Company Quick10K Filing
Immunomedics
Price14.32 EPS-2
Shares192 P/E-9
MCap2,749 P/FCF-15
Net Debt-366 EBIT-281
TEV2,383 TEV/EBIT-8
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-10-30
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-09
10-Q 2018-09-30 Filed 2018-11-07
10-K 2018-06-30 Filed 2018-08-23
10-Q 2018-03-31 Filed 2018-05-09
10-Q 2017-12-31 Filed 2018-02-08
10-Q 2017-09-30 Filed 2017-11-09
10-K 2017-06-30 Filed 2017-08-16
10-Q 2017-03-31 Filed 2017-05-10
10-Q 2016-12-31 Filed 2017-02-09
10-Q 2016-09-30 Filed 2016-11-02
10-K 2016-06-30 Filed 2016-08-18
10-Q 2016-03-31 Filed 2016-05-04
10-Q 2015-12-31 Filed 2016-02-03
10-Q 2015-09-30 Filed 2015-11-04
10-K 2015-06-30 Filed 2015-08-19
10-Q 2015-03-31 Filed 2015-05-06
10-Q 2014-12-31 Filed 2015-02-04
10-Q 2014-09-30 Filed 2014-11-05
10-K 2014-06-30 Filed 2014-08-25
10-Q 2014-03-31 Filed 2014-05-07
10-Q 2013-12-31 Filed 2014-02-10
10-Q 2013-09-30 Filed 2013-11-04
10-K 2013-06-30 Filed 2013-08-22
10-Q 2013-03-31 Filed 2013-05-08
10-Q 2012-12-31 Filed 2013-02-07
10-K 2012-06-30 Filed 2012-08-23
10-Q 2012-03-31 Filed 2012-05-08
10-Q 2011-12-31 Filed 2012-02-08
10-Q 2011-09-30 Filed 2011-11-04
10-K 2011-06-30 Filed 2011-08-24
10-Q 2011-03-31 Filed 2011-05-10
10-Q 2010-12-31 Filed 2011-02-04
10-Q 2010-09-30 Filed 2010-11-04
10-K 2010-06-30 Filed 2010-08-26
10-Q 2010-03-31 Filed 2010-05-10
10-Q 2009-12-31 Filed 2010-02-02
8-K 2020-07-06 Other Events, Exhibits
8-K 2020-06-18
8-K 2020-05-27
8-K 2020-05-06
8-K 2020-05-05
8-K 2020-04-27
8-K 2020-04-22
8-K 2020-04-06
8-K 2020-04-06
8-K 2020-03-25
8-K 2020-02-27
8-K 2020-02-26
8-K 2020-02-13
8-K 2019-12-26
8-K 2019-12-04
8-K 2019-12-03
8-K 2019-10-30
8-K 2019-09-28
8-K 2019-08-07
8-K 2019-06-05
8-K 2019-05-28
8-K 2019-05-09
8-K 2019-04-29
8-K 2019-04-24
8-K 2019-04-15
8-K 2019-04-15
8-K 2019-04-05
8-K 2019-03-29
8-K 2019-03-13
8-K 2019-03-05
8-K 2019-03-05
8-K 2019-02-22
8-K 2019-02-11
8-K 2019-02-04
8-K 2019-01-17
8-K 2019-01-15
8-K 2018-12-20
8-K 2018-12-19
8-K 2018-12-14
8-K 2018-11-07
8-K 2018-10-02
8-K 2018-09-24
8-K 2018-09-11
8-K 2018-08-23
8-K 2018-08-23
8-K 2018-07-18
8-K 2018-07-06
8-K 2018-06-22
8-K 2018-06-12
8-K 2018-06-04
8-K 2018-06-01
8-K 2018-05-09
8-K 2018-04-13
8-K 2018-04-09
8-K 2018-04-04
8-K 2018-04-02
8-K 2018-02-08
8-K 2018-01-07

IMMU 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-10.41 immu-3312020ex1041.htm
EX-10.42 immu-3312020ex1042.htm
EX-10.43 immu-3312020ex1043.htm
EX-10.44 immu-3312020ex1044.htm
EX-10.45 immu-3312020ex1045.htm
EX-10.46 immu-3312020ex1046.htm
EX-31.1 immu-3312020ex311.htm
EX-31.2 immu-3312020ex312.htm
EX-32.1 immu-3312020ex321.htm
EX-32.2 immu-3312020ex322.htm

Immunomedics Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
0.70.50.30.2-0.0-0.22012201420172020
Assets, Equity
0.10.0-0.0-0.1-0.1-0.22012201420172020
Rev, G Profit, Net Income
0.40.30.20.10.0-0.12012201420172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2020

or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____ to _____
 
Commission File Number:  0-12104
Immunomedics, Inc.
(Exact name of Registrant as specified in its charter) 
Delaware
61-1009366
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)

300 The American Road, Morris Plains, New Jersey 07950
(Address of principal executive offices) (Zip Code)
 
(973) 605-8200
(Registrant’s Telephone Number, Including Area Code)
 
Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report:  Not Applicable
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
IMMU
 
Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No  
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period the registrant was required to submit such files).    Yes   No  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company  Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No
 
The number of shares of the registrant’s common stock outstanding as of May 1, 2020 was 230,900,071.




Immunomedics, Inc.
Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



PART I.        FINANCIAL INFORMATION 
ITEM 1.
FINANCIAL STATEMENTS (Unaudited)

IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited) 
 
March 31,
2020
 
December 31,
2019
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
536,295

 
$
608,628

Marketable securities
4,325

 
4,550

Accounts receivable, net of allowances of $0 at March 31, 2020 and December 31, 2019

 
295

Prepaid expenses
17,315

 
21,818

Other current assets
3,788

 
3,413

Total current assets
561,723

 
638,704

Property and equipment, net of accumulated depreciation and amortization of $8,907 and $7,925 at March 31, 2020 and December 31, 2019, respectively
32,150

 
32,762

Other long-term assets
233

 
256

Total Assets
$
594,106

 
$
671,722

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable and accrued expenses
$
59,268

 
$
60,860

Liability related to sale of future royalties - current
7,491

 
3,455

Lease liability - current
346

 
337

Convertible senior notes, net

 
7,106

Total current liabilities
67,105

 
71,758

Liability related to sale of future royalties - non-current
267,215

 
257,769

Deferred revenues
65,000

 
65,000

Lease liability - non-current
9,875

 
9,965

Total Liabilities
409,195

 
404,492

Commitments and Contingencies (Note 11)


 


Stockholders' Equity:
 
 
 
Convertible preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued and outstanding at March 31, 2020 and December 31, 2019

 

Common stock, $0.01 par value; authorized 250,000,000 shares; issued 213,929,505 shares and outstanding 213,809,884 shares at March 31, 2020; issued 212,529,313 shares and outstanding 212,409,692 shares at December 31, 2019
2,139

 
2,125

Capital contributed in excess of par
1,590,185

 
1,579,205

Treasury stock, at cost: 119,621 shares at March 31, 2020 and December 31, 2019
(2,095
)
 
(2,095
)
Accumulated deficit
(1,403,453
)
 
(1,310,406
)
Accumulated other comprehensive loss
(802
)
 
(568
)
Total Immunomedics, Inc. stockholders' equity
185,974

 
268,261

Noncontrolling interest in subsidiary
(1,063
)
 
(1,031
)
Total Stockholders' Equity
184,911

 
267,230

Total Liabilities and Stockholders' Equity
$
594,106

 
$
671,722




See accompanying notes to unaudited condensed consolidated financial statements.


3



IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS 
(Dollars in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
 
March 31,
 
2020
 
2019
 
 
 
 
Revenues
$

 
$

 
 
 
 
Costs and Expenses:
 
 
 
Research and development
62,428

 
58,172

Sales and marketing
8,067

 
7,881

General and administrative
11,473

 
13,595

Total costs and expenses
81,968

 
79,648

Operating loss
(81,968
)
 
(79,648
)
Interest expense
(13,538
)
 
(9,959
)
Interest and other income
2,427

 
2,203

Loss before income tax
(93,079
)
 
(87,404
)
Income tax expense

 

Net loss
$
(93,079
)
 
$
(87,404
)
Net loss attributable to noncontrolling interest
(32
)
 
(67
)
Net loss attributable to Immunomedics, Inc. stockholders
$
(93,047
)
 
$
(87,337
)
Loss per common share attributable to Immunomedics, Inc. stockholders (basic and diluted):
(0.44
)
 
(0.46
)
Weighted average shares used to calculate loss per common share (basic and diluted):
213,247

 
191,052

Other comprehensive loss, net of tax:
 
 
 
Foreign currency translation adjustments
(9
)
 
(9
)
Unrealized loss on securities available for sale
(225
)
 
(200
)
Other comprehensive loss, net of tax:
(234
)
 
(209
)
Comprehensive loss
(93,313
)
 
(87,613
)
Comprehensive loss attributable to noncontrolling interest
(32
)
 
(67
)
Comprehensive loss attributable to Immunomedics, Inc. stockholders
$
(93,281
)
 
$
(87,546
)








See accompanying notes to unaudited condensed consolidated financial statements.


4



IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
 
Immunomedics, Inc. Stockholders' Equity
 
 
 
 
 
Convertible Preferred Stock
 
 
 
 
 
Capital Contributed in Excess of Par
 
 
 
 
 
Accumulated Other Comprehensive Income (Loss)
 
 
 
 
 
 
Common Stock
 
 
Treasury Stock
 
Accumulated Deficit
 
 
Noncontrolling Interest
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
Total
Three Months Ended March 31, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019

 
$

 
212,529

 
$
2,125

 
$
1,579,205

 
$
(2,095
)
 
$
(1,310,406
)
 
$
(568
)
 
$
(1,031
)
 
$
267,230

Exercise of stock options, net

 

 
7

 

 
32

 

 

 

 

 
32

Stock-based compensation

 

 

 

 
3,848

 

 

 

 

 
3,848

Issuance of common stock due to debt conversion

 

 
1,393

 
$
14

 
7,100

 

 

 

 

 
7,114

Other comprehensive loss

 

 

 

 

 

 

 
(234
)
 

 
(234
)
Net loss

 

 

 

 

 

 
(93,047
)
 

 
(32
)
 
(93,079
)
Balance at March 31, 2020

 
$

 
213,929

 
$
2,139

 
$
1,590,185

 
$
(2,095
)
 
$
(1,403,453
)
 
$
(802
)
 
$
(1,063
)
 
$
184,911

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018

 
$

 
190,446

 
$
1,905

 
$
1,219,237

 
$
(824
)
 
$
(953,216
)
 
$
(351
)
 
$
(902
)
 
$
265,849

Exercise of stock options, net

 

 
1,063

 
10

 
3,086

 
(1,271
)
 

 

 

 
1,825

Stock-based compensation

 

 

 

 
1,743

 

 

 

 

 
1,743

Other comprehensive income

 

 

 

 

 

 

 
(209
)
 

 
(209
)
Net loss

 

 

 

 

 

 
(87,337
)
 

 
(67
)
 
(87,404
)
Balance at March 31, 2019

 
$

 
191,509

 
$
1,915

 
$
1,224,066

 
$
(2,095
)
 
$
(1,040,553
)
 
$
(560
)
 
$
(969
)
 
$
181,804





See accompanying notes to unaudited condensed consolidated financial statements.


5



IMMUNOMEDICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 

 
 

Net loss
$
(93,079
)
 
$
(87,404
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
960

 
804

Loss on disposal of property and equipment
87

 

Interest on non-recourse debt
13,482

 
9,962

Amortization of debt issuance costs
8

 
13

Non-cash lease expense
70

 
64

Non-cash expense related to stock-based compensation
3,848

 
1,743

Changes in other operating assets and liabilities
2,751

 
20,141

Net cash used in operating activities
(71,873
)
 
(54,677
)
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(473
)
 
(2,064
)
Net cash used in investing activities
(473
)
 
(2,064
)
Cash flows from financing activities:
 
 
 
Exercise of stock options, net
32

 
1,825

Net cash provided by financing activities
32

 
1,825

Effect of changes in exchange rates on cash, cash equivalents and restricted cash
(19
)
 
(9
)
Net decrease in cash, cash equivalents and restricted cash
(72,333
)
 
(54,925
)
Cash, cash equivalents and restricted cash beginning of period
612,041

 
494,173

Cash, cash equivalents and restricted cash end of period
$
539,708

 
$
439,248

Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
169

 
$
169

Schedule for non-cash investing and financing activities:
 
 
 
Accrued capital expenditures
$
132

 
$
3,140

Shares received in cashless exercise
$

 
$
1,271

Issuance of common stock due to debt conversion
$
7,114

 
$

    
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows and supplemental cash flow information related to leases (dollars in thousands):
 
March 31, 2020
 
March 31, 2019
Cash and cash equivalents
$
536,295

 
$
437,935

Restricted cash in other current assets
3,413

 
1,313

Total cash, cash equivalents and restricted cash
$
539,708

 
$
439,248

 
 
 
 
Supplemental cash flow information related to leases for the three months ended:
 
 
 
Non-cash lease expense
$
70

 
$
64

Change in operating lease liabilities
$
81

 
$
37



See accompanying notes to unaudited condensed consolidated financial statements.

6



IMMUNOMEDICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Reference is made to the Annual Report on Form 10-K, of Immunomedics, Inc., a Delaware corporation (“Immunomedics,” the “Company,” “we,” “our” or “us”), for the year ended December 31, 2019, which contains our audited consolidated financial statements and the notes thereto.
1.    Business Overview, Basis of Presentation and Recent Accounting Pronouncements

Business Overview
Immunomedics, Inc., a Delaware corporation, together with its subsidiaries (collectively "we," "our," "us," "Immunomedics", or the "Company"), is a leader in next-generation antibody-drug conjugate (“ADC”) technology, committed to help transform the lives of people with hard-to-treat cancers. Immunomedics manages its operations as one line of business of researching, developing, manufacturing and marketing biopharmaceutical products, particularly antibody-based products for patients with difficult-to-treat solid tumor and blood cancers. The Company currently reports as a single industry segment with substantially all business conducted in the United States. Immunomedics conducts its research activities in the United States and runs its development studies in the United States and selected European countries.
On April 22, 2020, the United States Food and Drug Administration ("FDA") granted accelerated approval to Trodelvy™ (sacituzumab govitecan-hziy) for the treatment of adult patients with metastatic triple-negative breast cancer (“mTNBC”). Patients must have received at least two prior therapies before taking Trodelvy. Trodelvy, which was granted Breakthrough Therapy Designation and Priority Review, was approved under the FDA’s Accelerated Approval Program based on the objective response rate of 33.3 percent and duration of response of 7.7 months observed in 108 adult mTNBC patients who had previously received a median of three prior systemic therapies in the metastatic setting in a single-arm, multicenter Phase 2 study. Continued approval may be contingent upon verification of clinical benefit in the Phase 3 confirmatory ASCENT study. On April 6, 2020, we announced that the ASCENT study was halted due to compelling evidence of efficacy across multiple endpoints. This decision was based on the unanimous recommendation by the independent Data Safety Monitoring Committee during its recent routine review. Top-line data for the ASCENT study is expected to be available mid-2020.    
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Immunomedics, which incorporates our foreign subsidiary, Immunomedics GmbH in Rödermark, Germany, have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), for interim financial information and the instructions to the Quarterly Report on Form 10‑Q and Regulation S‑X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete annual financial statements. With respect to the financial information for the interim periods included in this Quarterly Report on Form 10-Q, which is unaudited, management believes that all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation of the results for such interim periods have been included. Operating results for the three month period ended March 31, 2020, are not necessarily indicative of the results that may be expected for the full calendar year ending December 31, 2020, or any other period. The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included in our 2019 Annual Report on Form 10-K. Such significant accounting policies are applicable for periods prior to the adoption of the following new accounting standards.

Recent Accounting Pronouncements

Accounting Pronouncements adopted during the year:

In November 2018, the FASB issued ASU 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606,"    to clarify when ASC 606 should be used for collaborative arrangements when the counterparty is a customer. The guidance precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The guidance is effective for

7



public business entities in fiscal years beginning after December 15, 2019, and interim periods therein. Adoption of ASU 2018-18 did not have any impact to our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," to no longer require public companies to disclose transfers between Level 1 and Level 2 of the fair value hierarchy, and to require disclosure about the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Upon adoption of ASU 2018-13, there was no material effect to the Company's disclosures in the footnotes to the condensed consolidated financial statements. For new disclosures regarding our Level 3 financial instrument please refer to Note 6 - "Estimated Fair Value of Financial Instruments".

Accounting Pronouncements yet to be adopted:

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principals in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. For public business entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. We are currently assessing the impact of ASU 2019-12.

2.          Revenue Recognition

Everest Medicines II Limited

On April 29, 2019, we entered into a license agreement (the "License Agreement") with Everest Medicines II Limited, a China limited company ("Everest"). Pursuant to the License Agreement, we granted Everest an exclusive license to develop and commercialize Trodelvy in the People's Republic of China, Taiwan, Hong Kong, Macao, Indonesia, Philippines, Vietnam, Thailand, South Korea, Malaysia, Singapore and Mongolia (the "Territory"). In consideration for entering into the License Agreement, Everest made a one-time, non-refundable upfront payment to us in the aggregate amount of $65.0 million which is recorded as deferred revenue on the condensed consolidated balance sheets. The License Agreement contains a development milestone payment of $60.0 million based upon our achievement of FDA approval for Trodelvy. On April 22, 2020, the FDA granted accelerated approval to Trodelvy for the treatment of adult patients with mTNBC. Also, on April 22, 2020, Everest announced the China National Medical Products Administration has approved the Clinical Trial Application for a pivotal Phase 3 study of Trodelvy for the treatment of mTNBC in China. The License Agreement also contains additional development milestone payments in a total amount of up to $180.0 million based upon the achievement of certain other development milestones. In addition, the License Agreement contains sales milestone payments in a total amount of up to $530.0 million based upon the achievement of certain sales milestones. Everest will make royalty payments to us based upon percentages of net sales of Trodelvy, ranging from 14% to 20%.

The Company assessed the arrangement in accordance with ASC 606 and concluded that the contract counterparty, Everest, is a customer based on the arrangement structure. The Company identified two material promises to deliver under the contract: (1) grant of license and the (2) clinical and commercial supply of the product. However, given the nature of the manufacturing of the product the license is not considered to be distinct from the clinical and commercial supply promise. The Company therefore concluded that there is one combined performance obligation.

The Company initially deferred and will recognize the $65.0 million over the performance obligation period of the combined performance obligation. As it relates to the upfront consideration, the $65.0 million is recorded as deferred revenue and will be recognized over the term of the of the contract performance obligation period, which the Company has concluded to be 15 years after initial sale of the product in the territory. As concluded above, the Company has a combined performance obligation, which includes delivering the license and clinical and commercial supply to Everest. As such, because the clinical and commercial supply obligation occur throughout the period of the License Agreement, the $65.0 million fixed consideration is recognized over the period in which commercial and clinical supply of product is delivered (over-time). During the three months ended March 31, 2020 and 2019, no revenues were recorded relating to the License Agreement.

The future potential milestone payments are excluded from the transaction price, as the achievement of the milestone events require considerable judgment in determining whether it is probable of being achieved, and that a significant revenue reversal would not occur. As such, all milestone payments are fully constrained. The Company will reevaluate the transaction

8



price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

Janssen Biotech Inc.

On April 5, 2019, the Company entered into a promotion agreement (the "Promotion Agreement") with Janssen Biotech Inc., ("Janssen") pursuant to which the Company would provide non-exclusive product detailing services to Janssen for erdafitinib (the "Product"). Pursuant to the Promotion Agreement, we were obligated to provide a dedicated sales team to detail the Product to oncologists and other targeted health care providers in the United States. Under the terms of the Promotion Agreement, Janssen would maintain ownership of the New Drug Application for the Product as well as legal, regulatory, distribution, commercialization and manufacturing responsibilities for the Product, while the Company would provide product detailing services to Janssen through March 31, 2020. Following the achievement of certain sales targets in 2019 and 2020, Janssen would pay the Company (a) a service fee equal to a percentage in the low double digits of the portion of Cumulative Net Sales (as defined in the Promotion Agreement) in excess of a baseline amount during each of 2019 and 2020, and (b) potential milestone payments of up to $15.0 million when Cumulative Net Sales exceed certain thresholds during each of 2019 and 2020. On April 12, 2019, the Company was informed that the FDA granted accelerated approval to Janssen's Balversa (erdafitinib) for the treatment of adult patients with locally advanced or metastatic urothelial carcinoma that has a type of susceptible genetic alteration known as FGFR3 or FGFR2, and that has progressed during or following prior platinum-containing chemotherapy. During the three months ended March 31, 2020 and 2019, no revenues were recorded relating to the Promotion Agreement.

3.          Marketable Securities

Immunomedics considers all of its current investments to be available-for-sale. Marketable securities at March 31, 2020, consisted of the following (in thousands):
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
(Loss)
 
Fair Value
U.S. Government Sponsored Agencies
$
4,941

 
$

 
$
(616
)
 
$
4,325


 
Maturities of debt securities classified as available-for-sale were as follows at March 31, 2020 (in thousands):
 
Fair Value
 
Net Carrying
Amount
Due after one year through five years
$
4,325

 
$
4,337

 

Marketable securities at December 31, 2019 consisted of the following (in thousands):
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
(Loss)
 
Fair Value
U.S. Government Sponsored Agencies
$
4,941

 
$

 
$
(391
)
 
$
4,550

 

Maturities of debt securities classified as available-for-sale were as follows at December 31, 2019 (in thousands):
 
Fair Value
 
Net Carrying
Amount
Due after one year through five years
$
4,550

 
$
4,562


 
4.    Debt

Liability Related to Sale of Future Royalties:

On January 7, 2018, the Company entered into a funding agreement with RPI Finance Trust, a Delaware statutory trust ("RPI"), under which we sold a portion of our right to receive royalties on potential net sales of the ADC Trodelvy, in exchange for $175.0 million in cash. Concurrently, we entered into a common stock purchase agreement with RPI through which RPI purchased 4.4 million shares of the Company's common stock for $75.0 million (the "Financing").


9



The Company concluded that there were two units of accounting in the transaction: (1) the liability related to the sale of future royalties (the "Liability") and (2) the "Financing". We allocated the consideration of $250.0 million on a relative fair value basis to the Liability for $182.2 million and the common stock for $67.8 million. We continue to accrete the Liability related to the sale of future royalties using the effective interest method with an annual interest rate of approximately 21% over a period of 20 years for the three months ended March 31, 2020. As of March 31, 2020, and December 31, 2019, we determined the fair value at $274.7 million and $261.2 million, respectively. During the three months ended March 31, 2020 and 2019, the Company recognized approximately $13.5 million and $10.0 million in interest expense, respectively.

The following table shows the activity within the liability related to sale of future royalties during the three months ended March 31, 2020 and 2019 (in thousands):
 
Three Months Ended March 31,
 
2020
 
2019
Carrying value of liability related to sale of future royalties, beginning of the period
$
261,224

 
$
221,295

Interest expense recognized
13,482

 
9,962

Carrying value of liability related to sale of future royalties, end of period
$
274,706

 
$
231,257



Convertible Senior Notes:

In February 2015, the Company issued $100.0 million of Convertible Senior Notes (the "Convertible Senior Notes") (net proceeds of approximately $96.3 million after deducting the initial purchasers’ fees and offering expenses) in a private offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Rule 144A under the Securities Act. The remaining $7.1 million Convertible Senior Notes at December 31, 2019, converted into 1.4 million shares of common stock based on the initial conversion price of $5.11 per share of common stock on February 14, 2020. The effective interest rate on the Convertible Senior Notes was 5.48% for the period from the date of issuance through settlement. 

Total interest expense for the Convertible Senior Notes for the three months ended March 31, 2020 and 2019 was $0.1 million and $0.1 million, respectively. Included in interest expense was an immaterial amount of amortization of debt issuance costs for the three months ended March 31, 2020 and 2019.

5.     Stock-based Compensation

Stock Incentive Plan
The Company has a stock incentive plan, the Immunomedics, Inc. 2014 Long-Term Incentive Plan (the "Plan") that provides for the granting of stock options, restricted stock units ("RSUs"), performance stock options ("PSOs"), and other stock-based awards to eligible individuals on the terms and subject to the conditions set forth in the Plan. There were no significant modifications to the Plan during the three months ended March 31, 2020 or 2019.
Stock-based compensation expense included in the condensed consolidated statements of comprehensive loss was $3.8 million, and $1.7 million for the three months ended March 31, 2020 and 2019, respectively.

The following table summarizes the activity for stock options, RSUs and PSOs for the three months ended March 31, 2020 (in thousands):
 
Stock Options
 
RSUs
 
PSOs
Equity awards outstanding, beginning of year
5,901

 
58

 
837
   Changes during the year:
 
 
 
 
 
   Granted
1,429

 
100

 

   Exercised
(7
)
 

 

   Expired or forfeited
(281
)
 

 
(153
)
Equity awards outstanding, end of period
7,042

 
158

 
684

    

10



As of March 31, 2020, total compensation cost related to unvested awards not yet recognized and the weighted-average periods over which the awards are expected to be recognized were as follows ($ in thousands):
 
Stock Options
 
RSUs
 
PSOs
Unrecognized compensation cost
$
47,499

 
$
308

 
$
4,644

Expected weighted-average period in years of compensation cost to be recognized
3.1

 
1.9

 
0.7


 
6.    Estimated Fair Value of Financial Instruments

Cash Equivalents and Marketable Securities as of:
 
(in thousands)
March 31, 2020
Level 1 (a)
 
Level 2 (b)
 
Level 3 (c)
 
Total
Money Market Funds Note (d)
$
502,461

 
$

 
$

 
$
502,461

Marketable Securities:

 
 
 
 
 


U.S. Government Sponsored Agencies
4,325

 

 

 
4,325

Total
$
506,786

 
$

 
$

 
$
506,786

 
 
(in thousands)
December 31, 2019
Level 1 (a)
 
Level 2 (b)
 
Level 3 (c)
 
Total
Money Market Funds Note (d)
$
550,788

 
$

 
$

 
$
550,788

Marketable Securities:
 
 
 
 
 
 
 

U.S. Government Sponsored Agencies
4,550

 

 

 
4,550

Total
$
555,338

 
$

 
$

 
$
555,338


(a) Level 1 - Financial instruments whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which the company has the ability to access at the measurement date.

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

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

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

Convertible Senior Notes

The carrying amounts and estimated fair values (Level 2) of debt instruments are as follows (in thousands):
 
As of March 31, 2020
 
As of December 31, 2019
 
Carrying Amount
 
Estimated Fair Value
 
Carrying Amount
 
Estimated Fair Value
 
 
 
 
Convertible Senior Notes
$

 
$

 
$
7,106

 
$
28,900


The fair value of the Convertible Senior Notes, which differs from their carrying values, is influenced by interest rates, the Company’s stock price and stock price volatility, and is determined by prices for the Convertible Senior Notes observed in market trading which are Level 2 inputs. The remaining $7.1 million Convertible Senior Notes at December 31, 2019, converted into 1.4 million shares of common stock on February 14, 2020 (See Note 4 - "Debt").


11



Liability Related to the Sale of Future Royalties

The Company has determined the fair value of the liability related to the sale of future royalties is based on the Company's current estimates of future royalties expected to be paid to RPI, over the life of the arrangement, which are considered Level 3 (See Note 4 - "Debt"). The liability related to sale of future royalties and the related non-cash interest expense are measured based on the Company's current estimate of the timing and amount of expected future royalties expected to be paid using a discounted cash flow model. The liability is amortized using the effective interest rate method, resulting in recognition of non-cash interest expense over the estimated term of the agreement. Each reporting period, the Company assesses the estimated timing and amount of future expected royalty payments over the estimated term. If there are changes to the estimate, the Company recognizes the impact to the liability’s amortization schedule and the related non-cash interest expense prospectively.

The following table summarizes the significant unobservable inputs in the fair value measurement of the liability related to the sale of future royalties as of March 31, 2020:
 
Fair Value
(in thousands)
Valuation Technique
Unobservable Input
Range
Weighted Average
Liability related to the sale of future royalties
$274,706
Discounted cash flow
Discount rate
16% - 26%
19%
 
 
 
Future royalty payments
2020 to 2036
 


7.          Stockholders’ Equity

Common Stock 

On December 9, 2019, we closed an underwritten public offering of 16,428,572 shares of common stock at a public offering with a price of $17.50 per share. We received gross proceeds of $287.5 million and net proceeds of $273.0 million after deducting the underwriting discounts and commissions and expenses related to the offering.

On May 1, 2020, we closed an underwritten public offering of 16,947,389 shares of common stock at a public offering price of $28.50 per share. We received gross proceeds of $483.0 million and net proceeds of $464.6 million after deducting the underwriting discounts and commissions and other expenses related to the offering.

At-the-Market Offering

On March 29, 2019, the Company entered into a sales agreement (the "ATM Agreement") with Cowen and Company, LLC ("Cowen") to issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $150.0 million, from time to time during the term of the ATM Agreement, through an “at-the-market” equity offering program at the Company's sole discretion, under which Cowen will act as the Company’s agent and/or principal. The Company will pay Cowen a commission up to 3.0% of the gross sales proceeds of any common stock sold through Cowen under the ATM Agreement. Since inception of the ATM agreement, the Company sold 4,432,416 shares of common stock with net proceeds of $71.6 million at a weighted average price of $16.40 (excluding commissions) under the ATM Agreement. During the three months ended March 31, 2020 and 2019, the Company had no activity under the ATM Agreement.

Treasury Stock

During the three months ended March 31, 2019, there were 84,896 shares received in connection with a non-cash equity transaction related to the Company's Plan.


12



8.    Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss were as follows (in thousands):
 
Currency
Translation
Adjustments
 
Net Unrealized Losses on Available-
for-Sale Securities
 
Accumulated Other
Comprehensive
Loss
Balance, December 31, 2018
$
(347
)
 
$
(4
)
 
$
(351
)
Other comprehensive loss before reclassifications
(9
)
 
(200
)
 
(209
)
Net current-period other comprehensive loss
$
(9
)
 
$
(200
)
 
$
(209
)
Balance, March 31, 2019
$
(356
)
 
$
(204
)
 
$
(560
)
 
 
 
 
 
 
Balance, December 31, 2019
$
(173
)
 
$
(395
)
 
$
(568
)
Other comprehensive loss before reclassifications
(9
)
 
(225
)
 
(234
)
Net current-period other comprehensive loss
(9
)
 
(225
)
 
(234
)
Balance, March 31, 2020
$
(182
)
 
$
(620
)
 
$
(802
)

There were no amounts reclassified from accumulated other comprehensive loss during the three months ended March 31, 2020, and 2019. All components of accumulated other comprehensive loss are net of tax, except currency translation adjustments, which exclude income taxes related to indefinite investments in foreign subsidiaries.
9.        Related Party Transactions

The Company appointed Scott Canute, a member of the Company’s Board, as the Company’s Executive Director. Upon recommendation of the Compensation Committee, the Board approved that Mr. Canute would be paid $16,667 per month for his service as Executive Director and was granted a nonqualified stock option to purchase 79,818 shares of the Company’s common stock. The Compensation Committee determined that in order to reflect the scope of his role and the significant time that Mr. Canute would be devoting to his role as Executive Director, Mr. Canute’s cash compensation was increased to $21,372 per month, and Mr. Canute was granted an additional nonqualified stock option to purchase 22,854 shares of the Company’s common stock. The options have a seven-year term and an exercise price equal to the fair market value of the Company’s common stock based on the closing price of the Company’s common stock on each date of grant and would be subject to the terms of a nonqualified stock option agreement. Such options vested in full upon the Company’s receipt of approval from the FDA for the Company’s BLA resubmission for Trodelvy on April 22, 2020. During the three months ended March 31, 2020 and 2019, the Company paid Mr. Canute $0.1 million and $0.1 million, respectively for such services. Effective April 16, 2020, with the appointment of the Company's new Chief Executive Officer, Mr. Canute stepped down from his role as Executive Director but will continue to serve as a Board member.

On November 19, 2019, pursuant to the Plan, the Board of Directors approved a stock option grant to Behzad Aghazadeh, Executive Chairman of the Board of Directors of the Company, to purchase 150,000 shares of the Company's common stock (the "Performance-Based Option") for certain duties performing this role; including providing consulting and advisory services to the Company. The Performance-Based Option is a nonqualified stock option and one third vested upon FDA acceptance of the BLA resubmission in December 2019, and two thirds vested upon approval from the FDA for Trodelvy on April 22, 2020. Additionally, on March 20, 2020, the Board of Directors approved a grant of 100,000 restricted stock units to Dr. Aghazadeh as consideration for services rendered and expected to be rendered in his role as Executive Chairman.

10.    Collaboration Agreements

GBG Forschungs GmbH

In September 2019, the Company entered into a clinical collaboration with the German Breast Group Forschungs-GmbH ("GBG"), Neu-Isenburg, Germany, to develop Trodelvy as a treatment for newly-diagnosed breast cancer patients who do not achieve a pathological complete response ("pCR") following standard neoadjuvant therapy.

The multinational, post-neoadjuvant Phase 3 SASCIA study developed by GBG will be conducted under the sponsorship of GBG. Approximately 1,200 high-risk patients with newly-diagnosed HER2-negative breast cancer not achieving a pCR following standard neoadjuvant therapy will be randomized to receive either Trodelvy or treatment of physician’s choice. Primary endpoint is invasive disease-free survival with overall survival, patient reported outcome/quality of life, circulating tumor DNA clearance, and safety serving as secondary endpoints.

13



Under the terms of the agreement, GBG is eligible to receive up to 33.0 million in potential clinical and regulatory milestone payments over a span of approximately six years, of which 0.5 million was paid at signing. In April 2020, a 3.0 million regulatory milestone payment was achieved.

11.    Commitments and Contingencies

a. Legal Matters
Stockholder Complaints:

Class Action Stockholder Federal Securities Cases

Two purported class action cases were filed in the United States District Court for the District of New Jersey; namely, Fergus v. Immunomedics, Inc., et al., filed June 9, 2016; and Becker v. Immunomedics, Inc., et al., filed June 10, 2016. These cases arise from the same alleged facts and circumstances and seek class certification on behalf of purchasers of our common stock between April 20, 2016 and June 2, 2016 (with respect to the Fergus matter) and between April 20, 2016 and June 3, 2016 (with respect to the Becker matter). These cases concern the Company’s statements in press releases, investor conference calls, and filings with the U.S. Securities and Exchange Commission (the "SEC") beginning in April 2016 that the Company would present updated information regarding its IMMU-132 breast cancer drug at the 2016 American Society of Clinical Oncology (“ASCO”) conference in Chicago, Illinois. The complaints allege that these statements were false and misleading in light of June 2, 2016 reports that ASCO had canceled the presentation because it contained previously reported information. The complaints further allege that these statements resulted in artificially inflated prices for our common stock, and that the Company and certain of its officers are thus liable under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). An order of voluntary dismissal without prejudice was entered on November 10, 2016 in the Becker matter. An order granting motion to consolidate cases, appoint lead plaintiff, and approve lead and liaison counsel was entered on February 7, 2017 in the Fergus matter. A consolidated complaint was filed on October 4, 2017. The Company filed a motion to dismiss the consolidated complaint on January 26, 2018. On March 31, 2019, the court granted the Company's motion to dismiss, without prejudice, and left plaintiffs with the ability to file an amended complaint within thirty (30) days. Counsel for the Company consented to an extension of time for plaintiffs to file the proposed amended complaint for an additional thirty (30) days. On May 30, 2019, plaintiffs filed an amended complaint alleging many of the same allegations that were set forth in the previously filed complaints, and the Company has filed a motion to dismiss.

A third purported class action case was filed in the United States District Court for the District of New Jersey; namely, Odeh v. Immunomedics, Inc., et al., filed December 27, 2018. The complaint in this action alleges that the Company failed to disclose the results of observations made by the FDA during an inspection of the Company’s manufacturing facility in Morris Plains, New Jersey in August 2018. The complaint alleges that Immunomedics misled investors by failing to disclose the Form 483 inspection report issued by the FDA which set forth the observations of the FDA inspector during the inspection. Such observations purportedly included, inter alia, manipulated bioburden samples, misrepresentation of an integrity test procedure in the batch record, and backdating of batch records. The complaint further alleges that the Company’s failure to disclose the Form 483 resulted in an artificially inflated price for our common stock, and that the Company and certain of its officers are thus liable under Sections 10(b) and 20(a) of the Exchange Act.

On February 8, 2019, a purported class action case was filed in the United States District Court for the District of New Jersey; namely, Choi v. Immunomedics, Inc., et al. The complaint asserts violations of the federal securities laws based on claims that the Company violated the federal securities laws by making alleged misstatements in various press releases and securities filings from February 8, 2018 to November 7, 2018 and by failing to disclose the substance of its interactions with the FDA in connection with the Company's submission of its BLA for Trodelvy. 

Motions for the appointment of a lead plaintiff and lead counsel and to consolidate the Odeh and Choi actions were granted on September 10, 2019. Pursuant to a scheduling order entered by the court on October 7, 2019, the plaintiffs filed an amended complaint on November 18, 2019. The Company filed a motion to dismiss the consolidated, amended complaint on January 17, 2020. The motion is still pending in front of the court.

On April 8, 2019, a putative stockholder of the Company filed a derivative action purportedly on behalf of the Company and against the Company’s board of directors and certain Company current and former officers, in the Superior Court of New Jersey, Law Division (Morris County); namely, Crow v. Aghazadeh, et al. The Crow complaint alleges that the individual defendants breached their fiduciary duties and committed other violations of law based on the same core allegations in the Odeh and Choi actions. The Crow complaint was served on the Company and other defendants on July 18, 2019. On August 13, 2019, the parties

14



submitted to the court a stipulation and proposed order to stay the action until either the entry of an order denying all motions to dismiss the now-consolidated federal actions or the entry of an order dismissing the federal actions with prejudice. That stipulation is currently pending court approval.

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

On February 13, 2017, venBio commenced an action captioned venBio Select Advisor LLC v. Goldenberg, et al., C.A. (Del. Ch.) (the “venBio Action”), alleging that the Company’s Board breached their fiduciary duties when the Board (i) amended the Company’s Amended and Restated By-laws (the “By-Laws”) to call for a plurality voting regime for the election of directors instead of majority voting, and providing for mandatory advancement of attorneys’ fees and costs for the Company’s directors and officers, (ii) rescheduled the Company’s 2016 Annual Meeting of Stockholders (the “2016 Annual Meeting”) from December 14, 2016 to February 16, 2017, and then again to March 3, 2017, and (iii) agreed to the proposed licensing transaction with Seattle Genetics (the "Licensing Transaction"). venBio also named Seattle Genetics as a defendant and sought an injunction preventing the Company from closing the Licensing Transaction. On March 6, 2017, venBio amended its complaint, adding further allegations. The Court of Chancery entered a temporary restraining order on March 9, 2017, enjoining the closing of the Licensing Transaction. venBio amended its complaint a second time on April 19, 2017, this time adding Greenhill & Co. Inc. and Greenhill & Co. LLC (together “Greenhill”), the Company’s financial advisor on the Licensing Transaction, as an additional defendant. On May 3, 2017, venBio and the Company and individual defendants Dr. David M. Goldenberg, our former Chairman of our Board of Directors, our former Chief Scientific Officer and our former Chief Patent Officer, Ms. Cynthia L. Sullivan , a former Director and our former President and Chief Executive Officer (who is also the wife of Dr. Goldenberg), and Mr. Brian A. Markison, a director of the Company (collectively, the “Individual Defendants”) entered into the Initial Term Sheet. On June 8, 2017, venBio the Company and Greenhill entered into the Greenhill Term Sheet. On February 9, 2018, the Court of Chancery approved the Settlement, and entered an order and partial judgment releasing all claims that were asserted by venBio against the Individual Defendants and Greenhill in the venBio Action and awarding venBio fees and expenses. On May 24, 2018 the remaining parties to the venBio Action participated in a mediation of the claims against Geoff Cox, Robert Forrester, Bob Oliver, and Jason Aryeh (the "Remaining Defendants"). The mediation was unsuccessful. The Remaining Defendants filed motions to dismiss the claims against them in the venBio Action. On March 18, 2019, venBio amended its complaint, adding further allegations. The Remaining Defendants filed a motion to dismiss the claims against them on May 1, 2019. The Court of Chancery held oral arguments for the motion to dismiss on November 13, 2019 and following arguments, denied Defendants' motion to dismiss on that same date. The parties are now engaged in discovery activities.

Insurance Coverage Arbitration:

The Company has initiated an arbitration with two of its management liability insurers: Starr Indemnity & Liability Company (“Starr”), and Liberty Insurance Underwriters Inc. (“Liberty”) (collectively, “Insurers”).  The arbitration arises from the 2015 Insurers’ refusal to cover $3.4 million in attorneys’ fees and expenses paid to venBio pursuant to a December 1, 2017, settlement agreement between venBio, the Company, Dr. Goldenberg, Ms. Sullivan, Mr. Markison, and Greenhill to partially settle the venBio Action and fully settle the Federal Action and the Delaware Section 225 Action (the “venBio Fee Award”).  
 
The Insurers argue that the venBio Fee Award does not satisfy their policies’ definitions of covered “loss” because the policies only cover defense costs incurred by the Company.  The Company counters that the venBio Fee Award is a covered settlement, not a claim for defense costs.  Insurers also argue that they have no obligation to pay any defense costs or settlement incurred in the Federal Action or 225 Action because Immunomedics initiated those lawsuits.  The Company’s position is that the Federal Action and 225 Action were defensive in nature and therefore covered because they were initiated to further the defense of the venBio Action.  Additionally, Insurers argue the venBio Fee Award is not covered because the Company was required to obtain Insurers’ consent to enter into a binding term sheet in the venBio Action and to agree to pay the venBio Fee Award and that the Company failed to do so.  The Company takes the position that Insurers at all times were aware of the developments in the venBio Action, that they sought consent to enter into the settlement, and that Insurers cannot show they were prejudiced by an any alleged failure to obtain Insurers’ consent.

Starr is presently advancing the costs to defend the remaining claims in the venBio Action, i.e., those against the Company as Nominal Defendant and individual defendants Aryeh, Cox, Forrester, and Oliver.  However, all Insurers have reserved their rights to contest coverage for any potential settlement of those claims.

b. Other Matters:

Immunomedics is also a party to various claims and litigation arising in the normal course of business.


15



c. License

On April 4, 2018, we entered into a license agreement with The Scripps Research Institute ("TSRI"). Pursuant to the license agreement, TSRI granted to us an exclusive, worldwide, sub-licensable, royalty-bearing license to use certain patent rights relating to Trodelvy. The license agreement expires on a country-by-country basis on the expiration date of the last to expire licensed patent rights in such country covering a licensed product. The license agreement may be terminated by the mutual written consent of the Company and TSRI, and TSRI may terminate the license agreement upon the occurrence of certain events, including, but not limited to, if we do not make a payment due pursuant to the license agreement and fail to cure such non-payment within 30 days after the date of TSRI's written notice of such non-payment. As consideration for the license granted, we made a cash payment of $0.3 million to TSRI, and during 2019, we recognized a $0.5 million milestone payment expense. Additionally, we will pay TRSI (i) product development milestone payments that range from the mid six-digit dollar figure to the low seven-digit dollar figure and (ii) royalties on net sales of licensed products in the low-single digit percentage figure range capped at an annual amount. We have agreed to use reasonable efforts to develop and market the licensed products.

d. Michael Pehl Separation

On March 13, 2019, the Company entered into a separation agreement (the “Separation Agreement”) with Michael Pehl, the Company’s former Chief Executive Officer, President and member of the Company’s Board. Mr. Pehl resigned as Chief Executive Officer, President and member of the Company’s Board effective February 23, 2019. Pursuant to the Separation Agreement, Mr. Pehl will receive cash payments of approximately $1.0 million over an eighteen-month period. During the three months ended March 31, 2020, the Company paid approximately $0.2 million to Mr. Pehl, and $0.4 million was accrued for as of March 31, 2020. Mr. Pehl also released the Company from any and all claims with respect to all matters arising out of or related to Mr. Pehl’s employment by the Company and his resignation.

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

Cautionary Note Regarding Forward-Looking Statements

The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this Quarterly Report, and they may also be made a part of this Quarterly Report by reference to other documents filed with the SEC, which is known as “incorporation by reference.”

Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance are intended to identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, among other things: expectations for the timing of the commercial launch of Trodelvy and the development of Trodelvy for additional indications, the success of our clinical trials (including the funding therefor, anticipated patient enrollment, trial outcomes, interpretation of those data by regulators, timing or associated costs), regulatory applications and related timelines, including the filing and approval timelines for BLAs and BLA supplements, out-licensing arrangements, forecasts of future operating results, potential collaborations, capital raising activities, and the timing for bringing any product candidate to market, involve significant risks and uncertainties and actual results could differ materially from those expressed or implied herein. Factors that could cause such differences include, but are not limited to, the Company’s reliance on third-party relationships and outsourcing arrangements (for example in connection with manufacturing, logistics and distribution, and sales and marketing) over which it may not always have full control, including the failure of third parties on which the Company is dependent to meet the Company’s business and operational needs for investigational or commercial products and, or to comply with the Company’s agreements or laws and regulations that impact the Company’s business; the Company’s ability to meet post-approval compliance obligations (on topics including but not limited to product quality, product distribution and supply chain requirements, and promotional and marketing compliance); imposition of significant post-approval regulatory requirements on our product candidates, including a requirement for a post-approval confirmatory clinical study, or failure to maintain or obtain full regulatory approval for the Company’s product candidates, if received, due to a failure to satisfy post-approval regulatory requirements, such as the submission of sufficient data from a confirmatory clinical study; the uncertainties inherent in research and development; safety and efficacy concerns related to the Company’s products and product candidates; uncertainties in the rate and degree of market acceptance of products and product candidates, if approved; inability to create an effective direct sales and marketing infrastructure or to partner with third parties that offer such an infrastructure for distribution of the Company’s product candidates, if approved; inaccuracies in the Company’s estimates of the size of the potential markets for the Company’s product

16



candidates or limitations by regulators on the proposed treatment population for the Company’s products and product candidates; decisions by regulatory authorities regarding labeling and other matters that could affect the availability or commercial potential of the Company’s products and product candidates; the Company’s dependence on business collaborations or availability of required financing from capital markets, or other sources on acceptable terms, if at all, in order to further develop our products and finance our operations; new product development (including clinical trials outcome and regulatory requirements/actions); the risk that we or any of our collaborators may be unable to secure regulatory approval of and market our drug candidates; risks relating to the COVID-19 pandemic in the U.S. and around the world; risks associated with litigation to which the Company is or may become a party, including the cost and potential reputational damage resulting from such litigation; loss of key personnel; competitive risks to marketed products; and the Company’s ability to repay its outstanding indebtedness, if and when required, as well as the risks discussed in the Company’s filings with the SEC. The Company is not under any obligation, and the Company expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. Refer to Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q for more information.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference in this Quarterly Report on Form 10-Q, as applicable. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise except as may be required by applicable law. All subsequent forward-looking statements attributable to the Company or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Overview

Immunomedics, Inc., a Delaware corporation, together with its subsidiaries (collectively "we," "our," "us," "Immunomedics," or the "Company"), is a leader in next-generation antibody-drug conjugate (“ADC”) technology, committed to help transform the lives of people with hard-to-treat cancers. Our advanced proprietary technologies allow us to create humanized antibodies that can be used either alone in unlabeled or “naked” form, or conjugated with chemotherapeutics, cytokines or toxins. On April 22, 2020, the U.S.  Food and Drug Administration ("FDA") granted accelerated approval to Trodelvy™ (sacituzumab govitecan-hziy) (previously referred to as “IMMU-132”) for the treatment of adult patients with metastatic triple-negative breast cancer (“mTNBC”) who have received at least two prior therapies for metastatic disease. Trodelvy is our lead product and most advanced program in our unique ADC platform. Our current focus is to commercialize Trodelvy as a third-line therapy for patients with mTNBC in the United States and to complete our confirmatory Phase 3 trial for full approval of Trodelvy.

We believe that our antibodies have therapeutic potential, in some cases as a naked antibody or when conjugated with chemotherapeutics, cytokines or other toxins to create unique and potentially more effective treatment options. The attachment of effective anti-tumor compounds to antibodies is intended to allow the delivery of these therapeutic agents to tumor sites with better specificity than conventional chemotherapy. This treatment method is designed to optimize the therapeutic window through reducing the systemic exposure of the patient to the therapeutic agents, which ideally minimizes debilitating side effects while maximizing the concentration of the therapeutic agent at the tumor, potentially leading to better efficacy.
    
Our portfolio of investigational products includes antibody-drug conjugates ("ADCs") that are designed to deliver a specific payload of a chemotherapeutic directly to the tumor while reducing overall toxicities that are usually associated with conventional administration of these chemotherapeutic agents. Our lead ADC product Trodelvy, was granted Breakthrough Therapy Designation and Priority Review, was approved under the FDA’s Accelerated Approval Program based on the objective response rate of 33.3 percent and duration of response of 7.7 months observed in 108 adult mTNBC patients who had previously received a median of three prior systemic therapies in the metastatic setting in a single-arm, multicenter Phase 2 study. Continued approval may be contingent upon verification of clinical benefit in the Phase 3 confirmatory ASCENT study.

On May 1, 2020, we closed an underwritten public offering of 16,947,389 shares of common stock at a public offering price of $28.50 per share. We received gross proceeds of $483.0 million and net proceeds of $464.6 million after deducting the underwriting discounts and commissions and other expenses related to the offering. We intend to use the net proceeds from this offering primarily to support the commercial launch of Trodelvy in the United States in mTNBC, continue to expand the clinical development programs for Trodelvy, invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), continued scale-up of manufacturing and manufacturing process improvements, as well as for working capital and general corporate purposes.
    

17



On April 7, 2020, the FDA granted Fast Track designation for Trodelvy for the treatment of adult patients with locally advanced or metastatic urothelial cancer ("mUC") who have previously received a programmed death receptor-1 ("PD-1") or programmed death-ligand 1 ("PD-L1") inhibitor, and a platinum containing chemotherapy in the neoadjuvant/adjuvant, locally advanced or metastatic setting, including patients who are platinum ineligible and have previously received a PD-1 or PD-L1 inhibitor in the neoadjuvant/adjuvant, locally advanced, or metastatic setting.

On April 6, 2020, we announced that the ASCENT study will be halted due to compelling evidence of efficacy across multiple endpoints. This decision was based on the unanimous recommendation by the independent Data Safety Monitoring Committee during its recent routine review. Top-line data for the ASCENT study is expected to be available mid-2020.

On April 4, 2020, upon recommendation from the Compensation Committee of the Board of Directors and approval by the Board of Directors, the Company appointed Harout Semerjian as the Company's President and Chief Executive Officer, effective April 16, 2020. Mr. Semerjian was also appointed as a member of the Board of Directors. With the appointment of Mr. Semerjian and effective as of the commencement date of Mr. Semerjian’s employment, Mr. Scott Canute stepped down from his role as Executive Director but will continue to serve as a Board member, while Dr. Aghazadeh remains as Executive Chairman focusing on corporate strategy and business development and, during a transition period, will continue to interface with the investment community on behalf of the Company.

As of March 31, 2020, we had $540.6 million in cash, cash equivalents and marketable securities. We believe our projected financial resources are adequate to (i) support commercial launch of Trodelvy in the United States in mTNBC, (ii) continue to expand the clinical development programs for developing Trodelvy in mTNBC, metastatic urothelial cancer ("mUC"), hormone receptor-positive ("HR+")/human epidermal growth factor receptor 2-negative ("HER2-") metastatic breast cancer ("mBC"), and other indications of high medical need, (iii) invest in the broader clinical development of the platform (including IMMU-130 and IMMU-140), (iv) continued scale up of manufacturing and manufacturing process improvements, and (v) general working capital requirements. However, in case of regulatory delays or other unforeseen events, we may require additional funding. Potential sources of funding in such a case could include (i) the entrance into potential development and commercial partnerships to advance and maximize our full pipeline for mTNBC and beyond in the United States and globally, and (ii) potential private and public capital markets financing. Refer to "Note 7 - Stockholders' Equity" for additional information.

On April 29, 2019, we entered into a license agreement (the "License Agreement") with Everest Medicines II Limited, a China limited company ("Everest"). Pursuant to the License Agreement, we granted Everest an exclusive license to develop and commercialize Trodelvy in the People’s Republic of China, Taiwan, Hong Kong, Macao, Indonesia, Philippines, Vietnam, Thailand, South Korea, Malaysia, Singapore and Mongolia (the "Territory"). In consideration for entering into the License Agreement, Everest made a one-time, non-refundable upfront payment to us in the aggregate amount of $65.0 million which is recorded as deferred revenue on the condensed consolidated balance sheets. The License Agreement contains a development milestone payment of $60.0 million based upon our achievement of FDA approval for Trodelvy. On April 22, 2020, the FDA granted accelerated approval to Trodelvy for the treatment of adult patients with mTNBC. Also, on April 22, 2020, Everest announced the China National Medical Products Administration has approved the Clinical Trial Application for a pivotal Phase 3 study of Trodelvy for the treatment of mTNBC in China. The License Agreement also contains additional development milestone payments in a total amount of up to $180.0 million based upon the achievement of certain other development milestones. In addition, the License Agreement contains sales milestone payments in a total amount of up to $530.0 million based upon the achievement of certain sales milestones. Everest will make royalty payments to us based upon percentages of net sales of Trodelvy, ranging from 14% to 20%. Refer to "Note 2 - Revenue Recognition" for additional information.

As part of our commitment to invest in and scale our global supply capacity with world-class partners in each component of our supply-chain, on September 11, 2018, we entered into a Master Services Agreement (the “MSA”) with Samsung BioLogics Co., Ltd. (“Samsung”), pursuant to which Samsung provides the Company with certain biologics manufacturing and development services in accordance with one or more product specific agreements. In connection with the MSA, on September 11, 2018, we also entered into a product specific agreement with Samsung for the production of hRS7, the antibody used in the Company’s lead ADC Trodelvy. In addition, on December 26, 2018, we expanded our long-term master supply agreement with Johnson Matthey, which will continue to scale the manufacturing of CL2A-SN-38, the drug-linker that is a key component of Trodelvy.

To accelerate the clinical and preclinical development of Trodelvy, we have entered into the following clinical collaborations: with AstraZeneca PLC to investigate Trodelvy in combination with the checkpoint inhibitor, durvalumab (Imfinzi®), in earlier lines of therapy for mTNBC, mUC and metastatic NSCLC ("mNSCLC"); with Clovis Oncology, Inc. to combine Trodelvy with its poly (ADP-ribose) polymerase (PARP) inhibitor, rucaparib (Rubraca®), in mTNBC, advanced UC and ovarian cancer; and with Roche to initiate a Phase 1b/2 study (MORPHEUS) comparing the safety and efficacy of the combination of atezolizumab (Tecentriq®) and Trodelvy as a frontline treatment for patients with metastatic or inoperable locally advanced mTNBC versus

18



atezolizumab plus nab-paclitaxel as standard of care. Additionally, we have entered into a collaboration with the German Breast Group to conduct a multinational, post-neoadjuvant registrational Phase 3 study (SASCIA) that will evaluate Trodelvy as a treatment for newly-diagnosed breast cancer patients who do not achieve a pathological complete response ("pCR") following standard neoadjuvant therapy.

We are also working with (i) Massachusetts General Hospital (“MGH”) on a Phase 2 NeoSTAR study to evaluate Trodelvy in patients with localized TNBC using pCR rate as the primary endpoint, with disease-free survival and overall survival serving as secondary endpoints. This multicenter study is sponsored by Dana-Farber/Partners CancerCare, the adult oncology collaboration of Dana Farber Cancer Institute, Brigham and Women’s Hospital, and the MGH Cancer Center; (ii) MGM on a Phase 1b/2 study of Trodelvy combining with Pfizer’s PARP inhibitor, talazoparib (TALZENNA®), in patients with mTNBC previously treated with no more than one prior therapeutic regimen for metastatic disease; (iii) Yale University on a Phase 2 study of Trodelvy in patients with persistent and recurrent endometrial cancer; and (iv) the University of Wisconsin in patients with metastatic castration-resistant prostate cancer who have progressed on second generation androgen receptor-directed therapy on a Phase 2 study.

We also have a number of other product candidates that target solid tumors and hematologic malignancies in various stages of clinical and preclinical development. They include other ADCs such as IMMU-130, which binds the CEACAM5 antigen expressed on CRC and other solid cancers, and IMMU-140, which targets HLA-DR for the potential treatment of hematologic malignancies. We believe that our portfolio of intellectual property provides commercially reasonable protection for our product candidates and technologies.

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

the time and expense required for us to comply with all applicable federal, state and foreign legal requirements, including, without limitation, our receipt of the necessary approvals of the FDA (which receipt is uncertain);

the time and expense required for us to establish and maintain compliant operations for commercial manufacturing, sale, and distribution of products under FDA and healthcare law requirements, and risks of non-compliance;

we may be unable to obtain additional capital through strategic collaborations, licensing, or potential private and public capital markets financings, including the use of the ATM Agreement, in order to continue our research and secure regulatory approval of and market our lead drug candidate;

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

our ability, as well as the ability of our partners, to conduct and complete clinical trials on a timely basis, including as a result of any impacts to current or future trials due to COVID-19 pandemic;

the ability to provide and maintain an adequate clinical and commercial supply, including through contract manufacturer and vendor relationships;

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

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

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


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Critical Accounting Policies and Accounting Estimates

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

For a description of our significant accounting policies, refer to "Part II, Item 8. Financial Statements and Supplementary Data, Note 1 - Business Overview and Summary of Significant Accounting Policies" in our 2019 Annual Report on Form 10-K. Of these policies, the following are considered critical to an understanding of our Unaudited Condensed Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments: stock-based compensation expenses, and fair value for the liability related to sale of future royalties and related interest expense. Refer to "Note 4 - Debt", "Note 5 - Stock-based Compensation" and "Note 6 - Estimated Fair Value of Financial Instruments", respectively, for more information.

Recent Accounting Pronouncements

Refer to "Note 1 - Business Overview, Basis of Presentation and Recent Accounting Pronouncements” in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and their expected impact on our financial position and results of operations.

Results of Operations

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

Three-Month Period Ended March 31, 2020 Compared to Three-Month Period Ended March 31, 2019

Costs and Expenses
 
 
 
 
 
($ in thousands)
 
 
 
 
 
Increase/(Decrease)
Three Months Ended March 31,
2020
 
2019
 
2020 vs 2019
   Research and development
$
62,428

 
$
58,172

 
$
4,256

 
7.3%
   Sales and marketing
8,067

 
7,881

 
186

 
2.4%
   General and administrative
11,473

 
13,595

 
(2,122
)
 
(15.6)%
      Total costs and expenses
$
81,968

 
$
79,648

 
$
2,320

 
2.9%
 
 
 
 
 
 
 
 
Total costs and expenses for the three months ended March 31, 2020 increased $2.3 million compared to the three months ended March 31, 2019, primarily due to an increase in research and development expenses of $4.3 million, and an increase in sales and marketing expenses of $0.2 million, partially offset by a decrease in general and administrative expenses of $2.1 million.

Research and Development

We do not track expenses on the basis of each individual compound under investigation and therefore we do not provide a breakdown of such historical information in that format. We evaluate projects under development from an operational perspective, including such factors as results of individual compounds from laboratory/animal testing, patient results and enrollment statistics in clinical trials. It is important to note that multiple product candidates are often tested simultaneously. It is not possible to calculate each antibody’s supply costs. There are many different development processes and test methods that examine multiple product candidates at the same time. We have, historically, tracked our costs in the categories discussed below, specifically “research costs” and “product development costs” and by the types of costs outlined below.

Our research costs consist of outside costs associated with animal studies and costs associated with research and testing of our product candidates prior to reaching the clinical stage. Such research costs primarily include personnel costs, facilities, including depreciation, lab supplies, funding of outside contracted research and license fees. Our product development costs consist of costs from preclinical development (including manufacturing), conducting and administering clinical trials and patent expenses.


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The following table summarizes our research and development costs for the three months ended March 31, 2020, compared to the three months ended March 31, 2019:
 
 
 
 
 
($ in thousands)
 
 
 
 
 
Increase/(Decrease)
Three Months Ended March 31,
2020
 
2019
 
2020 vs 2019
Labor
$
14,907

 
$
11,554

 
$
3,353

 
29.0
 %
Manufacturing and quality costs
32,885

 
39,658

 
(6,773
)
 
(17.1
)%
Clinical development and operations
10,426

 
4,655

 
5,771

 
nm

Other
4,210

 
2,305

 
1,905

 
82.6
 %
Total research and development costs
$
62,428

 
$
58,172

 
$
4,256

 
7.3
 %
nm - not meaningful
 
 
 
 
 
 
 
    
Research and development costs increased for the three months ended March 31, 2020 by approximately $4.3 million to $62.4 million compared to the three months ended March 31, 2019. The increase in research and development costs for the three months ended March 31, 2020, compared to the three months ended March 31, 2019, relate primarily to increased clinical development and operational costs due to the expansion of clinical trials with increased enrollment and an increase in labor costs due to higher headcount and stock-based compensation expense, partially offset by a decrease in manufacturing and quality costs from lower contract manufacturing expenses and decreased usage of consulting services in response to the FDA's Complete Response Letter and re-inspection readiness.
 
Completion of clinical trials may take several years or more. The length of time varies according to the type, complexity and the disease indication of the product candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following periods:
 
    
Estimated Completion Period
Clinical Phase
 
(Years)
I
 
0-1
II
 
1-2
III
 
1-4
The duration and cost of clinical trials through each of the clinical phases may vary significantly over the life of a particular project as a result of, among other things, the following factors:

the length of time required to recruit qualified patients for clinical trials;
the duration of patient follow-up in light of trial results;
the number of clinical sites required for trials; and
the number of patients that ultimately participate.


21



Sales and Marketing

The following table summarizes our sales and marketing expenses for the three months ended March 31, 2020, compared to the three months ended March 31, 2019:
 
 
 
 
 
($ in thousands)
 
 
 
 
 
Increase/(Decrease)
Three Months Ended March 31,
2020
 
2019
 
2020 vs 2019
Labor costs
$
5,246

 
$
6,687

 
$
(1,441
)
 
(21.5
)%
Marketing and promotions
1,508

 
657

 
851

 
nm

Consulting services
302

 

 
302

 
nm

Other
1,011

 
537

 
474

 
88.3
 %
Total sales and marketing
$
8,067

 
$
7,881

 
$
186

 
2.4
 %
nm- not meaningful
 
 
 
 
 
 
 

Sales and marketing expenses for the three months ended March 31, 2020 increased by approximately $0.2 million compared to the three months ended March 31, 2019, primarily due to an increase in marketing and promotions costs in connection with the pending launch of Trodelvy in the United States for patients with mTNBC offset by a decrease in labor costs due to lower headcount.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2020, compared to the three months ended March 31, 2019:
 
 
 
 
 
($ in thousands)
 
 
 
 
 
(Decrease)/Increase
Three Months Ended March 31,
2020
 
2019
 
2020 vs 2019
Labor costs
$
4,843

 
$
6,813

 
$
(1,970
)
 
(28.9
)%
Legal and advisory fees
1,749

 
1,054

 
695

 
65.9
 %
Consulting services
1,118

 
2,146

 
(1,028
)
 
(47.9
)%
Other
3,763

 
3,582

 
181

 
5.1
 %
Total general and administrative
$
11,473

 
$
13,595

 
$
(2,122
)
 
(15.6
)%
 
 
 
 
 
 
 
 

General and administrative expenses for the three months ended March 31, 2020 decreased by approximately $2.1 million compared to the three months ended March 31, 2019, primarily due to decreased labor costs from non-recurring charges recorded in the prior period pursuant to the separation agreement on our former CEO along with decreased consulting services offset by an increase in legal and advisory fees due to increased reliance on outside legal counsel.