PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

        ImmunoGen's Common Stock is quoted on The Nasdaq National Market under the symbol IMGN. The table below sets forth the high and low bid prices on the Nasdaq National Market for our Common Stock for each of the quarters indicated.

        As of September 12, 2003, there were approximately 123 holders of record of the Company's Common Stock and, according to the Company's estimates, approximately 19,000 beneficial owners of the Company's Common Stock.

        The Company has not paid any cash dividends on its Common Stock since its inception and does not intend to pay any cash dividends in the foreseeable future.

Item 6.    Selected Financial Data

        The following table sets forth consolidated financial data with respect to the Company for each of the five years in the period ended June 30, 2003. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this report on Form 10-K.

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Overview

        Since the Company's inception, we have been principally engaged in the development of antibody-based cancer therapeutics and novel treatments in the field of oncology. The combination of our expertise in antibodies and cancer has resulted in the generation of both proprietary products and technologies. Our lead, proprietary, tumor-activated prodrug, or TAP, technology combines extremely potent, small-molecule drugs with monoclonal antibodies that recognize and bind specifically to tumor cells. Our targeted delivery technology increases the potency of these cancer-specific antibodies, which allow our drugs to kill cancer cells while avoiding harm to healthy tissue. The cytotoxic agent we currently use in all of our TAP products is the maytansinoid DM1, a chemical derivative of a naturally occurring substance called maytansine. We also use our expertise in antibodies and cancer to develop other types of therapeutics, such as naked antibody anticancer products.

        We have entered into collaborative agreements that allow companies to use our TAP technology to develop commercial products containing their antibodies. We have also used our proprietary TAP technology in conjunction with our in-house antibody expertise to develop our own anticancer products. In July 2003, we announced a discovery, development and commercialization collaboration with Aventis Pharmaceuticals, Inc. Under the terms of the agreement, Aventis gains commercialization rights to three of the most advanced products in our preclinical pipeline and the commercialization rights to certain new products developed during the research program portion of the collaboration. This collaboration allows us to access Aventis' cancer targets and their clinical development and commercialization capabilities. We also licensed certain rights to huN901-DM1, an internally developed TAP product candidate, to British Biotech in order to access their clinical development capabilities. The terms of our collaborative agreements vary, reflecting the value we add to the development of any particular product candidate; however, the agreements generally provide that we receive upfront and milestone payments, royalties on sales of any resulting products and reimbursement of our fully burdened cost to manufacture preclinical and clinical materials. Under the terms of the Aventis agreement, we also are entitled to receive committed research funding of approximately $50.7 million during the three-year research program. Should Aventis elect to exercise its contractual right to extend the term of the research program, we will receive additional research funding. Under certain agreements, we receive our fully burdened cost to manufacture preclinical and clinical materials plus a profit margin. Currently, our collaborative partners include Abgenix, Inc., Aventis, Boehringer Ingelheim International GmbH, British Biotech plc, Genentech, Inc. and Millennium Pharmaceuticals, Inc. We expect that substantially all of our revenue for the foreseeable future will result from payments under our collaborative arrangements.

        In January 2003, we announced that pursuant to the terms and conditions of the agreement between GlaxoSmithKline and ourselves, GlaxoSmithKline gave us written notice that it would relinquish all rights to develop and commercialize cantuzumab mertansine under their product license. In February 2003, we regained the development and commercialization rights to cantuzumab mertansine from GlaxoSmithKline, thereby terminating the product license. We are now free to relicense the product as we consider most appropriate.

        To date, we have not generated revenues from commercial product sales and we expect to incur significant operating losses over the foreseeable future. As of June 30, 2003, we had approximately $101.3 million in cash and marketable securities. In August 2003, we received $12.0 million from Aventis, representing the non-refundable upfront payment owed us upon the execution of our collaboration agreement. We anticipate that our current capital resources and future collaboration payments, including the $50.7 million of committed research funding due us under the Aventis agreement, will enable us to meet our operational expenses and capital expenditures for at least the next five to seven fiscal years.

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        We do not anticipate that we will have a commercially approved product within the foreseeable future. Research and development expenses are expected to increase significantly in the near term as we continue our development efforts. In the next six months, we expect to pay out approximately $72,000 to further expand our development and pilot manufacturing facility in Norwood, Massachusetts. On July 23, 2002, we signed a sublease on approximately 15,000 square feet of laboratory and office space in a building located at 148 Sidney Street, Cambridge, Massachusetts. We expect that we will spend approximately $281,000 over the next 3 months to equip and occupy this additional space.

        On August 27, 2002, we announced that our Board of Directors had authorized the open market repurchase of up to 4.1 million shares of ImmunoGen common stock. The repurchases are to be made at the discretion of management and as market conditions warrant. No time limit was set for the completion of the repurchase program. As of June 30, 2003, the Company had repurchased 3,675,062 shares of its common stock at a total cost of $11.1 million. Because repurchases are at management's discretion and subject to market conditions, we are unable to estimate the total cost of the repurchase program or the period during which such repurchases may take place.

        We anticipate that the increase in total cash expenditures will be partially offset by collaboration-derived proceeds including milestone payments and the committed research funding we will receive pursuant to the Aventis collaboration. Accordingly, period-to-period operational results may fluctuate dramatically. 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 allowing for the development of internal product candidates and technologies. However, we can give no assurances that such collaborative agreement funding will, in fact, be realized. 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.

Critical Accounting Policies

        We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. 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.

        We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

        We estimate the period of our significant involvement during development for each of our collaborative agreements. We recognize any upfront fees received from our collaborators ratably over this estimated period of significant involvement. We generally believe our period of significant involvement occurs between the date we sign a collaboration agreement and projected FDA approval of our collaborators' product that is the subject of the collaboration agreement. We estimate that this time period is generally six years. The actual period of our involvement could differ significantly based upon the results of our collaborators' preclinical and clinical trials, competitive products that are introduced into the market and the general uncertainties surrounding drug development. Any difference between our estimated period of involvement during development and our actual period of involvement could have a material effect upon our results of operations. In February 2003, our full

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product license with GlaxoSmithKline terminated. During the quarter ended March 31, 2003, we recognized $348,000 of revenue related to the GlaxoSmithKline upfront fee that remained in deferred revenue as of the termination date.

Inventory

        We review our estimates of the net realizable value of our inventory at each reporting period. Our estimate of the net realizable value of our inventory is subject to judgment and estimation. The actual net realizable value of our inventory could vary significantly from our estimates and could have a material effect on our financial condition and results of operations in any reporting period. We consider any DM1 or ansamitocin P3 raw material inventory in excess of 12 months' projected usage that is not supported by collaborators' firm fixed orders to be excess. We record any such raw material identified as excess at its net realizable value. Our estimate of 12 months' usage of DM1 and ansamitocin P3 raw material inventory is based upon our collaborators' estimates of their future clinical material requirements. Our collaborators' estimates of their clinical material requirements are based upon expectations of their clinical trials, including the timing, size, dosing schedule and maximum tolerated dose of each clinical trial. Our collaborators' actual requirements for clinical materials may vary significantly from their projections. Significant differences between our collaborators' actual manufacturing orders and their projections could result in our actual 12 months' usage of DM1 and ansamitocin P3 varying significantly from our estimated usage at an earlier reporting period. During the year ended June 30, 2003, we recorded as research and development expense $1.7 million of amounts paid or payable to the manufacturers of ansamitocin P3 and DM1 to produce material that we have identified as excess based upon our inventory policy.

        In April 2003, one of our collaborators informed us that it may explore alternative sources of ansamitocin P3 and/or DM1. In applying our inventory policy, we included this collaborator's 12 months' projected usage in the determination of our 12-month supply of ansamitocin P3 and DM1. At June 30, 2003, we believe that approximately $1.6 million of our ansamitocin P3 and/or DM1 inventory will be used to produce conjugate for this collaborator. If the collaborator finds and elects to use an alternative source of ansamitocin P3 and/or DM1, we will evaluate our inventory and, if necessary, will record an inventory valuation allowance to reduce to its net realizable value any ansamitocin P3 or DM1 inventory identified as excess. We are unable to determine when, if ever, the collaborator would be able to secure an alternative source of ansamitocin P3 and/or DM1.

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Results of Operations

Revenues

        Our total revenues for the year ended June 30, 2003 were $7.6 million compared with $5.9 million and $4.5 million for the years ended June 30, 2002 and 2001, respectively. The 30% increase in revenues from 2002 to 2003 is primarily attributable to higher collaboration revenue. On October 8, 2002, Boehringer Ingelheim confirmed to us that clinical trials of the novel anticancer agent, bivatuzumab mertansine, composed of our DM1 effector molecule and Boehringer Ingelheim's anti-CD44v6 antibody, had been initiated on or about September 24, 2002. The achievement of this milestone triggered a milestone payment of $1.0 million from Boehringer Ingelheim to us. On November 21, 2002, we announced that ImmunoGen had earned a $1.0 million milestone payment under its single target license agreement with Millennium upon Millennium's initiation of clinical trials with MLN2704. The 31% increase in revenues from 2001 to 2002 is primarily attributable to increased revenues associated with preclinical and clinical materials we manufactured and delivered to our collaborative partners offset by lower collaboration revenue.

        Collaboration revenue for the year ended June 30, 2003 increased 144% to $4.2 million compared to $1.7 million in the same period in 2002. Collaboration revenue for the year ended June 30, 2001 was $3.6 million. The increase in collaboration revenue from 2002 to 2003 is primarily attributable to milestones achieved under our single target license agreements with Boehringer Ingelheim and Millennium Pharmaceuticals, as discussed above. In addition, during the year ended June 30, 2003, we recognized collaboration revenue of $348,000 from GlaxoSmithKline that represents the portion of the upfront payment GlaxoSmithKline had previously paid to ImmunoGen that had not been recognized as revenue at the date of termination of the license agreement. Included in collaboration revenue in the year ended June 30, 2001 is a $2.0 million milestone payment we received from GlaxoSmithKline upon the commencement of a Phase I multidose clinical trial. The revenue associated with this milestone was recognized on a percentage of completion basis over the period of our performance. We substantially completed all of our performance during the year ended June 30, 2001. We did not earn any similar milestone payment during the year ended June 30, 2002. Total collaboration revenue recognized from each of our collaborative partners in the years ended June 30, 2003, 2002 and 2001 is included in the following table:

        Clinical materials reimbursement decreased 10% to $3.2 million in the year ended June 30, 2003 compared to $3.5 million in the year ended June 30, 2002. We earned clinical materials reimbursement of $597,000 during the year ended June 30, 2001. We first shipped clinical materials, for which we were entitled to reimbursement, in the quarter ended March 31, 2001. Clinical materials reimbursement for the year ended June 30, 2002 reflects 12 months of shipments compared to only five months of shipments in the year ended June 30, 2001. During the year ended June 30, 2002, we shipped clinical

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materials in support of the cantuzumab mertansine and huN901-DM1 clinical trials, as well as preclinical materials manufactured in accordance with current Good Manufacturing Practices (cGMP) at our pilot plant, in support of certain other collaborators' development efforts. During the year ended June 30, 2003, we shipped clinical materials in support of the huN901-DM1, bivatuzumab mertansine, and MLN2704 clinical trials, as well as preclinical materials, in support of certain other collaborators' development efforts. The amount of clinical materials reimbursement we earn, and the related cost of clinical materials reimbursed, is directly related to (i) the number of on-going clinical trials for which we are producing clinical material for our collaborators, 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 (ii) our production of clinical grade material on behalf of our collaborators, either in anticipation of clinical trials, or for process development and analytical purposes. As such, the amount of clinical materials reimbursement and the related cost of clinical materials reimbursed may vary significantly from quarter to quarter and annually.

        Development fees decreased 58% from $654,000 for the year ended June 30, 2002 to $275,000 for the year ended June 30, 2003. Development fees were $237,000 in the year ended June 30, 2001. Development fees represent the fully burdened reimbursement of costs incurred in producing research-grade materials in accordance with Good Laboratory Practices and developing antibody-specific conjugation processes on behalf of our collaborators and potential collaborators during the early evaluation and preclinical testing stages of drug development. During the year ended June 30, 2002, we provided development services to more collaborators and potential collaborators than we had during the years ended June 30, 2003 and 2001. Development fees decreased in 2003 compared to 2002, primarily as a result of the advancement into clinical trials of bivatuzumab mertansine and MLN2704, the products that are the subject of our collaborations with Boehringer Ingelheim and Millennium, respectively. 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' products 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 annually.

Research and Development Expenses

        We report research and development expense net of reimbursements we receive from our collaborators. Our net research and development expenses consist of (i) research to identify and evaluate new targets and to develop and evaluate new antibodies and cytotoxic drugs, (ii) preclinical testing and clinical trials of our own, and in certain instances, our collaborators' product candidates, and (iii) development related to improving clinical and commercial manufacturing processes. During the three fiscal years ended June 30, 2003, our research efforts have been primarily focused in the following areas:

 

• Our contributions to the clinical development of huN901-DM1 and cantuzumab mertansine;



 

• Process improvements related to clinical and commercial production of the huN901 antibody;



 

• Process improvements to our TAP technology;



 

• Preclinical development of our own potential products;



 

• Process improvement related to the production of DM1 and strain development of its precursor, ansamitocin P3;



 

• Process development related to the commercial manufacture of the huN901-DM1 conjugate;



 

• Operation, maintenance and expansion of our pilot scale manufacturing plant;



 

• Identification and evaluation of potential antigen targets;

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• Evaluation of internally developed and in-licensed antibodies; and



 

• Development and evaluation of additional cytotoxic agents.

        British Biotech is currently conducting phase I and phase I/II clinical trials of huN901-DM1. British Biotech is conducting the Phase I/II study in the United States and the Phase I clinical trial of huN901-DM1 in the United Kingdom. British Biotech is the sponsor of these trials and, as such, has control over the clinical trial schedule and progress.

        In July 2003, British Biotech announced its proposed acquisition of Vernalis. In late August 2003 the acquisition was declared unconditional in all respects after a significant majority of Vernalis' shareholders accepted British Biotech's tender offer. In connection with the acquisition, the merged company, which is proposed to be called Vernalis, has announced that it intends to review its merged product candidate portfolio. We anticipate that huN901-DM1 will be subject to review and we cannot, with any degree of certainty, predict the outcome of such review.

        In addition to retaining commercial rights to huN901-DM1 worldwide, excluding the European Union and Japan, we retain worldwide manufacturing rights. Under the terms of the contract, we are responsible for all clinical and commercial manufacturing process development and certain antibody costs. We are developing various processes related to the commercial manufacture of the huN901-DM1 conjugate. Under an arrangement with Genzyme Transgenics Corporation, we investigated the viability of commercial production of huN901 antibody using transgenic goats. Worldwide antibody manufacturing capacity is currently constrained, and, generally, manufacturing capacity must be reserved months in advance of production. We anticipate that we will incur substantial costs to meet our obligations under our agreement with British Biotech to complete clinical and commercial conjugation process development efforts, reserve manufacturing space and manufacture humanized antibody. We also expect that we will continue to devote significant human resources to the manufacturing process development efforts over the next five years.

        In January 2003, we announced that we would regain the development and commercialization rights to cantuzumab mertansine from GlaxoSmithKline, thereby terminating our collaborative agreement. In February 2003, GlaxoSmithKline terminated our license agreement and we are now free to relicense the product as we consider most appropriate. We expect that the future cost, if any, to develop cantuzumab mertansine will be borne by a collaborative partner if we are successful in relicensing the product. At present, we do not expect to incur significant additional costs related to the continued clinical development of cantuzumab mertansine.

        As discussed above, we have licensed three of the most advanced product candidates in our preclinical pipeline to Aventis under the terms of our discovery, development and commercialization collaboration. Those three product candidates are huMy9-6-DM1, an anti-IGF-IR antibody and a third product. huMy9-6-DM1 is a humanized monoclonal antibody conjugated to DM1 and is directed against acute myeloid leukemia. huMy9-6-DM1 is in preclinical development. At June 30, 2003 we continued to conduct preclinical safety and efficacy studies on huMy9-6-DM1. Pending the successful preclinical development of huMy9-6-DM1 and favorable outcome of preclinical safety and efficacy studies and any other studies, we expected to be prepared to file an Investigational New Drug Application (IND) for huMy9-6-DM1 in the first half of calendar year 2004. However, the continued development of huMy9-6-DM1 and the actual filing of this IND is now dependent upon Aventis' development and clinical strategy, as well as the results of any and all preclinical studies. As a result, the timing of the filing of this IND, if it occurs at all, may vary from our original estimates.

        Anti-IGF-IR antibody is a naked antibody directed against a target found on various solid tumors including certain breast, lung and prostate cancers. At June 30, 2003, we continued to perform preclinical experiments to evaluate candidate antibodies and identify a lead antibody product candidate. Subject to Aventis' development and clinical strategy, pending the final results of the product candidate

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evaluations, we expect that one antibody will move into preclinical development in calendar year 2003. The third, undisclosed, potential product candidate is directed at certain B-cell malignancies, including non-Hodgkin's lymphoma, and is in the early stages of preclinical development.

        The cost to develop new products and advance those products to the IND stage can be significant. Under the terms of our discovery, development and research collaboration with Aventis, they have licensed three of our most advanced preclinical product candidates. With the exception of those antibodies or antibody targets that are the subject of our preexisting or future collaboration and license agreements, during the term of our collaborative research program, we are required to propose for inclusion in the collaborative research program, certain antibodies or antibody targets that we believe will have utility in oncology. Aventis then has the right to either include or exclude these proposed antibodies and antibody targets into the collaborative research program. If Aventis elects to exclude any antibodies or antibody targets, we may elect to develop the products. Furthermore, Aventis may only include a certain number of antibody targets in the research program at any one time. Aventis must therefore exclude any proposed antibody or antibody target in excess of this number. Over the original, three-year term of the research program, we will receive a minimum of $50.7 million of committed research funding and will devote a significant amount of our internal research and development resources to advancing the research program. Under the terms of the agreement, we may advance any TAP or antibody products that Aventis has elected not to either initially include or advance in the research program. At present, the potential product candidates in our pipeline that are not part of the Aventis collaboration are in an early stage of discovery research and we are unable to accurately estimate which potential products, if any, will eventually move into our internal preclinical research program. We are unable to reliably estimate the costs to develop our potential 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 into the clinical development phase is predicated upon the results of preclinical tests. We cannot accurately predict which, if any, of the discovery research stage product candidates will advance from preclinical testing and move into our internal clinical development program. The costs to take a product through clinical trials is dependent upon, among other things, the medical indications, the timing, size and dosing schedule of each clinical trial, the number of patients enrolled in each trial, and the speed at which patients are enrolled and treated. In many cases, we are unable to determine what, if any, indication a particular product candidate will treat until we have completed extensive preclinical studies. Given the uncertainties related to new drug development, we are currently unable to estimate when, if ever, our research stage product candidates will generate revenues and cash flows.

        DM1 is the cytotoxic agent that we currently use in the manufacture of all of our collaborators' and our own conjugates. In order to make commercial manufacture of DM1 conjugates viable, we have devoted substantial resources to improve the strain of the microorganism that produces ansamitocin P3, the precursor to DM1, to enhance manufacturing yields. We also continue to devote considerable resources to improve other DM1 manufacturing processes.

        We generally have not tracked our historical research and development costs by project; rather, we track such costs by department and expense category. For this reason, we cannot accurately estimate with any degree of certainty what our historical costs have been for certain research and development projects. We believe that our research and development costs by project are confidential and the disclosure of such costs could have a material negative effect on our ability to negotiate with our suppliers, collaborators and potential collaborators and, accordingly, do not disclose our individual project research and development expenses.

        Research and development expense for the year ended June 30, 2003 increased 32% to $23.4 million from $17.7 million for the year ended June 30, 2002. Research and development expense for the year ended June 30, 2001 was $15.2 million. Included in research and development expense for the year ended June 30, 2003 is $3.4 million of antibody that we purchased in anticipation of potential

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future clinical trials and $1.7 million of amounts paid or payable to the manufacturers of ansamitocin P3 and DM1. Based upon current collaborator firm fixed orders and projections, we determined that our on-hand supply of DM1 and its precursor ansamitocin P3 represented more than a 12-month supply and is therefore considered excess under our inventory policy. During the same period in 2002, we recorded charges of $1.5 million and $753,000 to reduce the value of cantuzumab mertansine inventory and huN901 prepaid assets and inventory, respectively, to their net realizable value. During the year ended June 30, 2002, GlaxoSmithKline was conducting their second and third Phase I clinical trials of cantuzumab mertansine. GlaxoSmithKline reimbursed us the cost of clinical materials in the second trial. This trial reached its primary endpoints and achieved its additional objectives earlier than anticipated. The trial, therefore, used less clinical material than originally projected. As a result of the early conclusion of the second trial, we had more cantuzumab mertansine inventory on-hand than GlaxoSmithKline would reimburse. As a result, in the quarter ended March 31, 2002, we wrote down the value of the inventory to its estimated net realizable value. The inventory valuation allowance was charged to research and development expense in the three-month period ended March 31, 2002. In the quarter ended June 30, 2002, enrollment and dosing were completed in the second phase I clinical trial. As the second Phase I clinical trial was complete, at June 30, 2002, we wrote down the cantuzumab mertansine inventory against the valuation allowance previously established. The write down did not result in any additional charge or reversal of any portion of the previously established valuation allowance. In the other Phase I study of cantuzumab mertansine, we provided clinical material at our cost. We wrote down the value of the huN901 prepaid assets and inventory based on an agreement with British Biotech in which we agreed in principle that ImmunoGen and British Biotech would share in costs of antibody in excess of our estimates. There were no similar charges during the year ended June 30, 2001.

        In fiscal 2002, we entered into several agreements with outside vendors to perform ansamitocin P3 and DM1 process development. Included in the year ended June 30, 2003, 2002 and 2001 were $3.0 million, $1.1 million, and $928,000, respectively, of expenses related to ansamitocin P3 and DM1 process development.

        In September 2000, November 2000, January 2001 and March 2001, we entered into collaborations with MorphoSys AG, Genzyme Transgenics Corporation, Avalon Pharmaceuticals, Inc. and Raven Biotechnologies, Inc., respectively. These agreements relate to our internal research and development efforts and our collaboration with British Biotech. Included in the years ended June 30, 2003, 2002, and 2001 were $92,000, $2.5 million and $3.9 million, respectively, of expenses related to these agreements.

        During the years ended June 30, 2003 and 2002, we produced 16 and 24 batches of conjugates, respectively, on behalf of certain collaborators. Due to lower utilization of the Norwood pilot manufacturing plant during 2003 as compared to the same period in 2002, manufacturing and quality control costs included in research and development expense increased approximately $1.2 million. This increase represents the cost of operating the Norwood plant that we were unable to allocate to the cost of batches manufactured on behalf of our collaborators during the period.

        The number of research and development personnel increased to 94 at June 30, 2003 compared to 78 at June 30, 2002. We had 60 research and development personnel at June 30, 2001. Research and development salaries and related expenses increased by $2.0 million in the year ended June 30, 2003 compared to the year ended June 30, 2002 and increased $1.3 million in the year ended June 30, 2002 compared to the year ended June 30, 2001. Facilities expense also increased by $827,000 during the year ended June 30, 2003 as compared to the same period in 2002 due to an increase in rent for the 128 Sidney Street lease and expenses related to our new location at 148 Sidney Street, Cambridge, Massachusetts. We expect future research and development expenses to increase as we continue development of our product candidates and technologies.

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General and Administrative Expenses

        General and administrative expense for the year ended June 30, 2003 increased 10% to $6.0 million from $5.4 million for the year ended June 30, 2002. General and administrative expenses for the year ended June 30, 2001 were $4.5 million. Included in the general and administrative expense for the year ended June 30, 2003 was a payment of $400,000 for the settlement of a legal claim asserted against the Company. General and administrative expenses for the year ended June 30, 2003 and 2002 are reported net of $158,000 and $532,000, respectively, of expenses for which we are entitled to reimbursement from our collaborators. As discussed above, we established a valuation allowance during the year ended June 30, 2002 to record the cantuzumab mertansine inventory at its estimated realizable value. Approximately $209,000 of the valuation allowance was recorded as a charge to general and administrative expenses. Facilities expense increased $302,000 due to an increase in rent for the 128 Sidney Street lease and expenses related to our new location at 148 Sidney Street, Cambridge, Massachusetts. The approximate $922,000, or 21%, increase in general and administrative expense from 2001 to 2002 was primarily due to an increase of $443,000 for general and administrative salaries and related expenses, including estimated fiscal year 2002 bonuses that were accrued, an increase of $341,000 in professional services including legal and accounting fees, insurance costs and travel expenses, and a valuation allowance of $209,000 established to record cantuzumab mertansine inventory at its net realizable value.

Interest Income

        Interest income for the year ended June 30, 2003 decreased 47% to $2.7 million from $5.1 million for the year ended June 30, 2002. Interest income for the year ended June 30, 2001 was $5.9 million. The decline in interest income from 2002 to 2003 is attributable to a lower average cash and investments balance combined with lower rates of return. For the year ended June 30, 2002, our average cash and investment balances were higher than during the same period in the prior year, resulting from our November 2000 public stock offering, a collaborator investment of $15.0 million in September 2000, receipt of $5.0 million in warrant exercise proceeds in September 2001, and receipt of $9.0 million and $2.2 million in collaborator payments during the year ended June 30, 2001 and the year ended June 30, 2002, respectively. However, rates of return during the year ended June 30, 2002 were lower than during the comparable period in the prior year. The impact of higher average cash and investment balances was offset by lower rates of return, so that our interest income during the year ended June 30, 2002 declined compared with that of the same period in the prior year.

Net Realized Gains on Investments

        Net realized gains on investments were $540,000, $945,000, and $133,000 for the years ended June 30, 2003, 2002, and 2001, respectively. The increase in net realized gains is attributable to the timing of investment sales.

Other Income

        Other income for the year ended June 30, 2003 increased to $1.4 million from $53,000 for the same period in the prior year. Included in other income during the year ended June 30, 2003 is $1.4 million, which represents the net gain on the final financial settlement of the GlaxoSmithKline collaboration. Other income for the year ended June 30, 2001 was $333,000. Other income in the year ended June 30, 2001 included our receipt of a cash payment in settlement of a securities litigation case filed on our behalf.

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Liquidity and Capital Resources

Cash Flows

        As of June 30, 2003, we had approximately $101.3 million in cash and short-term investments. In November 2000, we completed a public offering of 4.0 million shares of our common stock. Net proceeds of the offering were $124.8 million. We intend to use the net proceeds from the offering for working capital and general corporate purposes, including research and development. Since July 1, 2000, we have received $69.1 million from collaborative and other financing sources. These sources include milestone revenues earned under our collaboration agreements with GlaxoSmithKline, Genentech, Abgenix, Millennium and Boehringer Ingelheim, the sale of equity securities to Abgenix and the exercise of stock options and warrants to purchase common stock.

        Net cash used in operations during the year ended June 30, 2003 was $21.9 million compared to net cash used in operations of $16.0 million in the year ended June 30, 2002. Net cash used in operations during the year ended June 30, 2001 was $6.5 million. This increase in operational cash use is largely due to the increase in operating expenses discussed previously as well as the increase in clinical materials inventory produced on behalf of our collaborators. We received $2.0 million, $2.2 million, and $9.0 million in upfront and milestone payments during the years ended June 30, 2003, 2002, and 2001, respectively.

        Net cash provided by investing activities was $26.8 million and $11.3 million for the year ended June 30, 2003 and 2002, respectively, and primarily represents the sales and maturities of marketable securities. Net cash used in investing activities was $122.2 million for the year ended June 30, 2001 and primarily represents our investment of excess cash in marketable securities. Capital purchases were $3.7 million and $4.3 million for the fiscal year ended June 30, 2003 and 2002, respectively, and consisted primarily of costs associated with the build-out of our existing Norwood, Massachusetts, development and pilot scale manufacturing facility and the renovation of our new laboratory and office facility at 148 Sidney Street, Cambridge, Massachusetts.

        Net cash used for financing activities was $11.1 million for the year ended June 30, 2003. Net cash provided by financing activities was $6.1 million for the year ended June 30, 2002 versus $142.2 million provided by financing activities for the year ended June 30, 2001. For the year ended June 30, 2003, net cash used for financing activities includes the repurchase of 3,675,062 shares of common stock for $11.1 million offset by proceeds from the exercise of 2,375 stock options. For the year ended June 30, 2002, net cash provided by financing activities includes proceeds from the exercise of 1,279,422 warrants and 150,336 stock options. Our total net proceeds from all common stock issued for the year ended June 30, 2002 were $6.1 million. Net cash provided by financing activities for the year ended June 30, 2001 includes proceeds from our November 2000 public offering of 4.0 million shares of common stock as well as the exercise of 381,342 warrants and 313,928 stock options and the September 7, 2000 issuance of 789,473 shares of our common stock to Abgenix. Our total net proceeds from all common stock issued for the year ended June 30, 2001 were $142.3 million.

        We anticipate that our current capital resources and future collaborator payments, including committed research funding that we expect to receive from Aventis pursuant to the terms of our collaboration agreement, will enable us to meet our operational expenses and capital expenditures for at least the next five to seven years. We believe that the proceeds from our November 2000 public

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stock offering in addition to our established collaborative agreements will provide funding sufficient to allow us to meet our obligations under all collaborative agreements while also allowing us to develop product candidates and technologies not covered by collaborative agreements. However, we cannot provide assurance that such collaborative agreement funding will, in fact, be realized. Should we 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.

        On August 27, 2002, we announced that our Board of Directors had authorized the open market repurchase of up to 4.1 million shares of ImmunoGen common stock. The repurchases are to be made at the discretion of management and as market conditions warrant. No time limit was set for the completion of the repurchase program. As of September 12, 2003, the Company had repurchased 3,675,062 shares of its common stock at a total cost of $11.1 million. As repurchases are at management's discretion and subject to market conditions, we are unable to estimate the total cost of the repurchase program or the period during which such repurchases may take place.

Contractual Obligations

        Below is a table that presents our contractual obligations and commercial commitments as of June 30, 2003:

Certain Factors That May Affect Future Results of Operations

        This report contains certain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. We caution investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the following: the success of the Company's research and clinical development processes; the difficulties inherent in the development of pharmaceuticals, including uncertainties as to the timing, expense and results of preclinical studies and clinical trials; the Company's dependence upon existing and potential collaborative partners; uncertainty as to whether the Company's potential products or those of the Company's collaborators will succeed in entering human clinical trials and uncertainty as to the results of such trials; the risk that the Company and/or its collaborators may not be able to obtain regulatory approvals necessary to commercialize their product candidates; the potential development by competitors of competing products and technologies; uncertainty whether the Company's TAP technology will produce safe, effective and commercially viable products; the lack of assurance regarding patent and other protection for our proprietary technology; governmental regulation of our activities, facilities, products and personnel; the dependence on key personnel; uncertainties as to the extent of reimbursement for the costs of our potential products and related treatments by government and private health insurers and other organizations; the potential adverse impact of government-directed health care reform; the risk of product liability claims; and economic conditions, both generally and those specifically related to the biotechnology industry. As a result, our future development efforts involve a high degree of risk. For further information, refer to the more specific risks and uncertainties discussed throughout this Annual Report on Form 10-K.

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Recent Accounting Pronouncements

        In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—An Amendment of SFAS No. 123" (SFAS 148). SFAS 148 amends SFAS 123 to provide alternative methods of transition for those companies who voluntarily change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both the annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provision of SFAS 148 are effective for fiscal years ending after December 15, 2002. The interim disclosure provision of SFAS 148 is effective for interim periods beginning after December 15, 2002. We have not adopted the fair value method of accounting for stock-based compensation and will continue to apply APB 25 for our stock-based compensation plans. We incorporated the interim disclosure requirements of SFAS 148 at March 31, 2003 and incorporated the annual disclosure requirements of SFAS 148 in this Annual Report on Form 10-K for the fiscal year ended June 30, 2003.

        In November 2002, the FASB issued Emerging Issues Task Force (EITF) Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 addresses certain aspects of the accounting by a company for arrangements under which it will perform multiple revenue-generating activities. EITF Issue No. 00-21 addresses when and how an arrangement involving multiple deliverables should be divided into separate units of accounting. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into after June 30, 2003. The provisions of the EITF Issue No. 00-21 do not impact the accounting treatment of our existing revenue arrangements. We believe that the adoption of EITF Issue No. 00-21 will not result in a material change to our existing revenue recognition policy for prospective revenue arrangements. We do not expect the adoption of EITF Issue No. 00-21 to have a material impact on our consolidated financial statements or results of operations.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51" ("FIN 46"). FIN 46 provides a new consolidation model that determines control and consolidation based on potential variability in gains and losses. The provisions of FIN 46 are effective for enterprises with variable interests in variable interest entities created after January 31, 2003. For public companies with variable interest in variable interest entities created before February 1, 2003, the provisions of FIN 46 are to be applied no later than July 1, 2003. We have not invested in any variable interest entities. We do not expect the adoption of FIN 46 will have a material impact on our financial position or results of operations.

Item 7A.    Quantitative and Qualitative Disclosure About Market Risk

        We maintain an investment portfolio in accordance with our Investment Policy. The primary objectives of our Investment Policy are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. Although our investments are subject to credit risk, our Investment Policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. Our investments are also subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the conservative nature of our investments and relatively short duration, interest rate risk is mitigated. We do not own derivative financial instruments in our investment portfolio.

        Accordingly, we do not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item.

Item 8.    Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors

The Board of Directors and Stockholders of ImmunoGen, Inc.

        We have audited the accompanying consolidated balance sheets of ImmunoGen, Inc. as of June 30, 2003 and 2002, and the related statements of operations, stockholders' equity, and cash flows for each of the two years in the period ended June 30, 2003. Our audit also included the financial statement schedule in the Index at Item 15(a). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ImmunoGen, Inc. at June 30, 2003 and 2002, and the consolidated results of its operations, stockholders' equity, and cash flows for each of the two years in the period ended June 30, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for the two years in the period ended June 30, 2003, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Boston, Massachusetts
July 25, 2003, except for Note J, as to which the date is July 31, 2003

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Report of Independent Accountants

To the Board of Directors and Stockholders of ImmunoGen, Inc.:

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows present fairly, in all material respects, the financial position of ImmunoGen, Inc. (the Company) at June 30, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

        As discussed in Note B to the consolidated financial statements, during the year ended June 30, 2001, the Company changed its method of accounting for revenue recognition.

/s/ Pricewaterhouse Coopers LLP

Boston, Massachusetts
August 14, 2001

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IMMUNOGEN, INC.

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of the consolidated financial statements.

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The accompanying notes are an integral part of the consolidated financial statements.

44

IMMUNOGEN, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of the consolidated financial statements.

45

IMMUNOGEN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS