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 September 30, 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 September 30, 1998 there were 9,175,221 shares of common stock, par
value $.0013 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.... 10
Item 3. Quantitative and Qualitative Disclosures
about Market Risk................................ 13
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........ 14
Item 6. Exhibits and Reports on Form 8-K................. 14
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<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 (Unaudited)
September 30, December 31,
1998 1997
------------- -------------
ASSETS:
Current assets:
Cash and cash equivalents............... $ 13,042,938 $ 21,737,925
Marketable securities - short term...... 8,401,297
Accounts receivable..................... 1,905,723 164,308
Other current assets (including
accrued interest of $224,587 as
of September 30, 1998)................ 305,380 32,160
------------- -------------
Total current assets............... 23,655,338 21,934,393
Marketable securities..................... 1,536,450 1,886,200
Fixed assets, at cost, net of accumulated
depreciation and amortization........... 877,580 688,174
Security deposits and other assets........ 37,860 33,844
------------- -------------
Total assets....................... $ 26,107,228 $ 24,542,611
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued
liabilities........................... $ 926,716 $ 1,226,248
Income taxes payable.................... 57,770
Capital lease obligations,
current portion....................... 101,821 82,859
------------- -------------
Total current liabilities.......... 1,028,537 1,366,877
Capital lease obligations................. 142,907 141,402
------------- -------------
Total liabilities.................. 1,171,444 1,508,279
------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value,
14,320,174 authorized; none
issued and outstanding
Common stock - $.0013 par value,
40,000,000 authorized; issued
and outstanding - 9,001,553
in 1997, 9,052,041 in 1998............ 11,768 11,702
Additional paid-in capital.............. 43,663,862 43,444,701
Unearned compensation................... (1,273,609) (1,761,381)
Accumulated deficit..................... (17,494,103) (18,661,030)
Accumulated other comprehensive
income................................ 27,866 340
------------- -------------
Total stockholders' equity......... 24,935,784 23,034,332
------------- -------------
Total liabilities and
stockholders' equity............. $ 26,107,228 $ 24,542,611
============= =============
The accompanying notes are an integral part of these statements.
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<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Contract research and development. $ 3,070,256 $13,296,877 $ 8,399,473 $13,446,383
Research grants................... 390,518 147,216 971,228 318,545
Product sales..................... 73,759 24,770 110,205 49,908
Interest income................... 371,078 101,708 1,097,703 109,281
----------- ----------- ----------- -----------
Total revenues................. 3,905,611 13,570,571 10,578,609 13,924,117
----------- ----------- ----------- -----------
Expenses:
Research and development.......... 2,142,964 3,586,556 6,054,405 5,966,215
General and administrative........ 940,007 520,821 2,876,990 1,335,338
Interest expense.................. 13,493 120,888 31,785 302,767
Depreciation and amortization..... 134,973 78,150 362,252 238,493
----------- ----------- ----------- -----------
Total expenses................. 3,231,437 4,306,415 9,325,432 7,842,813
----------- ----------- ----------- -----------
Operating income .............. 674,174 9,264,156 1,253,177 6,081,304
Income taxes........................ 86,250 151,310 86,250 151,310
----------- ----------- ----------- -----------
Net income .................... $ 587,924 $ 9,112,846 $ 1,166,927 $ 5,929,994
=========== =========== =========== ===========
Net income per share - basic........ $0.06 $3.78 $0.13 $2.52
===== ===== ===== =====
Net income per share - diluted...... $0.06 $1.73 $0.11 $0.82
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL COMPRE-
------------------ PAID-IN UNEARNED ACCUMULATED COMPREHENSIVE STOCKHOLDERS' HENSIVE
Shares Amount CAPITAL COMPENSATION DEFICIT INCOME (LOSS) EQUITY INCOME
--------- ------- ----------- ------------ ------------- ------------- ------------- ----------
<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 487,772 487,772
Issuance of Common Stock in
connection with exercise
of stock options 50,488 66 194,336 194,402
Other adjustments to
stockholders' equity 24,825 24,825
Net income 1,166,927 1,166,927 $1,166,927
Change in unrealized gain on
marketable securities 27,526 27,526 27,526
--------- ------- ----------- ------------ ------------- ------- ----------- ----------
Balance at September 30, 1998 9,052,041 $11,768 $43,663,862 ($1,273,609) ($17,494,103) $27,866 $24,935,784 $1,194,453
========= ======= =========== ============ ============= ======= =========== ==========
</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
Nine months ended September 30,
-------------------------------
1998 1997
Cash flows from operating activities: ------------- -------------
Net income............................... $ 1,166,927 $ 5,929,994
------------- -------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization.......... 264,857 238,493
Amortization of discounts, net of
premiums, on marketable securities.... 97,395
Net realized gain on sale of
marketable securities................. (36,996)
Noncash expenses incurred in
connection with issuance of common
stock, stock options and warrants..... 512,597 2,038,689
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable........................... (1,741,415) 41,881
Increase in prepaid expenses and
other current assets................. (273,220) (12,603)
(Increase) decrease in security
deposits and other assets............ (4,016) 1,786
Decrease in accounts payable and
accrued expenses..................... (299,532) (1,190,909)
Decrease in deferred lease liability.. (16,735)
(Decrease) increase in income taxes
payable.............................. (57,770) 151,310
------------- -------------
Total adjustments.............. (457,974) 825,151
------------- -------------
Net cash (used in) provided by
operating activities................. (371,173) 7,181,906
------------- -------------
Cash flows from investing activities:
Capital expenditures..................... (355,125) (24,158)
Sales of marketable securities........... 1,345,000
Purchase of marketable securities........ (9,429,420)
------------- -------------
Net cash used in investing
activities........................... (8,439,545) (24,158)
------------- -------------
Cash flows from financing activities:
Proceeds from the exercise of stock
options and other adjustments to
stockholders' equity.................... 194,402 35,910
Proceeds from notes payable.............. 2,000,000
Repayments of notes payable.............. (2,000,000)
Payment of capital lease obligations..... (78,671) (94,941)
Other.................................... (25,380)
------------- -------------
Net cash provided by (used in)
financing activities................ 115,731 (84,411)
------------- -------------
Net (decrease) increase in cash
and cash equivalents................ (8,694,987) 7,073,337
------------- -------------
Cash and cash equivalents at beginning
of period............................... 21,737,925 646,664
------------- -------------
Cash and cash equivalents at end
of period........................... $ 13,042,938 $ 7,720,001
============= =============
Supplemental disclosure of noncash
investing and financing activities:
Fixed assets acquired with capital
leases.................................. $ 99,138 $ 20,000
============= =============
The accompanying notes are an integral part of these statements.
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<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. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of September 30, 1998 and December 31,
1997 consist of the following:
September 30, December 31,
1998 1997
------------- ------------
Accounts payable $ 725,825 $ 517,714
Fees payable to Scientific Advisory Board 34,500 38,500
Accrued payroll and related costs 51,391 330,480
Legal and accounting fees payable 115,000 322,819
Deferred lease liability, current portion 16,735
---------- ----------
$ 926,716 $1,226,248
========== ==========
3. Net Income Per Share
The Company's basic net income per share amounts have been computed by
dividing net income by the weighted average number of common shares outstanding
during the respective periods. For the three and nine months ended September
30, 1998, the Company reported net income and, therefore, the calculation of
diluted per share amounts includes all common stock equivalents with exercise
prices below the average per share price of the Company's common stock for the
respective periods. The calculations of basic and diluted net income per share
are as follows:
Net Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
1998:
Three months-ended September 30, 1998:
Basic: $587,924 9,051,024 $0.06
=====
Effect of Dilutive Securities:
Options 1,437,320
Warrants 169,783
----------
Diluted: $587,924 10,658,127 $0.06
========== =====
Nine months-ended September 30, 1998:
Basic: $1,166,927 9,025,803 $0.13
=====
Effect of Dilutive Securities:
Options 1,621,541
Warrants 200,938
---------
Diluted: $1,166,927 10,848,282 $0.11
========== =====
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<PAGE>
Net Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
1997:
Three months-ended September 30, 1997:
Basic: $9,112,846 2,410,371 $3.78
=====
Effect of Dilutive Securities:
Options 943,863
Warrants 60,882
Convertible preferred stock 4,259,878
---------
Diluted: $9,112,846 5,264,623 $1.73
========= =====
Nine months-ended September 30, 1997:
Basic: $5,929,994 2,349,883 $2.52
=====
Effect of Dilutive Securities:
Options 633,083
Warrants 16,934
Convertible preferred stock 4,259,878
---------
Diluted: $5,929,994 7,259,778 $0.82
========= =====
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 September 30,
---------------------------------------------
1998 1997
--------------------- ---------------------
Wtd. Avg. Wtd. Avg.
Wtd. Avg. Exercise Wtd. Avg. Exercise
Number Price Number Price
--------- --------- --------- ---------
Options 204,791 $14.74 - -
------- -------
Total 204,791
======= =======
Nine Months Ended September 30,
---------------------------------------------
1998 1997
--------------------- ---------------------
Wtd. Avg. Wtd. Avg.
Wtd. Avg. Exercise Wtd. Avg. Exercise
Number Price Number Price
--------- --------- --------- ---------
Options 14,000 $18.20 53,736 $6.67
Warrants 260,455 6.67
------ -------
Total 14,000 314,191
====== =======
4. Income Taxes
The tax provision for all periods presented has been computed based upon the
prevailing federal and state tax rates, offset by the utilization of net
operating loss carryforwards to the extent permitted by the alternative minimum
tax rules of the federal and state tax codes.
-8-
<PAGE>
5. Adoption of New Accounting Standard
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No.130"). Comprehensive income
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 of the Company includes net income adjusted for the change
in the unrealized gain or loss on marketable securities. For the three and nine
months ended September 30, 1997, comprehensive income included only net income
since the Company held no marketable securities. The net effect of income
taxes on comprehensive income is immaterial. The disclosures required by SFAS
No. 130 for the nine months ended September 30, 1998 have been included in the
statement of stockholders' equity.
6. Impact of the Future Adoption of Recently Issued Accounting Standard
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" ("SFAS No.133"). SFAS No. 133 establishes a comprehensive standard
on accounting for derivatives and hedging activities and is effective for
periods beginning after June 15, 1999. Management does not believe that the
future adoption of SFAS No. 133 will have a material effect on the Company's
financial position and results of operations.
7. Reclassifications
Certain reclassifications have been made to the 1997 Financial Statements to
conform with the 1998 presentation.
-9-
<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 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 September 30, 1998 have been (i) contract research
and development and license fees received pursuant to its collaborations with
Bristol-Myers Squibb Company ("BMS") and F. Hoffmann-La Roche Ltd ("Roche"),
(ii) research grants and contract payments related to the Company's HIV
programs and (iii) 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
experienced recurring losses and had an accumulated deficit of $17,494,000 at
September 30, 1998. The Company has financed its operations primarily through
the private sale 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, proceeds from
research grants and contracts, 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 clinical trials,
and to fund operating losses that are expected in the foreseeable future. The
Company does not expect its products under development to be commercialized in
the near future.
-10-
<PAGE>
Results of Operations
Three Months Ended September 30, 1998 and 1997
Contract research and development revenue decreased to $3,070,000 for the
three months ended September 30, 1998, representing primarily payments received
under the Company's collaborations with BMS and Roche, from $13,297,000 for the
three months ended September 30, 1997. A one-time, upfront license fee of
$11,500,000 was received by the Company in 1997 pursuant to the BMS License.
Revenues from research grants were $391,000 for the three months ended
September 30, 1998 as compared to $147,000 for the three months ended
September 30, 1997. The increase resulted from the funding of a greater number
of grants in the third quarter of 1998. Product sales increased to $74,000 for
the three months ended September 30, 1998 from $25,000 for the three months
ended September 30, 1997 as the Company delivered large quantities of research
reagents to the National Institutes of Health in the third quarter of 1998.
Interest income increased to $371,000 for the three months ended September 30,
1998 from $102,000 for the three months ended September 30, 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 IPO in November 1997.
Research and development expenses decreased to $2,143,000 for the three
months ended September 30, 1998 from $3,587,000 for the three months ended
September 30, 1997. The decrease was principally due to reduced manufacturing
costs in the third quarter of 1998 for the Company's Phase III clinical trials.
General and administrative expenses increased to $940,000 for the three
months ended September 30, 1998 from $521,000 for the three months ended
September 30, 1997. The increase was principally due to increases in salaries
to employees, deferred compensation charges 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 $13,000 for the three months ended September
30, 1998 from $121,000 for the three months ended September 30, 1997. During
the third quarter of 1997 the Company incurred interest expense including the
amortization of deferred financing costs and original issue discount 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.
Income taxes decreased to $86,000 for the three months ended September 30,
1998 from $151,000 for the three months ended September 30, 1997. The Company
recognized a provision for income taxes in both periods which was based upon
prevailing federal and state tax rates reduced by the utilization of net
operating loss carryforwards to the extent permitted by the alternative minimum
tax rules.
The Company's net income for the third quarter of fiscal 1998 was $588,000
compared to a net income of $9,113,000 for the third quarter of fiscal 1997.
Nine Months Ended September 30, 1998 and 1997
Contract research and development revenue decreased to $8,399,000 for the
nine months ended September 30, 1998 from $13,446,000 for the nine months ended
September 30, 1997 as the Company received milestone payments and reimbursement
of clinical development costs pursuant to the BMS License Agreement, the
Company's collaboration with Roche and contract revenue from the National
Institutes of Health and the Department of Defense during 1998. Of the
$13,446,000 received by the Company in 1997, $11,500,000 was a one-time license
fee pursuant to the BMS License Agreement. Revenues from research grants
increased to $971,000 for the nine months ended September 30, 1998 from
$319,000 for the nine months ended September 30, 1997. The increase resulted
from the funding of a greater number of grants in 1998. Sales of research
reagents increased to $110,000 for the nine months ended September 30, 1998
from $50,000 for the nine months ended September 30, 1997 resulting from
increased quantities of shipments for such reagents.
Interest income increased to $1,098,000 for the nine months ended
September 30, 1998 from $109,000 for the nine months ended September 30, 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 IPO in November
1997.
-11-
<PAGE>
Research and development expenses remained relatively constant at
$6,054,000 for the nine months ended September 30, 1998 and $5,966,000 for the
nine months ended September 30, 1997.
General and administrative expenses increased to $2,877,000 for the nine
months ended September 30, 1998 from $1,335,000 for the nine months ended
September 30, 1997. The increase was principally due to increases in salaries
to employees, deferred compensation charges related to granting of stock
options, patent expenses and costs of investor relations following the
Company's IPO.
Interest expense decreased to $32,000 for the nine months ended September
30, 1998 from $303,000 for the nine months ended September 30, 1997. During
the first nine months of 1997 the Company incurred interest expense including
the amortization of deferred financing costs and original issue discount 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.
Income taxes decreased to $86,000 for the nine months ended September 30,
1998 from $151,000 for the nine months ended September 30, 1997. The Company
recognized a provision for income taxes in both periods which was based upon
prevailing federal and state tax rates reduced by the utilization of net
operating loss carryforwards to the extent permitted by the alternative minimum
tax rules.
The Company's net income for the nine months ended September 30, 1998 was
$1,167,000 compared to a net income of $5,930,000 for the nine months ended
September 30, 1997.
Liquidity and Capital Resources
Prior to the Company's initial offering in November 1997, the Company
funded its operations 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 collaboration with BMS.
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 September 30, 1998, the Company has also received cash proceeds of
$3,106,000 from research grants, $2,046,000 from interest on investments and
$555,000 from the sale of research reagents and had financed $1,351,000 of
equipment purchases through capitalized leases and a promissory note.
At September 30, 1998, the Company had cash, cash equivalents and
marketable securities totaling $22,981,000 compared with $23,624,000 at
December 31, 1997. The Company's facility lease has been extended to December
1999. The Company expects to incur costs of approximately $250,000 to enhance
its manufacturing capabilities for clinical trials during the fourth quarter of
1998 and $250,000 during the first half of 1999.
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, if
ever, 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.
-12-
<PAGE>
Year 2000 Compliance
The "Year 2000" problem relates to many currently installed computers,
software, and other equipment that relies on embedded technology (collectively,
"Business Systems"). These Business Systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, in less than two
years, Business Systems used by many companies, in a very wide variety of
applications, will experience operating difficulties unless they are modified,
upgraded, or replaced to adequately process information involving, related to
or dependent upon the century change. If a Business System used by the Company
or a third party dealing with the Company fails because of the inability of the
Business System to properly read a 21st century date, the results could have a
material adverse effect on the Company. The Company recognizes the need to
ensure its operations will not be adversely impacted by Year 2000 Business
Systems failures and has established a team to address Year 2000 risk. The
team is reviewing the Company's internal infrastructure and believes that it
has identified substantially all of the major Business Systems used in
connection with its internal operations. The Company has commenced the process
of identifying and correcting the major Business Systems that may need to be
modified, upgraded, or replaced, and expects to complete this process, along
with remedial actions before the end of 1999. Costs incurred to date to
correct Year 2000 problems have been immaterial. The Company estimates the
total cost to complete any required modifications, upgrades, or replacements of
affected Business Systems will not have a material impact on the Company's
business or results of operations. This estimate is being monitored and will
be revised, if necessary, as additional information becomes available. The
Company also recognizes the risk that suppliers of products, services, and
collaborators with whom the Company transacts business on a worldwide basis may
not comply with Year 2000 requirements. The Company has initiated formal
communications with significant suppliers and collaborators to determine the
extent to which the Company is vulnerable if these third parties fail to
remediate their own Year 2000 issues. The review is ongoing and the Company is
unable to determine, at this time, the probability that any material supplier
or collaborator will not be able to correct any Year 2000 problem in a timely
manner. In the event any such third parties cannot provide the Company with
products, services, or continue the collaborations with the Company, the
Company's results of operations could be materially adversely affected. Based
on the above, the Company has yet to develop a comprehensive contingency plan
with respect to the Year 2000 problem. The Company will continue to monitor
its own Business Systems and, to the extent possible, evaluate the Business
Systems of its third party suppliers and collaborators to ensure progress on
this critical matter. However, if the Company identifies significant risk
related to the Year 2000 compliance or progress deviates from anticipated
timelines, the Company will develop contingency plans as deemed necessary at
that time.
Impact of the Future Adoption of Recently Issued Accounting Standard
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivatives and Hedging Activities" ("SFAS No.133"). SFAS No. 133 establishes
a comprehensive standard on accounting for derivatives and hedging activities
and is effective for periods beginning after September 15, 1999. Management
does not believe that the future adoption of SFAS No. 133 will have a material
effect on the Company's financial position and results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
At September 30, 1998, the Company did not hold any market risk sensitive
instruments.
-13-
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(d) As of September 30, 1998, of the $17,112,000 net proceeds from the
Company's initial public offering, approximately $10,938,000 has been
applied to research and development and general operating expenses and the
remainder has been applied to temporary investments in corporate debt
securities and money market funds. With the exception of compensation
paid to the officers and certain of the directors of the Company as
employees or consultants, no amounts paid in respect of operating expenses
were paid to directors or officers of the Company or their associates, to
any person owning 10% or more of any class of equity securities of the
Company or to any affiliates of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 - Employment Agreement dated as of June 10, 1998 between the
registrant and Ronald J. Prentki, as amended by Amendment No. 1 to
Employment Agreement dated as of October 8, 1998
27 - Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 30, 1998, there was no report on Form
8-K.
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: November 12, 1998 by /s/ Robert A. McKinney
-----------------------------
Robert A. McKinney
Vice President
(Duly authorized officer of
the Registrant and
Principal Financial
and Accounting Officer)
-14-
<PAGE>
EXHIBIT INDEX
Exhibit Description
- - ------- ----------------------------------------------
10 Employment Agreement dated as of June 10, 1998
between the registrant and Ronald J. Prentki,
as amended by Amendment No. 1 to Employment
Agreement dated as of October 8, 1998
27 Financial Data Schedule
-15-
<PAGE>
[CONFORMED COPY]
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 10th
day of June, 1998, between Progenics Pharmaceuticals, Inc., a Delaware
corporation (the "Company") with its principal place of business at 777 Old Saw
Mill River Road, Tarrytown, New York 10591, and Ronald J. Prentki (the
"Executive"), residing at 4 Charter Oak Lane, Greenwich, Connecticut 06830.
WHEREAS, the Company is engaged in the development and
commercialization of pharmaceuticals; and
WHEREAS, the Company wishes to employ the Executive as President of
the Company, and the Executive wishes to serve the Company in such capacity;
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby covenant and agree as follows:
1. Employment.
On and subject to the terms and conditions hereinafter set forth, the
Company hereby agrees to employ the Executive as President of the Company and
the Executive hereby agrees to serve the Company in such capacity.
2. Term.
(a) The period of this Agreement (the "Agreement Term") shall
commence as of the date hereof (the "Effective Date") and shall expire on
December 31, 2000 (the "Initial Expiration Date"). The Agreement Term shall be
automatically extended for an additional period of 12 months on the Initial
Expiration Date and on each successive anniversary of the Initial Expiration
Date, unless written notice of non-extension is provided by either party to the
other party at least 180 days prior to the Initial Expiration Date or any such
anniversary.
(b) The period of the Executive's employment by the Company under
this Agreement (the "Employment Period") shall commence as of July 6, or such
other date as shall be mutually agreed to by the parties (the "Commencement
Date"), and shall expire at the end of the Agreement Term, unless sooner
terminated in accordance with the terms and conditions of this Agreement.
3. Position, Duties and Responsibilities.
The Executive shall be employed by the Company during the Employment
Period as President of the Company. The Executive shall have general
responsibility for the management of the business and affairs of the Company
with respect to business development, strategic planning, sales and marketing,
human resources, finance and accounting, legal (except with regard to patent
matters), corporate communications (including investor and media relations) and
general administration and the Executive shall have such powers and duties
usually incident to the office of President and necessary to effectuate the
foregoing, subject only to the authority of the Board of Directors (the "Board
of Directors") and the Chief Executive Officer of the Company. The Executive
shall have such additional responsibilities as may be delegated to him by the
Board of Directors or the Chief Executive Officer of the Company; provided,
however, that in connection with any material increase in responsibilities, the
Board of Directors shall consider increasing the Executive's compensation
hereunder. The Executive shall report directly to the Chief Executive Officer
of the Company.
<PAGE>
Except for vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the Executive shall
devote his full time, attention and energy during the Employment Period to the
business of the Company. During the Employment Period, the Executive will not
engage in any business activity which, in the judgment of the Board of
Directors, conflicts with the duties of the Executive hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary advantage.
The Company shall use its reasonable best efforts to cause the
Executive to be nominated to the Company's Board of Directors.
4. Place of Performance.
The Executive shall perform his duties at the principal offices of
the Company, which are currently located at 777 Old Saw Mill River Road,
Tarrytown, New York 10591, but from time to time the Executive may be required
to travel to other locations in the proper conduct of his responsibilities
under this Agreement.
5. Compensation and Benefits.
In consideration of the services rendered by the Executive during the
Employment Period, the Company shall pay or provide the Executive the amounts
and benefits set forth below.
(a) Base Salary. During the Employment Period, the Company will pay
to the Executive an annual base salary (the "Base Salary") of $225,000, payable
in accordance with the Company's normal payroll policy. The Executive's Base
Salary shall be reviewed annually by the Board of Directors or any Committee of
the Board of Directors (a "Committee") to which the Board of Directors has
delegated such authority and shall be subject to increase (but not decrease) at
the option and sole discretion of the Board of Directors or any such Committee.
(b) Sign-On Bonus. Within 10 days after the Commencement Date, the
Company shall pay the Executive a sign-on bonus (the "Sign-On Bonus") of
$30,000. One twelfth (1/12) of the Sign-On Bonus shall be considered earned by
the Executive at the end of each full calendar month the Executive is still
employed by the Company; provided, however, that, if the Executive's employment
with the Company is terminated pursuant to a Termination Without Cause (as
defined in Section 8 hereof) or a Termination for Good Reason (as defined in
Section 9 hereof) or due to death or Disability (as defined in Section 6
hereof), the entire Sign-On Bonus will be considered earned at the time of such
termination. In the event that the Executive's employment with the Company is
terminated prior to the first anniversary of the Commencement Date pursuant to
a Termination for Cause (as defined in Section 7 hereof) or a Voluntary
Termination (as defined in Section 10 hereof), the Executive shall repay to the
Company the then unearned portion of the Sign-On Bonus. Any unearned portion
of the Sign-On Bonus required to be repaid by the Executive shall be due and
payable immediately upon termination of employment. The Executive hereby
authorizes the Company to set-off the amount of any unearned portion of the
Sign-On Bonus against any amounts, including wages, which the Company may then
be required to pay to the Executive and further authorizes the Company to
withhold the amount of any such unearned portion of the Sign-On Bonus from any
amounts owed by the Company to the Executive under this Agreement or otherwise
until the Executive shall have made repayment in full of such unearned portion
of the Sign-On Bonus to the Company.
(c) Annual Bonus. During the Employment Period, the Executive shall
be eligible to receive, at the sole discretion of the Board of Directors or any
Committee to which the Board of Directors has delegated such authority, an
annual calendar-year bonus based on such performance standards or other
criteria as the Board of Directors or any such Committee shall, in its sole
discretion, determine. It is the Company's intent to set a target for such
bonus of 25% of the Base Salary, although such target is not intended as a
guaranteed amount, and the amount of the bonus, if any, paid with respect to
any year shall be within the sole discretion of the Board of Directors or any
such Committee. Notwithstanding the foregoing, the Executive shall be entitled
to receive a cash bonus for the period ending on December 31, 1998 of at least
$30,000, such bonus to be paid in accordance with the normal policies of the
Company (but in any event by March 31, 1999), unless the Employment Period
shall have been earlier terminated pursuant to a Termination for Cause or a
Voluntary Termination.
<PAGE>
(d) Stock Option Grant. The Company shall grant the Executive an
option pursuant to the Company's 1996 Stock Incentive Plan (the "Option") to
purchase 200,000 shares of common stock of the Company ("Common Stock") at an
exercise price equal to $14.50 per share, representing the fair market value
per share of the Common Stock as of the close of business on the Effective
Date. The Option shall have a ten-year term and shall vest in equal one-fifth
(1/5) increments on each of the first five anniversaries of the Commencement
Date if on each such anniversary the Executive is, and has continuously since
the Commencement Date been, employed by the Company; provided, however, that,
(i) unless the Executive's employment is terminated pursuant to a Termination
for Cause or a Voluntary Termination prior to the first anniversary of the
Commencement Date, one-fifth (1/5) of the Option shall vest on the first
anniversary of the Commencement Date irregardless of the employment status of
the Executive and (ii) if the Executive's employment is terminated pursuant to
a Termination Without Cause or a Termination for Good Reason (as such terms are
defined in Sections 8 and 9 hereof, respectively), the Option shall vest upon
the effectiveness of such termination as to an additional number of shares
equal to 40,000 shares multiplied by the sum of one plus a fraction, the
numerator of which is the number of days elapsed in the then-current Contract
Year through the day of termination and the denominator of which is 365. For
purposes of the foregoing, "Contract Year" shall mean the one-year period
commencing on the previous July 6 and ending on the subsequent July 5. Upon
any Change in Control (as hereinafter defined) of the Company, the Option will
immediately become 100% vested. In the event of the Executive's death prior to
the expiration or earlier termination of the Option, the Option may be
transferred by will, the laws of descent or otherwise to the Executive's
spouse, and if not so transferred may be exercised by the Executive's estate at
any time prior to the earlier to occur of the expiration or earlier termination
of the Option or the first anniversary of the Executive's death. The Option
shall be subject to a stock option agreement entered into between the Company
and the Executive on terms not inconsistent with the foregoing.
For purposes of this Agreement, a "Change in Control" shall mean:
(i) a change in the composition of the Board of Directors such that
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clause (ii) or (iii) of this paragraph) whose election by the Board of
Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority of the members thereof;
(ii) the approval by the stockholders of the Company of a merger,
consolidation, reorganization or similar corporate transaction, whether or
not the Company is the surviving corporation in such transaction, in which
outstanding shares of Common Stock are converted into (A) shares of stock
of another company, other than a conversion into shares of voting common
stock of the successor corporation (or a holding company thereof)
representing more than 50% of the voting power of all capital stock
thereof outstanding immediately after the merger or consolidation or (B)
other securities (of either the Company or another company) or cash or
other property; or
(iii) the approval by the stockholders of the Company of (A) the
sale or other disposition of all or substantially all of the assets of the
Company or (B) a complete liquidation or dissolution of the Company.
(e) Equity Participation. During the Employment Period, the
Executive shall be eligible to receive awards under any stock option, stock
purchase or equity-based incentive compensation plan or arrangement adopted by
the Company from time to time for which senior executives of the Company are
eligible to participate. The level of the Executive's participation in any
such plan or arrangement shall be at the sole discretion of the Board of
Directors or any Committee to which the Board of Directors has delegated such
authority.
<PAGE>
(f) Employee Benefits. During the Employment Period, the Executive
shall be eligible to participate in all employee benefit plans and programs of
the Company in which other senior executives of the Company are eligible to
participate from time to time, including, without limitation, any qualified or
non-qualified pension, 401(k), profit sharing and savings plans, any death
benefit and disability benefit plans and any medical, dental, health and
welfare plans, subject to and on a basis consistent with the terms, conditions
and overall administration of such plans and programs. The Executive shall be
entitled to participate in such plans and programs on terms no less favorable
to the Executive than those on which senior executives of the Company generally
participate. Without limiting the generality of the foregoing, the Company
shall provide the Executive with such long-term disability benefits as are made
generally available to senior executives of the Company.
During the Employment Period, the Executive shall be entitled to such
fringe benefits and perquisites as are made generally available to senior
executives of the Company from time to time. Notwithstanding the foregoing,
the Executive shall be entitled to two weeks' paid vacation during the period
ending December 31, 1998, and in each calendar year of the Employment Period
thereafter the Executive shall accrue three (but not more than three) weeks'
paid vacation. In any calendar year commencing with the calendar year ending
December 31, 1999, the Executive may carry-over and use up to one week's paid
vacation in respect of paid vacation accrued but unused in the prior calendar
year.
The Executive acknowledges and agrees that the Company does not
guarantee the adoption or continuance of any particular employee benefit plan
or program or other fringe benefit during the Employment Period, and
participation by the Executive in any such plan or program shall be subject to
the rules and regulations applicable thereto.
(g) Reimbursement of Expenses. The Company shall provide the
Executive with reimbursement of all reasonable travel and other business
expenses and disbursements incurred by the Executive in the performance of his
duties under this Agreement, upon proper accounting in accordance with the
Company's normal practices and procedures for reimbursement of business
expenses. The Executive acknowledges and agrees that no reimbursement of
relocation expenses shall be payable to the Executive in connection with the
entering into of this Agreement.
(h) Indemnification. The Company shall indemnify the Executive to
the full extent permitted by Delaware law with respect to any losses, damages,
expenses (including the reasonable fees and expenses of counsel) or liabilities
paid or incurred by the Executive as a result of the good-faith performance by
the Executive of his duties hereunder.
6. Death; Disability.
If the Executive dies, or is incapacitated or disabled by accident,
sickness or otherwise so as to render the Executive mentally or physically
incapable of performing the services required to be performed by the Executive
under this Agreement (as determined by a medical professional mutually
acceptable to the Company and the Executive) for a period that would entitle
the Executive to qualify for long-term disability benefits under the Company's
then-current long-term disability insurance program or, in the absence of such
a program, for a period of 90 consecutive days or longer, or for 120 days
within any 180 day period (such condition being herein referred to as a
"Disability"), then (i) in the case of the Executive's death, the Employment
Period shall terminate on the date of the Executive's death or (ii) in the case
of a Disability, the Company, at its option, may terminate the Employment
Period upon 30 days' notice to the Executive to that effect. In the case of a
Disability, until the Company shall have terminated the Employment Period
hereunder in accordance with the foregoing, the Executive shall be entitled to
receive compensation as provided for herein notwithstanding any such physical
or mental disability. As specified in Section 5(f) above, the Company shall
provide the Executive with such long-term disability benefits as are made
generally available to senior executives of the Company.
<PAGE>
7. Termination For Cause.
The Company may terminate the Employment Period at any time for
"Cause" (such termination being hereinafter called a "Termination for Cause")
by giving the Executive written notice of such termination, upon the giving of
which such termination will take effect immediately. For purposes of this
Agreement, "Cause" means (i) the Executive's willful and substantial
misconduct, (ii) the Executive's willful and continued failure to substantially
perform his duties with the Company (other than any such failure resulting from
death or Disability) after written notice from the Company, (iii) the
Executive's breach in any material respect of any of the agreements contained
in Sections 12, 13, 14, 15 or 16 hereof, (iv) the commission by the Executive
of any fraudulent act with respect to the business and affairs of the Company
or any subsidiary or affiliate thereof or the conviction of (or plea of nolo
contendere to) a crime constituting a felony, (v) habitual drunkenness, use of
illegal drugs or abuse of controlled substances by the Executive,
(vi) excessive absenteeism not related to sick leave, accidental physical
injury or vacations, (vii) the existence of a conflict of interest between the
Executive and the Company or (viii) the commission of any act involving moral
turpitude that a reasonable person would consider damaging to the reputation of
the Company; provided, however, that, in the case of clauses (i), (ii), (v),
(vi) or (vii), the Company shall have given the Executive written notice
identifying in reasonable detail the acts or omissions constituting "cause" and
such acts or omissions shall not have been cured by the Executive within 30
days, and that in the case of clause (iii), the Company shall provide such
notice of, and allow the opportunity to cure any, breach of Section 13, 14 or
15 hereof unless any such breach has adversely affected the Company.
8. Termination Without Cause.
The Company may terminate the Employment Period without Cause by
giving the Executive written notice of such termination, upon the giving of
which such termination will take effect on the date specified on such notice.
Any such termination, or any other termination of the Employment Period by the
Company other than a termination for death or Disability or a Termination for
Cause shall be deemed hereinafter to be a "Termination Without Cause."
9. Termination for Good Reason.
The Executive shall have the right at any time to terminate his
employment during the Employment Period for "Good Reason" (such termination
being hereinafter called a "Termination for Good Reason"). "Good Reason" shall
exist if there shall have occurred and be continuing:
(a) a material diminution during the Employment Period in the
Executive's position, title, responsibilities, authority or
reporting relationship from that provided for in this Agreement;
(b) a material breach by the Company of its obligations under
this Agreement, including the Company's obligations under
Section 5 hereof;
(c) relocation of the Company's principal offices from their
current location to a site more than 75 miles from such location
(other than any such relocation recommended or endorsed by the
Executive); or
(d) failure by the Company's stockholders or its Board of
Directors to elect the Executive as a director within 90 days of
the Effective Date;
in either case that has not been cured within a period of 30 days following the
giving of notice by the Executive to the Company identifying in reasonable
detail the acts or omissions constituting "Good Reason" (unless such acts or
omissions cannot be cured or remedied within 30 days, in which case the period
for cure or remedy shall be extended for a reasonable time (not to exceed 30
additional days), so long as the Company has made and continues to make a
diligent effort to effect such cure or remedy). Notwithstanding the foregoing,
the reduction or elimination of responsibilities as to one (but only one) of
the areas of responsibilities identified in the second sentence of Section 3
hereof (deeming, for these purposes, sales and marketing to be one area,
finance and accounting to be one area and investor and media relations to be
one area) shall not be deemed to constitute "Good Reason" or give rise to the
right to terminate this Agreement under this Section 9.
<PAGE>
10. Voluntary Termination.
Any termination of the Employment Period by the Executive other than
a Termination for Good Reason will be deemed to be a "Voluntary Termination."
A Voluntary Termination will be deemed to be effective immediately upon such
termination or, at the Company's option, up to 30 days following a notice of
voluntary termination being given by the Executive.
11. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause. Upon the
termination of the Employment Period pursuant to a Voluntary Termination or a
Termination For Cause, neither the Executive nor the Executive's beneficiaries
or estate will have any further rights or claims against the Company under this
Agreement except the right to receive, subject to the provisions of
Section 5(b) hereof, (i) the unpaid portion of the Base Salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the date of termination,
(ii) any unpaid bonus declared payable pursuant to Section 5(c) hereof,
(iii) payment of the Executive's previously accrued but unpaid rights that are
then payable in accordance with the terms of any incentive compensation, stock
option, retirement, employee welfare or other employee benefit plans or
programs of the Company in which the Executive is then participating in
accordance with Section 5 hereof, but only to the extent such amounts are
payable in accordance with the terms of any such plans and programs, and (iv)
reimbursement for any expenses for which the Executive shall not have
theretofore been reimbursed as provided in Section 5 hereof.
(b) Termination Without Cause; Termination for Good Reason. Upon
the termination of the Employment Period pursuant to a Termination Without
Cause or Termination for Good Reason, neither the Executive nor the Executive's
beneficiaries or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i) the payments and
other rights provided for in Section 11(a) hereof and (ii) severance payments
in the form of a continuation of the Base Salary as in effect immediately prior
to such termination payable in accordance with the Company's normal payroll
policy (and not in a lump sum), and the continuation of the medical and life
insurance benefits to which the Executive was entitled at the time of
termination, until the expiration of 12 months following the effective date of
such termination. In addition, the Executive shall be entitled to (y) a cash
payment, to be made when the Company makes its regular end-of-year bonus
payment to its senior executives in respect of the year of termination (but in
any event not later than March 31 in the calendar year next succeeding the year
of termination), in an amount equal to the annual bonus paid to the Executive
in respect of the calendar year next preceding the year of termination (the
"Prior Year Bonus") and (z) a cash payment, to be made when the Company makes
its regular end-of-year bonus payment to its senior executives in respect of
the year following the year of termination (but in any event not later than
March 31 of the second year following the year of termination), in an amount
equal to the Prior Year Bonus multiplied by a fraction, the number of which is
the number of days in the calendar year of termination through and including
the day of termination and the denominator of which is 365.
(c) Termination Upon Death or Disability. Upon the termination of
the Employment Period as a result of death or Disability, neither the Executive
nor the Executive's beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the right to receive the
payments and other rights provided for in Section 11(a) hereof.
Forfeiture of Rights. In the event that, subsequent to termination of
employment hereunder, the Executive breaches any of the provisions of Section
12, 13, l4, 15 or 16 hereof (i) all payments and benefits to which the
Executive may otherwise have been entitled pursuant to Section 5(b) hereof or
this Section 11 shall immediately terminate and be forfeited, and any portion
of such amounts as may have been paid to the Executive shall forthwith be
returned to the Company, and (ii) the Option, to the extent not theretofore
exercised, shall be forfeited.
<PAGE>
12. Nondisclosure of Information.
The Executive will not, at any time during or after the Employment
Period, disclose to any person, firm, corporation or other business entity,
except as required by law, any Proprietary Information (as hereinafter defined)
for any reason or purpose whatsoever, nor will the Executive make use of any of
such Proprietary Information for personal purposes or for the benefit of any
person, firm, corporation or other business entity except the Company or any
subsidiary or affiliate thereof. Notwithstanding the foregoing, the Executive
shall not be deemed to have violated the provisions of this Section 12 as a
result of an inadvertent disclosure of Proprietary Information that is not
reasonably likely to adversely affect the Company. For purposes of the
foregoing, "Proprietary Information" shall mean any non-public information
concerning the business, products, technology, collaborators, employees and
consultants or affairs of the Company or any subsidiary or affiliate thereof,
including trade secrets, formulae, data and know-how, improvements and
inventions, techniques, marketing plans, strategies, forecasts and customer
lists.
13. Noncompetition and Non-Solicitation.
(a) The Executive hereby acknowledges and recognizes that, during
the Employment Period, the Executive will be privy to trade secrets and
confidential proprietary information critical to the Company's business, and
the Executive further acknowledges and recognizes that the Company would find
it extremely difficult or impossible to replace the Executive and, accordingly,
the Executive agrees that, in consideration of the benefits to be received by
the Executive hereunder, the Executive will not from and after the date hereof
until 18 months after the termination of the Employment Period (i) engage in
the development, production, marketing or sale of products or services that
directly compete or, upon commercialization, would directly compete with
products of the Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the Executive's termination (a
"Conflicting Product or Service," and such business or activity being
hereinafter called a "Competing Business"), whether such engagement shall be as
an officer, director, owner, employee, partner, affiliate, consultant or other
participant in any Competing Business or (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing clause (i);
provided, however, that in the case of a Termination Without Cause, a
Termination for Good Reason or the non-extension of the Agreement Term as a
result of a notice to such effect (a "Non-Extension Notice") given by the
Executive in accordance with the second sentence of Section 2(a) hereof, the
prohibitions of the foregoing clauses (i) and (ii) shall terminate upon the
first anniversary of the termination of the Employment Period and that in the
case of the non-extension of the Agreement Term as a result of a Non-Extension
Notice given by the Company, the prohibitions of the foregoing clauses (i) and
(ii) shall terminate upon the six-month anniversary of the termination of the
Employment Period. Notwithstanding the foregoing, in the event the Executive's
employment is terminated pursuant to a Termination Without Cause or a
Termination for Good Reason within one year following a Change in Control, the
term "Competing Business" as used in this Agreement shall not include any
business or activity that was not conducted or under development by the Company
prior to the effective date of a Change in Control. The foregoing provisions
of this clause (a) shall not (y) prohibit the Executive from working for a
division or other business unit of an organization involved with a Conflicting
Product or Service provided such division or business unit is not itself
involved with a Conflicting Product or Service, or (z) apply to the ownership
by the Executive of publicly-traded voting securities of any corporation
representing less than one percent (1%) of the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors.
(b) During any period subsequent to the Employment Period that the
restrictive provisions of this Section 13 apply to the Executive, the Executive
obtains employment, or the employment responsibilities of the Executive change
in any material respect, the Executive shall, within 15 days of obtaining such
employment or of any such change, notify the Company of the facts and
circumstances of such employment or change in responsibility and provide the
Company with such additional information as the Company may reasonably request
in order for the Company to verify compliance by the Executive with the
provisions of this Section 13.
<PAGE>
(c) The Employee will not, at any time during or after the
Employment Period, induce other employees of the Company or any subsidiary
thereof to terminate their employment with the Company or any subsidiary
thereof or engage in any Competing Business; provided, however, that the
foregoing shall not prohibit the Executive from terminating the employment of
an employee of the Company during the Employment Period in the good-faith
exercise of the Executive's duties hereunder.
14. Company Right to Inventions.
The Executive will promptly disclose, grant and assign to the
Company, for its sole use and benefit, any and all inventions, improvements,
technical information and suggestions relating in any way to the business of
the Company which the Executive may develop or acquire during the Employment
Period (whether or not during usual working hours), together with all patent
applications, patents, copyrights and reissues thereof that may at any time be
granted for or upon any such invention, improvement or technical information.
In connection therewith:
(i) the Executive shall, without charge, but at the expense of the
Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest title to any
such inventions, improvements, technical information, patent applications,
patents, copyrights or reissues thereof in the Company and to enable it to
obtain and maintain the entire right and title thereto throughout the
world; and
(ii) the Executive shall render to the Company, at the Company's
expense (including a reasonable payment for the time involved in case the
Executive is not then in its employ), all such assistance as it may
require in the prosecution of applications for said patents, copyrights or
reissues thereof, in the prosecution or defense of interferences which may
be declared involving any said applications, patents or copyrights and in
any litigation in which the Company may be involved relating to any such
patents, inventions, improvements or technical information.
15. Return of Documents, Etc.
All documents, data, records, apparatus, equipment and other physical
property furnished to the Executive by the Company or produced by the Executive
or others in connection with his employment shall be and remain the sole
property of the Company and shall be returned promptly to the Company as and
when requested by the Company. Should the Company not so request, the
Executive shall return and deliver all such property upon termination of his
employment with the Company for any reason, and the Executive will not take
with him any such property or any reproduction of such property upon such
termination.
On the expiration of the Employment Period, the Executive shall
promptly surrender to the Company all of the Company's books, records,
documents and customer lists and/or other of the Company's materials or records
he may have in his possession, including but not limited to the materials
described in the immediately preceding paragraph.
16. Adverse Public Statements and Disclosures.
The parties hereto agree that at no time during or subsequent to the
Employment Period will either party directly or indirectly make or facilitate
the making of any adverse public statements or disclosures with respect to the
other (including, with respect to the Company, regarding its business or
securities or its Board of Directors, management or other personnel).
17. Employment Taxes.
All compensation paid pursuant to this Agreement shall be subject to
reduction by all applicable withholding, social security and other federal,
state and local taxes and deductions.
<PAGE>
18. No Conflicting Arrangements of Executive.
The Executive hereby represents and warrants to the Company that the
Executive is not a party or subject to any contractual or legal constraint, nor
is he aware of any other presently existing fact, circumstance or event, that
would preclude or restrict him from entering into this Agreement or providing
to the Company the services contemplated by this Agreement, or which would give
rise to any breach of any term or provision hereof, or which could otherwise
give rise to a Termination for Cause. In the event of any breach of this
representation, this Agreement shall be null and void.
19. Key-Man Life Insurance.
The Executive hereby agrees to cooperate with the Company with
respect to the procurement by the Company of key-man life insurance on the
Executive's life in an amount determined to be appropriate by the Company.
20. Enforcement.
It is the desire and intent of the parties hereto that the provisions
of this Agreement be enforceable to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, to the extent that a restriction contained in this
Agreement is more restrictive than permitted by the laws of any jurisdiction
where this Agreement may be subject to review and interpretation, the terms of
such restriction, for the purpose only of the operation of such restriction in
such jurisdiction, will be the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have been revised
accordingly herein.
21. Remedies; Survival.
(a) The Executive acknowledges and understands that the provisions
of the covenants contained in Sections 12, 13, 14, 15 or 16 hereof, the
violation of which cannot be accurately compensated for in damages by an action
at law, are of crucial importance to the Company, and that the breach or
threatened breach of the provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened breach by the
Executive in any material respect of the provisions of Section 12, 13, 14, 15
or 16 hereof, the Company will be entitled to an injunction (without the
posting of any bond) restraining the Executive from such breach. Nothing
herein contained will be construed as prohibiting the Company from pursuing any
other remedies available for any breach or threatened breach of this Agreement.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the provisions of Section 12, 13, 14, 15, 16, 17 and 20 hereof will
survive the expiration or other termination of this Agreement until, by their
terms, such provisions are no longer operative.
22. Notices.
Notices and other communications hereunder will be in writing and
will be delivered personally or sent by air courier or first class certified or
registered mail, return receipt requested and postage prepaid, to the addresses
stated above. All notices and other communications given to any party hereto
in accordance with the provisions of this Agreement will be deemed to have been
given on the date of delivery, if personally delivered; on the business day
after the date when sent, if sent by air courier; and on the third business day
after the date when sent, if sent by mail, in each case addressed to such party
as provided in this Section 22 or in accordance with the latest unrevoked
direction from such party.
23. Binding Agreement; Benefit.
The provisions of this Agreement will be binding upon, and will inure
to the benefit of, the respective heirs, legal representatives and successors
of the parties hereto.
<PAGE>
24. Governing Law.
This Agreement will be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without reference to
conflict of law principles.
25. Waiver of Breach.
The waiver by either party of a breach of any provision of this
Agreement by the other must be in writing and will not operate or be construed
as a waiver of any subsequent breach by such other party.
26. Entire Agreement; Amendments.
This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements or
understandings among the parties with respect thereof. This Agreement may be
amended only by an agreement in writing signed by the parties hereto.
27. Headings.
The section headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.
28. Severability.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction will, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
29. Assignment.
This Agreement is personal in its nature and the parties hereto shall
not, without the consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder; provided, that the provisions hereof
(including, without limitation, Sections 12, 13, 14, 15 and 16) will inure to
the benefit of, and be binding upon, each successor of the Company, whether by
merger, consolidation, transfer of all or substantially all of its assets or
otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
PROGENICS PHARMACEUTICALS, INC.
By: /s/ Paul J. Maddon, M.D., Ph.D.
--------------------------------
Paul J. Maddon, M.D., Ph.D.
Title: Chairman and Chief Executive Officer
/s/ Ronald J. Prentki
--------------------------------
Ronald J. Prentki
<PAGE>
[CONFORMED COPY]
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT is made as of the 8th
day of October, 1998, between Progenics Pharmaceuticals, Inc., a Delaware
corporation (the "Company") with its principal place of business at 777 Old Saw
Mill River Road, Tarrytown, New York 10591, and Ronald J. Prentki (the
"Executive"), residing at 4 Charter Oak Lane, Greenwich, Connecticut 06830.
WHEREAS, the Company and the Executive are parties to an Employment
Agreement dated as of June 10, 1998 (the "Employment Agreement"); and
WHEREAS, the Company and the Executive desire to amend the Employment
Agreement and provide for certain other matters relating thereto.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby covenant and agree as follows:
30. The first sentence of Section 2(a) of the Employment Agreement is
hereby amended to read in its entirety as follows:
"2. Term.
(a) The period of this Agreement (the "Agreement Term") shall
commence as of June 10, 1998 (the "Effective Date") and shall
expire on March 31, 2001 (the "Initial Expiration Date")."
31. The stock option granted to the Executive pursuant to Section 5(d) of
the Employment Agreement shall be, and hereupon is, cancelled, and in lieu
thereof a new stock option shall be granted as of the date hereof with the
following terms:
Stock Option Grant. The Company shall grant the Executive an option
pursuant to the Company's 1996 Stock Incentive Plan (the "New
Option") to purchase 190,000 shares of common stock of the Company
("Common Stock") at an exercise price equal to $9.25 per share,
representing the fair market value per share of the Common Stock as
of the date hereof. The New Option shall have a ten-year term and
shall vest in equal one-fifth (1/5) increments on each of the first
five anniversaries of the date hereof if on each such anniversary the
Executive is, and has continuously since the Commencement Date been,
employed by the Company; provided, however, that, (i) unless the
Executive's employment is terminated pursuant to a Termination for
Cause or a Voluntary Termination prior to the first anniversary of
the date hereof, one-fifth (1/5) of the New Option shall vest on the
first anniversary of the date hereof irregardless of the employment
status of the Executive and (ii) if the Executive's employment is
terminated pursuant to a Termination Without Cause or a Termination
for Good Reason, the New Option shall vest upon the effectiveness of
such termination as to an additional number of shares equal to 38,000
shares multiplied by the sum of one plus a fraction, the numerator of
which is the number of days elapsed in the then-current Contract Year
through the day of termination and the denominator of which is 365.
For purposes of the foregoing, "Contract Year" shall mean the one-
year period commencing on the previous October 8 and ending on the
subsequent October 7. Upon any Change in Control of the Company, the
Option will immediately become 100% vested. In the event of the
Executive's death prior to the expiration or earlier termination of
the New Option, the New Option may be transferred by will, the laws
of descent or otherwise to the Executive's spouse, and if not so
transferred may be exercised by the Executive's estate at any time
prior to the earlier to occur of the expiration or earlier
termination of the New Option or the first anniversary of the
Executive's death. The New Option shall be subject to a stock option
agreement entered into between the Company and the Executive on terms
not inconsistent with the foregoing.
<PAGE>
References in the Employment Agreement to the "Option" shall be
deemed to refer to the New Option.
32. Except as expressly stated herein, this Amendment No. 1 to Employment
Agreement is not intended to waive any rights of the parties under, or amend or
modify the terms of, the Employment Agreement. All capitalized terms not
defined herein shall have the respective meanings assigned thereto in the
Employment Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Amendment
No. 1 to Employment Agreement as of the date first above written.
PROGENICS PHARMACEUTICALS, INC.
By: /s/ Paul J. Maddon
----------------------------
Name: Paul J. Maddon, M.D., Ph.D.
Title: Chairman and Chief Executive Officer
/s/ Ronald J. Prentki
----------------------------
Name: Ronald J. Prentki
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Financial Statements of Progenics Pharmaceuticals, Inc. at September 30, 1998
and is qualified in its entirety by reference to such Financial
Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,042,938
<SECURITIES> 9,937,747
<RECEIVABLES> 1,905,723
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,655,338
<PP&E> 2,239,970
<DEPRECIATION> 1,362,390
<TOTAL-ASSETS> 26,107,228
<CURRENT-LIABILITIES> 1,028,537
<BONDS> 0
0
0
<COMMON> 11,768
<OTHER-SE> 24,924,016
<TOTAL-LIABILITY-AND-EQUITY> 26,107,228
<SALES> 110,205
<TOTAL-REVENUES> 10,578,609
<CGS> 0
<TOTAL-COSTS> 9,293,647
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,785
<INCOME-PRETAX> 1,253,177
<INCOME-TAX> 86,250
<INCOME-CONTINUING> 1,166,927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,166,927
<EPS-PRIMARY> .13
<EPS-DILUTED> .11
</TABLE>