UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 000-23143
PROGENICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3379479
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 Old Saw Mill River Road
Tarrytown, New York 10591
(Address of principal executive offices)
(Zip Code)
(914) 789-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of May 1, 1998 there were 9,003,753 shares of common stock, par value
$.01 per share, of the registrant outstanding.
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets............................... 3
Condensed Statements of Operations..................... 4
Condensed Statement of Stockholders' Equity............ 5
Condensed Statements of Cash Flows..................... 6
Notes to Condensed Financial Statements................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 9
Item 3. Quantitative and Qualitative Disclosures
about Market Risk...................................... 11
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........ 12
Item 6. Exhibits and Reports on Form 8-K................. 12
2
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
AT MARCH 31, 1998 AND DECEMBER 31, 1997 (Unaudited)
March 31, December 31,
1998 1997
ASSETS:
Current assets:
Cash and cash equivalents............... $ 13,414,888 $ 21,737,925
Marketable securities................... 3,356,149
Accounts receivable..................... 424,985 164,308
Other current assets.................... 200,124 32,160
Total current assets................. 17,396,146 21,934,393
Marketable securities..................... 5,929,538 1,886,200
Fixed assets, at cost, net of accumulated
depreciation and amortization........... 647,490 688,174
Security deposits and other assets........ 33,844 33,844
Total assets......................... $ 24,007,018 $ 24,542,611
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued
liabilities........................... $ 712,087 $ 1,226,248
Income taxes payable.................... 32,770 57,770
Capital lease obligations,
current portion....................... 80,175 82,859
Total current liabilities............ 825,032 1,366,877
Capital lease obligations................. 124,750 141,402
Total liabilities.................... 949,782 1,508,279
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value,
20,000,000 authorized; none
issued and outstanding
Common stock - $.0013 par value,
40,000,000 authorized; issued
and outstanding - 9,001,553
in 1997, 9,002,853 in 1998............ 11,704 11,702
Additional paid-in capital.............. 43,476,001 43,444,701
Unearned compensation................... (1,598,791) (1,761,381)
Accumulated deficit..................... (18,825,495) (18,661,030)
Accumulated other comprehensive
(loss) income......................... (6,183) 340
Total stockholders' equity........... 23,057,236 23,034,332
Total liabilities and
stockholders' equity............... $ 24,007,018 $ 24,542,611
The accompanying notes are an integral part of these statements.
3
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31,
1998 1997
Revenues:
Contract research and development....... $ 1,650,677 $ 84,968
Research grants......................... 62,502 171,329
Product sales........................... 6,623 18,677
Interest income......................... 369,525 4,524
Total revenues....................... 2,089,327 279,498
Expenses:
Research and development................ 1,377,530 872,271
General and administrative.............. 785,210 407,283
Interest expense........................ 8,955 40,043
Depreciation and amortization........... 82,097 81,248
Total expenses....................... 2,253,792 1,400,845
Net loss............................. $ (164,465) $ (1,121,347)
Net loss per share - basic and diluted.... $ (0.02) $ (0.48)
The accompanying notes are an integral part of these statements.
4
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE QUARTER ENDED MARCH 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON STOCK PAID-IN UNEARNED ACCUMULATED COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
Shares Amount CAPITAL COMPENSATION DEFICIT INCOME (LOSS) EQUITY LOSS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 9,001,553 11,702 $43,444,701 ($1,761,381) ($18,661,030) $340 $23,034,332
Amortization of unearned
compensation 162,590 162,590
Issuance of Common Stock in
connection with exercise
of stock options 1,300 2 5,198 5,200
Other adjustments to
stockholders' equity 26,102 26,102
Net loss (164,465) (164,465) ($164,465)
Change in unrealized gain
on marketable securities (6,523) (6,523) (6,523)
Balance at March 31, 1998 9,002,853 $11,704 $43,476,001 ($1,598,791) ($18,825,495) ($6,183) $23,057,236 ($170,988)
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Three months ended March 31,
1998 1997
Cash flows from operating activities:
Net loss................................... $ (164,465) $ (1,121,347)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization............ 82,097 81,248
Amortization of deferred financing costs. 24,836
Amortization of discounts, net of
premiums, on marketable securities...... 29,772
Expenses incurred in connection with
issuance of common stock, stock
options and warrants.................... 162,590 29,941
Changes in assets and liabilities:
Decrease (increase) in accounts
Receivable............................. (260,677) 2,080
Decrease (increase) in other
current assets......................... (167,964) 7,887
Increase in security deposits and
other assets........................... (633)
Decrease in accounts payable and
accrued expenses....................... (548,724) (201,953)
Decrease in deferred lease liability.... (16,735)
Increase in income taxes payable........ (25,000)
Total adjustments.................. (727,906) (73,329)
Net cash used in operating activities... (892,371) (1,194,676)
Cash flows from investing activities:
Capital expenditures....................... (6,850) (6,128)
Purchase of marketable securities.......... (7,435,782)
Net cash used in investing activities... (7,442,632) (6,128)
Cash flows from financing activities:
Proceeds from the exercise of stock
options and other adjustments to
stockholders' equity.................... 31,302 35,910
Proceeds from notes payable................ 1,000,000
Payment of capital lease obligations....... (19,336) (39,180)
Net cash provided by financing
activities.......................... 11,966 996,730
Net decrease in cash and cash
Equivalents......................... (8,323,037) (204,074)
Cash and cash equivalents at beginning
of period................................. 21,737,925 646,664
Cash and cash equivalents at end
of period........................... $ 13,414,888 $ 442,590
Supplemental disclosure of noncash
investing and financing activities:
Fixed assets included in accounts
payable and accrued expenses........... $ 34,563
The accompanying notes are an integral part of these statements.
6
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Interim Financial Statements
The interim Condensed Financial Statements of Progenics Pharmaceuticals, Inc.
(the "Company") have been prepared in accordance with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
information and disclosures necessary for a presentation of the Company's
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management, these
financial statements reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the Company's
financial position, results of operation and cash flows for such periods. The
results of operations for any interim periods are not necessarily indicative of
the results for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
2. Net Loss Per Share
The Company's basic net loss per share amounts have been computed by
dividing net loss by the weighted average number of Common shares outstanding.
For the three months ended March 31, 1997 and 1998, the Company reported net
losses and, therefore, no common stock equivalents were included in the
computation of diluted net loss per share since such inclusion would have been
antidilutive. The calculations of basic and diluted net loss per share are as
follows:
Net Loss Shares Per Share
(Numerator) (Denominator) Amount
1998:
Basic and Diluted ($164,465) 9,002,504 ($0.02)
1997:
Basic and Diluted ($1,121,347) 2,316,575 ($0.48)
Options, warrants and convertible preferred shares which have been
excluded from the diluted per share amounts because their effect would have
been antidilutive include the following:
Three Months Ended March 31,
1998 1997
Wtd. Avg. Wtd. Avg.
Wtd. Avg. Exercise Wtd. Avg. Exercise
Number Price Number Price
Options 2,309,797 $4.54 1,827,447 $4.65
Warrants 330,455 6.10 271,011 6.45
Convertible preferred shares 4,259,878
Total 2,640,252 6,358,336
7
<PAGE>
3. Line of Credit
On March 12, 1997, the Company obtained a line of credit ("Line") from a bank.
The terms of the Line provide for the Company to borrow up to $2 million.
Outstanding borrowings accrue interest, payable monthly, at the bank's prime
rate of interest. The initial term of the Line was 90 days (June 10, 1997)
with monthly extensions through July 31, 1997. The repayment of the Line was
guaranteed by two affiliates of a stockholder of the Company ("Affiliates").
Subsequent to March 31, 1997, borrowings under the line were repaid and the
Line was terminated.
In consideration for the guarantee of the Line, the Company issued 50,000
warrants to the Affiliates on March 12, 1997 (the "March Warrants"); an
additional 10,000 warrants, with terms identical to the March Warrants, were to
be issued for each monthly extension beyond June 10, 1997. Such warrants
vested immediately and expire after five years. The exercise price was
determined to be $4.00 per share in November 1997 upon completion of the
Company's initial public offering. The fair value of the March Warrants was
approximately $124,000 and has been accounted for as an original issue discount
amortized as additional interest expense over the initial term of the Line.
For the quarter ended March 31, 1997, the Company amortized approximately
$25,000 of the original issue discount as interest expense.
4. Adoption of New Accounting Standard
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No.130"). Comprehensive income (loss)
represents the change in net assets of a business enterprise during a period
from transactions and other events and circumstances for non-owner sources.
Comprehensive income (loss) of the Company includes net income (loss) adjusted
for the change in the unrealized gain or loss on marketable securities. For
the quarter ended March 31, 1997, comprehensive (loss) included only net (loss)
since the Company held no marketable securities. The net effect of income
taxes on comprehensive income (loss) is immaterial. The disclosures required
by SFAS No. 130 for the quarter ended March 31, 1998 have been included in the
statement of stockholders' equity.
5. Reclassifications
Certain reclassifications have been made to the financial statements for the
year ended December 31, 1997 as reported on Form 10-K to conform with the
current report on Form 10-Q.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any expected future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: technological uncertainties
related to early stage product development, uncertainties associated with
preclinical and clinical testing, risks relating to corporate collaborations
,the lack of product revenue and the uncertainty of future profitability, the
need for additional financing and other factors set forth more fully in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997 and other periodic filings with the Securities and Exchange Commission.
The following discussion should be read in conjunction with the Company's
Condensed Financial Statements and the related notes thereto. References to
notes refer to the notes to such statements.
General
Progenics is a biopharmaceutical company focusing on the development and
commercialization of innovative products for the treatment and prevention of
cancer and viral diseases. The Company commenced principal operations in late
1988 and since that time has been engaged primarily in organizational efforts,
including recruitment of scientific and management personnel, research and
development efforts, development of its manufacturing capabilities,
establishment of corporate collaborations and raising capital. In order to
commercialize the principal products that the Company has under development,
the Company will need to address a number of technological challenges and
comply with comprehensive regulatory requirements. Accordingly, it is not
possible to predict the amount of funds that will be required or the length of
time that will pass before the Company receives revenues from sales of any of
its products. To date, product sales have consisted solely of limited revenues
from the sale of research reagents. The Company expects that sales of research
reagents in the future will not significantly increase over current levels.
The Company's other sources of revenues through March 31, 1998 have been
payments received under its collaborations with Bristol-Myers Squibb Company
("BMS") and F. Hoffmann-La Roche Ltd ("Roche"), research grants related to the
Company's HIV programs and interest income.
To date, a majority of the Company's expenditures have been for research
and development activities. The Company expects that its research and
development expenses will increase significantly as its programs progress and
the Company makes filings for related regulatory approvals. The Company has
recurring losses and had an accumulated deficit of $18,825,000 at March 31,
1998. The Company has financed its operations primarily through the private
sale and issuance of equity securities, a line of credit that has since been
repaid and terminated, payments received under its collaborations with BMS
beginning in July 1997 and Roche beginning in December 1997, and the proceeds
of the Company's initial public offering ("IPO") in November 1997. The Company
may require additional funds to complete the development of its products, to
fund the cost of ongoing clinical trials, and to fund operating losses which
are expected to continue for the foreseeable future. The Company does not
expect its products under development to be commercialized for the next several
years.
9
<PAGE>
Results of Operations
Three Months Ended March 31, 1998 and 1997
Contract research and development revenue increased to $1,651,000 for the
three months ended March 31, 1998 from $85,000 for the three months ended March
31, 1997 as the Company received reimbursement of clinical development costs in
connection with the BMS License Agreement, the collaboration with Roche and
contract revenue from the National Institutes of Health and the Department of
Defense. Revenues from research grants decreased to $63,000 for the three
months ended March 31, 1998 from $171,000 for the three months ended March 31,
1997. The decrease resulted from the funding of a fewer number of grants in
the first three months of 1998. Sales of research reagents decreased to $7,000
for the three months ended March 31, 1998 from $19,000 for the three months
ended March 31, 1997 resulting from decreased orders for such reagents.
Interest income increased to $370,000 for the three months ended March 31, 1998
from $5,000 for the three months ended March 31, 1997 due to the increase in
cash available for investing as the Company received funding from the BMS
License Agreement in July 1997 and its initial public offering in November
1997.
Research and development expenses increased to $1,378,000 for the three
months ended March 31, 1998 from $872,000 for the three months ended March 31,
1997. The increase was principally due to additional costs in 1998 of
conducting the Company's Phase III clinical trials, including the manufacture
of GMK and MGV.
General and administrative expenses increased to $785,000 for the three
months ended March 31, 1998 from $407,000 for the three months ended March 31,
1997. The increase was principally due to increases in salaries to employees,
deferred compensation charge related to granting of stock options, patent
expenses and costs of investor relations following the Company's IPO in
November 1997. Interest expense decreased to $9,000 for the three months ended
March 31, 1998 from $40,000 for the three months ended March 31, 1997. During
the first three months of 1997 the Company incurred interest expense as a
result of borrowings which commenced in March 1997 under a line of credit which
was paid in full and terminated in July 1997.
The Company's net loss for the three months ended March 31, 1998 was
$164,000 compared to a net loss of $1,121,000 for the three months ended March
31, 1997.
10
<PAGE>
Liquidity and Capital Resources
The Company has funded its operations since inception primarily through
private placements of equity securities, which provided aggregate cash proceeds
of $22,817,000 (including loans that were subsequently converted into equity
securities) and payments received under its collaborations with BMS and Roche.
In November 1997, the Company sold 2,300,000 shares of Common Stock in its
initial public offering. After deducting underwriting discounts and
commissions and other expenses, the Company received net proceeds of
$16,015,000. The net proceeds were invested in short-term, interest bearing
investment grade securities and are being used by the Company for working
capital and general corporate purposes.
Through March 31, 1998, the Company had also received cash proceeds of
$2,216,000 from research grants, $1,318,000 from interest on investments and
$452,000 from the sale of research reagents and had financed $1,331,000 of
equipment purchases through capitalized leases and a promissory note.
At March 31, 1998, the Company had cash, cash equivalents and marketable
securities totaling $22,700,000 compared with $23,600,000 at December 31, 1997.
The Company's facility lease has been extended to December 1999. The Company
expects to incur costs of approximately $500,000 to enhance its manufacturing
capabilities during 1998.
The Company believes that its present capital resources should be
sufficient to fund operations at least through the end of 1999, based on the
Company's current operating plan. No assurance can be given that there will be
no change that would consume the Company's liquid assets before such time. The
Company will require substantial funds to conduct research and development
activities, preclinical studies, clinical trials and other activities relating
to the commercialization of any potential products. In addition, the Company's
cash requirements may vary materially from those now planned because of results
of research and development and product testing, potential relationships with
in-licensors and collaborators, changes in the focus and direction of the
Company's research and development programs, competitive and technological
advances, the cost of filing, prosecuting, defending and enforcing patent
claims, the regulatory approval process, manufacturing and marketing and other
costs associated with the commercialization of products following receipt of
regulatory approvals and other factors. The Company has no committed external
sources of capital and, as discussed above, expects no significant product
revenues for a number of years as it will take at least that much time to bring
the Company's products to the commercial marketing stage. The Company may seek
additional financing, such as through future offerings of equity or debt
securities or agreements with corporate partners and collaborators with respect
to the development of the Company's technology, to fund future operations.
There can be no assurance, however, that the Company will be able to obtain
additional funds on acceptable terms, if at all.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
At March 31, 1998, the Company did not hold any market risk sensitive
instruments.
11
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(d) The net proceeds of the Company initial public offering of $17,112,000
have been applied to temporary investments as follows:
At March 31, 1998, $9,286,000 of the net proceeds were invested in
corporate debt securities, and the balance was invested in money market
funds pending the purchase of corporate debt securities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended March 31, the registrant filed a Current Report
on Form 8-K dated February 6, 1998 which reported Item 5 Other Events and
included no financial statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROGENICS PHARMACEUTICALS, INC.
Date: May 14, 1998 by /s/ Robert A. McKinney
Robert A. McKinney
Vice President
(Duly authorized officer
of the Registrant and
Principal Financial
and Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Financial Statements of Progenics Pharmaceuticals, Inc. at March 31, 1998
and is qualified in its entirety by reference to such Financial
Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,414,888
<SECURITIES> 9,285,687
<RECEIVABLES> 424,985
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,396,146
<PP&E> 1,827,119
<DEPRECIATION> 1,179,629
<TOTAL-ASSETS> 24,007,018
<CURRENT-LIABILITIES> 825,032
<BONDS> 0
0
0
<COMMON> 11,704
<OTHER-SE> 23,045,532
<TOTAL-LIABILITY-AND-EQUITY> 24,007,018
<SALES> 6,623
<TOTAL-REVENUES> 2,089,327
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,244,837
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,955
<INCOME-PRETAX> (164,465)
<INCOME-TAX> 0
<INCOME-CONTINUING> (164,465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (164,465)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
