Shares of Immunomedics (IMMU) rose 23.5% to $6.68 on Friday morning following news of the termination of the license agreement between the company and Seattle Genetics (SGEN) for cancer drug sacituzumab govitecan (IMMU-132). The companies also announced the settlement of related litigation.
The news comes after Delaware Vice Chancellor J. Travis Laster in March halted the license deal as a result of a lawsuit filed by VenBio Partners, an activist firm invested in Immunomedics.
Also on Friday, Immunomedics said Cynthia L. Sullivan will step down as president, CEO and director, and CFO Michael R. Garone will serve as interim CEO effective upon the execution of a broad legal settlement with VenBio and other parties. Immunomedics founder Dr. David M. Goldenberg will step down as chief scientific officer and chief patent officer effective upon the execution of the settlement pact and will remain a director.
In addition, Immunomedics said it raised $125 million in gross proceeds in a private placement of its Series A-1 convertible preferred stock with institutional investors.
Bothell, Wash.-based Seattle Genetics and Morris Plains, N.J.-based Immunomedics announced a license agreement on February 10.
Under the terms of the deal, Seattle Genetics will pay $250 million in cash to Immunomedics for rights to IMMU-132. Immunomedics is also eligible for an additional $1.7 billion in back-end milestone payments plus royalties on IMMU-132 sales. Concurrent with the transaction, Seattle Genetics said in February it will make an equity investment of up to $57 million for up to a 9.9% stake in Immunomedics through an immediate purchase of common stock and a three-year warrant.
VenBio Select Advisor LLC, the investment fund managed by Behzad Aghazadeh that last fall unveiled a slate of four nominees to Immunomedics' board, filed a complaint with Delaware Court of Chancery on Feb. 13, seeking an injunction against the Seattle Genetics partnership.
VenBio accused Immunomedics management of undervaluing and essentially giving away its most valuable asset -- IMMU-132 -- because they were afraid of losing their jobs in a proxy vote. A day after VenBio filed its lawsuit, Immunomedics issued a statement saying it believes the allegations "are completely without merit."
The activist won its campaign on March 3 at the company's annual shareholder meeting, where its slate of four directors were elected to Immunomedics' board.
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Upon the termination of the license agreement, the parties have agreed to settle, resolve and release each other from all disputes, claims and liabilities. Seattle Genetics will continue to own 3 million Immunomedics shares, as well as a warrant to acquire an additional 8.7 million shares at $4.90 per share exercisable until Dec. 31, 2017.
In a statement on Friday, Seattle Genetics president and CEO Clay Siegall said that the Immunomedics deal "would have effectively utilized our substantial expertise in antibody-drug conjugate (ADC) development to advance IMMU-132 for patients in need."
"However, due to significant delays and lack of progress towards closing the deal, we are turning our full attention and resources to our promising pipeline and the substantial opportunities in front of us, including the upcoming topline data readout from the ADCETRIS ECHELON-1 trial and ongoing or planned pivotal trials of vadastuximab talirine (SGN-CD33A) and enfortumab vedotin (ASG-22ME)," Siegall said.
Shares of Seattle Genetics were trading at $62.11, down 2.6%.
Aghazadeh, Immunomedics' chairman, said in a statement: "After conducting a full multi-faceted review of the organizational, operational, and clinical and regulatory capabilities, we are confident that Immunomedics can fully execute on a strategic plan over the next several years to become a recognized leader in the field of antibody-drug conjugates."
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