall be responsible for all costs and expenses associated with its commercialization activities hereunder.

 

6.5          Commercialization Reporting.  Licensee will keep the JSC regularly informed about all of Licensee’s efforts to commercialize Licensed Product, including progress towards meeting the goals and milestones in the Commercialization Plan, significant developments in such Commercialization efforts, any reasons for any deviations or variances (either in time or in sales or other numerical figures) in meeting sales projections, milestones or timelines in the Commercialization Plan, and any proposed changes in its marketing strategies.  Such disclosures will be made in a written report provided to Company at least annually for as long as Licensed

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Products are being sold in one (1) or more of the ***.

 

6.6          Co-Promotion Right .  At any point prior to ***, Company shall have the right (the “ Co-Promotion Right ”) to elect, in writing to Licensee, to field up to 50%, of the sales efforts  (excluding any management personnel)  for the commercialization of IMMU-132 in all indications in the United States, reasonably calculated taking into account ***, *** and *** for IMMU-132, up to a maximum of ***, subject to Licensee’s reasonable determination that Company’s representatives have sufficient expertise and ability to fully perform the tasks assigned to them in the Commercialization Plan and by the JCC and the hiring, training and readiness of those representatives in accordance with the Co-Promotion Agreement (as defined below).  In the event that Company notifies Licensee of its exercise of the Co-Promotion Right by the deadline set forth above, the Parties shall confer and negotiate in good faith the terms of a written agreement under which Company will co-promote Licensed Product (the “ Co-Promotion Agreement ”).  The Co-Promotion Agreement shall be consistent with this Section 6.6 and shall include the following terms: (i) Company will be ***; (ii) Licensee shall ***; (iii) ***; and (iv) such other terms and conditions customary for this type of agreement and appropriate to ensure the quality and performance of Company’s sales representatives.  The Parties shall use commercially reasonable efforts to complete and execute the Co-Promotion Agreement no later than *** following Company’s exercise of the co-promotion right.  

 

Article 7

 

Manufacturing

 

7.1          Manufacturing Generally .  Subject to Section 7.2 and Section 7.3, Licensee shall have sole control, at its sole expense, over manufacturing, and controlling the supply chain for, all Licensed Products for use and/or sale by Licensee, its Affiliates, and its permitted Sublicensees in the Territory.  To the extent Company is responsible for Manufacturing clinical and commercial supply, without limiting the foregoing:

 

(a)          Supply Agreement and Quality Agreement . The Parties shall negotiate in good faith, and as soon as reasonably practicable, execute and deliver a supply agreement and related quality assurance agreement that governs the responsibilities related to supply of IMMU-132 and quality systems, quality requirements, quality control, testing and manufacturing records, audits, complaints, inspections and release for IMMU-132 (the “ Supply/Quality Agreements ”).

 

(b)          Access to Facilities .  Company will accommodate Licensee personnel visiting any of its facilities where it conducts manufacturing of IMMU-132 (each a “ Facility ”).  Licensee will provide Company with reasonable notice for any such visits.  While at a Facility, such Licensee personnel shall have reasonable access to all areas as are relevant to Company’s performance of  its manufacturing obligations hereunder, including areas for the manufacture, storage or quality testing of IMMU-132, and shall comply with all applicable Company policies and procedures.  Licensee will be solely responsible for all costs associated with such visits by Licensee personnel.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(c)          Person in Plant . Licensee may designate at its discretion up to *** representatives to be present in the applicable Facility during normal working hours to coordinate, expedite and guide manufacturing.  

 

(d)          Office Space .  With respect to any Licensee representatives designated by Licensee to be present at any Facility, Company shall provide: (a) an on-site office or conference room, reasonable access to parking and toilet facilities; (b) reasonable access to and use of telephone, internet (but not Company’s intranet), and photocopying services; and (c) such other reasonable and customary business accommodations for such Licensee personnel as are necessary to perform any activities relating to manufacturing performed at such Facility.

 

(e)          Subcontracting .  Notwithstanding Section 2.2(b), Section 2.3, and Section 2.4, to the extent such activity is conducted as of the Execution Date by Company at a Facility, Company shall not subcontract all or any portion of its obligations under this Article 7 without Licensee’s prior written approval and in accordance with the applicable Supply/Quality Agreement, and, in the event of such approval, Licensee shall have the right to review and approve in advance any proposed subcontract to be executed by Company; such review and approval will not be unreasonably delayed, withheld, or conditioned.  Any new agreement with a permitted subcontractor shall provide that Licensee has the right, but not the obligation, to conduct audits of the vendors’ and subcontractors’ facilities and operations, subject to the reasonable approval of said vendors and subcontractors.  Company shall be liable for its subcontractors hereunder to the same extent as if Company itself had performed or failed to perform.

 

7.2          Clinical and Commercial Supply.  On a transitional basis, Company shall supply mutually agreed quantities of IMMU-132 for use by Licensee for the activities contemplated under the Development Plan and as otherwise for commercial launch and inventory build, at a transfer price equal to Company’s Fully Burdened Cost plus *** percent (***%).  Such transfer price shall be paid by Licensee no later than *** (***) days after Licensee’s receipt of a shipment of IMMU-132.  Company shall (or cause its Affiliates to) (a) manufacture (or have manufactured on its behalf) IMMU-132 in accordance with GMP and (b) provide, and shall use Commercially Reasonable Efforts to cause Company’s Third Party manufacturer(s) to provide, all reasonable access, as requested by Licensee, to audit the manufacturing process.  For clarity, this provision does not apply to Existing Inventory.

 

7.3          Transfer of Manufacturing Technology .

 

(a)          Promptly   after the Effective Date, Company shall transfer to Licensee all then-existing and in-process inventory of IMMU-132 (totaling ***) (“ Existing Inventory ”), including a copy of all supporting batch records, in-process and release testing, GMP certifications and other documentation as reasonably required by Licensee. Company hereby represents and warrants to Licensee that all Existing Inventory has been manufactured and stored in accordance with GMP and all Applicable Laws, and that it complies in all respects with applicable specifications, which will be provided to Licensee as soon as practicable after the Effective Date.  Further, Company shall assign and transfer to Licensee any existing manufacturer’s warranty with respect to the Existing Inventory to the extent allowed under any applicable agreement.  The transfer price for such Existing Inventory shall be equal to

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Company’s Fully Burdened Cost of manufacturing, but not to exceed ***.  Subject to the provision by Company to Licensee of reasonable documentation demonstrating such costs, such transfer price shall be paid by Licensee no later than *** after receipt of the Existing Inventory.

 

(b)          At Licensee’s request, Company shall, without any further consideration, fully transfer, within a reasonable and expeditious timeframe and in any event to be initiated within *** of the Effective Date, the entirety of the commercial process for the Manufacture of the antibody component of IMMU-132 (i.e., “hRS7”) and all related processes and components, including all Information and Company Know-How used in, necessary for or related to such process, to a contract manufacturer designated by Licensee; provided   that at Licensee’s request, Company shall transfer all documents and materials required for implementation of the Manufacture of IMMU-132 as soon as practicable, but no later than *** after the request by Licensee at any time following the Effective Date.  

 

(c)          Without limiting the foregoing, Company will ensure that each Facility is ready for Pre-Approval Inspection (PAI) within *** after the submission of the BLA, and the costs of mutually agreed maintenance or upgrades required at each Facility for such Facility to successfully complete PAI will be ***.  

 

(d)          After Licensee has notified Company that it is prepared to take over all manufacturing responsibility for Licensed Product, Company shall, to the extent it is legally able, assign, or cause to be assigned, to Licensee all of Company’s and its Affiliates’ existing manufacturing, supply and storage agreements pertaining to any Licensed Products (the “ Manufacturing Agreements ”), but excluding the portion of any such agreements that relate to products that are not included in the licenses granted to Licensee hereunder.  To the extent that, and for so long as, Company is unable to effect such assignments to Licensee, Company shall take any and all actions necessary (including entering into any subcontracting, subleasing or sublicensing arrangements) to provide Licensee with the full benefits of such Manufacturing Agreements with respect to Licensed Product.

 

Article 8

 

FINANCIAL PROVISIONS

 

8.1          Upfront Payment . On or within *** following the Effective Date, Licensee shall pay to Company an initial fee of Two Hundred Fifty Million Dollars ($250,000,000).  Such fee shall be non-refundable and, except as set forth in Section 16.20, shall not be creditable against any other amount due to Company pursuant to this Agreement.

 

8.2          Added Territory Payment .  In consideration for receiving license rights outside the U.S., Canada, and EU, Licensee agrees as follows:

 

(a)          If Licensee sublicenses commercial rights under this Agreement outside of the U.S., Canada and EU to one or more Third Parties (a “ Qualifying Sublicensee ”) prior to *** of the Execution Date, then, in addition to the royalties and milestone payments otherwise due under this Article 8 ***, Licensee shall pay Company ***% of any *** received by Licensee

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

from such Qualifying Sublicensee(s).  For clarification, if earned, Company shall receive the greater of *** or ***. For the avoidance of doubt, if Licensee makes the payment in accordance with Section 8.2(b), this Section 8.2(a) shall no longer apply.

 

(b)          At any time prior to the earlier of (i) *** of the Execution Date; or (ii) the grant of a Sublicense to a Qualifying Sublicensee in accordance with Section 8.2(a), Licensee shall have the right to elect to pay Company a *** payment of $50 million, and upon such payment,   ***.  

 

(c)          If Licensee does not comply with either Section 8.2(a) or 8.2(b), then *** of the Execution Date.  In such event, the Parties will ***.

 

8.3          Equity Purchase . On the Execution Date, Licensee and Company shall execute (a) a Stock Purchase Agreement, pursuant to which (i)  Licensee will purchase 3,000,000 shares (the “ Purchased Shares ”) of common stock, par value $0.01 per share, of Company (“ Common Stock ”) for an aggregate purchase price of $14,691,930 and (ii) Company will execute and deliver to, and in favor of, Licensee, a warrant on customary terms reasonably acceptable to Licensee (the “ Warrant ”), pursuant to which Licensee will have the right, until February 10, 2020, to purchase up to 8,655,804 shares (the “ Warrant Shares ”) of Common Stock at an exercise price of $4.90 per share (in each case, subject to adjustment in accordance with the terms of the Warrant), and (b) a Registration Rights Agreement, pursuant to which Company will agree to register the Purchased Shares and the Warrant Shares. 

 

8.4          Development Milestone Payments. Licensee shall pay to Company the milestone payments set forth in the table below within *** after the first achievement by Licensee, its Affiliates or Sublicensees of the listed milestone event (“ Milestone Event ”) ******. For clarity, the payments under this Section 8.4 ******.    

 

Milestone Event

Milestone Payment

 

1. *** by *** in *** for *** (i.e., ***).  The Parties acknowledge and agree that ***, without any duty to make such *** in ***, and that if this ***. 

***

2. *** by ***. 

***

3. *** of ***

***

4. *** by *** (i.e., *** on the *** granted by the ***).  The Parties acknowledge and agree that if this ***.

***

5. *** by *** under the ***.

***

6. *** Regulatory Approval by ***.

***

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

7. *** of BLA ***

***

8. Acceptance by ***.  Not applicable if ***.    

***

9. *** Regulatory Approval by ***.  Not applicable if ***.

***

10. *** by ***.  *** if such ***.

***

11. *** by ***.  *** if such ***.

***

***

1. *** of a ***.

***

2. *** by ***.

***

3. *** by ***.

***

4. *** by ***.  *** such ***.

***

5. *** by ***.  *** if such ***.

***

6. *** by ***.

***

7. *** of ***

***

8. *** of ***

***

9. *** of ***for *** such ***

***

***

1. *** of a ***.

***

2. *** by ***.

***

3. ***

***

4. *** by ***.

***

5. *** by ***.

***

6. *** by ***.

***

7. ***

***

8. *** of ***.

***

9. *** of ***.

***

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

The milestone payments set forth in this Section 8.4 are subject to, and conditioned upon the following terms and conditions:  (a) the Parties acknowledge and agree that ***; (b) for any given indication, the milestone payments shall ***; (c) in the event that a milestone is paid for an indication ***; (d) the milestones set forth in the table above with respect to ***; (e) the milestones set forth in the table above with respect to ***; and (f) for *** and the *** for purposes of this Section 8.4, such ***.

 

8.5          Sales Milestones.  Licensee shall pay to Company each of the one-time milestone payments set forth below within *** after the conclusion of the Calendar Quarter in which Net Sales of all IMMU-132 Products in the Territory first exceed the indicated Dollar value in a Calendar Year.  Licensee shall promptly notify Company of the occurrence of the first achievement of each such sales level. For clarity, the payments under this Section 8.5 shall not apply to any Licensed Product, other than an IMMU-132 Product.

 

Global Annual Net Sales

Milestone Payment

***

***

***

***

***

***

***

***

***

***

***

***

***

***

 

8.6          Milestone Terms and Conditions.  Licensee shall notify Company within *** after the occurrence of each milestone event giving rise to a payment obligation.  Once paid, all milestone payments made to Company pursuant to Section 8.4 or Section 8.5 shall be non-refundable and, except as set forth in this Article 8 or Section 16.20, shall not be creditable against any other amount due to Company pursuant to this Agreement.  If Company believes that any Milestone Event has been achieved or that Licensee’s determination with respect to a Milestone Event is not reasonable, it shall so notify Licensee in writing and the Parties shall promptly meet and discuss in good faith whether such Milestone Event has occurred.  Any dispute under this Section 8.6 regarding whether or not a Milestone Event has occurred or whether Licensee’s determination that a Milestone Event has not occurred is reasonable shall be subject to resolution in accordance with Article 15.

 

8.7          Royalty Payments .

 

(a)          Royalty Rates on Licensed Products or Royalty Bearing NGP . Subject to Section 8.7(c), for the term specified in Section 8.7(b), Licensee shall pay to Company

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

incremental royalties on Net Sales of Licensed Products (in aggregate) or Royalty Bearing NGP at tiered royalty rates determined by annual Net Sales of each as follows:

 

 

 

Net Sales (US$) Per Calendar Year of Licensed Products (in aggregate) or Royalty Bearing NGPs

Royalty Rate

***

***

***

***

***

***

***

20%

 

Notwithstanding anything to the contrary, (i) with respect to any Licensed Product other than an IMMU-132 Product, the royalty rate in any country for the period ending on the *** of the First Commercial Sale of IMMU-132 Product in such country will be as set forth in the table above, and thereafter, until the expiration of the Other Royalty Term for such Licensed Product in such country, will be ***, and (ii) except for the royalties set forth in this Section 8.7(a), ***.

 

For example, in the instance of a full Calendar Year, if annual Net Sales of all Licensed Products in such Calendar Year are $1.5 billion in the aggregate and Net Sales of all Royalty Bearing NGPs are $1 billion in the aggregate, royalty payments would be calculated as follows:

 

(i)          With respect to Licensed Products,   the royalty rate would be ***. 

 

(ii)         With respect to Royalty Bearing NGP, the royalty rate would be ***. 

 

(b)          Royalty Term

 

(i)          IMMU-132 Product Royalty Term . Licensee’s obligation to pay a royalty under Section 8.7(a) for a particular IMMU-132 Product shall be in effect in each country of sale from First Commercial Sale in the country and shall expire, on a country-by-country and product-by-product basis, on the later of (i) *** and (ii) ***.

 

(ii)         Other Royalty Term . Licensee’s obligation to pay a royalty under Section 8.7(a) for *** shall be in effect in each country of sale from First Commercial Sale in the country of such *** and shall expire, on a country-by-country and product-by-product basis, on the later of (i) *** following the First Commercial Sale of such Licensed Product in such country and (ii) ***, is referred to herein as the “ Other Royalty Term .”  For clarity, Licensee shall have no obligation to pay any royalties with respect to a Licensed Product in a country unless and until there is a First Commercial Sale of IMMU-132 Product in such country.

 

(iii)        Royalty Bearing NGP Royalty Term . Licensee’s obligation to pay a royalty under Section 8.7(a) for a particular Royalty Bearing NGP shall be in effect only until the *** of the First Commercial Sale of IMMU-132 Product in such country; provided ,   however , ***.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(c)          Royalty Adjustments .

 

(i)          Generic Erosion.  If, on a country-by-country basis, sales in the Field on a per dose units basis of Generic Products in such country in aggregate exceed the amounts as set forth below of the total aggregate sales of per dose units of all Generic Products and IMMU-132 Products (or other Licensed Products or Royalty Bearing NGPs, as applicable), in such country as measured at the end of a full Calendar Quarter, then any royalties due under Section 8.7(a) shall be reduced, starting with the immediately succeeding Calendar Quarter, by:

 

(1)          ***% if such Generic Product sales reach ***% of such per dose unit sales levels; and

 

(2)          the percentage of such per dose unit sales levels represented by Generic Product sales, if such Generic Product sales exceed ***% of such per dose unit sales levels; provided ,   that , in the case of IMMU-132 Product, such royalty rate will not be reduced below ***, and in the case of any Licensed Product other than IMMU-132 Product, such royalty rate will not be reduced below ***;

 

(3)          Sales levels for Generic Products shall be based on information provided by a qualified market research firm selected by mutual agreement of the Parties (collectively, the “ Generic Market Data ”).  Notwithstanding anything to the contrary, where Generic Market Data is not available on a country-by-country basis for a country but Generic Market Data (x) is available on a regional basis for the geographic region containing such country, such available regional sales data across all countries in the applicable geographical region (e.g., ***) shall be used in the determination of the volume of sales of Generic Products in such country or (y) is available for the major market country(ies) in such geographical region accounting for at least *** of the total market for Generic Products across such geographic region, the Generic Market Data for the applicable major market countries will be used to determine the volume of sales for all countries within the applicable geographical region.  Where no Generic Market Data is available for a particular geographical region, the Parties will determine the level of sales of Generic Products in such region in good faith based on the totality of the information then available for global sales of Licensed Products and Generic Products.

 

(ii)         Payments Under Third Party Agreements.  

 

(1)          Royalties Generally . In the event that Licensee reasonably determines that, in order to Develop, Manufacture, or Commercialize a Licensed Product and avoid infringement of any Patent not licensed hereunder, it is necessary, or otherwise the JPC deems it to be advisable,   to obtain a license from a Third Party and to pay a royalty or other payments under such Patent, then subject to Section 8.7(c)(iii), Licensee shall be entitled to a credit against the royalty payments due to Company under this Agreement of an amount equal to *** of the royalty or other payments paid to such Third Party. The Parties agree that ***; provided ,   however , that ***.  For clarity, (A) any license from a New Affiliate of Company under any Patent excluded pursuant to Section 2.11 shall be considered a license from a Third Party for purposes of this Section 8.7(c)(ii), and (B) a license agreement to which Licensee or any of its Affiliates is a party as of the Execution Date, in the form such agreement exists as of

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

the Execution Date, will not be considered a third party agreement subject to provision of this Section 8.7(c)(ii)(1).

 

(2)          *** Patents . Without limiting the foregoing, if Licensee reasonably determines that it is necessary or advisable to obtain from a Third Party a license which includes any of the *** Patents, Licensee shall be entitled to, with respect to any amounts paid to such Third Party under such license, credit: (A) an amount equal to ***; (B) subject to 8.7(c)(iii), an amount equal to ***; (C) with respect to any milestone or upfront payment paid to such Third Party, ***.

 

(iii)        Maximum Reduction.  The royalty owed to Company for sales of a Licensed Product or Royalty Bearing NGP, as applicable, shall not be reduced, *** by more than ***, provided that ***.

 

Article 9

 

PAYMENTS; PAYMENT REPORTS; AUDITS; taxes; financial matters

 

9.1          Timing of Payment.  Royalty obligations under Section 8.7 shall accrue at the time the sale of the Licensed Product is made, or invoice is delivered, whichever is earliest, and royalty, know-how or other payment obligations that have accrued during a particular Calendar Quarter shall be paid, on a quarterly basis, within *** after the end of the Calendar Quarter during which the obligation accrued.  Licensee’s obligation to pay royalties under this Agreement are imposed only once with respect to the same unit of Licensed Product regardless of the number of Patents pertaining thereto.

 

9.2          Sublicenses .  In the event Licensee grants licenses or Sublicenses to others to sell Licensed Products that are subject to royalties under Section 8.7, such licenses or Sublicenses shall include an obligation for the Sublicensee to account for and report its sales of Licensed Products on the same basis as if such sales were sales by Licensee, and Licensee shall pay to Company, with respect to such sales, such royalties as if such sales of the Sublicensee were sales of Licensee.

 

9.3          Mode of Payment.  All payments to Company hereunder shall be made by deposit of Dollars by wire transfer in immediately available funds in the requisite amount to such bank account as Company may from time to time designate by notice to Licensee.   

 

9.4          Payment Reports and Records Retention.  Within *** after the end of each Calendar Quarter during which Licensed Products have been sold, Licensee shall deliver to Company a written report that shall contain at a minimum for the applicable Calendar Quarter:

 

(a)          Net Sales of each Licensed Product (on a country-by-country basis);

 

(b)          a calculation of the amount of royalty payment due on sales during such Calendar Quarter, and calculations showing how such royalties were determined, including the royalty rate(s) applied to calculate the royalties due;

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(c)          the amount of taxes, if any, withheld to comply with any Applicable Law;

 

(d)          the exchange rates used in determining the payments due Company; and

 

(e)          any royalty offsets or other adjustments (e.g., for any Third Party license) applied in calculating the royalties due to Company, and stepwise calculations showing the royalties due to Company for the applicable Licensed Product after any such offset or adjustments.

 

For three years after the end of each Calendar Quarter, Licensee shall keep (and shall ensure that its Affiliates and Sublicensees shall keep) complete and accurate records of sales of Licensed Product in such Calendar Quarter in sufficient detail to confirm the accuracy of the royalty and other payment calculations hereunder.

 

9.5          Audits .

 

(a)          Upon the written request of Company, and not more than once in each Calendar Year, Licensee shall permit an independent certified public accounting firm of internationally recognized standing selected by Company, and reasonably acceptable to Licensee, to have access to and to review, during normal business hours and upon no less than *** prior written notice, the applicable records of Licensee and its Affiliates to verify the accuracy and timeliness of the reports and payments made by Licensee under this Agreement.  Such review may cover the records for sales made in any Calendar Year ending not more than *** prior to the date of such request, and the records for any Calendar Year may be audited no more than once.  The accounting firm shall disclose to Company only whether the royalty reports are correct or incorrect and the specific details concerning any discrepancies.

 

(b)          If such accounting firm concludes that any payments were late or additional amounts were owed during such period, Licensee shall pay the late payments and/or additional amounts, with interest from the date originally due as set forth in Section 9.6, within *** after the date Company delivers to Licensee a notice referencing the accounting firm’s written report and requesting such payment.  If the amount of the underpayment is greater than *** of the total amount actually owed for the Calendar Year audited, then Licensee shall in addition reimburse Company for all costs related to such audit; otherwise, Company shall pay all costs of the audit.  In the event of overpayment, any amount of such overpayment shall be a credit against the next royalty payment or payments due to Company, until fully utilized.  Any dispute under this Section 9.5 shall be subject to resolution in accordance with Article 15.

 

(c)          Licensee shall include in each Sublicense granted by it pursuant to this Agreement a provision requiring the Sublicensee to make reports to Licensee, to keep and maintain records of sales made pursuant to such distribution agreement or Sublicense and to grant access to such records by Company’s independent accountant to the same extent required by Licensee under this Agreement.

 

(d)          Company shall (i) treat all information that it receives under this Section 9.5 or under any sublicense agreement of Licensee in accordance with the confidentiality provisions of Article 11 and (ii) cause its accounting firm to enter into an acceptable

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

confidentiality agreement with Licensee obligating such firm to retain all such financial information in confidence pursuant to such confidentiality agreement, in each case except to the extent necessary for Company to enforce its rights under this Agreement. 

 

9.6          Interest.  If either Party fails to make any payment due to the other Party under this Agreement, then interest shall accrue on a daily basis at an annual rate of *** percentage points above the then-applicable prime rate of interest as quoted in the “Money Rates” section of the West Coast edition of the Wall Street Journal (or, if not available therein, as quoted in a reputable source reasonably acceptable to both Parties), calculated daily on the basis of a 365-day year, or at the maximum rate permitted by Applicable Law, whichever is the lower, for the period from the due date for payment until the date of actual payment.

 

9.7          Taxes .

 

(a)          Licensee will make all payments to Company under this Agreement without deduction or withholding for taxes except to the extent that any such deduction or withholding is required by Applicable Law to be made on account of Taxes.  Solely for purposes of this Section 9.7, “ Tax ” means any present or future taxes, levies, imposts, duties, charges, assessments or fees of any nature (including interest, penalties and additions thereto) that are imposed by the applicable government or other taxing authority.

 

(b)          Any Tax required to be withheld under Applicable Law on amounts payable under this Agreement will promptly be paid by Licensee on behalf of Company to the appropriate governmental authority, and Licensee will furnish Company with evidence of such requirement together with proof of payment of such Tax within *** following such payment.  Any such Tax, to the extent withheld and paid to the appropriate governmental authority, shall be treated for all purposes of this Agreement as having been paid to Company.  Any such Tax required to be withheld will be an expense of and borne by Company.

 

(c)          If Licensee had a duty to withhold Taxes in connection with any payment it made to Company under this Agreement but Licensee failed to withhold, and such Taxes were assessed against and paid by Licensee, then Company will indemnify and hold harmless Licensee from and against such Taxes (but excluding any interest and penalties arising from Licensee’s failure).  If Licensee makes a claim under this Section 9.7(c), it will comply with the obligations imposed by Section 9.7(b) as if Licensee had withheld Taxes from a payment to Company.

 

(d)          Licensee and Company will cooperate with respect to all documentation required by any taxing authority or reasonably requested by Licensee or Company to secure a reduction in the rate of applicable withholding Taxes.

 

9.8          Exchange Rates.  With respect to sales of Licensed Products invoiced in U.S. Dollars, the Net Sales and royalties payable shall be expressed in U.S. Dollars.  With respect to sales of Licensed Products invoiced in a currency other than U.S. Dollars, the Net Sales and royalties payable shall be expressed in the currency of the invoice issued by the Party making the sale together with the U.S. Dollars equivalent of the royalty due, calculated pursuant to this Section 9.8. Such foreign currency amounts shall be converted into United States Dollars (USD)

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

using Licensee’s standard conversion methodology.  Such conversion methodology shall be consistently applied for all currency conversions in arriving at the financial information publicly reported in Licensee’s audited financial statements and should be consistent with accounting standards generally accepted in the United States.

 

9.9          Exchange Control.  If at any time legal restrictions prevent the prompt remittance of part or all royalties with respect to any country in the Territory where any Licensed Products are sold, the Parties agree that (a) such occurrence shall not be considered a breach of this Agreement but only to the extent that (i) such legal restrictions cannot be reasonably avoided by Licensee and (ii) they are not imposed by Licensee’s country of domicile, (b) royalty payments shall be made through such lawful means or method as the Parties reasonably shall determine and (c) royalty payments on Net Sales of a Licensed Product due hereunder shall continue to accrue until such time as payment shall be made through any lawful means or methods that may be available as the Parties shall reasonably determine.

 

9.10        Cooperation in Financial Reporting .  Company shall cooperate in good faith with Licensee with respect to, and will assist Licensee in connection with, matters relating to financial statements, audits, filings with the U.S. Securities and Exchange Commission, to the extent such matters arise out of or relate to this Agreement, including providing financial information to Licensee to enable Licensee to timely fulfill its reporting requirements under the Exchange Act.

 

Article 10

 

INVENTIONS AND PATENTS

 

10.1          Ownership of Inventions . Each Party shall own all Inventions generated solely by it and its Affiliates and their respective employees, agents and independent contractors in the course of conducting such Party’s activities under this Agreement (collectively, “ Sole Inventions ”).  All Inventions that are generated jointly by employees, Affiliates, agents, or independent contractors of each Party in the course of performing activities under this Agreement (collectively, “ Joint Inventions ”) shall be owned jointly by the Parties in accordance with joint ownership interests of co-inventors under U.S. patent laws (that is, each Party shall have full rights to license, assign and exploit such Joint Inventions (and any patents arising therefrom) anywhere in the world, without any requirement of gaining the consent of, or accounting to, the other Party), subject to the licenses granted herein and subject to any other intellectual property held by such other Party. Inventorship shall be determined in accordance with U.S. patent laws.

 

10.2          Disclosure of Inventions . Each Party shall promptly disclose to the other all Sole Inventions or Joint Inventions, including all invention disclosures or other similar documents submitted to such Party by its, or its Affiliates’, employees, agents or independent contractors describing such Sole Inventions or Joint Inventions. Such Party shall also respond promptly to reasonable requests from the other Party for more Information relating to such inventions.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

10.3          Prosecution of Patents .  

 

(a)          Company Patents . Except as otherwise provided in this Section 10.3(a), as between the Parties, subject to ***, the Company Patents in the Territory shall be controlled, prepared, filed, and prosecuted ***. As soon as reasonably practicable after the Effective Date, the Parties shall ***.  Both Parties shall have the opportunity to comment on the response or document within such thirty (30) day period, which comments shall be reasonably considered by the other Party.  The Parties acknowledge and agree that certain Company Patents may include both (i) ***; and (ii) ***. If Company determines *** to abandon any Company Patent, cease prosecution of any claim or prosecute any claim in a manner which Licensee, *** deems as material to a Licensed Molecule, Licensed Product, Next Generation Product or its activities hereunder, or not maintain any Company Patent anywhere in the Territory, then Company shall provide Licensee written notice of such determination at least *** before any deadline for taking action to avoid abandonment (or other loss of rights) and shall provide Licensee with the opportunity to prepare, file, prosecute and maintain such Company Patent in the Territory on behalf of Company and in Company’s name; provided ,   however , such Company Patent or claim shall be considered expired for the purposes of the Royalty Term pursuant to Section 8.7(b) and Section 8.7(c). Company agrees to provide Licensee with all information necessary or desirable to enable Licensee to comply with the duty of candor/duty of disclosure requirements of any patent authority. ***, in the course of preparing, filing, prosecuting and maintaining the Company Patents, ***.

 

(b)          Licensee Patents . Subject to the oversight of the JPC, Licensee shall have the sole right and authority to prepare, file, prosecute (including any oppositions, interferences, reissue proceedings reexaminations and post-grant proceedings) and maintain the Licensee Patents. ***.

 

(c)          Joint Patents . Subject to the oversight of the JPC, with respect to any potentially patentable Joint Invention, Licensee shall have the first right, but not the obligation, to prepare patent applications based on such Joint Invention, to file and prosecute (including any oppositions, interferences, reissue proceedings, reexaminations and post-grant proceedings) such patent applications, and to maintain any patents issuing therefrom (any such patent application and patents, a “ Joint Patent ”).  Each Party shall bear its own internal costs in respect of the filing prosecution of and maintenance Joint Patents by Licensee. Out-of-pocket costs incurred in respect of the filing, prosecution and maintenance of Joint Patents by Licensee shall be borne by Licensee. Licensee shall provide Company reasonable opportunity to review and comment on such prosecution efforts regarding such Joint Patent, and Company shall provide Licensee reasonable assistance in such efforts. Licensee shall provide Company with a copy of all material communications from any patent authority in the applicable jurisdictions regarding the Joint Patent being prosecuted by Licensee, and shall provide drafts of any material filings or material responses to be made to such patent authorities a reasonable time in advance of submitting such filings or responses. Each Party agrees to provide the other Party with all information necessary or desirable to enable the other Party to comply with the duty of candor/duty of disclosure requirements of any patent authority. If Licensee declines to file, or if Licensee subsequent to filing determines that it is no longer interested in supporting the continued prosecution or maintenance of a particular Joint Patent in a country or jurisdiction: (i) then Licensee shall

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

provide Company written notice of such determination at least *** before any deadline for taking action to avoid abandonment (or other loss of rights) and shall provide Company with the opportunity to prepare, file, prosecute and maintain such Joint Patent, at Company’s sole cost; and (ii) Licensee shall, if requested in writing by Company, assign its ownership interest in such Joint Patent in such country or jurisdiction to Company for no additional consideration (except in the case of a U.S. patent or patent application that is tied by a terminal disclaimer to another patent right owned by the Licensee). If such assignment is effected (or if it is not effected because of a terminal disclaimer), any such Joint Patent shall thereafter be excluded from the license granted by Company under Section 2.1.

 

(d)          Cooperation . Each Party shall provide the other Party all reasonable assistance and cooperation in the patent prosecution efforts provided above in this Section 10.3, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution. Licensee shall consult with Company before applying for or obtaining any patent term extension or related extension of rights, including supplementary protection certificates and similar rights for any Company Patent or Joint Patent. Company shall provide reasonable assistance to Licensee in connection with obtaining any such extensions for the Company Patent or Joint Patent.  To the extent reasonably and legally required in order to obtain any such extension in a particular country, each Party shall make available to the other a copy of the necessary documentation to enable such other Party to use the same for the purpose of obtaining the extension in such country.

 

10.4          Infringement by Third Parties .  

 

(a)          Notification . If there is any infringement, threatened infringement, or alleged infringement of a Company Patent, Licensee Patent, or Joint Patent on account of a Third Party’s manufacture, use, offer for sale, or sale of a Licensed Molecule or Licensed Product in the Field (in each case, a “ Product Infringement ”), then each Party shall promptly notify the other Party in writing of any such Product Infringement of which it becomes aware, and shall provide evidence in such Party’s possession demonstrating such Product Infringement.

 

(b)          Enforcement Rights .

 

(i)          Company Patents and Joint Patents . Subject to Section 10.4(e) and the remainder of this Section 10.4(b)(i), subject to the oversight of the JPC, Licensee shall have the first right, but not the obligation, to bring an appropriate suit or other action against any person or entity allegedly engaged in any Product Infringement of the Company Patents or the Joint Patents in the Territory (and to defend any related counterclaim), at Licensee’s expense. Licensee shall have until the Action Date, to elect to so enforce such Company Patent or Joint Patent in the Territory (or to settle or otherwise secure the abatement of such Product Infringement).  In the event Licensee fails to initiate legal action (or settle or otherwise secure the abatement of such Product Infringement) by the Action Date, Company shall have the right to commence a suit or take action to enforce the applicable Company Patents or Joint Patents with respect to such Product Infringement in the Licensed Territory, at Company’s expense.  Each Party shall provide to the Party enforcing any such rights under this Section 10.4(b)(i) reasonable assistance in such enforcement, at such enforcing Party’s request and expense, including joining such action as a party plaintiff if required by Applicable Law to pursue such

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

action. The enforcing Party shall keep the other Party regularly informed of the status and progress of such enforcement efforts, and shall reasonably consider the other Party’s comments on any such efforts.

 

(ii)          Licensee Patents . Subject to the oversight of the JPC, Licensee shall have the sole right, but not the obligation, to bring an appropriate suit or other action against any person or entity allegedly engaged in any Product Infringement of the Licensee Patents.  Company shall provide reasonable assistance to Licensee in such enforcement, at Licensee’s request and expense. Licensee shall keep Company regularly informed of the status and progress of such enforcement efforts, and shall reasonably consider Company’s comments on any such efforts.

 

(c)          Settlement . Subject to the oversight of the JPC, without the prior written consent of the other Party, neither Party shall settle any claim, suit or action that it brought under this Section 10.4 that admits the invalidity or unenforceability of any Company Patent, Licensee Patent, or Joint Patent, requires abandonment or limits the scope of any Company Patent, Licensee Patent, or Joint Patent or would limit or restrict the ability of either Party to sell Licensed Products anywhere in the Territory.

 

(d)          Expenses and Recoveries . A Party bringing a claim, suit or action under Section 10.4(b)(i) or 10.4(b)(ii) against any person or entity engaged in Product Infringement shall be solely responsible for any expenses incurred by such Party as a result of such claim, suit or action.  If such Party recovers monetary damages from such Third Party in such claim, suit or action, such recovery shall be allocated first to the reimbursement of any expenses incurred by the Parties in such litigation, and any remaining amount shall be distributed as follows: *** *** to the Party bringing such claim, suit or action, and *** to the other Party. 

 

(e)          Patents Licensed from Third Parties .  Each Party’s rights under this Section 10.4 with respect to any Company Patent, Licensee Patent, or Joint Patent licensed to the other Party by a Third Party shall be subject to the rights of such Third Party to enforce such Patent and/or defend against any claims that such Patent is invalid or unenforceable.

 

10.5          Defense of Patents .

 

(a)          Subject to the oversight of the JPC, if any Party receives notice by counterclaim, declaratory judgment action or otherwise, alleging the invalidity or unenforceability of any Company Patent or Joint Patent, it shall bring such fact to the attention of the other Party, including all relevant information related to such claim. Where such allegation is made in an opposition, reexamination, interference or other patent office proceeding, the provisions of Section 10.3 shall apply. Where such allegation is made in a counterclaim to a suit or other action brought under Section 10.4, the provisions of Section 10.4 shall apply. Where such allegation is made in a declaratory judgment or other court action, (i) the Party who prosecuted such Company Patent or Joint Patent pursuant to Section 10.3 shall have the first right to defend such action at its own expense, provided   that if a Party pursuant to Section 10.4 elects to bring an infringement counterclaim, the provisions of Section 10.4 shall thereafter apply; and (ii) Licensee shall have the sole right, but no obligation, to defend such Licensee Patent.  If the Party with the first right to defend a Company Patent or Joint Patent elects not to

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

defend such action, it shall so notify the other Party in writing, and the other Party shall have the right to defend such action, at the other Party’s expense. For any such action involving a Company Patent or Joint Patent, the non-defending Party shall provide to the defending Party all reasonable assistance in such defense, at the defending Party’s request and expense; and the defending Party shall keep the other Party regularly informed of the status and progress of such efforts, and shall reasonably consider the other Party’s comments on any such efforts.

 

(b)          Without the prior written consent of the other Party, neither Party shall enter into any settlement of any claim, suit or action that it defended under this Section 10.5 that admits the invalidity or unenforceability of any Company Patent or Joint Patent, requires abandonment or limits the scope of any Company Patent or Joint Patent or would limit or restrict the ability of either Party to sell Licensed Products anywhere in the Territory.

 

10.6          Patent Marking . Licensee shall, and shall require its Affiliates and Sublicensees, to, mark Licensed Products sold by it hereunder (in a reasonable manner consistent with industry custom and practice) with appropriate patent numbers or indicia to the extent permitted by Applicable Law, in those countries in which such markings or such notices impact recoveries of damages or equitable remedies available with respect to infringements of Patents.

 

10.7          Personnel Obligations . Prior to beginning work under this Agreement relating to any Development, Manufacture or Commercialization of a Licensed Molecule or Licensed Product, each employee, agent or independent contractor of Licensee or Company or of either Party’s respective Affiliates shall be bound by non-disclosure and invention assignment obligations that are consistent with the obligations of Licensee or Company, as appropriate, in this Article 10, including without limitation: (a) promptly reporting any invention, discovery, process or other intellectual property right; (b) assigning to Licensee or Company, as appropriate, all of his or her right, title and interest in and to any invention, discovery, process or other intellectual property right; (c) cooperating in the preparation, filing, prosecution, maintenance and enforcement of any patent and patent application; (d) performing all acts and signing, executing, acknowledging and delivering any and all documents required for effecting the obligations and purposes of this Agreement; and (e) abiding by the obligations of confidentiality and non-use set forth in Article 11. It is understood and agreed that such non-disclosure and invention assignment agreement need not reference or be specific to this Agreement.

 

10.8          Trademarks .

 

(a)          Licensee shall be responsible for the selection, searching, clearance, filing, registration, maintenance and defense of the trademarks used to identify the Licensed Products, and all trademarks, logos, taglines, trade dress, domain names and/or indicia of origin for use in connection with the sale or marketing of Licensed Products in the Field in the Territory (the “ Marks ”), as well as all expenses associated therewith.  Notwithstanding the foregoing, only upon the reversion of rights in ***and ***to Company in accordance with Section 8.2(c),  in order to further the development of a consistent worldwide brand for the Licensed Product, Licensee agrees to consult with Company on the selection of Marks and to use good faith efforts to implement suggestions made by Company in furtherance of such worldwide brand.  All uses of the Marks shall be reviewed by the JSC (or a subcommittee thereof) and shall comply with all

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Applicable Laws (including, without limitation, those laws and regulations particularly applying to the proper use and designation of trademarks in the applicable countries). Neither Party shall, without the other Party’s prior written consent, use any trademarks or house marks of the other Party (including the other Party’s corporate name), or marks confusingly similar thereto, in connection with such Party’s marketing or promotion of Licensed Products under this Agreement, except to the extent required to comply with Applicable Laws. Licensee shall own all Marks.

 

(b)          During the term of the Co-Promotion Agreement, Licensee will grant to Company the non-exclusive right, free of charge, (i) to use the Licensee’s corporate name and logo in the U.S. solely for the purpose of co-promoting Licensed Products in accordance with the terms of this Agreement and, when executed, the Co-Promotion Agreement, and to use Company’s corporate name and logo in the U.S. solely for the purpose of co-promoting Licensed Products in accordance with the terms of this Agreement and, when executed, the Co-Promotion Agreement, provided   that such rights shall be exercised, and all Licensed Products bearing such names and/or logos shall be manufactured in accordance with the quality standards established by the JSC.  Licensee shall remain the owner of the Licensee corporate name and logo and the trademarks and the goodwill pertaining thereto.  Company shall remain the owner of the Company corporate name and logo and the trademarks and the goodwill pertaining thereto.

 

10.9          Common Interest Disclosures.  With regard to any information or opinions disclosed pursuant to this Agreement by one Party to the other regarding intellectual property and/or technology owned by Third Parties, Company (or its Affiliates) or Licensee (or its Affiliates), Company and Licensee agree that they have a common legal interest in determining whether, and to what extent, Third Party intellectual property rights may affect the conduct of the development, manufacturing, marketing and/or sale of Licensed Products, and have a further common legal interest in defending against any actual or prospective Third Party claims based on allegations of misuse or infringement of intellectual property rights relating to the development, manufacturing, marketing and/or sale of Licensed Products.  Accordingly, Company and Licensee agree that all such information and materials obtained by Company and Licensee from each other will be used solely for purposes of the Parties’ common legal interests with respect to the conduct of the Agreement.  All information and materials will be treated as protected by the attorney-client privilege, the work product privilege, and any other privilege or immunity that may otherwise be applicable.  By sharing any such information and materials, neither Party intends to waive or limit any privilege or immunity that may apply to the shared information and materials.  Neither Party shall have the authority to waive any privilege or immunity on behalf of the other Party without such other Party’s prior written consent, nor shall the waiver of privilege or immunity resulting from the conduct of one Party be deemed to apply against any other Party.

 

10.10        CREATE Act.  The   Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in the Cooperative Research and Technology Enhancement (CREATE) Act of 2004, U.S. Public Law 108-453.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Article 11

 

CONFIDENTIALITY; SOLICITATION BY Company

 

11.1          Confidentiality Obligations.  All Information disclosed by one Party to the other Party pursuant to this Agreement, or pursuant to the Confidential Information Agreement by and between Licensee and Company effective as of June 3, 2016, shall be the “ Confidential Information ” of the disclosing Party for all purposes hereunder.  Each Party agrees that, for the Term and for five (5) years thereafter (or, if shorter, for the longest period allowed under Applicable Law), such Party shall, and shall ensure that its Affiliates, officers, directors, employees and agents shall keep confidential and not publish or otherwise disclose and not use for any purpose except as expressly permitted hereunder any Confidential Information or materials furnished to it by the other Party (including, without limitation, know-how of the disclosing Party).  Confidential Information includes any and all technical, business or other information provided by or on behalf of one Party to the other Party, whether prior to, on or after the Effective Date, or otherwise generated by or on behalf of either or both Parties in connection with this Agreement, including the terms of this Agreement (subject to Section 11.4 and 11.5), information relating to the Licensed Molecule or any Licensed Product (including Regulatory Materials), any Development, Manufacture or Commercialization of the Licensed Molecule or any Licensed Product, any know-how with respect thereto developed by or on behalf of the disclosing Party or its Affiliates or Sublicensees or the scientific, regulatory or business affairs or other activities of either Party (including, for the avoidance of doubt, any such information that is shared pursuant to this Agreement).  Any Confidential Information primarily relating to IMMU-132 shall be the Confidential Information of both Parties (“ IMMU-132 Information ”), and each Party shall be deemed both the disclosing Party and the receiving Party with respect thereto. Any Confidential Information primarily relating to a Next Generation Product shall be deemed to be the Confidential Information of Licensee alone. The foregoing obligations shall not apply to any Information disclosed by a Party hereunder to the extent that the receiving Party can demonstrate with competent evidence that such Information:

 

(a)          was already known to the receiving Party or its Affiliate, other than under an obligation of confidentiality, at the time of disclosure; 

 

(b)          was generally available to the public or otherwise part of the public domain, at the time of its disclosure to the receiving Party;

 

(c)          became generally available to the public or otherwise part of the public domain after its disclosure to the receiving Party and other than through any act of the receiving Party in breach of this Agreement;

 

(d)          was subsequently lawfully disclosed on a non-confidential basis to the receiving Party or its Affiliate by a Third Party, other than in contravention of a confidentiality or non-use obligation of such Third Party to the disclosing Party; or

 

(e)          was independently developed or discovered by employees of the receiving Party or its Affiliates without reference to or reliance upon Confidential Information of the disclosing Party as demonstrated by competent evidence.

 

For clarity, subsections (a) and (e) above do not apply to IMMU-132 Information.

 

11.2          Authorized Disclosure .  A Party may disclose the Confidential Information

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

belonging to the other Party to the extent such disclosure is reasonably necessary in the following instances:

 

(a)          Filing or prosecuting Patents relating to Joint Inventions, Licensed Products as permitted under this Agreement;

 

(b)          Regulatory submissions and filings and other interactions with regulatory authorities relating to Licensed Products;

 

(c)          Prosecuting or defending litigation as permitted under this Agreement;

 

(d)          Disclosure required by applicable rules or regulations of any regulatory body including without limitation the U.S. Securities and Exchange Commission or similar regulatory agency in a country other than the United States, or stock exchanges (such as Nasdaq); and

 

(e)          Disclosure, in connection with the performance of this Agreement or exercise of rights or licenses under this Agreement, to Affiliates, licensees, sublicensees, research collaborators, employees, auditors, consultants, subcontractors, clinical investigators or agents, each of whom prior to such disclosure must be bound by similar obligations of confidentiality and non-use no less restrictive to those set forth in this Article 11;

 

provided, in each case (b) and (d), that the disclosing Party must (i) provide the other Party a reasonable opportunity to review and comment in advance on such proposed disclosure, (ii) consider in good faith any comments provided by the other Party, (iii) limit the disclosure to that actually required, and (iv) seek confidential treatment of the information required to be disclosed if the other Party so requests.

 

Further, a Party may disclose the other Party’s Confidential Information to the extent such disclosure is required by valid court order or legal process; provided ,   however ,   that such Party gives the other Party advance notice of such required disclosure, limits the disclosure to that actually required, and cooperates in the other Party’s attempts to obtain a protective order or confidential treatment of the information required to be disclosed.

 

11.3          Confidentiality of Agreement Terms.  The Parties acknowledge that the terms of this Agreement shall be treated confidentially as Confidential Information of both Parties.  For clarity, Section 11.1(a) and (e) shall not apply to the terms of this Agreement.  Notwithstanding the foregoing and subject Company’s obligations under Section 11.6, after the No-Shop Start Date, such terms may be disclosed by a Party to investment bankers, investors, and potential investors or acquirers and their respective advisors, in the context of a potential transaction, each of whom prior to disclosure must be bound by similar obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 11.  In addition, the Parties agree that each of them will be required to file a copy of this Agreement with the U.S. Securities and Exchange Commission, and each of them will seek to obtain confidential treatment of economic and trade secret information and further agree that neither one of them will file this Agreement as an exhibit to Form 8-K but rather will attach it as an exhibit to its next periodic report required to be filed under the Securities Exchange Act of 1934, as amended. If the Agreement is required to

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

be filed with another similar regulatory agency in a country other than the United States or of any stock exchange or other securities trading institution, as required by Applicable Law, the Parties agree to consult with each other in advance of any such filing and obtain the consent of the other Party with respect to the content of such disclosure, with such consent not to be unreasonably withheld.  In connection with any such filing, such Party shall endeavor to obtain confidential treatment of economic and trade secret information.  In any event, the Parties agree to take all reasonable action to avoid disclosure of Confidential Information except as permitted hereunder. The Party subject to such disclosure requirement shall provide the other Party with a reasonable opportunity to review and comment in advance on the disclosing Party’s proposed disclosure and such disclosing Party shall consider in good faith any comments thereon provided by the other Party.

 

11.4          Publicity .

 

(a)          Each Party may issue a press release announcing the execution of this Agreement, provided   that the timing and content of each such release shall be mutually agreed, such agreement not to be unreasonably withheld.  Exhibit 5 sets forth the form of Licensee’s press release and Exhibit 6 sets forth the form of Company’s press release.

 

(b)          During the Term, Licensee may issue additional press releases or public statements; provided ,   that prior to such issuance Licensee shall provide copies of such press releases or public disclosure statements to Company to provide a reasonable opportunity to review and comment in advance on such proposed disclosure and Licensee shall consider in good faith any comments provided by Company. Subject to Applicable Law, Licensee shall not issue a press release or public announcement disclosing the terms of this Agreement without the prior written approval of Company, not to be unreasonably withheld, conditioned or delayed.  Company shall not issue a press release or public announcement relating to Licensed Products and/or this Agreement without the prior written approval of Licensee at Licensee’s sole discretion.  Notwithstanding the above, but subject to Section 11.3, a Party may issue a press release or public announcement if and to the extent required by Applicable Law, including without limitation by the rules or regulations of the U.S. Securities and Exchange Commission or similar regulatory agency in a country other than the U.S. or the rules of any stock exchange or Nasdaq, in each case after first notifying the other Party of such planned press release or public announcement at least *** in advance of issuing such press release or making such public announcement (or with as much advanced notice as practicable under the circumstances if it is not practicable to provide notice at least *** in advance) for the sole purpose of allowing the other Party to review the proposed press release or public announcement for the inclusion of Confidential Information or the use of its name, and such disclosing Party must seek to limit the disclosure to that actually required, and obtain a protective order or confidential treatment of the information required to be disclosed.

 

(c)          Notwithstanding the above, if the relevant text of a press release or public announcement has already previously been reviewed and approved by the other Party and the text remains accurate and complete (such as the description of this Agreement in filings under the U.S. Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), then such text may be republished without further review by the other Party.  In addition, the advance review provided in Section 11.4(a) or 11.4(b) shall apply only to the portion of the public announcement

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

that concerns Licensed Products, this Agreement and/or the other Party and shall not be interpreted to require a Party to provide an advance copy of the entire public announcement (such as an advance copy of an entire filing under the Exchange Act).

 

(d)          When appropriate in Licensee’s reasonable discretion, Licensee will reference Company as the licensor of IMMU-132 and/or IMMU-132 Product in public statements regarding IMMU-132 and/or IMMU-132 Product.

 

11.5          Publications .  During the Term, Licensee may publicly present or publish results of studies carried out under this Agreement relating to any Licensed Product in the Field (each such presentation or publication, a “ Publication ”); provided ,   that prior to such presentation or publication Licensee shall provide copies of such Publication to Company to provide a reasonable opportunity to review and comment in advance on such Publication and Licensee shall consider in good faith any comments provided by Company. Licensee shall provide Company the opportunity to review any proposed Publication at least *** prior to the earlier of its presentation or intended submission for publication.  Licensee agrees, upon request by Company, not to submit or present any Publication until the other Party has had an additional *** to comment on any material in such Publication.  Licensee shall consider the comments of the other Party in good faith, but will retain the sole authority to present or submit for publication the Publication.  Licensee shall provide the other Party a copy of the Publication at the time of the submission or presentation. Notwithstanding the foregoing, Licensee shall not have the right to publish or present Company’s Confidential Information without Company’s prior written consent, and Company shall not have the right to publish or present Licensee’s Confidential Information without Licensee’s prior written consent. The Parties further acknowledge that Company has made significant contributions to the development of Licensed Molecules and Licensed Products as of the Effective Date, and the Parties agree that any public disclosure and/or scientific publications made after the Effective Date regarding Licensed Molecules and/or Licensed Products shall give appropriate recognition to Company scientists who are responsible for the development of Licensed Molecules and/or Licensed Products. Company shall not publicly present or publish any Publications without Licensee’s prior written approval at Licensee’s sole discretion.

 

11.6          Solicitation by Company

 

(a)          Company and its Affiliates shall, and shall cause their representatives to, immediately cease and cause to be terminated any discussions, activities or negotiations with any Person (other than an Interested Person) that may be ongoing with respect to a Proposal (including terminating access to any physical or electronic data rooms relating to a possible Proposal) and, if applicable, shall request each Person that has heretofore executed a confidentiality agreement in connection with a possible Proposal to have returned to Company or destroyed any confidential information that has been provided to any Person in any such discussions or negotiations occurring in the *** prior to the Execution Date.  From and after the date hereof until the termination of this Agreement pursuant to Article 14, Company and its Affiliates shall not, and shall cause their representatives not to, directly or indirectly, (i) solicit, initiate or encourage, including by way of continuing to provide access to non-public

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

information, or take any other action to facilitate, any inquiry in connection with or the making of any proposal from any Person that constitutes, or may reasonably be expected to lead to, a Proposal, (ii) enter into, explore, maintain, participate in or continue any discussion or negotiation with any Person (other than Licensee or any of its representatives, as applicable) regarding a Proposal, or furnish to any Person (other than Licensee or any of its representatives, as applicable) any information or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other Person (other than Licensee or its representatives, as applicable) to make or effect a Proposal or (iii) enter into any agreement, arrangement or understanding with respect to, or otherwise endorse, any Proposal; provided ,   however , that from and after the date hereof and continuing until 11:59 p.m. New York City time on February 19, 2017 (the “ No-Shop Start Date ”), nothing contained in this Section 11.6 shall prohibit Company (acting under the direction of the Transaction Committee), its Affiliates and its representatives from directly or indirectly: (i) soliciting, initiating and encouraging Proposals from the Interested Parties, including by way of continuing to provide access to non-public information to such Interested Parties (provided that Company shall concurrently provide or make available to Licensee any non-public information concerning Company that is provided or made available to any Person given such access which was not previously provided or made available to Licensee); and (ii) participating in discussions or negotiations with respect to Proposals from Interested Parties or otherwise cooperating with or assisting or participating in, or facilitating any such discussions or negotiations. Notwithstanding the foregoing, Company shall not be permitted to provide this Agreement and any materials related thereto (including term sheets and other materials and communications prepared, used or made by the Parties during the negotiations leading to this Agreement, but excluding any information pertaining to Company), or any materials, proposals, counter-proposals or communications prepared, used or made following the Execution Date relating to any adjustment to the terms of this Agreement, to any Person. 

 

(b)          If, prior to the No-Shop Start Date, Company receives a Proposal that did not result from a breach by Company of Section 11.6(a), that is fully documented and only requires the countersignature of Company and that the Transaction Committee and the Company Board has determined in good faith constitutes a Superior Proposal, then Company shall provide the terms of such Superior Proposal, including a copy of all proposed agreements relating to such Proposal without any redactions, to Licensee and Licensee shall have a period of *** following the time it has received of all such materials (the “ Match Period ”) to provide a counter-proposal to Company reflecting terms that are at least as favorable to Company from a financial point of view as compared to the financial terms set forth in such Proposal such that such Proposal no longer constitutes a Superior Proposal.  (For the avoidance of doubt, ***.)  Any amendment or modification to such Proposal shall be deemed to be a new Proposal for purposes of this Section 11.6(b), and Company shall comply with the provisions of this Section 11.6(b) with respect thereto.  In the event that Licensee provides a counter-proposal to Company reflecting terms that are at least as favorable to Company from a financial point of view than the terms set forth in a Proposal such that such Proposal no longer constitutes a Superior Proposal, Company may no longer (i) consider any Proposals or (ii) terminate this Agreement pursuant to Section 14.3(b). Company may only provide the notice provided in the first sentence of this paragraph one time, and after providing such notice may not provide notice with respect to any other Proposals nor terminate the Agreement with respect to such any other Proposals. Following the No-Shop Start

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Date, Company shall, and shall cause its Affiliates and representatives to, (x) terminate all discussions and negotiations with any Interested Person relating to a Proposal or Possible Proposal and (y) within *** (***) Business Days request each Person who submitted a Proposal to return or destroy any information furnished by Company to such Person in any discussions or negotiations occurring in the twelve (12) month period prior to the No-Shop Start Date.

 

(c)          ***, in the event that ***, subject to its confidentiality obligations with such party, Company must notify Licensee within ***, including providing *** relating to such ***, and thereafter keep *** about the status of *** with respect to such ***.  Company shall use *** to amend the terms of its then *** with such party in order to permit the ***.  Prior to entering into any agreement relating to a ***, Company shall provide Licensee at least *** shall include a copy of ***.  Any amendment or modification to a *** shall be deemed to be a *** for purposes of this Section 11.6(c), and Company shall comply with the provisions of this Section 11.6(c) with respect thereto. 

 

Article 12

 

INDEMNIFICATION

 

12.1          Indemnification by Licensee.  From and after the Effective Date, Licensee shall indemnify, defend and hold harmless Company and its Affiliates and each of their respective employees, officers, directors and agents (the “ Company Indemnitees ”) from and against any and all liability, damages, loss, cost, fine, penalty or expense (including without limitation reasonable attorneys’ fees and expenses (collectively, “ Losses ”) incurred in connection with the enforcement of this provision) arising out of Third Party claims, actions, proceedings, or suits (“ Claims ”) against a Company Indemnitee resulting from (a) the gross negligence or willful misconduct of Licensee, its Affiliates and their respective directors, officers, employees and agents or any of them in connection with this Agreement; (b) ***; or (c) breach of, or inaccuracy in, any representations and warranties made by Licensee in this Agreement, or any breach or violation of any covenant or agreement of Licensee in or pursuant to this Agreement; provided ,   however , that Licensee’s obligations pursuant to this Section 12.1 shall not apply to the extent such Claims or Losses  result from (i) any breach of this Agreement by Company, (ii) the negligence or willful misconduct of any of the Company Indemnitees in connection with this Agreement or the activities contemplated herein, or (iii) any activity described in Section 12.2(b). 

 

12.2          Indemnification by Company.  From and after the Effective Date, Company shall indemnify, defend and hold harmless Licensee and its Affiliates and each of their respective employees, officers, directors and agents (the “ Licensee Indemnitees ”) from and against any and all Losses incurred in connection with the enforcement of this provision), amounts paid in settlement, and taxes arising out of Claims against a Licensee Indemnitee resulting from (a) the gross negligence or willful misconduct of Company, its Affiliates and their respective directors,

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

officers, employees and agents or any of them in connection with this Agreement; (b) *** arising from the negligence or willful misconduct of Company or its Affiliates or their respective officers, directors, employees or agents, ***; or (c) breach of, or inaccuracy in, any representations and warranties made by Company in this Agreement, or any breach or violation of any covenant or agreement of Company in or pursuant to this Agreement; provided ,   however , that Company’s obligations pursuant to this Section 12.2 shall not apply to the extent that such Claims or Losses result from ***.

 

12.3          Indemnification Procedure

 

(a)          To be eligible to seek indemnification under this Article 12 in respect of a liability, damage, loss, cost, fine, penalty or expense arising from a claim, proceeding or suit brought against such Licensee Indemnitee or Company Indemnitee (each, an “ Indemnitee ”) by a Third Party (such claim hereinafter referred to as a “ Third Party Claim ”), an Indemnitee shall promptly give written notice thereof to the Party from whom indemnification is sought (such Party hereinafter referred to as the “ Indemnitor ”) within a reasonable period of time after the assertion of such Third Party Claim by such Third Party; provided ,   however , that the failure to provide written notice of such Third Party Claim within a reasonable period of time shall not relieve the Indemnitor of any of its obligations hereunder, except to the extent that the Indemnitor is actually prejudiced by such failure.

 

(b)          The Indemnitor shall have the right to assume the complete control of the defense, compromise or settlement of any Third Party Claim (provided that no settlement of any Third Party Claim shall include any admission of wrongdoing on the part of an Indemnitee or the invalidity, unenforceability or absence of infringement of any patent relating to the Licensed Products or any patent Controlled, owned in whole or part by the Indemnitee, and shall not grant any right inconsistent with the terms of this Agreement, without the prior written consent of such Indemnitee, which consent shall not be unreasonably withheld), including, at its own expense, employment of legal counsel reasonably acceptable to the Indemnitee.  At any time thereafter the Indemnitor shall be entitled to exercise, on behalf of the Indemnitee, any rights that may mitigate the extent or amount of such Third Party Claim; provided ,   however , that if the Indemnitor shall have exercised its right to assume control of such Third Party Claim, the Indemnitee (i) may, in its sole discretion and at its own expense (which expense shall not be subject to indemnification hereunder), employ legal counsel to represent it (in addition to the legal counsel employed by the Indemnitor) in any such matter, and in such event legal counsel selected by the Indemnitee shall be required to confer and cooperate with counsel of the Indemnitor in such defense, compromise or settlement for the purpose of informing and sharing information with the Indemnitor; (ii) shall, at its own expense, make available to Indemnitor those employees, officers and directors of Indemnitee whose assistance, testimony or presence is necessary or appropriate to assist the Indemnitor in evaluating and in defending any such Third Party Claim ( provided, however , that any such access shall be conducted in such a manner as not to interfere unreasonably with the operations of the businesses of Indemnitee); and (iii) shall otherwise fully cooperate with the Indemnitor and its legal counsel in the investigation and defense of such Third Party Claim.

 

(c)          The Parties shall cooperate with each other in connection with any such claim, action, proceeding or suit and shall keep each other reasonably informed of all material developments in connection with any such claim, action, proceeding or suit.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(d)          If the Parties acting in good faith cannot agree as to the applicability of Section 12.1 and/or 12.2 to a particular Third Party Claim, then each Party (and its respective Indemnitees) reserves the right to conduct its own defense of such Third Party Claim and seek indemnification from the applicable Party upon its resolution.

 

12.4          Insurance.  Beginning at the time any Licensed Product is being distributed, sold or commercialized, each Party will secure and maintain in full force and effect adequate insurance coverage against its liabilities under this Agreement including commercial general liability and product liability insurance consistent with the normal and customary practices of biopharmaceutical companies of similar size and scope (or reasonable self-insurance sufficient to provide materially the same level and type of protection).  Such insurance shall be maintained beyond the expiration or termination of this Agreement for a period of five years thereafter.  Prior to the initiation of any clinical study, the Party responsible for the applicable clinical study shall secure and maintain in full force and effect clinical trial insurance in compliance with Applicable Law in those territories where clinical studies are conducted.  Upon written request, each Party shall provide the other with a certificate of insurance evidencing the required coverage.  Notwithstanding the foregoing, either Party’s failure to maintain adequate insurance shall not relieve the other Party of its obligations set forth in this Agreement.

 

12.5         Limitation of Liability.  FOLLOWING THE EFFECTIVE DATE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES, OTHER THAN DUE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LIABLE PARTY.  NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 12.5 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 12.1 OR 12.2, OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF THE OBLIGATIONS IN ARTICLE 11.  

 

Article 13

 

REPRESENTATIONS AND WARRANTIES

 

13.1          Representations and Warranties.  Company and Licensee, each for itself and its Affiliates, represent and warrant to the other Party as of the Execution Date and the Effective Date:

 

(a)          the execution, delivery to the other Party and performance by it of this Agreement and its compliance with the terms and provisions of this Agreement do not and will not conflict with, or result in a breach of, any of the terms or provisions of: (i) any other contractual obligations of such Party in any material respect; (ii) the provisions of its charter, operating documents or bylaws; or (iii) any order, writ, injunction or decree of any court or governmental authority entered against it or by which it or any of its property is bound except where such breach or conflict would not materially impact the warranting Party’s ability to meet its obligations hereunder;

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(b)          this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms except as enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights and (ii) equitable principles of general applicability;

 

(c)          such Party is a corporation duly organized, validly existing and in good standing under the laws of the state or other jurisdiction of incorporation or formation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof except where failure to be in good standing would not materially impact the Party’s ability to meet its obligations hereunder;

 

(d)          such Party is duly authorized, by all requisite corporate action, to execute and deliver this Agreement and the execution, delivery and performance of this Agreement by such Party does not require any shareholder action or approval, and the person executing this Agreement on behalf of such Party is duly authorized to do so by all requisite corporate action; and

 

(e)          no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the Part of such Party in connection with the valid execution, delivery and performance of this Agreement (other than as may be required under the HSR Act).

 

13.2          Company Warranties.  Company represents and warrants to Licensee, as of the Execution Date and as of the Effective Date:

 

(a)          Company (i) has the right to grant the licenses specified herein and (ii) has the right to use all Regulatory Materials, and all Information included or referenced therein, and any other Company Know-How necessary for the Parties to conduct the Development, Manufacture and Commercialization of Licensed Molecules and Licensed Products as contemplated under this Agreement.

 

(b)          As of such date, (i) all Pre-Existing Company Patents are (A) subsisting, and to the best of Company’s knowledge, the issued Pre-Existing Company Patents are valid and enforceable, in whole or in part, (B) solely and exclusively owned or exclusively licensed by Company, free of any encumbrance, lien or with respect to owned Patents, claim of ownership by any Third Party, (ii) the pending applications included in Pre-Existing Company Patents are being diligently prosecuted in the respective patent offices in the Territory in accordance with Applicable Law and Company and its Affiliates have presented all relevant references, documents and information of which it and the inventors are aware to the relevant patent examiner at the relevant patent office, and (iii) all Pre-Existing Company Patents have been filed and maintained properly and correctly and all applicable fees have been paid on or before the due date for payment.

 

(c)          Each of the Pre-Existing Company Patents properly identifies each and every inventor of the claims thereof as determined in accordance with the laws of the jurisdiction in which such Patent is issued or such application is pending.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(d)          To the best of Company’s knowledge, the Pre-Existing Company Patents represent all Patents that Company or its Affiliates own, Control or otherwise have rights to relating to the Licensed Molecules or the Licensed Products or the Development, Manufacture or Commercialization thereof, as of such date. There is no Information owned by, or otherwise in the possession or control of, Company or any of its Affiliates as of the such date that relates to the Licensed Molecules or the Licensed Products that is not included in the Company Know-How.

 

(e)          No claim or litigation has been brought or asserted against Company or its Affiliates or with respect any Company Patent (and to the best of Company’s knowledge, no such claims have been threatened) by any Person (i) alleging the invalidity, misuse, unregisterability, unenforceability or non-infringement of any of the Company Patents, or (ii) challenging Company’s Control of the Company Patents or with respect to owned Patents, making any adverse claim of ownership thereof.

 

(f)          True, complete and correct copies of the file wrappers, and to the extent in the possession or control of Company or its Affiliates or their respective counsel, other documents and materials relating to the prosecution, defense or maintenance of the Pre-Existing Company Patents have been provided or made available to Licensee prior to such date.     

 

(g)          True, complete and correct copies of all material information with respect to the safety and efficacy of the Licensed Molecules and Licensed Products known to Company have been provided or made available to Licensee. 

 

(h)          Neither Company nor any of its Affiliates has previously entered into any agreement, whether written or oral, with respect to or otherwise assigned, transferred, licensed, conveyed, granted any right or forbearance with respect to, or otherwise encumbered its right, title or interest in or to the Company Patents, Company Know-How, Regulatory Materials, and any Information included or referenced therein, or any Patent right or other intellectual property or proprietary right or Information that would be Company Patents, Company Know-How or Regulatory Approval but for such assignment, transfer, license, conveyance, right, forbearance or encumbrance and it will not enter into any such agreements, grant any such right, title or interest to any Person that, in each case, is inconsistent with or otherwise diminish the rights and licenses granted to Licensee under this Agreement. 

 

(i)          To the best of Company’s knowledge, except pursuant to *** in the form disclosed to Licensee, there are no amounts that will be required to be paid to a Third Party or any inventor of the Company Patents (including under any applicable inventor remuneration laws) as a result of the Development, Manufacture or Commercialization of the Licensed Molecules, or Licensed Products that arise out of any agreement to which Company or any of its Affiliates is a party.

 

(j)          Other than ***, Company has not been a party to any agreement with the United States federal government or an agency thereof pursuant to which the United States federal government or such agency provided funding for the Development of the Licensed Molecules or Licensed Products, and the Inventions claimed or covered by the Pre-Existing Company Patents (A) were not conceived, discovered, developed or otherwise made in

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connection with any research activities funded, in whole or in part, by the federal government of the United States or any agency thereof, (B) are not a “subject invention” as that term is described in 35 U.S.C. Section 201(e) and (C) are not otherwise subject to the provisions of the Patent and Trademark Law Amendments Act of 1980, as amended, codified at 35 U.S.C. §§ 200-212, as amended, as well as any regulations promulgated pursuant thereto, including in 37 C.F.R. Part 401.

 

(k)          There is no action or other proceeding filed against Company or any of its Affiliates, nor, to the best of Company’s knowledge, threatened against Company or any of its Affiliates alleging that the Development, Manufacture or Commercialization of any Licensed Molecules or Licensed Product or use of Company Know-How as contemplated herein or the conception, development, reduction to practice, disclosing, copying, making, assigning or licensing of the Regulatory Materials or any Information included or referenced therein, and any other Information Controlled by Company or any of its Affiliates violates, infringes, constitutes misappropriation or otherwise conflicts or interferes with or would violate, infringe, constitute a misappropriation or otherwise conflict or interfere with, any intellectual property or proprietary right of any Third Party, and, to the best of Company’s knowledge, there is no basis for any such claim or action described above. There are no judgments, orders, writs, injunctions, decrees, awards or settlements against or owed by Company or any of its Affiliates or to which Company or any of its Affiliates is a party or, to the best of Company’s knowledge, any actions, or claims or actions threatened, in each case relating to Company or any of its Affiliates or the Licensed Molecules or Licensed Products.

 

(l)          Company and its Affiliates, contractors and consultants have conducted all development activities with respect to the Licensed Molecules and Licensed Product, including studies, tests and pre-clinical studies and clinical studies of the Licensed Molecules and Licensed Products in accordance with Good Clinical Practice, Good Laboratory Practice, Good Manufacturing Practice, as applicable, and all other Applicable Laws.  Company and its Affiliates have generated, prepared, maintained and retained all Regulatory Materials that are required to be maintained or retained pursuant to and in accordance with Good Clinical Practice, Good Laboratory Practice, Good Manufacturing Practice, as applicable, and all other Applicable Laws and all such information is true, complete and correct.

 

(m)          Neither Company nor any of its Affiliates, nor any of its or their respective officers, employees or agents has (i) committed an act, (ii) made a statement or (iii) failed to act or make a statement that, in any case ((i), (ii) (iii)), that (x) would be or create an untrue statement of material fact or fraudulent statement to the FDA or any other Regulatory Authority with respect to the development, manufacture or commercialization of the Licensed Molecules, or Licensed Products or (y) would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto or any analogous laws or policies in the Territory, with respect the development, manufacture or commercialization of the Licensed Molecules or Licensed Products.

 

(n)          All current and former officers, employees, agents and consultants of Company or any of its Affiliates who are inventors of or have otherwise contributed in a material manner to the creation or development of any Pre-Existing Company Patent or Company Know-

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

How or who are or will be performing Company’s   Development activities hereunder or who otherwise have access to any Confidential Information of  Licensee have executed and delivered to Company or such Affiliate an assignment or other agreement regarding the protection of proprietary information and the assignment to Company or such Affiliate of any inventions made by such officer, employee, agent or consultant within the scope of his or her employment or consulting relationship with Company or its Affiliates.  To the best of Company’s knowledge, no current officer, employee, agent or consultant of Company or any of its Affiliates is in violation of any term of any assignment or other agreement regarding the protection of Patents or other intellectual property or proprietary information of Company or such Affiliate or of any employment contract or any other contractual obligation relating to the relationship of any such Person with Company .

 

(o)          Company has obtained the right (including under any Patents and other intellectual property rights) to use in the Development, Manufacture and Commercialization of Licensed Molecules and Licensed Products as contemplated hereunder, all Information and all other materials (including any formulations and manufacturing processes and procedures) developed or delivered by any Third Party to Licensee or its Affiliates (or their respective designees) under any agreements between Company and any such Third Party.

 

(p)          Neither Company nor its Affiliates is a “covered entity” or a “business associate” as those terms are defined in 45 C.F.R. § 160.103.  Company and its Affiliates may use, and may grant Licensee and its Affiliates the right to use, consistent with Applicable Laws and their representations to consumers and employees, all Personal Data that is used in or necessary for the Development, Manufacture and Commercialization of the Licensed Molecules or Licensed Products. For purposes of this Agreement, “Personal Data” means all data or information that is linked to any reasonably identifiable person and any other data protected under Applicable Law relating to privacy or data security, which information includes any genetic data, medical information, and insurance numbers.

 

(q)          Company and its Affiliates maintain information security program(s) that includes administrative, technological, and physical safeguards reasonably calculated to safeguard their confidential information (including Personal Data processed by Company and its Affiliates) and their information systems. To the best of Company’s knowledge, neither Company nor any of its Affiliates or agents has experienced any security breach or other incident resulting in the unauthorized access, use, or disclosure of Personal Data.

 

(r)          Neither Company nor its Affiliates, nor any of their respective officers, directors, employees, nor, to the best of Company’s knowledge, any representatives, agents, or other Persons acting on behalf of Company or its Affiliates (a) has paid, made, authorized, offered, solicited or received any bribe, unlawful rebate, payoff, influence payment, or kickback, (b) has established or maintained, or is maintaining, any unlawful fund of corporate monies or other properties, (c) has used or is using any corporate funds for any illegal contributions, gifts, entertainment, travel or other unlawful expenses, (d) has violated or is violating in any respect the United States Foreign Corrupt Practices Act, the UK Bribery Act, or any other anti-corruption or anti-bribery Law or requirement applicable to Company or its Affiliates, (e) is, or within the past *** has been, under administrative, civil, or criminal investigation, indictment, information, suspension, debarment, or audit (other than a routine contract audit) by any party, in

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

connection with possible violations of any Law that prohibits improper payments, or (f) has received notice from, or made a voluntary disclosure to, any Governmental Authority regarding possible violations of any Law that prohibits improper payments.

 

(s)          Exhibit 7 sets forth a true and complete (in all material respects) list of all of Company’s Manufacturing Agreements.

 

13.3         Disclaimer of Warranties.  N otwithstanding anything to the contrary contained herein, Each party acknowledges and agrees that the other party is not making, nor has such other party made, any representation or warranty, oral or written, express or implied, other than as expressly made by such Other Party in Article 7 or this Article 13. except for the representations and warranties expressly set forth in article 7 or this Article 13, Each Party specifically disclaims that it is relying upon or has relied upon any representations or warranties or other statements or omissions that may have been made by any Person or otherwise occurred.

 

Article 14

 

TERM AND TERMINATION

 

14.1         Term and Expiration.  This Agreement shall bind the Parties upon execution and continue in full force and effect unless and until the termination or expiration of the Agreement by its terms (the “ Term ”); provided ,   however , that each Party’s grant of license rights hereunder, Licensee’s obligation to make the payments hereunder, and Licensee’s obligations hereunder in connection with the Development and Commercialization of the Licensed Products shall not become effective unless and until each of the following conditions are satisfied: (i) the waiting period provided by the HSR Act shall have expired or been terminated (and all antitrust clearance has been obtained), (ii) no court or administrative challenges to the transactions are pending, (iii) no court or administrative orders are outstanding blocking the completion of the transactions and (iv) Company’s representations and warranties set forth in this Agreement are true and correct (the first date on which each such condition is satisfied or waived, the “ Effective Date ”); provided,   further, that the condition in clause (iv) is for the sole benefit of Licensee and Licensee shall have the right to waive such condition in whole or in part at any time in its sole discretion. For the avoidance of doubt, Section 2.9, Section 8.3, Section 16.19(a) and (b), Article 11, Article 13 and any related definitions in Article 1, shall become effective on the Execution Date.  This Agreement, unless earlier terminated in whole pursuant to Section 14.2 or 14.3, shall continue thereafter in full force and effect on a country-by-country basis (a) until the expiration of Licensee’s obligations to make royalty payments to Company with respect to such country or (b) as long as Licensee or sub-licensee is selling the Licensed Product in the country, whichever is later.

 

14.2          Termination upon Material Breach .

 

(a)          If a Party commits a material breach of this Agreement, the other Party

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may provide to the alleged breaching Party a written notice specifying the nature of the breach, requiring the alleged breaching Party to make good or otherwise cure such breach, and stating its intention to terminate this Agreement if such breach is not cured.  If such breach is not cured within *** after the receipt of such notice, then subject to Section 14.2(b), the Party not in default shall be entitled, without prejudice to any of its other rights conferred under this Agreement, and in addition to any other remedies available to it by law or in equity, to terminate this Agreement by written notice to the other Party; provided ,   however , if the cause of the material breach is non-payment of the amounts due under this Agreement, then the cure period for such non-payment shall be *** from the date of notice of material breach by the non-breaching Party.

 

(b)          If the alleged breaching Party disputes in good faith the existence or materiality of a breach specified in a notice provided by the other Party in accordance with Section 14.2(a), and such alleged breaching Party provides the other Party notice of such dispute within *** of the date of the notice provided by the other Party in accordance with Section 14.2(a), then the non-breaching Party will not have the right to terminate this Agreement under Section 14.2(a) unless and until (i) the ***, in accordance with Section 14.2(c), have determined that the alleged breaching Party ***, and (ii) the alleged breaching Party has failed to cure such breach within *** following such *** will include a description of ***.  It is understood and agreed that during the pendency of such dispute, all of the terms and conditions of this Agreement will remain in effect. 

 

(c)          *** shall be reached, and the ***shall be conducted, ***. The number of *** shall be *** shall be appointed by *** and the ***shall be selected by *** with the input of the ***, within *** of the selection of the *** and thereafter by the ***. The seat of the *** will be ***. *** shall be ***.  ***.    

 

(d)          The Parties agree that termination pursuant to Section 14.2(a) is a remedy to be invoked only if the breach cannot be adequately remedied through a combination of specific performance and the payment of money damages.

 

(e)          The right of a Party to terminate this Agreement, as provided in this Article 14, shall not be affected in any way by its waiver or failure to take action with respect to any prior default or breach.

 

14.3          Other Terminations .  

 

(a)          Termination for Convenience.  Licensee may terminate this Agreement in its entirety upon at least two hundred seventy (270) days’ prior written notice to Company.

 

(b)          Termination by Company for Superior Proposal.  Subject to Section 11.6(b)(ii), if prior to the No-Shop Start Date Company receives a Proposal that the Transaction Committee (the “ Transaction Committee ”) of the Company Board and the Company Board determines is a Superior Proposal, and after complying with Section 11 of this Agreement, the Transaction Committee and Company Board again determines at the end of the Match Period that such Proposal constitutes a Superior Proposal, and Company is not in material breach of Section 11.6, then within *** after the end of the Match Period, Company may terminate this

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Agreement concurrently with paying the amount required by Section 14.4(c)(v) upon entering into the definitive agreement providing for the Superior Proposal (provided that if such termination upon entering into such definitive agreement occurs on a day that is not a Business Day, Company is permitted to pay the amount required by Section 14.4(c)(v) on the first succeeding Business Day).  For the avoidance of doubt, if Company does not exercise its termination right under this Section 14.3(b) within *** after the end of the Match Period, Company shall no longer be permitted to terminate this Agreement pursuant to this Section 14.3(b).

 

(c)          Termination of Certain Rights of Company for Fundamental Breach .  If Company commits a Fundamental Breach, Licensee may provide to Company a written notice specifying the nature of the breach, requiring it to make good or otherwise cure such breach, and stating Licensee’s intention to terminate specified provisions of this Agreement pursuant to this Section 14.3(c), if such breach is not cured in accordance with this Section 14.3.  Company may cure a Fundamental Breach in accordance with this Section 14.3 as follows:

 

(i)          if a Fundamental Breach is capable of being cured within ***and such breach is cured at its sole expense within such ***period; or

 

(ii)         if a Fundamental Breach is not capable of being cured within *** but is capable of cure, and such breach is cured at its sole expense within the following extended cure period, which extended cure period shall apply, if, and only for so long as, the following conditions are satisfied (A) prior to the expiration of such *** period, Company delivers to Licensee detailed written plan (1) explaining the causes of the Fundamental Breach, the reasons  such breach is not capable of being cured within the *** period, and the steps required in order to effect such cure, and (2) setting forth a plan in reasonable detail with the actions and resources required to effect such cure, and the soonest possible date, which shall be no later than *** after occurrence of such Fundamental Breach, in which such cure can be completed, and (B) during the entirety of such cure period, Company uses its best efforts and expends such resources as are reasonably designed (1) to cure such breach as quickly and effectively as possible and (2) to mitigate any adverse impact to Licensee and its Development and Commercialization of the Licensed Product resulting from such Fundamental Breach.

 

In the event a Fundamental Breach is not cured in accordance with the foregoing subsection (i) or (ii), or is not capable of cure, Licensee shall be entitled, by written notice to Company, without prejudice to any of its other rights conferred under this Agreement, and in addition to any other remedies available to it by law or in equity, to terminate the rights and obligations of the Parties ***. In the event of any such termination, Company will cooperate with Licensee in the orderly transition to Licensee of any obligations of Company under the provisions in *** in the preceding sentence.  For clarity, a Fundamental Breach does not relieve Licensee of its payment obligations under Article 8.

 

14.4          Consequences of Termination. 

 

(a)          Upon termination of this Agreement in its entirety for any reason prior to expiration, each Party shall promptly return to the other Party all relevant records and materials in its possession or control containing or comprising the other Party’s Confidential Information

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and to which the Party does not retain rights or licenses hereunder; provided ,   however , that each Party shall be entitled to retain copies of the other Party’s Confidential Information to the extent necessary to comply with applicable regulatory obligations and shall be entitled to retain one copy of the other Party’s Confidential Information for archival purposes. For clarity, upon the termination of this Agreement in its entirety, IMMU-132 Information shall be deemed to be the Confidential Information of Company alone.

 

(b)          Upon termination of this Agreement in its entirety by Company pursuant to Section 14.2 (Material Breach) or by Licensee pursuant to Section 14.3(a) (Convenience), (i) all licenses granted by Company to Licensee shall terminate (except as set forth in Section 14.5); (ii) all rights in any and all Licensed Products and Licensed Molecules granted by Company to Licensee under this Agreement shall revert to Company; and (iii) any and all claims and payment obligations that accrued prior to the date of such termination shall survive such termination.

 

(c)          Upon termination of this Agreement in its entirety by Company pursuant to Section 14.3(b) (Termination by Company for Superior Proposal), (i) all licenses granted by each Party to the other Party shall terminate; (ii) all rights in any and all Licensed Products and Licensed Molecules granted by Company to Licensee under this Agreement shall revert to Company; (iii) Licensee will have no payment obligations or liability of any kind to Company, including no obligations for any upfront, milestone or other payments or costs or expenses of Company or its Affiliates of any kind; (iv) effective upon such termination, Company and its Affiliates fully and forever irrevocably and unconditionally release, acquit, and discharge Licensee, its Affiliates and its and their respective successors, assigns, directors, employees, and officers, from all past, present and future liability, obligation, claim, or loss of any kind arising under or in connection with this Agreement and the subject matter hereof; and (v) Company shall pay to Licensee an amount in cash equal to *** concurrently with such termination (provided that if such termination occurs on a day that is not a Business Day, Company is permitted to pay such *** amount on the *** Business Day).

 

(d)          Upon termination of this Agreement in its entirety by Licensee pursuant to Section 14.2 (Material Breach), except as provided for in Sections 14.5(b), 14.5(c), 14.5(f), 14.5(g), 14.5(j), 14.5(k), 14.5(l) and 14.6, the Agreement shall terminate in its entirety (including all licenses granted by either Party herein) and Licensee will have no further obligations under Article 8.

 

14.5          Additional Consequences of Termination .   Upon termination of this Agreement in its entirety by Company pursuant to Section 14.2  (Material Breach) or by Licensee pursuant to Section 14.3(a) (Convenience), or in the case of Sections 14.5(b), 14.5(c), 14.5(f), 14.5(g), 14.5(j), 14.5(k) and 14.5(l) upon any termination of this Agreement, the following terms and conditions will apply: 

 

(a)          Licenses to Company . Licensee shall be automatically deemed to grant to Company a worldwide license (with rights to sublicense subject to the applicable terms of this Agreement) under the Licensee’s interest in the Joint Patents and Joint Inventions, in each case, to Develop, Manufacture, and Commercialize Licensed Products and Licensed Molecules in the Field in the Territory, and further, ***.

 

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(b)          Regulatory Filings .  Licensee shall promptly assign to Company, and will provide full copies of, all Regulatory Approvals and Regulatory Materials that relate to Licensed Products and/or Licensed Molecules and are owned or Controlled by Licensee or its Affiliates.  Licensee shall also take such actions and execute such other instruments, assignments and documents as may be necessary to effect the transfer of rights thereunder to Company.

 

(c)          Data Disclosure .  Licensee shall provide to Company copies of the relevant portions of all material reports and data, including clinical and non-clinical data and reports, obtained or generated during the Term of this Agreement after the Effective Date by or on behalf of Licensee or its Affiliates or Sublicensees to the extent that they relate exclusively to Licensed Products and Licensed Molecules, within *** of such termination unless otherwise agreed, and Company shall have the right to use any such Information in developing and commercializing Licensed Products and Licensed Molecules, and to license any Third Parties to do so.

 

(d)          Trademarks .  If Licensee used, with regard to any Licensed Product or Licensed Molecule in a country, any trademark, tradename or logo related solely to a Licensed Product and/or Licensed Molecule (“ Licensee Mark(s) ”), Licensee shall either assign or license to Company (upon written request from Company within *** of termination) the Licensee Mark(s), it being understood that the choice between assignment and licensing shall be made by Licensee at its discretion. ***. For clarity, Company shall under no circumstance receive any rights under the house marks of Licensee or its Affiliates, except with respect to selling off existing inventory .

 

(e)          Third Party Licenses .  At Company’s request, (i) Licensee shall promptly provide to Company copies of all Third Party agreements under which Licensee or its Affiliates obtained a license under Patents or patent applications claiming inventions or know-how specific to or used or incorporated into the development, manufacture and/or commercialization of the Licensed Products and/or Licensed Molecules; and (ii) Licensee shall promptly: (A) with respect to such Third Party licenses relating solely to the applicable Licensed Products and Licensed Molecules, use commercially reasonable efforts to assign (or cause to be assigned), such agreements to Company, and (B) with respect to all other Third Party licenses, at Licensee’s option either use commercially reasonable efforts to assign the agreement or grant (or cause to be granted) to Company a sublicense thereunder of a scope equivalent to that described in Section 14.5(a), provided Licensee has the ability to assign such agreement or grant a sublicense to Company thereunder. In any case, thereafter Company shall be fully responsible for all obligations due for its actions under the Third Party agreements. Notwithstanding the above, if Company does not wish to assume any financial or other obligations associated with a particular assignment or sublicense, then Company shall so notify Licensee and Licensee shall not make such assignment or grant such sublicense (or cause it to be made or granted). 

 

(f)          Further Sales .  Licensee may continue to sell its remaining inventory of the Licensed Product for a period of *** from the effective date of such termination, subject to the payment of royalties pursuant to Section 8.7.  Licensee covenants that promptly after such *** period it and its Affiliates and former Sublicensees hereunder shall cease to sell, and thereafter shall not sell, any Licensed Products or Licensed Molecules.

 

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(g)          Remaining Materials .  At the end of the period described in Section 14.5(f) or, if this Agreement is terminated prior to the First Commercial Sale, at the request and expense of Company, Licensee shall transfer to Company, all quantities of Licensed Products and/or Licensed Molecules in the possession of Licensee or its Affiliates (including, without limitation, clinical trial supplies and Licensed Products and/or Licensed Molecules intended for commercial sale).  Licensee shall transfer to Company all such quantities of Licensed Products and/or Licensed Molecules without charge, except that Company shall pay the reasonable costs of shipping.  Licensee shall have no obligation to alter the labeling of such Licensed Products and/or Licensed Molecules.

 

(h)          Licensed Product/Compound Manufactured by Licensee .  If any Licensed Product and/or Licensed Molecule was manufactured by Licensee or its Affiliate (including, without limitation, any testing and/or release) at the time of such termination, at Company’s request, Licensee (or its Affiliate, as applicable) shall continue to manufacture and supply such Licensed Product and/or Licensed Molecule to Company, at a commercially reasonable cost to be agreed between the Parties, from the time of the effective date of termination, until such time (not to exceed ***) as Company is able to secure an equivalent alternative commercial manufacturing source from which quantities of Licensed Product and/or Licensed Molecule are registered for commercial sale. Any such supply will be made pursuant to a supply agreement between the Parties containing commercially reasonable provisions that are customary for this type of agreement.

 

(i)          Technical Assistance .  Promptly after the effective date of such termination, Licensee shall provide, at Company’s request and expense (at Licensee’s commercially reasonable FTE rates) technical assistance of the equivalent of up to a total of ***, to provide technology transfer necessary for Company to commence or continue to commercially manufacture Licensed Products and/or Licensed Molecules, and a non-exclusive, royalty-free, perpetual license under any know-how disclosed by Licensee to Company in the course of such activities to manufacture Licensed Products and/or Licensed Molecules.  At Company’s request and expense, Licensee shall promptly provide to Company copies of all agreements between Licensee or its Affiliates and Third Party suppliers, vendors, or distributors that relate to the supply, sale, or distribution of Licensed Products and/or Licensed Molecules in the Territory.  At Company’s request and expense, Licensee shall promptly:  (x) with respect to such Third Party agreements relating solely to the applicable Licensed Products and/or Licensed Molecules, immediately assign (or cause to be assigned), such agreements to Company, and (y) with respect to all other such Third Party agreements, Licensee shall reasonably cooperate to assist Company in obtaining the benefits of such agreements.

 

(j)          Ongoing Clinical Trials .  Licensee shall promptly assign to Company the management and continued performance of any clinical trials for Licensed Product ongoing hereunder as of the effective date of such termination, ***.

 

(k)          No Further Representations .  Subject to Sections 14.5(f) and (h), Licensee and its Affiliates shall (i) discontinue making any representation regarding its status as a licensee of or distributor for Company, for all Licensed Products and/or Licensed Molecules and (ii) cease conducting any activities with respect to the marketing, promotion, sale or distribution of the Licensed Products and/or Licensed Molecules.

 

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(l)          Commercialization .  Company shall have the right to develop and commercialize the Licensed Products and/or Licensed Molecules itself or with one or more Third Parties, and shall have the right, without obligation to Licensee, to take any such actions in connection with such activities as Company (or its designee), at its discretion, deems appropriate, provided that, the foregoing will not constitute or be construed as a grant, whether express or implied, of any license or right under any intellectual property of Licensee or its Affiliates.

 

14.6          Accrued Rights; Surviving Obligations .

 

(a)          Termination, relinquishment or expiration of this Agreement for any reason shall be without prejudice to any liabilities that shall have accrued prior to such termination, or expiration.  Such termination, relinquishment or expiration shall not relieve a Party from obligations that are expressly indicated to survive termination or expiration of this Agreement.

 

(b)          Without limiting the foregoing, Article 1, Section 8.3, Section 9.7(c), Section 9.7(d), Section 10.1, Section 10.2, Section 10.9, Section 10.10, Article 11, Article 12, Article 13, Section 14.1, Section 14.4, Section 14.5, Section 14.6, Article 15, and Article 16 (other than Section 16.19) shall survive the expiration or termination of this Agreement for any reason.

 

14.7          Rights in Bankruptcy.    All licenses granted under this Agreement by Licensee or Company are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101(34A) of the U.S. Bankruptcy Code.  The Parties agree that the Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code.  The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code, the Party hereto that is not a party to such proceeding shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property (including all Information related to such intellectual property and rights of reference with respect to Regulatory Approvals), and same, if not already in their possession, shall be promptly delivered to them (a) upon any such commencement of a bankruptcy proceeding upon their written request therefore, unless the Party subject to such proceeding continues to perform all of its obligations under this Agreement, or (b) if not delivered or granted under (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefore by the non-subject Party.

 

14.8          Sale of the Company.  For the avoidance of doubt, this Agreement will remain in full force and effect notwithstanding a Sale of the Company, subject to the terms and conditions of this Agreement.

 

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Article 15

 

DISPUTE RESOLUTION

 

15.1          Disputes. Following the Effective Date, with respect to disputes not within the decision-making authority and powers of the JSC to resolve (or, following the termination of the JSC pursuant to Section 3.1(d), within the decision-making authority and powers of Licensee to resolve), in the event of any controversy or claim arising out of, relating to or in connection with any provision of this Agreement, or the rights or obligations of the Parties hereunder, the Parties shall try to settle their differences amicably between themselves.  Either Party may initiate such informal dispute resolution by sending written notice of the dispute to the other Party, and within *** after such notice appropriate representatives of the Parties shall meet for attempted resolution by good faith negotiations.  If such representatives are unable to resolve promptly such disputed matter, it shall be referred to the Executive Officers for discussion and resolution.  If such personnel are unable to resolve such dispute within *** of initiating such negotiations, unless otherwise agreed by the Parties, such dispute shall be finally settled under Sections 15.2 and 15.3.

 

15.2          Mediation.  Following the Effective Date, if a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation (as provided by Section 15.1), then the Parties agree before resorting to litigation (as provided by Section 15.3) ***, to first try in good faith to settle the dispute by non-binding mediation with a neutral mediator; provided ,   however , that (a) no such mediation shall be required for any disagreement regarding the failure by a Party to fully pay any sum due hereunder, and (b) if such mediation has not occurred within *** after a written request for mediation by either Party, then either Party may commence litigation ***.

 

15.3          Litigation.  Following the Effective Date, if a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through either negotiation (as provided by Section 15.1) or mediation (as provided by Section 15.2) then the Parties shall be entitled to resort to litigation to settle the dispute.  Notwithstanding this Section 15.3, any dispute within the scope of Section 14.2 will be resolved exclusively as set forth in Section 14.2(b).

 

15.4          Language of Dispute Resolution. All proceedings under this Article 15 shall be conducted in the English language and all documents exchanged between the Parties and/or submitted in the context of a proceeding under this Article 15 shall be in English or shall be accompanied with a certified English translation of the original document.

 

15.5          Injunctive Relief. Notwithstanding any other provision of this Article 15 or Section 14.2, either Party, at any time, may seek from a court of competent jurisdiction any interim or provisional injunctive relief (such as attachment, preliminary injunction, replevin, etc.) to avoid irreparable harm, maintain the status quo , or preserve the subject matter of the dispute as may be necessary to protect the rights or property of that Party.

 

Article 16

 

MISCELLANEOUS PROVISIONS

 

16.1          Relationship of the Parties.  Nothing in this Agreement is intended or shall be

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deemed to constitute a partnership, agency or employer-employee relationship between the Parties.  Neither Party shall incur any debts or make any commitments for the other.

 

16.2          Assignment.  Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other, except that a Party may make such an assignment without the other Party’s consent to such Party’s Affiliate or to a successor to all or substantially all of the business of such Party to which this Agreement pertains, whether by way of merger, sale of stock, sale of assets or other transaction. Any permitted successor or assignee of rights and/or obligations hereunder shall, in a writing to the other Party, expressly assume performance of such rights and/or obligations.  Any permitted assignment shall be binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 16.2 shall be null, void and of no legal effect.

 

16.3          Performance by/Responsibility for Affiliates.  Each of Company and Licensee acknowledge that their obligations and rights under this Agreement may be performed and exercised by Affiliates of Company and Licensee, respectively.  Obligations of the Party for which one of its Affiliates is performing hereunder shall be deemed to extend to such performing Affiliate.  Each of Company and Licensee guarantee performance of this Agreement by its Affiliates.  Wherever in this Agreement the Parties delegate responsibility to Affiliates, the Parties agree that such entities shall not make decisions inconsistent with this Agreement, amend the terms of this Agreement or act contrary to its terms in any way.  If a Party’s Affiliate breaches any aspect of this Agreement in the performance of any activity that has been delegated to such Affiliate, then the other Party shall be entitled to proceed against the Party whose Affiliate so breached, and shall not first be required to proceed against the Affiliate that so breached.

 

16.4          Further Assurances. Each Party agrees to execute, acknowledge and deliver such further instruments and to do all such other reasonable acts as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. Without limiting the generality of the foregoing, Company further agrees that, if any consent or other approval of any Person or Persons not expressly contemplated by this Agreement is or becomes necessary to carry out the purposes and intent of this Agreement or to authorize or give effect to any of the transactions contemplated hereby for the benefit of each of the Parties hereto, Company shall use its reasonable best efforts to take, or cause to be taken, all actions necessary or appropriate to obtain any such consent or other approval.

 

16.5          Force Majeure.  Neither Party shall be liable to the other for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by earthquake, riot, civil commotion, war, strike, flood, act of terrorism, governmental acts or restrictions or any other reason that is beyond the control of the respective Party. The Party affected by force majeure shall provide the other Party with full particulars thereof as soon as it becomes aware of the same (including its best estimate of the likely extent and duration of the interference with its activities), and will use Commercially Reasonable Efforts to overcome the difficulties created thereby and to resume performance of its obligations as soon as practicable. 

 

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16.6          Entire Agreement of the Parties; Amendments. This Agreement and the agreements contemplated by Section 8.3 constitute and contain the entire understanding and agreement of the Parties respecting the subject matter hereof and cancel and supersede any and all prior negotiations, correspondence, understandings and agreements between the Parties, whether oral or written, regarding such subject matter (including the Confidential Information Agreement entered into by and between Licensee and Company dated as of June 3, 2016 and the Standstill Letter Agreement by and between Licensee and Company effective as of November 16, 2016).  No waiver, modification or amendment of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party. 

 

16.7          Captions. The captions to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement.

 

16.8          Governing Law.  This Agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the law of the State of Delaware without regard to the conflicts of law principles thereof. The parties hereby irrevocably submit to the personal jurisdiction of the Court of Chancery of the State of Delaware (or if, and only if, the Court of Chancery of the State of Delaware lacks jurisdiction, the Complex Commercial Litigation Division of the Superior Court of the State of Delaware or the Federal court of the United States of America sitting in Delaware) and any appellate court from any thereof, in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the Parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such courts. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 16.10 or in such other manner as may be permitted by law shall be valid and sufficient service thereof.  EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, INCLUDING ANY LEGAL PROCEEDING ARISING OUT OF THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT. EACH PARTY CERTIFIES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION 16.8. 

 

16.9          Tolling of Time Periods. In the event that a controversy or claim has been raised and is in the process of dispute resolution in accordance with Article 15, any applicable time period governing the underlying controversy or claim shall be tolled pending the outcome

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

of the resolution process after which the time period shall again begin to run.

 

16.10        Notices and Deliveries. Any notice, request, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted by facsimile (receipt verified), email (receipt verified) or by express courier service (signature required) or five (5) days after it was sent by registered letter, return receipt requested (or its equivalent), to the Party to which it is directed at its address or facsimile number shown below or such other address or facsimile number as such Party shall have last given by notice to the other Parties.  This Section 16.10 is not intended to govern the day-to-day business communications necessary between the Parties in performing their obligations under the terms of this Agreement.

 

If to Licensee, addressed to:

 

Seattle Genetics, Inc.

21823 30th Drive St.

Bothell, WA  98021

Fax:  (425) 527-4107

Email: legal@seagen.com

Attention:  General Counsel

 

With a copy to (which shall not constitute notice):

 

Sullivan & Cromwell LLP

1870 Embarcadero Road

Palo Alto, CA 94303

Fax: (650) 461-5740

Email: mousavin@sullcrom.com

Attention: Nader A. Mousavi

 

and

 

Sullivan & Cromwell LLP

125 Broad St.

New York, NY 10004

Fax: (212) 291-9519

Email: veeraraghavank@sullcrom.com

Attention: Krishna Veeraraghavan

 

Invoices to Licensee shall be sent to: accountspayable@seagen.com

 

With a copy to:

 

Accounts Payable 

21823 – 30th Drive SE

Bothell, WA 98021

 

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If to Company, addressed to:

 

Immunomedics, Inc.

300 The American Road

Morris Plains, NJ 07950

Attention: Michael R. Garone, Chief Financial Officer

Fax: (973) 605-8511

 

With a copy to (which shall not constitute notice):

 

DLA Piper LLP (US)

51 John F. Kennedy Parkway

Short Hills, New Jersey 07078

Attention: Andrew P. Gilbert, Esq.

Fax: (973) 520-2573

 

And

 

DLA Piper LLP (US)

2000 University Avenue

East Palo Alto, California 94303

Attention:  Shane Albright, Esq.

Fax: (650) 687-9295

 

16.11        Other Obligations. Except as set forth in the Letter Agreement and in Section 16.20, each Party shall bear its own costs incurred in connection with the implementation of the obligations under this Agreement. 

 

16.12        Waiver. The failure or delay of a Party to enforce or to exercise, at any time for any period of time, any provisions hereof or any right or remedy hereunder shall not be construed as a waiver of such provision or right or remedy or of the right of such Party thereafter to enforce or exercise the same; provided ,   however , that such right or remedy is not time-barred or otherwise precluded by law or by a writing expressly waiving such right or remedy and signed by that Party seeking to assert such right or remedy.  The written waiver by either Party of a breach of any term or provision of this Agreement by the other Party shall not be construed as a waiver of any subsequent breach.

 

16.13        Translation .  This Agreement is in English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the Parties.  All communications and notices to be made or given pursuant to this Agreement, and any dispute proceeding related to or arising hereunder, shall be in the English language.  If there is a discrepancy between any translation of this Agreement and this Agreement, this Agreement shall prevail. 

 

16.14        Export Laws. Notwithstanding anything to the contrary contained herein, all obligations of Company and Licensee are subject to prior compliance with U.S. export regulations and such other U.S. laws and regulations as may be applicable, and to obtaining all

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necessary approvals required by the applicable agencies of the government of the U.S. or the European Union.  Company and Licensee, respectively, shall each use its reasonable efforts to obtain such approvals for its own activities.  Each Party shall cooperate with the other Party and shall provide assistance to the other Party as reasonably necessary to obtain any required approvals.

 

16.15        Severability. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under Applicable Law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.  The Parties shall make a good faith effort to replace the invalid or unenforceable provision with a valid one that conforms as nearly as possible with the original intent of the Parties.

 

16.16        No Implied Licenses. Except as expressly and specifically provided under this Agreement, the Parties agree that neither Party is granted any implied rights to or under any of the other Party’s current or future patents, trade secrets, copyrights, moral rights, trade or service marks, trade dress, or any other intellectual property rights. 

 

16.17        Third Party Beneficiaries. Except for the rights of the Company Indemnitees and Licensee Indemnitees set forth in Article 12, all rights, benefits and remedies under this Agreement are solely intended for the benefit of Company and Licensee, and no Third Party shall have any rights whatsoever to (i) enforce any obligation contained in this Agreement; (ii) seek a benefit or remedy for any breach of this Agreement; or (iii) take any other action relating to this Agreement under any legal theory, including but not limited to, actions in contract, tort (including but not limited to negligence, gross negligence and strict liability), or, as a defense, set-off or counterclaim to any action or claim brought or made by the Parties. 

 

16.18        Advice of Counsel. Company and Licensee have each consulted counsel of their choice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed to have been drafted by one Party or another and will be construed accordingly. 

 

16.19        Governmental and Consent Matters

 

(a)          To the extent, if any, that a Party concludes in good faith that it is required to file or register this Agreement or a notification thereof with any governmental authority, including without limitation the U.S. Securities and Exchange Commission, the U.S. Department of Justice (the “ DoJ ”), the U.S. Federal Trade Commission (the “ FTC ”) and/or the Competition Directorate of the Commission of the European Community, in accordance with Applicable Law, such Party may do so, and the other Party shall cooperate in such filing or notification and shall execute all documents reasonably required in connection therewith, at the expense of the requesting Party, subject to Section 16.19(b).  The Parties shall promptly notify each other as to the activities or inquiries of any such governmental authority relating to this Agreement, and shall cooperate, to respond to any request for further information therefrom at the expense of the requesting Party.

 

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(b)          Within *** after the Execution Date, each of Licensee and Company shall file with the FTC and the DoJ any filing required of it under the HSR Act with respect to the subject matter of this Agreement, which filings shall specifically request early termination of the initial HSR Act waiting period.  The Parties shall, to the extent reasonably practicable, cooperate and consult with one another in connection with any filings, responses to inquiries, or other contacts with the FTC or DoJ concerning the transactions contemplated hereby and shall use their respective reasonable best efforts to seek any other consent, approval or waiver as required by Applicable Law.  Each of Licensee and Company shall (i) reply at the earliest practicable date to any requests for information or for the production of witnesses received by either Party from the FTC or DoJ pursuant to the HSR Act; (ii) reasonably cooperate with any government investigation under the HSR Act regarding the legality of the transactions described in this Agreement; and (iii) use its good faith, diligent efforts to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the filing date.  Each Party will bear its own expenses in connection with activities under this Section 16.19(b), except that Licensee and Company shall each be responsible for half of the fee due to the FTC in respect of such filing.  Subject to Applicable Law relating to the exchange of information, Licensee shall have the right to direct all matters with respect to the FTC and DoJ hereunder. Licensee shall have the right to review in advance any filing or submission to be made by Company, and Company shall consider in good faith the view of Licensee in light of Licensee’s right to direct issues related to reviews by the FTC and DoJ. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not become effective (with the exception of Section 2.9, Section 16.19(a), this Section 16.19(b), Article 11, Article 13 and any related definitions in Article 1) until such time as (A) the Parties shall have complied with all applicable requirements of the HSR Act; (B) the waiting period under the HSR Act shall have expired or earlier been terminated with respect to this Agreement; (C) any investigations opened by means of a second request or otherwise shall have been terminated, without action by a government authority to prevent the Parties from implementing the transactions contemplated by this Agreement with respect to the U.S.; and (d) no requirements or conditions shall have been formally requested or imposed by the FTC or the DoJ in connection therewith which are not reasonably and mutually satisfactory to the Parties (collectively, the “HSR Conditions” ).  In the event that the HSR Conditions are not met within six (6) months from the date the filing required under the HSR Act is made, either Party may terminate this Agreement upon written notice to the other Party.

 

(c)          Licensee may, at its expense, register the exclusive license granted under this Agreement in any country, or community or association of countries.  Company shall reasonably cooperate in such registration at Licensee’s expense.  Upon request by Licensee, Company agrees promptly to execute any “short form” licenses developed in a form reasonably acceptable to both Licensee and Company and reasonably submitted to it by Licensee from time to time in order to effect the foregoing registration in such country.  No such “short form” license shall be deemed to amend or be used to interpret this Agreement.  If there is any conflict between such a license or other recordation document and this Agreement, this Agreement shall control. 

 

16.20        Costs .  Company agrees that it shall pay Licensee within five days upon Company’s receipt of a reasonably detailed invoice, by wire transfer to an account or accounts designated by Licensee, ***.

 

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16.21        Equitable Relief .  Notwithstanding anything to the contrary herein, the Parties shall be entitled to seek equitable relief, including injunction and specific performance, as a remedy for any breach of this Agreement. Such remedies shall not be deemed to be the exclusive remedies for a breach of this Agreement but shall be in addition to all other remedies available at law or equity. The Parties further agree not to raise as a defense or objection to the request or granting of such relief that any breach of this Agreement is or would be compensable by an award of money damages.

 

16.22         Counterparts. This Agreement may be executed simultaneously in any number of counterparts, any one of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement.  Copies of original signature pages sent by facsimile and/or PDF shall have the same effect as signature pages containing original signatures. 

 

[The remainder of this page has been intentionally left blank.]

 

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the Execution Date.

 

IMMUNOMEDICS, INC.

 

By:

/s/ Cynthia L. Sullivan

 

 

 

 

Name:

Cynthia L. Sullivan

 

 

 

 

Title:

President and Chief Executive Officer

 

 

SEATTLE GENETICS, INC.

 

 

 

 

By:

/s/ Clay B. Siegall, Ph.D.

 

 

 

 

Name:

Clay B. Siegall, Ph.D.

 

 

 

 

Title:

President and Chief Executive Officer

 

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List of Exhibits

 

Exhibit 1:

    

Company Know-How

Exhibit 2:

 

Development Plan

Exhibit 3:

 

IMMU-132

Exhibit 4:

 

Pre-Existing Company Patents

Exhibit 5:

 

Licensee Press Release

Exhibit 6:

 

Company Press Release

Exhibit 7:

 

Manufacturing Agreements

 

 

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Exhibit 1

 

Company Know-How

 

***

 

 

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Exhibit 2

 

Proposed Clinical Development Plan for IMMU-132

 

***

 

 

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Exhibit 3

 

Description of IMMU-132

 

***

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Exhibit 4

 

Pre-Existing Company Patents

 

***

 

 

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Exhibit 5

Licensee Press Release

 

 

PICTURE 8

 

 

FOR RELEASE:          Friday, February 10, 2017

 

3:30 a.m. Pacific / 6:30 a.m. Eastern

 

Seattle Genetics Announces Global License Agreement with Immunomedics for Sacituzumab Govitecan (IMMU-132), a Promising Late-Stage ADC for Solid Tumors

 

-Seattle Genetics to Lead Development, Manufacturing and Commercialization of
Sacituzumab Govitecan Globally-

 

-Planned BLA for Triple Negative Breast Cancer Indication;
Other Solid Tumors Being Explored in the Clinic-

 

- Conference Call Today at 8:30 a.m. ET-

 

BOTHELL, WA– February 10, 2017 Seattle Genetics, Inc. (Nasdaq: SGEN), a global biotechnology company, today announced a development and license agreement with Immunomedics, Inc. (Nasdaq: IMMU) under which Seattle Genetics would receive exclusive worldwide rights to develop, manufacture and commercialize sacituzumab govitecan (IMMU-132). Sacituzumab govitecan is an antibody-drug conjugate (ADC) targeted to TROP-2, which is expressed in several solid tumors including cancers of the breast, lung and bladder. Sacituzumab govitecan is in a phase 1/2 trial for patients with triple negative breast cancer (TNBC), as well as multiple other solid tumors. It received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for the treatment of patients with TNBC who have failed prior therapies for metastatic disease. Data from the phase 1/2 trial are intended to serve as the basis for a planned Biologics License Application (BLA) submission under the FDA’s accelerated approval regulations.

 

“This agreement would add a promising late-stage ADC to our pipeline as we continue making progress towards our goal of becoming a global, multi-product oncology company. Sacituzumab govitecan would complement our existing pipeline by providing a potential near-term opportunity to commercialize a second drug in the United States, expand our international capabilities in Europe and elsewhere and extend our efforts in solid tumors,” said Clay Siegall, Ph.D., President and Chief Executive Officer of Seattle Genetics. “In addition, we believe our expertise in ADCs, including demonstrated success in clinical development, regulatory, manufacturing and commercialization, ideally positions Seattle Genetics to advance this program globally. We look forward to working with Immunomedics to advance this program for patients in need, including those with triple negative breast cancer and other solid tumors.” 

 

Cynthia L. Sullivan, President and Chief Executive Officer of Immunomedics, said, “After a long and robust process, we concluded that licensing our lead asset, sacituzumab govitecan, to Seattle Genetics, the leading ADC company, would give us the best opportunity to advance this product on behalf of advanced

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stage cancer patients. Sacituzumab govitecan has the potential to drive significant value for patients with multiple types of cancer who are in need of new therapy options, and we look forward to continuing its development with Seattle Genetics.”

 

Upon closing of the transactions contemplated by the development and license agreement, Immunomedics would receive an upfront payment of $250 million. In addition, Seattle Genetics will pay development, regulatory and sales-dependent milestone payments across multiple indications and geographic regions of up to a total maximum of approximately $1.7 billion, as well as tiered double-digit royalties. The closing of the transactions contemplated by the development and license agreement is subject to customary conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. In addition, for a limited period of time, Immunomedics has the right to continue discussions with a small number of parties that previously expressed interest in licensing sacituzumab govitecan. If a third party provides Immunomedics with a financially superior licensing offer, Seattle Genetics has the right to match any such offer, and if it decides not to match, Immunomedics has the right to accept the superior offer and terminate the proposed development and license agreement upon payment of a termination fee to Seattle Genetics.

 

Concurrent with the transaction, Seattle Genetics is purchasing approximately $15 million of common stock, representing a 2.8 percent stake in Immunomedics. Seattle Genetics has also been granted the right to purchase an additional 8,655,804 shares of common stock at a price of $4.90 for a defined period. The equity purchase and rights are not subject to closing of the development and license agreement.

 

Seattle Genetics’ financial guidance for 2017 provided on and as of February 9, 2017 does not take into account the impact of the transactions contemplated by the development and license agreement or the equity investment in Immunomedics. Seattle Genetics plans to update its financial guidance for 2017 after the closing of the transactions contemplated by the development and license agreement.

 

About Sacituzumab Govitecan

 

Sacituzumab govitecan is an ADC composed of an anti-TROP-2 antibody linked to SN-38, the active metabolite of irinotecan. TROP-2 is a cell-surface receptor that is expressed on several tumors, including cancers of the breast, colon, lung and bladder.

 

In data reported from a phase 1/2 trial, in 85 evaluable patients with metastatic TNBC, sacituzumab govitecan showed an objective response rate of 29 percent and a median duration of response of 10.8 months. For all 89 patients in the intent-to-treat population, the estimated median overall survival was 18.8 months. Sacituzumab govitecan was generally well-tolerated. The most common adverse events were nausea, neutropenia, diarrhea, anemia, vomiting and fatigue.

 

In 2016, sacituzumab govitecan received Breakthrough Therapy Designation from the FDA for the treatment of patients with TNBC who have failed prior therapies for metastatic disease. The regulatory agency has also granted the ADC Fast Track designation for patients with small-cell lung cancer (SCLC) or non-small-cell lung cancer (NSCLC). In addition, sacituzumab govitecan has been designated an orphan drug by the FDA for the treatment of patients with SCLC or pancreatic cancer and by the European Medicines Agency (EMA) for the treatment of patients with pancreatic cancer.

 

Conference Call Details

 

Seattle Genetics’ management will host a conference call and webcast to discuss the transaction today at 5:30 a.m. Pacific Time (PT); 8:30 a.m. Eastern Time (ET). The live event will be available from the Seattle Genetics website at www.seattlegenetics.com, under the Investors and News section, or by calling 800-279-9534 (domestic) or 719-325-2108 (international). The conference ID is 2159368. A replay of the

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discussion will be available beginning at approximately 8:30 a.m. PT today from the Seattle Genetics website or by calling 888-203-1112 (domestic) or 719-457-0820 (international), using conference ID 2159368. The telephone replay will be available until 5:00 p.m. PT on Monday, February 13, 2017.

 

About Seattle Genetics

 

Seattle Genetics is an innovative biotechnology company that develops and commercializes novel antibody-based therapies for the treatment of cancer. The company’s industry-leading antibody-drug conjugate (ADC) technology harnesses the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells. ADCETRIS ® (brentuximab vedotin), the company’s lead product, in collaboration with Takeda Pharmaceutical Company Limited, is the first in a new class of ADCs and is commercially available globally in 66 countries for relapsed classical Hodgkin lymphoma (HL) and relapsed systemic anaplastic large cell lymphoma (sALCL). Seattle Genetics is also advancing vadastuximab talirine (SGN-CD33A; 33A), an ADC in a phase 3 trial for acute myeloid leukemia. Headquartered in Bothell, Washington, Seattle Genetics has a robust pipeline of innovative therapies for blood-related cancers and solid tumors designed to address significant unmet medical needs and improve treatment outcomes for patients. The company has collaborations for its proprietary ADC technology with a number of companies including AbbVie, Astellas, Bayer, Celldex, Genentech, GlaxoSmithKline and Pfizer. More information can be found at www.seattlegenetics.com.

 

Forward-Looking Statements

 

Certain of the statements made in this press release are forward looking, such as those, among others, relating to the anticipated closing of the transactions contemplated by the development and license agreement and the timing and benefits thereof; the expected future impacts from, planned regulatory filings relating to and the performance of, sacituzumab govitecan; the future development, commercial and other opportunities relating to the licensing of sacituzumab govitecan, including the expectation of the near-term opportunity to launch a second drug in the U.S.; and other statements that are not historical facts. Actual results or developments may differ materially from those projected or implied in these forward-looking statements. Factors that may cause such a difference include, but are not limited to, risks related to Seattle Genetics’ ability to complete the transactions contemplated by the development and license agreement on the proposed terms and schedule, including risks and uncertainties related to the satisfaction of closing conditions and the possibility that competing offers by third parties for the licensing of sacituzumab govitecan will be made; risks associated with licensing transactions, such as the risks that sacituzumab govitecan will not be integrated into Seattle Genetics’ pipeline successfully or will not perform in clinical testing as expected, in which case, Seattle Genetics’ may not recover its investment in sacituzumab govitecan; risks related to future opportunities and plans for Seattle Genetics and sacituzumab govitecan, including uncertainty of the expected future regulatory filings and future development of sacituzumab govitecan; the possibility that if Seattle Genetics does not complete the transactions contemplated by the development and license agreement or does not achieve the perceived benefits of the proposed transaction as rapidly or to the extent anticipated by financial analysts or investors, the market price of Seattle Genetics’ common stock could decline; the difficulty and uncertainty of pharmaceutical product development; the inherent uncertainty associated with the regulatory approval process, including the risk that regulatory approval for sacituzumab govitecan in the U.S. or elsewhere may not be obtained in a timely manner or at all. More information about the risks and uncertainties faced by Seattle Genetics is contained in the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2016 filed with the Securities and Exchange Commission. Seattle Genetics disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

# # #

 

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CONTACTS :

Investors:

Peggy Pinkston

(425) 527-4160

ppinkston@seagen.com

 

Media:

Brandi Robinson

(425) 527-2910

brobinson@seagen.com

 

 

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Exhibit 6
Company Press Release

 

NEWS RELEASE

 

 

BLUELGREYT IMMUNOMEDICS, INC.

300 The American Road, Morris Plains, New Jersey 07950 ¤ (973) 605-8200 ¤ Fax (973) 605-8282

 

Immunomedics Enters into Exclusive Global Licensing Agreement with Seattle Genetics for Sacituzumab Govitecan (IMMU-132) with Potential Payments of up to

 

Approximately $2 Billion, Plus Royalties

 

Immunomedics to Receive $250 Million in Upfront Cash Payment; Plus Among Other Milestone Payments, an Additional $50 Million or Negotiated Economic Splits Relating to Rights Outside US, Canada and EU

 

Agreement Provides for Seattle Genetics to Develop, Manufacture and Commercialize IMMU-132 in Multiple Indications; Immunomedics Retains Rights to Co-Promote in the United States

 

Seattle Genetics to Make up to $57 Million Equity Investment for up to 9.9% Stake in Immunomedics Via an Immediate Purchase of Common Stock and a Three-Year Warrant, Each Priced at a 10% Premium to the Company’s 15-Day VWAP

 

Agreement Follows Months-Long Robust, Strategic Process Led by Independent Transaction Committee of the Board and Outside Financial Advisor, Greenhill & Co.

 

IMMU-132 Represents Potential for First-Ever Approved Therapy Specifically for

 

Advanced Metastatic Triple-Negative Breast Cancer (TNBC)

 

Company to Host Conference Call at 8:00 AM Eastern Time to Discuss Transaction

 

Morris Plains, N.J., February 10, 2017 – Immunomedics, Inc. (NASDAQ: IMMU) (“Immunomedics”) today announced that it has entered into an exclusive global licensing agreement with Seattle Genetics, Inc. (NASDAQ: SGEN), an innovative global biotechnology company that develops and commercializes novel antibody-drug conjugates (ADCs) for the treatment of cancer. Under the agreement, Seattle Genetics will develop, fund, manufacture and commercialize IMMU-132, Immunomedics’ proprietary solid tumor therapy candidate.

 

The agreement also provides that Seattle Genetics will be responsible for initiating the Phase 3 clinical trial of IMMU-132 in patients with metastatic triple-negative breast

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cancer (TNBC) and submitting the initial Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) for accelerated approval. The agreement includes the development of additional indications for IMMU-132, including urothelial cancer (UC), small-cell lung cancer (SCLC) and non-small-cell lung cancer (NSCLC), which are currently in Phase 2 clinical studies, along with other solid tumor indications being studied in ongoing clinical trials.

 

Cynthia L. Sullivan, President and Chief Executive Officer of Immunomedics, said, “We are pleased to enter into this exclusive worldwide licensing agreement with Seattle Genetics to further advance IMMU-132 on behalf of patients with late-stage cancers, who have limited therapeutic options, while delivering significant and compelling near- and long-term value to stockholders. Since its founding, Immunomedics has been dedicated to   creating and advancing novel therapies in challenging diseases with unmet therapeutic needs. Seattle Genetics’ reputation, development portfolio and track record make them an ideal partner to advance IMMU-132. Additionally, this agreement validates the dedication and effort by our entire internal teams in research and development, manufacturing, clinical, regulatory and general administration. In just over three years, we have brought IMMU-132 through clinical developments in multiple indications, and have advanced the TNBC indication to a potential accelerated approval and launch by late 2017 or early 2018, which could make IMMU-132 available to patients dealing with a highly malignant form of breast cancer. We are proud to have achieved this critical milestone and thank our entire team for their hard work. Immunomedics looks forward to appropriately supporting Seattle Genetics as it seeks to bring IMMU-132 to commercialization.”

 

Clay Siegall, Ph.D., President and Chief Executive Officer of Seattle Genetics, said, “As the global leader in ADCs, we are excited to enter into this licensing agreement with Immunomedics for sacituzumab govitecan. This program would complement our rich pipeline of late- and early-stage programs, potentially allowing us to bring a new therapy for triple-negative breast cancer to patients in need. We have successfully demonstrated our expertise in the development, manufacturing and commercialization of ADCs in oncology, and we look forward to working with Immunomedics to advance this program.”

 

Dr. David M. Goldenberg, Chairman and Chief Scientific Officer of Immunomedics, commented, “After extensive preclinical research conducted by our scientists, and about three years of clinical development by our clinicians and our collaborating external investigators studying over 400 patients, we have decided that this is the right time to out-license IMMU-132. Although we have had partnerships in the past, I am extremely enthusiastic about entering into this collaboration with Seattle Genetics, a company that has achieved a leadership role in antibody-drug conjugates. Both companies are committed to bringing important products to cancer patients. This common goal is sincere and will be the basis of making IMMU-132 fulfill its full potential.”

 

Dr. Goldenberg further remarked, “After a long period of interactions with many interested partnering candidates, and a considerable period of discussion with Seattle

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Genetics, we concluded that working with this group of successful business and marketing executives, clinicians and scientists would allow us to contribute our own scientific and clinical knowledge to them as they further develop IMMU-132 and bring it to commercialization. We are particularly pleased with their enthusiasm, and that this arrangement allows us to continue our ongoing Phase 2 studies in a number of additional cancer types while we transition this product candidate to them.”

 

Terms of the Agreement

 

The agreement provides for potential payments of approximately $2 billion across multiple indications, plus double-digit tiered royalties on global net sales. Under the terms of the agreement, Immunomedics will receive $250 million in upfront cash payment, plus, among other milestone payments, an additional $50 million (or negotiated economic splits) relating to rights outside the U.S., Canada and the EU. The remainder of the consideration comprises approximately $1.7 billion that is contingent upon achieving certain clinical, development, regulatory and sales milestones, including an anticipated near-term milestone for acceptance of the Biologics License Application (BLA) by the U.S. Food and Drug Administration for TNBC, additional milestones based on regulatory approval of IMMU-132 for TNBC in the U.S. and other territories, and future development and regulatory milestones for additional indications beyond TNBC. Future royalty payments are tiered double-digit royalties based on global net sales. In addition, Immunomedics will retain the right to elect to co-promote IMMU-132 in the United States by participating in 50% of the sales effort, subject to certain parameters set forth in the agreement.

 

Joint Steering Committee

 

Upon completion of the transaction, Immunomedics and Seattle Genetics will each appoint representatives to serve on a Joint Steering Committee (JSC) that will be chaired by a Seattle Genetics representative. The JSC will be responsible for, among other things, determining the overall development, commercialization, manufacturing and intellectual property strategy for IMMU-132.

 

Timing and Approvals

 

The companies expect the transaction to close in the first quarter of 2017, subject to expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, as well as other customary closing conditions.

 

Modified Go-Shop Period

 

Under the terms of the agreement, for a limited period, through February 19, 2017, Immunomedics has the right to continue negotiating with a select number of parties still in the strategic process, and accept a superior proposal. Seattle Genetics has the right to match any superior proposal and if it decides not to match, Immunomedics has the right to accept the superior proposal and terminate the proposed development and license agreement upon payment of a termination fee to Seattle Genetics.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Equity Investment

 

Concurrent with the transaction, Seattle Genetics is purchasing 3,000,000 shares of common stock, representing an approximately 2.8% stake in Immunomedics, at a per share price of $4.90, which represents a 10% premium to Immunomedics’ 15-day trading volume weighted average stock price of $4.45 for the period ending at the close of trading February 9, 2017, the last trading day prior to entering into the global licensing agreement.  Seattle Genetics will also be issued a three-year warrant to purchase 8,655,804 shares of common stock at the same price, which shall be exercisable when the Company has sufficient authorized shares of common stock to enable the exercise of the warrant. Seattle Genetics will not be eligible to vote its stake at the upcoming 2016 Annual Meeting of Stockholders.

 

“We are delighted to welcome Seattle Genetics to our stockholder base and appreciate their commitment to Immunomedics. Our promising clinical results and this partnership validating the promise of our novel antibody-drug conjugation technology stimulates us to advance our other product candidates using this platform technology,” added Ms. Sullivan.

 

Strategic Process

 

The agreement with Seattle Genetics follows a 13 months-long competitive strategic process led over the past several months by outside financial advisor, Greenhill & Co. (“Greenhill”), which was retained for their global capabilities and their significant experience in biopharma M&A and licensing transactions. Greenhill & Co. reports directly to the Transaction Committee of the Board, composed exclusively of the Company’s five independent directors.

 

Jason Aryeh, independent Vice Chairman of the Immunomedics Board, stated, “We are pleased to offer Immunomedics stockholders the compelling and significant value provided by this agreement with Seattle Genetics. This agreement is the culmination of a robust strategic process, led by Greenhill and the Transaction Committee.  Greenhill’s outreach was to more than 45 parties and involved more than half of those parties entering into confidentiality agreements and participating in diligence. In addition to the highly competitive financial terms of the transaction, we believe that Seattle Genetics is the ideal partner for IMMU-132.”

 

Future Financial Plans

 

Upon closing of the transaction, the Immunomedics Board and management will evaluate and prioritize the Company’s remaining clinical programs, long- and short-term funding requirements and tax-efficient ways to return capital to stockholders, including share buybacks. The Company will announce the outcome of this review once a decision has been reached.

 

Immunomedics expects that the transaction will fulfill its liquidity needs such that the Company can fund itself without additional equity raises for the foreseeable future.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Advisors

 

Greenhill & Co., LLC, is serving as financial advisor to Immunomedics and DLA Piper LLP (US) is serving as legal advisor on the transaction.

 

Conference Call to Discuss Transaction and Second Quarter 2017 Financial Results

 

Immunomedics will host a conference call and live audio webcast today at 8:00 AM Eastern Time to discuss this announcement and will also discuss the Company’s second quarter 2017 financial results announced separately yesterday, February 9, 2017. The Company will post a presentation for analysts and investors to its website, www.immunomedics.com, at least 15 minutes prior to the beginning of the conference call.

 

To access the conference call, please dial (877) 303-2523 or (253) 237-1755 using the Conference ID 58226264. The conference call will be also webcast via the Investors page on Immunomedics’ website at www.immunomedics.com.

 

Approximately two hours following the live event, a webcast replay of the conference call will be available on the Company’s website for 30 days through March 11, 2017.

 

About Immunomedics

 

Immunomedics (the “Company”) is a clinical-stage biopharmaceutical company developing monoclonal antibody-based products for the targeted treatment of cancer, autoimmune disorders and other serious diseases. Immunomedics’ advanced proprietary technologies allow the Company to create humanized antibodies that can be used either alone in unlabeled or “naked” form, or conjugated with radioactive isotopes, chemotherapeutics, cytokines or toxins. Using these technologies, Immunomedics has built a pipeline of eight clinical-stage product candidates. Immunomedics’ portfolio of investigational products includes antibody-drug conjugates (ADCs) that are designed to deliver a specific payload of a chemotherapeutic directly to the tumor while reducing overall toxic effects that are usually found with conventional administration of these chemotherapeutic agents. Immunomedics’ most advanced ADCs are sacituzumab govitecan (IMMU-132) and labetuzumab govitecan (IMMU-130), which are in Phase 2 trials for a number of solid tumors and metastatic colorectal cancer, respectively. IMMU-132 has received Breakthrough Therapy Designation from the FDA for the treatment of patients with triple-negative breast cancer who have failed at least two prior therapies for metastatic disease. Immunomedics has a research collaboration with Bayer to study epratuzumab as a thorium-227-labeled antibody. Immunomedics has other ongoing collaborations in oncology with independent cancer study groups. The IntreALL Inter-European study group is conducting a large, randomized Phase 3 trial combining epratuzumab with chemotherapy in children with relapsed acute lymphoblastic leukemia at clinical sites in Australia, Europe, and Israel. Immunomedics also has a number of other product candidates that target solid tumors and hematologic malignancies, as well as other diseases, in various stages of clinical and preclinical development. These include combination therapies involving its antibody-drug conjugates, bispecific antibodies targeting cancers and infectious diseases as T-cell redirecting immunotherapies, as well as bispecific antibodies for next-generation cancer and autoimmune disease therapies, created using its patented DOCK-AND-LOCK® protein conjugation technology. The

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Company believes that its portfolio of intellectual property, which includes approximately 301 active patents in the United States and more than 400 foreign patents, protects its product candidates and technologies. For additional information on the Company, please visit its website at www.immunomedics.com. The information on its website does not, however, form a part of this press release.

 

Important Additional Information

 

Immunomedics, Inc. (the “Company”), its directors and certain of its executive officers will be deemed to be participants in the solicitation of proxies from Company stockholders in connection with the matters to be considered at the Company’s 2016 Annual Meeting. The Company has filed a definitive proxy statement and form of WHITE proxy card with the U.S. Securities and Exchange Commission (the “SEC”) in connection with any such solicitation of proxies from Company stockholders. COMPANY STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS AND SUPPLEMENTS), THE ACCOMPANYING WHITE PROXY CARD AND ANY OTHER RELEVANT DOCUMENTS THAT THE COMPANY FILES WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Information regarding the identity of participants, and their direct or indirect interests, by security holdings or otherwise, is set forth in the proxy statement and other materials filed by the Company with the SEC. Stockholders will be able to obtain the proxy statement, any amendments or supplements to the proxy statement and other documents filed by the Company with the SEC for no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Company’s website at www.immunomedics.com, by writing to Immunomedics, Inc. at 300 The American Road, Morris Plains, New Jersey 07950, or by calling the Company’s proxy solicitor, or by calling Dr. Chau Cheng, Senior Director, Investor Relations & Corporate Secretary, (973) 605-8200, extension 123.

 

Forward-Looking Statements

 

This release, in addition to historical information, may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Such statements, including statements regarding clinical trials (including the funding therefor, anticipated patient enrollment, trial outcomes, timing or associated costs), regulatory applications and related timelines, out-licensing arrangements (including the timing and amount of contingent payments under the license and development agreement with Seattle Genetics), forecasts of future operating results, potential collaborations, and capital raising activities, involve significant risks and uncertainties and actual results could differ materially from those expressed or implied herein. Factors that could cause such differences include, but are not limited to, the Company’s dependence on business collaborations or availability of required financing from capital markets, or other sources on acceptable terms, if at all, in order to further develop our products and finance our operations, new product development (including clinical trials outcome and regulatory requirements/actions), the risk that we or any of our collaborators may be unable to secure regulatory approval of and market our drug candidates, risks associated with the outcome of pending litigation and competitive risks to marketed products, and the

Exh. 6-6


 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Company’s ability to repay its outstanding indebtedness, if and when required, as well as the risks discussed in the Company’s filings with the Securities and Exchange Commission. The Company is not under any obligation, and the Company expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

 

For More Information:

Dr. Chau Cheng

Senior Director, Investor Relations & Corporate Secretary

(973) 605-8200, extension 123

ccheng@immunomedics.com

 

Media

Dan Katcher / Ed Trissel / Nick Lamplough

Joele Frank, Wilkinson Brimmer Katcher

(212) 355-4449

 

Investors

Dan Burch/Bob Marese

MacKenzie Partners, Inc.

(212) 929-5500

 

 

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

Exhibit 7

 

Manufacturing Agreements of Company***

 

Exh. 7-1


Exhibit 10.2

 

EXECUTION VERSION

 

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “ Agreement ”) is dated as of February 10, 2017 (the “ Effective Date ”), by and between Immunomedics, Inc., a Delaware corporation (the “ Company ”), and Seattle Genetics, Inc., a Delaware corporation (together with any valid assignees of its rights hereunder pursuant to Section ‎5.6, the “ Purchaser ”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “ Securities Act ”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, shares of common stock of the Company.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

Article I  

DEFINITIONS

1.1 Definitions . In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section ‎1.1:

Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

Board of Directors ” means the board of directors of the Company.

Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

Closing ” means the closing of the purchase and sale of the Shares pursuant to Section ‎2.1.

Closing Date ” means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchaser’s obligations to pay the Subscription Amount and (ii) the Company’s obligation to deliver the Shares has been satisfied or waived.

Commission ” means the Securities and Exchange Commission.


 

Common Stock ” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

Common Stock Equivalents ” means any securities of the Company or its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants  or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

Data Room ” means the on-line “virtual data room” set up in connection with this Agreement (and prior to the date hereof) to allow the Purchaser to review diligence materials provided by the Company.

Disqualification Events ” shall have the meaning ascribed to such term in Section ‎3.1(o).

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

FCPA ” means the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

GAAP ” shall have the meaning ascribed to such term in Section ‎3.1(g).

Governmental Entity ” means any:  (i) federal, state, local, municipal, foreign or other government; (ii) governmental, quasi-governmental, supranational or regulatory authority (including any governmental division, department, agency, commission, instrumentality, organization, unit or body and any court or other tribunal); or (iii) self-regulatory organization (including the Nasdaq Stock Market).

Liens ” means a lien, charge, security interest, encumbrance, hypothecation, right of first refusal, preemptive right or other restriction.

Material Adverse Effect ” means any circumstance, development, effect, change, event, occurrence or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (i) the legality, validity or enforceability of any Transaction Document, (ii) the results of operations, assets, business or financial condition of the Company and its subsidiaries, taken as a whole, or (iii) the Company’s and its subsidiaries’ ability to perform in any material respect on a timely basis their respective obligations under any Transaction Document.

OFAC ” means the Office of Foreign Assets Control of the U.S. Treasury Department.

Outside Date ” shall have the meaning ascribed to such term in Section ‎2.2(c).

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Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

Registration Rights Agreement ” means the registration rights agreement, executed concurrently with this Agreement, between the Company and the Purchaser, in the form attached hereto as Exhibit A .  “ Registration Rights Agreement ” shall also include the registration rights agreement as amended, modified or supplemented from time to time in accordance with its terms.

Required Filings ” shall have the meaning ascribed to such term in Section ‎3.1(d).

Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder or implementing the provisions thereof.

SEC Reports ” shall have the meaning ascribed to such term in Section ‎3.1(g).

Securities Act ” shall have the meaning ascribed to such term in the Recitals hereto.

Shares ” means the shares of Common Stock issued or issuable to the Purchaser pursuant to this Agreement.

Short Sales ” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

Solicitor ” shall have the meaning ascribed to such term in Section ‎3.1(o).

Subscription Amount ” means $14,691,930.

Trading Day ” means a day on which the Trading Market is open for trading.

Trading Market ” means the Nasdaq Global Market.

Transaction Documents ” means this Agreement, the Registration Rights Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.

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Transfer Agent ” means Broadridge Corporate Issuer Solutions, Inc., the current transfer agent of the Company, with a mailing address of Broadridge Corporate Issuer Solutions, P.O. Box 1342, Brentwood, NY 11717, telephone number of (877) 830-4936, facsimile number of (215) 553-5402 and e-mail of shareholder@broadridge.com, and any successor transfer agent of the Company.

Warrant ” shall have the meaning ascribed to such term in Section ‎4.8(a).

Warrant Expiration Date ” shall have the meaning ascribed to such term in Section ‎4.8(a).

Article II  

PURCHASE AND SALE

2.1 Closing . On the Closing Date, upon the terms and subject to the conditions set forth herein, concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchaser agrees to purchase in the aggregate three million (3,000,000) Shares. The Purchaser shall deliver to the Company, via wire transfer, immediately available funds equal to the Subscription Amount, and the Company shall deliver to the Purchaser the Shares, and the Company and the Purchaser shall deliver the other items set forth in Section ‎2.2 at the Closing. Upon the satisfaction of the covenants and conditions set forth in Sections ‎2.2 and ‎2.3, the Closing shall occur at the offices of DLA Piper LLP (US), 51 John F. Kennedy Parkway, Suite 120, Short Hills, New Jersey 07078, or such other location as the parties shall mutually agree.

2.2 Deliveries .

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Purchaser the following: 

(i) this Agreement duly executed by the Company;

(ii) the Registration Rights Agreement duly executed by the Company;

(iii) a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to issue the Shares into book entry;

(iv) a customary opinion of DLA Piper LLP (US), as counsel for the Company, to the Purchaser, dated as of the Closing Date, in a form and substance reasonably acceptable to the Purchaser;

(v) a certificate of the Secretary of State of Delaware certifying that the Company is duly incorporated under the laws of the State of Delaware and is in good standing and has a legal corporate existence so far as the records of the Secretary of State of Delaware show;

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(vi) a certificate of a duly authorized officer of the Company certifying that all conditions precedent to the Purchaser’s obligations in connection with Closing have been fulfilled; and

(vii) a certificate of the secretary of the Company certifying (A) the Company’s Second Amended and Restated By-Laws, (B) the Company’s Amended and Restated Certificate of Incorporation, as amended and (C)  the resolutions of the Board of Directors approving the Transaction Documents and the transactions contemplated hereby.

(b) On or prior to the Closing Date, the Purchaser shall deliver or cause to be delivered to the Company the following:

(i) this Agreement duly executed by the Purchaser;

(ii) the Registration Rights Agreement duly executed by the Purchaser; and

(iii) a cash amount equal to the Subscription Amount by wire transfer to the account as specified in writing by the Company.

(c) If the Purchaser provides the cash amount set forth in Section ‎2.2(b)(iii) prior to the Closing Date and the Closing Date does not occur within one (1) Business Day following the receipt of such cash amount (the “ Outside Date ”), the Company shall return the full cash amount to the Purchaser within one (1) Business Day following the Outside Date.  The Company acknowledges that any cash amount received from the Purchaser prior to the Closing Date is property of the Purchaser and is being held in trust by the Company for the Purchaser until the occurrence of the Closing on the Closing Date. 

2.3 Closing Conditions .

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met, unless otherwise waived by the Company:

(i) the representations and warranties of the Purchaser contained herein shall be true and correct as of the Closing Date;

(ii) all obligations, covenants and agreements of the Purchaser required to be performed at or prior to the Closing Date shall have been performed;

(iii) the Development and License Agreement, dated as of the date hereof, by and between the Purchaser and the Company (the “ License Agreement ”) shall have been executed by the Purchaser and the Company; and

(iv) the Purchaser shall have delivered to the Company each of the items set forth in Section ‎2.2(b) of this Agreement.

(b) The obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being met, unless otherwise waived by the Purchaser:

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(i) the representations and warranties of the Company contained herein shall be true and correct as of the Closing Date;

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

(iii) the License Agreement shall have been executed by the Purchaser and the Company; and

(iv) the Company shall have delivered to the Purchaser each of the items set forth in Section ‎2.2(a) of this Agreement.

Article III  

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company . Except as set forth in the SEC Reports (but (i) without giving effect to any amendment thereof filed with, or furnished to, the Commission on or after the date hereof and (ii) excluding any disclosures contained under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or in any other section to the extent they are forward-looking statements or cautionary, predictive or forward-looking in nature) and the Data Room, which SEC Reports and Data Room shall be deemed a part hereof and shall qualify any representation made herein, the Company hereby makes the following representations and warranties to the Purchaser:

(a) Organization and Qualification . The Company and each of its subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, by-laws or other organizational or charter documents. Each of the Company and its subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification, except where such Proceeding could not have or reasonably be expected to result in a Material Adverse Effect.

(b) Authorization; Enforcement . The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations under the Transaction Documents. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Filings. Each Transaction Document has

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been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms of the Transaction Documents, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(c) No Conflicts . The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Shares and the consummation by the Company of the other transactions contemplated by the Transaction Documents do not and will not (i) conflict with or violate any provision of the Company’s or any subsidiary’s certificate or articles of incorporation, by-laws or other organizational or charter documents, or (ii) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement, credit facility, debt or other instrument (evidencing a Company or subsidiary debt or otherwise) or other understanding to which the Company or any subsidiary is a party or by which any property or asset of the Company or any subsidiary is bound or affected, or (iii) subject to the Required Filings, conflict with or result in a violation of any material law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a subsidiary is bound or affected.

(d) Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section ‎4.4 of this Agreement, and (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “ Required Filings ”).

(e) Issuance of the Shares . The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.

(f) Capitalization . The capitalization of the Company is as set forth in the Company’s SEC Reports. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plan and pursuant to the conversion or exercise of Common Stock Equivalents. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Shares and except as

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set forth in the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or preferred stock, or contracts, commitments, understandings or arrangements by which the Company or any subsidiary is or may become bound to issue additional shares of Common Stock, Common Stock Equivalents, preferred stock or preferred stock equivalents. All of the outstanding shares and warrants of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares or warrants was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.

(g) SEC Reports; Financial Statements . The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Sections 13(a) and 15(d) thereof, for the three (3) years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “ SEC Reports ”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“ GAAP ”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

(h) Material Changes; Undisclosed Events, Liabilities or Developments . Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not made any changes to its accounting policies, (iv) the Company has not declared or made any

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dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.

(i) Litigation . Except as disclosed in the SEC Reports and the Data Room, there is no action, suit, inquiry, notice of violation, Proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents, the Shares or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.

(j) Compliance . Neither the Company nor any subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any subsidiary under), nor has the Company or any subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement (or any documents related to the foregoing) or any other material agreement or material instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

(k) Regulatory Permits . The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any subsidiary has received any notice of Proceedings relating to the revocation or modification of any material permit.

(l) Private Placement . Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section ‎3.2, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Purchaser as contemplated hereby. The issuance and sale of the Shares hereunder does not contravene the rules and regulations of the Trading Market.

(m) Investment Company . The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as amended.

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(n) No General Solicitation . Neither the Company nor to its knowledge any person acting on behalf of the Company has offered or sold any of the Shares by any form of general solicitation or general advertising. To the knowledge of the Company, no person acting on behalf of the Company has offered the Shares for sale other than to the Purchaser and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

(o) No “Bad Actor” Disqualification .  The Company has exercised reasonable care, in accordance with Commission rules and guidance, and has conducted a factual inquiry, including by the procurement of relevant questionnaires from each Covered Person (as defined below) or other means, the nature and scope of which reflect reasonable care under the relevant facts and circumstances, to determine whether any Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (“ Disqualification Events ”).  To the Company’s knowledge, after conducting such sufficiently diligent factual inquiries, no Covered Person (as defined below) is subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act.  The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act.  “Covered Persons” are those persons specified in Rule 506(d)(1) under the Securities Act, including the Company, any predecessor or affiliate of the Company, any director, executive officer, other officer participating in the offering, any beneficial owner of twenty percent (20%) or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, any promoter (as defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of the sale of the Shares, and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Shares (a “ Solicitor ”), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any Solicitor.

(p) Use of Proceeds . The Company will use the net proceeds from the sale of the Shares hereunder for general working capital purposes (which shall not include any dividend or distribution).

(q) Compliance with Registration Requirements . The Company meets the requirements for use of Form S-3 under the Securities Act and all of the currently outstanding Common Stock has been duly registered under the Securities Act.

(r) Accounting and Disclosure Controls . The Company and its subsidiaries maintain and have established and maintained effective “internal control over financial reporting” (as defined in Rule 13a-15 promulgated by the Commission pursuant to the Exchange Act). The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the SEC Reports, there has not been (A) at any time during

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the Company’s five consecutive fiscal years ended with and including the Company’s most recent fiscal year or at any time subsequent thereto, any material weakness (as defined in Rule 1-02 of Regulation S-X of the Commission) in the Company’s internal control over financial reporting (whether or not remediated), or (B) any fraud, whether or not material, involving management or other employees who have a role in the Company’s internal control over financial reporting and, since the Company’s most recent fiscal year end, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company and its subsidiaries have established, maintained and periodically evaluate the effectiveness of “disclosure controls and procedures” (as defined in Rules 13a-15 and 15d-15 promulgated by the Commission pursuant to the Exchange Act); such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and the interactive data in eXtensible Business Reporting Language included as an exhibit to the SEC Reports or incorporated by reference in any SEC Reports are recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive officer or officers and principal financial officer or officers, as appropriate, to allow timely decisions regarding disclosure. The Company’s independent public accountants and the audit committee of the Company’s board of directors have been advised of all material weaknesses, if any, and significant deficiencies (as defined in Rule 1-02 of Regulation S-X of the Commission), if any, in the Company’s internal control over financial reporting and of all fraud, if any, whether or not material, involving management or other employees who have a role in the Company’s internal control over financial reporting, in each case that occurred or existed, or was first detected, at any time during the Company’s five consecutive fiscal years ended with and including the Company’s most recent fiscal year end or at any time subsequent thereto. 

(s) Compliance with the Sarbanes-Oxley Act . There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act with which any of them is required to comply, including Section 402 related to loans and Sections 302 and 906 related to certifications.

(t) OFAC . Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by OFAC; and the Company will not directly or indirectly use any of the proceeds from the sale of Shares by the Company in the offering contemplated by this Agreement, or lend, contribute or otherwise make available any such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(u) Foreign Corrupt Practices Act . Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that has resulted or would result in a violation by any such person of the FCPA, including, without limitation, any offer, payment, promise to pay or

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authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and its subsidiaries, and, to the knowledge of the Company, its other affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to ensure, continued compliance therewith.

(v) Brokers . There is not a broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any of the transactions contemplated by this Agreement or the other Transaction Documents, except for fees and/or commissions paid or payable to Greenhill & Co., Inc.

3.2 Representations and Warranties of the Purchaser . The Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

(a) Organization; Authority . The Purchaser is an entity duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation with the requisite power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations under the Transaction Documents. The execution and delivery of each of the Transaction Documents by the Purchaser and the consummation by it of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary action on the part of the Purchaser. Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms of the Transaction Documents, will constitute the valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b) Own Account . The Purchaser understands that the Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Shares (this representation and warranty not limiting the Purchaser’s right to sell the Shares in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law. The Purchaser is acquiring the Shares hereunder in the ordinary course of its business.

(c) Purchaser Status . At the time the Purchaser was offered the Shares, it was, and at the date hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as

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defined in Rule 144A(a) under the Securities Act. The Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and all of the SEC Reports have been made available to the Purchaser.

(d) Experience of the Purchaser . The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.

(e) General Solicitation . The Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar attended by the Purchaser.

(f) Short Sales and Confidentiality Prior To The Date Hereof . Other than the transactions contemplated hereunder and under the Transaction Documents, the Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with the Purchaser, directly or indirectly executed any purchases or dispositions, including Short Sales, of the securities of the Company during the period commencing from the time that the Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder until the date hereof. Other than to other Persons party to this Agreement and to its representatives, the Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

(g) Diligence .  Purchaser has conducted the diligence appropriate as a potential investor in the Company and has, in connection with such diligence review, reviewed the SEC Reports.

(h) No “Bad Actor” Disqualification Events .  Neither the Purchaser nor any of its directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members is subject to any of the “bad actor” Disqualification Events, except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) under the Securities Act and disclosed in writing in reasonable detail to the Company.

Article IV  

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions .

(a) The Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Shares (other than pursuant to an effective registration statement or Rule 144 promulgated under the Securities Act, to the Company or to an Affiliate of the Purchaser or in connection with a pledge as contemplated in Section ‎4.1(b)), the Company may require the transferor thereof to provide to the Company an opinion of counsel

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selected by the transferor to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of the Purchaser under this Agreement.

(b) The Purchaser agrees to the imprinting, so long as is required by this Section ‎4.1, of a legend on any of the Shares in the following form:

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND, ACCORDINGLY, MAY NOT BE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (2) PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES ACT, (3) TO THE COMPANY, (4) TO AN AFFILIATE OF THE INITIAL HOLDER OF THIS SECURITY, (5) IN CONNECTION WITH A PLEDGE OR (6) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE AND FEDERAL SECURITIES LAWS AS SHALL BE EVIDENCED (IN THE CASE OF (6) ONLY) BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT UPON THE COMPANY’S REQUEST.

(c) Certificates evidencing the Shares shall not contain any legend (including the legend set forth in Section ‎4.1(b)), (i) following any sale of such Shares pursuant to Rule 144, or (ii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its legal counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section ‎4.1(c), it will, no later than three Trading Days following the delivery by the Purchaser to the Company or the Transfer Agent of a certificate representing Shares issued with a restrictive legend, deliver or cause to be delivered to the Purchaser a certificate representing such Shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section ‎4.1(c). Certificates for Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by the Purchaser.

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(d) The Purchaser agrees that it will sell any Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Shares are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Shares as set forth in this Section ‎4.1 is predicated upon the Company’s reliance upon this understanding.

4.2 Furnishing of Information . As long as the Purchaser owns Shares purchased pursuant to this Agreement, the Company shall timely file (or obtain extensions in respect thereof and file within the applicable grace period) all materials required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as the Purchaser owns Shares purchased pursuant to this Agreement, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchaser and make publicly available in accordance with Rule 144(c) such information as is required for the Purchaser to sell the Shares under Rule 144. The Company shall take such further action as any holder of Shares may reasonably request, to the extent required from time to time to enable such holder to sell such Shares without registration under the Securities Act within the requirements of the exemption provided by Rule 144.

4.3 Integration . The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Purchaser or that would be integrated with the offer or sale of the Shares to the Purchaser for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

4.4 Securities Laws Disclosure; Publicity . The Company shall, within four (4) Trading Days immediately following the date hereof, issue a Current Report on Form 8-K, disclosing the material terms of the transactions contemplated hereby.

4.5 Use of Proceeds . The Company shall use the net proceeds from the sale of the Shares hereunder for general working capital purposes, which shall not include the payment of any dividend or distribution.

4.6 Form D; Blue Sky Filings . The Company agrees to timely file a Form D with respect to the Shares as required under Regulation D and to provide a copy thereof, promptly upon request of the Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Shares for, sale to the Purchaser at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Purchaser.

4.7 Listing of Shares . The Company shall cause the Shares to be approved for listing on the Trading Market promptly following the Closing Date.  The Company shall cause any

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shares of Common Stock deliverable upon exercise of the Warrant to be approved for listing on the Trading Market promptly following the exercise of the Warrant.

4.8 Warrant .  

(a) No later than February 16, 2017, the Company shall execute and deliver to, and in favor of, the Purchaser, a warrant on customary terms reasonably acceptable to the Purchaser (the “ Warrant ”), pursuant to which the Purchaser will have the right, upon the approval by the Company’s stockholders of an amendment to the Company’s certificate of incorporation, and filing thereof, increasing such number of shares of common stock in an amount sufficient to allow for the exercise of the shares being issued upon the exercise of the Warrant, until February 10, 2020 (the “ Warrant Expiration Date ”), to purchase up to 8,655,804 shares of Common Stock, for cash only, at an exercise price of $4.90 per share (in each case, subject to adjustment in accordance with the terms of the Warrant).

(b) From the date hereof until the earliest to occur of (A) the exercise in full of the Warrant and (B) the Warrant Expiration Date:

(i) any shares of Common Stock authorized for issuance by the Company, but not currently reserved for issuance as of the date hereof, shall first be reserved for issuance for purposes of permitting the exercise of the Warrant in full, up to such amount necessary to permit the exercise of the Warrant in full; and

(ii) at any time there is not a sufficient number of authorized and unissued shares of Common Stock to permit the exercise of the Warrant in full, the Company may not issue or reserve for issuance shares of Common Stock for any purpose other than for the exercise of the Warrant in full (unless such shares are currently reserved for issuance as of the date hereof, in which case they may be issued in accordance with the terms of any equity compensation plan or other agreement pursuant to which they are being reserved).

Article V  

MISCELLANEOUS

5.1 Fees and Expenses . Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery to the Purchaser of any Shares.

5.2 Entire Agreement . The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with

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respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

5.3 Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. Either party may from time to time change its address for notice by giving at least five (5) days’ written notice of such changed address to the other party.

5.4 Amendments; Waivers . No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

5.5 Headings . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

5.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser (other than by merger). The Purchaser may assign any or all of its rights under this Agreement to any Person to whom the Purchaser assigns or transfers any Shares, provided such transferee agrees in writing to be bound, with respect to the transferred Shares, by the provisions of the Transaction Documents that apply to the “Purchaser.” Any assignment in violation of the foregoing shall be null and void.

5.7 No Third-Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

5.8 Governing Law . All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and

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any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding that it is not personally subject to the jurisdiction of any such court, that such Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence a Proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.

5.9 Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

5.10 Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

5.11 Rescission and Withdrawal Right . Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever the Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

18


 

5.12 Replacement of Shares . If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Shares.

5.13 Remedies; Specific Performance . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser and the Company will be entitled to specific performance under the Transaction Documents (including the Company’s obligation to execute the Warrant). The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

5.14 Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

5.15 Waiver of Jury Trial . In any Proceeding in any jurisdiction brought by any party against any other party, the parties each knowingly and intentionally, to the greatest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and expressly waives forever trial by jury.

5.16 Allocation .  The Purchaser and the Company shall cooperate to determine the amounts to be allocated (for U.S. federal tax purposes) to the Shares and the Warrant.  In the case of failure to reach an agreement on such allocation within ninety (90) days of the date hereof, the allocation shall be made by a nationally recognized accounting firm jointly selected by the Purchaser and the Company, with costs to be shared equally.  The Purchaser and the Company shall report the tax treatment of the transactions contemplated in this agreement consistent with the allocation determined under this Section ‎5.16.

(Signature Pages Follow)

 

 

19


 

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

COMPANY:

 

 

 

 

 

Immunomedics, Inc.

 

Address for Notice:

 

 

300 The American Road

 

 

Morris Plains, New Jersey 07950

By:

/s/ Cynthia L. Sullivan

 

Attention: Michael R. Garone, Chief Financial

Name:

Cynthia L. Sullivan

 

Officer

Title:

President and

 

Fax: (973) 605-8511

 

Chief Executive Officer

 

 

 

 

 

With a copy to (which shall not constitute notice):

 

 

 

DLA Piper LLP (US)

 

 

 

51 John F. Kennedy Parkway

 

 

 

Short Hills, New Jersey 07078

 

 

 

Attention:  Andrew P. Gilbert, Esq.

 

 

 

Fax: (973) 520-2573

 

 

 

 

PURCHASER:

 

 

 

 

 

Seattle Genetics, Inc.

 

Address for Notice:

 

 

 

Seattle Genetics, Inc.

 

 

 

21823 - 30th Drive S.E.

By:

/s/ Clay B. Siegall

 

Bothell, Washington 98021

Name:

Clay B. Siegall, Ph.D.

 

Attention: General Counsel

Title:

President and

 

Fax: (425) 527-4107

 

Chief Executive Officer

 

 

 

 

 

With a copy to (which shall not constitute notice):

 

 

 

Sullivan & Cromwell LLP

 

 

 

125 Broad Street

 

 

 

New York, New York 10004

 

 

 

Attention:  Krishna Veeraraghavan, Esq.
Ari B. Blaut, Esq.

 

 

 

Fax: (212) 558-3588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]  


 

 

Exhibit A

Registration Rights Agreement

[See attached.]

 

 


Exhibit 31.1

Certification of Chief Executive Officer

I, Cynthia L. Sullivan, certify that:

1.   I have reviewed this quarterly report of Immunomedics, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 10, 2017

 

/s/  Cynthia L. Sullivan

 

Cynthia L. Sullivan

 

President and Chief Executive Officer

 

 


Exhibit 31.2

Certification of Chief Financial Officer

I, Michael R. Garone, certify that:

1.   I have reviewed this quarterly report of Immunomedics, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2017

 

/s/  Michael R. Garone

 

Michael R. Garone

 

Vice President, Finance

 

and Chief Financial Officer

 

 


Exhibit 32.1

 

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Immunomedics, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

 

The Form 10-Q for the quarter ended March  31, 2017, (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Dated:  May 10, 2017

/s/ Cynthia L. Sullivan

 

Cynthia L. Sullivan

 

President and Chief Executive Officer

 

 

 

 

Dated:  May 10, 2017

/s/ Michael R. Garone

 

 Michael R. Garone

 

Vice President, Finance

 

and Chief Financial Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.