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, 1999
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 March 31, 1998 there were 9,398,356 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.......... 9
Item 3. Quantitative and Qualitative Disclosures
about Market Risk...................................... 12
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........ 13
Item 6. Exhibits and Reports on Form 8-K................. 13
2
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
AT MARCH 31, 1999 AND DECEMBER 31, 1998 (Unaudited)
March 31, December 31,
1999 1998
ASSETS: ------------- -------------
Current assets:
Cash and cash equivalents............... $ 13,001,637 $ 14,437,263
Marketable securities................... 9,011,353 10,212,876
Accounts receivable..................... 2,467,993 1,634,480
Interest receivable 323,173 300,340
Other current assets.................... 258,223 255,522
------------- -------------
Total current assets................. 25,062,379 26,840,481
Marketable securities..................... 1,287,508
Fixed assets, at cost, net of accumulated
depreciation and amortization........... 1,125,781 1,045,389
Security deposits and other assets........ 13,745 13,745
------------- -------------
Total assets......................... $ 27,489,413 $ 27,899,615
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued
liabilities........................... $ 1,156,395 $ 1,595,665
Capital lease obligations,
current portion....................... 106,869 107,346
------------- -------------
Total current liabilities............ 1,263,264 1,703,011
Capital lease obligations................. 88,694 117,166
------------- -------------
Total liabilities.................... 1,351,958 1,820,177
------------- -------------
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 - 9,398,356
in 1999, 9,358,207 in 1998............ 12,218 12,166
Additional paid-in capital.............. 44,557,704 44,377,193
Unearned compensation................... (981,050) (1,111,018)
Accumulated deficit..................... (17,452,902) (17,207,993)
Accumulated other comprehensive
income......................... 1,485 9,090
------------- -------------
Total stockholders' equity........... 26,137,455 26,079,438
------------- -------------
Total liabilities and
stockholders' equity............... $ 27,489,413 $ 27,899,615
============= =============
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,
-----------------------------
1999 1998
------------- -------------
Revenues:
Contract research and development....... $ 2,614,606 $ 1,713,179
Research grants......................... 211,500
Product sales........................... 17,980 6,623
Interest income......................... 303,296 369,525
------------- -------------
Total revenues....................... 3,147,382 2,089,327
------------- -------------
Expenses:
Research and development................ 2,360,280 1,377,530
General and administrative.............. 868,738 785,210
Interest expense........................ 13,503 8,955
Depreciation and amortization........... 149,770 82,097
------------- -------------
Total expenses....................... 3,392,291 2,253,792
------------- -------------
Net loss............................. $ (244,909) $ (164,465)
============= =============
Net loss per share - basic and diluted.... $ (0.03) $ (0.02)
========== ==========
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, 1999 (Unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
----------------- 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, 1998 9,358,207 $12,166 $44,377,193 ($1,111,018) ($17,207,993) $9,090 $26,079,438
Amortization of unearned
compensation 129,968 129,968
Issuance of compensatory
stock options 48,332 48,332
Sale of Common Stock under
employee stock purchase
plans and exercise of
stock options and warrants 40,149 52 132,179 132,231
Net loss (244,909) (244,909) ($244,909)
Change in unrealized gain
on marketable securities (7,605) (7,605) (7,605)
--------- ------- ----------- ------------ ------------- ------------- ------------- -------------
Balance at March 31, 1999 9,398,356 $12,218 $44,557,704 ($981,050) ($17,452,902) $1,485 $26,137,455 ($252,514)
========= ======= =========== ============ ============= ============= ============= =============
</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,
-----------------------------
1999 1998
------------- -------------
Cash flows from operating activities:
Net loss................................... $ (244,909) $ (164,465)
------------- -------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization............ 149,770 82,097
Amortization of discounts, net of
premiums, on marketable securities...... 33,370 29,772
Noncash expenses incurred in connection
with issuance of common stock, stock
options and warrants.................... 178,300 162,590
Changes in assets and liabilities:
Increase in accounts receivable......... (833,513) (260,677)
Increase in prepaid expenses and other
current assets......................... (25,534) (167,964)
Decrease in accounts payable and
accrued expenses....................... (465,460) (548,724)
Decrease in income taxes payable........ (25,000)
------------- -------------
Total adjustments.................. (963,067) (727,906)
------------- -------------
Net cash used in operating activities... (1,207,976) (892,371)
------------- -------------
Cash flows from investing activities:
Capital expenditures....................... (203,972) (6,850)
Sale of marketable securities.......... 2,475,000
Purchase of marketable securities (2,601,960) (7,435,782)
------------- -------------
Net cash used in investing activities... (330,932) (7,442,632)
------------- -------------
Cash flows from financing activities:
Proceeds from the exercise of stock
options and other adjustments to
stockholders' equity.................... 132,231 31,302
Payment of capital lease obligations....... (28,949) (19,336)
------------- -------------
Net cash provided by financing
activities.......................... 103,282 11,966
------------- -------------
Net decrease in cash and cash
Equivalents......................... (1,435,626) (8,323,037)
------------- -------------
Cash and cash equivalents at beginning
of period................................. 14,437,263 21,737,925
------------- -------------
Cash and cash equivalents at end
of period........................... $ 13,001,637 $ 13,414,888
============= =============
Supplemental disclosure of noncash
investing and financing activities:
Fixed assets included in accounts
payable and accrued expenses........... $ 14,769 $ 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,
1998.
2. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of March 31, 1999 and Decemer 31, 1998
consist of the following:
March 31, 1999 December 31, 1998
-------------- -----------------
Accounts payable $ 909,079 $ 1,156,442
Accrued payroll and related costs 150,316 144,615
Legal and accounting fees payable 97,000 294,608
------------ -------------
$ 1,156,395 $ 1,595,665
============ =============
3. 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, 1999 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
----------- ------------- ---------
1999:
Basic and Diluted ($244,909) 9,371,742 ($0.03)
1998:
Basic and Diluted ($164,465) 9,002,504 ($0.02)
Options and warrants 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,
----------------------------------------------
1999 1998
--------------------- ---------------------
Wtd. Avg. Wtd. Avg.
Wtd. Avg. Exercise Wtd. Avg. Exercise
Number Price Number Price
--------- --------- --------- ---------
Options 3,214,639 $8.17 2,309,797 $4.54
Warrants 329,841 $6.12 330,455 $6.10
--------- ---------
Total 3,544,480 $7.98 2,640,252 $4.74
========= =========
7
<PAGE>
4. Reclassifications
Certain reclassifications have been made to the 1998 financial statements
to conform with the 1999 presentation.
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,
1998 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.
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, 1999 have been
payments received under its collaboration agreements, research grants and
contracts related to the Company's cancer and 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 had
recurring losses prior to 1997 and had at March 31, 1999 an accumulated deficit
of $17,453,000. 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 collaboration with the
Bristol-Myers Squibb Company ("BMS") beginning in July 1997, payments received
under its collaboration with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche,
Inc. ("Roche") beginning in January 1998 and the proceeds of the Company's
initial public offering in November 1997. The Company will require additional
funds to complete the development of its products, to fund the cost of 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 in the near future.
9
<PAGE>
Results of Operations
Three Months Ended March 31, 1999 and 1998
Contract research and development revenue increased to approximately
$2,615,000 for the three months ended March 31, 1999 from approximately
$1,713,000 for the three months ended March 31, 1998 as the Company received
reimbursement of clinical development costs under its Joint Development and
Master License Agreement with BMS (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 were
approximately $212,000 for the three months ended March 31, 1999. No research
grant revenues were recognized for the three months ended March 31, 1998. The
increase resulted from the funding of a greater number of grants in the first
three months of 1999. Sales of research reagents increased to approximately
$18,000 for the three months ended March 31, 1999 from approximately $7,000 for
the three months ended March 31, 1998 resulting from increased orders for such
reagents. Interest income decreased to approximately $303,000 for the three
months ended March 31, 1999 from approximately $370,000 for the three months
ended March 31, 1998 due to the decrease in cash available for investing as the
Company funded its expanded research programs.
Research and development expenses increased to approximately $2,360,000
for the three months ended March 31, 1999 from approximately $1,378,000 for the
three months ended March 31, 1998. The increase was principally due to
additional costs in 1999 of conducting the Company's Phase III clinical trials,
including the manufacture of GMK and MGV. The Company also paid $100,000 to
Sloan-Kettering as a license fee for the rights to a new product,
dehydroascorbic acid, ("DHA"), a derivative of vitamin C and issued stock
options to a consultant.
General and administrative expenses increased to approximately $869,000
for the three months ended March 31, 1999 from approximately $785,000 for the
three months ended March 31, 1998. The increase was principally due to
increases in employee salaries, the additional salary of a president hired in
July 1998,and increased legal fees and patent expenses as the Company
negotiated the in-licensing of new products offset by a decrease in franchise
taxes. Interest expense increased to approximately $14,000 for the three
months ended March 31, 1999 from approximately $9,000 for the three months
ended March 31, 1998 due to an increase in capital leases. Depreciation
expense increased to approximately $150,000 for the three months ended March
31, 1999 from approximately $82,000 for the three months ended March 31, 1998
due to an increase in capital expenditures and leasehold improvements during
the third and fourth quarters of 1998.
The Company's net loss for the three months ended March 31, 1999 was
approximately $245,000 compared to a net loss of approximately $164,000 for the
three months ended March 31, 1998.
Liquidity and Capital Resources
The Company has funded its operations since inception primarily through
private placements of equity securities, loans that were subsequently converted
into equity securities, a line of credit that was repaid and terminated,
payments received under collaboration agreements including those with BMS and
Roche, an initial public offering, funding under research grants and contracts,
interest on investments, the sale of research reagents, and the proceeds from
the exercise of outstanding options and warrants.
10
<PAGE>
At March 31, 1999, the Company had cash, cash equivalents and marketable
securities totaling approximately $23,300,000 compared with approximately
$24,650,000 at December 31, 1998. The Company's facility lease has been
extended to December 2000. In connection with the extended facility lease, the
Company expended approximately $830,000 for equipment and leasehold
improvements during the period from January 1, 1998 to March 31, 1999 and
expects that an additional $250,000 will be spent to enhance its manufacturing
capabilities for clinical trials during 1999.
The Company believes that its present capital resources should be
sufficient to fund operations at least through the end of 2000, 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.
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 one
year, 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
11
<PAGE>
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
At March 31, 1999, the Company did not hold any market risk sensitive
instruments
12
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(d) As of March 31, 1999, $16,584,000 of the $17,112,000 net proceeds from the
Company's initial public offering, 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
27 - Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended March 31 1999, there were no reports 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: May 13, 1999 by /s/ Robert A. McKinney
----------------------------
Robert A. McKinney
Vice President
(Duly authorized officer
of the Registrant and
Principal Financial
and Accounting Officer)
13
<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, 1999
and is qualified in its entirety by reference to such Financial
Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,001,637
<SECURITIES> 10,298,861
<RECEIVABLES> 2,791,166
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,062,379
<PP&E> 2,668,664
<DEPRECIATION> 1,542,883
<TOTAL-ASSETS> 27,489,413
<CURRENT-LIABILITIES> 1,263,264
<BONDS> 0
0
0
<COMMON> 12,218
<OTHER-SE> 26,125,237
<TOTAL-LIABILITY-AND-EQUITY> 27,489,413
<SALES> 17,980
<TOTAL-REVENUES> 3,147,382
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,378,788
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,503
<INCOME-PRETAX> (244,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> (244,909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (244,909)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
