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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Fiscal Year Ended December 31, 1999.
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period
from _____________ to ____________
Commission File No. 000-23143
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PROGENICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3379479
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
777 OLD SAW MILL RIVER ROAD
TARRYTOWN, NY 10591
(Address of principal executive offices, zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 789-2800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE
ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION
12(G) OF THE ACT:
Common Stock, par value $0.0013 per share
(Title of Class)
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 28, 2000, based upon the closing price of the Common Stock
on the Nasdaq National Market of $67.50 per share, was approximately
$604,380,000. As of March 28, 2000, 12,129,692 shares of Common Stock, par value
$.0013 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III-Portions of the Registrant's definitive Proxy Statement with respect to
the Registrant's Annual Meeting of Stockholders, to be filed not later than 120
days after the close of the Registrant's fiscal year.
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1 Calculated by excluding all shares that may be deemed to be beneficially
owned by executive officers, directors and five percent stockholders of the
Registrant, without conceding that all such persons are "affiliates" of the
Registrant for purposes of the Federal securities laws.
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This Annual Report on Form 10-K contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ materially
from those anticipated in these forward-looking statements. Factors that may
cause such differences include, but are not limited to, the uncertainties
associated with product development, the risk that clinical trials will not
commence when planned, the risks and uncertainties associated with dependence
upon the actions our corporate, academic and other collaborators and of
government regulatory agencies, the risk that products that appeared promising
in early clinical trials do not demonstrate efficacy in larger-scale clinical
trials and the other risks described in this report, including those described
under the caption "Business--Risk Factors."
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's Public Reference Rooms at 450 Fifth Street, N.W., Washington, D.C.
20549. You can also request copies of our documents, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
These SEC filings are also available to the public from the SEC's web site at
http:www.sec.gov.
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PART I
ITEM 1. BUSINESS
GENERAL
OVERVIEW
Progenics is a biopharmaceutical company focusing on the development
and commercialization of innovative products for the treatment and prevention of
cancer and viral and other life-threatening diseases. We apply our immunology
expertise to develop biopharmaceuticals that induce an immune response or that
mimic natural immunity in order to fight cancers, such as malignant melanoma,
and viral diseases, such as HIV infection. Our most advanced product candidate,
GMK, is a therapeutic vaccine that has completed enrollment of a pivotal Phase
III clinical trial for the treatment of melanoma, the deadliest form of skin
cancer. Our second vaccine product candidate, MGV, is being developed for the
treatment of various cancers and is entering Phase II clinical trials. We have a
collaboration with Bristol-Myers Squibb Company to develop and commercialize GMK
and MGV. Based on our participation in the discoveries of two major receptors
for HIV, we are engaged in the research and development of therapeutic products
designed to block entry of HIV into human immune system cells. We have completed
two Phase I/II clinical trials of one of these product candidates, PRO 542, and
a Phase I clinical trial of another product candidate, PRO 367. We plan to
initiate in 2000 a Phase II clinical trial of PRO 542 and a Phase I/II clinical
trial of PRO 367. We are also engaged in a program with the Roche Group of
Basel, Switzerland to discover and develop novel small-molecule HIV
therapeutics that target the fusion co-receptors of the virus.
PRODUCT DEVELOPMENT
We apply our expertise in immunology to the development of therapeutic
biopharmaceuticals that use components of the immune system, particularly
antibodies, to fight diseases. Our principal programs are directed towards
cancer and HIV. In the case of cancer, we are developing vaccine products that
are designed to induce specific antibody responses to cancer antigens. In the
case of HIV, we are developing therapeutic products by genetically engineering
molecules that function as antibodies and selectively target HIV and
HIV-infected cells for neutralization or destruction. We are also actively
engaged in research and discovery of compounds based on the HIV receptor, CD4,
and HIV co-receptors, including CCR5 and CXCR4, and their roles in viral
attachment, fusion and entry. We are also actively seeking out other promising
products and technologies around which to build programs.
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The following table summarizes the status of our principal development
programs and product candidates and identifies any related corporate
collaborator.
<TABLE>
<CAPTION>
Program/Product Indication/Use Status(1) Corporate Collaborator
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<S> <C> <C> <C>
Cancer Therapeutics
GMK Vaccine for melanoma Phase III BMS
MGV Vaccine for colorectal Phase II expected to BMS
cancer, lymphoma, small commence in 2000
cell lung cancer, sarcoma,
gastric cancer and
neuroblastoma
PSMA Immunotherapeutics for Preclinical; Phase I/II CYTOGEN(2)
prostate and expected to commence in
other cancers 2001
HIV Therapeutics
PRO 542 HIV therapy Phase II expected to --
commence in 2000
PRO 367 HIV therapy Phase I/II expected to --
commence in 2000
PRO 140 HIV therapy Preclinical; Phase I/II --
expected to commence in
2000
Small-molecule drugs:
Co-receptor/fusion HIV therapy Research Roche
HIV attachment HIV therapy Research AHP(3), Pharmacopeia
ProVax HIV vaccine Research --
Other Therapeutics
DHA Stroke, Alzheimer's Preclinical; Phase I --
disease and other expected to commence in
diseases of oxidative the first half of 2001
stress
</TABLE>
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(1) "Research" means initial research related to specific molecular targets,
synthesis of new chemical entities, assay development or screening for the
identification of lead compounds. "Preclinical" means that a lead compound
is undergoing toxicology, formulation and other testing in preparation for
clinical trials. Phase I-III clinical trials denote safety and efficacy
tests in humans as follows:
"Phase I": Evaluation of safety.
"Phase I/II": Evaluation of safety with some measure of efficacy.
"Phase II": Evaluation of safety, dosing and efficacy.
"Phase III": Larger scale evaluation of safety and efficacy.
See "Business -- Government Regulation." The actual timing of events can
vary dramatically due to a variety of factors. See "--Risk Factors--Our
clinical trials could take longer to complete than we expect."
(2) Collaboration is in the form of a joint venture.
(3) "AHP" means the Wyeth-Ayerst Research Division of American Home Products
Corporation.
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THE HUMAN IMMUNE SYSTEM
The human immune system protects the body from disease by specifically
recognizing and destroying invading viruses, bacteria and other pathogens. In
addition, the immune system is capable of recognizing and eliminating from the
body abnormal cells, such as cancer cells and cells infected with viruses and
bacteria. This recognition function relies on the immune system's ability to
recognize as foreign specific molecular configurations, which are referred to
generically as antigens. White blood cells, particularly B and T lymphocytes,
have the ability to recognize antigens made by infectious agents and abnormal
cells and react to them. For example, B-lymphocytes produce antibodies that
recognize specific antigens. Antibodies are complex protein molecules that can
bind to these antigens and neutralize or eliminate infectious agents and cancer
cells.
Vaccines are designed to induce the production of antibodies against
specific antigens on infectious agents and abnormal cells and thereby protect
the body from illness. Although vaccines have historically been used
prophylactically to prevent the contraction of an infectious disease, more
recently vaccines are also being developed as therapeutics to fight ongoing
diseases. In addition, genetic engineering techniques have enabled the
production of antibodies or antibody-like molecules in the laboratory. These
genetically designed molecules are intended to mimic the body's own immune
response in situations where the immune response has been suppressed or
otherwise compromised.
CANCER THERAPEUTICS
Cancer is a set of different diseases, each of which is characterized
by aberrations in cell growth and differentiation. The establishment and spread
of a tumor is a function of its growth characteristics and its ability to
suppress or evade the body's normal defenses, including surveillance and
elimination of cancer cells by the immune system. Eradication of malignant cells
that can metastasize, or spread, to vital organs, leading to death, is central
to the effective treatment of cancer.
Despite recent advances in treatment, therapies for many types of
cancer continue to suffer from serious limitations. The principal therapies for
cancer have historically been surgery, radiation and chemotherapy. A significant
drawback to conventional anti-cancer therapy is that both occult, or hidden, and
residual disease is difficult or impossible to eliminate fully, which can lead
to relapse.
GANGLIOSIDE CONJUGATE VACCINES
Our principal cancer vaccine programs, GMK and MGV, involve the use of
purified gangliosides as cancer antigens. Gangliosides are chemically-defined
molecules composed of carbohydrate and lipid components. Certain gangliosides
are usually found in low amounts in normal human tissue, but are abundant in
certain cancers, such as melanoma, colorectal cancer, lymphoma, small cell lung
cancer, sarcoma, gastric cancer and neuroblastoma.
Our cancer vaccines use known amounts of chemically-defined antigens,
not dead cancer cells or crude extracts from cancer cells. As a result, we are
able to measure specific immune responses to the gangliosides in our vaccines.
We also believe that there is a reduced likelihood of variability in our
products as compared to vaccines which are prepared from dead cancer cells or
crude extracts from cancer cells or which require complicated manufacturing
processes.
Because gangliosides alone do not normally trigger an immune response
in humans, we attach gangliosides to large, highly immunogenic carrier proteins
to form "conjugate" vaccines designed to trigger specific immune responses to
ganglioside antigens. To further augment this immune response, we add an
immunological stimulator, known as an "adjuvant," to our ganglioside-carrier
protein conjugate.
Our ganglioside conjugate vaccines stimulate the immune system to
produce specific antibodies to ganglioside antigens. These antibodies have been
shown in vitro to recognize and destroy cancer cells. In vitro refers to tests
conducted in an artificial environment, like a test tube or culture media, as
opposed to in vivo, which refers to tests in animals or otherwise in a living
body, or ex vivo, which refers to tests conducted outside the body on samples of
blood or other tissue that have been removed from the patient. Based on the in
vitro results and the
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clinical trial results described below, we believe that vaccination of cancer
patients with ganglioside conjugate vaccines will delay or prevent recurrence of
cancer and prolong overall survival.
GMK: THERAPEUTIC VACCINE FOR MALIGNANT MELANOMA
Our most advanced product under development is GMK, a proprietary
therapeutic vaccine for melanoma that is currently in a pivotal Phase III
clinical trial. We are collaborating with Bristol-Myers Squibb Company on this
program. GMK, which is the first cancer vaccine based on a defined cancer
antigen to enter Phase III clinical trials, is designed to prevent recurrence of
melanoma in patients who are at risk of relapse after surgery. GMK is composed
of the ganglioside GM2 conjugated to the carrier protein keyhole limpet
hemocyanin, or KLH, and combined with the adjuvant QS-21. QS-21 is the lead
compound in the StimulonTM family of adjuvants developed and owned by Aquila
Biopharmaceuticals, Inc.
Target Market
Melanoma is a highly lethal cancer of the skin cells that produce the
pigment melanin. In early stages melanoma is limited to the skin, but in later
stages it spreads to the lungs, liver, brain and other organs. The National
Cancer Institute estimates that in 1999 there were 480,000 melanoma patients in
the United States. The American Cancer Society estimates that 47,700 patients in
the United States will be newly diagnosed with melanoma in 2000. Melanoma has
one of the fastest growing incidence rates of any cancer in the United States.
Increased exposure to the ultraviolet rays of the sun may be an important factor
contributing to the increase in new cases of melanoma.
Melanoma patients are categorized according to the following staging
system.
<TABLE>
<CAPTION>
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MELANOMA STAGING
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STAGE I STAGE II STAGE III STAGE IV
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<S> <C> <C> <C>
lesion less than lesion greater metastasis to o distant
1.5 mm thickness than 1.5 mm thickness regional draining metastasis
lymph nodes
no apparent local spread regional spread
metastasis from primary cancer from primary cancer
site site
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</TABLE>
GMK is designed for the treatment of patients with Stage II or Stage
III melanoma. The American Cancer Society estimates that approximately 50% of
new melanoma patients are diagnosed with Stage II or Stage III melanoma and that
approximately half of all Stage III melanoma patients will experience
recurrence of their cancer and die within five years after surgery.
Current Therapies
Standard treatment for melanoma patients includes surgical removal of
the cancer. Thereafter, therapy varies depending on the stage of the disease.
For Stage I and II melanoma patients, treatment generally consists of close
monitoring for recurrence. The only approved treatment for Stage III melanoma
patients is high-dose alpha interferon. In a reported study, the median
recurrence-free survival period after surgery for patients treated with
high-dose alpha interferon was 20 months versus 12 months for patients who
received no treatment. In addition, the median overall survival period after
surgery was 46 months for the treated group versus 34 months for the untreated
group. However, treatment with high-dose alpha interferon causes substantial
toxicities, requires an intensive treatment over twelve months (intravenous
administration five days a week for the first month followed by subcutaneous
injections three times a week for the remaining eleven months) and costs about
$35,000 for the drug alone.
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Other approaches for treatment of Stage II or III melanoma patients are
currently under investigation, but none has been approved for marketing. These
experimental therapies include chemotherapy, low-dose alpha interferon and other
vaccines.
Clinical Trials
GMK entered a pivotal Phase III clinical trial in the United States in
August 1996. A pivotal clinical trial is one that is designed to produce results
sufficient to support regulatory approval. An additional, international pivotal
Phase III clinical trial of GMK in earlier stage melanoma patients is also
planned. We expect that this second trial will commence in 2000. GMK is
administered in the studies on an out-patient basis by 12 subcutaneous
injections over a two-year period.
The ongoing U.S. Phase III clinical trial compares GMK with high-dose
alpha interferon in Stage IIb (advanced Stage II) and Stage III melanoma
patients who have undergone surgery but are at high risk for recurrence. This
randomized trial, which had achieved its targeted enrollment of 851 patients by
September 1999, is being conducted nationally by the Eastern Cooperative
Oncology Group in conjunction with the Southwest Oncology Group and other major
cancer centers, cooperative cancer research groups, hospitals and clinics. ECOG
and SWOG are leading cooperative cancer research groups supported by the
National Cancer Institute and are comprised of several hundred participating
hospitals and clinics, primarily in the United States. The primary endpoint of
the U.S. trial is to compare the recurrence of melanoma in patients receiving
GMK versus in patients receiving high-dose alpha interferon. The study will also
compare quality of life and overall survival of patients in both groups.
The second planned pivotal Phase III clinical trial is a randomized
study in Stage II (IIa and IIb) melanoma patients who have undergone surgery but
are at intermediate risk for recurrence. This trial will be conducted in Europe,
South Africa, Canada, South America and Australia under the guidance of the
European Organization for Research and Treatment of Cancer, Europe's largest
cooperative cancer research group. Patients will be randomized to receive either
GMK or observation with no treatment. The primary endpoint of this trial is to
compare the recurrence of melanoma in patients receiving GMK versus in patients
receiving observation with no treatment. The study will also compare overall
survival of patients in both groups.
A predecessor of GMK, called GM2-BCG, which combined the GM2
ganglioside with the adjuvant BCG, underwent clinical testing at Memorial
Sloan-Kettering Cancer Center in the late 1980s. In a double-blind, randomized
Phase II study in 122 Stage III melanoma patients, subjects in the treated group
received GM2-BCG for six months after surgery; subjects in the control group
received the same regimen with BCG alone. The median recurrence-free survival
period after surgery for patients treated with GM2-BCG was 33 months versus 17
months for the patients in the control group. In addition, the median overall
survival period after surgery for patients in the treated group was 70 months
versus 30 months for patients in the control group. Approximately 85% of treated
patients developed antibodies to the GM2 ganglioside. The presence of these
antibodies significantly correlated with improved recurrence-free survival and
overall survival of patients.
Phase I/II clinical trials of GMK under institutional INDs, or
investigational new drug applications, were conducted at Sloan-Kettering. In
these studies, approximately 120 patients, most of whom had Stage III melanoma,
were treated with GMK. All patients receiving GMK at the dose level being used
in the current Phase III trials of GMK developed antibodies to GM2 ganglioside,
which killed melanoma cells. Patients treated with GMK had levels of antibody to
GM2 ganglioside that were on average four times higher and also were longer
lasting than in patients treated with GM2-BCG in the GM2-BCG Phase II trial. In
addition, GMK was well-tolerated by all patients in these studies, and no
clinically significant side effects attributable to the vaccine were observed.
MGV: THERAPEUTIC VACCINE FOR CERTAIN CANCERS
Our second ganglioside conjugate vaccine in development, MGV, is a
proprietary therapeutic vaccine for cancers which express GD2 or GM2
gangliosides. These cancers include colorectal cancer, lymphoma, small cell lung
cancer, sarcoma, gastric cancer and neuroblastoma. We are collaborating with
Bristol-Myers Squibb Company on this program. MGV has three components: (i)
GM2-KLH, or GM2 ganglioside conjugated to KLH; (ii) GD2-KLH, or GD2 ganglioside
conjugated to KLH; and (iii) QS-21 adjuvant. MGV is designed to prevent
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recurrence of cancer and prolong overall survival of patients after their cancer
has been removed by surgery or reduced by chemotherapy or radiation therapy.
Target Market
MGV targets cancers that the American Cancer Society estimates will
have an aggregate incidence in the United States of over 250,000 during 2000.
The American Cancer Society also estimates that more than 135,000 persons will
die from these targeted cancers, representing nearly 25% of all expected deaths
from any cancer during 2000.
Clinical Trials
MGV completed a Phase I/II clinical trial in 1999 under an
institutional IND at Sloan-Kettering. The primary objectives of the study were
to establish the safety of MGV and the ability of the vaccine to induce specific
immune responses to both GD2 and GM2 gangliosides in patients with different
cancer types. In addition, a goal of the study was to find the best ratio of GD2
and GM2 gangliosides in MGV to be used in future clinical trials.
In this clinical trial, 31 patients with high-risk melanoma and sarcoma
were immunized with MGV over a period of nine months. Patients were randomly
assigned to five groups receiving a fixed dose of GM2-KLH and QS-21 adjuvant and
one of a number of escalating doses of GD2-KLH. This study showed that the
combination of GM2-KLH/GD2-KLH/QS-21 could produce antibodies to GM2 and GD2 and
was well-tolerated. We expect that Phase II clinical trials of MGV will commence
in 2000.
PSMA
We are engaged in a research and development program relating to
vaccine and antibody immunotherapeutics based on Prostate Specific Membrane
Antigen. PSMA is a protein that is abundantly expressed on the surface of
prostate cancer cells. We believe this antigen may have applications in
immunotherapeutics for prostate cancer and potentially for other types of
cancer. We will focus on developing products which either target, or stimulate a
response to, cells expressing PSMA on their surface. We are engaged in a
research and development program to pursue these applications and expect to
commence a Phase I/II clinical trial in 2001. Our PSMA program is being
conducted in collaboration with CYTOGEN Corporation.
Prostate cancer is the most common form of cancer affecting U.S. males
and is the second leading cause of cancer deaths in men each year. The American
Cancer Society estimates that 31,900 persons will die from prostate cancer, and
180,400 new cases will be diagnosed, in 2000. Conventional therapies include
radical prostectomy, in which the prostate gland is surgically removed,
radiation and hormone therapies, chemotherapy and "watchful waiting." Surgery
and radiation therapy are associated with urinary incontinence and impotence.
Hormone therapy and chemotherapy are generally not intended to be curative and
are not actively used to treat localized, early-stage prostate cancer.
HIV THERAPEUTICS
HIV infection causes a slowly progressive deterioration of the immune
system which results in AIDS. HIV specifically infects cells that have the CD4
receptor on their surface. Cells with the CD4 receptor are critical components
of the immune system and include T lymphocytes, monocytes, macrophages and
dendritic cells. The devastating effects of HIV are largely due to the
multiplication of the virus in these cells and the resulting dysfunction and
destruction of these cells.
Viral infection occurs when the virus binds to a host cell, enters the
cell and, by commandeering the host cell's own reproductive machinery, creates
thousands of copies of itself within the host cell. This process is called viral
replication. Our scientists and their collaborators have made important
discoveries in understanding how HIV enters human cells and initiates viral
replication.
In the 1980s, our scientists, in collaboration with researchers at
Columbia University, the Institute of Cancer Research in London and the Centers
for Disease Control and Prevention, demonstrated that the initial step of
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HIV infection involves the specific attachment of the virus to the CD4 receptor
on the surface of human immune system cells. These researchers also showed that
a specific glycoprotein, gp120, located on the surface of the virus, binds with
high affinity to the CD4 receptor. Although these researchers demonstrated that
binding to CD4 was necessary for HIV attachment, further discoveries have shown
that attachment alone is not sufficient to enable the virus to enter the cell
and initiate viral replication.
Our scientists, in collaboration with researchers at the Aaron Diamond
AIDS Research Center, described in an article in Nature the discovery of a
co-receptor for HIV on the surface of human immune system cells. This
co-receptor, CCR5, enables fusion of HIV with the cell membrane after binding of
the virus to the CD4 receptor. This fusion step results in entry of the viral
genetic information into the cell and subsequent viral replication. Our
scientists, in collaboration with researchers at ADARC, demonstrated that it is
the gp120 glycoprotein that binds to the CCR5 co-receptor as well as to the CD4
receptor. By a sophisticated process known as mutational analysis, these
scientists further determined that the gp120 binding site on CCR5 is a discrete
region at one end of the CCR5 molecule.
PROGENICS' HIV RECEPTOR TECHNOLOGIES
Based on our participation in the discoveries of CD4 and CCR5, we are
pursuing several approaches in the research and development of products designed
to block entry of HIV into human immune system cells. Our PRO 542 and PRO 367
product candidates and our viral attachment programs are based on the CD4
receptor, and our PRO 140 and HIV co-receptor/fusion programs are based on the
CCR5 and CXCR4 co-receptors.
Because HIV must first attach to the CD4 receptor to infect human
cells, we believe that the part of the gp120 glycoprotein that attaches to the
CD4 receptor must remain constant across all strains of the virus. The gp120
glycoprotein is located on the exterior of both HIV and HIV-infected cells. PRO
542 and PRO 367 incorporate a part of the CD4 receptor into genetically
engineered molecules that function like antibodies and are designed to bind
specifically to the gp120 glycoprotein of HIV or HIV-infected cells. In in vitro
tests, these molecules have demonstrated the ability to bind with high affinity
to gp120 glycoproteins from a wide range of HIV strains, including the strains
most prevalent in the United States and the rest of the world. Because this
technology is targeted to a part of HIV that is believed to be necessary for the
virus to enter cells and not to mutate, we believe that our technology may
address the obstacles presented by the high mutation rate of the virus.
We have developed a panel of monoclonal antibodies against CCR5 that
have been shown to block the ability of HIV to infect cells isolated from
healthy individuals by inhibiting virus-cell fusion. One of these monoclonal
antibodies, which we have designated PRO 140, inhibited HIV fusion in vitro at
concentrations that had no apparent effect on the normal function of CCR5.
TARGET MARKET
Our HIV therapeutic product candidates are designed primarily for use
in asymptomatic HIV-positive individuals. Accordingly, the target population for
these products is patients who are aware of their infection but do not yet have
AIDS. Although there are few signs of disease in an HIV-positive individual
during the asymptomatic period, the virus is replicating in the body by
infecting healthy cells. The World Health Organization estimated that as of the
end of 1998, 1.4 million people in North America and Western Europe and 33.4
million people worldwide were infected with HIV. According to WHO, approximately
74,000 people in North America and Western Europe were newly infected with HIV
during 1998.
CURRENT THERAPIES
At present, two classes of products have received marketing approval
from the FDA, the agency that regulates new drug approvals in the United States,
for the treatment of HIV infection and AIDS: reverse transcriptase inhibitors
and protease inhibitors. Both types of drugs are inhibitors of viral enzymes and
have shown efficacy in reducing the concentration of HIV in the blood and
prolonging asymptomatic periods in HIV-positive individuals, especially when
administered in combination.
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While combination therapy slows the progression of disease, it is not a
cure. HIV's rapid mutation rate results in the development of viral strains that
are resistant to reverse transcriptase and protease inhibitors. The potential
for resistance is exacerbated by interruptions in dosing which lead to lower
drug levels and permit increased viral replication. Non-compliance is common in
patients on combination therapies, since these drug regimens require more than a
dozen tablets to be taken at specific times each day. An additional problem is
that currently approved drugs produce toxic side-effects in many patients,
affecting a variety of organs and tissues, including the peripheral nervous
system and gastrointestinal tract. These side-effects often result in patients
interrupting or discontinuing therapy.
PRO 542: HIV THERAPY
We are developing PRO 542 for the treatment of HIV infection. PRO 542
is a proprietary antibody-like product with four binding sites for the gp120
glycoprotein on HIV. PRO 542 is designed to neutralize HIV through one of two
mechanisms: (i) binding to the gp120 glycoprotein and thereby preventing
infection of healthy cells; or (ii) binding to and detaching the gp120
glycoprotein from the virus.
In in vitro and ex vivo tests we conducted in collaboration with
scientists at the Aaron Diamond AIDS Research Center and the Centers for Disease
Control and Prevention, PRO 542 neutralized a wide variety of clinical strains
of HIV as well as viruses in the blood of HIV-positive individuals. In
comparative in vitro studies at ADARC using a panel of neutralizing antibodies
to HIV, PRO 542 was found to be more potent and broadly neutralizing than the
antibodies to which it was compared. In further studies at ADARC, PRO 542
protected severe combined immune deficient mice transplanted with human
peripheral blood lymphocytes against infection by the three HIV strains tested,
including strains of the virus isolated from HIV-positive individuals.
We completed two dose-escalation Phase I/II clinical trials of PRO 542
in 1999. Both trials were designed to measure the safety, pharmacokinetics,
immunogenicity and antiviral activity of PRO 542. Pharmacokinetics studies
analyze how the body acts on a drug once the drug is administered and will
determine, for example, how long the drug persists in the body. Immunogenicity
studies analyze to what extent a patient's immune system mounts a response to
the drug, which could impair the drug's ability to have its desired therapeutic
effect and could, in some cases, have serious health consequences to the
patient. Immunogenicity can be a serious problem, particularly for
antibody-based drugs.
Our first dose-escalation clinical trial of PRO 542 was conducted in 15
HIV-positive adult patients at Mount Sinai Medical Center in New York City.
Findings indicated peak and one-week serum concentrations of PRO 542 compared
favorably with preclinical models, approximating drug levels previously shown to
neutralize clinical HIV strains in vitro. Data from this trial demonstrated that
in patients receiving the highest dosage of PRO 542, infectious HIV was reduced
to undetectable levels for prolonged periods following treatment. Data from this
trial also indicated that administration of a single dose of PRO 542 was able to
produce a statistically significant reduction in viral load in patients treated
with the highest dose. Viral load means the concentration of virus nucleic acid,
or genetic material, in the blood and is a widely used indicator of infection
levels. PRO 542 serum concentrations remained above HIV inhibitory levels for
greater than one week. In addition, PRO 542 was well-tolerated and
non-immunogenic in all patients treated. We believe that these results support
expanded clinical testing of this agent as a non-toxic therapy for HIV
infection.
The second dose-escalation Phase I/II clinical trial was conducted in
HIV-positive children at Baylor College of Medicine in Houston, the University
of California at San Francisco and the University of Pennsylvania by the AIDS
Clinical Trials Group, a leading cooperative HIV research group supported by the
National Institute of Allergy and Infectious Diseases. This trial was the first
time PRO 542 was tested on children and in multiple doses. All patients treated
demonstrated a decrease in viral load. Additionally, the drug was well-tolerated
by all patients tested. We plan to initiate Phase II clinical trials in adults
and children commencing in 2000.
In February 2000, we entered into a development and supply agreement
with Genzyme Transgenics Corporation, continuing the collaboration with Genzyme
Transgenics we commenced in September 1997. The objective of this program is to
develop a transgenic source of PRO 542 using Genzyme Transgenics' proprietary
technology. This collaboration is designed to result in commercial-scale
manufacture by producing PRO 542 in the
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milk of transgenic goats. The expanded agreement was entered into upon the
successful outcome of transgenic feasibility studies conducted by Genzyme
Transgenics.
PRO 367: HIV Therapy
We are developing PRO 367 as a therapeutic agent designed to destroy
HIV-infected cells. PRO 367 is composed of a proprietary antibody-like molecule
with binding sites for the gp120 glycoprotein linked to a therapeutic
radioisotope, which is a particle that emits radiation. PRO 367 is designed to
bind with high affinity specifically to the gp120 glycoprotein on HIV-infected
cells and to destroy these cells by delivering a lethal dose of radiation.
In in vitro tests, PRO 367 bound with high affinity specifically to the
gp120 glycoprotein on the cell surface. In addition, a pilot Phase I clinical
trial in AIDS patients of a trace-labeled precursor of PRO 367 was conducted
under an institutional IND at Sloan-Kettering. This trial assessed the safety
and pharmacology of the compound with low doses of the radioisotope iodine-131.
The compound was well-tolerated by all patients, no clinically significant side
effects attributable to the compound were observed and the compound exhibited
suitable pharmacokinetics for further development. We plan to initiate
dose-escalation Phase I/II clinical trials of PRO 367 in 2000 subject to
obtaining necessary regulatory clearances. The study is expected to assess
safety, pharmacokinetics, biodistribution, immunogenicity and antiviral
effects of PRO 367 in HIV-positive adult patients. In these trials, we plan to
use a new and highly potent type of radioisotope known as alpha-emitters.
PRO 140: HIV Therapy
In May 1999, we announced the development of a panel of proprietary
anti-CCR5 monoclonal antibodies created at Progenics and evaluated in
collaboration with the Aaron Diamond AIDS Research Center. These antibodies
blocked the ability of HIV to infect cells isolated from healthy individuals by
inhibiting virus-cell fusion, an approach not targeted by current HIV therapies.
One monoclonal antibody, which we have designated PRO 140, inhibited HIV
infection at concentrations that had no apparent effect on the normal function
of CCR5. These properties were correlated with PRO 140's ability to bind to a
distinct site on CCR5.
Effective April 1999, we entered into a development and license
agreement with Protein Design Labs, Inc. for PDL to develop a humanized version
of PRO 140 that retains PRO 140's antiviral activity but which is more suitable
for chronic use in humans. Assuming successful completion of the humanization
program, we expect that the humanized PRO 140 will enter Phase I/II clinical
trials in 2000.
Recently we announced the findings from a preclinical study carried out
in collaboration with ADARC in which PRO 140 potently blocked 17 of 17 primary
HIV isolates that use CCR5 as a fusion co-receptor. These viruses are important
for person-to-person transmission of HIV and predominate during the early stages
of infection, when antiviral therapies have proven to be most effective. The
test viruses were selected for their genetic and geographic diversity. PRO 140
was shown in these in vitro models to be effective at protecting primary T-cells
and macrophages, immune system cells that provide the major targets for HIV
infection in vivo.
SMALL-MOLECULE DRUGS
Co-Receptor/Fusion: HIV Therapy
Our HIV co-receptor programs are based on the CCR5 and CXCR4
co-receptors and the important role these molecules play in virus-cell fusion
and subsequent viral replication. CCR5 and CXCR4 belong to a larger family of
cellular receptors, known as 7-transmembrane G-protein-coupled receptors. These
receptors have been successfully exploited as drug targets by commercialized
pharmaceuticals addressing a wide range of human diseases. Additionally, studies
have indicated that a naturally-occurring genetic mutation that disables the
CCR5 co-receptor prevents HIV infection without compromising immune function.
For these reasons, we believe that our co-receptor/fusion technology offers
significant commercial opportunities.
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We have developed proprietary fusion assays based on our HIV
co-receptor technology. These assays model fusion of HIV with human cells
rapidly, automatically, sensitively and without the use of infectious virus. In
December 1997 we entered into a collaboration with the Roche Group of Basel,
Switzerland to use these assays to discover and develop small-molecule HIV
therapeutics that target the fusion co-receptors, including CCR5 and CXCR4.
Under the terms of the collaboration, we granted to Roche an exclusive worldwide
license to our HIV co-receptor technology. Roche made an up-front payment and a
milestone payment and is obligated to make further milestone payments, fund
research for up to three years and pay royalties on the sale of any products
commercialized as a result of the collaboration.
In collaboration with ADARC, we have identified specific
naturally-occurring chemical modifications to CCR5 that govern its binding
to HIV. Synthetic peptides incorporating these modifications potently blocked
the binding of HIV to CCR5 on the cell surface. The modified CCR5 co-receptor
also inhibited certain HIV strains from entering target cells in vitro. The
modified CCR5 co-receptor may constitute a new class of HIV fusion inhibitors
and also may provide a tool for identifying small-molecule drugs that target
CCR5.
HIV Attachment Drug Screen: HIV Therapy
As part of a collaborative research project with the Wyeth-Ayerst
Research Division of American Home Products Corporation, we are using our
proprietary HIV attachment assay to identify small-molecule compounds that
inhibit attachment of HIV to the CD4 receptor. This assay has been used in a
high-throughput screening program, and the compounds discovered are undergoing
additional studies by Progenics and AHP to evaluate further their antiviral
activity.
In March 2000, we entered into a research and license agreement with
Pharmacopeia, Inc. to discover small molecule HIV therapeutics that block the
attachment of the virus to its primary cellular receptor, CD4. This agreement
expanded on a collaboration with Pharmacopeia commenced in September 1997. Under
the terms of the new agreement, we will provide proprietary CD4 attachment
assays and expertise related to the interaction between HIV and CD4, and
Pharmacopeia will engage in a screening program of its internal compound
library. We will be granted a license to active compounds identified in the
program.
ProVax: HIV Vaccine
We are conducting research with respect to our ProVax vaccine, a
vaccine candidate which we believe may be useful as a preventative or a
therapeutic treatment for HIV-positive individuals. We are currently performing
government-funded research and development of the ProVax vaccine in
collaboration with the Aaron Diamond AIDS Research Center.
OTHER THERAPEUTICS: DHA
In February 1999, we licensed from Memorial Sloan-Kettering Cancer
Center patent rights and technology relating to a derivative of vitamin C called
dehydroascorbic acid, or DHA. We have obtained exclusive worldwide rights to use
DHA for treatment of disease involving oxidative damage to tissue, including
tissues of the central nervous system.
Antioxidants are compounds that act as scavengers of free radicals --
highly unstable molecules that play a role in certain diseases that damage
tissue. Studies have shown that antioxidants can slow the progression of
degenerative neurological diseases, such as Alzheimer's disease. Vitamin C is a
potent antioxidant, but does not easily cross from the circulatory system into
the brain. David W. Golde, M.D., Physician-in-Chief of Memorial Hospital, and
his colleagues at Sloan-Kettering have shown that DHA readily crosses the
blood-brain barrier and, once in the brain, is converted into vitamin C. As a
result of these properties, we believe that DHA is a promising drug candidate
for a broad range of neurodegenerative diseases caused by oxidative stress,
such as stroke. We are engaged in a research and development program to pursue
these applications and anticipate starting a Phase I clinical trial in 2001.
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CORPORATE COLLABORATIONS
BRISTOL-MYERS SQUIBB COMPANY
In July 1997, Progenics and Bristol-Myers Squibb Company entered into a
series of related agreements. Pursuant to these agreements, we granted to BMS an
exclusive, worldwide license to make, have made, use, sell, have sold and
develop GMK and MGV and any other product to which we have rights that include
the GM2 or GD2 ganglioside antigens and are used for the treatment or prevention
of human cancer. BMS is entitled under these agreements to grant sublicenses,
subject to restrictions.
Pursuant to our agreements, BMS has made payments to us and is required
to make milestone payments and pay royalties on any sales of licensed products.
In July 1997, BMS paid us approximately $13.3 million, representing $11.5
million as reimbursement for expenses previously incurred by us in the
development of GMK and MGV and licensing fees and $1.8 million as reimbursement
of our clinical development costs for the period from April 15, 1997 to
September 30, 1997. BMS is also required to make payments of up to $61.5 million
upon achievement of specified milestones relating to the development and
regulatory approval of GMK, MGV or other products that include the GM2 or GD2
ganglioside antigens. We received clinical milestone and related payments in
June 1998, September 1999 and December 1999. BMS is also required to pay
royalties on any sale of licensed products and to fund ongoing development,
clinical trials and regulatory activities of GMK and MGV pursuant to plans
agreed to by the parties.
In connection with our agreements with BMS, we granted to them
sublicenses to the technology and other rights licensed to Progenics from each
of Sloan-Kettering, The Regents of the University of California and Aquila
Biopharmaceuticals under the licenses with these entities discussed under
"--Licenses." These sublicenses are exclusive as to the Sloan-Kettering and the
Regents sublicenses and non-exclusive as to the Aquila sublicense and are
intended, in general, to make available to BMS the technology licensed by us
from these entities and used to make GMK and MGV. BMS is entitled under these
sublicenses to grant further sublicenses, subject to certain restrictions.
In connection with payments made by BMS to us under our agreements with
BMS, we made payments to licensors as an inducement to these licensors to enter
into agreements with us and BMS amending certain provisions of the prime
licenses and granting to BMS certain related rights. Future payments made by BMS
to us under our agreements with BMS also trigger payment obligations to these
licensors. See "--Licenses."
Our agreements with BMS terminate at various times related, in general,
to the expiration or abandonment of the related patents or to the first
commercial sale of products. The agreements can also be terminated by either
party upon a material, uncured breach by the other party. BMS has the further
right to terminate our principal agreement with BMS (including its funding and
milestone obligations) as to specified licensed products at specified times.
ROCHE GROUP
In December 1997, we entered into a collaboration agreement with the
Roche Group of Basel, Switzerland to discover and develop novel HIV therapeutics
that target the recently identified fusion co-receptors of the virus. This
collaboration, among other things, provides for Roche to apply its library of
small-molecule compounds to our original screening assays in order to identify
inhibitors of the interaction between HIV co-receptors and HIV. This program is
in the early stage of drug discovery.
Under the terms of the Roche agreement, we have granted to Roche a
license covering products to which we have rights or that are developed as a
result of the collaboration and which have been identified as, or developed for
the purpose of, inhibiting the interaction between chemokine receptors that act
as HIV co-receptors, including CCR5 and CXCR4, and HIV, which interaction
results in fusion of HIV with cells. The license does not extend to certain
classes of molecules, as to which we have retained rights. Pursuant to this
license, Roche has an exclusive worldwide right to develop, make, have made,
use, sell, offer to sell and import any covered products for the therapy
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of HIV infection. Subject to specified restrictions, Roche retains the right to
grant sublicenses under the Roche agreement.
Pursuant to the Roche agreement, Roche made an up-front payment and a
milestone payment and is obligated to make further milestone payments, fund
research for up to three years and pay royalties on the sale of any products
commercialized as a result of the collaboration. We are also entitled to
contingent licensing rights.
The collaboration remains in full force, subject to the exceptions
identified below, until the expiration of all obligations to pay royalties
pursuant to any of the licenses granted therein. The Roche agreement can be
terminated by either party upon a material, uncured breach by the other party.
Roche has the further right to terminate the Roche agreement or the
collaboration contemplated under the Roche agreement at specified times;
however, in either case, Roche will not be relieved of certain minimum research
funding obligations.
CYTOGEN Corporation
We have entered into a collaboration with CYTOGEN Corporation to
develop vaccine and antibody-based immunotherapeutic products based on Prostate
Specific Membrane Antigen. This collaboration is a joint venture structured in
the form of a mutually owned limited liability company. All patents and know how
currently owned or acquired in the future by Progenics or CYTOGEN and useful in
the development of PSMA-based antibody or vaccine immunotherapeutics have been
licensed to the joint venture. The principal patents licensed initially are
several patents owned by Sloan-Kettering that cover PSMA. By the terms of the
agreement, we are responsible for preclinical and clinical development, and
CYTOGEN is principally responsible for product marketing. In addition, we have
certain co-promotion rights.
The joint venture aspects of the collaboration are governed by a
limited liability company agreement. This agreement provides generally for joint
management. We are obligated to provide the initial $3.0 million in research and
development funding and $2.0 million in payments the joint venture is required
to pay CYTOGEN over time. Any other funding obligations are to be shared 50/50,
with voting and ownership dilution resulting if a party fails to fund its share.
The license agreement terminates on the last to expire or terminate of
any licensable rights to patents or patent applications licensed by Progenics or
CYTOGEN to the joint venture.
GENZYME TRANSGENICS CORPORATION
We have entered into a collaboration with Genzyme Transgenics to
develop a transgenic source of the PRO 542 molecule. Under this agreement,
Genzyme Transgenics will engage in a program designed to result in the
establishment of a line of transgenic goats capable of expressing the molecule
in lactation milk. We are obligated to pay Genzyme Transgenics certain fees to
conduct the program as well as additional fees upon the achievement of specified
milestones. If the program is successful, we may elect to enter into a further
agreement for production by Genzyme Transgenics of commercial-scale quantities
of the molecule, the principle terms of which have been agreed upon.
PHARMACOPEIA, INC.
In March 2000, we entered into a research and license agreement with
Pharmacopeia, Inc. to discover small molecule HIV therapeutics that block the
attachment of the virus to its primary cellular receptor, CD4. This agreement
expanded on a collaboration with Pharmacopeia commenced in September 1997. Under
the terms of the new agreement, we will provide proprietary CD4 attachment
assays and expertise related to the interaction between HIV and CD4 and
Pharmacopeia will engage in a screening program of its internal compound
library. We will be granted a license to active compounds identified in the
program. We are obligated to pay Pharmacopeia fees for its screening programs as
well as additional amounts upon the achievement of specified milestones and
royalties on any sales of therapeutics marketed as a result of the
collaboration.
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LICENSES
We are a party to license agreements under which we have obtained
rights to use certain technologies in our cancer and HIV programs, as well as
certain other human therapeutics. Set forth below is a summary of these
licenses.
Sloan-Kettering. We are party to a license agreement with
Sloan-Kettering under which we obtained the worldwide, exclusive rights to
certain technology relating to ganglioside conjugate vaccines, including GMK and
MGV, and their use to treat or prevent cancer. The Sloan-Kettering license
terminates upon the expiration of the last of the licensed patents or 15 years
from the date of the first commercial sale of a licensed product pursuant to the
agreement, whichever is later. In addition to patent applications, the
Sloan-Kettering license includes the exclusive rights to use certain relevant
technical information and know-how. A number of Sloan-Kettering
physician-scientists also serve as consultants to Progenics. We are also a party
to a license agreement with Sloan-Kettering under which we obtained an
exclusive, worldwide license to certain patent rights relating to DHA. The
license continues for 20 years or to the end of the term for which the patent
rights are granted.
Regents of the University of California. We are party to a license
agreement with the Regents of the University of California under which we
obtained the exclusive rights to an issued U.S. patent covering certain
ganglioside conjugate vaccines. The license agreement terminates upon the
expiration of the patent.
Columbia University. We are party to a license agreement with Columbia
University under which we obtained exclusive, worldwide rights to certain
technology and materials relating to CD4 and its use to treat or prevent HIV
infection. The license agreement will terminate upon the expiration of the last
of the licensed patents.
Aquila Biopharmaceuticals. We have entered into a license and supply
agreement with Aquila Biopharmaceuticals, Inc. pursuant to which Aquila agreed
to supply us with all of our requirements for the QS-21 adjuvant for use in
certain ganglioside-based cancer vaccines, including GMK and MGV. QS-21 is the
lead compound in the Stimulon family of adjuvants developed and owned by Aquila.
The license terminates upon the expiration of the last of the licensed patents.
Protein Design Labs. We have entered into a development and license
agreement with PDL for the humanization by PDL of PRO 140. Pursuant to the
agreement PDL granted us certain exclusive and nonexclusive worldwide licenses
under relevant patents, patent applications and know how covering or relating to
the humanized PRO 140. The licensing agreement terminates on the later of ten
years from the first commercial sale or the last date on which there is an
unexpired patent or a patent application that has been pending for less than ten
years. Thereafter the license is fully paid up.
The research, development and commercialization of a biopharmaceutical
often involves alternative development and optimization routes, which are
presented at various stages in the development process. The preferred routes
cannot be predicted at the outset of a research and development program because
they will depend on subsequent discoveries and test results. There are numerous
third-party patents in our field, and it is possible that to pursue the
preferred development route of one or more of our products we will need to
obtain a license to a patent, which would decrease the ultimate profitability of
the applicable product. If we cannot negotiate a license, we might have to
pursue a less desirable development route or terminate the program altogether.
The licenses to which we are a party impose various milestone,
commercialization, sublicensing, royalty and other payment, insurance,
indemnification and other obligations on us and are subject to certain
reservations of rights. Our failure to comply with these requirements could
result in the termination of the applicable agreement, which would likely cause
us to terminate the related development program and cause a complete loss of our
investment in that program.
In connection with our collaboration with Bristol-Myers Squibb Company,
we granted to BMS sublicenses to the technology and other rights licensed to us
from each of Sloan-Kettering, the Regents and Aquila under the licenses with
these entities described above. See "--Corporate Collaborations--Bristol-Myers
Squibb Company."
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PATENTS AND PROPRIETARY TECHNOLOGY
Our policy is to protect our proprietary technology, and we consider
the protection of our rights to be important to our business. In addition to
seeking U.S. patent protection for many of our inventions, we generally file
patent applications in Canada, Japan, Western European countries and additional
foreign countries on a selective basis in order to protect the inventions deemed
to be important to the development of our foreign business.
Under a license agreement with Sloan-Kettering, we obtained worldwide,
exclusive rights to certain technology relating to ganglioside conjugate
vaccines, including GMK and MGV, and their use to treat or prevent cancer. This
technology is the subject of a patent application filed by Sloan-Kettering in
the United States and 25 foreign countries claiming composition of matter and
methods of production and use of certain ganglioside conjugate vaccines for the
treatment or prevention of human cancer.
Under a license agreement with Columbia University, we obtained
worldwide, exclusive rights to certain technology relating to CD4 and its use to
treat or prevent HIV infection. This technology is the subject of issued U.S.
and European patents and several related U.S. and foreign patent applications
filed by Columbia University. The issued patents and the patent applications
claim composition of matter and methods of production and use of certain
CD4-based products for the treatment or prevention of HIV infection. We have
also filed a number of U.S. and foreign patent applications on our HIV
attachment assay technology, our technology relating to PRO 542 and PRO 367, our
ProVax technology and clinical uses of these technologies. We have also filed a
number of U.S. and foreign patent applications, one of which is owned jointly
with the Aaron Diamond AIDS Research Center, relating to the discovery of an HIV
co-receptor, CCR5.
Under a license agreement with Sloan-Kettering, we obtained worldwide,
exclusive rights to certain technology relating to dehydroascorbic acid and its
use to increase the concentration of vitamin C in tissues, including the brain,
for treating neurodegenerative and neurovascular diseases. This technology is
the subject of a patent application filed by Sloan-Kettering in the United
States and as an international application claiming methods for increasing the
vitamin C concentration in the cells of a subject by administering to the
subject dehydroascorbic acid.
The enactment of the legislation implementing the General Agreement on
Tariffs and Trade has resulted in certain changes to U.S. patent laws that
became effective on June 8, 1995. Most notably, the term of patent protection
for patent applications filed on or after June 8, 1995 is no longer a period of
seventeen years from the date of grant. The new term of U.S. patents will
commence on the date of issuance and terminate twenty years from the earliest
effective filing date of the application. Because the time from filing to
issuance of patent applications is often more than three years, a twenty-year
term from the effective date of filing may result in a substantially shortened
term of patent protection, which may adversely impact our patent position.
GOVERNMENT REGULATION
Progenics and our products are subject to comprehensive regulation by
the Food and Drug Administration in the United States and by comparable
authorities in other countries. These national agencies and other federal, state
and local entities regulate, among other things, the preclinical and clinical
testing, safety, effectiveness, approval, manufacture, labeling, marketing,
export, storage, record keeping, advertising and promotion of our products. None
of our product candidates has received marketing or other approval from the FDA
or any other similar regulatory authority.
FDA approval of our products, including a review of the manufacturing
processes and facilities used to produce such products, will be required before
such products may be marketed in the United States. The process of obtaining
approvals from the FDA can be costly, time consuming and subject to
unanticipated delays. We cannot assure you that approvals of our proposed
products, processes, or facilities will be granted on a timely basis, or at all.
If we experience delays in obtaining, or do not obtain, approvals for our
products, commercialization of our products would be slowed or stopped.
Moreover, even if we obtain regulatory approval, the approval may include
significant limitations on indicated uses for which the product could be
marketed or other significant marketing restrictions.
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The process required by the FDA before our products may be approved for
marketing in the United States generally involves:
o preclinical laboratory and animal tests;
o submission to the FDA of an investigational new drug application, or
IND, which must become effective before clinical trials may begin;
o adequate and well-controlled human clinical trials to establish the
safety and efficacy of the product for its intended indication;
o submission to the FDA of a marketing application; and
o FDA review of the marketing application in order to determine, among
other things, whether the product is safe and effective for its
intended uses.
Preclinical tests include laboratory evaluation of product chemistry
and animal studies to gain preliminary information about a product's
pharmacology and toxicology and to identify any safety problems that would
preclude testing in humans. Products must generally be manufactured according to
current Good Manufacturing Practices, and preclinical safety tests must be
conducted by laboratories that comply with FDA regulations regarding good
laboratory practices. The results of the preclinical tests are submitted to the
FDA as part of an IND. An IND is a submission which the sponsor of a clinical
trial of an investigational new drug must make to the FDA and which must become
effective before clinical trials may commence. The IND submission must include,
among other things:
o a description of the sponsor's investigational plan;
o protocols for each planned study;
o chemistry, manufacturing, and control information;
o pharmacology and toxicology information; and
o a summary of previous human experience with the investigational
drug.
Unless the FDA objects to, or makes comments or raises questions concerning an
IND, the IND will become effective 30 days following its receipt by the FDA, and
initial clinical studies may begin, although companies often obtain affirmative
FDA approval before beginning such studies. We cannot assure you that submission
of an IND will result in FDA authorization to commence clinical trials.
A New Drug Application, or NDA, is an application to the FDA to market
a new drug. The NDA must contain, among other things:
o information on chemistry, manufacturing, and controls;
o nonclinical pharmacology and toxicology;
o human pharmacokinetics and bioavailability; and
o clinical data.
The new drug may not be marketed in the United States until the FDA has approved
the NDA.
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A Biologic License Application, or BLA, is an application to the FDA to
market a biological product. The BLA must contain, among other things, data
derived from nonclinical laboratory and clinical studies which demonstrate that
the product meets prescribed standards of safety, purity and potency, and a full
description of manufacturing methods. The biological product may not be marketed
in the United States until a biologic license is issued.
Clinical trials involve the administration of the investigational new
drug to healthy volunteers or to patients under the supervision of a qualified
principal investigator. Clinical trials must be conducted in accordance with the
FDA's Good Clinical Practice requirements under protocols that detail, among
other things, the objectives of the study, the parameters to be used to monitor
safety, and the effectiveness criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND. Further, each clinical study must be
conducted under the auspices of an Institutional Review Board. The Institutional
Review Board will consider, among other things, ethical factors, the safety of
human subjects, the possible liability of the institution and the informed
consent disclosure which must be made to participants in the clinical trial.
Clinical trials are typically conducted in three sequential phases,
although the phases may overlap. During Phase I, when the drug is initially
administered to human subjects, the product is tested for safety, dosage
tolerance, absorption, metabolism, distribution and excretion. Phase II involves
studies in a limited patient population to:
o evaluate preliminarily the efficacy of the product for specific,
targeted indications;
o determine dosage tolerance and optimal dosage; and
o identify possible adverse effects and safety risks.
When a new product is found to have an effect and to have an acceptable safety
profile in Phase II evaluation, Phase III trials are undertaken in order to
further evaluate clinical efficacy and to further test for safety within an
expanded patient population. The FDA may suspend clinical trials at any point in
this process if it concludes that clinical subjects are being exposed to an
unacceptable health risk.
The results of the preclinical studies and clinical studies, the
chemistry and manufacturing data, and the proposed labeling, among other things,
are submitted to the FDA in the form of an NDA or BLA, approval of which must be
obtained prior to commencement of commercial sales. The FDA may refuse to accept
the application for filing if certain administrative and content criteria are
not satisfied, and even after accepting the application for review, the FDA may
require additional testing or information before approval of the application.
Our analysis of the results of our clinical studies is subject to review and
interpretation by the FDA, which may differ from our analysis. We cannot assure
you that our data or our interpretation of data will be accepted by the FDA. In
any event, the FDA must deny an NDA or BLA if applicable regulatory requirements
are not ultimately satisfied. In addition, delays or rejections may be
encountered based upon changes in applicable law or FDA policy during the period
of product development and FDA regulatory review. Moreover, if regulatory
approval of a product is granted, such approval may be made subject to various
conditions, including post-marketing testing and surveillance to monitor the
safety of the product, or may entail limitations on the indicated uses for which
it may be marketed. Finally, product approvals may be withdrawn if compliance
with regulatory standards is not maintained or if problems occur following
initial marketing.
Both before and after approval is obtained, a product, its
manufacturer, and the sponsor of the marketing application for the product are
subject to comprehensive regulatory oversight. Violations of regulatory
requirements at any stage, including the preclinical and clinical testing
process, the approval process, or thereafter, may result in various adverse
consequences, including FDA delay in approving or refusal to approve a product,
withdrawal of an approved product from the market or the imposition of criminal
penalties against the manufacturer or sponsor. In addition, later discovery of
previously unknown problems may result in restrictions on such product,
manufacturer, or sponsor, including withdrawal of the product from the market.
Also, new government requirements may be established that could delay or prevent
regulatory approval of our products under development.
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Whether or not FDA approval has been obtained, approval of a
pharmaceutical product by comparable government regulatory authorities in
foreign countries must be obtained prior to marketing such product in such
countries. The approval procedure varies from country to country, and the time
required may be longer or shorter than that required for FDA approval. Although
there are some procedures for unified filing for certain European countries, in
general, each country has its own procedures and requirements. We do not
currently have any facilities or personnel outside of the United States.
In addition to regulations enforced by the FDA, we are also subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and various other present and potential future federal, state or
local regulations. Our research and development involves the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds.
Although we believe that our safety procedures for storing, handling, using and
disposing of such materials comply with the standards prescribed by applicable
regulations, we cannot completely eliminate the risk of accidental
contaminations or injury from these materials. In the event of such an accident,
we could be held liable for any legal and regulatory violations as well as
damages that result. Any such liability could have a material adverse effect on
Progenics.
MANUFACTURING
We currently manufacture GMK, MGV, PRO 542, PRO 367 and PRO 140 in our
pilot production facilities in Tarrytown, New York. One of these facilities is
for the production of vaccines and the other is for the production of
recombinant proteins. We believe that our existing production facilities will be
sufficient to meet our initial needs for clinical trials. However, these
facilities may be insufficient for all of our late-stage clinical trials and
would be insufficient for commercial-scale requirements. We may be required to
expand our manufacturing staff and facilities, obtain new facilities or contract
with third parties or corporate collaborators to assist with production. In the
event we decide to establish a full-scale commercial manufacturing facility, we
would need to spend substantial additional funds and will be required to hire
and train significant numbers of employees and comply with the extensive FDA
regulations applicable to such a facility.
SALES AND MARKETING
We plan to market products for which we obtain regulatory approval
through co-marketing, co-promotion, licensing and distribution arrangements with
third party collaborators. We believe that this approach will both increase
market penetration and commercial acceptance of our products and enable us to
avoid expending significant funds to develop a large sales and marketing
organization. BMS, Roche and CYTOGEN have marketing rights with respect to the
products covered by their respective collaborations with us.
COMPETITION
Competition in the biopharmaceutical industry is intense and
characterized by ongoing research and development and technological change. We
face competition from many companies and major universities and research
institutions in the United States and abroad. We will face competition from
companies marketing existing products or developing new products for diseases
targeted by our technologies. Many of our competitors have substantially greater
resources, experience in conducting preclinical studies and clinical trials and
obtaining regulatory approvals for their products, operating experience,
research and development and marketing capabilities and production capabilities
than we do. We cannot assure you that our products under development will be
able to compete successfully with existing products or products under
development by other companies, universities and other institutions. Our
competitors may succeed in obtaining FDA approval for products more rapidly than
we do. Drug manufacturers that are first in the market with a therapeutic for a
specific indication generally obtain and maintain a significant competitive
advantage over later entrants. Accordingly, the speed with which we can develop
products, complete the clinical trials and approval processes and ultimately
supply commercial quantities of the products to the market is expected to be an
important competitive factor.
With respect to GMK, the FDA and certain other regulatory authorities
have approved high-dose alpha interferon for marketing as a treatment for
patients with high-risk melanoma. High-dose alpha interferon has demonstrated
some efficacy for this indication. With respect to our products for the
treatment of HIV infection, two classes of products made by our competitors have
been approved for marketing by the FDA for the treatment of HIV
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infection and AIDS: reverse transcriptase inhibitors and protease inhibitors.
Both types of drugs have shown efficacy in reducing the concentration of HIV in
the blood and prolonging asymptomatic periods in HIV-positive individuals,
especially when administered in combination.
A significant amount of research in the biopharmaceutical field is also
being carried out at academic and government institutions. Our strategy is to
in-license technology and product candidates from academic and government
institutions. These institutions are becoming increasingly sensitive to the
commercial value of their findings and are becoming more aggressive in pursuing
patent protection and negotiating licensing arrangements to collect royalties
for use of technology that they have developed. These institutions may also
market competitive commercial products on their own or in collaboration with
competitors and will compete with us in recruiting highly qualified scientific
personnel. Any resulting increase in the cost or decrease in the availability of
technology or product candidates from these institutions may adversely affect
our business strategy.
Competition with respect to our technologies and product candidates is
and will be based, among other things, on:
o capabilities of our collaborators;
o efficacy and safety of our products;
o timing and scope of regulatory approval;
o product reliability and availability;
o marketing and sales capabilities;
o reimbursement coverage from insurance companies and others;
o degree of clinical benefits of our product candidates relative to
their costs;
o method of administering a product;
o price; and
o patent protection.
Our competitive position will also depend upon our ability to attract
and retain qualified personnel, to obtain patent protection or otherwise develop
proprietary products or processes, and to secure sufficient capital resources
for the often substantial period between technological conception and commercial
sales. Competitive disadvantages in any of these factors could materially harm
our business and financial condition.
PRODUCT LIABILITY
The testing, manufacturing and marketing of our products involves an
inherent risk of product liability attributable to unwanted and potentially
serious health effects. To the extent we elect to test, manufacture or market
products independently, we will bear the risk of product liability directly. We
have obtained insurance in the amount of $5.0 million against the risk of
product liability. This insurance is subject to certain deductibles and coverage
limitations. There is no guarantee that insurance will continue to be available
at a reasonable cost, or at all, or that the amount of such insurance will be
adequate.
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HUMAN RESOURCES
At December 31, 1999, we had 45 full-time employees, five of whom,
including Dr. Maddon, hold Ph.D. degrees or foreign equivalents and two of whom,
including Dr. Maddon, hold M.D. degrees. At such date, 34 employees were engaged
in research and development, medical and regulatory affairs and manufacturing
activities and 11 were engaged in finance, administration and business
development. We consider our relations with our employees to be good. None of
our employees is covered by a collective bargaining agreement.
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EXECUTIVE OFFICERS AND KEY MANAGEMENT
Our executive officers and key management are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Paul J. Maddon, M.D., Ph.D....................... 40 Chairman of the Board, Chief Executive Officer and
Chief Science Officer
Ronald J. Prentki, M.B.A......................... 42 President and Director
Robert J. Israel, M.D............................ 43 Vice President, Medical Affairs
Robert A. McKinney, CPA.......................... 43 Vice President, Finance & Operations and Treasurer
Kenneth G. Surowitz, Ph.D........................ 41 Vice President, Quality & Regulatory Affairs
William C. Olson, Ph.D........................... 37 Senior Director, Research and Development
Patricia C. Fazio................................ 41 Senior Director, Health & Safety, Special Projects
Thomas A. Boyd, Ph.D............................. 48 Senior Director, Project Management
</TABLE>
Paul J. Maddon, M.D., Ph.D. is our founder and has served in various
capacities since our inception, including Chairman of the Board of Directors,
Chief Executive Officer, President and Chief Science Officer. From 1981 to 1988,
Dr. Maddon performed research at the Howard Hughes Medical Institute at Columbia
University in the laboratory of Dr. Richard Axel. Dr. Maddon serves on two NIH
scientific review committees and is a member of the editorial board of the
Journal of Virology. He received a B.A. in biochemistry and mathematics and a
M.D. and a Ph.D. in biochemistry and molecular biophysics from Columbia
University. Dr. Maddon has been an Adjunct Assistant Professor of Medicine at
Columbia University since 1989.
Ronald J. Prentki, M.B.A. joined us as our President in July 1998 and
became a director in September 1998. Prior to joining Progenics, Mr. Prentki had
been Vice President of Business Development and Strategic Planning at
Hoffmann-La Roche Inc. from 1996 to 1998. Mr. Prentki spent from 1990 to 1996 at
Sterling Winthrop (subsequently acquired by Sanofi Pharmaceuticals), most
recently serving as Vice President of Business Development. From 1985 to 1990
Mr. Prentki was with Bristol-Myers Squibb International Division, initially
supporting the marketing of that company's oncology products and later as
Director of Cardiovascular Products. Mr. Prentki started his career in 1979 in
the Ames Diagnostic Division of Miles Laboratories holding a series of sales,
marketing and product development positions before leaving Miles Laboratories in
1985. Mr. Prentki received a B.S. in Microbiology and Public Health from
Michigan State University and an M.B.A. from the University of Detroit.
Robert J. Israel, M.D. joined us in October 1994 and has been Vice
President, Medical Affairs since that time. From 1991 to 1994, Dr. Israel was
Director, Clinical Research-Oncology and Immunohematology at Sandoz
Pharmaceuticals Corporation. From 1988 to 1991, he was Associate Director,
Oncology Clinical Research at Schering-Plough Corporation. Dr. Israel is a
licensed physician and is board certified in both internal medicine and medical
oncology. He received a B.A. in physics from Rutgers University and a M.D. from
the University of Pennsylvania and completed an oncology fellowship at
Sloan-Kettering. Dr. Israel has been a consultant to the Solid Tumor Service at
Sloan-Kettering since 1987.
Robert A. McKinney, CPA joined us in September 1992. Mr. McKinney
served as Director, Finance and Operations and Treasurer from 1992 to January
1993, when he was appointed Vice President, Finance and Operations and Treasurer
of Progenics. From 1991 to 1992, he was Corporate Controller at VIMRx
Pharmaceuticals, Inc., a biotechnology research company. From 1990 to 1991, Mr.
McKinney was Manager, General Accounting at Micrognosis, Inc., a software
integration company. From 1985 to 1990, he was an audit supervisor at Coopers &
Lybrand LLP, an international accounting firm. Mr. McKinney studied finance at
the
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University of Michigan, received a B.B.A. in accounting from Western
Connecticut State University, and is a Certified Public Accountant.
William C. Olson, Ph.D. joined us in May 1994 and presently serves as
Senior Director, Research and Development. From 1989 to 1992, Dr. Olson served
as a Research Scientist at Johnson & Johnson, and from 1992 until 1994 he was a
Development Scientist at MicroGeneSys, Inc., a biotechnology company. Dr. Olson
received a Ph.D. from the Massachusetts Institute of Technology and a B.S. from
the University of North Dakota. Both degrees were awarded in the field of
chemical engineering.
Kenneth G. Surowitz, Ph.D. joined us in January 1999. Dr. Surowitz
served as Senior Director, Quality & Regulatory Affairs from January 1999 to
January 2000, when he was appointed Vice President, Quality & Regulatory Affairs
of Progenics. From 1988 to 1999, Dr. Surowitz was employed at the Wyeth-Lederle
Vaccines and Pediatrics unit of American Home Products Corp. in a number of
position within the organization, most recently as Director of Global Regulatory
Affairs. From 1985 to 1988, he was employed as a Product Development
Microbiologist at Procter and Gamble. Dr. Surowitz received Ph.D. and M.S.
degrees from Ohio State University in the field of microbiology and an A.B.
degree from Lafayette College in biology.
Patricia C. Fazio joined us in August 1992. Ms. Fazio has served in
various management positions at Progenics, most recently as Senior Director,
Health & Safety, Special Projects. From 1987 to 1992, she was Senior Research
Technician and Laboratory Manager at the Howard Hughes Medical Institute at
Columbia University. From 1982 to 1987, Ms. Fazio was Chief Laboratory
Technologist in the Department of Pathology at Columbia Presbyterian Medical
Center. She received a B.S. in biology and chemistry at the College of New
Rochelle.
Thomas A. Boyd, Ph.D. joined us in January 2000 and presently serves as
Senior Director, Project Management. From 1996 until 2000, Dr. Boyd served as
Associate Director of R&D Project Management at Boehringer Ingelheim
Pharmaceuticals. From 1986 to 1996, he was Director of Project Management at
Alteon, Inc., a biotechnology company. From 1985 to 1989, Dr. Boyd served as
Director, Project Coordination at Wyeth-Ayerst. He also held a similar position
at Revlon Health Care Group from 1981 to 1985. Dr. Boyd received his Ph.D. from
Brown University in biology and an A.B. from Cornell University in biological
sciences.
SCIENTIFIC ADVISORY BOARDS AND CONSULTANTS
An important component of our scientific strategy is our collaborative
relationship with leading researchers in cancer and virology. Certain of these
researchers are members of our two Scientific Advisory Boards, one in cancer and
one in virology. The members of each SAB attend periodic meetings and provide us
with specific expertise in both research and clinical development. In addition,
we have collaborative research relationships with certain individual SAB
members. All members of the SABs are employed by employers other than us and may
have commitments to or consulting or advisory agreements with other entities
that may limit their availability to us. These companies may also compete with
us. Several members of the SABs have, from time to time, devoted significant
time and energy to our affairs. However, no member is regularly expected to
devote more than a small portion of time to Progenics. In general, our
scientific advisors are granted stock options in Progenics and receive financial
remuneration for their services.
The following table sets forth information with respect to our Scientific
Advisory Boards.
<TABLE>
<CAPTION>
Cancer Scientific Advisory Board
Name Position/Affiliation
---- --------------------
<S> <C>
Alan N. Houghton, M.D. (Chairman)................ Chairman, Immunology Program, Sloan-Kettering and Professor,
Cornell University Medical College ("CUMC")
Angus G. Dalgleish, M.D., Ph.D................... Chairman and Professor of Medical Oncology, St. George's
Hospital, London
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name Position/Affiliation
---- --------------------
<S> <C>
Samuel J. Danishefsky, Ph.D...................... Kettering Professor and Head, Bioorganic Chemistry,
Sloan-Kettering Institute and Professor of Chemistry,
Columbia University
David R. Klatzmann, M.D., Ph.D................... Professor of Immunology, Pitie-Salpetriere Hospital, Paris
Philip O. Livingston, M.D........................ Member, Sloan-Kettering and Professor, CUMC
John Mendelsohn, M.D............................. President, The University of Texas M. D. Anderson Cancer
Center
David A. Scheinberg, M.D., Ph.D.................. Chief, Leukemia Service, Sloan-Kettering and Professor, CUMC
David B. Agus, M.D............................... Research Director, Prostate Cancer Institute, Cedars-Sinai
Medical Center
Virology Scientific Advisory Board
Name Position/Affiliation
---- --------------------
Stephen P. Goff, Ph.D. (Chairman)................ Professor of Biochemistry, Columbia University
Mark Alizon, M.D., Ph.D.......................... Director of Research, Institute Cochin, Paris
Lawrence A. Chasin, Ph.D......................... Professor of Biological Sciences, Columbia University
Leonard Chess, M.D............................... Professor of Medicine, Columbia University
Wayne A. Hendrickson, Ph.D....................... Professor of Biochemistry, Columbia University
Israel Lowy, M.D., Ph.D.......................... Assistant Professor of Medicine, Mount Sinai Medical Center
J. Steven McDougal, M.D.......................... Chief, Immunology Branch, CDC, Atlanta
Sherie L. Morrison, Ph.D......................... Professor of Microbiology, UCLA
Robin A. Weiss, Ph.D............................. Professor and Director of Research, ICR, Royal Cancer
Hospital, London
Other Scientific Consultants
David W. Golde, M.D.............................. Physician-in-Chief, Sloan-Kettering and Professor, CUMC
</TABLE>
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<PAGE>
RISK FACTORS
Our business and operations entail a variety of risks and
uncertainties, including those described below.
IF WE CANNOT ADVANCE OUR PRODUCTS BEYOND THE EARLY STAGES OF PRODUCT DEVELOPMENT
OR DEMONSTRATE CLINICAL EFFICACY, WE WILL NEVER COMMERCIALIZE A PRODUCT.
Most of our products are at an early stage of development. The
successful commercialization of our products will require significant further
research, development, testing and regulatory approvals and additional
investment. If we cannot advance our products beyond the early stages of product
development or demonstrate clinical efficacy, we will never commercialize a
product. There are a number of technological challenges that we must
successfully address to complete most of our development efforts. We cannot
assure you that any of our products in the research or preclinical development
stage will yield results that would permit or justify clinical testing or that
products that advance to clinical testing will be commercialized.
OUR PRODUCT DEVELOPMENT PROGRAMS ARE NOVEL AND, CONSEQUENTLY, INHERENTLY RISKY.
We are subject to the risks of failure inherent in the development of
product candidates based on new technologies. These risks include the
possibility that:
o the technologies we use will not be effective;
o our product candidates will be unsafe or otherwise fail to receive
the necessary regulatory approvals;
o our product candidates will be hard to manufacture on a large scale
or will be uneconomical to market; or
o we do not successfully overcome technological challenges presented
by our products.
To our knowledge, no cancer therapeutic vaccine and no drug designed to
treat HIV infection by blocking viral entry has been approved for marketing. Our
other research and development programs involve similarly novel approaches to
human therapeutics. Consequently, there is no precedent for the successful
commercialization of products based on our technologies. We cannot assure you
that any of our products will be successfully developed.
A SETBACK IN OUR GMK PROGRAM WOULD CAUSE A SHARP DROP IN OUR STOCK PRICE.
We have an ongoing Phase III clinical trial for GMK and expect that a
second Phase III clinical trial will commence in 2000. Both of these trials are
designed to be pivotal, which means that they are designed to produce results
sufficient to support regulatory approval. If the results of these trials are
not satisfactory, we would need to conduct additional clinical trials or abandon
our GMK program. Since GMK is our most advanced product, a setback of this
nature would almost certainly cause a sharp drop in our stock price. Moreover,
failure of our GMK program could reflect adversely on our MGV program.
Although we have completed patient enrollment in our first pivotal
Phase III clinical trial involving GMK, a considerable amount of time will
elapse before we know the results of this trial. This time is required to
conduct patient follow-up and then to analyze the data. We cannot predict how
long this will take, although we do not expect to know the results much before
the second half of 2000, and it is just as likely that we will not know the
results before 2001 or later.
OUR CLINICAL TRIALS COULD TAKE LONGER TO COMPLETE THAN WE EXPECT.
Although for planning purposes we forecast the commencement and
completion of clinical trials, and have included some of those forecasts herein,
the actual timing of these events can vary dramatically due to factors such as
delays, scheduling conflicts with participating clinicians and clinical
institutions and the rate of patient accruals. Our most advanced product
candidates are intended for treating patients with relatively early stage cancer
and are designed to delay or prevent the recurrence of disease. As a
consequence, clinical trials involving these product
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<PAGE>
candidates are likely to take longer to complete than clinical trials involving
other types of therapeutics. We cannot assure you that clinical trials involving
our product candidates will commence or be completed as forecasted.
We have limited experience in conducting clinical trials. In certain
circumstances we rely on corporate collaborators, academic institutions or
clinical research organizations to conduct, supervise or monitor some or all
aspects of clinical trials involving our products. In addition, certain clinical
trials for our products will be conducted by government-sponsored agencies and
consequently will be dependent on governmental participation and funding. We
will have less control over the timing and other aspects of these clinical
trials than if we conducted them entirely on our own. We cannot assure you that
these trials will commence or be completed as we expect or that they will be
conducted successfully. Failure to commence or complete, or delays in, any of
our planned clinical trials could shake investors' confidence in our ability to
develop products, which would likely cause our stock price to decrease.
IF TESTING DOES NOT YIELD SUCCESSFUL RESULTS, OUR PRODUCTS WILL FAIL.
If preclinical and clinical testing of one or more of our products does
not yield successful results, those products will fail. To achieve the results
we need, we or our collaborators must demonstrate a product's safety and
efficacy in humans through extensive preclinical and clinical testing. Numerous
unforeseen events may arise during, or as a result of, the testing process,
including the following:
o the results of preclinical studies may be inconclusive, or they may
not be indicative of results that will be obtained in human clinical
trials;
o potential products may not have the desired effect or may have
undesirable side effects or other characteristics that preclude
regulatory approval or limit their commercial use if approved;
o results attained in early human clinical trials may not be
indicative of results that are obtained in later clinical trials;
o after reviewing test results, we or our collaborators may abandon
projects which we might previously have believed to be promising,
some of which may be described in this prospectus; and
o we, our collaborators or regulators may suspend or terminate
clinical trials if the participating subjects or patients are being
exposed to unacceptable health risks.
Clinical testing is very expensive and can take many years. The failure
to adequately demonstrate the safety and efficacy of a therapeutic product under
development would delay or prevent regulatory approval of the product, which
could adversely affect our profitability and credibility.
EVEN IF WE GET OUR PRODUCTS APPROVED, THEY MIGHT NOT BE ACCEPTED IN THE
MARKETPLACE.
The commercial success of our products will depend upon their
acceptance by the medical community and third party payors as clinically useful,
cost effective and safe. Even if our products obtain regulatory approval, we
cannot assure you that they will achieve market acceptance of any significance.
If any of our products do not achieve market acceptance, we will likely lose our
entire investment in that product.
MARKETPLACE ACCEPTANCE WILL DEPEND IN PART ON COMPETITION IN OUR INDUSTRY, WHICH
IS INTENSE.
The extent to which any of our products achieve market acceptance will
depend on competitive factors. Competition in our industry is intense, and it is
accentuated by the rapid pace of technological development. Products currently
exist in the market that will compete with the products that we are developing.
Many of our competitors have substantially greater research and development
capabilities and experience and greater manufacturing, marketing, financial and
managerial resources than do we. These competitors may develop products that are
superior to those we are developing and render our products or technologies
non-competitive or obsolete. If our product candidates receive marketing
approval but cannot compete effectively in the marketplace, our profitability
and financial position would suffer.
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<PAGE>
IF WE LOSE OUR COLLABORATIVE PARTNERS, OR IF THEY DO NOT APPLY ADEQUATE
RESOURCES TO OUR COLLABORATIONS, OUR PRODUCT DEVELOPMENT AND PROFITABILITY MAY
SUFFER. IN PARTICULAR, ADVERSE DEVELOPMENTS IN OUR RELATIONSHIP WITH
BRISTOL-MYERS SQUIBB COMPANY CAN HAVE A SIGNIFICANT AND ADVERSE EFFECT ON US AND
OUR STOCK PRICE.
Our business strategy includes entering into collaborations with
corporate partners, primarily pharmaceutical companies, for one or more of the
research, development, manufacturing, marketing and other commercialization
activities relating to certain of our product candidates. If we lose our
collaborative partners, or if they do not apply adequate resources to our
collaborations, our product development and profitability may suffer.
We have entered into a significant corporate collaboration with
Bristol-Myers Squibb Company covering our most advanced product candidates, GMK
and MGV. Adverse developments in our relationship with BMS can have a
significant and adverse effect on us and our stock price. Pursuant to our
agreements with BMS, we have granted to them the exclusive worldwide license to
manufacture, use and sell GMK and MGV and any other products to which we have
rights that include the GM2 or GD2 ganglioside antigens for the treatment or
prevention of human cancer. As a result of the governing agreements, we are
dependent on BMS to fund testing, to make certain regulatory filings and to
manufacture and market existing and any future products resulting from this
collaboration.
We have also entered into a collaboration with the Roche Group of
Basel, Switzerland pursuant to which we granted Roche an exclusive worldwide
license to certain applications of our HIV co-receptor technology. This
collaboration is subject to the same risks, to the extent of the product
development program it covers, as our collaboration with BMS. We have also
entered into collaborations with other partners.
The amount and timing of resources dedicated by BMS or our other
collaborators to their collaborations with us is not within our control. If any
collaborator breaches or terminates its agreements with us, or fails to conduct
its collaborative activities in a timely manner, the commercialization of our
product candidates could be slowed down or blocked completely. We cannot assure
you that BMS or our other collaborative partners will not change their strategic
focus or pursue alternative technologies or develop alternative products, either
on their own or in collaboration with others, as a means for developing
treatments for the diseases targeted by these collaborative programs. For
example, both BMS and Roche market products that may compete against products
being developed in their collaborations with us. Our revenues and earnings also
will be affected by the effectiveness of our corporate partners in marketing any
successfully developed products.
We cannot assure you that our collaborations with BMS or others will
continue or be successful or that we will receive any further research funding
or milestone or royalty payments. If our partners do not develop products under
these collaborations, we cannot assure you that we would be able to do so on our
own. Disputes may arise between us and BMS or our other collaborators as to a
variety of matters, including financial or other obligations under our
contracts, the most promising scientific or regulatory route to pursue or
ownership of intellectual property rights. These disputes may be both expensive
and time-consuming and may result in delays in the development and
commercialization of product candidates.
WE MAY NOT BE ABLE TO NEGOTIATE ADDITIONAL COLLABORATIVE AGREEMENTS, WHICH COULD
REDUCE OUR RATE OF PRODUCT DEVELOPMENT.
We intend to continue to enter into new collaborative agreements in the
future. However, we cannot assure you that we will negotiate any additional
collaborative arrangements or that any of these relationships, if established,
will be scientifically or commercially successful. Any additional collaborations
would likely subject us to some or all of the risks described above with respect
to our current collaborations.
WE HAVE A HISTORY OF OPERATING LOSSES, AND WE MAY NEVER BE PROFITABLE.
We have a history of operating losses, and we may never be profitable.
We have incurred substantial losses since our inception. As of December 31,
1999, we had an accumulated deficit of approximately $17.7 million. These losses
have resulted principally from costs incurred in our research and development
programs and from our general and administrative costs. We have derived no
significant revenues from product sales or royalties, and we
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<PAGE>
do not expect to achieve significant product sales or royalty revenue for a
number of years, if ever. We may incur additional operating losses in the
future, which could increase significantly as we expand development and clinical
trial efforts.
Our ability to achieve long-term profitability is dependent in part on
obtaining regulatory approvals for products and entering into agreements for
commercialization of our products. However, we cannot assure you that our
operations will be profitable even if any of our products under development is
commercialized.
WE ARE LIKELY TO NEED ADDITIONAL FINANCING, BUT OUR ACCESS TO CAPITAL FUNDING IS
UNCERTAIN.
Our current and anticipated development projects require substantial
capital. We are likely to need substantial additional funds to conduct research
activities, preclinical studies, clinical trials and other activities relating
to the successful commercialization of potential products. However, our access
to capital funding is uncertain. We do not have committed external sources of
funding for most of our drug discovery and development projects, and we cannot
assure you that we will be able to obtain additional funds on acceptable terms,
if at all. If adequate funds are not available, we may be required to:
o delay, reduce the scope of or eliminate one or more of our programs;
o obtain funds through arrangements with collaborative partners or
others that may require us to relinquish rights to technologies,
product candidates or products that we would otherwise seek to
develop or commercialize ourselves; or
o license rights to technologies, product candidates or products on
terms that are less favorable to us than might otherwise be
available.
If we raise additional funds by issuing equity securities, further
dilution to stockholders may result, and new investors could have rights
superior to existing stockholders.
WE HAVE LIMITED MANUFACTURING CAPABILITIES, WHICH COULD ADVERSELY IMPACT OUR
ABILITY TO COMMERCIALIZE PRODUCTS.
We have limited manufacturing capabilities, which may result in
increased costs of production or delay product development or commercialization.
In order to commercialize our product candidates successfully, we or our
collaborators must be able to manufacture products in commercial quantities, in
compliance with regulatory requirements, at acceptable costs and in a timely
manner. The manufacture of our product candidates can be complex, difficult to
accomplish even in small quantities, difficult to scale-up when large scale
production is required and subject to delays, inefficiencies and poor or low
yields of quality products. The cost of manufacturing certain of our products
may make them prohibitively expensive. The contamination or loss of a supply of
our product candidates, adjuvants or related materials could seriously delay
clinical trials, since these materials are time-consuming to manufacture and
cannot be readily obtained from third-party sources. We have constructed two
pilot-scale manufacturing facilities, one for the production of vaccines and one
for the production of recombinant proteins, which we believe will be sufficient
to meet our initial needs for clinical trials. However, these facilities may be
insufficient for late-stage clinical trials and would be insufficient for
commercial-scale manufacturing requirements. We may be required to expand
further our manufacturing staff and facilities, obtain new facilities or
contract with corporate collaborators or other third parties to assist with
production.
In the event that we decide to establish a commercial-scale
manufacturing facility, we will require substantial additional funds and will be
required to hire and train significant numbers of employees and comply with
applicable regulations, which are extensive. We cannot assure you that we will
be able to develop a manufacturing facility that both meets regulatory
requirements and is sufficient for all clinical trials or commercial-scale
manufacturing.
We have entered into arrangements with third parties for the
manufacture of certain of our products. We cannot assure you that this strategy
will result in a cost-effective means for manufacturing products. In employing
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<PAGE>
third-party manufacturers, we will not control many aspects of the manufacturing
process. We cannot assure you that we will be able to obtain adequate supplies
from third-party manufacturers in a timely fashion for development or
commercialization purposes or that commercial quantities of products will be
available from contract manufacturers at acceptable costs.
WE ARE SUBJECT TO EXTENSIVE REGULATION, WHICH CAN BE COSTLY, TIME CONSUMING AND
SUBJECT US TO UNANTICIPATED DELAYS.
We and our products are subject to comprehensive regulation by the Food
and Drug Administration in the United States and by comparable authorities in
other countries. These national agencies and other federal, state and local
entities regulate, among other things, the preclinical and clinical testing,
safety, effectiveness, approval, manufacture, labeling, marketing, export,
storage, record keeping, advertising and promotion of pharmaceutical products.
Violations of regulatory requirements at any stage, whether before or after
marketing approval is obtained, may result in fines, forced removal of a product
from the market and other adverse consequences.
WE DO NOT YET HAVE, AND MAY NEVER OBTAIN, THE REGULATORY APPROVALS WE NEED TO
SUCCESSFULLY MARKET OUR PRODUCTS.
Our products have not yet been approved by applicable regulatory
authorities for commercialization. The process of obtaining FDA and other
required regulatory approvals, including foreign approvals, often takes many
years and can vary substantially based upon the type, complexity and novelty of
the products involved. We have had only limited experience in filing and
pursuing applications necessary to gain regulatory approvals. We cannot
guarantee that any of our products under development will be approved for
marketing by the FDA. Even if regulatory approval of a product is granted, we
cannot be certain that we will be able to obtain the labeling claims necessary
or desirable for the promotion of such products. Even if we obtain regulatory
approval, we may be required to undertake post-marketing trials to verify a
product's efficacy or safety. In addition, identification of side effects after
a drug is on the market or the occurrence of manufacturing problems could result
in subsequent withdrawal of approval, reformulation of the drug, additional
preclinical testing or clinical trials, changes in labeling of the product, and
additional marketing applications. If we receive regulatory approval, we will
also be subject to ongoing FDA obligations and continued regulatory review.
Delays in receipt of or failure to receive regulatory approvals, or the loss of
previously received approvals, would delay or prevent product commercialization,
which would adversely affect our financial results.
WE ARE DEPENDENT ON OUR PATENTS AND PROPRIETARY RIGHTS. THE VALIDITY,
ENFORCEABILITY AND COMMERCIAL VALUE OF THESE RIGHTS ARE HIGHLY UNCERTAIN.
Our success is dependent in part on obtaining, maintaining and
enforcing patent and other proprietary rights. The patent position of
biotechnology and pharmaceutical firms is highly uncertain and involves many
complex legal and technical issues. There is no clear policy involving the
breadth of claims allowed in such cases, or the degree of protection afforded
under such patents. Accordingly, we cannot assure you that patent applications
owned by or licensed to us will result in patents being issued or that, if
issued, the patents will give us an advantage over competitors with similar
technology.
We own or have licenses to certain issued patents. However, the
issuance of a patent is not conclusive as to its validity or enforceability. The
validity or enforceability of a patent after its issuance by the patent office
can be challenged in litigation. We cannot assure you that our patents will not
be successfully challenged. Moreover, the cost of litigation to uphold the
validity of patents and to prevent infringement can be substantial. If the
outcome of litigation is adverse to us, third parties may be able to use our
patented invention without payment to us. Moreover, we cannot assure you that
our patents will not be infringed or successfully avoided through design
innovation.
There may be patent rights belonging to others that require us to alter
our products, pay licensing fees or cease certain activities. If our products
conflict with patent rights of others, they could bring legal actions against us
claiming damages and seeking to enjoin manufacturing and marketing of the
affected products. If these legal actions are successful, in addition to any
potential liability for damages, we could be required to obtain a license in
order to continue to manufacture or market the affected products. We cannot
assure you that we would prevail in any such action or that any license required
under any such patent would be made available on acceptable terms or at all. For
example, we have filed a number of U.S. and foreign patent applications, one of
which is owned jointly
27
<PAGE>
with the Aaron Diamond AIDS Research Center, relating to the discovery of the
HIV co-receptor CCR5. We are aware that other groups have claimed discoveries
similar to those covered by our patent applications. We do not expect to know
for several years the relative strength of our patent position as compared to
these other groups.
The research, development and commercialization of a biopharmaceutical
often involves alternative development and optimization routes, which are
presented at various stages in the development process. The preferred routes
cannot be predicted at the outset of a research and development program because
they will depend on subsequent discoveries and test results. There are numerous
third-party patents in our field, and it is possible that to pursue the
preferred development route of one or more of our products we will need to
obtain a license to a patent, which would decrease the ultimate profitability of
the applicable product. If we cannot negotiate a license, we might have to
pursue a less desirable development route or terminate the program altogether.
We are required to make substantial cash payments and achieve certain
milestones and satisfy certain conditions, including filing investigational new
drug applications, obtaining product approvals and introducing products, to
maintain our rights under our licenses, including our licenses from Memorial
Sloan-Kettering Cancer Center and Columbia University. We cannot assure you that
we will be able to maintain our rights under these licenses. Termination of any
of these licenses could result in our being unable to commercialize any related
product.
In addition to the intellectual property rights described above, we
also rely on unpatented technology, trade secrets and confidential information.
We cannot assure you that others will not independently develop substantially
equivalent information and techniques or otherwise gain access to our technology
or disclose such technology, or that we can effectively protect our rights in
unpatented technology, trade secrets and confidential information. We require
each of our employees, consultants and advisors to execute a confidentiality
agreement at the commencement of an employment or consulting relationship with
us. We cannot assure you, however, that these agreements will provide effective
protection in the event of unauthorized use or disclosure of this confidential
information.
WE ARE DEPENDENT ON THIRD PARTIES FOR A VARIETY OF FUNCTIONS; WE CANNOT ASSURE
YOU THAT THESE ARRANGEMENTS WILL PROVIDE US WITH THE BENEFITS WE EXPECT.
In addition to our reliance on corporate collaborators, we rely in part
on third parties to perform a variety of functions, including research and
development, manufacturing, clinical trials management and regulatory affairs.
As of December 31, 1999, we had only 45 full-time employees. We are party to
several agreements which place substantial responsibility on third parties for
clinical development of our products. We also in-license technology from medical
and academic institutions in order to minimize investments in early research,
and we enter into collaborative arrangements with certain of these entities with
respect to clinical trials of product candidates. We cannot assure you that we
will be able to maintain any of these relationships or establish new ones on
beneficial terms, that we can enter into these arrangements without undue delays
or expenditures or that these arrangements will allow us to compete
successfully.
WE LACK SALES AND MARKETING EXPERIENCE, WHICH MAKES US DEPENDENT ON THIRD
PARTIES FOR THEIR EXPERTISE IN THIS AREA.
Assuming receipt of required regulatory approvals, we expect to market
and sell our products principally through distribution, co-marketing,
co-promotion or licensing arrangements with third parties. Our agreements with
Bristol-Myers Squibb Company, the Roche Group and CYTOGEN Corporation grant
these collaborators exclusive marketing rights with respect to products
resulting from their respective collaborations with us. We have no experience in
sales, marketing or distribution. To the extent that we enter into distribution,
co-marketing, co-promotion or licensing arrangements for the marketing and sale
of our products, any revenues we receive will depend primarily on the efforts of
these third parties. We will not control the amount and timing of marketing
resources such third parties devote to our products. In addition, if we market
products directly, significant additional expenditures and management resources
would be required to develop an internal sales force. We cannot assure you that
we would be able to establish a successful sales force should we choose to do
so.
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<PAGE>
IF WE LOSE KEY MANAGEMENT AND SCIENTIFIC PERSONNEL ON WHOM WE DEPEND, OUR
BUSINESS COULD SUFFER.
We are dependent upon our key management and scientific personnel. In
particular, the loss of Dr. Maddon, our Chief Executive Officer and Chief
Science Officer, or Mr. Prentki, our President, could cause our management and
operations to suffer unless a qualified replacement could be found. We maintain
key man life insurance on Dr. Maddon in the amount of $2.5 million. We have an
employment agreement with Dr. Maddon that expires in December 2001 and one with
Mr. Prentki that expires in March 2001.
Competition for qualified employees among companies in the
biopharmaceutical industry is intense. Our future success depends upon our
ability to attract, retain and motivate highly skilled employees. In order to
commercialize our products successfully, we may be required to expand
substantially our personnel, particularly in the areas of manufacturing,
clinical trials management, regulatory affairs, business development and
marketing. We cannot assure you that we will be successful in hiring or
retaining qualified personnel.
IF SUFFICIENT QUANTITIES OF THE RAW MATERIALS NEEDED TO MAKE OUR PRODUCTS ARE
NOT AVAILABLE, PRODUCT DEVELOPMENT AND COMMERCIALIZATION COULD BE SLOWED OR
STOPPED.
We cannot assure you that sufficient quantities of the raw materials
needed to make our products will be available to support continued research,
development or commercial manufacture of our products. We currently obtain
supplies of critical raw materials used in production of GMK and MGV from single
sources. In particular, commercialization of GMK and MGV requires an adjuvant,
QS-21, available only from Aquila Biopharmaceuticals Inc. We have entered into a
license and supply agreement with Aquila pursuant to which Aquila agreed to
supply us with all of our QS-21 requirements for use in certain
ganglioside-based cancer vaccines, including GMK and MGV. In connection with our
collaboration with Bristol-Myers Squibb Company, we granted to BMS a
non-exclusive sublicense under our license and supply agreement with Aquila, and
BMS entered into a supply agreement with Aquila. We cannot assure you that
Aquila will be able to supply sufficient quantities of QS-21 or that we or BMS
will have the right or capability to manufacture sufficient quantities of QS-21
to meet our needs if Aquila is unable or unwilling to do so. We cannot assure
you that we will not be subject to delays or disruption in the supply of this
component. Any delay or disruption in the availability of raw materials could
slow or stop product development and commercialization of the relevant product.
A SUBSTANTIAL PORTION OF OUR FUNDING COMES FROM FEDERAL GOVERNMENT GRANTS; WE
CANNOT RELY ON THESE GRANTS AS A CONTINUING SOURCE OF FUNDS.
A substantial portion of our revenues to date has been derived from
federal research grants. We cannot rely on these grants as a continuing source
of funds. The government's obligation to make payments under these grants is
subject to appropriation by the United States Congress for funding in each year.
Moreover, it is possible that Congress or the government agencies that
administer these government research programs will decide to scale back these
programs or terminate them. Consequently, we cannot assure you that we will be
awarded research grants in the future or that any amounts derived from them will
not be less than those received to date.
WE ARE SUBJECT TO THE UNCERTAINTY RELATED TO HEALTH CARE REFORM MEASURES AND
REIMBURSEMENT POLICIES.
In recent years, there have been numerous proposals to change the
health care system in the United States. Some of these proposals have included
measures that would limit or eliminate payments for medical procedures and
treatments or subject the pricing of pharmaceuticals to government control. In
addition, as a result of the trend towards managed health care in the United
States, as well as legislative proposals to reduce government insurance
programs, third-party payors are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement of new drug
products. Consequently, significant uncertainty exists as to the reimbursement
status of newly-approved health care products. If we or any of our collaborators
succeeds in bringing one or more of our products to market, we cannot assure you
that third-party payors will establish and maintain price levels sufficient for
realization of an appropriate return on our investment in product development.
Significant changes in the health care system in the United States or elsewhere,
including changes resulting from adverse trends in third-party reimbursement
programs, could have a material adverse effect on our profitability. Such
changes also could have a material adverse effect on our ability to raise
capital. Furthermore, our ability to commercialize products may be adversely
affected to the extent that these proposals affect our collaborators.
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<PAGE>
WE ARE EXPOSED TO PRODUCT LIABILITY CLAIMS, AND IT IS UNCERTAIN THAT IN THE
FUTURE INSURANCE AGAINST THESE CLAIMS WILL BE AVAILABLE TO US AT A REASONABLE
RATE.
Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical
products. We cannot assure you that we will be able to avoid product liability
exposure. Product liability insurance for the biopharmaceutical industry is
generally expensive, when available at all. We have obtained product liability
insurance coverage in the amount of $5.0 million per occurrence, subject to a
$5.0 million aggregate limitation. However, we cannot assure you that our
present insurance coverage is now or will continue to be adequate. In addition,
some of our license and collaborative agreements require us to obtain product
liability insurance. It is possible that future license and collaborative
agreements may also include such a requirement. We cannot assure you that
adequate insurance coverage will be available to us at a reasonable cost in the
future or that a product liability claim or recall would not have a material
adverse effect on our financial position.
WE DEAL WITH HAZARDOUS MATERIALS AND MUST COMPLY WITH ENVIRONMENTAL LAWS AND
REGULATIONS, WHICH CAN BE EXPENSIVE AND RESTRICT HOW WE DO BUSINESS. WE COULD
ALSO BE LIABLE FOR DAMAGES, PENALTIES OR OTHER FORMS OF CENSURE IF WE ARE
INVOLVED IN A HAZARDOUS WASTE SPILL OR OTHER ACCIDENT.
Our research and development work and manufacturing processes involve
the use of hazardous, controlled and radioactive materials. We are subject to
federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of these materials. Despite precautionary
procedures that we implement for handling and disposing of these materials, the
risk of accidental contamination or injury cannot be eliminated. In the event of
a hazardous waste spill or other accident, we could also be liable for damages,
penalties or other forms of censure. Although we believe that we are in
compliance in all material respects with applicable environmental laws and
regulations, we cannot assure you that we will not be required to incur
significant costs to comply with environmental laws and regulations in the
future or that we will not be materially and adversely affected by current or
future environmental laws or regulations.
OUR STOCK PRICE HAS A HISTORY OF VOLATILITY. YOU SHOULD CONSIDER AN INVESTMENT
IN OUR STOCK AS RISKY AND INVEST ONLY IF YOU CAN WITHSTAND A SIGNIFICANT LOSS.
Our stock price has a history of significant volatility. This
volatility has existed even in the absence of significant news or developments
relating to Progenics. Moreover, the stocks of biotechnology companies and the
stock market generally have been subject to dramatic price swings in recent
years. Factors that may have a significant impact on the market price of our
common stock include:
o the results of preclinical studies and clinical trials by us, our
collaborators or our competitors;
o announcements of technological innovations or new commercial
products by us, our collaborators or our competitors;
o developments in our relationships with collaborative partners,
especially Bristol-Myers Squibb Company;
o developments in patent or other proprietary rights;
o governmental regulation;
o changes in reimbursement policies;
o health care legislation;
o public concern as to the safety and efficacy of products developed
by us, our collaborators or our competitors;
o fluctuations in our operating results; and
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<PAGE>
o a general market conditions.
In addition, the market prices of equity securities generally have experienced
significant volatility in the recent past, with the stock of small
capitalization companies, like us, experiencing the greatest volatility. These
price swings, both as to our stock and as to our industry and the stock market
generally, are apt to continue. Moreover, the experiences of other companies
would lead us to expect a severe decline in our stock price if we experience an
adverse development in our business. As described above, our business plan is
risky, and so there is a very real possibility that we will not succeed in
achieving our goals.
ANTI-TAKEOVER PROVISIONS MAY DISCOURAGE HOSTILE BIDS FOR CONTROL OF OUR COMPANY
THAT MAY BE BENEFICIAL TO OUR STOCKHOLDERS.
Certain of our stockholders, including Dr. Maddon and stockholders
affiliated with Tudor Investment Corporation, beneficially own or control a
substantial portion of our outstanding shares of common stock and therefore may
have the ability, acting together, to elect all of our directors, to determine
the outcome of corporate actions requiring stockholder approval and otherwise
control our business. This control could have the effect of delaying or
preventing a change in control of our company and, consequently, could adversely
affect the market price of our common stock. In addition, our Board of Directors
is authorized, without further stockholder action, to issue from time to time
shares of preferred stock in one or more designated series or classes. The
issuance of preferred stock, as well as provisions in certain of our stock
options which provide for acceleration of exercisability upon a change of
control, and Section 203 and other provisions of the Delaware General
Corporation Law, could make the takeover of Progenics or the removal of our
board of directors or management more difficult, discourage hostile bids for
control of Progenics in which stockholders may receive a premium for their
shares of common stock or otherwise dilute the rights of holders of common stock
and depress the market price of our common stock.
SALES OF COMMON STOCK MAY HAVE AN ADVERSE IMPACT ON THE MARKET PRICE OF OUR
COMMON STOCK.
A substantial number of outstanding shares of common stock and shares
of common stock issuable upon exercise of outstanding options and warrants are
eligible for sale in the public market. Sales of substantial numbers of shares
of common stock could adversely affect prevailing market prices. Some of our
stockholders are entitled to require us to register their shares of common stock
for offer or sale to the public. We have filed a Form S-8 registration statement
registering shares issuable pursuant to our stock option plans. Any sales by
existing stockholders or holders of options or warrants may have an adverse
effect on our ability to raise capital and may adversely affect the market price
of the common stock.
ITEM 2. PROPERTIES
We sublease approximately 24,000 square feet of laboratory,
manufacturing and office space in Tarrytown, New York. We sublease this space
pursuant to a sublease which terminates in December 2000. We have pilot
production facilities within these leased facilities for the manufacture of
products for clinical trials. We believe that these facilities are adequate for
our current needs, although we may in the future need to expand our facilities
for additional research and development and manufacturing capacity.
ITEM 3. LITIGATION
We are not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders during the fourth
quarter of 1999.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
Our Common Stock is quoted on the Nasdaq National Market under the
symbol "PGNX." Shares of our Common Stock were first offered to the public on
November 19, 1997. The following table sets forth, for the periods indicated,
the high and low sales price per share of the Common Stock, as reported on the
Nasdaq National Market. Such prices reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1998:
First quarter..................................... $ 22 5/8 $ 13
Second quarter.................................... 22 13
Third quarter..................................... 15 3/4 8 1/2
Fourth quarter.................................... 16 1/2 9
1999:
First quarter..................................... 16 3/4 10 5/8
Second quarter.................................... 15 1/4 11 3/8
Third quarter..................................... 31 3/8 12 1/2
Fourth quarter.................................... 59 3/4 15 1/2
</TABLE>
On March 28, 2000, the last sale price for the Common Stock as reported by
Nasdaq was $67.50. There were approximately 157 holders of record of the
Company's Common Stock as of March 28, 2000.
DIVIDENDS
We have not paid any dividends since our inception and presently
anticipate that all earnings, if any, will be retained for development of our
business and that no dividends on our common stock will be declared in the
foreseeable future.
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ITEM 6.
SELECTED FINANCIAL DATA
The selected financial data presented below as of December 31, 1998 and
1999 and for each of the years in the three year period ended December 31, 1999
are derived from the Company's audited financial statements, included elsewhere
herein. The selected financial data presented below with respect to the balance
sheet data as of December 31, 1995, 1996 and 1997 and for each of the years in
the two-year period ended December 31, 1996 are derived from the Company's
audited financial statements not included herein. The data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements and
related Notes included elsewhere herein.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Contract research and development ................ $ 200 $ 318 $14,591 $11,135 $14,867
Research grants .................................. 525 203 665 1,251 1,106
Product sales .................................... 50 98 57 180 40
Interest income .................................. 46 106 301 1,455 1,440
------- ------- ------- ------- -------
Total revenues ................................. 821 725 15,614 14,021 17,453
------- ------- ------- ------- -------
EXPENSES:
Research and development ......................... 3,852 3,700 7,364 8,296 11,227
General and administrative ....................... 1,094 2,808 2,222 3,841 3,866
Loss in Joint Venture ............................ 2,047
Interest expense ................................. 87 51 312 43 112
Depreciation and amortization .................... 291 309 319 388 697
------- ------- ------- ------- -------
Total expenses ................................. 5,324 6,868 10,217 12,568 17,949
------- ------- ------- ------- -------
Operating (loss) income ........................ (4,503) (6,143) 5,397 1,453 (496)
Income taxes ..................................... 258
Net (loss) income .............................. $(4,503) $(6,143) $ 5,139 $ 1,453 $ (496)
======= ======= ======= ======= =======
Per share amounts on net (loss) income (1):
Basic ............................................ $ (1.99) $ (2.68) $ 1.64 $ 0.16 $ (0.05)
======= ======= ======= ======= =======
Diluted .......................................... $ (1.99) $ (2.68) $ 0.66 $ 0.14 $ (0.05)
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities ...$ 559 $ 647 $23,624 $24,650 $67,617
Working capital .................................... 19 (1,109) 20,562 25,137 53,053
Total assets ..................................... 1,736 1,663 24,543 27,900 71,261
Capital lease obligations and deferred lease
liability, long-term portion ....................... 213 156 141 117 37
Total stockholders' equity (deficit) ............. 852 (385) 23,034 26,079 67,821
</TABLE>
- ----------
(1) For all periods presented above, the Company adopted the provision of
Financial Accounting Standard No. 128 "Earnings per Share". (See notes to
the Financial Statements)
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Progenics is a biopharmaceutical company focusing on the development
and commercialization of innovative products for the treatment and prevention of
cancer and viral and other life-threatening diseases. We commenced principal
operations in late 1988 and since that time have been engaged primarily in
research and development efforts, development of our manufacturing capabilities,
establishment of corporate collaborations and raising capital. In order to
commercialize the principal products that we have under development, we 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 we receive revenues from sales of any of these products. To
date, product sales have consisted solely of limited revenues from the sale of
research reagents. We expect that sales of research reagents in the future will
not significantly increase over current levels. Our other sources of revenues
through December 31, 1999 have been payments received under our collaboration
agreements, research grants and contracts related to our cancer and HIV programs
and interest income.
To date, a majority of our expenditures have been for research and
development activities. We expect that our research and development expenses
will increase significantly as our programs progress and we make filings for
related regulatory approvals. With the exception of the years ended December 31,
1997 and 1998, we have had recurring losses and had, at December 31, 1999, an
accumulated deficit of approximately $17,704,000. We have financed our
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 our collaboration with the Bristol-Myers Squibb Company beginning in July
1997, payments received under our collaboration with the Roche Group beginning
in January 1998, funding under research grants and contracts, the proceeds of
our initial public offering in November 1997, the proceeds of a subsequent
public offering in November 1999, and the proceeds from the exercise of
outstanding options and warrants. We will require additional funds to complete
the development of our products, to fund the cost of clinical trials and to fund
operating losses that are expected to continue for the foreseeable future. We do
not expect our products under development to be commercialized in the near
future.
RESULTS OF OPERATIONS
Years Ended December 31, 1998 and 1999
Contract research and development revenue increased from $11,135,000 in
1998 to $14,867,000 in 1999. The increase was the result of receiving additional
milestone and related payments in 1999 compared to 1998, in connection with our
collaboration with BMS, while reimbursement of clinical development costs during
1999 remained at 1998 levels. Revenues from research grants decreased slightly
from $1,251,000 in 1998 to $1,106,000 in 1999. The decrease resulted from the
funding of a greater number of grants in 1998. Sales of research reagents
decreased from $180,000 in 1998 to $40,000 in 1999 resulting from decreased
orders for such reagents during 1999. Interest income was relatively unchanged
in 1999 compared to 1998 as cash available for investing remained relatively
constant.
Research and development expenses increased from $8,297,000 in 1998 to
$11,227,000 in 1999. The increase was principally due to additional costs of
manufacturing GMK and monitoring clinical trials during 1999, and additional
costs of manufacturing PRO 542. We also initiated a new joint venture with
CYTOGEN Corporation in 1999.
General and administrative were relatively unchanged in 1999 compared
to 1998.
The Company recognized a loss in its joint venture with CYTOGEN of
approximately $2,047,000 for the year ended December 31, 1999 as the joint
venture paid a license fee with respect to intellectual property and commenced
research efforts on PSMA in the second half of 1999.
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<PAGE>
Interest expense increased from $43,000 in 1998 to $112,000 in 1999.
The increase was principally due to the recognition of interest expense as the
Company discounted future capital contributions to the joint venture.
In 1998, we were able to utilize net operating loss carryforwards to
offset our income and, therefore, had no provision for income taxes. In 1999, we
recognized a net loss and, therefore, had no provision for income taxes
Our net income was $1,453,000 in 1998 compared to net loss of $496,000
in 1999.
Years Ended December 31, 1997 and 1998
Contract research and development revenue decreased from $14,591,000 in
1997 to $11,135,000 in 1998. In connection with our collaboration with BMS, we
received a licensing fee in 1997 and a milestone payment in 1998 and
reimbursement of clinical development during both years. Revenues from research
grants increased from $665,000 in 1997 to $1,251,000 in 1998. The increase
resulted from the funding of a greater number of grants in 1998. Sales of
research reagents increased from $57,000 in 1997 to $180,000 in 1998 resulting
from increased orders for such reagents during 1998. Interest income increased
from $301,000 in 1997 to $1,455,000 in 1998 due to the increase in cash
available for investing as we received continued funding under our collaboration
with BMS and invested the proceeds of our initial public offering completed in
November 1997.
Research and development expenses increased from $7,364,000 in 1997 to
$8,296,000 in 1998. The increase was principally due to additional costs of
manufacturing GMK and monitoring clinical trials during 1998, and additional
costs of manufacturing PRO 542.
General and administrative expenses increased from $2,222,000 in 1997
to $3,841,000 in 1998. The increase was principally due to the increase of
professional fees associated with the negotiation of potential license
agreements and increased costs of investor relations associated with operating
as a public entity for the full year of 1998. Interest expense decreased from
$312,000 in 1997 to $43,000 in 1998 as borrowings under a line of credit that
commenced in March 1997 were repaid in July 1997. We also had more interest
expense on capitalized leases during 1997. Depreciation and amortization
increased from $319,000 in 1997 to $388,000 in 1998. We purchased additional
laboratory and office equipment in 1998.
In 1998, we were able to utilize net operating loss carryforwards to
offset our income and, therefore, had no provision for income taxes. In 1997, we
recognized a provision for income taxes of $258,000, 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.
Our net income in 1997 was $5,139,000 compared to net income of
$1,453,000 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our 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, two
public offerings of common stock, funding under research grants and contracts,
interest on investments, and the proceeds from the exercise of outstanding
options and warrants.
In March 1997, we entered into a credit agreement with Chase Capital
Bank, which provided for borrowings of up to $2,000,000. We borrowed the full
amount available under this facility in drawings made between March and June
1997. Our borrowings had a stated interest rate of prime and were used to fund
working capital. We repaid all outstanding borrowings in July 1997 from proceeds
of payments we received under our collaboration with BMS. Upon repayment, the
line of credit terminated. Our obligations under the Chase loan agreement were
guaranteed by two of our affiliates, and in consideration of such guarantee
these affiliates were issued between March and July 1997 warrants to purchase an
aggregate of 70,000 shares of common stock at an exercise price of $4.00 per
share. At June 30, 1999, all 70,000 warrants were outstanding and fully
exercisable.
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<PAGE>
In November 1997, we sold 2,300,000 shares of common stock in our
initial public offering. After deducting underwriting discounts and commissions
and other expenses, we received net proceeds of $16,015,000. In November 1999,
we completed an additional public offering of 2,300,000 shares of common stock
and received net proceeds, after underwriting discounts and commissions and
other expenses, of $40,584,000. The net proceeds from both offerings were
invested in short-term, interest bearing investment grade securities pending
further application.
At December 31, 1999, we had cash, cash equivalents and marketable
securities, including non-current portion, totaling approximately $67,617,000
compared with approximately $24,650,000 at December 31, 1998. Our facility lease
has been extended to December 2000. In connection with the extended facility
lease, we expended approximately $1.0 million for equipment and leasehold
improvements during 1999. In addition, we are obligated, under the terms of our
joint venture with CYTOGEN Corporation, to contribute to the joint venture an
additional $1.0 million in license fees through December 31, 2001 and to fund
research and development of up to $3.0 million.
We believe that our existing capital resources should be sufficient to
fund operations at least through 2001. However, this is a forward-looking
statement based on our current operating plan and the assumptions on which it
relies. There could be changes that would consume our assets before such time.
We 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, our 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 our
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. We have no committed external sources of
capital and, as discussed above, expect no significant product revenues for a
number of years as it will take at least that much time, if ever, to bring our
products to the commercial marketing stage. We 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 our
technology, to fund future operations. We cannot assure you, however, that we
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
and software as well as other equipment that relies on embedded computer
technology. If these systems are not capable of distinguishing 21st century
dates from 20th century dates they will experience operating difficulties
subsequent to December 31, 1999 unless modified, upgraded, or replaced to
adequately process information involving, related to or dependent upon the
century change. If a system used by us or a third party dealing with us fails
because of the inability of the system to properly read a 21st century date, the
results could have a material adverse effect on our operations. We believe that
we have identified and corrected any potential Year 2000 problems by modifying,
upgrading or replacing the necessary hardware and software in these major
systems, and to date we have not experienced any significant Year 2000 problems.
We cannot assure you, however, that we identified all Year 2000 non-compliant
business systems on which we rely or adequately remediated non-compliant systems
that we have identified. Costs incurred to date to correct Year 2000 problems
have been immaterial.
IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARD
We believe that the future adoption of recently issued accounting
standards will not have a material impact on our financial statements, except
that the we are currently evaluating the future impact that Staff Accounting
Bulletin 101, "Revenue Recognition", issued in December 1999 by the Securities
and Exchange Commission, will have on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999, the Company did not hold any market risk
sensitive instruments.
36
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 11. EXECUTIVE COMPENSATION
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
The following documents or the portions thereof indicated are filed as
a part of this Report.
a) Documents filed as part of this Report:
1. Report of Independent Accountants
2. Financial Statements and Supplemental Data
Balance Sheets at December 31, 1998 and 1999
Statements of Operations for the years ended December 31,
1997, 1998 and 1999 Statements of Stockholders' Equity
(Deficit) for the years ended December 31, 1997, 1998 and 1999
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999 Notes to the Financial Statements
b) Reports on Form 8-K
On October 26, 1999 we filed a current report on Form 8-K announcing
our results of operations for the third quarter and the first nine
months of 1999. The report contained consolidated statement of
operations and condensed balance sheets for the third quarter and the
nine months ended September 1999.
c) Item 601 Exhibits
Those exhibits required to be filed by Item 601 of Regulation S-K are
listed in the Exhibit Index immediately preceding the exhibits filed
herewith and such listing is incorporated by reference.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
Progenics Pharmaceuticals, Inc.
By: /s/ Paul J. Maddon, M.D., Ph.D.
--------------------------------
Paul J. Maddon, M.D., Ph.D.
Chairman of the Board and Chief
Executive Officer
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------- ----------------------------------- -------------------
<S> <C> <C>
/s/ Paul J. Maddon, M.D., Ph.D. Chairman of the Board and Chief March 30 , 2000
- -------------------------------------- Executive Officer (Principal
Paul J. Maddon, M.D., Ph.D. Executive Officer)
/s/ Ronald J. Prentki President and Director March 30, 2000
- --------------------------------------
Ronald J. Prentki
/s/ Robert A. McKinney Vice President, Finance and March 30, 2000
- -------------------------------------- Operations and Treasurer (Principal)
Robert A. McKinney Financial and Accounting Officer)
/s/ Charles A. Baker Director March 30, 2000
- --------------------------------------
Charles A. Baker
/s/ Mark F. Dalton Director March 30, 2000
- --------------------------------------
Mark F. Dalton
/s/ Stephen P. Goff, Ph.D. Director March 30, 2000
- --------------------------------------
Stephen P. Goff, Ph.D.
/s/ Kurt W. Briner Director March 30, 2000
- --------------------------------------
Kurt W. Briner
/s/ Paul F. Jacobson Director March 30, 2000
- --------------------------------------
Paul F. Jacobson
/s/ David A. Scheinberg, M.D., Ph.D. Director March 30, 2000
- ------------------------------------
David A. Scheinberg, M.D., Ph.D.
</TABLE>
39
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROGENICS PHARMACEUTICALS, INC.
Report of Independent Accountants F-2
Financial Statements:
Balance Sheets as of December 31, 1998 and 1999 F-3
Statements of Operations for the years ended December 31, 1997,
1998 and 1999 F-4
Statements of Stockholders' (Deficit) Equity for the years ended
December 31, 1997, 1998 and 1999 F-5
Statements of Cash Flows for the years ended December 31, 1997,
1998 and 1999 F-6
Notes to Financial Statements F-7
PSMA DEVELOPMENT COMPANY L.L.C.
Report of Independent Accountants F-27
Financial Statements:
Balance Sheet as of December 31, 1999 F-28
Statement of Operations for the period from June 15, 1999 (inception)
To December 31, 1999 F-29
Statement of Stockholders' Equity for the period from June 15, 1999 (inception)
To December 31, 1999 F-30
Statement of Cash Flows for the period from June 15, 1999 (inception)
To December 31, 1999 F-31
Notes to Financial Statements F-32
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Progenics Pharmaceuticals, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' (deficit) equity and of cash flows present fairly, in
all material respects, the financial position of Progenics Pharmaceuticals, Inc.
(the "Company") at December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 11, 2000 except for
the last three paragraphs of
Note 7c, for which the date
is March 6, 2000
F-2
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1998 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $14,437,263 $24,212,448
Marketable securities 10,212,876 29,655,101
Accounts receivable 1,634,480 1,146,740
Other current assets 555,862 1,024,459
----------- -----------
TOTAL CURRENT ASSETS 26,840,481 56,038,748
----------- -----------
Marketable securities 13,749,156
Fixed assets, at cost, net of accumulated
depreciation and amortization 1,045,389 1,396,917
Investment in joint venture 73,044
Security deposits and other assets 13,745 3,039
----------- -----------
TOTAL ASSETS $27,899,615 $71,260,904
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,595,665 $ 2,453,564
Amount due to joint venture 452,606
Capital lease obligations, current portion 107,346 79,562
----------- -----------
TOTAL CURRENT LIABILITIES 1,703,011 2,985,732
Amount due to joint venture 417,141
Capital lease obligations 117,166 37,328
----------- -----------
TOTAL LIABILITIES 1,820,177 3,440,201
=========== ===========
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $.001 par value; 14,320,174 shares authorized;
issued and outstanding - none
Common stock, $.0013 par value; 40,000,000 shares authorized;
shares issued and outstanding 9,358,207 in 1998
and 11,905,774 in 1999 12,166 15,478
Additional paid-in capital 44,377,193 86,329,599
Unearned compensation (1,111,018) (591,142)
Accumulated deficit (17,207,993) (17,703,528)
Accumulated other comprehensive (loss) income 9,090 (229,704)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 26,079,438 67,820,703
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,899,615 $71,260,904
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Revenues:
Contract research and development $14,591,505 $ 11,135,026 $ 14,866,982
Research grants 664,983 1,250,908 1,106,298
Product sales 56,531 180,204 40,315
Interest income 300,966 1,454,844 1,439,461
----------- ------------ ------------
TOTAL REVENUES 15,613,985 14,020,982 17,453,056
----------- ------------ ------------
Expenses:
Research and development 7,364,117 8,296,559 11,226,521
General and administrative 2,221,667 3,840,737 3,866,321
Loss in Joint Venture 2,047,409
Interest expense 311,522 42,729 111,925
Depreciation and amortization 319,486 387,920 696,415
----------- ------------ ------------
TOTAL EXPENSES 10,216,792 12,567,945 17,948,591
----------- ------------ ------------
OPERATING INCOME (LOSS) 5,397,193 1,453,037 (495,535)
Income taxes 257,770
----------- ------------ ------------
NET INCOME (LOSS) $ 5,139,423 $ 1,453,037 $ (495,535)
----------- ------------ ------------
Net income (loss) per share - basic $ 1.64 $ 0.16 $ (0.05)
=========== ============ ------------
Net income (loss) per share - diluted $ 0.66 $ 0.14 $ (0.05)
----------- ------------ ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
--------------------- ----------------------- Paid-in Unearned
Shares Amount Shares Amount Capital Compensation
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 5,679,826 $ 5,680 2,294,675 $ 2,983 $23,862,082 $ (454,952)
Issuance of compensatory stock options and warrants 2,634,950 (2,634,950)
Amortization of unearned compensation 1,328,521
Exercise of stock options ($1.33 per share) 27,000 35 35,875
Issuance of common stock in July in consideration for
an amendment to an agreement ($7.50 per share) 120,000 156 899,844
Issuance of common stock in an initial public offering
($8.00 per share), net of expenses 2,300,000 2,990 16,011,808
Conversion of preferred stock to common stock
as the result of the initial public offering (5,679,826) (5,680) 4,259,878 5,538 142
Net income for the year ended December 31, 1997
Net unrealized gain on marketable securities
----------- --------- ---------- -------- ----------- -------------
Balance at December 31, 1997 - - 9,001,553 11,702 43,444,701 (1,761,381)
Amortization of unearned compensation 650,363
Sale of Common Stock under employee stock purchase
plans and exercise of stock options 356,654 464 907,667
Other adjustments to stockholders' equity 24,825
Net income for the year ended December 31, 1998
Changes in unrealized gain on marketable securities
----------- --------- ---------- -------- ----------- -------------
Balance at December 31, 1998 9,358,207 12,166 44,377,193 (1,111,018)
Amortization of unearned compensation 519,876
Issuance of compensatory stock options 48,332
Sale of Common Stock under employee stock purchase
plans and exercise of stock options and warrants 247,567 322 1,322,841
Issuance of Common Stock in connection with
a public offering ($19.00/share), net of expenses 2,300,000 2,990 40,581,233
Net loss for the year ended December 31, 1999
Changes in unrealized (loss) on marketable securities
----------- --------- ---------- -------- ----------- -------------
Balance at December 31, 1999 11,905,774 $ 15,478 $86,329,599 $ (591,142)
=========== ========= ========== ======== =========== =============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Accumulated Comprehensive Comprehensive
Deficit Income Total (Loss) Income
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $(23,800,453) $ (384,660)
Issuance of compensatory stock options and warrants
Amortization of unearned compensation 1,328,521
Exercise of stock options ($1.33 per share) 35,910
Issuance of common stock in July in consideration for
an amendment to an agreement ($7.50 per share) 900,000
Issuance of common stock in an initial public offering
($8.00 per share), net of expenses 16,014,798
Conversion of preferred stock to common stock
as the result of the initial public offering
Net income for the year ended December 31, 1997 5,139,423 5,139,423 $5,139,423
Net unrealized gain on marketable securities $ 340 340 340
-------------- --------- ----------- ----------
Balance at December 31, 1997 (18,661,030) 340 23,034,332 $5,139,763
==========
Amortization of unearned compensation 650,363
Sale of Common Stock under employee stock purchase
plans and exercise of stock options 908,131
Other adjustments to stockholders' equity 24,825
Net income for the year ended December 31, 1998 1,453,037 $ 1,453,037 1,453,037
Changes in unrealized gain on marketable securities 8,750 8,750 8,750
-------------- --------- ----------- ----------
Balance at December 31, 1998 (17,207,993) 9,090 26,079,438 $1,461,787
==========
Amortization of unearned compensation 519,876
Issuance of compensatory stock options 48,332
Sale of Common Stock under employee stock purchase
plans and exercise of stock options and warrants 1,323,163
Issuance of Common Stock in connection with
a public offering ($19.00/share), net of expenses 40,584,223
Net loss for the year ended December 31, 1999 (495,535) (495,535) (495,535)
Changes in unrealized (loss) on marketable securities (238,794) (238,794) (238,794)
-------------- --------- ----------- ----------
Balance at December 31, 1999 (17,703,528) (229,704) $67,820,703 $ (734,329)
============== ========= =========== ==========
</TABLE>
Securities issued for non-cash consideration were valued based upon the Board of
Directors' estimate of fair value of the securities issued at the time the
services were rendered or based on quoted prices as per NASDAQ Market.
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,139,423 $ 1,453,037 $ (495,535)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 319,486 387,920 696,415
Amortization of premiums, net of discounts, on
marketable securities 132,406 148,857
Amortization of discount on investment in Joint Venture 72,813
Loss in Joint Venture 2,047,409
Expenses incurred in connection with issuance of
common stock, stock options and warrants 1,328,521 650,363 568,208
Stock issued in consideration for amending an agreement 900,000
Other 24,825
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (50,197) (1,470,172) 487,740
(Increase) in prepaid and other current assets (5,433) (529,379) (468,597)
(Increase) decrease in security deposits and other assets (1,309) 25,776 10,706
(Decrease) increase in accounts payable and accrued expenses (559,596) 410,376 852,796
Increase in investment in Joint Venture (1,323,519)
Decrease in deferred lease liability (16,735)
Increase (decrease) in income taxes payable 57,770 (57,770)
----------- ----------- -----------
Net cash provided by operating activities 7,111,930 1,027,382 2,597,293
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (69,784) (767,688) (1,042,840)
Purchase of marketable securities (1,886,036) (9,295,332) (46,449,032)
Sale of marketable securities 845,000 12,870,000
Other 80,732 -
----------- ----------- -----------
Net cash used in investing activities (1,955,820) (9,137,288) (34,621,872)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of equity securities, net of
offering expenses 16,050,708 908,131 41,907,386
Payment of capital lease obligations (115,557) (98,887) (107,622)
Proceeds from notes payable 2,000,000 -
Repayments of notes payable (2,000,000) -
----------- ----------- -----------
Net cash provided by financing activities 15,935,151 809,244 41,799,764
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 21,091,261 (7,300,662) 9,775,185
----------- ----------- -----------
Cash and cash equivalents at beginning of period 646,664 21,737,925 14,437,263
----------- ----------- -----------
Cash and cash equivalents at end of period $21,737,925 $14,437,263 $24,212,448
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 83,655 $ 42,729 $ 38,832
Cash paid for income taxes 200,000 140,000
Supplemental disclosure of noncash investing and
financing activities:
Increase in capital lease obligations $ 95,000 $ 99,138
Fixed assets included in accounts payable and accrued expenses 40,959 35,856
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND BUSINESS
Progenics Pharmaceuticals, Inc. (the "Company") is a biopharmaceutical
company focusing on the development and commercialization of innovative
products for the treatment and prevention of cancer, viral diseases,
including human immunodeficiency virus ("HIV") infection, and other
diseases. The Company was incorporated in Delaware on December 1, 1986.
The Company has no products approved for sale by the U.S. Food and Drug
Administration. In addition to the normal risks associated with a new
business venture, there can be no assurance that the Company's research
and development will be successfully completed, that any products
developed will obtain necessary government regulatory approval or that
any approved products will be commercially viable. In addition, the
Company operates in an environment of rapid change in technology and is
dependent upon the continued services of its current employees,
consultants and subcontractors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company has derived all of its product revenue from the sale of
research reagents to three customers. Product sales revenue is
recognized at the time reagents are shipped. The reagents are products
of the Company's research and development efforts. The Company
maintains no inventory of reagents and cost of product sales is not
material.
The Company has been awarded government research grants and contracts
from the National Institutes of Health (the "NIH"). The NIH grants are
used to subsidize the Company's research projects ("Projects")
regarding HIV. NIH revenue is recognized on a pro rata basis as
subsidized Project costs are incurred. Such method approximates the
straight-line basis over the lives of the Projects. The NIH contracts
reimburse the Company for costs associated with manufacturing products
ordered by the NIH in the HIV area.
Payments from Bristol-Myers Squibb Company, Hoffmann-LaRoche, the
Department of Defense, Aaron Diamond AIDS Research Center and the
National Institutes of Health (collectively the "Collaborators") (See
Note 7) for contract research and development are used to subsidize the
Company's research and development efforts. Such amounts are recognized
as revenue as the related services are performed by the Company,
provided the collection of the resulting receivable is probable. In
situations where the Company receives payments in advance of
performance of services, such amounts are deferred and recognized as
revenue as the related services are performed.
Upon the achievement of defined events certain Collaborators are
required to make milestone payments to the Company. Such amounts are
included in contract research and development revenue and are
recognized as revenue upon the achievement of the event and when
collection of the resulting receivable is probable.
Interest income is recognized as earned.
For each of the three years in the period ended December 31, 1999, all
of the Company's research grant revenue and contract research and
development revenue came from the NIH and the Collaborators.
F-7
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash, cash equivalents,
marketable securities and receivables from the NIH and the
Collaborators. The Company invests its excess cash in investment grade
securities issued by corporations and governments. The Company has
established guidelines that relate to credit quality, diversification
and maturity and that limit exposure to any one issue of securities.
FIXED ASSETS
Leasehold improvements, furniture and fixtures, and equipment are
stated at cost. Furniture, fixtures, and equipment are depreciated on a
straight-line basis over their estimated useful lives. Leasehold
improvements are amortized on a straight-line basis over the life of
the lease or of the improvement, whichever is shorter. Expenditures for
maintenance and repairs which do not materially extend the useful lives
of the assets are charged to expense as incurred. The cost and
accumulated depreciation of assets retired or sold are removed from the
respective accounts and any gain or loss is recognized in operations.
The estimated useful lives of fixed assets are as follows:
Machinery and equipment 5-7 years
Furniture and fixtures 5 years
Leasehold improvements Life of lease
PATENTS
As a result of research and development efforts conducted by the
Company, it has applied, or is applying, for a number of patents to
protect proprietary inventions. All costs associated with patents are
expensed as incurred.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments which have
maturities of three months or less, when acquired, to be cash
equivalents. The carrying amount reported in the balance sheet for cash
and cash equivalents approximates its fair value. Cash and cash
equivalents subject the Company to concentrations of credit risk. At
December 31, 1999 and 1998, the Company had invested approximately
$18,603,000 and $14,208,000 in funds with two major investment
companies and held approximately $3,609,000 and $229,000 in a single
commercial bank, respectively. In addition, at December 31, 1999 the
Company held a $2 million certificate of deposit, in a commercial bank,
with a 30-day maturity.
NET (LOSS) INCOME PER SHARE
The Company prepares its per share data in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No.
128"). Basic net (loss) income per share is computed on the basis of
net (loss) income for the period divided by the weighted average number
of shares of common stock outstanding during the period. Diluted net
(loss) income per share includes, where dilutive, the number of shares
issuable upon exercise of outstanding options and warrants and the
conversion of preferred stock. Disclosures required by SFAS No. 128
have been included in Note 13.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"). SFAS No. 109 requires that the Company
recognize deferred tax liabilities and assets for the
F-8
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined on the basis of the
difference between the tax basis of assets and liabilities and their
respective financial reporting amounts ("temporary differences") at
enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Significant estimates relate to the
recoverability of fixed assets and deferred taxes. Actual results could
differ from those estimates. See also Notes 1 and 7(c).
STOCK-BASED COMPENSATION
The accompanying financial position and results of operations of the
Company have been prepared in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"). Under APB
No. 25, generally, no compensation expense is recognized in the
financial statements in connection with the awarding of stock option
grants to employees provided that, as of the grant date, all terms
associated with the award are fixed and the fair value of the Company's
stock, as of the grant date, is equal to or less than the amount an
employee must pay to acquire the stock. The Company will recognize
compensation expense in situations where the terms of an option grant
are not fixed or where the fair value of the Company's common stock on
the grant date is greater than the amount an employee must pay to
acquire the stock.
Disclosures required by Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
including pro forma operating results had the Company prepared its
financial statements in accordance with the fair-value-based method of
accounting for stock-based compensation, have been included in Note 9.
The fair value of options and warrants granted to non-employees for
financing, goods or services are included in the financial statements
and expensed over the life of the debt, as the goods are utilized or
the services performed, respectively.
COMPREHENSIVE (LOSS) INCOME
Comprehensive (loss) income represents the change in net assets of a
business enterprise during a period from transactions and other events
and circumstances from non-owner sources. Comprehensive (loss) income
of the Company includes net (loss) income adjusted for the change in
net unrealized gain or loss on marketable securities. The net effect of
income taxes on comprehensive (loss) income is immaterial. The
disclosures required by Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" for the years ended December 31,
1997, 1998 and 1999 have been included in the Statements of
Stockholders' (Deficit) Equity.
IMPACT OF FUTURE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
Management believes that the future adoption of recently issued
accounting standards will not have a material impact on the Company's
financial statements, except that the Company is currently evaluating
the future impact that Staff Accounting Bulletin 101, "Revenue
Recognition", issued in December 1999 by the Securities and Exchange
Commission, will have on its financial statements.
F-9
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. MARKETABLE SECURITIES
The Company considers its marketable securities to be
"available-for-sale," as defined by Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", and, accordingly, unrealized holding gains and
losses are excluded from operations and reported as a net amount in a
separate component of stockholders' equity.
As of December 31, 1998 and 1999, marketable securities had maturities
of less than three years. The following table summarizes the amortized
cost basis, the aggregate fair value, and gross unrealized holding
gains and losses at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
UNREALIZED HOLDING
AMORTIZED FAIR ----------------------------------------
COST BASIS VALUE GAINS (LOSSES) NET
<S> <C> <C> <C> <C> <C>
1998:
Maturities less than one year
Corporate debt securities $ 10,203,786 $ 10,212,876 $ 12,296 $ (3,206) $ 9,090
============ ============= ========== =========== ===========
1999:
Maturities less than one year
Corporate debt securities $ 29,761,333 $ 29,655,101 $ 1,633 $ (107,866) $ (106,233)
Maturities 1-3 years
Corporate debt securities $ 13,872,628 $ 13,749,156 $ 9,788 $ (133,259) $ (123,471)
------------- ------------- ----------- ------------ ------------
$ 43,633,961 $ 43,404,257 $ 11,421 $(241,125) $(229,704)
============ ============= ========== =========== ===========
</TABLE>
For the years ended December 31, 1998 and 1999, there were no realized
gains and losses from the sale of marketable securities. The Company
computes the cost of its investments on a specific identification
basis. Such cost includes the direct costs to acquire the securities,
adjusted for the amortization of any discount or premium. The fair
value of marketable securities has been estimated based on quoted
market prices.
4. FIXED ASSETS
Fixed assets, including amounts under capitalized lease obligations,
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
<S> <C> <C>
Machinery and equipment $1,813,726 $2,502,543
Furniture and fixtures 216,810 242,768
Leasehold improvements 399,477 741,133
----------- ------------
2,430,013 3,486,444
Less, Accumulated depreciation and amortization (1,384,624) (2,089,527)
----------- -----------
$ 1,045,389 $ 1,396,917
=========== ===========
</TABLE>
F-10
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
<S> <C> <C>
Accounts payable $1,140,442 $1,718,661
Accrued expenses 96,000 101,250
Accrued payroll and related costs 144,615 379,903
Legal fees payable 214,608 253,750
---------- -----------
$1,595,665 $2,453,564
========== ===========
</TABLE>
6. STOCKHOLDERS' EQUITY
Subsequent to the Company's initial public offering of its common stock
as discussed below, the Company is authorized to issue 40,000,000
shares of common stock, par value $.0013 ("Common Stock"), and
14,320,174 shares of preferred stock, par value $.001. The Board has
the authority to issue common and preferred shares, in series, with
rights and privileges determined by the Board.
Prior to the Company's initial public offering ("IPO"), 4,000,000
preferred shares were designated as Series A Preferred Stock ("Series
A"), 2,500,000 shares were designated as Series B Preferred Stock
("Series B") and 3,750,000 shares were designated as Series C Preferred
Stock ("Series C") (collectively the "Preferred Stock").
In connection with the issuance of Series C stock in 1995 and 1996, the
Company issued 347,249 five-year warrants (the "C Warrants"). Each C
Warrant, subsequent to the IPO, entitles the holder to purchase .75
share of Common Stock at $6.67. The number of C Warrants and their
exercise price are subject to adjustment in the event the Company
issues additional shares of Common Stock at below defined per share
prices. During the year ended December 31, 1999, 29,400 C Warrants were
exercised into 14,101 shares of Common Stock. As of December 31, 1999,
317,849 C Warrants were issued and outstanding and fully exercisable
into 238,387 shares of Common Stock.
During November 1997, the Company completed an IPO of 2,300,000 shares
of its Common Stock, in which the Company raised approximately $16
million, net of expenses and underwriting discount. Concurrent with the
IPO, all outstanding shares of Preferred Stock, were converted into
4,259,878 shares of Common Stock and thereafter retired.
On November 19, 1999, the Company completed a follow-on offering of
2,300,000 shares of its common stock, in which the Company raised
approximately $40.6 million, net of expenses and underwriting discount.
F-11
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
A. OPERATING LEASES
The Company leased office and laboratory space under
noncancelable lease agreements (the "Leases"). The Leases
provided for escalations of the minimum rent during the lease
term as well as additional charges based upon usage of certain
utilities in excess of defined amounts ("Additional Utility
Charges"). The Company recognized rental expense from the Leases
on the straight-line basis. During the years ended December 31,
1997 and 1998, approximately $33,000 and $17,000, respectively,
of previously recognized rent expense, which had been included as
a deferred lease liability, was paid.
On January 27, 1998, the Company entered into a sublease
agreement ("Sublease") consolidating and extending the Leases for
office and laboratory space from May 1, 1998 through December 31,
1999. In June 1999, the sublease agreement was extended through
December 31, 2000. Fixed monthly rental expense totals
approximately $54,000. The Sublease can be extended at the option
of the Company for two additional one-year terms; subject to
approval by the landlord.
The Company also leases office equipment and an automobile under
noncancelable operating leases. The leases expire at various
times through March 2002.
As of December 31, 1999, future minimum annual payments under all
operating lease agreements, including the Sublease, are as
follows:
MINIMUM
YEARS ENDING ANNUAL
DECEMBER 31, PAYMENTS
2000 $654,105
2001 2,314
--------
$654,419
Rental expense totaled approximately $628,000, $672,000 and
$659,000 for the years ended December 31, 1997, 1998 and 1999,
respectively. Additional Utility Charges, were not material for
these periods.
B. CAPITAL LEASES
The Company leases certain equipment under various noncancelable
capital lease agreements. The leases are for periods ranging from
three to five years, after which the Company: (i) either has the
option or is required to purchase the equipment at defined
amounts or (ii) may extend the lease for up to one additional
year at defined monthly payments or (iii) is required to return
the equipment, as per the respective lease agreements.
F-12
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As of December 31, 1999, minimum annual payments under all
capital leases, including required payments to acquire leased
equipment, are as follows:
<TABLE>
<CAPTION>
MINIMUM
YEARS ENDING ANNUAL
DECEMBER 31, PAYMENTS
<S> <C>
2000 $102,994
2001 37,069
2002 4,140
--------
144,203
Less, Amounts representing interest 27,313
--------
Present value of net minimum capital lease
payments $116,890
--------
</TABLE>
Leased equipment included as a component of fixed assets was
approximately $388,000 and $351,000 at December 31, 1998 and
1999, respectively; related accumulated depreciation was
approximately $148,000 and $192,000 for the same respective
periods.
C. LICENSING AND CORPORATE COLLABORATION AGREEMENTS
I. UNIVERSITIES
The Company (as licensee) has a worldwide licensing agreement
with Columbia University ("Columbia"). The license, as
amended during October 1996, provides the Company with the
exclusive right to use certain technology developed on behalf
of Columbia. According to the terms of the agreement, the
Company is required to pay nonrefundable licensing fees
("Licensing Fees"), payable in installments by defined dates
or, if earlier, as certain milestones associated with product
development ("Milestones") occur, as defined, which include
the manufacture and distribution of a product which uses the
licensed technology by 2004. The Company expenses Licensing
Fees when they become payable by the Company to Columbia. In
addition, the Company is required to remit royalties based
upon the greater of minimum royalties, as defined, or a
percentage of net sales of products which utilize the
licensed technology and a portion of sublicensing income, as
defined. The licensing agreement may be terminated by
Columbia under certain circumstances which includes the
Company's failure to achieve the Milestones; however,
Columbia shall not unreasonably withhold its consent to
revisions to the due dates for achieving the Milestones under
certain circumstances. If not terminated early, the agreement
shall continue until expiration, lapse or invalidation of
Columbia's patents on the licensed technology. The Company
has the right to terminate the agreement at any time upon 90
days prior written notice. The termination of the license
could have a material adverse effect on the business of the
Company. Although the Company intends to use its best efforts
to comply with the terms of the agreement, there can be no
assurances that the agreement will not be terminated.
The Company (as licensee) also has a non-exclusive licensing
agreement with Stanford University whereby the Company has
the non-exclusive, non-transferable right to use certain
technology owned by the university. According to the terms of
the agreement,
F-13
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
the Company will be required to remit royalties based upon
the greater of minimum royalties, as defined or various
percentages of sales of products resulting from the use of
licensed patent rights, as defined. Royalties shall continue
to be payable, irrespective of termination of this license
agreement, until such time as all sales of products which
utilize the licensed technology shall have ceased.
In September 1996, the Company (as licensee) entered into a
licensing agreement with The Regents of the University of
California ("Regents"). According to the terms of the
agreement, the Company is required to remit royalties based
upon the greater of minimum of royalties or a percentage of
product sales and a portion of sublicensing income, as
defined. The agreement can be terminated by the Company upon
90 days notice or by Regents in the event the Company fails
to perform, which includes the achievement of certain defined
milestones; otherwise the agreement terminates upon the lapse
of Regents' patent regarding the licensed technology. Early
termination of the agreement could have a material adverse
effect on the business of the Company. Although the Company
intends to use its best efforts to comply with the terms of
the agreement, there can be no assurances that the agreement
will not be terminated.
II. SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH
In November 1994, the Company (as licensee) entered into a
worldwide exclusive licensing agreement with Sloan-Kettering
Institute for Cancer Research ("Sloan-Kettering") whereby the
Company has the exclusive right to use certain technology
owned by Sloan-Kettering. Certain employees of
Sloan-Kettering are consultants to the Company (see Note
7(d)). The Company is required to remit royalties based upon
the greater of minimum royalties, as defined, or as a
percentage of sales of any licensed product, as defined
("Product Royalties"), and sublicense income, as defined,
earned under sublicenses granted by the Company in accordance
with this licensing agreement ("Sublicense Royalties"). In
the event that no Product Royalties or Sublicense Royalties
are due in a given calendar year, then a defined percentage
of that year's minimum royalty will be creditable against
future Product Royalties or Sublicense Royalties due
Sloan-Kettering. The licensing agreement may be terminated by
Sloan-Kettering in the event that the Company fails to
achieve certain defined objectives, which include the
manufacture and distribution of a product which uses the
licensed technology, by 2004, or if the Company fails to
satisfy certain other contractual obligations ("Early
Termination"); otherwise the agreement shall terminate either
upon the expiration or abandonment of Sloan-Kettering's
patents on the technology licensed, or 15 years from the date
of first commercial sale, as defined, whichever is later.
With regard to Early Termination, Sloan-Kettering shall not
unreasonably withhold its consent to revisions to the due
dates for achieving the defined objectives under certain
circumstances. The Company has the right to terminate the
agreement at any time upon 90 days prior written notice
("Company Termination"). In the event of Early Termination or
Company Termination, all licensing rights under the agreement
would revert to Sloan-Kettering. Early Termination of the
license could have a material adverse effect on the business
of the Company. Although the Company intends to use its best
efforts to comply with the terms of the license, there can be
no assurance that the licensing agreement will not be
terminated.
III. AQUILA BIOPHARMACEUTICALS, INC.
In August 1995, the Company (as licensee) entered into a
license and supply agreement (the "L&S Agreement") with
Aquila Biopharmaceuticals, Inc. ("Aquila"). Under the terms
of the L&S Agreement, the Company obtained a coexclusive
license to use certain
F-14
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
technology and a right to purchase QS-21 adjuvant (the
"Product") from Aquila for use in the Company's research and
development activities. In consideration for the license, the
Company paid a nonrefundable, noncreditable license fee and
issued 45,000 restricted shares of the Company's Common Stock
("Restricted Shares") to Aquila. The Restricted Shares are
nontransferable with this restriction lapsing upon the
Company's achievement of certain milestones ("L&S
Milestones"), as defined. In the event that any one or more
L&S Milestones do not occur, the underlying Restricted Shares
would be returned to the Company. As of December 31, 1999,
the restrictions on 22,500 shares of common stock have
lapsed. The fair value of the Restricted Shares, combined
with the noncreditable license fee, were expensed during 1995
as research and development. In addition, the Company will be
required to remit royalties based upon the net sales of
products sold using the licensed technology ("Licensed
Products") and a defined percentage of any sublicense fees
and royalties payable to the Company with respect to Licensed
Products. The L&S Agreement may be terminated by Aquila in
the event that the Company fails to achieve certain defined
objectives, which include the manufacture and distribution of
a Licensed Product, by 2004 ("Early Termination"); otherwise
the L&S Agreement shall terminate upon the expiration of
Aquila's patents on the technology licensed. With regard to
Early Termination, Aquila shall not unreasonably withhold its
consent to revisions to the due dates for achieving the L&S
Milestones under certain circumstances. The Company has the
right to terminate the L&S Agreement at any time upon 90 days
prior written notice ("Company Termination"), as defined. In
the event of Early Termination or Company Termination, all
licensing rights under the agreement would revert to Aquila.
Early termination of the L&S Agreement would have a material
adverse effect on the business of the Company. Although the
Company intends to use its best efforts to comply with the
terms of the L&S Agreement, there can be no assurance that
the agreement will not be terminated.
IV. BRISTOL-MYERS SQUIBB COMPANY
In July 1997, the Company and Bristol-Myers Squibb Company
("BMS") entered into a Joint Development and Master License
Agreement (the "BMS License Agreement") under which BMS
obtained an exclusive worldwide license to manufacture, use
and sell products resulting from development of the Company's
products related to certain therapeutic cancer vaccines (the
"Cancer Vaccines"). Upon execution of the agreement, BMS made
non-refundable cash payments of $9.5 million, as
reimbursement for expenses previously incurred by the Company
in the development of the Cancer Vaccines, $2.0 million as a
licensing fee and approximately $1.8 million as reimbursement
of the Company's budgeted clinical development costs for the
Cancer Vaccines for the period April 15, 1997 through
September 30, 1997. In addition, BMS is obligated to make
future non-refundable payments as defined upon the
achievement of specified milestones and pay royalties on any
product sales. BMS is also required to subsidize ongoing
development, clinical trials and regulatory filings
("Development Costs") conducted by the Company on a time and
material basis related to the Cancer Vaccines. BMS's funding
of future Development Costs are refundable by the Company
only to the extent that the Company receives such funding in
advance and fails to expend such amounts for their intended
purposes. The Company recognized as revenue (a) the
reimbursement of prior expenses and the licensing fee upon
receipt of the funds; (b) the funding of Development Costs on
a pro rata basis as the related expenses are incurred and (c)
milestone payments when the milestone has been achieved,
there are no additional services to be provided or costs to
be incurred by the Company and the resulting receivable is
probable.
F-15
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The BMS License Agreement and related sublicenses terminate
at various times, generally upon the expiration or
abandonment of the related patents. The agreements can also
be terminated by either party upon a material uncured breach
by the other party. BMS has the further right to terminate
the BMS License Agreement (including its funding and
milestone obligations) as to specified licensed products at
specified times.
V. HOFFMANN-LAROCHE
On December 23, 1997 (the "Effective Date"), the Company
entered into an agreement (the "Roche Agreement") to conduct
a research collaboration with F. Hoffmann-LaRoche Ltd and
Hoffmann-LaRoche, Inc. (collectively "Roche") to identify
novel HIV therapeutics. The Roche Agreement grants to Roche
an exclusive worldwide license to use certain of the
Company's intellectual property rights related to HIV to
develop, make, use and sell products resulting from the
collaboration.
The terms of the Roche Agreement require Roche to pay the
Company an upfront fee and defined amounts annually for the
first year, with annual adjustments thereafter, for the
funding of research conducted by the Company. Roche's annual
payment is made quarterly in advance. Such funding will
continue for a minimum of two years from the Effective Date.
In addition, the Company will receive non-refundable
milestone payments and royalty payments based on achievement
of certain events and a percentage of worldwide sales of
products developed from the collaboration, respectively. The
Company recognizes as revenue milestone payments as earned
and research reimbursements on a pro rata basis as the
underlying costs are incurred. The collaboration has a term
of three years and may be extended by mutual agreement. The
Roche Agreement shall remain in force until the expiration of
all obligations to pay royalties pursuant to any licenses
specified by the Roche Agreement. Roche may terminate the
Roche Agreement at any time with prior written notice, at
which time the license granted by the Company will terminate.
Either party may terminate the Roche Agreement if the other
party defaults on its obligations and such default is not
cured within sixty days of written notice of such default.
VI. DEVELOPMENT AND LICENSE AGREEMENT WITH PROTEIN DESIGN
LABS, INC.
Effective April 30, 1999, the Company and Protein Design
Labs, Inc. ("PDL") entered into a Development and License
Agreement (the "License Agreement") under which PDL agreed to
develop a humanized antibody (the "Technology") on behalf of
the Company and granted to the Company an exclusive worldwide
license under certain patents and patent applications to
develop, use and sell products arising from the Technology
("Products"). PDL also granted to the Company non-exclusive
licenses to PDL technical information, as defined, and
sublicenses to PDL licenses from third parties to the extent
necessary to enable the Company to make, use and sell
Products. In addition, in June 1999 the Company exercised its
right under the License Agreement to acquire an option to
obtain a sublicense to certain additional patents and paid
PDL a fee in connection therewith.
Upon the achievement by PDL of certain performance-based
milestones, as defined, the Company is required to make
non-refundable payments to PDL. The Company is also required
to pay royalties based on a percentage of net sales, as
defined, of all Products for a specified period and
non-refundable annual maintenance fees under certain
conditions.
F-16
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has the ability to terminate the License
Agreement upon 60 days prior written notice. If terminated
prior to a defined date, the Company will reimburse PDL for
costs and expenses to the date of termination. Either party
may terminate the License Agreement upon 10 or 30 days
written notice of default in making scheduled payments or
other breach, respectively, that is not cured by the other
party. Otherwise, the License Agreement will continue until
expiration of the Company's obligation to pay royalties to
PDL.
VII. GENZYME TRANSGENICS CORPORATION
In February 2000, the Company entered into a collaboration
agreement (the "Genzyme Agreement") with Genzyme Transgenics
Corporation ("Genzyme") to conduct a program to develop and
supply a transgenic source of one of the Company's HIV
products (the "Product"). Under the terms of the Genzyme
Agreement, the Company is obligated to pay Genzyme certain
non-refundable fees to conduct the program as well as
additional fees upon the achievement of defined milestones.
The Company may further elect to cause Genzyme to produce
moderate amounts of the Product for an additional fee and may
enter into an additional agreement for the supply of larger
amounts of the Product. Either party may terminate the
Genzyme Agreement in the event of a material breach by the
other party that is not cured within 30 days and the Company
has the right to terminate the Genzyme Agreement on 90 days
notice, as defined.
VIII. PHARMACOPEIA, INC.
In March 2000, the Company entered into a research and
license agreement (the "Pharmacopeia Agreement") with
Pharmacopeia, Inc. ("Pharmacopeia") related identifying
compounds that may serve as HIV therapeutics. Pharmacopeia
will grant the Company worldwide licenses to make and use
active compounds identified in the program. Under the terms
of the Pharmacopeia Agreement, the Company is required to pay
non-refundable fees during the research program as well as
additional amounts upon achievement of specified milestones
and royalties on any sales of therapeutics arising from this
agreement. Either party may terminate the Genzyme Agreement
in the event of a material breach by the other party that is
not cured within 60 days and the Company has the right to
terminate the Pharmacopeia Agreement upon notice, as defined.
In connection with all the agreements discussed above, the Company has
recognized license and sub-license fees, which are included in research
and development expenses, including transaction costs, totaling
approximately $1,901,000, $550,000 and $2,076,667 for the years ended
December 31, 1997, 1998 and 1999, respectively. Such expenses include
the fair value of the Restricted Shares and 120,000 shares of Common
Stock issued in July 1997. In addition, future remaining payments
associated with milestones and defined objectives with respect to the
above agreements total $2.6 million. Future annual minimum royalties
under the licensing agreements described in (i) through (iii) and (vi)
above are not significant.
D. CONSULTING AGREEMENTS
As part of the Company's research and development efforts it
enters into consulting agreements with external scientific
specialists ("Scientists") and others. These Agreements contain
varying terms and provisions including fees to be paid by the
Company and royalties, in the event of future sales, and
milestone payments, upon achievement of defined events, payable
to the Company. Certain Scientists, some of who are members of
the Company's Scientific Advisory Board, have purchased Common
Stock or received stock options which are subject to vesting
provisions, as defined. The Company has recognized expenses with
regards to these consulting agreements totaling approximately
$971,000, $482,000 and $583,000 for the years ended December 31,
1997, 1998 and 1999, respectively. Such expenses include the fair
value of stock options of approximately $772,000, $329,000 and
$329,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
8. FORMATION OF PSMA DEVELOPMENT COMPANY LLC
On June 15, 1999, the Company and CYTOGEN Corporation ("CYTOGEN")
(collectively, the "Members") formed a joint venture in the form of a
limited liability company (the "LLC" or "JV") for the purposes of
conducting research, development, manufacturing and marketing of
products related to the prostate-specific membrane antigen ("PSMA"). In
connection with the formation of the JV, the Members entered into a
series of agreements, including an LLC Agreement, a License Agreement
and a Services Agreement (collectively, the "Agreements"). Each Member
made an initial capital contribution of $100,000. In general, each
Member has equal representation on the JV's management committee and
equal voting rights and rights to profits and losses of the JV.
Under the LLC Agreement, as long as the Company is a Member, the
Company is required to pay to the JV $2 million in supplemental capital
contributions at certain defined dates or upon the achievement of
defined milestones by the JV. As discussed below, since it is probable
that the Company will be required to fund the $2 million supplemental
capital contribution, the Company, on June 15, 1999, recorded a
liability to the JV of approximately $1.8 million. Such amount
represented the present value of the supplemental capital contribution
discounted at 10%. The discount will be amortized as interest expense
over the term of the remaining payments. $1
F-17
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
million was paid during 1999. The unamortized balance at December 31,
1999 totaled $869,747, of which $452,606 is payable during 2000 and the
balance is payable during 2001. During the year ended December 31,
1999, the Company recognized its allocated share of the JV's loss of
approximately $2.0 million.
In accordance with the Agreements, the Company's $2 million
supplemental capital contribution is to be used by the JV to pay a $2
million non-refundable licensing fee to CYTOGEN ("CYTOGEN Payment").
The payment terms of the CYTOGEN Payment are identical to the payment
terms of the Company's required supplemental capital contribution.
Accordingly, the JV has discounted the CYTOGEN Payment along with the
Company's supplemental capital contribution thereby recording
approximately a $1.8 million liability to CYTOGEN and a $1.8 million
receivable from the Company.
The Company is engaged in a research program on behalf of the JV under
the Services Agreement and is compensated for its services based on
agreed upon terms. The Company is required to fund the cost of research
up to $3 million. As of December 31, 1999, the Company had funded
approximately $224,000 in research performed on behalf of the JV. All
inventions made by the Company in connection with the Services
Agreement will be assigned to the JV for its use and benefit.
The Agreements generally terminate upon the last to expire of the
patents granted by the Members to the JV or upon breach by either
party, which is not cured within 60 days of written notice.
F-18
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company accounts for its investment in the JV in accordance with
the equity method of accounting. Selected financial statement data of
the JV are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
BALANCE SHEET DATA 1999
-----------
<S> <C>
Cash $ 200,000
-----------
Accounts payable
CYTOGEN ($452,606, due currently) 869,747
The Company 53,911
Capital contributions
CYTOGEN 100,000
The Company 2,120,454
Accounts receivable from the Company (869,747)
Accumulated deficit (2,074,365)
-----------
$ 200,000
===========
FOR THE PERIOD
FROM JUNE 15,
1999 (INCEPTION)
TO DECEMBER 31,
STATEMENT OF OPERATIONS DATA 1999
Total revenue $ 72,813
Total expenses 2,147,178
-------------
Net loss $ (2,074,365)
=============
</TABLE>
9. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
The Company adopted three stock option plans, the Non-Qualified Stock
Option Plan, the Stock Option Plan and the Amended Stock Incentive Plan
(individually the "89 Plan," "93 Plan" and "96 Plan," respectively, or
collectively, the "Plans"). Under the 89 Plan, the 93 Plan and the 96
Plan as amended, a maximum of 375,000, 750,000 and 2,000,000 shares of
Common Stock, respectively, are available for awards to employees,
consultants, directors and other individuals who render services to the
Company (collectively, "Optionees"). The Plans contain certain
anti-dilution provisions in the event of a stock split, stock dividend
or other capital adjustment as defined. The 89 Plan and 93 Plan provide
for the Board, or the Compensation Committee ("Committee") of the
Board, to grant stock options to Optionees and to determine the
exercise price, vesting term and expiration date. The 96 Plan provides
for the Board or Committee to grant to Optionees stock options, stock
appreciation rights, restricted stock performance awards or phantom
stock, as defined (collectively "Awards"). The Committee will also
determine the term and vesting of the Award and the Committee may in
its discretion accelerate the vesting of an Award at any time. Options
granted under the Plans generally vest pro rata over five to ten year
periods and have terms of ten to twenty years. Except as noted below,
the exercise price of outstanding awards was equal to the fair value of
the Company's Common Stock on the dates of grant. Under the 89 Plan,
for a period of ten years following the termination for any reason of
an Optionee's employment or active involvement with the Company, as
determined by the Board, the Company has the right to repurchase any or
all shares of Common Stock held by the Optionee
F-19
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
and/or any or all of the vested but unexercised portion of any option
granted to such Optionee at a purchase price defined by the 89 Plan.
The 89 Plan terminated in April, 1994 and the 93 Plan and the 96 Plan
will terminate in December, 2003 and October, 2006, respectively;
however, options granted before termination of the Plans will
continue under the respective Plans until exercised, cancelled or
expired.
The following table summarizes stock option information for the Plans
as of December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$1.33 157,434 5.1 yrs. $1.33 149,934 $1.33
$3.67-$5.33 999,796 5.6 yrs. $4.47 695,494 $4.48
$6.65-$9.63 363,500 8.7 yrs. $9.22 78,900 $9.02
$10.00-$15.00 760,833 9.1 yrs. $12.49 371,000 $12.33
$17.00-$25.06 28,500 9.2 yrs. $19.81 21,166 $19.30
$26.25 3,000 9.9 yrs. $26.25 --
- ------ -------- -------- ---------
$1.33-$26.25 2,313,063 7.3 yrs. $7.86 1,316,494 $6.84
========= =========
</TABLE>
Transactions involving stock option awards under the Plans during 1997,
1998 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
Number Weighted-Average
of Shares Exercise Price (2)
--------- ------------------
<S> <C> <C>
Balance outstanding, December 31, 1996 1,041,236 $4.57
1997: Granted (1) 848,000 $4.00
Cancelled (1) (302,888) $5.36
Exercised (27,000) $1.33
----------
Balance outstanding, December 31, 1997 1,559,348 $4.17
1998: Granted 930,800 $11.07
Cancelled (10,700) $7.89
Exercised (191,150) $4.54
----------
Balance outstanding, December 31, 1998 2,288,298 $6.89
1999: Granted 254,500 $14.12
Cancelled (24,866) $10.12
Exercised (201,269) $4.32
Expirations (3,600) $15.33
---------
Balance outstanding, December 31, 1999 2,313,063 $7.86
----------
</TABLE>
F-20
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
----------
(1) Includes 216,225 options repriced, as discussed below
(2) For 248,000 in 1999, all options granted in 1998, and 2,100 in
1997, the option exercise price equaled the fair value of the
Company's common stock on the date of grant. For 1999 and 1997,
6,500 and 845,900 options, respectively, were granted, with an
exercise price below the fair market value of the Company's common
stock on the date of grant.
As of December 31, 1997, 1998 and 1999, 818,586, 858,464 and 1,316,494
options with weighted average exercise prices of $3.92, $4.01 and
$6.84, respectively, were exercisable under the Plans.
As of December 31, 1999, shares available for future grants under the
93 Plan and the 96 Plan amounted to 37,028 and 333,000, respectively.
The Company, during 1997, granted 520,900 stock options (including
216,225 options repriced as discussed below) to employees, with an
average exercise price of $4.00, which was below the estimated fair
value of the Common Stock on the date of grant. Accordingly, the
Company is recognizing compensation expense on a pro rata basis over
the respective options' vesting periods, of one to five years, for the
difference between the estimated fair value of the Common Stock on the
date the option was granted and the exercise price ("Unamortized
Compensation"). The Unamortized Compensation as of December 31, 1997,
1998 and 1999 has been included within stockholders equity. For the
years ended December 31, 1997, 1998 and 1999, the annual amortization
of Unearned Compensation for employees totaled $322,296, $314,902 and
$189,415, respectively. The Company since its inception and prior to
May 1997 has granted an aggregate of 1,082,000 options with a
weighted-average exercise price of $3.86 to consultants in
consideration for services. The fair values of these options have been
included as Unearned Compensation and are being amortized as
compensation expense on a pro rata basis over the service period
ranging from four years to ten years. For the years ended December 31,
1997, 1998 and 1999 the annual amortization of Unearned Compensation
for consultants totaled $778,358, $335,461 and $330,461, respectively.
The above amounts included the fair value of stock options issued to
consultants as discussed in Note 7(d). As of December 31, 1999, the
unamortized portion of Unearned Compensation for employees and
consultants totaled $591,142.
On April 1, 1997, the exercise price of 216,225 options granted under
the Plans, having exercise prices in excess of $4.00 per share, were
reduced to $4.00 per share. The exercise price of the repriced options
was less than the fair value of the underlying stock on the date of
repricing. Accordingly, the Company is recognizing compensation expense
on a pro rata basis over the respective remaining options' vesting
periods of one to five years for the difference between the estimated
fair value of the Common Stock on the date the option was repriced and
$4.00. All other aspects of the options remain unchanged.
During 1993, the Company adopted an Executive Stock Option Plan (the
"Executive Plan"), under which a maximum of 750,000 shares of Common
Stock, adjusted for stock splits, stock dividends, and other capital
adjustments, as defined, are available for stock option awards. Awards
issued under the Executive Plan may qualify as incentive stock options
("ISOs"), as defined by the Internal Revenue Code, or may be granted as
non-qualified stock options. Under the Executive Plan, the Board may
award options to senior executive employees (including officers who may
be members of the Board) of the Company, as defined. The Executive Plan
will terminate on December 15, 2003; however, any option outstanding as
of the termination date shall remain outstanding until such option
expires in accordance with the terms of the respective grant.
F-21
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
During December 1993, the Board awarded a total of 750,000 stock
options under the Executive Plan to one officer, of which 664,774 were
non-qualified options ("NQOs") and 85,226 were ISOs. The NQOs and ISOs
have a term of ten years and entitle the officer to purchase an equal
number of shares of Common Stock at prices of $5.33 and $5.87 per
share, respectively, which represented the estimated fair market value
and 110% of the estimated fair market value of the Company's Common
Stock at the date of grant, as determined by the Board of Directors.
375,000 of the options vest pro rata over a period of four years, with
the remaining 375,000 options vesting in full on the tenth anniversary
of the date of grant; however, vesting with respect to the options
vesting on the tenth anniversary will be accelerated in the event of
the effective date of an initial public offering of the Company's
Common Stock that yields certain gross per share amounts, as defined,
or immediately before the closing of an acquisition of the Company. As
the result of the Company's IPO and subsequent increase in the fair
market value of the Company's Common Stock, 300,000 options vested in
1998 and 75,000 options vested in 1999. During 1998, 275,226 options,
with a weighted-average exercise price of $5.50 per share, were
exercised.
The following table summarizes stock option information for the
Executive Plan as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- -------------------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$5.33 474,774 4.0 years $5.33 474,774 $5.33
</TABLE>
As of December 31, 1997, 1998 and 1999, 450,000, 399,774 and 474,774
options with weighted-average exercise prices of $5.43, $5.33 and
$5.33, respectively, were exercisable under the Executive Plan.
On May 1, 1998, the Company adopted two employee stock purchase plans
(the "Purchase Plans"), the 1998 Employee Stock Purchase Plan (the
"Qualified Plan)" and the 1998 Non-Qualified Employee Purchase Plan
(the "Non-Qualified"). The Purchase Plans provide for the grant to all
employees of options to use up to 25% of their quarterly compensation,
as such percentage is determined by the Board of Directors prior to the
date of grant, to purchase shares of the Common Stock at a price per
share equal to the lesser of the fair market value of the Common Stock
on the date of grant or 85% of the fair market value on the date of
exercise. Options are granted automatically on the first day of each
fiscal quarter and expire six months after the date of grants. The
Qualified Plan is not available for employees owning more than 5% of
the Common Stock and imposes certain other quarterly limitations on the
option grants. Options under the Non-Qualified Plan are granted to the
extent the option grants are restricted under the Qualified Plan. The
Qualified and Non-Qualified Plans provide for the issuance of up to
150,000 and 50,000 shares of Common Stock, respectively.
F-22
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Purchases of Common Stock during the years ended December 31, 1998 and
1999 are summarized as follows:
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plan
---------------------------------- -------------------------------
Shares Shares
Purchased Price Range Purchased Price Range
<S> <C> <C> <C>
1999 28,664 $10.00 - $27.05 3,533 $10.00 - $24.79
1998 3,494 $10.63 - $12.96
</TABLE>
At December 31, 1999, shares reserved for future purchases under the
Qualified and Non-Qualified Plans were 117,842 and 46,467,
respectively.
The following table summarizes the pro forma operating results of the
Company had compensation costs for the Plans, the Executive Plan and
the Purchase Plans been determined in accordance with the fair value
based method of accounting for stock based compensation as prescribed
by SFAS No. 123. Since option grants awarded during 1997, 1998 and 1999
vest over several years and additional awards are expected to be issued
in the future, the pro forma results shown below are not likely to be
representative of the effects on future years of the application of the
fair value based method.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Pro forma net (loss) income $5,016,206 $1,138,602 $2,270,184
---------- ---------- ----------
Pro forma net (loss) income per share, basic $ 1.60 $ 0.13 $ (0.23)
---------- ---------- ----------
Pro forma net (loss) income per share, diluted $ 0.65 $ 0.11 $ (0.23)
---------- ---------- ----------
</TABLE>
For the purpose of the above pro forma calculation, the fair value of
each option granted was estimated on the date of grant using the
Black-Scholes option pricing model. The following assumptions were used
in computing the fair value of option grants: expected volatility of
81% in 1997 and 71% in 1998 and 1999, expected lives of 5 years after
vesting; zero dividend yield and weighted-average risk-free interest
rates of 6.72% in 1997, 4.45% in 1998 and 5.28% in 1999.
During the years ended December 31, 1997, 1998 and 1999, 2,100, 930,800
and 248,000 options, respectively, whose exercise price was equal to
the market price of the stock on the date of grant were granted under
the Plans. The weighted average exercise price of those options was
$4.00, $11.07 and $14,25, respectively, and the weighted average grant
date fair value of those options was $5.45, $6.87 and $8.91,
respectively. During the years ended December 31, 1997 and 1999,
845,900 and 6,500 options whose exercise price was less than the market
price of the stock on the date of grant were granted under the Plans.
The weighted average exercise price of those options was $4.00 and
$9.09, respectively, and the weighted average grant date fair value was
$3.91 and $10.78, respectively.
F-23
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. EMPLOYEE SAVINGS PLAN
The Company, during 1993, adopted the provisions of the amended and
restated Progenics Pharmaceuticals 401(k) Plan (the "Amended Plan").
The terms of the Amended Plan, among other things, allow eligible
employees, as defined, to participate in the Amended Plan by electing
to contribute to the Amended Plan a percentage of their compensation to
be set aside to pay their future retirement benefits, as defined. The
Company has agreed to match 100% of up to the first 8% of compensation
that eligible employees contribute to the Amended Plan, as defined. In
addition, the Company may also make a discretionary contribution, as
defined, each year on behalf of all participants who are non-highly
compensated employees, as defined. The Company made matching
contributions of approximately $9,000, $27,000 and $95,000 to the
Amended Plan for the years ended December 31, 1997, 1998 and 1999,
respectively.
11. INCOME TAXES
There is no benefit for federal or state income taxes for the year
ended December 31, 1999, since the Company has incurred an operating
loss and has established a valuation allowance equal to the total
deferred tax asset.
There is no tax provision for the year ended December 31, 1998 as the
Company was able to utilize net operating loss carryforwards that
previously had been fully provided for. The effects of the alternative
minimum tax on the 1998 provision were immaterial.
The tax provision for the year ended December 31, 1997 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.
The differences between the Company's effective income tax rate,
(benefit) provision, and the Federal statutory rate is reconciled
below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Federal statutory rate 34% 34% (34)%
State income taxes, net of Federal benefit 6 6 (6)
Research and experimental tax credit (3) (17) (110)
Change in valuation allowance (32) (23) 150
----------- ------------- -------------
5% -- % -- %
=========== ============= =============
</TABLE>
F-24
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The tax effect of temporary differences, net operating losses and tax
credits carryforwards as of December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1999
<S> <C> <C>
Deferred tax assets and valuation allowance:
Net operating loss carry-forwards $2,669,911 $5,606,833
Fixed assets 108,500 209,693
Deferred charges 4,762,978 3,614,201
Research and experimental tax credit carry-forwards 1,083,944 1,627,460
Alternative minimum tax credit carry-forward 211,384 211,384
Valuation allowance (8,836,717) (11,269,571)
---------- ------------
$ -- $ --
========== ============
</TABLE>
The Company does not recognize deferred tax assets considering the
history of taxable losses and the uncertainty regarding the Company's
ability to generate sufficient taxable income in the future to utilize
these deferred tax assets.
As of December 31, 1999, the Company has available, for tax purposes,
unused net operating loss carryforwards of approximately $13.7 million
which will expire in various years from 2002 to 2019. The Company's
research and experimental tax credit carryforwards expire in various
years from 2003 to 2019. In addition, the Company's alternative minimum
tax credit can be carried forward indefinitely. Future ownership
changes may limit the future utilization of these net operating loss
and tax credit carryforwards as defined by the federal and state tax
codes.
12. LINE OF CREDIT
During March 1997 the Company obtained a line of credit ("Line") from a
bank. The terms of the Line provide for the Company to borrow up to $2
million. Outstanding borrowings accrue interest, payable monthly, at
the bank's prime rate of interest. The Line expired on July 31, 1997.
The repayment of the Line was guaranteed by two affiliates of a
stockholder of the Company ("Affiliates").
In consideration for the guarantee of the Line, the Company issued
70,000 warrants to the Affiliates. Such warrants vested immediately,
expire after five years and have an exercise price of $4.00. The
aggregate fair value of the warrants totaled $227,867, which was
expensed during the year ended December 31, 1997. As of December 31,
1999, all 70,000 warrants were outstanding.
13. NET (LOSS) INCOME PER SHARE
The Company's basic net (loss) income per share amounts have been
computed by dividing net (loss) income by the weighted-average number
of common shares outstanding during the period. For the year ended
December 31, 1999, the Company reported a net loss and, therefore,
common stock equivalents were not included since such inclusion would
have been anti-dilutive. For the years ended December 31, 1997 and
1998, the Company reported net income and, therefore, all
F-25
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
common stock equivalents, with exercise prices less than the average
fair market value of the Company's Common Stock for the year, have been
included in the calculation, as follows:
<TABLE>
<CAPTION>
NET INCOME
----------
(LOSS) SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
1999:
Basic and diluted:
Net (loss) $ (495,535) 9,728,403 $ 0.05
========== ======
1998:
Basic:
Net income $1,453,037 9,067,594 $ 0.16
========== ======
Effect of Dilutive Securities
Options 1,465,119
Warrants 194,420
-----------
Diluted:
Amounts used in computing per share data $1,453,037 10,727,133 $ 0.14
=========== =========== ======
1997:
Basic:
Net income $5,139,423 3,127,855 $ 1.64
========== ======
Effect of Dilutive Securities
Options 829,156
Warrants 77,211
Effect of conversion of preferred stock 3,769,700
----------
Diluted:
Amounts used in computing per share data $5,139,423 7,803,922 $ 0.66
=========== ========= ======
</TABLE>
For the years ended December 31, 1997, 1998 and 1999 common stock
equivalents which have been excluded from diluted per share amounts
because their effect would have been anti-dilutive, include the
following:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------------- ------------------------- ----------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
<S> <C> <C> <C> <C>
Options and
Warrants -- $ -- 16,000 $ 18.34 3,148,754 $ 7.05
</TABLE>
F-26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of PSMA Development Company LLC:
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of PSMA Development Company LLC (the "Company")
at December 31, 1999, and the results of its operations and its cash flows for
the period from June 15, 1999 (inception) to December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 11, 2000
F-27
<PAGE>
PSMA DEVELOPMENT COMPANY L.L.C.
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
DECEMBER 31,
1999
------------
<S> <C>
ASSETS:
Current assets:
Cash $ 200,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 506,517
Non-current liabilities:
Accounts payable 417,141
------------
TOTAL LIABILITIES 923,658
------------
Capital contributions 2,220,454
Contribution receivable, Progenics Pharmaceuticals, Inc. (869,747)
Accumulated deficit (2,074,365)
------------
TOTAL STOCKHOLDERS' DEFICIT (723,658)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 200,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
PSMA DEVELOPMENT COMPANY L.L.C.
STATEMENT OF OPERATION
FOR THE PERIOD JUNE 15, 1999 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
DECEMBER 31,
1999
------------
<S> <C>
Revenue:
Interest income $ 72,813
-----------
Expenses:
Research and development 223,520
General and administrative 53,911
Interest 72,813
Licensing fees 1,796,934
-----------
Total expenses 2,147,178
-----------
Net loss $(2,074,365)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE>
PSMA DEVELOPMENT COMPANY L.L.C.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JUNE 15, 1999 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL CONTRIBUTION ACCUMULATED COMPREHENSIVE
CONTRIBUTIONS RECEIVABLE DEFICIT TOTAL LOSS
<S> <C> <C> <C> <C> <C>
Capital contributions $2,220,454 $2,220,454
Contribution receivable,
Progenics Pharmaceuticals, Inc. $(869,747) (869,747)
Net loss for the period June 15, 1999
(inception) to December 31, 1999 $(2,074,365) $(2,074,365) $(2,074,365)
----------- --------- -------------- ----------- -----------
BALANCE AT DECEMBER 31, 1999 $2,220,454 $(869,747) $(2,074,365) $ (723,658) $(2,074,365)
----------- --------- -------------- ---------- -----------
----------- --------- -------------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE>
PSMA DEVELOPMENT COMPANY L.L.C.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE PERIOD JUNE 15, 1999
(INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $(2,074,365)
Amortization of discount on capital contribution - Progenics (72,813)
Adjustment to reconcile net loss to net cash
used in operating activities:
Increase in accounts payable 923,658
-----------
NET CASH USED IN OPERATING ACTIVITIES (1,223,520)
-----------
Cash flows from financing activities:
Capital contributions 2,293,267
Contributions receivable from Progenics Pharmaceuticals, Inc. (869,747)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,423,520
-----------
INCREASE IN CASH AND CASH EQUIVALENTS 200,000
-----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 200,000
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE>
PSMA DEVELOPMENT COMPANY L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND BUSINESS
PSMA Development Company LLC (the "JV") was formed on June 15, 1999 as
a joint venture between Progenics Pharmaceuticals, Inc. ("Progenics")
and CYTOGEN Corporation ("CYTOGEN") (collectively, the "Members") for
the purposes of conducting research, development, manufacturing and
marketing of products related to prostate-specific membrane antigen
("PSMA"). Each Member made an initial capital contribution of $100,000
and each has equal representation on the JV's management committee and
equal voting rights and rights to profits and losses of the JV, as
defined. In connection with the formation of the JV, the Members
entered into a series of agreements, including an LLC Agreement, a
Licensing Agreement and a Services Agreement (collectively, the
"Agreements") which define the obligations of each Member as to future
capital contributions and funding of research and development of the JV
(see Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The JV considers all highly liquid investments which have maturities of
three months or less when acquired to be cash equivalents. The carrying
amount reported in the balance sheet for cash and cash equivalents
approximates its fair value. At December 31, 1999, cash consisted of a
single interest bearing money market account in a commercial bank.
REVENUE RECOGNITION
Interest income from the investment of excess cash balances is
recognized as earned. Interest income from the amortization of discount
is recognized ratably over the term of the financial instrument.
RESEARCH AND DEVELOPMENT
Research and development costs are expenses as incurred.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the JV to concentration
of credit risk consist of cash and receivables from Members.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
INCOME TAXES
The JV's financial statements do not include a provision (credit) for
income taxes. Income taxes, if any, are the liability of the individual
Members.
3. COLLABORATION AGREEMENTS
In connection with the formation of the JV, the Members entered into a
series of agreements, including an LLC Agreement, a Licensing Agreement
and a Services Agreement. Under the terms of the LLC Agreement,
Progenics is required to pay to the JV $2 million in supplemental
capital contributions at certain defined dates or upon the achievement
of defined milestones by the JV.
F-32
<PAGE>
In accordance with the Agreements, Progenics' $2 million supplemental
capital contribution is to be used by the JV to pay a $2 million
non-refundable licensing fee to CYTOGEN (the "CYTOGEN Payment"). The
payment terms of the CYTOGEN Payment are identical to the payment terms
of Progenics' required supplemental capital contribution. Since it is
probable that Progenics will be required to fund the $2 million
supplemental capital contribution and that the JV will be required to
pay the licensing fee to CYTOGEN, the JV, upon execution of the
Agreements, recognized a receivable and payable from Progenics and
CYTOGEN, respectively, for $1,796,934. Such amount represented the
present value of the supplemental capital contribution and the CYTOGEN
Payment discounted at 10%. The discount on those payments is being
amortized ratably over the term of the LLC Agreement as interest income
and interest expense. During the period from June 15, 1999 (inception)
to December 31, 1999, the JV received $1 million from Progenics which
was, in turn, paid to CYTOGEN during that same period. In addition,
$72,813 of discount was amortized during the period from June 15, 1999
(inception) to December 31, 1999. Thus, at December 31, 1999, accounts
receivable from Progenics and accounts payable to CYTOGEN amounted to
$869,747, of which $452,606 is payable during 2000 and the balance is
due during 2001.
Under the terms of the Services Agreement, Progenics is engaged in a
research program on behalf of the JV. Progenics is required to fund the
cost of the research up to $3 million and is compensated based on
agreed upon terms. All inventions made by Progenics in connection with
the Services Agreement will be assigned to the JV for its use and
benefit. As of December 31, 1999, Progenics had funded approximately
$224,000 in costs for research which it had performed on behalf of the
JV.
The Agreements terminate upon the last to expire of the patents granted
by the Members to the JV or upon breach by a Member which is not cured
within 60 days of written notice.
F-33
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ---------------------------------------------------------------
*3.1 Certificate of Incorporation of the Registrant, as amended.
*3.2 By-laws of the Registrant.
*4.1 Specimen Certificate for Common Stock, $.0013 par value per share,
of the Registrant
*10.1 Form of Registration Rights Agreement
*10.2 1989 Non-Qualified Stock Option Plan (psi)
*10.3 1993 Stock Option Plan as amended (psi)
*10.4 1993 Executive Stock Option Plan (psi)
******10.5 Amended and Restated 1996 Stock Incentive Plan (psi)
*10.6 Form of Indemnification Agreement (psi)
****10.7 Employment Agreement dated December 22, 1998 between the Registrant
and Dr. Paul J. Maddon (psi)
*10.8 Letter dated August 25, 1994 between the Registrant and Dr. Robert
J. Israel (psi)
***10.9 Employment Agreement dated as of June 10, 1998 between the
Registrant and Ronald J. Prentki, as amended by Amendment No. 1 to
the Employment Agreement dated as of October 8, 1998 (psi)
*+10.10 gp120 Supply Agreement dated July 19, 1995 between the Registrant
and E. I. DuPont DeNemours and Company, as amended, October 27, 1995
*+10.11 sCD4 Supply Agreement dated June 27, 1995 between the Registrant and
E. I. DuPont De Nemours and Company
*+10.12 Supply Agreement dated February 8, 1996 between the Registrant and
Intracel Corporation Stock Purchase Agreement dated February 11,
1994 between the Registrant and Christopher Ben
*+10.13 License Agreement dated November 17, 1994 between the Registrant and
Sloan-Kettering Institute for Cancer Research
*+10.14 Clinical Trial Agreement dated December 12, 1994 between the
Registrant and Sloan-Kettering Institute for Cancer Research
*+10.15 QS-21 License and Supply Agreement dated August 31, 1995 between the
Registrant and Cambridge Biotech Corporation (now known as Aquila
Biopharmaceuticals, Inc.)
*+10.16 gp120 Sublicense Agreement dated March 17, 1995 between the
Registrant and Cambridge Biotech Corporation (now known as Aquila
Biopharmaceuticals, Inc.)
*+10.17 Cooperative Research and Development Agreement dated February 25,
1993 between the Registrant and the Centers for Disease Control and
Prevention
*+10.18 License Agreement dated March 1, 1989, as amended by a Letter
Agreement dated March 1, 1989 and as amended by a Letter Agreement
dated October 22, 1996 between the Registrant and the Trustees of
Columbia University
*+10.19 License Agreement dated June 25, 1996 between the Registrant and The
Regents of the University of California
*+10.20 KLH Supply Agreement dated July 1, 1996 between the Registrant and
PerImmune, Inc.
*+10.21 sCD4 Supply Agreement dated November 3, 1993 between the Registrant
and E.I. DuPont DeNemours and Company
*******10.22 Sublease dated January 27, 1998 between the Registrant and Witco
Corporation
*+10.23 Joint Development and Master License Agreement dated as of April 15,
1997 between Bristol-Myers Squibb Company and the Registrant
*+10.24 Sublicense Agreement with respect to the Sloan-Kettering License
Agreement dated as of April 15, 1997 between Bristol-Myers Squibb
Company and the Registrant
*+10.25 Sublicense Agreement with respect to The Regents' License Agreement
dated April 15, 1997 between Bristol-Myers Squibb Company and the
Registrant
*+10.26 Sublicense Agreement with respect to Aquila Biopharmaceuticals, Inc.
License and Supply Agreement dated April 15, 1997 between
Bristol-Myers Squibb Company and the Registrant
*+10.27 Letter agreement dated as of April 15, 1997 among Bristol-Myers
Squibb Company, Registrant and the Sloan-Kettering Institute for
Cancer Research
*10.28 Letter agreement dated as of April 15, 1997 among Bristol-Myers
Squibb Company, Registrant and The Regents of the University of
California
<PAGE>
Exhibit No. Description of Exhibit
- ----------- ---------------------------------------------------------------
*+10.29 Letter agreement dated as of April 15, 1997 among Bristol-Myers
Squibb Company, Registrant and Aquila Biopharmaceuticals, Inc.
*10.30 Form of Warrant to purchase Series C Preferred Stock
*10.31 Form of Warrant issued to Tudor BVI Futures, Ltd. and Tudor Global
Trading LLC
**+10.32 Heads of Agreement, effective as of December 23, 1997, among F.
Hoffman-La Roche Ltd., Hoffmann-La Roche Inc. and Registrant
*****+10.33 Development and License Agreement effective as of April 30, 1999,
between Protein Design Labs, Inc. and the Registrant
*****+10.34 PSMA/PSMP License Agreement dated June 15, 1999, by and among the
Registrant, CYTOGEN Corporation and PSMA Development Company LLC
*****+10.35 Limited Liability Company Agreement of PSMA Development Company,
dated June 15, 1999, by and among the Registrant, CYTOGEN
Corporation and PSMA Development Company LLC
10.36 Director Stock Option Plan (psi)
23.1 Consent of PricewaterhouseCoopers LLP (regarding the Registrant)
23.2 Consent of PricewaterhouseCoopers LLP (regarding PSMA Development
Company LLC)
27.1 Financial Data Schedule.
- -------------
* Previousl filed as an exhibit to the Company's Registration Statement
on Form S-1, Commission File No. 333-13627, and incorporated by
reference herein.
** Previously filed as an exhibit to the Company's Current Report on Form
8-K dated February 6, 1998, and incorporated by reference herein.
*** Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1998, and
incorporated by reference herein.
**** Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1998, and incorporated by
reference herein.
***** Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1999, and
incorporated by reference herein.
****** Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1999, and
incorporated by reference herein.
******* Previously filed as an exhibit to the Company's Registration Statement
on Form S-3, Commission File No. 333-88931, and incorporated by
reference herein.
+ Confidential treatment granted as to certain portions, which portions
are omitted and filed separately with the Commission.
(psi) Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit 10.36
PROGENICS PHARMACEUTICALS, INC.
AMENDED 1996 STOCK INCENTIVE PLAN
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Stock Option Plan for Non-Employee Directors (the "Directors'
Plan") provides for the grant to those members of the Board of Directors of
Progenics Pharmaceuticals, Inc. (the "Company") who are not employees of the
Company or any of its subsidiaries (each a "Non-Employee Director") of options
to purchase shares of the Company's common stock, par value $.0013 per share
(the "Common Stock"), under the Amended 1996 Stock Incentive Plan (the "Plan").
1. Eligibility. Each member of the Board of Directors who is a
Non-Employee Director as of the first day of each calendar quarter shall be
eligible on such date to receive a grant under the Directors' Plan.
2. Grants. On the first day of each calendar quarter (a "Date of
Grant"), each Non-Employee Director who is eligible to receive a grant under the
Directors' Plan shall automatically and without further approval of the Board of
Directors be granted an option under the Directors' Plan to purchase 2,500
shares of the Common Stock.
2. Exercise Price. The price per share of the Common Stock payable upon
the exercise of any stock option granted under the Directors' Plan shall be the
closing price per share of the Common Stock on the Nasdaq National Market on the
last trading date prior to the Date of Grant.
3. Vesting. All stock options granted hereunder shall be fully vested
as of the Date of Grant.
4. Stock Option Agreements. Each grant of a stock option under the
Directors' Plan shall be evidenced by an agreement in the form attached hereto,
which shall be signed on behalf of the Company by an officer thereof and
accepted and agreed to by the Non-Employee Director.
5. Term; Termination. All stock options granted hereunder shall have a
term of ten years, subject to earlier termination as follows. Each option that
has not expired or previously been exercised shall terminate on the earlier to
occur of (i) the close of business on the first anniversary of the grantee's
death or disability or (ii) the close of business on the 90th day after the date
on which the grantee ceases to be a director of the Company, other than by
reason of such grantee's death or disability.
6. Amendment. The terms and conditions for the grant of options under
the Directors' Plan may be amended, or such grants may be terminated entirely,
at any time by the Board of Directors of the Company provided that no such
amendment or termination shall in any way affect any option theretofore granted
without the written consent of the holder thereof.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-52277 and 333-56571) and Form S-3 (No.
333-88931) of Progenics Pharmaceuticals, Inc. of our report date February 11,
2000, except for the last three paragraphs of Note 7c, for which the date is
March 6, 2000 relating to the financial statements of Progenics Pharmaceuticals,
Inc., which appears in this Form 10-K.
PricewaterhouseCoopers LLP
New York, New York
March 29, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-52277 and 333-56571) and Form S-3 (No.
333-88931) of Progenics Pharmaceuticals, Inc. of our report date February 11,
2000 relating to the financial statements of Progenics Pharmaceuticals, Inc.,
which appears in this Form 10-K.
PricewaterhouseCoopers LLP
New York, New York
March 29, 2000
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