Table of Contents
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For the quarterly period ended September 30, 2009
OR
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number 0-17999
ImmunoGen, Inc.
Massachusetts
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04-2726691
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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830 Winter Street, Waltham, MA 02451
(Address of principal executive offices, including zip code)
(781) 895-0600
(Registrants telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
x
Yes
o
No
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
o
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
o
Yes
x
No
Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.
Shares
of common stock, par value $.01 per share: 57,060,324 shares outstanding
as of October 26, 2009.
Table of Contents
IMMUNOGEN,
INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2009
TABLE
OF CONTENTS
2
Table of Contents
ITEM 1.
Financial Statements
IMMUNOGEN,
INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
In
thousands, except per share amounts
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September 30,
2009
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June 30,
2009
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ASSETS
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Cash and cash equivalents
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$
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58,641
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$
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69,639
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Marketable securities
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1,229
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1,486
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Accounts receivable
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2,189
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1,746
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Unbilled revenue
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975
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561
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Inventory
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1,372
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1,836
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Restricted cash
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574
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366
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Prepaid and other current assets
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973
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1,232
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Total current assets
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65,953
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76,866
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Property and equipment, net of accumulated
depreciation
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19,039
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19,671
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Long-term restricted cash
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3,887
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4,142
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Other assets
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42
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25
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|
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Total assets
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$
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88,921
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$
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100,704
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LIABILITIES AND SHAREHOLDERS EQUITY
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Accounts payable
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$
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1,051
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$
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1,244
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Accrued compensation
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1,727
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4,140
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Other accrued liabilities
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2,284
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1,566
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Current portion of deferred lease incentive
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979
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979
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Current portion of deferred revenue
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3,901
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3,199
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Total current liabilities
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9,942
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11,128
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Deferred lease incentive, net of current portion
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9,296
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9,540
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Deferred revenue, net of current portion
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9,592
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9,543
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Other long-term liabilities
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3,737
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3,636
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Total liabilities
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32,567
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33,847
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Commitments and contingencies (Note E)
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Shareholders equity:
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Preferred stock, $.01 par value; authorized 5,000
shares; no shares issued and outstanding
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Common stock, $.01 par value; authorized 75,000
shares; issued and outstanding 57,060 and 56,947 shares as of September 30,
2009 and June 30, 2009, respectively
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571
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569
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Additional paid-in capital
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389,565
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387,947
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Accumulated deficit
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(333,826
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)
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(321,451
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)
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Accumulated other comprehensive income (loss)
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44
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(208
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)
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Total shareholders equity
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56,354
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66,857
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Total liabilities and shareholders equity
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$
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88,921
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$
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100,704
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The accompanying
notes are an integral part of the consolidated financial statements.
3
Table of Contents
IMMUNOGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
In thousands, except per share amounts
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Three Months Ended
September 30,
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2009
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2008
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Revenues:
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Research and development support
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$
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782
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$
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3,207
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License and milestone fees
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1,831
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2,223
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Clinical materials reimbursement
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486
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696
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Total revenues
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3,099
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6,126
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Operating Expenses:
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Research and development
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12,188
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11,860
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General and administrative
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3,592
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3,678
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Total operating expenses
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15,780
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15,538
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Loss from operations
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(12,681
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)
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(9,412
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)
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Other income, net
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144
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16
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Loss before (benefit) provision for income taxes
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(12,537
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)
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(9,396
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)
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(Benefit) provision for income taxes
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(162
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)
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1
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Net loss
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$
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(12,375
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)
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$
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(9,397
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)
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Basic and diluted net loss per common share
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$
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(0.22
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)
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$
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(0.19
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)
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Basic and diluted weighted average common shares
outstanding
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57,032
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50,783
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The accompanying notes are an integral part of the consolidated
financial statements.
4
Table of Contents
IMMUNOGEN, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
In thousands, except per share
amounts
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Three months ended September 30,
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2009
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2008
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|
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Cash flows from operating activities:
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|
|
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Net loss
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$
|
(12,375
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)
|
$
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(9,397
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)
|
Adjustments to reconcile net loss to net cash used
for operating activities:
|
|
|
|
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Depreciation and
amortization
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1,258
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1,233
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Gain on sale of fixed assets
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|
(1
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)
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Amortization of deferred
lease incentive
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(244
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)
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(241
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)
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Loss on sale of marketable securities
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33
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Other-than-temporary impairment
of investments
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136
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(Gain) loss on forward contracts
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(16
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)
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103
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|
Stock and deferred share
unit compensation
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1,104
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1,355
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Deferred rent
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14
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|
692
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Changes in operating
assets and liabilities:
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|
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Accounts receivable
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(443
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)
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(757
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)
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Unbilled revenue
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(414
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)
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121
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Inventory
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464
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|
297
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Prepaid and other current
assets
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256
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1,024
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|
Restricted cash
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47
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|
48
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Other assets
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(17
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)
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6
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Accounts payable
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(193
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)
|
309
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|
Accrued compensation
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(2,413
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)
|
317
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|
Other accrued liabilities
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810
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(1,249
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)
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Deferred revenue
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|
751
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2,650
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Proceeds from landlord for tenant improvements
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|
|
|
750
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Net cash used for
operating activities
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|
(11,411
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)
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(2,571
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)
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|
|
|
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Cash flows from investing
activities:
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|
|
|
|
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Proceeds from maturities or sales of marketable
securities
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|
509
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|
2,830
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Purchases of property and
equipment, net
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(627
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)
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(627
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)
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Proceeds (payments) from settlement of forward
contracts
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22
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|
(85
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)
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Net cash (used for)
provided by investing activities
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|
(96
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)
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2,118
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|
|
|
|
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Cash flows from financing
activities:
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|
|
|
|
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Proceeds from stock options exercised
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509
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|
43
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|
Net cash provided by
financing activities
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|
509
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|
43
|
|
|
|
|
|
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|
Net change in cash and
cash equivalents
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|
(10,998
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)
|
(410
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)
|
|
|
|
|
|
|
Cash and cash equivalents,
beginning balance
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|
69,639
|
|
31,619
|
|
|
|
|
|
|
|
Cash and cash equivalents,
ending balance
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|
$
|
58,641
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|
$
|
31,209
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|
The accompanying notes are an integral part of the
consolidated financial statements.
5
Table of Contents
IMMUNOGEN,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30,
2009
A. Summary of
Significant Accounting Policies
Basis of Presentation
The accompanying
unaudited consolidated financial statements at September 30, 2009 and June 30,
2009 and for the three months ended September 30, 2009, and 2008 include
the accounts of ImmunoGen, Inc., or the Company, and its wholly-owned
subsidiaries, ImmunoGen Securities Corp. and ImmunoGen Europe Limited. The
consolidated financial statements include all of the adjustments, consisting
only of normal recurring adjustments, which management considers necessary for
a fair presentation of the Companys financial position in accordance with
accounting principles generally accepted in the U.S. for interim financial
information. Certain information and footnote disclosures normally included in
the Companys annual financial statements have been condensed or omitted. The preparation
of interim financial statements requires the use of managements estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the interim
financial statements and the reported amounts of revenues and expenditures
during the reported period. The results of the interim periods are not
necessarily indicative of the results for the entire year. Accordingly, the
interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Companys Annual Report
on Form 10-K for the year ended June 30, 2009.
Subsequent Events
The Company has evaluated all events or transactions
that occurred after September 30, 2009 up through November 4, 2009,
the date the Company issued these financial statements. During this period the Company did not have
any material recognizable or unrecognizable subsequent events.
Other-than-Temporary Impairments
An other-than-temporary impairment must be recognized through earnings
if an investor has the intent to sell the debt security or if it is more likely
than not that the investor will be required to sell the debt security before
recovery of its amortized cost basis. In the event of a credit loss, only the
amount associated with the credit loss is recognized in net income (loss). The
amount of loss relating to other factors is recorded in accumulated other
comprehensive income (loss).
The Company adopted certain provisions of FASBs Accounting Standards
Codification
(ASC)
Topic 820, Investments Debt and Equity Securities,
on April 1,
2009. As a result of the adoption, $54,000 of previously recognized
other-than-temporary impairment charges was reclassified to other comprehensive
loss as a cumulative effect adjustment.
The Company conducts periodic reviews to identify and evaluate each
investment that has an unrealized loss, which exists when the current fair
value of an individual security is less than its amortized cost basis.
Unrealized losses on available-for-sale securities that are determined to be
temporary, and not related to credit loss, are recorded in accumulated other
comprehensive loss.
For available-for-sale debt securities with unrealized losses,
management performs an analysis to assess whether it intends to sell or whether
it would more likely than not be required to sell the security before the
expected recovery of the amortized cost basis. Where the Company intends to
sell a security, or may be required to do so, the securitys decline in fair
value is deemed to be other-than-temporary and the full amount of the
unrealized loss is recorded in the statement of operations as an
other-than-temporary impairment charge. When this is not the case, the Company
performs additional analysis on all securities with unrealized losses to
evaluate losses associated with the creditworthiness of the security. Credit
losses are identified where the Company does not expect to receive cash flows,
based on using a single best estimate, sufficient to recover the amortized cost
basis of a security and these are recognized in other income (expense), net.
Fair
Value of Financial Instruments
Fair
value is defined under ASC Topic 820 as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.
Valuation techniques used to measure fair value under Topic 820 must maximize
the use of observable inputs and minimize the use of unobservable inputs.
The topic describes a fair value hierarchy to measure fair value which is based
on three levels of inputs, of which the first two are considered observable and
the last unobservable, as follows:
·
Level 1 - Quoted prices in active markets
for identical assets or liabilities.
6
Table of Contents
·
Level 2 - Inputs other than Level 1 that
are observable, either directly or indirectly, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
·
Level 3 - Unobservable inputs that are
supported by little or no market activity and that are significant to the fair
value of the assets or liabilities.
As of September 30,
2009, the Company held certain assets that are required to be measured at fair value
on a recurring basis, including our cash equivalents and marketable
securities. In accordance with Topic 820, the following table represents
the fair value hierarchy for our financial assets measured at fair value on a
recurring basis as of September 30, 2009 (in thousands):
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Fair Value Measurements at September 30, 2009 Using
|
|
|
|
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Quoted Prices in
Active Markets for
Identical Assets
|
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Significant Other
Observable Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
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Total
|
|
(Level 1)
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(Level 2)
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(Level 3)
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|
Cash, cash equivalents and restricted cash
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$
|
63,102
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|
$
|
63,102
|
|
$
|
|
|
$
|
|
|
Available-for-sale marketable securities
|
|
1,229
|
|
|
|
1,229
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|
|
|
|
|
$
|
64,331
|
|
$
|
63,102
|
|
$
|
1,229
|
|
$
|
|
|
The
fair value of the Companys investments is generally determined from market
prices based upon either quoted prices from active markets or other significant
observable market transactions at fair value.
The carrying amounts reflected in the consolidated
balance sheets for accounts receivable, unbilled revenue, restricted cash,
prepaid and other current assets, accounts payable, accrued compensation, and
other accrued liabilities approximate fair value due to their short-term
nature.
Unbilled Revenue
The
majority of the Companys unbilled revenue at September 30, 2009 and June 30,
2009 represents (i) research funding earned based on actual resources
utilized under the Companys agreements with Amgen, Bayer HealthCare, Biogen
Idec, Biotest and sanofi-aventis; and (ii) reimbursable expenses incurred
under the Companys agreements with sanofi-aventis and Biotest that the Company
has not yet invoiced.
Inventory
Inventory
costs primarily relate to clinical trial materials being manufactured for sale
to the Companys collaborators. Inventory is stated at the lower of cost or market
as determined on a first-in, first-out (FIFO) basis.
Inventory
at September 30, 2009 and June 30, 2009 is summarized below (in
thousands):
|
|
September 30,
2009
|
|
June 30,
2009
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
864
|
|
$
|
952
|
|
Work in process
|
|
508
|
|
884
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,372
|
|
$
|
1,836
|
|
All
Targeted Antibody Payload, or TAP, product candidates currently in preclinical
and clinical testing through ImmunoGen or its collaborators include either DM1
or DM4 as a cell-killing agent. Raw materials inventory consists entirely of
DM1 and DM4, collectively referred to as DMx.
Inventory
cost is stated net of write-downs of $1.4 million and $1.8 million as of September 30,
2009 and June 30, 2009, respectively. The write-downs represent the cost
of raw materials that the Company considers to be in excess of a twelve-month
supply based on firm, fixed orders and projections from its collaborators as of
the respective balance sheet date. The Company did not record any expense
related to excess inventory during the three-month periods ended September 30,
2009 and 2008.
7
Table of Contents
Computation of Net Loss per
Common Share
Basic and diluted net loss per share is calculated
based upon the weighted average number of common shares outstanding during the
period. The Companys common stock equivalents, as calculated in accordance
with the treasury-stock accounting method, are shown in the following table (in
thousands):
|
|
Three Months Ended
September 30,
|
|
|
|
2009
|
|
2008
|
|
Options to purchase common stock
|
|
6,656
|
|
5,633
|
|
Common stock equivalents under treasury stock
method
|
|
2,052
|
|
739
|
|
The Companys common stock equivalents have not been
included in the net loss per share calculation because their effect is
anti-dilutive due to the Companys net loss position.
Comprehensive Loss
For the three months ended September 30, 2009 and
2008, total comprehensive loss equaled $12.1 million and $9.3 million, respectively.
Comprehensive loss is comprised of the Companys net loss for the period and
unrealized gains and losses recognized on available-for-sale marketable
securities.
Stock-Based Compensation
As of September 30, 2009, the Company is authorized to grant
future awards under one employee share-based compensation plan, which is the
ImmunoGen, Inc. 2006 Employee, Director and Consultant Equity Incentive
Plan, or the 2006 Plan. As amended, the 2006 Plan provides for the issuance of
Stock Grants, the grant of Options and the grant of Stock-Based Awards for up
to 4,500,000 shares of the Companys common stock, as well as any shares of
common stock that are represented by awards granted under the previous stock
option plan, the ImmunoGen, Inc. Restated Stock Option Plan, or the Former
Plan, that are forfeited, expire or are cancelled without delivery of shares of
common stock or which result in the forfeiture of shares of common stock back
to the Company on or after November 13, 2006, or the equivalent of such
number of shares after the Administrator, in its sole discretion, has
interpreted the effect of any stock split, stock dividend, combination,
recapitalization or similar transaction in accordance with the 2006 Plan;
provided, however, that no more than 5,900,000 shares shall be added to the
Plan from the Former Plan, pursuant to this provision. Option awards are
granted with an exercise price equal to the market price of the Companys stock
at the date of grant. Options vest at various periods of up to four years and
may be exercised within ten years of the date of grant.
The fair value of each stock
option is estimated on the date of grant using the Black-Scholes option-pricing
model with the assumptions noted in the following table. As the Company has not
paid dividends since inception, nor does it expect to pay any dividends for the
foreseeable future, the expected dividend yield assumption is zero. Expected
volatility is based exclusively on historical volatility data of the Companys
stock. The expected term of stock options granted is based exclusively on
historical data and represents the period of time that stock options granted
are expected to be outstanding. The expected term is calculated for and applied
to one group of stock options as the Company does not expect substantially
different exercise or post-vesting termination behavior among its employee
population. The risk-free rate of the stock options is based on the U.S.
Treasury rate in effect at the time of grant for the expected term of the stock
options.
8
Table of Contents
|
|
Three
Months Ended
September 30,
|
|
|
|
2009
|
|
2008
|
|
Dividend
|
|
None
|
|
None
|
|
Volatility
|
|
60.0%
|
|
62.9%
|
|
Risk-free
interest rate
|
|
3.24%
|
|
3.40%
|
|
Expected
life (years)
|
|
6.9
|
|
7.0
|
|
Using the Black-Scholes option-pricing model, the
weighted average grant date fair values of options granted during the three
months ended September 30, 2009 and 2008 were $5.97 and $3.13 per share,
respectively.
Stock
compensation expense incurred during the three months ended September 30,
2009 and 2008 was $891,000 and $1.3 million respectively. During the three months ended September 30,
2008, the Company recorded approximately $747,000 of stock compensation expense
related to the modification of the terms of certain options previously granted
to the previous chief executive officer of the Company in accordance with the
succession plan approved by the Companys Board of Directors in September 2008.
As of September 30,
2009, the estimated fair value of unvested employee awards was $7.7 million,
net of estimated forfeitures. The weighted-average remaining vesting period for
these awards is approximately two and a half years.
During the three months
ended September 30, 2009, holders of options issued under the Plan
exercised their rights to acquire an aggregate of 113,000 shares of common
stock
at prices ranging from $3.14 to $8.57 per share
. The total proceeds to the Company
from these option exercises were approximately $509,000.
Financial Instruments and Concentration of Credit
Risk
The Companys cash and cash equivalents consist principally of U.S.
Government and agency-backed money market funds which are maintained with two financial
institutions in the U.S. Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of marketable
securities. Marketable securities at September 30, 2009 generally consist
of high-grade corporate bonds and asset-backed securities. The Company has
classified its marketable securities as available-for-sale and, accordingly,
carries such securities at aggregate fair value. The cost of securities sold is
based on the specific identification method. The Companys investment policy,
approved by the Board of Directors, limits the amount it may invest in any one
type of investment, thereby reducing credit risk concentrations.
Derivative instruments
include a portfolio of short duration foreign currency forward contracts
intended to mitigate the risk of exchange fluctuations for existing or
anticipated receivable and payable balances denominated in foreign currency.
Derivatives are estimated at fair value and classified as other current assets
or liabilities. The fair value of these instruments represent the present value
of estimated future cash flows under the contracts, which are a function of
underlying interest rates, currency rates, related volatility, counterparty
creditworthiness and duration of the contracts. Changes in these factors or a
combination thereof may affect the fair value of these instruments.
The
Company does not designate foreign currency forward contracts as hedges for
accounting purposes, and changes in the fair value of these instruments are
recognized in earnings during the period of change. Because the Company enters into forward
contracts only as an economic hedge, any gain or loss on the underlying
foreign-denominated existing or anticipated receivable or payable balance would
be offset by the loss or gain on the forward contract. For the three months
ended September 30, 2009, net gains recognized on forward contracts were
$16,000, and are included in the accompanying consolidated statement of
operations as other income, net. As of September 30, 2009, the Company had
outstanding forward contracts with amounts equivalent to approximately $296,000
(201,000 in Euros), all maturing on or before October 23, 2009. As of June 30,
2009, the Company had outstanding forward contracts with amounts equivalent to
approximately $517,000 (371,000 in Euros). For the three months ended September 30,
2008, net losses recognized on forward contracts were $103,000. The Company
does not anticipate using derivative instruments for any purpose other than
hedging our exchange rate exposure.
Segment Information
During the three months ended September 30, 2009,
the Company continued to operate in one reportable business segment which is
the business of discovery of monoclonal antibody-based anticancer therapeutics.
9
Table of Contents
The percentages of revenues recognized from significant customers of
the Company in the three months ended September 30, 2009 and 2008 are
included in the following table:
|
|
Three
Months Ended
September 30,
|
|
Collaborative Partner:
|
|
2009
|
|
2008
|
|
Bayer
HealthCare
|
|
41%
|
|
1%
|
|
sanofi-aventis
|
|
28%
|
|
49%
|
|
Biotest
|
|
15%
|
|
17%
|
|
Biogen
Idec
|
|
2%
|
|
15%
|
|
There were no other customers of the Company with significant revenues
in the three months ended September 30, 2009 and 2008.
Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting
Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements, which
establishes the accounting and reporting guidance for arrangements under which
a vendor will perform multiple revenue-generating activities. This
statement becomes effective for the Companys fiscal year 2011 and the Company
does not expect it to have a significant impact on its financial position or
results of operations.
Effective for the Companys
quarter ended September 30, 2009, the FASB ASC Topic 105, Generally
Accepted Accounting Principles, became the single source for authoritative
nongovernmental U.S. generally accepted accounting principles. During the
quarter, four new accounting standards became effective. These new standards
are included in Topic 808 Collaborative Arrangements, Topic 820 Fair Value
Measurements and Disclosures as it relates to non-financial assets and
liabilities, Topic 815 Derivatives and Hedging, and Topic 815 Business
Combinations of the FASB ASC. These changes to the accounting standards did
not have a material effect on the Companys financial position or results of
operations.
In August 2009, the
FASB issued Accounting Standards Update No. 2009-05, Measuring
Liabilities at Fair Value, which provides clarification that in circumstances
where a quoted market price in an active market for an identical liability is
not available, a reporting entity must measure fair value of the liability
using one of the following techniques: 1) the quoted price of the identical
liability when traded as an asset; 2) quoted prices for similar liabilities or
similar liabilities when traded as assets; or 3) another valuation technique,
such as a present value technique or the amount that the reporting entity would
pay to transfer the identical liability or would receive to enter into the
identical liability that is consistent with the provisions of the standard.
This standard becomes effective for the first reporting period (including
interim periods) beginning after issuance. The Company will adopt this standard
beginning in the second quarter of fiscal 2010 and does not expect it to have a
material effect on the Companys financial position or results of operations.
The provisions of ASC Topic
810, Consolidations, related to the changes to how a reporting entity
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated will be
effective for fiscal years beginning after November 15, 2009 (the Companys
fiscal year 2011). Early application is not permitted. The Company does not
expect the adoption of these provisions to have a significant impact on its
financial position or results of operations.
Certain provisions of ASC
Topic 860, Transfers and Servicing, require enhanced information reported to
users of financial statements by providing greater transparency about transfers
of financial assets and an entitys continuing involvement in transferred
financial assets. The provisions are effective for fiscal years beginning after
November 15, 2009 (the Companys fiscal year 2011). The Company does not
expect the adoption of these provisions to have a significant impact on its
financial position or results of operations.
B.
Significant
Collaborative Agreements
sanofi-aventis
In
August 2006, sanofi-aventis exercised its final remaining option to extend
the term of the research collaboration with the Company until August 31,
2008, and committed to pay the Company a minimum of $10.4 million in research
support over the twelve months beginning September 1, 2007. The two
companies subsequently agreed to extend the date of payment through October 31,
2008 to enable completion of previously agreed-upon research. The Company
recorded the research funding as it was earned based upon its actual resources
utilized in the collaboration. The Company earned $81.5 million of committed
funding over the duration of the research program and is now compensated for
research performed for sanofi-aventis on a mutually agreed-upon basis.
10
Table of Contents
In October 2006,
sanofi-aventis licensed non-exclusive rights to use the Companys proprietary
resurfacing technology to humanize antibodies to targets not included in the
collaboration, including antibodies for non-cancer applications. Under the
terms of the license, the Company received a $1 million license fee, half of
which was paid upon contract signing and the second half was paid in August 2008.
The Company has deferred the $1 million upfront payment and is recognizing this
amount as revenue over the five-year term of the agreement.
In August 2008, sanofi-aventis exercised its option under a 2006
agreement for expanded access to the Companys TAP technology. The Company
received $3.5 million with the exercise of this option in August 2008,
in addition to the $500,000 the Company received in December 2006 with the
signing of the option agreement. The agreement has a three-year term from the
date of the exercise of the option and can be renewed by sanofi-aventis for one
additional three-year term by payment of a $2 million fee. The Company has
deferred the $3.5 million exercise fee and is recognizing this amount as
revenue over the initial three-year option term.
Bayer
HealthCare AG
In October 2008,
the Company entered into a development and license agreement with Bayer
HealthCare AG. The Company received a $4 million upfront payment upon execution
of the agreement, which the company has deferred and is recognizing as revenue
ratably over the estimated period of substantial involvement. In September 2009,
Bayer reached a preclinical milestone which triggered a $1 million payment to
the Company. This milestone is included in license and milestone fees for the
quarter ended September 30, 2009.
Amgen, Inc.
In September 2009, the Company entered into a
development and license agreement with Amgen Inc. granting Amgen the exclusive
right to use the Companys maytansinoid TAP technology to develop anticancer
therapeutics to a specific target. This license was taken under an agreement
established in 2000 between ImmunoGen and Abgenix, Inc., which later was
acquired by Amgen. Under the terms of the license, the Company received a $1
million upfront payment.
The Company has deferred the $1 million
upfront payment and is recognizing this amount as revenue ratably over the
estimated period of substantial involvement.
Additional information on the agreements the Company
has with these and other companies is described elsewhere in this Quarterly
Report and in its 2009 Annual Report on Form 10-K.
C. Capital Stock
2001 Non-Employee Director Stock Plan
During the three months ended September 30, 2009
and 2008, the Company recorded approximately $(8,000) and $28,000 in (expense
reduction) or compensation expense, respectively, related to stock units outstanding under the
Companys 2001 Non-Employee Director Stock Plan. The value of the stock units
is adjusted to market value at each reporting period as the redemption amount
of stock units for this plan will be paid in cash. No stock units have been
issued under the 2001 Plan subsequent to June 30, 2004.
2004 Non-Employee Director
Compensation and Deferred Share Unit Plan
The 2004 Non-Employee
Director Compensation and Deferred Share Unit Plan, or 2004 Director Plan, was
amended on September 5, 2006. Under the terms of the amended 2004 Director
Plan, the redemption amount of deferred share units will be paid in shares of
common stock of the Company. In addition, the vesting for annual retainers was
to take place quarterly over the three years after the award and the number of
deferred share units awarded for all compensation is now based on the market
value of the Companys common stock on the date of the award.
On September 16,
2009, the Board adopted a new Compensation Policy for Non-Employee Directors,
which supersedes the 2004 Plan and makes certain changes to the compensation of
its non-employee directors. Effective November 12,
2009, non-employee directors will become entitled to receive annual meeting
fees and committee fees under the new policy.
The new policy makes changes to the equity portion of the non-employee
director compensation, but leaves the cash portion unchanged. Effective November 11,
2009, non-employee directors will become entitled to receive deferred stock
units under the new policy as follows.
·
New non-employee directors will be initially awarded a
number of deferred stock units having an aggregate market value of $65,000,
based on the closing price of our common stock on the date of their initial
election to the Board. These awards will
vest quarterly over three years from the date of grant, contingent upon the
individual remaining a director of ImmunoGen as of each vesting date.
·
On the first anniversary of a non-employee directors
initial election to the Board, such non-employee director will be awarded a
number of deferred stock units having an aggregate market value of $30,000,
based on the closing price of our
11
Table of Contents
common stock on such date
of grant and pro-rated based on the number of whole months remaining between
the first day of the month in which such grant date occurs and the first October 31
following the grant date. These awards
will generally vest quarterly over approximately the period from the grant date
to the first November 1 following the grant date, contingent upon the
individual remaining a director of ImmunoGen as of each vesting date.
·
Thereafter, non-employee directors in general will be
annually awarded a number of deferred stock units having an aggregate market
value of $30,000, based on the closing price of our common stock on the date of
our annual meeting of shareholders.
These awards will vest quarterly over approximately one year from the
date of grant, contingent upon the individual remaining a director of ImmunoGen
as of each vesting date.
As
with the 2004 Plan, vested deferred stock units are redeemed on the date a
director ceases to be a member of the Board, at which time such directors
deferred stock units will be settled in shares of our common stock issued under
our 2006 Plan at a rate of one share for each vested deferred stock unit then
held. Any deferred stock units that
remain unvested at that time will be forfeited.
The new policy provides that all unvested deferred stock units will
automatically vest immediately prior to the occurrence of a change of control,
as defined in the 2006 Plan.
In
connection with the adoption of the new compensation policy, the Board also
amended the 2004 Plan as follows:
·
All unvested deferred stock awards (other than any
unvested initial awards) were vested in full on September 16, 2009 unless
the date such deferred stock units were credited to the non-employee director
was less than one year prior to September 16, 2009, in which case such
unvested deferred stock units will vest on the first anniversary of the date
such deferred stock units were credited to the non-employee director.
·
All unvested deferred stock awards will automatically
vest prior to the occurrence of a change of control.
During
the three months ended September 30, 2009 and 2008,
the Company recorded approximately $217,000 and $34,000 in compensation
expense, respectively, related to deferred share units issued and outstanding
under the amended 2004 Director Plan.
D. Marketable
Securities
As of September 30, 2009, $58.6 million in cash and money
market funds were classified as cash and cash equivalents. The Companys cash,
cash equivalents and marketable securities as of September 30, 2009 are as
follows (in thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Cash and money market funds
|
|
$
|
58,641
|
|
$
|
|
|
$
|
|
|
$
|
58,641
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
Current
|
|
169
|
|
15
|
|
|
|
184
|
|
Non-current
|
|
991
|
|
86
|
|
(58
|
)
|
1,019
|
|
Corporate notes
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
25
|
|
1
|
|
|
|
26
|
|
Total
|
|
$
|
59,826
|
|
$
|
102
|
|
$
|
(58
|
)
|
$
|
59,870
|
|
Less amounts classified as cash and cash
equivalents
|
|
(58,641
|
)
|
|
|
|
|
(58,641
|
)
|
Total marketable securities
|
|
$
|
1,185
|
|
$
|
102
|
|
$
|
(58
|
)
|
$
|
1,229
|
|
As of June 30, 2009, $69.6 million in cash and money market
funds were classified as cash and cash equivalents. The Companys cash, cash
equivalents and marketable securities as of June 30, 2009 are as follows (in
thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Cash and money market funds
|
|
$
|
69,639
|
|
$
|
|
|
$
|
|
|
$
|
69,639
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
Current
|
|
395
|
|
25
|
|
(25
|
)
|
395
|
|
Non-current
|
|
1,024
|
|
201
|
|
(410
|
)
|
815
|
|
Corporate notes
|
|
|
|
|
|
|
|
|
|
Current
|
|
250
|
|
|
|
|
|
250
|
|
Non-current
|
|
25
|
|
1
|
|
|
|
26
|
|
Total
|
|
$
|
71,333
|
|
$
|
227
|
|
$
|
(435
|
)
|
$
|
71,125
|
|
Less amounts classified as cash and cash
equivalents
|
|
(69,639
|
)
|
|
|
|
|
(69,639
|
)
|
Total marketable securities
|
|
$
|
1,694
|
|
$
|
227
|
|
$
|
(435
|
)
|
$
|
1,486
|
|
12
Table of Contents
During the three month period ended September 30, 2009, the
Company had no realized gains or losses on the sale of investments, compared to
realized losses of $33,000 during the same period last year.
As of September 30, 2009, the Company had 15 individual securities
in its investment portfolio, of which six were in an unrealized loss position.
The aggregate fair value of investments with unrealized losses was
approximately $584,000, of which $207,000 had been in an unrealized loss
position for more than one year, as of September 30, 2009. All such other
investments as of September 30, 2009 have been or were in an unrealized
loss position for less than a year. As of June 30, 2009, the Company had
19 individual securities in its investment portfolio, of which seven were in an
unrealized loss position. The aggregate fair value of investments with
unrealized losses was approximately $705,000 as of June 30, 2009, of which
$332,000 had been in an unrealized loss position for more than a year, as of June 30,
2009. See Note A
Other-than-Temporary
Impairments.
The Company reviewed its investments with unrealized
losses and as a result recorded $136,000 as an other-than-temporary impairment
charge during the quarter ended September 30, 2008. No similar charges
were incurred during the quarter ended September 30, 2009.
E. Commitments and
Contingencies
Effective
July 27, 2007, the Company entered into a lease agreement with
Intercontinental Fund III for the rental of approximately 89,000 square feet of
laboratory and office space at 830 Winter Street, Waltham, MA. The Company uses
this space for its corporate headquarters, research and other operations. The
initial term of the lease is for twelve years with an option for the Company to
extend the lease for two additional terms of five years. The Company is required to pay certain
operating expenses for the leased premises subject to escalation charges for
certain expense increases over a base amount.
As
part of the lease agreement, the Company received a construction allowance of
up to approximately $13.3 million to build out laboratory and office space to
the Companys specifications. After completion, the Company had recorded $12
million of leasehold improvements under the construction allowance. The Company
received $10.8 million from the landlord and paid out the same amount towards
these leasehold improvements. The remaining balance of the improvements was
paid directly by the landlord. The lease term began on October 1, 2007, when
the Company obtained physical control of the space in order to begin
construction.
Under
the terms of the agreement, any remaining construction allowance was to be
applied evenly as a credit to rent for the first year. The final balance of the
construction allowance was determined in August 2008, resulting in a
credit of $1.3 million to the Company from the landlord during fiscal year 2009
relating to the first year of occupancy, of which $667,000 was accounted for
during the quarter ended September 30, 2008.
At
September 30, 2009, the Company also leases facilities in Norwood and
Cambridge, MA under agreements through 2011. The Company is required to pay
certain operating expenses for the leased premises subject to escalation
charges for certain expense increases over a base amount. The Company entered
into a sub-sublease in May 2008 for the entire space in Cambridge, MA
through October 2010, the remainder of the sublease.
13
Table of Contents
The
minimum rental commitments, including real estate taxes and other expenses, for
the next five fiscal years under the non-cancelable operating lease agreements
discussed above are as follows (in thousands):
2010 (nine months remaining)
|
|
$
|
4,743
|
|
2011
|
|
5,887
|
|
2012
|
|
4,859
|
|
2013
|
|
4,859
|
|
2014
|
|
4,925
|
|
Total minimum lease payments
|
|
$
|
25,273
|
|
Total minimum rental income from sub-sublease
|
|
(855
|
)
|
Total minimum lease payments, net
|
|
$
|
24,418
|
|
The Company intends to
sublease approximately 14,000 rentable square feet of laboratory and office
space at 830 Winter Street, Waltham, MA. The Company has not included any
estimated sublease income for the space in Waltham in the table above.
F. Income
Taxes
During
the three months ended September 30, 2009, the Company recognized $162,000
of tax benefit associated with U.S. research and development tax credits
against which the Company had previously provided a full valuation allowance,
but which became refundable as a result of federal legislation passed in
2009.
Due to the degree of uncertainty related to the
ultimate use of loss carryforwards and tax credits, the Company has established
a valuation allowance to fully reserve the remaining tax benefits.
ITEM 2.
Managements Discussion
and Analysis of Financial Condition and Results of Operations
OVERVIEW
Since
our inception, we have been principally engaged in the development of novel,
targeted therapeutics for the treatment of cancer using our expertise in cancer
biology, monoclonal antibodies, and small-molecule cytotoxic, or cell-killing,
agents. Our Targeted Antibody Payload, or TAP, technology uses antibodies
to deliver a potent cytotoxic agent specifically to cancer cells, and consists
of a tumor-targeting monoclonal antibody with one of our proprietary
cell-killing agents attached using one of our engineered linkers. The antibody
component enables a TAP compound to bind specifically to cancer cells that express
a particular target antigen, the highly potent cytotoxic agent serves to kill
the cancer cell, and the engineered linker controls the release of the
cytotoxic agent inside the cancer cell. Our TAP technology is designed to
enable the creation of highly effective, well-tolerated anticancer products.
All of our and our collaborative partners TAP compounds currently in
preclinical and clinical testing contain either DM1 or DM4 as the cytotoxic
agent. Both DM1 and DM4 are our proprietary derivatives of a naturally
occurring substance called maytansine. We also use our expertise in antibodies
and cancer biology to develop naked, or non-conjugated, antibody anticancer
product candidates.
We
have entered into collaborative agreements that enable companies to use our TAP
technology to develop commercial product candidates to specified targets. We
have also used our proprietary TAP technology in conjunction with our in-house
antibody expertise to develop our own anticancer product candidates. Under
the terms of our collaborative agreements, we are generally entitled to upfront
fees, milestone payments and royalties on any commercial product sales. In
addition, under certain agreements we are entitled to research and development
funding based on activities performed at our collaborative partners request.
We are reimbursed for our direct and a portion of overhead costs to manufacture
preclinical and clinical materials and, under certain collaborative agreements,
the reimbursement includes a profit margin. Currently, our collaborative
partners include Amgen
, Bayer
HealthCare, Biogen Idec, Biotest,
Genentech (a
wholly-owned member of the Roche Group) and sanofi-aventis. We expect that
substantially all of our revenue for the foreseeable future will result from
payments under our collaborative arrangements.
Details for some of our major and recent collaborative agreements
follow.
sanofi
-
aventis
In July 2003,
we entered into a discovery, development and commercialization collaboration
with sanofi-aventis. Inclusive of its extensions, the agreement
entitled us to receive committed research funding totaling $79.3 million
over the five years of the research collaboration. The two companies
subsequently agreed to extend the date of payment through October 31, 2008
to enable completion of previously agreed-upon research. We earned $81.5
million of committed research funding for activities performed under the
completed research term of this agreement, and are now compensated for research
performed for sanofi-aventis on a mutually agreed-upon basis.
The collaboration
agreement also provides for certain other payments based on the achievement of
product candidate milestones and royalties on sales of any resulting products,
if and when such sales commence. For the targets included in the collaboration
at this
14
Table of Contents
time, we are entitled to
milestone payments potentially totaling $21.5 million for each product
candidate developed under this agreement. Through September 30, 2009, we
have earned and received an aggregate of $10.5 million in milestone payments
under this agreement for compounds covered under this agreement now or in the
past.
Additionally, in October 2006,
sanofi-aventis licensed non-exclusive rights to use our proprietary
humanization technology, which enables antibodies of murine origin to avoid
detection by the human immune system. Under the terms of the license, we received
a $1 million license fee, half of which was paid upon contract signing and the
second half was paid in August 2008. We have deferred the $1 million
upfront payment and are recognizing this amount as revenue over the five-year
term of the agreement.
In August 2008, sanofi-aventis exercised its option under a 2006
agreement for expanded access to our TAP technology. We received
$3.5 million with the exercise of this option in August 2008, in
addition to the $500,000 we received in December 2006 with the signing of
the option agreement. The agreement has a three-year term from the date of the
exercise of the option and can be renewed by sanofi-aventis for one additional
three-year term by payment of a $2 million fee. We have deferred the $3.5
million exercise fee and are recognizing this amount as revenue over the
initial three-year option term.
Genentech
In
May 2000, we entered into a license agreement with Genentech that granted
Genentech exclusive rights to use our maytansinoid TAP technology with antibodies,
such as trastuzumab, that target HER2. We received a $2 million upfront payment
from Genentech upon execution of the agreement. We also are entitled to up to
$44 million in milestone payments from Genentech under this agreement, as
amended in May 2006, in addition to royalties on the net sales of any
resulting product. Through September 30, 2009, we have received $13.5
million in milestone payments.
In December 2008,
Genentech licensed the exclusive right to use our maytansinoid TAP technology
with its therapeutic antibodies to an undisclosed target. This license was taken under a right-to-test
agreement entered into by the companies in 2000 that provided Genentech with
the right to take exclusive licenses to use our maytansinoid TAP technology to
develop products for individual targets on agreed-upon terms. While the
agreement expired in May 2008, a limited number of options to targets
remained in place for a short period of time, and this license was taken under
one of these options. As of the date of this Quarterly Report on Form 10-Q
no options remained outstanding. Under the terms of the license, we received a
$1 million upfront payment and are entitled to receive up to $38 million in
milestone payments plus royalties on the sales of any resulting products.
Genentech is responsible for the development, manufacturing, and marketing of
any products resulting from this license. We have deferred the $1 million
upfront payment and are recognizing this amount as revenue over the estimated
period of substantial involvement.
Bayer HealthCare
In
October 2008, we entered into a development and license agreement with
Bayer HealthCare AG. The agreement grants Bayer HealthCare exclusive rights to
use our maytansinoid TAP technology to develop and commercialize therapeutic
compounds to a specific target. We received a $4 million upfront payment upon
execution of the agreement, andfor each compound developed and marketed by
Bayer HealthCare under this collaborationwe could potentially receive up to
$170.5 million in milestone payments; additionally, we are entitled to receive
royalties on the sales of any resulting products. We will be compensated by
Bayer HealthCare at a stipulated rate for work performed on behalf of Bayer
HealthCare under a mutually agreed-upon research plan and budget which may be
amended from time to time during the term of the agreement. We also are
entitled to receive payments for manufacturing any preclinical and clinical
materials made at the request of Bayer HealthCare as well as for any related
process development activities. We have deferred the $4 million upfront payment
and are recognizing this amount as revenue over the estimated period of
substantial involvement. In September 2009,
Bayer reached a preclinical milestone which triggered a $1.0 million payment to
us. This milestone is included in license and milestone fees for the quarter
ended September 30, 2009.
Amgen, Inc.
In
September, 2009, we entered into a development and license agreement with Amgen
Inc. granting Amgen the exclusive right to use our maytansinoid TAP technology
to develop anticancer therapeutics to a specific target. This license was taken
under an agreement established in 2000 between ImmunoGen and Abgenix, Inc.,
which later was acquired by Amgen. Under the terms of the license, we received
a $1 million upfront payment. We have deferred the $1 million upfront payment
and are recognizing this amount as revenue ratably over the estimated period of
substantial involvement. We also are entitled to receive milestone payments
potentially totaling $34 million plus royalties on the sales of any resulting
products. When milestone fees are specifically tied to a separate earnings
process and are deemed to be substantive and at risk, revenue will be
recognized when such milestones are achieved. Amgen is responsible for the
development, manufacturing, and marketing of any products resulting from this
license. The agreement established in September 2000 grants Amgen certain
rights to test our maytansinoid TAP technology with antibodies and to license
on agreed-upon terms the right to use the technology with antibodies to
individual targets to develop products.
To date, we have not
generated revenues from commercial product sales and we expect to incur
significant operating losses for the foreseeable future. As of September 30,
2009, we had approximately $59.9 million in cash and marketable securities
compared to $71.1 million in cash and marketable securities as of June 30,
2009.
We anticipate that
future cash expenditures will be partially offset by collaboration-derived
proceeds, including milestone payments, clinical material reimbursements and
upfront fees. Accordingly, period-to-period operational results may fluctuate
dramatically based upon the timing of receipt of the proceeds. We believe that
our established collaborative agreements, while subject to specified milestone
achievements, will provide funding to assist us in meeting obligations under
our collaborative agreements while also assisting in providing funding for
the development of internal product candidates and technologies. However, we
can give no
15
Table of Contents
assurances that such
collaborative agreement funding will, in fact, be realized in the time frames
we expect, or at all. Should we or our partners not meet some or all of the
terms and conditions of our various collaboration agreements, we may be
required to pursue additional strategic partners, secure alternative financing
arrangements, and/or defer or limit some or all of our research, development
and/or clinical projects. However, we cannot provide assurance that any such
opportunities presented by additional strategic partners or alternative
financing arrangements will be entirely available to us, if at all.
Critical Accounting Policies
We
prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the U.S. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to our collaborative agreements and
inventory. We base our estimates on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Actual
results may differ from these estimates.
Certain
provisions of
ASC
Topic 820, Investments Debt and Equity Securities,
related to
other non-financial assets and liabilities was adopted for the Company on July 1,
2009 and did not have a material impact on our financial position or results of
operations upon adoption; however, this standard may impact us in subsequent
periods and require additional disclosures. Refer to
Note A
Fair Value of Financial Instruments
to our unaudited consolidated
financial statements included in Item 1 of this Quarterly Report for a
discussion of our adoption of this standard.
There
were no other significant changes to our critical accounting policies from
those disclosed in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2009.
RESULTS OF OPERATIONS
Comparison of Three Months ended September 30,
2009 and 2008
Revenues
Our
total revenues for the three months ended September 30, 2009 and 2008 were
$3.1 million and $6.1 million, respectively.
The $3.0 million decrease in revenues in the three
months ended September 30, 2009 from the same period in the prior year is
attributable to a decrease in research and development support revenue, license
and milestone fees and clinical materials reimbursement revenue, all of which
are discussed below.
Research and development
support was $782,000 for the three months ended September 30, 2009
compared with $3.2 million for the three months ended September 30, 2008.
These amounts primarily represent research funding earned based on actual
resources utilized under our agreements with Amgen, Bayer HealthCare, Biogen
Idec, Biotest, Genentech and sanofi-aventis. The decreased research and
development support fees in the current period compared to the prior year
period is primarily due to a reduction in the amount earned from sanofi-aventis
with the conclusion of its committed funding obligations in calendar 2008. Also
included in research and development support revenue are development fees
charged for reimbursement of our direct and overhead costs incurred in
producing and delivering research-grade materials to our collaborators and for
developing antibody-specific conjugation processes on behalf of our
collaborators and potential collaborators during the early evaluation and
preclinical testing stages of drug development. The amount of development fees
we earn is directly related to the number of our collaborators and potential
collaborators, the stage of development of our collaborators product
candidates and the resources our collaborators allocate to the development
effort. As such, the amount of development fees may vary widely from quarter to
quarter and year to year. Total revenue recognized from research and
development support from each of our collaborative partners in the three-month
periods ended September 30, 2009 and 2008 is included in the following
table (in thousands):
|
|
Three months ended September 30,
|
|
Research and Development
Support
|
|
2009
|
|
2008
|
|
Collaborative Partner:
|
|
|
|
|
|
Amgen
|
|
$
|
33
|
|
$
|
3
|
|
Bayer HealthCare
|
|
|
|
33
|
|
Biogen Idec
|
|
7
|
|
239
|
|
Biotest
|
|
428
|
|
525
|
|
Genentech
|
|
196
|
|
9
|
|
sanofi-aventis
|
|
118
|
|
2,350
|
|
Other
|
|
|
|
48
|
|
Total
|
|
$
|
782
|
|
$
|
3,207
|
|
16
Table of Contents
Revenues from license
and milestone fees for the three months ended September 30, 2009 decreased
$392,000 to $1.8 million from $2.2 million in the same period ended September 30,
2008. Included in license and milestone fees for the three months ended September 30,
2009 was a $1 million preclinical milestone earned pursuant to our development
and license agreement with Bayer. Included in license and milestone fees for the three months ended September 30,
2008 was a $500,000 milestone related to the initiation of Phase I clinical
testing of BT-062 by Biotest. Also in
this prior year period, Millennium Pharmaceuticals and Boehringer Ingelheim
agreed to terminate their licenses with us that were no longer being used to
develop products and as a result, we recognized as license and milestone fees
$361,000 and $486,000, respectively, of upfront fees previously deferred. Total revenue from license and milestone fees
recognized from each of our collaborative partners in the three-month periods
ended September 30, 2009 and 2008 is included in the following table (in
thousands):
|
|
Three months ended September 30,
|
|
License and Milestone Fees
|
|
2009
|
|
2008
|
|
Collaborative Partner:
|
|
|
|
|
|
Amgen
|
|
$
|
147
|
|
$
|
125
|
|
Bayer HealthCare
|
|
1,154
|
|
|
|
Biogen Idec
|
|
57
|
|
57
|
|
Biotest
|
|
42
|
|
542
|
|
Boehringer Ingelheim
|
|
|
|
486
|
|
Centocor
|
|
34
|
|
34
|
|
Millennium Pharmaceuticals
|
|
|
|
361
|
|
Genentech
|
|
38
|
|
31
|
|
sanofi-aventis
|
|
359
|
|
587
|
|
Total
|
|
$
|
1,831
|
|
$
|
2,223
|
|
Deferred revenue of $13.5
million as of September 30, 2009 primarily represents payments received
from our collaborators pursuant to our license agreements, which we have yet to
earn pursuant to our revenue recognition policy.
Clinical
materials reimbursement decreased by approximately $210,000 in the three months
ended September 30, 2009, to $486,000 from $696,000 in the three months
ended September 30, 2008. We are reimbursed for certain of our direct and
overhead costs to produce clinical materials plus, for certain programs, a
profit margin. The amount of clinical materials reimbursement we earn, and the
related cost of clinical materials charged to research and development expense,
is directly related to the number of clinical trials our collaborators are
preparing or have underway, the speed of enrollment in those trials, the dosage
schedule of each clinical trial and the time period, if any, during which
patients in the trial receive clinical benefit from the clinical materials, and
the supply of clinical grade material to
our collaborators for process development and analytical purposes. As such, the
amount of clinical materials reimbursement revenue and the related cost of
clinical materials charged to research and development expense may vary
significantly from quarter to quarter and year to year.
Research
and Development Expenses
Our
net research and development expenses relate to (i) research to evaluate
new targets and to develop and evaluate new antibodies, linkers and cytotoxic
agents, (ii) preclinical testing of our own and, in certain instances, our
collaborators product candidates, and the cost of our own clinical trials, (iii) development
related to clinical and commercial manufacturing processes and (iv) manufacturing
operations which also includes raw material and process improvement efforts.
Research and development
expense for the three months ended September 30, 2009 increased $328,000
to $12.2 million from $11.9 million for the three months ended September 30,
2008. The increase was primarily due to increased salaries and related expenses
and greater clinical trial costs, partially offset by decreased contract
service expense.
We
are unable to accurately estimate which potential product candidates, if any,
will eventually move into our internal preclinical research program. We are
unable to reliably estimate the costs to develop these products as a result of
the uncertainties related to discovery research efforts as well as preclinical
and clinical testing. Our decision to move a product candidate into the
clinical development phase is predicated upon the results of preclinical tests.
We cannot accurately predict which, if any, of the discovery stage product
candidates will advance from preclinical testing and move into our internal
clinical development program. The clinical trial and regulatory approval processes
for our product candidates that have advanced or that we intend to advance to
clinical testing are lengthy, expensive and uncertain in both timing and
outcome. As a result, the pace and timing of the clinical development of our
product candidates is highly uncertain and may not ever result in approved
products. Completion dates and development costs will vary significantly for
each product candidate and are difficult to predict. A variety of factors, many
of which are outside our control, could cause or contribute to the prevention
or delay of the successful completion of our clinical trials, or delay or
prevent our obtaining necessary regulatory approvals. The costs to take a
product through clinical trials are dependent upon, among other factors, the clinical
indications, the timing, size and design of each clinical trial, the number of
patients enrolled in each trial, and the speed at which patients are enrolled
and treated. Product candidates may be found to be ineffective or to cause
unacceptable side effects during
17
Table of Contents
clinical
trials, may take longer to progress through clinical trials than anticipated,
may fail to receive necessary regulatory approvals or may prove impractical to
manufacture in commercial quantities at reasonable cost or with acceptable
quality.
The
lengthy process of securing FDA approvals for new drugs requires the
expenditure of substantial resources. Any failure by us to obtain, or any delay
in obtaining, regulatory approvals would materially adversely affect our
product development efforts and our business overall. Accordingly, we cannot
currently estimate, with any degree of certainty, the amount of time or money
that we will be required to expend in the future on our product candidates
prior to their regulatory approval, if such approval is ever granted. As a
result of these uncertainties surrounding the timing and outcome of our clinical
trials, we are currently unable to estimate when, if ever, our product
candidates that have advanced into clinical testing will generate revenues and
cash flows.
We
do not track our research and development costs by project. Since we use our
research and development resources across multiple research and development
projects, we manage our research and development expenses within each of the
categories listed in the following table and described in more detail below (in
thousands):
|
|
Three Months Ended September 30,
|
|
Research and Development Expense
|
|
2009
|
|
2008
|
|
Research
|
|
$
|
3,617
|
|
$
|
3,603
|
|
Preclinical and Clinical Testing
|
|
3,233
|
|
2,242
|
|
Process and Product Development
|
|
1,476
|
|
1,588
|
|
Manufacturing Operations
|
|
3,862
|
|
4,427
|
|
Total Research and Development Expense
|
|
$
|
12,188
|
|
$
|
11,860
|
|
Research
:
Research includes expenses associated with activities to identify and evaluate
new targets and to develop and evaluate new antibodies, linkers and cytotoxic
agents for our products and in support of our collaborators. Such expenses
primarily include personnel, fees to in-license certain technology, facilities
and lab supplies.
Research
expenses for the three months ended September 30, 2009 increased $14,000
compared to the three months ended September 30, 2008.
Preclinical and Clinical Testing
:
Preclinical and
clinical testing includes expenses related to preclinical testing of our own
and, in certain instances, our collaborators product candidates, and the cost
of our own clinical trials. Such expenses include personnel, patient enrollment
at our clinical testing sites, consultant fees, contract services, and facility
expenses.
Preclinical and clinical testing expenses for the three months ended September 30,
2009 increased $991,000 to $3.2 million compared to $2.2 million for the three
months ended September 30, 2008. This increase is primarily the result of
an increase in clinical trial costs, and to a lesser extent, an increase in s
alaries and related expenses due to the
addition of an executive officer and higher salary levels.
Process and Product Development
:
Process and product development expenses
include costs for development of clinical and commercial manufacturing
processes for our own and collaborator compounds. Such expenses include the
costs of personnel, contract services and facility expenses.
For the three months ended September 30,
2009, total development expenses decreased $112,000 to $1.5 million, compared
to $1.6 million for the three months ended September 30, 2008.
Manufacturing
Operations:
Manufacturing
operations expense includes costs to manufacture preclinical and clinical
materials for our own and our collaborators product candidates, and quality
control and quality assurance activities and costs to support the operation and
maintenance of our conjugate manufacturing facility. Such expenses include
personnel, raw materials for our and our collaborators preclinical studies and
clinical trials, development costs with contract manufacturing organizations,
manufacturing supplies, and facilities expense. For the three months ended September 30, 2009, manufacturing operations expense
decreased $565,000 to $3.9 million compared to $4.4 million in the same period
last year. The decrease in the three months ended September 30,
2009 as compared to the three months ended September 30, 2008 was
primarily the result of a decrease in contract service expense, and to a lesser
extent, a decrease in antibody development and supply costs due to timing of
supply requirements. Partially offsetting these decreases, overhead utilization
from the manufacture of clinical materials on behalf of our collaborators
decreased during the current period.
General and Administrative Expenses
General and
administrative expenses for the three months ended September 30, 2009
decreased $86,000 to $3.6 million compared to $3.7 million for the three months
ended September 30, 2008. This decrease is primarily due to a $690,000
decrease in salaries and related expenses. During the three months ended September 30,
2008, we recorded $747,000 of compensation expense related to the modification
of the terms regarding the exercise of certain options previously granted to
the former chief executive officer of the Company in accordance with the
succession plan approved by ImmunoGens Board of Directors in September 2008.
Partially offsetting this decrease, director fees, patent expenses and other
general corporate expenses increased during the current quarter compared to the
same period last year.
18
Table of
Contents
Other
Income, net
Other income, net for the three months ended
September 30
, 2009 and 2008
is included in the following table (in thousands):
|
|
Three Months Ended September 30,
|
|
Other Income, net
|
|
2009
|
|
2008
|
|
Interest Income
|
|
$
|
58
|
|
$
|
303
|
|
Net Realized Losses on Investments
|
|
|
|
(33
|
)
|
Other than Temporary Impairment
|
|
|
|
(136
|
)
|
Other Income (Expense)
|
|
86
|
|
(118
|
)
|
Total Other Income, net
|
|
$
|
144
|
|
$
|
16
|
|
Interest Income
Interest income for the
three months ended
September 30
, 2009
decreased $245,000 to $58,000 from $303,000 for the three months ended
September 30
, 2008. The
decrease in interest income is primarily the result of lower yields on
investments tied to lower market rates.
Other than Temporary Impairment
During the three months ended
September 30
, 2008, we recognized
$136,000 in charges for the impairment of available-for-sale securities that
were determined to be other-than-temporary following a decline in value. There were no such charges for the quarter
ended September 30, 2009.
Other Income (Expense)
Other income (expense) for
the three months ended September 30, 2009 was $86,000 and $(118,000),
respectively. During the three months ended
September 30
, 2009 we recorded net gains
on forward contracts of $16,000 compared to net losses on forward contracts of
($103,000) for the three months ended
September 30
, 2008. We incurred $69,000
and $(17,000) in foreign currency translation gains (losses) related to
obligations with non-U.S. dollar-based suppliers during the three months ended
September 30
, 2009 and
2008, respectively.
LIQUIDITY AND CAPITAL
RESOURCES
|
|
September 30,
|
|
|
|
2009
|
|
2008
|
|
|
|
(In thousands)
|
|
Cash, cash equivalents and short-term investments
|
|
$
|
59,870
|
|
$
|
44,552
|
|
Working capital
|
|
56,011
|
|
41,596
|
|
Shareholders equity
|
|
56,354
|
|
47,362
|
|
Cash used for operating activities (three months
ended)
|
|
(11,411
|
)
|
(2,571
|
)
|
Cash (used for) provided by investing activities
(three months ended)
|
|
(96
|
)
|
2,118
|
|
Cash provided by financing activities (three
months ended)
|
|
509
|
|
43
|
|
|
|
|
|
|
|
|
|
Cash
Flows
We require cash to fund
our operating expenses, including the advancement of our own clinical programs,
and to make capital expenditures. Historically, we have funded our cash
requirements primarily through equity financings in public markets
and payments from our collaborators, including equity investments, license
fees and research funding. As of September 30, 2009, we had approximately
$59.9 million in cash and marketable securities. Net cash used in
operations was $11.4 million and $2.6 million for the three months ended September 30,
2009 and 2008, respectively. The principal use of cash in operating activities
for all periods presented was to fund our net loss.
Net cash (used for)
provided by investing activities was $(96,000) and $2.1 million for the three
months ended September 30, 2009 and 2008, respectively, and substantially
represents cash inflows from the sales and maturities of marketable securities
partially offset by capital expenditures. Capital expenditures, primarily for
the purchase of new equipment, were $627,000 for each of the three-month
periods ended September 30, 2009 and 2008.
Net cash provided by financing activities was $509,000 and $43,000 for
the three months ended September 30, 2009 and 2008, respectively, which
represents proceeds from the exercise of approximately 113,000 and 11,000 stock
options, respectively.
19
Table of Contents
We anticipate that our
current capital resources and future collaborator payments will enable us to
meet our operational expenses and capital expenditures for the balance of
fiscal 2010 and at least a portion of the following fiscal year. However, we
cannot provide assurance that such collaborative agreement funding will, in
fact, be received. Should we or our partners not meet some or all of the terms
and conditions of our various collaboration agreements, we may be required to
pursue additional strategic partners, secure alternative financing
arrangements, and/or defer or limit some or all of our research, development
and/or clinical projects.
Contractual Obligations
There
have been no material changes to our contractual obligations outside the
ordinary course of business from those disclosed in our Annual Report on Form 10-K
for the fiscal year ended June 30, 2009.
Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting
Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements, which
establishes the accounting and reporting guidance for arrangements under which
a vendor will perform multiple revenue-generating activities. This
statement becomes effective for our fiscal year 2011 and we do not expect it to
have a significant impact on our financial position or results of operations.
Effective for the Companys
quarter ended September 30, 2009, the FASB (Financial Accounting Standards
Board) Accounting Standards Codification (ASC) (Topic 105, Generally Accepted
Accounting Principles), became the single source for authoritative
nongovernmental U.S. generally accepted accounting principles. During the
quarter, four new accounting standards became effective. These new standards
are included in Topic 808 Collaborative Arrangements, Topic 820 Fair Value
Measurements and Disclosures as it relates to non-financial assets and
liabilities, Topic 815 Derivatives and Hedging, and Topic 815 Business Combinations
of the FASB ASC. These changes to the accounting standards did not have a
material effect on our financial position or results of operations.
In August 2009, the
FASB issued Accounting Standards Update No. 2009-05, Measuring
Liabilities at Fair Value, which provides clarification that in circumstances
where a quoted market price in an active market for an identical liability is
not available, a reporting entity must measure fair value of the liability
using one of the following techniques: 1) the quoted price of the identical
liability when traded as an asset; 2) quoted prices for similar liabilities or
similar liabilities when traded as assets; or 3) another valuation technique,
such as a present value technique or the amount that the reporting entity would
pay to transfer the identical liability or would receive to enter into the
identical liability that is consistent with the provisions of the standard.
This standard becomes effective for the first reporting period (including
interim periods) beginning after issuance. We will adopt this standard
beginning in the second quarter of fiscal 2010 and do not expect it to have a
material effect on our financial position or results of operations.
The provisions of ASC Topic
810, Consolidations, related to the changes to how a reporting entity
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated will be
effective for fiscal years beginning after November 15, 2009 (our fiscal
year 2011). Early application is not permitted. We do not expect the adoption
of these provisions to have a significant impact on our financial position or
results of operations.
Certain provisions of ASC
Topic 860, Transfers and Servicing, require enhanced information reported to
users of financial statements by providing greater transparency about transfers
of financial assets and an entitys continuing involvement in transferred
financial assets. The provisions are
effective for fiscal years beginning after November 15, 2009 (our fiscal
year 2011). We do not expect the adoption of the provisions to have a
significant impact on our financial position or results of operations.
Forward-Looking Statements
This
quarterly report includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements relate to
analyses and other information which are based on forecasts of future results
and estimates of amounts that are not yet determinable. There are a number of
factors that could cause actual events or results to be significantly different
from those described in the forward-looking statements. Forward-looking
statements might include, but are not limited to, one or more of the following subjects:
·
future products revenues, expenses, liquidity
and cash needs;
·
anticipated redemptions from an investment
fund;
·
anticipated agreements with collaboration
partners;
·
anticipated clinical trial timelines or
results;
·
anticipated research and product development
results;
·
projected regulatory timelines;
20
Table of Contents
·
descriptions of plans or objectives of
management for future operations, products or services;
·
forecasts of future economic performance; and
·
descriptions or assumptions underlying or
relating to any of the above items.
Forward-looking
statements can be identified by the fact that they do not relate to historical
or current facts. They use words such as anticipate, estimate, expect, project,
intend, opportunity, plan, potential, believe or words of similar
meaning. They may also use words such as will, would, should, could or may.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements, which speak only as of the date of this report. You
should review carefully the risks and uncertainties identified in this
Quarterly Report on Form 10-Q, including the cautionary information set
forth under Part II, Item 1A., Risk Factors, and our Annual Report on Form 10-K
for the year ended June 30, 2009. We may not revise these forward-looking
statements to reflect events or circumstances after the date of this report or
to reflect the occurrence of unanticipated events.
OFF-BALANCE SHEET ARRANGEMENTS
None.
ITEM 3.
Quantitative and
Qualitative Disclosure about Market Risk
Our
market risks, and the ways we manage them, are summarized in Part II,
Item 7A, Quantitative and Qualitative Disclosures About Market Risk of
our Annual Report on Form 10-K for the fiscal year ended June 30,
2009. Since then there have been no material changes to our market risks or to
our management of such risks.
ITEM 4.
Controls and Procedures
(a)
Disclosure Controls and Procedures
The
Companys management, with the participation of its principal executive officer
and principal financial officer, has evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on such evaluation, the Companys principal executive officer and
principal financial officer have concluded that, as of the end of such period,
the Companys disclosure controls and procedures were adequate and effective.
(b)
Changes in Internal Controls
There have not been any
changes in the Companys internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the quarter ended September 30, 2009 that have
materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.
21
Table of
Contents
PART II. OTHER INFORMATION
ITEM 1.
Legal
Proceedings
From time to time we may be a party to various legal
proceedings arising in the ordinary course of our business. We are not
currently subject to any material legal proceedings.
ITEM 1A.
Risk Factors
You should carefully
review and consider the information regarding certain factors that could
materially affect our business, financial condition or future results set forth
under Item 1A. (Risk Factors) in our Annual Report on Form 10-K for
the fiscal year ended June 30, 2009. There have been no material changes
from the factors disclosed in our 2009 Annual Report on Form 10-K,
although we may disclose changes to such factors or disclose additional factors
from time to time in our future filings with the Securities and Exchange
Commission.
ITEM 2.
Unregistered Sales of
Equity Securities and Use of Proceeds
None.
ITEM 3.
Defaults Upon Senior
Securities
None.
ITEM 4.
Submission of Matters to a Vote of Security Holders
None
ITEM 5.
Other Information
None.
ITEM 6.
Exhibits
10.1
2004 Non-Employee Director Compensation
and Deferred Share Unit Plan, as amended through September 16, 2009
10.2
Compensation Policy for Non-Employee
Directors
31.1
Certification of Principal Executive
Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial
Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certifications of Principal Executive
Officer and Principal Financial Officer under Section 906 of the Sarbanes-
Oxley Act of 2002.
22
Table
of Contents
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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ImmunoGen, Inc.
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Date: November 4, 2009
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By:
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/s/ Daniel M. Junius
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Daniel M. Junius
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President, Chief Executive Officer
(Principal Executive Officer)
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Date: November 4, 2009
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By:
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/s/ Gregory D. Perry
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Gregory D. Perry
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Senior Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
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23
Table
of Contents
INDEX TO EXHIBITS
Exhibit No.
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Description
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10.1
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2004 Non-Employee
Director Compensation and Deferred Share Unit Plan, as amended through
September 16, 2009
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10.2
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Compensation Policy for
Non-Employee Directors
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31.1
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Certification of
Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act
of 2002.
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31.2
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Certification of
Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act
of 2002.
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32
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Certifications of
Principal Executive Officer and Principal Financial Officer under
Section 906 of the Sarbanes-Oxley Act of 2002.
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24
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