DELAWARE
|
13-3379479
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
|
Page
No.
|
Part
I
|
|
|
Item
1.
|
3
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
7
|
|
Item
2.
|
15
|
|
Item
3.
|
32
|
|
Item
4.
|
32
|
|
|
|
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1A.
|
32
|
|
Item
4.
|
34
|
|
Item
6.
|
34
|
|
|
35
|
|
|
Certifications
|
|
|
June
30,
2006
|
December
31,
2005
|
|||||
ASSETS:
|
|
|
|||||
Current
assets:
|
|
|
|||||
Cash
and cash equivalents
|
$
|
18,287
|
$
|
67,072
|
|||
Marketable
securities
|
135,507
|
98,983
|
|||||
Accounts
receivable
|
1,618
|
3,287
|
|||||
Other
current assets
|
2,785
|
2,561
|
|||||
Total
current assets
|
158,197
|
171,903
|
|||||
Marketable
securities
|
1,500
|
7,035
|
|||||
Fixed
assets, at cost, net of accumulated depreciation and
amortization
|
6,434
|
4,156
|
|||||
Investment
in joint venture
|
371
|
||||||
Restricted
cash
|
541
|
538
|
|||||
Total
assets
|
$
|
166,672
|
$
|
184,003
|
|||
|
|||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY:
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
11,574
|
$
|
10,238
|
|||
Deferred
revenue - current
|
26,851
|
23,580
|
|||||
Due
to joint venture
|
194
|
||||||
Other
current liabilities
|
213
|
790
|
|||||
Total
current liabilities
|
38,638
|
34,802
|
|||||
Deferred
revenue - long term
|
23,786
|
36,420
|
|||||
Deferred
lease liability
|
77
|
49
|
|||||
Total
liabilities
|
62,501
|
71,271
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders’
equity:
|
|||||||
Preferred
stock, $.001 par value, 20,000,000 shares authorized; none issued
and
outstanding
|
|||||||
Common
stock, $.0013 par value, 40,000,000 shares authorized; issued and
outstanding - 25,638,148 in 2006 and 25,229,240 in 2005
|
33
|
33
|
|||||
Additional
paid-in capital
|
310,193
|
306,085
|
|||||
Unearned
compensation
|
(4,498
|
)
|
|||||
Accumulated
deficit
|
(205,711
|
)
|
(188,740
|
)
|
|||
Accumulated
other comprehensive (loss)
|
(344
|
)
|
(148
|
)
|
|||
Total
stockholders’ equity
|
104,171
|
112,732
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
166,672
|
$
|
184,003
|
|
For
the three months ended
|
For
the six months ended
|
|||||||||||
|
June
30,
|
June
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
Revenues:
|
|
|
|
|
|||||||||
Contract
research and development from collaborator
|
$
|
17,044
|
$
|
25,533
|
|||||||||
Contract
research and development from joint venture
|
$
|
129
|
$
|
569
|
|||||||||
Research
grants and
contracts
|
2,064
|
1,925
|
4,526
|
4,070
|
|||||||||
Product
sales
|
14
|
21
|
65
|
25
|
|||||||||
Total
revenues
|
19,122
|
2,075
|
30,124
|
4,664
|
|||||||||
|
|||||||||||||
Expenses:
|
|||||||||||||
Research
and development
|
29,978
|
10,466
|
40,537
|
22,565
|
|||||||||
General
and administrative
|
5,016
|
2,900
|
9,528
|
6,042
|
|||||||||
Loss
in joint venture
|
1,339
|
121
|
1,544
|
||||||||||
Depreciation
and amortization
|
362
|
470
|
725
|
953
|
|||||||||
Total
expenses
|
35,356
|
15,175
|
50,911
|
31,104
|
|||||||||
|
|||||||||||||
Operating
loss
|
(16,234
|
)
|
(13,100
|
)
|
(20,787
|
)
|
(26,440
|
)
|
|||||
Other
income:
|
|||||||||||||
Interest
income
|
1,906
|
305
|
3,816
|
451
|
|||||||||
|
|||||||||||||
Net
loss
|
$
|
(14,328
|
)
|
$
|
(12,795
|
)
|
$
|
(16,971
|
)
|
$
|
(25,989
|
)
|
|
|
|||||||||||||
Net
loss per share - basic and diluted
|
$
|
(0.56
|
)
|
$
|
(0.65
|
)
|
$
|
(0.67
|
)
|
$
|
(1.40
|
)
|
|
Weighted-average
shares - basic and diluted
|
25,569
|
19,716
|
25,462
|
18,575
|
Common Stock
|
Additional
|
Accumulated
Other
|
Total
|
||||||||||||||||||||||
Shares
|
Amount
|
Paid-In
Capital
|
Unearned
Compensation
|
Accumulated
Deficit
|
Comprehensive
Loss
|
Stockholders’
Equity
|
Comprehensive
Loss
|
||||||||||||||||||
Balance
at December 31, 2005
|
25,229
|
$
|
33
|
$
|
306,085
|
$
|
(4,498
|
)
|
$
|
(188,740
|
)
|
$
|
(148
|
)
|
$
|
112,732
|
|||||||||
Compensation
expense for vesting of share- based payment
arrangements
|
4,401
|
4,401
|
|||||||||||||||||||||||
Issuance
of restricted stock, net of forfeitures
|
17
|
||||||||||||||||||||||||
Sale
of common stock under employee stock purchase plans and exercise of
stock options
|
392
|
3,859
|
3,859
|
||||||||||||||||||||||
Issuance
of compensatory stock options to non-employees
|
346
|
346
|
|||||||||||||||||||||||
Elimination
of unearned compensation upon adoption of SFAS No. 123(R)
|
(4,498
|
)
|
4,498
|
||||||||||||||||||||||
Net
(loss)
|
(16,971
|
)
|
(16,971
|
)
|
$
|
(16,971
|
)
|
||||||||||||||||||
Change
in unrealized loss on marketable securities
|
(196
|
)
|
(196
|
)
|
(196
|
)
|
|||||||||||||||||||
Balance
at June 30, 2006
|
25,638
|
$
|
33
|
$
|
310,193
|
$
|
¾
|
$
|
(205,711
|
)
|
$
|
(
344
|
)
|
$
|
104,171
|
$
|
(17,167
|
)
|
|
Six
Months Ended June 30,
|
||||||
|
2006
|
2005
|
|||||
Cash
flows from operating activities:
|
|
|
|||||
Net
loss
|
$
|
(16,971
|
)
|
$
|
(25,989
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
725
|
953
|
|||||
Amortization
of discounts, net of premiums, on marketable securities
|
55
|
130
|
|||||
Amortization
of unearned compensation
|
428
|
||||||
Noncash
expenses incurred in connection with vesting of share-based compensation
awards
|
4,401
|
12
|
|||||
Noncash
expenses incurred in connection with issuance of compensatory stock
options to non-employees
|
346
|
149
|
|||||
Expense
of purchased technology (see Note 8b)
|
13,209
|
||||||
Loss
in joint venture
|
121
|
1,544
|
|||||
Adjustment
to loss in joint venture
|
658
|
||||||
Write-off
of fixed assets
|
2
|
||||||
Changes
in assets and liabilities, net of effects of purchase of PSMA
LLC:
|
|||||||
Decrease
(increase) in accounts receivable
|
1,669
|
(885
|
)
|
||||
Increase
in amount due from joint venture
|
(1,068
|
)
|
|||||
(Increase)
decrease in other current assets and other assets
|
(224
|
)
|
333
|
||||
Increase
in accounts payable and accrued expenses
|
1,255
|
284
|
|||||
(Decrease)
increase in amount due to joint venture
|
(194
|
)
|
1,100
|
||||
Decrease
(increase) in investment in joint venture
|
250
|
(2,700
|
)
|
||||
(Decrease)
in deferred revenue
|
(9,363
|
)
|
|||||
(Decrease)
in other current liabilities
|
(577
|
)
|
|||||
Increase
(decrease) in deferred lease liability
|
28
|
(4
|
)
|
||||
Net
cash used in operating activities
|
(5,268
|
)
|
(25,055
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Capital
expenditures
|
(3,005
|
)
|
(391
|
)
|
|||
Sales
of marketable securities
|
171,570
|
26,941
|
|||||
Purchase
of marketable securities
|
(202,810
|
)
|
(43,254
|
)
|
|||
Acquisition
of PSMA LLC, net of cash acquired (see Note 8b)
|
(13,128
|
)
|
|||||
Increase in restricted cash
|
(3
|
)
|
|||||
Net
cash (used in) investing activities
|
(47,376
|
)
|
(16,704
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from public offerings of common stock
|
60,000
|
||||||
Expenses
associated with public offerings of common stock
|
(2,173
|
)
|
|||||
Proceeds
from the exercise of stock options and sale of common stock under
the
Employee Stock Purchase Plan
|
3,859
|
5,047
|
|||||
Net
cash provided by financing activities
|
3,859
|
62,874
|
|||||
Net
(decrease) increase in cash and cash equivalents
|
(48,785
|
)
|
21,115
|
||||
Cash
and cash equivalents at beginning of period
|
67,072
|
5,227
|
|||||
Cash
and cash equivalents at end of period
|
$
|
18,287
|
$
|
26,342
|
|||
Supplemental
disclosure of noncash investing activity:
|
|||||||
Fair value of assets, including purchased technology, acquired from
PSMA LLC (see Note 8b)
|
$
|
13,674
|
|||||
Cash paid for acquisition of PSMA LLC
|
(13,459
|
)
|
|||||
Liabilities assumed from PSMA LLC
|
$
|
215
|
Three
Months
Ended
June 30,
2005
|
Six
Months Ended June 30, 2005
|
||||||
Net
loss, as reported
|
$
|
(12,795
|
)
|
$
|
(25,989
|
)
|
|
Add:
Stock-based employee compensation expense included in reported
net
loss
|
235
|
440
|
|||||
Deduct:
Total Stock-based employee compensation expense determined under
fair
value based method for all awards
|
(1,904
|
)
|
(3,717
|
)
|
|||
Pro
forma net loss
|
$
|
(14,464
|
)
|
$
|
(29,266
|
)
|
|
Net
loss per share amounts, basic and diluted:
|
|||||||
As
reported
|
$
|
(0.65
|
)
|
$
|
(1.40
|
)
|
|
Pro
forma
|
$
|
(0.73
|
)
|
$
|
(1.58
|
)
|
For
the Six Months Ended
June
30,
|
|||||||
2006
|
2005
|
||||||
Expected
volatility
|
92
|
%
|
97
|
%
|
|||
Expected
dividends
|
zero
|
zero
|
|||||
Expected
term (in years)
|
6.5
|
6.5
|
|||||
Risk-free
rate
|
5.06
|
%
|
3.68
|
%
|
Options
|
Shares
(000)
|
Weighted
Average Exercise Price
|
Weighted
Average
Remaining Contractual Term (Yr.)
|
Aggregate
Intrinsic Value
|
|||||||||
Outstanding
at January 1, 2006
|
4,099
|
$
|
14.60
|
||||||||||
Granted
|
263
|
25.42
|
|||||||||||
Exercised
|
(221
|
)
|
8.27
|
||||||||||
Forfeited
or expired
|
(53
|
)
|
16.29
|
||||||||||
Outstanding
at June 30, 2006
|
4,088
|
$
|
15.62
|
5.78
|
$
|
36,801
|
|||||||
Exercisable
at June 30, 2006
|
2,859
|
$
|
13.91
|
4.76
|
$
|
30,688
|
Nonvested
Shares
|
Shares
(000)
|
Weighted
Average Grant-Date
Fair
Value
|
|||||
Nonvested
at January 1, 2006
|
242
|
$
|
19.47
|
||||
Granted
|
22
|
27.94
|
|||||
Vested
|
(78
|
)
|
20.32
|
||||
Forfeited
|
(5
|
)
|
20.26
|
||||
Nonvested
at June 30, 2006
|
181
|
$
|
20.11
|
For
the Six Months Ended
June
30,
|
|||||||
2006
|
2005
|
||||||
Expected
volatility
|
38
|
%
|
44
|
%
|
|||
Expected
dividends
|
zero
|
zero
|
|||||
Expected
term
|
6
months
|
6
months
|
|||||
Risk-free
rate
|
4.05
|
%
|
2.53
|
%
|
Qualified
Plan
|
Non-Qualified
Plan
|
|||||||||||||||
Shares
Purchased
|
Price
Range
|
Weighted
Average
Grant-Date Fair Value
|
Shares
Purchased
|
Price
Range
|
Weighted
Average
Grant-Date Fair Value
|
|||||||||||
58
|
$
|
18.21
- $ 25.84
|
$
|
3.04
|
13
|
$
|
18.21
- $25.84
|
$
|
3.07
|
|
June
30,
2006
|
December
31,
2005
|
|||||
National
Institutes of Health
|
$
|
1,493
|
$
|
3,265
|
|||
Wyeth
|
118
|
||||||
Other
|
7
|
22
|
|||||
Total
|
$
|
1,618
|
$
|
3,287
|
|
June
30,
2006
|
December
31,
2005
|
|||||
Accounts
payable
|
$
|
577
|
$
|
880
|
|||
Accrued
consulting and clinical trial costs
|
6,968
|
6,721
|
|||||
Accrued
payroll and related costs
|
1,321
|
1,144
|
|||||
Legal
and professional fees
|
1,
251
|
1,255
|
|||||
Other
|
1,457
|
238
|
|||||
Total
|
$
|
11,574
|
$
|
10,238
|
6. |
Revenue
Recognition - Contract Research and Development from
Collaborator
|
|
Net
Loss (Numerator)
|
Shares
(Denominator)
|
Per
Share Amount
|
|||||||
Three
months ended June 30, 2006
|
|
|
|
|||||||
Basic
and Diluted
|
$
|
(14,328
|
)
|
25,569
|
$
|
(0.56
|
)
|
|||
Six
months ended June 30, 2006
|
||||||||||
Basic
and Diluted
|
$
|
(16,971
|
)
|
25,462
|
$
|
(0.67
|
)
|
|||
Three
months ended June 30, 2005
|
||||||||||
Basic
and Diluted
|
$
|
(12,795
|
)
|
19,716
|
$
|
(0.65
|
)
|
|||
Six
months ended June 30, 2005
|
||||||||||
Basic
and Diluted
|
$
|
(25,989
|
)
|
18,575
|
$
|
(1.40
|
)
|
|
Three
Months Ended June 30,
|
||||||||||||
|
2006
|
2005
|
|||||||||||
|
Wtd.
Avg. Number
|
Wtd.
Avg. Exercise Price
|
Wtd.
Avg. Number
|
Wtd.
Avg. Exercise Price
|
|||||||||
Stock
options
|
4,487
|
$
|
14.62
|
4,549
|
$
|
12.80
|
|||||||
Restricted
stock
|
253
|
151
|
|||||||||||
Total
|
4,740
|
4,700
|
|
Six
Months Ended June 30,
|
||||||||||||
|
2006
|
2005
|
|||||||||||
|
Wtd.
Avg. Number
|
Wtd.
Avg. Exercise Price
|
Wtd.
Avg. Number
|
Wtd.
Avg. Exercise Price
|
|||||||||
Stock
options
|
4,507
|
$
|
14.27
|
4,677
|
$
|
12.78
|
|||||||
Restricted
stock
|
248
|
163
|
|||||||||||
Total
|
4,755
|
4,840
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
Net
loss
|
$
|
(14,328
|
)
|
$
|
(12,795
|
)
|
$
|
(16,971
|
)
|
$
|
(25,989
|
)
|
|
Change
in net unrealized (loss) gain on marketable securities
|
(55
|
)
|
48
|
(196
|
)
|
48
|
|||||||
Comprehensive loss
|
$
|
(14,383
|
)
|
$
|
(12,747
|
)
|
$
|
(17,167
|
)
|
$
|
(25,941
|
)
|
Three
Months Ended
June
30,
|
Dollar
|
Percentage
|
|||
Category
|
2005
|
2006
|
Variance
|
Variance
|
Explanation
|
Salaries
and benefits (cash)
|
$
3,068
|
$
3,973
|
$
905
|
29
%
|
Compensation
increases and an increase in average headcount from 112 to 128 for
the
three month periods ended June 30, 2005 and 2006, respectively, in
the
research and development, manufacturing and medical departments,
including
the hiring of our Vice President, Quality in July 2005.
|
Share-based
compensation (non-cash)
|
21
|
1,288
|
1,267
|
6,033
|
Increase
due to the adoption of SFAS No. 123(R) on January 1, 2006, which
requires
the recognition of non-cash compensation expense related to share-based
payments from stock options, restricted stock and the Employee Stock
Purchase Plans (see “Critical Accounting Policies − Share-Based Payment
Arrangements” below).
|
Clinical
trial costs
|
2,557
|
2,292
|
(265)
|
(10)
|
Decrease
primarily related to decrease in methylnaltrexone ($325) due to completion
of the methylnaltrexone phase 3 trials (301 and 302 and their extension
studies) in the second half of 2005 and in the first quarter of 2006
.In
addition, there was a decrease in GMK ($86), due to achievement of
full
enrollment in the fourth quarter of 2005 offset by the completion
of the
trial by more patients in 2006 than in 2005. The decrease was, partially
offset by an increase in HIV ($146), resulting from an increase in
the PRO
140 trial activity in the 2006 period.
|
Laboratory
supplies
|
791
|
1,143
|
352
|
45
|
Increase
in methylnaltrexone ($26) due to the purchase of methylnaltrexone
in the
2006 period but not in the 2005 period, increase in HIV ($99), due
to
preparation of materials for the phase 1b PRO 140 clinical trial
and an
increase in basic research in 2006 for GMK ($45) and other projects
($182).
|
Contract
manufacturing and subcontractors
|
1,078
|
4,911
|
3,833
|
356
|
Increases
in methylnaltrexone ($2,442) related to future clinical trials under
our
collaboration agreement with Wyeth, HIV ($862), GMK ($504) and other
projects ($25). These expenses are related to the conduct of clinical
trials, including testing, analysis, formulation and toxicology services
and vary as the timing and level of such services are
required.
|
Consultants
|
857
|
1,522
|
665
|
78
|
Increases
in methylnaltrexone ($786), GMK ($2) and other projects ($24), partially
offset by a decrease in HIV ($147). These expenses are related to
monitoring and conduct of clinical trials, including analysis of
data from
completed clinical trials and vary as the timing and level of such
services are required.
|
License
fees
|
1,076
|
152
|
(924)
|
(86)
|
Decrease
primarily related to contractual payments to licensors, including
milestone payments, related to our programs in HIV ($1,020), partially
offset by increases in such payments related to methylnaltrexone
($3) and
GMK ($93).
|
Other
|
1,018
|
14,697
|
13,679
|
1,344
|
Increase
primarily due to $13,209 of expense related to the acquisition of
Cytogen’s 50% interest in PSMA LLC, and an increase in rent ($283) and
other operating expenses ($187) in the 2006 period over those in
the 2005
period.
|
Total
|
$
10,466
|
$ 29,978
|
$
19,512
|
186
%
|
|
Three
Months Ended
June
30,
|
Dollar
|
Percentage
|
|||
Category
|
2005
|
2006
|
Variance
|
Variance
|
Explanation
|
Salaries
and benefits (cash)
|
$
985
|
$
1,493
|
$
508
|
52
%
|
Increase
due to compensation increases and an increase in average headcount
from 24
to 31 in the general and administrative departments for the three
month
periods ended June 30, 2005 and 2006, respectively, including the
hiring
of our General Counsel in June 2005 and the departure of one senior
executive in April 2005.
|
Share-based
compensation (non-cash)
|
0
|
1,240
|
1,240
|
N/A
|
Increase
due to the adoption of SFAS No. 123(R) on January 1, 2006, which
requires
the recognition of non-cash compensation expense related to share-
based
payments from stock options, restricted stock and the Employee Stock
Purchase Plans (see “Critical Accounting Policies − Share-Based Payment
Arrangements” below).
|
Consulting
and professional fees
|
1,028
|
1,124
|
96
|
9
|
Increase
due primarily to increases in audit fees, including audit fees for
internal controls over financial reporting ($74), recruiting ($137),
partially offset by a decrease in legal and patent fees ($71), consultants
($34) and other ($10).
|
Operating
expenses
|
717
|
999
|
282
|
39
|
Increase
due primarily to an increase in insurance costs ($53), rent ($150),
computer supplies and software ($43) and other fees and expenses
($115),
partially offset by a decrease in Director compensation expense ($79)
due
to vesting of restricted stock awards in 2005 but not in
2006.
|
Other
|
170
|
160
|
(10)
|
(6)
|
Decrease
primarily related to decreased investor relations costs ($83) and
other
($4), partially offset by an increase in corporate taxes ($77).
|
Total
|
$
2,900
|
$
5,016
|
$
2,116
|
73
%
|
|
Six
Months Ended
June
30,
|
Dollar
|
Percentage
|
|||
Category
|
2005
|
2006
|
Variance
|
Variance
|
Explanation
|
Salaries
and benefits (cash)
|
$
6,447
|
$
7,805
|
$
1,358
|
21
%
|
Compensation
increases and an increase in average headcount from 112 to 126 for
the six
month periods ended June 30, 2005 and 2006, respectively, in the
research
and development, manufacturing and medical departments, including
the
hiring of our Vice President, Quality in July 2005.
|
Share-based
compensation (non-cash)
|
149
|
2,481
|
2,332
|
1,565
|
Increase
due to the adoption of SFAS No. 123(R) on January 1, 2006, which
requires
the recognition of non-cash compensation expense related to share-based
payments from stock options, restricted stock and the Employee Stock
Purchase Plans (see “Critical Accounting Policies − Share-Based Payment
Arrangements” below).
|
Clinical
trial costs
|
6,057
|
3,899
|
(2,158)
|
(36)
|
Decrease
primarily related to methylnaltrexone ($2,442) due to completion
of the
methylnaltrexone phase 3 trials (301 and 302 and their extension
studies)
in the second half of 2005 and in the first quarter of 2006. That
decrease
was partially offset by increases in GMK ($32), due to increased
enrollment in the 2006 period, and HIV ($252), resulting from an
increase
in the PRO 140 trial activity and a decline in PRO 542 activity in
the
2006 period.
|
Laboratory
supplies
|
3,417
|
2,070
|
(1,347)
|
(39)
|
Decrease
in methylnaltrexone ($1,846) due to the purchase of more methylnaltrexone
in the 2005 period than in the 2006 period, partially offset by increases
in HIV ($180), due to preparation of materials for the phase 1b PRO
140
clinical trial and an increase in basic research in 2006 for GMK
($51) and
other projects ($268).
|
Contract
manufacturing and subcontractors
|
1,982
|
6,046
|
4,064
|
205
|
Increase
in methylnaltrexone ($2,314) related to future clinical trials under
our
collaboration with Wyeth, HIV ($1,218) and GMK ($535), partially
offset by
decrease in other projects ($3). These expenses are related to the
conduct
of clinical trials, including testing, analysis, formulation and
toxicology services and vary as the timing and level of such services
are
required.
|
Consultants
|
1,298
|
2,094
|
796
|
61
|
Increases
in methylnaltrexone ($872), GMK ($47) and other ($19), partially
offset by
a decrease in HIV ($142). These expenses are related to monitoring
and
conduct of clinical trials, including analysis of data from completed
clinical trials and vary as the timing and level of such services
are
required.
|
License
fees
|
1,185
|
428
|
(757)
|
(64)
|
Decrease
primarily related to contractual payments to licensors, including
milestone payments, related to our programs in HIV ($1,106), partially
offset by increases in such payments related to methylnaltrexone
($263)
and GMK ($86).
|
Other
|
2,030
|
15,714
|
13,684
|
674
|
Increase
primarily due to $13,209 of expense related to our acquisition of
Cytogen’s 50% interest in PSMA LLC and an increase in rent ($310), travel
($108) and other operating expenses ($154) in the 2006 period, partially
offset by decreased insurance costs ($97) in the 2006 period over
those in
the 2005 period.
|
Total
|
$
22,565
|
$ 40,537
|
$
17,972
|
80
%
|
|
Six
Months Ended
June
30,
|
Dollar
|
Percentage
|
|||
Category
|
2005
|
2006
|
Variance
|
Variance
|
Explanation
|
Salaries
and benefits (cash)
|
$
2,297
|
$
2,958
|
$
661
|
29
%
|
Increase
due to compensation increases and an increase in average headcount
from 24
to 28 in the general and administrative departments for the six month
periods ended June 30, 2005 and 2006, respectively, including the
hiring
of our General Counsel in June 2005 and the departure of one senior
executive in April 2005, partially offset by a bonus to one executive
officer.
|
Share-based
compensation (non-cash)
|
12
|
2,270
|
2,258
|
18,817
|
Increase
due to the adoption of SFAS No. 123(R) on January 1, 2006, which
requires
the recognition of non-cash compensation expense related to share-
based
payments from stock options, restricted stock and the Employee Stock
Purchase Plans (see “Critical Accounting Policies − Share-Based Payment
Arrangements” below).
|
Consulting
and professional fees
|
2,130
|
2,232
|
102
|
5
|
Increase
due primarily to increases in audit fees, including audit fees for
internal controls over financial reporting ($194) and recruiting
($194),
partially offset by a decrease in legal and patent fees ($283) and
other
($3).
|
Operating
expenses
|
1,351
|
1,769
|
418
|
31
|
Increase
due primarily to an increase in insurance costs ($190), rent ($166),
computer supplies and software ($60) and other ($97), partially offset
by
a decrease in Director compensation expense ($95) due to vesting
of
restricted stock awards in 2005 but not in 2006.
|
Other
|
252
|
299
|
47
|
19
|
Increase
due primarily to an increase in corporate taxes ($136) and other
($1),
partially offset by decreased investor relations costs ($90).
|
Total
|
$
6,042
|
$
9,528
|
$
3,486
|
58
%
|
|
· |
$4.2
million of non-cash expenses related to the vesting of our share-based
payment awards, including stock options, restricted stock and Employee
Stock Purchase Plan, as we adopted SFAS No. 123(R) on January 1,
2006, and
the issuance of stock options to non-employee consultants; and
|
· |
$13.2
million of expense in connection with the purchase of PSMA LLC in
April 2006.
|
· |
a
decrease of $9.3 million in deferred revenue due to our recognition
of
revenue in the 2006 period from the $60 million upfront payment we
received from Wyeth in December 2005;
|
· |
a
decrease of $2.1 million in loss in joint venture, including the
adjustment to loss in joint venture in the 2005 period. Through December
31, 2005, we reduced our revenue from the joint venture and our loss
in
the joint venture by the amount we received from PSMA-related grant
funding up to a cap of $3.0 million. Beginning in the second quarter
of
2006, PSMA LLC became our wholly-owned subsidiary and, accordingly,
we no
longer recognize loss in joint venture. In addition, during the quarter
ended March 31, 2006, research and development costs for the joint
venture
decreased from those in the comparable period in 2005 since the Members
had not approved a work plan and budget for PSMA LLC for 2006. Prior
to
our acquisition of PSMA LLC, we accounted for PSMA LLC by using the
equity
method and recorded 50% of PSMA LLC’s net loss as our loss in joint
venture;
|
· |
a
decrease of $3.0 million in investment in joint venture since no
capital
contributions were made to PSMA LLC in the 2006 period and we acquired
the
net assets of PSMA LLC; and
|
· |
an
increase of $2.6 million in trade accounts receivable, mostly for
reimbursement of our second quarter 2006 expenses under our grants
and
contract with the NIH; and
|
· |
an
increase of $1.0 million in accounts payable and accrued
expenses.
|
Six
Months Ended June 30,
|
|||||||
2005
|
2006
|
||||||
(in
millions)
|
|||||||
Methylnaltrexone
|
$
|
13.3
|
$
|
14.7
|
|||
HIV
|
5.2
|
7.6
|
|||||
Cancer
|
3.3
|
16.9
|
|||||
Other
programs
|
0.8
|
1.3
|
|||||
Total
|
$
|
22.6
|
$
|
40.5
|
Payments
due by June 30,
|
||||||||||||||||
Total
|
2007
|
2008-2009
|
2010-2011
|
Thereafter
|
||||||||||||
(in
millions)
|
||||||||||||||||
Operating
leases
|
$
|
7.8
|
$
|
1.9
|
$
|
4.0
|
$
|
1.2
|
$
|
0.7
|
||||||
License
and collaboration agreements (1)
|
93.8
|
2.7
|
4.5
|
3.7
|
82.9
|
|||||||||||
Total
|
$
|
101
.6
|
$
|
4.6
|
$
|
8.5
|
$
|
4.9
|
$
|
83.6
|
(1) |
Assumes
attainment of milestones covered under each agreement, including
those by
PSMA LLC. The timing of the achievement of the related milestones
is
highly uncertain, and accordingly the actual timing of payments,
if any,
is likely to vary, perhaps significantly, relative to the timing
contemplated by this table.
|
· |
We
use the closing price of our common stock on the date of grant, as
quoted
on the NASDAQ exchange, as the exercise price.
|
· |
Historical
volatilities are based upon daily quoted market prices of our common
stock
on the NASDAQ exchange over a period equal to the expected term of
the
related equity instruments. We rely only on historical volatility
since
future volatility is expected to be consistent with historical; historical
volatility is calculated using a simple average calculation; historical
data is available for the length of the option’s expected term and a
sufficient number of price observations are used consistently. Since
our
stock options are not traded on a public market, we do not use implied
volatility. For the six months ended June 30, 2005 and 2006, the
volatility of our common stock has been high, in excess of 90%, which
is
common for entities in the biotechnology industry that do not have
commercial products. A higher volatility input to the Black-Scholes
model
increases the resulting compensation expense.
|
· |
The
expected term of options granted represents the period of time that
options granted are expected to be outstanding. Our expected term
has been
calculated based upon the simplified method as detailed in Staff
Accounting Bulletin No. 107 (“SAB 107”). Accordingly, we are using an
expected term of 6.5 years based upon the vesting period of the
outstanding options of four or five years and a contractual term
of ten
years. We plan to refine our estimate of expected term in the future
as we
obtain more historical data. A shorter expected term would result
in a
lower compensation expense.
|
· |
We
have never paid dividends and do not expect to pay dividends in the
future. Therefore, our dividend rate is
zero.
|
· |
The
risk-free rate for periods within the expected term of the options
is
based on the U.S. Treasury yield curve in effect at the time of
grant.
|
·
|
the
results of clinical trials and preclinical studies involving our
products
or those of our competitors;
|
·
|
changes
in the status of any of our drug development programs, including
delays in
clinical trials or program
terminations;
|
·
|
developments
regarding our efforts to achieve marketing approval for our
products;
|
·
|
developments
in our relationship with Wyeth regarding the development and
commercialization of
methylnaltrexone;
|
·
|
announcements
of technological innovations or new commercial products by us, our
collaborators or our competitors;
|
·
|
developments
in our relationships with other collaborative
partners;
|
·
|
developments
in patent or other proprietary
rights;
|
·
|
governmental
regulation;
|
·
|
changes
in reimbursement policies or health care
legislation;
|
·
|
public
concern as to the safety and efficacy of products developed by us,
our
collaborators or our competitors;
|
·
|
our
ability to fund on-going
operations;
|
·
|
fluctuations
in our operating results; and
|
·
|
general
market conditions.
|
|
||||||||
(i)
Election
of Directors
|
|
|
|
|
||||
Nominee
|
Votes
For
|
Votes
Against
|
Withheld
|
Abstentions/
Broker
Non-Votes
|
||||
Paul
J. Maddon, M.D., Ph.D.
|
19,554,274
|
0
|
129,470
|
0
|
||||
Charles
A. Baker
|
19,569,882
|
0
|
113,862
|
0
|
||||
Kurt
W. Briner
|
19,657,811
|
0
|
25,933
|
0
|
||||
Mark
F. Dalton
|
19,569,436
|
0
|
114,308
|
0
|
||||
Stephen
P. Goff, Ph.D.
|
15,032,316
|
0
|
4,651,428
|
0
|
||||
Paul
F. Jacobson
|
19,569,832
|
0
|
113,912
|
0
|
||||
David
A. Scheinberg, M.D., Ph.D.
|
19,555,971
|
0
|
127,773
|
0
|
||||
|
|
|
|
|
||||
(ii)
Ratification
of PricewaterhouseCoopers LLP
|
19,657,597
|
22,319
|
0
|
3,827
|
(a)
|
Exhibits
|
2.1
|
Membership
Interest Purchase Agreement dated April 20, 2006 by and between
Progenics
Pharmaceuticals, Inc. and Cytogen Corporation.
|
10.1 | Amended
and Restated PSMA/PSMP License Agreement dated April 20, 2006 by and
among
Progenics Pharmaceuticals, Inc., Cytogen Corporation and PSMA Development
Company LLC (confidential treatment has been requested as to certain
portions, which portions have been omitted and filed separately with
the
Commission).
|
31.1
|
Certification
of Paul J. Maddon, M.D., Ph.D., Chairman and Chief Executive Officer
of
the Registrant, pursuant to Rule 13a-14(a) and Rule 15d-14(a) under
the
Securities Exchange Act of 1934, as amended
|
31.2
|
Certification
of Robert A. McKinney, Chief Financial Officer and Senior Vice President,
Finance & Operations (Principal Financial and Accounting Officer) of
the Registrant, pursuant to Rule 13a-14(a) and Rule 15d-14(a) under
the
Securities Exchange Act of 1934, as amended
|
32
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
|
PROGENICS
PHARMACEUTICALS, INC.
|
|
Date:
August 8, 2006
|
By:
|
/s/
Robert A. McKinney
|
|
|
Robert
A. McKinney
Chief
Financial Officer
(Duly
authorized officer of the Registrant and Principal Financial and
Accounting Officer)
|