form10q9302007.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
quarterly period ended September 30, 2007
OR
o
TRANSITION
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
transition period from ___________________ to ________________
Commission
file number 000-23143
PROGENICS
PHARMACEUTICALS, INC.
(Exact
name of registrant as specified in its charter)
DELAWARE
|
13-3379479
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
777
Old Saw Mill River Road
Tarrytown,
New York 10591
(Address
of principal executive offices)
(Zip
Code)
(914)
789-2800
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes
xNo o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
one):
Large
Accelerated Filer ¨ Accelerated
Filer x
Non-accelerated
Filer ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o No
x
As
of
November 6, 2007 there were 29,708,958 shares of common stock, par value
$.0013 per share, of the registrant outstanding.
PROGENICS PHARMACEUTICALS,
INC.
|
|
Page
No.
|
Part
I
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
|
3
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
7
|
Item
2.
|
|
14
|
Item
3.
|
|
31
|
Item
4.
|
|
31
|
|
|
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1A.
|
|
32
|
Item
6.
|
|
43
|
|
|
44
|
|
Certifications
|
|
PART
I — FINANCIAL INFORMATION
PROGENICS PHARMACEUTICALS,
INC.
(amounts
in thousands, except for par value and share amounts)
(Unaudited)
|
|
September
30,
2007
|
|
|
December
31,
2006
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
64,368
|
|
|
$ |
11,947
|
|
Marketable
securities
|
|
|
81,293
|
|
|
|
113,841
|
|
Accounts
receivable
|
|
|
2,204
|
|
|
|
1,699
|
|
Other
current assets
|
|
|
2,555
|
|
|
|
3,181
|
|
Total
current assets
|
|
|
150,420
|
|
|
|
130,668
|
|
Marketable
securities
|
|
|
37,918
|
|
|
|
23,312
|
|
Fixed
assets, at cost, net of accumulated depreciation and
amortization
|
|
|
13,602
|
|
|
|
11,387
|
|
Restricted
cash
|
|
|
549
|
|
|
|
544
|
|
Total
assets
|
|
$ |
202,489
|
|
|
$ |
165,911
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
15,613
|
|
|
$ |
11,852
|
|
Deferred
revenue ¾
current
|
|
|
16,675
|
|
|
|
26,989
|
|
Other
current liabilities
|
|
|
57
|
|
|
|
|
|
Total
current liabilities
|
|
|
32,345
|
|
|
|
38,841
|
|
Deferred
revenue — long term
|
|
|
12,163
|
|
|
|
16,101
|
|
Other
liabilities
|
|
|
355
|
|
|
|
123
|
|
Total
liabilities
|
|
|
44,863
|
|
|
|
55,065
|
|
Commitments
and contingencies (Note 10)
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value; 20,000,000 shares authorized; issued and
outstanding — none
|
|
|
|
|
|
|
|
|
Common
stock, $.0013 par value; 40,000,000 shares authorized; issued and
outstanding — 29,612,583 in 2007 and 26,199,016 in 2006
|
|
|
38
|
|
|
|
34
|
|
Additional
paid-in capital
|
|
|
396,371
|
|
|
|
321,315
|
|
Accumulated
deficit
|
|
|
(238,774 |
) |
|
|
(210,358 |
) |
Accumulated
other comprehensive (loss)
|
|
|
(9 |
) |
|
|
(145 |
) |
Total
stockholders’ equity
|
|
|
157,626
|
|
|
|
110,846
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
202,489
|
|
|
$ |
165,911
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
PROGENICS
PHARMACEUTICALS, INC.
(amounts
in thousands, except net loss per share)
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
For
the Nine Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
research and development from collaborator
|
|
$ |
14,540
|
|
|
$ |
14,527
|
|
|
$ |
52,987
|
|
|
$ |
40,060
|
|
Research
grants and contract
|
|
|
2,471
|
|
|
|
3,316
|
|
|
|
7,077
|
|
|
|
7,842
|
|
Product
sales
|
|
|
7
|
|
|
|
5
|
|
|
|
48
|
|
|
|
70
|
|
Total
revenues
|
|
|
17,018
|
|
|
|
17,848
|
|
|
|
60,112
|
|
|
|
47,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
24,247
|
|
|
|
15,751
|
|
|
|
69,999
|
|
|
|
43,079
|
|
In-process
research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,209
|
|
General
and administrative
|
|
|
9,275
|
|
|
|
6,610
|
|
|
|
21,746
|
|
|
|
16,138
|
|
Loss
in joint venture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121
|
|
Depreciation
and amortization
|
|
|
845
|
|
|
|
381
|
|
|
|
2,144
|
|
|
|
1,106
|
|
Total
expenses
|
|
|
34,367
|
|
|
|
22,742
|
|
|
|
93,889
|
|
|
|
73,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(17,349 |
) |
|
|
(4,894 |
) |
|
|
(33,777 |
) |
|
|
(25,681 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,749
|
|
|
|
1,959
|
|
|
|
5,361
|
|
|
|
5,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(15,600 |
) |
|
$ |
(2,935 |
) |
|
$ |
(28,416 |
) |
|
$ |
(19,906 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$ |
(0.58 |
) |
|
$ |
(0.11 |
) |
|
$ |
(1.07 |
) |
|
$ |
(0.78 |
) |
Weighted-average
shares - basic and diluted
|
|
|
26,976
|
|
|
|
25,783
|
|
|
|
26,639
|
|
|
|
25,570
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
.
PROGENICS
PHARMACEUTICALS, INC.
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2007
(amounts
in thousands)
(Unaudited)
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-In Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
(Loss)
|
|
|
Total
Stockholders’
Equity
|
|
|
Comprehensive
(Loss)
|
|
Balance
at December 31, 2006
|
|
|
26,199
|
|
|
$ |
34
|
|
|
$ |
321,315
|
|
|
$ |
(210,358 |
) |
|
$ |
(145 |
) |
|
$ |
110,846
|
|
|
|
|
Compensation
expense for vesting of share-based payment arrangements
|
|
|
|
|
|
|
|
|
|
|
11,840
|
|
|
|
|
|
|
|
|
|
|
|
11,840
|
|
|
|
|
Issuance
of restricted stock, net of forfeitures
|
|
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock in a public offering ($23.15 per share, net of
underwriting discounts and commissions and other offering expenses
of
$3,058)
|
|
|
2,600
|
|
|
|
3
|
|
|
|
57,129
|
|
|
|
|
|
|
|
|
|
|
|
57,132
|
|
|
|
|
Sale
of Common Stock under employee stock purchase plans and exercise
of stock
options
|
|
|
569
|
|
|
|
1
|
|
|
|
6,106
|
|
|
|
|
|
|
|
|
|
|
|
6,107
|
|
|
|
|
Repurchase
of restricted stock
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
|
Net
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,416 |
) |
|
|
|
|
|
|
(28,416 |
) |
|
$ |
(28,416 |
) |
Change
in unrealized loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
136
|
|
|
|
136
|
|
Balance at September 30, 2007
|
|
|
29,613
|
|
|
$ |
38
|
|
|
$ |
396,371
|
|
|
$ |
(238,774 |
) |
|
$ |
(9 |
) |
|
$ |
157,626
|
|
|
$ |
(28,280 |
) |
The
accompanying notes are an integral part of these condensed financial
statements.
PROGENICS
PHARMACEUTICALS, INC.
(amounts
in thousands)
(Unaudited)
|
|
For
the Nine Months Ended
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(28,416 |
) |
|
$ |
(19,906 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,144
|
|
|
|
1,106
|
|
Amortization
of discounts, net of premiums, on marketable securities
|
|
|
(354 |
) |
|
|
27
|
|
Noncash
expenses incurred in connection with vesting of share-based compensation
awards
|
|
|
11,840
|
|
|
|
9,132
|
|
Expense
of purchased technology related to PSMA LLC
|
|
|
|
|
|
|
13,209
|
|
Loss
in joint venture
|
|
|
|
|
|
|
121
|
|
Write-off
of fixed assets
|
|
|
|
|
|
|
2
|
|
Changes
in assets and liabilities, net of effects of purchase of PSMA
LLC:
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
(505 |
) |
|
|
301
|
|
Decrease
(increase) in other current assets
|
|
|
626
|
|
|
|
(8 |
) |
Increase
in accounts payable and accrued expenses
|
|
|
3,761
|
|
|
|
1,073
|
|
(Decrease)
in amount due to joint venture
|
|
|
|
|
|
|
(194 |
) |
Decrease
in investment in joint venture
|
|
|
|
|
|
|
250
|
|
(Decrease)
in deferred revenue
|
|
|
(14,252 |
) |
|
|
(14,466 |
) |
Increase
(decrease) in other current liabilities
|
|
|
57
|
|
|
|
(790 |
) |
Increase
in other liabilities
|
|
|
232
|
|
|
|
51
|
|
Net
cash (used in) operating activities
|
|
|
(24,867 |
) |
|
|
(10,092 |
) |
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(4,359 |
) |
|
|
(6,511 |
) |
Sales
of marketable securities
|
|
|
188,997
|
|
|
|
236,212
|
|
Purchase
of marketable securities
|
|
|
(170,565 |
) |
|
|
(264,425 |
) |
Acquisition
of PSMA LLC, net of cash acquired
|
|
|
|
|
|
|
(13,128 |
) |
Increase
in restricted cash
|
|
|
(5 |
) |
|
|
(5 |
) |
Net
cash provided by (used in) investing activities
|
|
|
14,068
|
|
|
|
(47,857 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from the sale of common stock in a public offering (see Note
5)
|
|
|
60,190
|
|
|
|
|
|
Expenses
related to the sale of common stock in a public offering
|
|
|
(3,058 |
) |
|
|
|
|
Proceeds
from the exercise of stock options and sale of common stock under
the
Employee Stock Purchase Plan
|
|
|
6,107
|
|
|
|
5,309
|
|
Repurchase
of restricted stock
|
|
|
(19 |
) |
|
|
|
|
Net
cash provided by financing activities
|
|
|
63,220
|
|
|
|
5,309
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
52,421
|
|
|
|
(52,640 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
11,947
|
|
|
|
67,072
|
|
Cash
and cash equivalents at end of period
|
|
$ |
64,368
|
|
|
$ |
14,432
|
|
Supplemental
disclosure of noncash investing activity:
|
|
|
|
|
|
|
|
|
Fair
value of assets, including purchased technology, acquired from PSMA
LLC
|
|
|
|
|
|
$ |
13,674
|
|
Cash
paid for acquisition of PSMA LLC
|
|
|
|
|
|
|
(13,459 |
) |
Liabilities
assumed from PSMA LLC
|
|
|
|
|
|
$ |
215
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
PROGENICS
PHARMACEUTICALS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(amounts
in thousands, except per share amounts or unless otherwise
noted)
Progenics
Pharmaceuticals, Inc. (the “Company” or “Progenics”) is a biopharmaceutical
company focusing on the development and commercialization of innovative
therapeutic products to treat the unmet medical needs of patients with
debilitating conditions and life-threatening diseases. The Company’s principal
programs are directed toward gastroenterology, virology and oncology. The
Company was incorporated in Delaware on December 1, 1986. On April 20, 2006,
the
Company acquired full ownership of PSMA Development Company LLC (“PSMA LLC”) by
acquiring from CYTOGEN Corporation (“Cytogen”) its 50% interest in PSMA LLC.
Certain of the Company’s intellectual property rights are held by wholly owned
subsidiaries of Progenics. None of the Company’s subsidiaries, other than PSMA
LLC, had operations during the nine months ended September 30, 2007. Currently,
all of the Company’s operations are conducted at one location in New York State.
The Company’s chief operating decision maker reviews financial analyses and
forecasts relating to all of the Company’s research programs as a single unit
and allocates resources and assesses performance of such programs as a whole.
Therefore, the Company operates under a single research and development
segment.
The
Company’s lead product candidate is methylnaltrexone. The Company has
entered into a license and co-development agreement with Wyeth Pharmaceuticals
(“Wyeth”) for the development and commercialization of
methylnaltrexone. Under that agreement, the Company (i) has received
an upfront payment from Wyeth, (ii) has received, and is entitled to receive
further, additional payments as certain developmental milestones for
methylnaltrexone are achieved, (iii) has been and will be reimbursed by Wyeth
for expenses the Company incurs in connection with the development of
methylnaltrexone under the development plan for methylnaltrexone agreed to
between the Company and Wyeth, and (iv) will receive commercialization payments
and royalties if, and when, methylnaltrexone is sold. These payments
will depend on the successful development and commercialization of
methylnaltrexone, which is itself dependent on the actions of Wyeth and the
U.S.
Food and Drug Administration (“FDA”) and other regulatory bodies and the outcome
of clinical and other testing of methylnaltrexone. Many of these matters are
outside the control of the Company. Manufacturing and commercialization expenses
for methylnaltrexone will be funded by Wyeth.
During
March 2007, the Company submitted a New Drug Application with the FDA for
marketing approval in the United States for a subcutaneous formulation of
methylnaltrexone for the treatment of opioid-induced constipation in patients
receiving palliative care. In May 2007, Wyeth submitted a regulatory marketing
application in the European Union for the same indication. Both applications
were accepted for review in May 2007, which resulted in the Company earning
a
total of $9.0 million in milestone payments under its Collaboration Agreement
with Wyeth. In August 2007, Wyeth submitted a marketing application to the
Therapeutic Goods Administration division of the Australian government, and
in
October 2007, Wyeth announced that it had submitted a New Drug Submission
marketing application for subcutaneous methylnaltrexone to Health Canada, the
Health Products and Food branch of the Canadian regulatory agency. The Company and Wyeth
are
also developing intravenous and oral formulations of
methylnaltrexone.
The
Company’s other product candidates are not as advanced in development as
methylnaltrexone, and the Company does not expect any recurring revenues from
sales or otherwise with respect to these product candidates in the near term.
As
a result of Wyeth’s agreement to reimburse Progenics for methylnaltrexone
development expenses, the Company is able to devote its current and future
resources to its other research and development programs. The Company expects
that its research and development expenses with respect to these other product
candidates will increase significantly during the remainder of 2007 and
beyond.
As
a
result of its development expenses and other needs, the Company may require
additional funding to continue its operations. The Company may enter
into a collaboration agreement, or a license or sale transaction, with respect
to its product candidates other than methylnaltrexone. The Company
may also seek to raise additional capital through the sale of its common stock
or other securities (see Note 5) and expects to fund certain aspects of its
operations through government grants and contracts.
The
Company has had recurring losses. At September 30, 2007, the Company had an
accumulated deficit of $238.8 million and had cash, cash equivalents and
marketable securities, including non-current portion, totaling $183.6 million.
The Company expects that cash, cash equivalents and marketable securities at
September 30, 2007 will be sufficient to fund current operations beyond one
year. During the nine months ended September 30, 2007, the Company had a net
loss of $28.4 million and used cash in operating activities of $24.9
million.
PROGENICS
PHARMACEUTICALS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ¾
continued (unaudited)
(amounts
in thousands, except per share amounts or unless otherwise
noted)
The
interim condensed consolidated financial statements of the Company included
in
this report have been prepared in accordance with the instructions to
Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all
information and disclosures necessary for a presentation of the Company’s
financial position, results of operations and cash flows in conformity
with
generally accepted accounting principles. In the opinion of management,
these
financial statements reflect all adjustments, consisting primarily of
normal
recurring accruals, necessary for a fair statement of results for the
periods
presented. The results of operations for interim periods are not necessarily
indicative of the results for the full year. These financial statements
should
be read in conjunction with the financial statements and notes thereto
contained
in the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2006. All terms used but not defined elsewhere herein have the meaning
ascribed to them in that Annual Report. The year end condensed consolidated
balance sheet data were derived from audited financial statements but
do not
include all disclosures required by accounting principles generally accepted
in
the United States of America.
2.
Share-Based Payment Arrangements
On
January 1, 2007, the Company began to estimate the expected term of stock
options granted to employees and to officers and directors by using historical
data for each of those two groups. During 2006, in accordance with Staff
Accounting Bulletin 107, the Company had used the simplified method for that
purpose. The Company changed its method of estimating expected term because
sufficient historical data related to stock option exercise and post-employment
cancellation activity had been accumulated to effectively anticipate future
activity. During 2007, the expected term for options granted to the two groups
mentioned above was 5.25 and 7.5 years, respectively. During 2006, the expected
term for both groups, using the simplified method, was 6.5 years. The expected
term for stock options granted to non-employee consultants was ten years, which
was equal to the contractual term of those options. The expected volatility
of
stock options granted to each group was calculated based upon the periods of
the
respective expected terms. The impact of the change in estimate on net loss
and
net loss per share was immaterial.
The
assumptions used by the Company in the Black-Scholes option pricing model to
estimate the grant date fair values of stock options granted under the Plans
during the nine months ended September 30, 2007 and 2006 were as
follows:
|
|
For
the Nine Months Ended
September
30,
|
|
|
2007
|
|
2006
|
|
|
|
|
|
Expected
volatility
|
|
52%
- 85%
|
|
88%
|
Expected
dividends
|
|
zero
|
|
zero
|
Expected
term (in years)
|
|
5.25
- 10
|
|
6.5
|
Weighted
average expected term (years)
|
|
6.75
|
|
6.5
|
Risk-free
rate
|
|
4.77%
- 4.93%
|
|
4.74%
|
During
the nine months ended September 30, 2007 and 2006, the fair value of shares
purchased under the Purchase Plans was estimated on the date of grant in
accordance with FASB Technical Bulletin No. 97-1 Accounting under Statement
123 for Certain Employee Stock Purchase Plans with a Look-Back Option,
using the same option valuation model used for options granted under the Plans,
except that the assumptions noted in the following table were used for the
Purchase Plans:
|
|
For
the Nine Months Ended
September
30,
|
|
|
2007
|
|
2006
|
|
|
|
|
|
Expected
volatility
|
|
43%
|
|
43%
|
Expected
dividends
|
|
zero
|
|
zero
|
Expected
term
|
|
6
months
|
|
6
months
|
Risk-free
rate
|
|
4.78%
|
|
4.47%
|
PROGENICS
PHARMACEUTICALS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ¾
continued (unaudited)
(amounts
in thousands, except per share amounts or unless otherwise
noted)
The
total
fair value of shares under all of the Company’s share-based payment arrangements
that vested during the three months ended September 30, 2007 and 2006 was $6.1
million and $4.4 million, respectively; $1.8 million and $1.7 million,
respectively, of which was reported as research and development expense and
$4.3
million and $2.7 million, respectively, of which was reported as general and
administrative expense. The total fair value of shares under all of the
Company’s share-based payment arrangements that vested during the nine months
ended September 30, 2007 and 2006 was $11.8 million and $9.1 million,
respectively; $5.0 million and $4.2 million, respectively, of which was reported
as research and development expense and $6.8 million and $4.9 million,
respectively, of which was reported as general and administrative
expense.
No
tax
benefit was recognized related to such compensation cost during the three and
nine months ended September 30, 2007 and 2006 because the Company had a net
loss
for each of those periods and the related deferred tax assets were fully offset
by a valuation allowance. Accordingly, no amounts related to windfall tax
benefits have been reported in cash flows from operations or cash flows from
financing activities for the nine months ended September 30, 2007 and
2006.
In
applying the treasury stock method
for the calculation of diluted earnings per share (“EPS”), amounts of
unrecognized compensation expense and windfall tax benefits are required to
be
included in the assumed proceeds in the denominator of the diluted earnings
per
share calculation unless they are anti-dilutive. The Company incurred a net
loss
for the three
and
nine months ended September 30, 2007 and 2006 and, therefore, such amounts
have
not been included for those periods in the calculation of diluted EPS since
they
would be anti-dilutive. Accordingly, basic and diluted EPS are the same for
each
of those periods.
3.
Accounts Receivable
|
|
September
30,
2007
|
|
|
December
31,
2006
|
|
National Institutes of Health
|
|
$ |
2,200
|
|
|
$ |
1,697
|
|
Other
|
|
|
4
|
|
|
|
2
|
|
Total
|
|
$ |
2,204
|
|
|
$ |
1,699
|
|
4. Accounts
Payable and Accrued
Expenses
|
|
September
30,
2007
|
|
|
December
31,
2006
|
|
Accounts
payable
|
|
$ |
1,528
|
|
|
$ |
1,559
|
|
Accrued
consulting and clinical trial costs
|
|
|
9,829
|
|
|
|
7,404
|
|
Accrued
payroll and related costs
|
|
|
2,115
|
|
|
|
990
|
|
Legal
and professional fees
|
|
|
1,559
|
|
|
|
1,301
|
|
Other
|
|
|
582
|
|
|
|
598
|
|
Total
|
|
$ |
15,613
|
|
|
$ |
11,852
|
|
On
September 25, 2007, the Company completed a public offering of 2,600 shares
of
its common stock, pursuant to a shelf registration statement that had been
filed
with the Securities and Exchange Commission in 2006, which had registered 4,000
shares. The Company received proceeds, before expenses, of $57,304 or $22.04
per
share, which was net of underwriting discounts and commissions of $2,886. The
Company also paid approximately $172 in other offering
expenses.
PROGENICS
PHARMACEUTICALS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ¾
continued (unaudited)
(amounts
in thousands, except per share amounts or unless otherwise
noted)
6. Revenue
Recognition
In
January 2006, the Company began
recognizing revenues from Wyeth both (i) for reimbursement of its development
expenses for methylnaltrexone as incurred under the development plan agreed
between the Company and Wyeth and (ii) for a portion of the $60 million upfront
payment the Company received from Wyeth, based on the proportion of the
Company’s expected total effort to complete its development obligations, as
reflected in the most recent budget approved by both the Company and Wyeth,
that
was actually expended during each fiscal quarter. During the third quarter
of 2007, the estimate of the Company’s total remaining effort to complete its
development obligations was increased based upon a revised development budget
approved by both the Company and Wyeth and the period over which those
obligations will extend and over which the upfront payment will be amortized
was
extended from the end of 2008 to the end of 2009. As a result, the amount of
revenue recognized from the upfront payment in the third quarter of 2007
declined to $3.2 million from $5.1 million in the third quarter of 2006. In
prior quarters during 2006 and 2007, the Company had recognized an amount of
revenue similar to that in the third quarter of 2006.
During
the three and nine month periods ended September 30, 2007, the Company
recognized $3.2 million and $13.1 million, respectively, of revenue from the
$60
million upfront payment and $11.3 million and $30.8 million, respectively,
as
reimbursement for its out-of-pocket development costs. During the three and
nine
month periods ended September 30, 2006, the Company recognized $5.1 million
and
$14.5 million, respectively, of revenue from the $60 million upfront payment
and
$9.4 million and $25.6 million, respectively, as reimbursement for its
out-of-pocket development costs.
In
addition, during May 2007, the Company earned $9.0 million upon achievement
of
the two milestones anticipated in the Collaboration Agreement with Wyeth in
connection with the submission and acceptance for review of an NDA for a
subcutaneous formulation of methylnaltrexone with the FDA and a comparable
submission in the European Union. The Company considered those two milestones
to
be substantive based on the degree of risk at the inception of the Collaboration
Agreement of not achieving the milestones, the amount of the payment received
relative to the costs incurred since inception of the Collaboration Agreement
to
achieve the milestones and the passage of seventeen months from inception of
the
Collaboration Agreement and the achievement of those two milestones. Therefore,
the Company recognized as revenue, in the quarter ended June 30, 2007, the
$9.0
million earned from those two milestones. There were no milestones or
contingent events that were achieved during the nine months ended September
30,
2006 for which revenue was recognized.
The
Company’s basic net loss per share amounts have been computed by dividing net
loss by the weighted average number of common shares outstanding during the
respective periods. For the three and nine months ended September 30, 2007
and
2006, the Company reported a net loss and, therefore, no other potential common
stock was included in the computation of diluted net loss per share since such
inclusion would have been anti-dilutive. The calculations of net loss per share,
basic and diluted, are as follows:
|
|
Net
Loss (Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per
Share Amount
|
|
Three
months ended September 30, 2007
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$ |
(15,600 |
) |
|
|
26,976
|
|
|
$ |
(0.58 |
) |
Nine
months ended September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$ |
(28,416 |
) |
|
|
26,639
|
|
|
$ |
(1.07 |
) |
Three
months ended September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$ |
(2,935 |
) |
|
|
25,783
|
|
|
$ |
(0.11 |
) |
Nine
months ended September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$ |
(19,906 |
) |
|
|
25,570
|
|
|
$ |
(0.78 |
) |
PROGENICS
PHARMACEUTICALS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ¾
continued (unaudited)
(amounts
in thousands, except per share amounts or unless otherwise
noted)
Other
potential common stock, which has been excluded from the diluted per share
amounts because their effect would have been antidilutive, consist of the
following:
|
|
For
the Three Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Wtd.
Avg. Number
|
|
|
Wtd.
Avg. Exercise Price
|
|
|
Wtd.
Avg. Number
|
|
|
Wtd.
Avg. Exercise Price
|
|
Stock
options
|
|
|
4,832
|
|
|
$ |
17.90
|
|
|
|
4,856
|
|
|
$ |
15.74
|
|
Nonvested
shares
|
|
|
512
|
|
|
|
|
|
|
|
369
|
|
|
|
|
|
Total
|
|
|
5,344
|
|
|
|
|
|
|
|
5,225
|
|
|
|
|
|
|
|
For
the Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Wtd.
Avg. Number
|
|
|
Wtd.
Avg. Exercise Price
|
|
|
Wtd.
Avg. Number
|
|
|
Wtd.
Avg. Exercise Price
|
|
Stock
options
|
|
|
4,688
|
|
|
$ |
17.36
|
|
|
|
4,625
|
|
|
$ |
14.79
|
|
Nonvested
shares
|
|
|
428
|
|
|
|
|
|
|
|
286
|
|
|
|
|
|
Total
|
|
|
5,116
|
|
|
|
|
|
|
|
4,911
|
|
|
|
|
|
8. Uncertain
Tax Positions
|
On
January 1, 2007, the Company adopted
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an
Interpretation of FASB Statement 109 (“FIN 48”). FIN 48 prescribes a
comprehensive model for the manner in which a company should recognize, measure,
present and disclose in its financial statements all material uncertain tax
positions that the Company has taken or expects to take on a tax return. FIN
48
applies to income taxes and is not intended to be applied by analogy to other
taxes, such as sales taxes, value-add taxes, or property taxes.
The
Company
has reviewed its nexus in various tax jurisdictions and its tax positions
related to all open tax years for events that could change the status of its
FIN
48 liability, if any, or require an additional liability to be recorded. Such
events may be the resolution of issues raised by a taxing authority, expiration
of the statute of limitations for a prior open tax year or new transactions
for
which a tax position may be deemed to be uncertain. Those positions, for which
management’s assessment is that there is more than a 50 percent probability of
sustaining the position upon challenge by a taxing authority based upon its
technical merits, are subjected to the measurement criteria of FIN 48. The
Company records the largest amount of tax benefit that is greater than 50
percent likely of being realized upon ultimate settlement with a taxing
authority having full knowledge of all relevant information. Any FIN 48
liabilities for which the Company expects to make cash payments within the
next
twelve months are classified as “short term”.
Upon
adoption of FIN 48 and through
September 30, 2007, the Company had no unrecognized tax benefits. As of the
date
of adoption, there were no tax positions for which it is reasonably possible
that the total amounts of unrecognized tax benefits will significantly increase
or decrease within twelve months from the date of adoption of FIN 48 or from
September 30, 2007. As of September 30, 2007, the Company is subject
to federal and state income tax in the United States. Open tax years relate
to years in which unused net operating losses were generated or, if used, for
which the statute of limitation for examination by taxing authorities has not
expired. Thus, upon adoption of FIN 48, the Company’s open tax years extend back
to 1995, with the exception of 1997, during which the Company reported net
income. In the event that the Company concludes that it is subject to interest
and/or penalties arising from uncertain tax positions, the Company will record
interest and penalties as a component of income taxes. No amounts of interest
or
penalties were recognized in the Company’s Condensed Consolidated Statements of
Operations or Condensed Consolidated Balance Sheets upon adoption of FIN 48
or
as of and for the nine months ended September 30, 2007.
PROGENICS
PHARMACEUTICALS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ¾
continued (unaudited)
(amounts
in thousands, except per share amounts or unless otherwise
noted)
9.
Comprehensive Loss
Comprehensive
loss 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 of the Company includes net loss adjusted for the
change in net unrealized gain or loss on marketable securities. For the three
and nine months ended September 30, 2007 and 2006, the components of
comprehensive loss were:
|
|
For
the Three Months Ended
September
30,
|
|
|
For
the Nine Months Ended
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Net
loss
|
|
$ |
(15,600 |
) |
|
$ |
(2,935 |
) |
|
$ |
(28,416 |
) |
|
$ |
(19,906 |
) |
Change
in net unrealized gain (loss) on marketable securities
|
|
|
206
|
|
|
|
73
|
|
|
|
136
|
|
|
|
(123 |
) |
Comprehensive loss
|
|
$ |
(15,394 |
) |
|
$ |
(2,862 |
) |
|
$ |
(28,280 |
) |
|
$ |
(20,029 |
) |
10. Commitments
and
Contingencies
In
the
ordinary course of its business, the Company enters into agreements with third
parties that include indemnification provisions which, in its judgment, are
normal and customary for companies in its industry sector. These agreements
are
typically with business partners, clinical sites and suppliers. Pursuant to
these agreements, the Company generally agrees to indemnify, hold harmless
and
reimburse the indemnified parties for losses suffered or incurred by the
indemnified parties with respect to the Company’s products or product
candidates, use of such products or other actions taken or omitted by the
Company. The maximum potential amount of future payments the Company could
be
required to make under these indemnification provisions is not limited. The
Company has not incurred material costs to defend lawsuits or settle claims
related to these indemnification provisions. As a result, the estimated fair
value of liabilities relating to these provisions is minimal. Accordingly,
the
Company has no liabilities recorded for these provisions as of September 30,
2007.
11. Impact
of Recently Issued Accounting Standards
On
September 15, 2006, the FASB issued FASB Statement No. 157, Fair Value
Measurements (“FAS 157”), which addresses how companies should measure the
fair value of assets and liabilities when they are required to use a fair value
measure for recognition or disclosure purposes under generally accepted
accounting principles. FAS 157 does not expand the use of fair value in any
new
circumstances. Under FAS 157, fair value refers to the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting
entity transacts. FAS 157 clarifies the principle that fair value should be
based on the assumptions market participants would use when pricing the asset
or
liability. In support of this principle, the standard establishes a fair value
hierarchy that prioritizes the information used to develop those assumptions.
The fair value hierarchy gives the highest priority to quoted prices in active
markets and the lowest priority to unobservable data, for example, the reporting
entity’s own data. FAS 157 requires disclosures intended to provide information
about (1) the extent to which companies measure assets and liabilities at fair
value, (2) the methods and assumptions used to measure fair value, and (3)
the
effect of fair value measures on earnings. The Company will adopt FAS 157 on
January 1, 2008. The Company does not expect the impact of the adoption of
FAS
157 to be material to its financial position or results of
operations.
In
February 2007, the FASB issued FASB Statement No. 159 The Fair Value Option
for Financial Assets and Financial Liabilities (“FAS 159”), which provides
companies with an option to report certain financial assets and liabilities
at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. FAS 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar
types
of assets and liabilities. The objective of FAS 159 is to reduce both
complexity in accounting for financial instruments and the volatility in
earnings caused by measuring related assets and liabilities differently. FAS
159
is effective for fiscal years beginning after November 15, 2007. The Company
does not expect the impact of the adoption of FAS 159 to be material to its
financial position or results of operations.
PROGENICS
PHARMACEUTICALS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ¾
continued (unaudited)
(amounts
in thousands, except per share amounts or unless otherwise
noted)
The Emerging Issues Task Force has issued an Exposure Draft on Issue 07-1,
Accounting for Collaborative Arrangements (“EITF 07-1”).This
issue impacts entities that have entered into arrangements which are not
conducted through a separate legal entity. The Task Force reached a tentative
conclusion that a collaborative arrangement is within the scope of EITF 07-1
if
the arrangement meets the following two criteria: (i) the parties are active
participants in the arrangement and (ii) the participants are exposed to
significant risks and rewards that depend on the endeavor’s ultimate commercial
success. The Task Force also reached a tentative conclusion that transactions
with third parties (i.e., revenue generated and costs incurred by the partners)
should be reported in the appropriate line item in each company’s financial
statement pursuant to the guidance in EITF 99-19, Reporting Revenue Gross as
a Principal versus Net as an Agent. The Task Force also concluded
tentatively that the equity method of accounting under Accounting Principles
Board Opinion 18, The Equity Method of Accounting for Investments in Common
Stock, should not be applied to arrangements that are not conducted through
a separate legal entity. Comments
will be
considered by the Task Force at the November 28-29, 2007 EITF meeting. If
the tentative conclusions are approved as a consensus, the guidance in EITF
07-1 would go into effect for periods that begin after December 15, 2007 and
be
accounted for as a change in accounting principle through retrospective
application. The Company does not expect that there will be a material impact
to
its financial position or results of operations if the Exposure Draft is
approved in its current form.
On
September 27, 2007, the FASB reached a final consensus on Emerging Issues Task
Force Issue 07-3, Accounting for Advance Payments for Goods or Services to
Be Used in Future Research and Development Activities (“EITF 07-03”).
Currently, under FASB Statement No. 2, Accounting for Research and
Development Costs, non-refundable advance payments for future research and
development activities for materials, equipment, facilities, and purchased
intangible assets that have no alternative future use are expensed as incurred.
EITF 07-03 addresses whether such non-refundable advance payments for goods
or
services that have no alternative future use and that will be used or rendered
for research and development activities should be expensed when the advance
payments are made or when the research and development activities have been
performed. The consensus reached by the FASB requires companies involved in
research and development activities to capitalize such non-refundable advance
payments for goods and services pursuant to an executory contractual arrangement
because the right to receive those services in the future represents a probable
future economic benefit. Those advance payments will be capitalized until the
goods have been delivered or the related services have been
performed. Entities will be required to evaluate whether they expect the
goods or services to be rendered. If an entity does not expect the goods to
be
delivered or services to be rendered, the capitalized advance payment will
be
charged to expense. The consensus on EITF 07-03 is effective for financial
statements issued for fiscal years beginning after December 15, 2007, and
interim periods within those fiscal years. Earlier application is not permitted.
Entities are required to recognize the effects of applying the guidance in
EITF
07-03 prospectively for new contracts entered into after the effective date.
The
Company is in the process of evaluating the expected impact of EITF 07-03 on
its
financial position and results of operations following
adoption.
Special
Note Regarding Forward-Looking Statements
Certain
statements in this Quarterly Report on Form 10-Q constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. Any statements contained herein that are not statements of historical
fact may be forward-looking statements. When we use the words ‘anticipates,’
‘plans,’ ‘expects’ and similar expressions, it is identifying forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements, or industry results, to be materially different from any
expected future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the risks
associated with our dependence on Wyeth to fund and to conduct clinical testing,
to make certain regulatory submissions and to manufacture and market products
containing methylnaltrexone, the uncertainties associated with product
development, the risk that clinical trials will not commence, proceed or be
completed as planned, the risk that our products will not receive marketing
approval from regulators, the risks and uncertainties associated with the
dependence upon the actions of our corporate, academic and other collaborators
and of government regulatory agencies, the risk that our licenses to
intellectual property may be terminated because of our failure to have satisfied
performance milestones, the risk that products that appear promising in early
clinical trials are later found not to work effectively or are not safe, the
risk that we may not be able to manufacture commercial quantities of our
products, the risk that our products, if approved for marketing, do not gain
market acceptance sufficient to justify development and commercialization costs,
the risk that we will not be able to obtain funding necessary to conduct our
operations, the uncertainty of future profitability and other factors set forth
more fully in our Annual Report on Form 10-K for the year ended December 31,
2006 and in this Form 10-Q, including those described under the caption “Risk
Factors”, and other periodic filings with the Securities and Exchange
Commission, to which investors are referred for further
information.
We
do not
have a policy of updating or revising forward-looking statements, and we assume
no obligation to update any forward-looking statements contained in this Form
10-Q as a result of new information or future events or developments. Thus,
you
should not assume that our silence over time means that actual events are
bearing out as expressed or implied in such forward-looking
statements.
Overview
General
We
are a
biopharmaceutical company focusing on the development and commercialization
of
innovative therapeutic products to treat the unmet medical needs of patients
with debilitating conditions and life-threatening diseases. We commenced
principal operations in late 1988, and since that time we have been engaged
primarily in research and development efforts, development of our manufacturing
capabilities, establishment of corporate collaborations and raising capital.
We
do not currently have any commercial products. In order to commercialize the
principal products that we have under development, we will need to address
a
number of technological and clinical challenges and comply with comprehensive
regulatory requirements. Accordingly, we cannot predict the amount of funds
that
we will require, nor the length of time that will pass, before we receive
significant revenues from sales of any of our products, if ever.
Gastroenterology
Our
most
advanced product candidate and likeliest source of product revenue is
methylnaltrexone. In December 2005, we entered into a License and Co-development
Agreement (the “Collaboration Agreement”) with Wyeth Pharmaceuticals (“Wyeth”)
to develop and commercialize methylnaltrexone. The Collaboration Agreement
involves the development and commercialization of three formulations: (i) a
subcutaneous formulation of methylnaltrexone, to be used in patients with
opioid-induced constipation; (ii) an intravenous formulation of
methylnaltrexone, to be used in patients with post-operative ileus (“POI”) and
(iii) an oral formulation of methylnaltrexone, to be used in patients with
opioid-induced constipation. Once marketing approval for each product is
obtained, Wyeth is responsible for commercializing each of the three forms
of
methylnaltrexone worldwide.
Our
work
with methylnaltrexone has proceeded farthest as a treatment for opioid-induced
constipation. We have successfully completed two pivotal phase 3 clinical trials
of the subcutaneous formulation of methylnaltrexone in patients receiving
palliative care, including patients with cancer, Acquired Immunodeficiency
Syndrome (“AIDS”) and heart disease. We achieved positive results from our two
pivotal phase 3 clinical trials (studies 301 and 302). All primary and secondary
efficacy endpoints of both of the phase 3 studies were met and were
statistically significant. The drug was generally well tolerated in both phase
3
trials.
During
March 2007, we submitted a New Drug Application (“NDA”) with the FDA for
marketing approval in the United States for a subcutaneous formulation of
methylnaltrexone for the treatment of opioid-induced constipation in patients
receiving palliative care. In May 2007, Wyeth submitted a regulatory marketing
application in the European Union for the same indication. Both applications
were accepted for review in May 2007, which resulted in the Company earning
a
total of $9.0 million in milestone payments under its Collaboration Agreement
with Wyeth. The FDA review is expected to be completed by its Prescription
Drug
User Fee Act (”PDUFA”) date of January 30, 2008. In June 2007, the Company and
Wyeth announced positive results in a three-month extension of the 302 study
of
a subcutaneous formulation of methylnaltrexone. In August 2007, Wyeth submitted
a marketing application to the Therapeutic Goods Administration division of
the
Australian government, and in October 2007, the Company announced that Wyeth
had
submitted a New Drug Submission marketing application for
subcutaneous methylnaltrexone to Health Canada, the Health Products and Food
branch of the Canadian regulatory agency.
In
September 2007, we and Wyeth announced the commencement of two additional
clinical trials of the subcutaneous formulation of methylnaltrexone in patients
outside of the palliative care population included in the first NDA submission:
a phase 3 trial, conducted by Wyeth, in patients with chronic pain
not related to cancer, such as chronic severe back pain that requires treatment
with opioids; and a phase 2 trial, conducted by us, in patients rehabilitating
from an orthopedic surgical procedure in whom opioids are used to control
post-operative pain.
We
are
also developing an intravenous formulation of methylnaltrexone in collaboration
with Wyeth for the management of POI, a serious
condition of the gastrointestinal tract. We and Wyeth are
conducting two global pivotal phase 3 clinical trials to evaluate the safety
and
efficacy of an intravenous formulation of methylnaltrexone for the treatment
of
POI. In September 2007, we and Wyeth announced the initiation of an additional
phase 3 intravenous methylnaltrexone study, being conducted by Wyeth, in
patients with POI following a ventral hernia repair via laparotomy or
laparoscopy. Development
of the intravenous formulation of methylnaltrexone for POI has been granted
Fast
Track status from the U.S. Food and Drug Administration.
Under
the
Collaboration Agreement, Wyeth is also developing an oral formulation of
methylnaltrexone for the treatment of opioid-induced constipation in patients
with chronic pain. Prior to the Collaboration Agreement, we had completed phase
1 clinical trials of an oral formulation of methylnaltrexone in healthy
volunteers, which indicated that methylnaltrexone was well tolerated. In August
2006, Wyeth initiated a phase 2 clinical trial to evaluate once-daily dosing
of
an oral formulation of methylnaltrexone. Preliminary results from the
phase 2 trial, conducted by Wyeth, showed that the initial oral formulation
of
methylnaltrexone was generally well tolerated but did not exhibit sufficient
clinical activity to advance into phase 3 testing. In March 2007, Wyeth began
clinical testing of a new oral formulation of methylnaltrexone for the treatment
of opioid-induced constipation, and in July 2007 we announced positive
preliminary results from a phase 1 clinical trial of this new oral formulation
of methylnaltrexone. In October 2007, we announced plans to initiate two,
four-week phase 2 clinical trials to evaluate daily dosing of oral
methylnaltrexone in patients with chronic, non-malignant pain who are being
treated with opioids and are experiencing opioid-induced constipation. Each
study will separately evaluate a different oral formulation of methylnaltrexone,
including the formulation that exhibited positive preliminary results in a
phase
1 study announced in July 2007.
Wyeth
made a $60 million non-refundable upfront payment to us under the Collaboration
Agreement at the time it was entered into, for which we deferred the recognition
of revenue at December 31, 2005 since work under the Collaboration Agreement
did
not commence until January 2006. Wyeth has made $14.0 million in milestone
payments since that time and is obligated to make up to $342.5 million in
additional payments to us upon the achievement of milestones and contingent
events in the development and commercialization of methylnaltrexone. Costs
for
the development of methylnaltrexone incurred by Wyeth or us starting January
1,
2006 are being paid by Wyeth. We are being reimbursed for our out-of-pocket
development costs by Wyeth based on the number of our full time equivalent
employees (“FTE’s”) devoted to the development project. Wyeth is obligated to
pay to us royalties on the sale by Wyeth of methylnaltrexone throughout the
world during the applicable royalty periods.
Virology
In
the
area of virology, we are developing viral-entry inhibitors for HIV and Hepatitis
C virus infection, which are molecules designed to inhibit a virus’ ability to
enter certain types of immune cells and liver cells, respectively. In mid-2005,
we announced positive phase 1 clinical findings related to PRO 140, a monoclonal
antibody designed to target the HIV co-receptor CCR5, in healthy volunteers.
On
May 1, 2007, we announced positive results from the phase 1b trial of an
intravenous formulation of PRO 140 in HIV-infected patients. Patients receiving
a single 5.0 mg/kg dose of PRO 140, which was the highest dose tested, achieved
an average maximum decrease of viral concentrations in the blood of 98.5% (1.83
log10). In
these patients, reductions in viral load of greater than 90% (1.0 log10) on average
persisted for two to three weeks after dosing. In addition, PRO 140 was
generally well tolerated in this phase 1b proof-of-concept study. We are also
developing a subcutaneous formulation of PRO 140 with the goal of developing
a
long-acting, self-administered therapy for HIV infection. PRO 140 has been
granted Fast Track status from the U.S. Food and Drug Administration. We plan
to
initiate additional clinical testing of PRO 140 in the fourth quarter of 2007.
We are also conducting research into therapeutics for hepatitis C virus
infection that block viral entry into cells.
Oncology
We
are developing immunotherapies for
prostate cancer, including a monoclonal antibody-drug conjugate directed against
prostate-specific membrane antigen (“PSMA”), a protein found on the surface of
prostate cancer cells. We are also developing vaccines designed to stimulate
an
immune response to PSMA.
Results
of Operations (amounts
in
thousands)
Revenues:
Our
sources of revenue during the three and nine months ended September 30, 2007
and
2006 included our collaboration with Wyeth, our research grants and contracts
and, to a small extent, our sale of research reagents.
|
|
For
the Three Months Ended September
30,
|
|
For
the Nine Months Ended September
30,
|
|
|
2007
|
|
2006
|
|
Percent
Change
|
|
2007
|
|
2006
|
|
Percent
Change
|
Sources
of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
research from collaborator
|
|
$ 14,540
|
|
$ 14,527
|
|
0%
|
|
$ 52,987
|
|
$ 40,060
|
|
32%
|
Research
grants and contract
|
|
2,471
|
|
3,316
|
|
(25%)
|
|
7,077
|
|
7,842
|
|
(10%)
|
Product
sales
|
|
7
|
|
5
|
|
40%
|
|
48
|
|
70
|
|
(31%)
|
Total
|
|
$ 17,018
|
|
$ 17,848
|
|
(5%)
|
|
$ 60,112
|
|
$ 47,972
|
|
25%
|
Contract
research from collaborator
During
the three months ended September
30, 2007 and 2006, we recognized $14,540 and $14,527, respectively, of
revenue from Wyeth, including $3,219 and $5,103, respectively, of the
$60,000 upfront payment we received upon entering into our collaboration in
December 2005 and $11,321 and $9,424, respectively, as reimbursement of our
development expenses, including our labor costs. During the nine months ended
September 30, 2007 and 2006, we recognized $52,987 and $40,060,
respectively, of revenue from Wyeth, including $13,138 and $14,466,
respectively, of the $60,000 upfront payment we received upon entering into
our
collaboration in December 2005, $30,849 and $25,594, respectively, as
reimbursement of our development expenses, including our labor costs and $9,000
of non-refundable milestone payments related to the acceptance for review of
applications submitted for marketing approval of a subcutaneous formulation
of
methylnaltrexone in the U.S. and the European Union in the second quarter of
2007. From the inception of the Collaboration Agreement through September 30,
2007, we recognized $31,968 of revenue from the $60,000 upfront payment, $65,433
as reimbursement for our out-of-pocket development costs, including our labor
costs, and a total of $14,000 for non-refundable milestone
payments.
We
recognize a portion of the upfront
payment in each reporting period in accordance with the proportionate
performance method, which is based on the percentage of actual effort performed
on our development obligations in that period relative to total remaining effort
estimated in the most recent budget approved by both us and Wyeth for our
performance obligations under the arrangement. During the third quarter of
2007,
the estimate of our total remaining effort to complete our development
obligations was increased based upon a revised development budget approved
by
both us and Wyeth and the period over which those obligations will extend and
over which the upfront payment will be amortized was extended from the end
of
2008 to the end of 2009. As a result, the amount of revenue recognized from
the
upfront payment in the third quarter of 2007 declined to $3,219 from $5,103
in
the third quarter of 2006. In prior quarters during 2006 and 2007, we had
recognized an amount of revenue similar to that in the third quarter of
2006.
Reimbursement
of development costs,
including our labor costs, is recognized as revenue as the costs are incurred
under the development plan agreed to by us and Wyeth. Substantive milestone
payments are considered to be performance payments that are recognized upon
achievement of the milestone only if all of the following conditions are met:
(1) the milestone payment is non-refundable; (2) achievement of the milestone
involves a degree of risk and was not reasonably assured at the inception of
the
arrangement; (3) substantive effort is involved in achieving the milestone;
(4)
the amount of the milestone payment is reasonable in relation to the effort
expended or the risk associated with achievement of the milestone; and (5)
a
reasonable amount of time passes between the upfront license payment and the
first milestone payment as well as between each subsequent milestone payment.
We
have analyzed the facts and circumstances of the three milestones achieved
since
inception of the Collaboration Agreement with Wyeth and believe that they met
those criteria for revenue recognition upon achievement of the respective
milestones. See Critical Accounting Policies –Revenue Recognition,
below.
Research
grants and contract
Revenues
from research grants and contract decreased to $2,471 for the three months
ended
September 30, 2007 from $3,316 for the three months ended September 30, 2006.
Of
those amounts, $1,676 and $2,585, respectively, were earned from grants and
$795
and $731, respectively, were earned from the contract awarded to us by the
National Institutes of Health in September 2003 (the “NIH Contract”). The
decrease resulted from (i) an increase due to new grants awarded in 2007,
offset by (ii) a decrease in remaining reimbursable expenses under some of
the
previously awarded grants, including $13,100 in grants we were awarded during
2005, $10,100 of which was to partially fund our PRO 140 program over a three
and a half year period. In addition, there was increased activity under the
NIH
Contract. The NIH Contract provides for up to $28,600 in funding to us over
five
years for preclinical research and development and early clinical testing of
a
vaccine designed to prevent HIV from infecting individuals exposed to the virus.
A total of approximately $3,700 is earmarked under the NIH Contract to fund
such
subcontracts. Funding under the NIH Contract is subject to compliance with
its
terms, including the annual approved budgets. The payment of an aggregate of
$1,600 in fees (of which $180 had been recognized as revenue as of September
30,
2007) is subject to achievement of specified milestones.
Revenues
from research grants and contract decreased slightly to $7,077 for the nine
months ended September 30, 2007 from $7,842 for the nine months ended September
30, 2006. Of those amounts, $4,256 and $5,370 were earned from grants and
$2,821 and $2,472 were earned from the NIH Contract for the nine months
ended September 30, 2007 and 2006, respectively. The change resulted primarily
from increased activity on the NIH Contract, which was partially offset by
the
completion of work on several grants prior to the first quarter of 2007 and
the
decrease in reimbursable grant expenses in the third quarter of 2007, as noted
above.
Product
sales
Revenues
from product sales increased to $7 for the three months ended September 30,
2007
from $5 for the three months ended September 30, 2006. Revenues from product
sales decreased to $48 for the nine months ended September 30, 2007 from $70
for
the nine months ended September 30, 2006. We received fewer orders for research
reagents during the first quarter of 2007 than in 2006, which was partially
offset by an increase in orders for research reagents in the second and third
quarters of 2007.
Expenses:
Research
and Development Expenses:
Research
and development expenses include scientific labor, supplies, facility costs,
clinical trial costs, product manufacturing costs and license fees. Research
and
development expenses increased to $24,247 for the three months ended September
30, 2007 from $15,751 for the three months ended September 30, 2006 and
increased to $69,999 for the nine months ended September 30, 2007 from $56,288
for the nine months ended September 30, 2006, as follows:
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits (cash)
|
|
$5,939
|
|
$4,345
|
|
37%
|
|
$17,876
|
|
$12,150
|
|
47%
|
Three
Months: Increase was due to Company-wide compensation increases and an
increase in average headcount to 189 from 136 for the three months ended
September 30, 2007 and 2006, respectively, in the research and development,
manufacturing and clinical departments.
Nine
Months: Increase was due to Company-wide compensation increases and an
increase in average headcount to 186 from 129 for the nine months ended
September 30, 2007 and 2006, respectively, in the research and development,
manufacturing and clinical departments.
|
|
Three Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
(non-cash)
|
|
$1,829
|
|
$1,655
|
|
11%
|
|
$5,004
|
|
$4,136
|
|
21%
|
Three
Months: Increase due to increase in headcount and changes in the fair
market value of our common stock (see Critical Accounting Policies −
Share-Based Payment Arrangements, below). The
amount of non-cash compensation expense is expected to increase in the future
in
conjunction with increased headcount.
Nine
Months: Increase due to increase in headcount and changes in the fair
market value of our common stock (see Critical Accounting Policies −
Share-Based Payment Arrangements, below). The
amount of non-cash compensation expense is expected to increase in the future
in
conjunction with increased headcount.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical
trial costs
|
|
$6,124
|
|
$1,896
|
|
223%
|
|
$14,520
|
|
$5,795
|
|
151%
|
Three
Months: Clinical trial costs include the costs associated with conducting
our clinical trials, but do not include the costs associated with manufacturing
the compounds administered in the clinical trials, which costs are shown
in
Laboratory Supplies or Contract Manufacturing and Subcontractors, below.
Increase primarily related to Methylnaltrexone ($4,461) due to global pivotal
phase 3 clinical trials for the intravenous formulation, which began in the
fourth quarter of 2006. The increase was partially offset by decreases in
HIV
($195), resulting from a decrease in the PRO 140 phase 1b clinical trial
activity in the 2007 period, and Cancer-related costs ($38), due to a decrease
in GMK-related costs resulting from our decision to terminate the GMK study
in
the second quarter of 2007. The decrease in GMK-related cancer costs was
partially offset by an increase in PSMA-related costs in the 2007 period.
During
the remainder of 2007, clinical trial costs are expected to continue to increase
as we conduct clinical trials of subcutaneous and intravenous formulations
of
methylnaltrexone and PRO 140.
Nine
Months: Increase primarily related to Methylnaltrexone ($9,511)
due to global pivotal phase 3 clinical trials for the intravenous formulation,
which began in the fourth quarter of 2006, and Other projects ($2). The
increases were partially offset by decreases in HIV ($194), resulting from
a
decrease in the PRO 140 phase 1b clinical trial activity in 2007, and
Cancer-related costs ($594), due to a decrease in GMK-related costs resulting
from our decision to terminate the GMK study in the second quarter of 2007.
The
decrease in GMK-related cancer costs was partially offset by an increase
in
PSMA-related costs in the 2007 period. During the remainder of 2007, clinical
trial costs are expected to continue to increase as we conduct clinical trials
of subcutaneous and intravenous formulations of methylnaltrexone and PRO
140.
|
|
Three Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laboratory
supplies
|
|
$1,765
|
|
$2,191
|
|
(19%)
|
|
$5,616
|
|
$4,261
|
|
32%
|
Three
Months: Decrease primarily related to Methylnaltrexone ($1,113) due to
purchases of methylnaltrexone drug in the 2006 period for use in clinical trials
but not in the 2007 period, and a decrease in basic research costs in 2007
for
Cancer (primarily PSMA) ($58), which were partially offset by an increase in
HIV-related costs ($369), due to internal manufacture of drug materials for
use
in future clinical trials in HIV and for Other projects ($376).
Nine
Months: Increase in HIV-related costs ($800), due to internal
manufacture of drug materials for use in future clinical trials, an increase
in
basic research costs in 2007 for Cancer (primarily PSMA) ($197) and Other
projects ($1,040). The increases were partially offset by a decrease
related to Methylnaltrexone ($682) due to purchases of methylnaltrexone drug
in
the 2006 period for use in clinical trials but not in the 2007 period and
computer software costs in 2007 but not in 2006 related to the preparation
for
submission of a New Drug Application in March 2007.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
manufacturing and subcontractors
|
|
$6,008
|
|
$2,605
|
|
131%
|
|
$17,906
|
|
$8,651
|
|
107%
|
Three
Months: Increase in HIV ($1,470), Cancer ($1,192), Methylnaltrexone ($30)
and Other projects ($711). These expenses include manufacture by third parties
of materials for use in clinical trials as well as testing, analysis,
formulation and toxicology services for the conduct of clinical trials and
basic
research, and vary as the timing and level of such services are required.
We
expect these costs to increase during the remainder of 2007 as we expand
our
clinical trial costs for methylnaltrexone and PRO 140 and basic research
for
other projects.
Nine
Months: Increase in HIV ($4,430), Cancer ($5,831) and Other projects
($1,221), which were partially offset by a decrease in Methylnaltrexone
($2,227) related to clinical trials under our collaboration with Wyeth. These
expenses include manufacture by third parties of materials for use in clinical
trials as well as testing, analysis, formulation and toxicology services
for the
conduct of clinical trials and basic research, and vary as the timing and
level
of such services are required. We expect these costs to increase during the
remainder of 2007 as we expand our clinical trial costs for methylnaltrexone,
PRO 140 and basic research for other projects.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultants
|
|
$934
|
|
$1,628
|
|
(43%)
|
|
$3,636
|
|
$3,722
|
|
(2%)
|
Three
Months: Decrease in Methylnaltrexone ($957), partially offset by increases
in HIV ($218), Cancer ($24), and Other projects ($21). These expenses are
related to the monitoring of clinical trials and analysis of data from completed
clinical trials and basic research projects, which vary as the timing and
level
of such services are required. During the remainder of 2007, consultant
expenses are expected to increase for all of our research and development
programs.
Nine
Months: Decrease in Methylnaltrexone ($682), partially offset by increases
in HIV ($322), Cancer ($68) and Other projects ($206). These expenses are
related to the monitoring of clinical trials and analysis of data from completed
clinical trials and basic research projects, which vary as the timing and
level
of such services are required. During 2007, consultant expenses are expected
to
increase for all of our research and development programs.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
fees
|
|
($16)
|
|
$100
|
|
(116%)
|
|
$833
|
|
$528
|
|
58%
|
Three
Months: Decrease primarily related to a reduction in the amount due in
2007 related to our HIV program ($125), partially offset by an increase in
payments under our programs in Cancer ($9). The amounts of license fees for
the
remainder of 2007 are expected to decrease relative to those for
2006.
Nine
Months: Increase primarily related to payments in 2007 but not 2006 related
to our Cancer program ($428) and HIV program ($31), partially offset by a
decrease in Methylnaltrexone ($154) related to payments to the University
of
Chicago. The amounts of license fees for the remainder of 2007 are expected
to
decrease relative to those for 2006.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
operating expenses
|
|
$1,664
|
|
$1,331
|
|
25%
|
|
$4,608
|
|
$17,045
|
|
(73%)
|
Three
Months: Increase primarily related to rent ($377), which was
partially offset by decreases in expenses related to travel ($17), insurance
($22), and other operating expenses ($5). The increase in rent expense was
due
to additional space and rental rates in 2007. During the remainder of
2007 operating expenses are expected to increase over those of 2006, due to
higher rent and facility expenses.
Nine
Months: Decrease primarily due to $13,209 of expense related to the
acquisition of Cytogen’s 50% interest in PSMA LLC during 2006 and an increase in
expenses related to rent ($382), facilities expenses ($103), insurance
($136) and other operating expenses ($151). During the remainder of 2007,
except for expenses related to the acquisition of Cytogen’s interest in PSMA
LLC, operating expenses are expected to increase over those of 2006, due to
higher rent and facility expenses.
A
major
portion of our spending has been, and we expect will continue to be, associated
with methylnaltrexone. Beginning in 2006, Wyeth has been reimbursing us for
development expenses we incur related to methylnaltrexone under the development
plan agreed to between us and Wyeth. Spending for our virology and
oncology development programs is also expected to increase
significantly during the remainder of 2007.
General
and Administrative Expenses:
General
and administrative expenses increased to $9,275 for the three months ended
September 30, 2007 from $6,610 for the three months ended September 30,
2006 and to $21,746 for the nine months ended September 30, 2007 from $16,138
for the nine months ended September 30, 2006, as follows:
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits (cash)
|
|
$1,641
|
|
$1,556
|
|
5%
|
|
$5,418
|
|
$4,516
|
|
20%
|
Three
Months: Increase due to compensation increases and an increase in average
headcount to 42 from 34 in the general and administrative departments for the
three months ended September 30, 2007 and 2006, respectively.
Nine
Months: Increase due to compensation increases and an increase in
average headcount to 42 from 30 in the general and administrative departments
for the nine months ended September 30, 2007 and 2006, respectively, including
the hiring of our Vice President, Commercial Development and Operations in
January 2007.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation (non-cash)
|
|
$4,337
|
|
$2,731
|
|
59%
|
|
$6,836
|
|
$4,999
|
|
37%
|
Three
Months: Increase due to increased headcount and changes in the fair market
value of our common stock (see Critical Accounting Policies − Share-Based
Payment Arrangements, below). In addition, during
the third quarter of 2007, stock options were granted to one new director and
to
the two co-chairmen of the Board of Directors. The amount of non-cash
compensation expense is expected to increase in the future in conjunction with
increased headcount.
Nine
Months: Increase due to increased headcount and changes in the fair market
value of our common stock (see Critical Accounting Policies − Share-Based
Payment Arrangements, below). In addition, during
the third quarter of 2007, stock options were granted to one new director and
to
the two co-chairmen of the Board of Directors. The amount of non-cash
compensation expense is expected to increase in the future in conjunction with
increased headcount.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
and professional fees
|
|
$1,856
|
|
$1,461
|
|
27%
|
|
$5,601
|
|
$3,693
|
|
52%
|
Three
Months: Increase due primarily to increases in legal and patent fees ($458)
and other miscellaneous costs ($16), which were partially offset by decreases
in
consulting fees ($20), recruiting fees ($24) and audit and tax fees
($35).
Nine
Months: Increase due primarily to increases in consulting fees ($638),
recruiting fees ($49), legal and patent fees ($1,261) and other miscellaneous
costs ($51), which were partially offset by a decrease in audit and tax fees
($91).
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
operating expenses
|
|
$1,441
|
|
$862
|
|
67%
|
|
$3,891
|
|
$2,930
|
|
33%
|
Three
Months: Increase in investor relations ($40) and conference costs ($19),
corporate sales and franchise taxes ($55), travel ($54), computer supplies
and
software ($47), rent ($120) and other operating expenses ($250) due to increased
headcount, partially offset by a decrease in insurance ($6). The increase
in
rent expense was due to additional space and increased rental rates in 2007.
Other operating costs are expected to increase during the remainder of
2007.
Nine
Months: Increase in investor relations ($128) and conference
costs ($24), travel ($102), computer supplies and software ($142), rent ($115)
and other operating expenses ($512) due to increased headcount, partially
offset
by a decrease in insurance ($1) and corporate sales and franchise taxes ($61).
Other operating costs are expected to increase during the remainder of
2007.
We
expect
general and administrative expenses to increase during the remainder of 2007
due
to an increase in headcount.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
in Joint Venture
|
|
$0
|
|
$0
|
|
0%
|
|
$0
|
|
$121
|
|
(100%)
|
On
April
20, 2006, PSMA LLC became our wholly owned subsidiary and, accordingly, we
did
not recognize loss in joint venture from the date of acquisition. During the
nine months ended September 30, 2006, our 50% portion of the research and
development expenses and general and administrative expenses of PSMA LLC was
$121.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
$845
|
|
$381
|
|
122%
|
|
$2,144
|
|
$1,106
|
|
94%
|
Three
Months: Depreciation expense increased to $845 for the three months ended
September 30, 2007 from $381 for the three months ended September 30, 2006.
We purchased more capital assets and made more leasehold improvements in 2007
than in 2006 to increase our research and manufacturing
capacity.
Nine
Months: Depreciation expense increased to $2,144 for the nine months ended
September 30, 2007 from $1,106 for the nine months ended September 30,
2006. We purchased more capital assets and made more leasehold improvements
in
2007 than in 2006 to increase our research and manufacturing
capacity.
|
|
Three
Months Ended
September
30,
|
|
Percent
Change
|
|
Nine
Months Ended
September
30,
|
|
Percent
Change
|
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
$1,749
|
|
$1,959
|
|
(11%)
|
|
$5,361
|
|
$5,775
|
|
(7%)
|
Three
Months: Interest income decreased to $1,749 for the three months ended
September 30, 2007 from $1,959 for the three months ended September 30, 2006.
Interest income, as reported, is primarily the result of investment income
from
our marketable securities, offset by the amortization of premiums and discounts
we paid for those marketable securities. For the three months ended September
30, 2007 and 2006, investment income decreased to $1,618 from $1,931,
respectively, due to a lower average balance of cash equivalents and marketable
securities in 2007 than in 2006. Amortization of discounts net of premiums,
which is included in interest income, increased to $131 from $28 for the three
months ended September 30, 2007 and 2006, respectively.
Nine
Months: Interest income decreased to $5,361 for the nine months ended
September 30, 2007 from $5,775 for the nine months ended September 30, 2006.
Interest income, as reported, is primarily the result of investment income
from
our marketable securities, offset by the amortization of premiums and discounts
we paid for those marketable securities. For the nine months ended September
30,
2007 and 2006, investment income decreased to $5,007 from $5,802, respectively,
due to a lower average balance of cash equivalents and marketable securities
in
2007 than in 2006. Amortization of discounts net of premiums, which is included
in interest income, decreased to ($354) from $27 for the nine months ended
September 30, 2007 and 2006, respectively.
Net
Loss:
Our
net
loss was $15,600 for the three months ended September 30, 2007 compared to
$2,935 for the three months ended September 30, 2006 and $28,416 for the nine
months ended September 30, 2007 compared to $19,906 for the nine months ended
September 30, 2006.
Liquidity
and Capital Resources
Overview
We
have,
to date, generated no meaningful amounts of product revenue, and consequently
we
have relied principally on external funding to finance our operations. We have
funded our operations since inception primarily through private placements
of
equity securities, payments received under collaboration agreements, public
offerings of common stock, funding under government research grants and
contracts, interest on investments, the proceeds from the exercise of
outstanding options and warrants and the sale of our common stock under our
Employee Stock Purchase Plans. At September 30, 2007, we had cash, cash
equivalents and marketable securities, including non-current portion, totaling
$183.6 million compared with $149.1 million at December 31, 2006. Our existing
cash, cash equivalents and marketable securities at September 30, 2007 are
sufficient to fund current operations for at least one year. Our cash flow
from
operating activities was negative for the nine months ended September 30, 2007
and 2006 due primarily to the excess of expenditures on our research and
development programs and general and administrative costs related to those
programs over cash received from collaborators and government grants and
contracts to fund such programs, as described below.
Sources
of Cash
Operating
Activities
Since
January 2006, Wyeth has been reimbursing us for development expenses we incur
related to methylnaltrexone under the development plan agreed to between us
and
Wyeth, which is currently expected to continue through 2009. Wyeth has and
will
continue to provide milestone and other contingent payments upon the achievement
of certain events. Wyeth is also responsible for all commercialization
activities related to methylnaltrexone products. For the nine months ended
September 30, 2007, we received $30.8 million of reimbursement of our
development costs and $9.0 million of milestone payments related to the
acceptance for review of applications submitted for marketing approval of a
subcutaneous formulation of methylnaltrexone in the U.S. and the European Union,
which are within the development plan approved by the parties.
The
funding by Wyeth of our development costs for methylnaltrexone enables us to
devote our current and future resources to our other research and development
programs. We may also enter into collaboration agreements with respect to other
of our product candidates. We cannot forecast with any degree of certainty,
however, which products or indications, if any, will be subject to future
collaborative arrangements, or how such arrangements would affect our capital
requirements. The consummation of other collaboration agreements would further
allow us to advance other projects with our current funds.
In
September 2003, we were awarded a contract from the NIH. The NIH Contract
provides for up to $28.6 million in funding, subject to annual funding
approvals, to us over five years for preclinical research, development and
early
clinical testing of a prophylactic vaccine designed to prevent HIV from becoming
established in uninfected individuals exposed to the virus. These funds are
being used principally in connection with our ProVax HIV vaccine program. A
total of approximately $3.7 million is earmarked under the NIH Contract to
fund
subcontracts. Funding under the NIH Contract is subject to compliance with
its
terms, and the payment of an aggregate of $1.6 million in fees is subject to
achievement of specified milestones. Through September 30, 2007, we had
recognized revenue of $12.2 million from this contract, including $0.18 million
for the achievement of two milestones.
We
have
also been awarded grants from the NIH, which provide ongoing funding for a
portion of our virology and cancer research programs for periods including
the
nine months ended September 30, 2007 and 2006. Among those grants were an
aggregate of $4.4 million in grants made in 2006 and 2007. In
addition, two awards were made during 2005, which provide
for up to $3.0 million and $10.1 million, respectively, in support for our
hepatitis C virus research program and PRO 140 HIV development program,
respectively, to be awarded over a three year and a three and a half year
period, respectively. Funding under all of our NIH grants and contract is
subject to compliance with their terms, and is subject to annual funding
approvals. For the nine months ended September 30, 2007 and 2006, we recognized
$4.3 million and $5.4 million, respectively, of revenue from all of our NIH
grants.
Changes
in Accounts receivable and Accounts payable for the nine months ended September
2007 and 2006 resulted from the timing of receipts from the NIH and payments
made to trade vendors in the normal course of business.
Other
than amounts to be received from Wyeth and from currently approved grants and
contracts, we have no committed external sources of capital. Other than
potential revenues from methylnaltrexone, we 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.
Investing
Activities
We
purchase and sell marketable securities in order to provide funding for our
operations and to achieve appreciation of our unused cash in a low risk
environment. Our marketable securities, which include corporate debt and
securities of government-sponsored entities, are classified as available for
sale. The majority of these investments have short maturities. Interest rate
increases during 2007 have generally resulted in a minor decrease in the market
value of our portfolio. Based upon our currently projected sources and uses
of
cash, we intend to hold these securities until a recovery of fair value, which
may be maturity. Therefore, we do not consider these marketable securities
to be
other-than-temporarily impaired at September 30, 2007.
Financing
Activities
On
September 25, 2007, we completed a public offering of 2.6 million shares of
our
common stock, pursuant to a shelf registration statement that had been filed
with the Securities and Exchange Commission in 2006, which had registered 4.0
million shares of our common stock. We received proceeds of $57.3 million,
or
$22.04 per share, which was net of underwriting discounts and commissions of
approximately $2.9 million, and paid approximately $0.17 million in other
offering expenses. We anticipate using the net proceeds to fund clinical trials
of our product candidates and for research and development projects. We may
also
use the proceeds for other corporate purposes, including potential acquisitions
of technology or companies in complementary fields.
Unless
we
obtain regulatory approval from the FDA for at least one of our product
candidates and/or enter into agreements with corporate collaborators with
respect to the development of our technologies in addition to that for
methylnaltrexone, we will be required to fund our operations for periods in
the
future, by seeking additional financing through future offerings of equity
or
debt securities or funding from additional grants and government contracts.
Adequate additional funding may not be available to us on acceptable terms
or at
all. Our inability to raise additional capital on terms reasonably acceptable
to
us would seriously jeopardize the future success of our
business.
During
the nine months ended September
30, 2007 and 2006, we received cash of $6.1 million and $5.3 million,
respectively, from the exercise of stock options by employees, directors and
non-employee consultants and from the sale of our common stock under our
Employee Stock Purchase Plans. The amount of cash we receive from these sources
is greater with increases in headcount and with increases in the price of our
common stock on the grant date for options exercised, and on the sale date
for
shares sold under our Employee Stock Purchase Plans.
Uses
of Cash
Operating
Activities
Our
total
expenses for research and development from inception through September 30,
2007
have been approximately $367.2 million. We currently have major research and
development programs investigating gastroenterology, virology and
oncology. In addition, we are conducting several smaller research
projects in the areas of virology and oncology. For various reasons, many of
which are outside of our control, including the early stage of certain of our
programs, the timing and results of our clinical trials and our dependence
in
certain instances on third parties, we cannot estimate the total remaining
costs
to be incurred and timing to complete our research and development
programs.
For
the
nine months ended September 30, 2007 and 2006, research and development costs
incurred were as follows. Expenses for Cancer for the nine months ended
September 30, 2006 include $13.2 million related to our purchase of Cytogen’s
interest in our PSMA joint venture.
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(in
millions)
|
|
Methylnaltrexone
|
|
$ |
30.9
|
|
|
$ |
23.2
|
|
HIV
|
|
|
19.1
|
|
|
|
11.3
|
|
Cancer
|
|
|
13.5
|
|
|
|
19.3
|
|
Other
programs
|
|
|
6.5
|
|
|
|
2.5
|
|
Total
|
|
$ |
70.0
|
|
|
$ |
56.3
|
|
Although
we expect that our spending on methylnaltrexone will increase during the
remainder of 2007, our cash outlays in accordance with the agreed upon
development plan will be reimbursed by Wyeth. We also expect that spending
on
our PRO 140 and other programs will increase substantially during 2007 and
beyond. Consequently, we may require additional funding to continue our research
and product development programs, to conduct preclinical studies and clinical
trials, for operating expenses, to pursue regulatory approvals for our product
candidates, for the costs involved in filing and prosecuting patent applications
and enforcing or defending patent claims, if any, for the cost of product
in-licensing and for any possible acquisitions. Manufacturing and
commercialization expenses for methylnaltrexone will be funded by Wyeth.
However, if we exercise our option to co-promote methylnaltrexone products
in
the U.S., which must be approved by Wyeth, we will be required to establish
and
fund a sales force, which we currently do not have. If we commercialize any
other product candidate other than with a corporate collaborator, we would
also
require additional funding to establish manufacturing and marketing
capabilities.
Our
purchase of rights from our methylnaltrexone licensors in December 2005 has
extinguished our cash payments that would have been due to those licensors
in
the future upon the achievement of certain events, including sales of
methylnaltrexone products. We continue, however, to be responsible to make
payments (including royalties) to the University of Chicago upon the occurrence
of certain events.
Investing
Activities
During
the nine months ended September 30, 2007 and 2006, we have spent $4.4 million
and $6.5 million, respectively, on capital expenditures, including the expansion
of our office, laboratories and manufacturing facilities and the purchase of
more laboratory equipment for our ongoing and future research and development
projects. During the remainder of 2007 and beyond, we
expect further expenditures as we continue to lease and renovate additional
laboratory, manufacturing and office space and increase headcount of our
research and development and administrative staff.
Contractual
Obligations
Our
funding requirements, both for the next 12 months and beyond, will include
required payments under operating leases and licensing and collaboration
agreements. The following table summarizes our contractual obligations as of
September 30, 2007 for future payments under these agreements:
|
|
|
|
|
Payments
due by September 30,
|
|
|
|
Total
|
|
|
2008
|
|
|
|
2009-2010
|
|
|
|
2011-2012
|
|
|
Thereafter
|
|
|
|
(in
millions)
|
|
Operating
leases
|
|
$ |
7.7
|
|
|
$ |
2.8
|
|
|
$ |
3.8
|
|
|
$ |
0.7
|
|
|
$ |
0.4
|
|
License
and collaboration agreements (1)
|
|
|
99.4
|
|
|
|
3.0
|
|
|
|
6.5
|
|
|
|
4.2
|
|
|
|
85.7
|
|
Total
|
|
$ |
107.1
|
|
|
$ |
5.8
|
|
|
$ |
10.3
|
|
|
$ |
4.9
|
|
|
$ |
86.1
|
|
_______________
(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.
|
For
each
of our programs, we periodically assess the scientific progress and merits
of
the programs to determine if continued research and development is economically
viable. Certain of our programs have been terminated due to the lack of
scientific progress and lack of prospects for ultimate commercialization.
Because of the uncertainties associated with research and development of these
programs, the duration and completion costs of our research and development
projects are difficult to estimate and are subject to considerable variation.
Our inability to complete our research and development projects in a timely
manner or our failure to enter into collaborative agreements could significantly
increase our capital requirements and adversely impact our
liquidity.
Our
cash requirements may vary
materially from those now planned because of results of research and development
and product testing, changes in existing relationships or new relationships
with, licensees, licensors or other 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.
The
above
discussion contains forward-looking statements based on our current operating
plan and the assumptions on which it relies. There could be changes that would
consume our assets earlier than planned.
Off-Balance
Sheet Arrangements
and Guarantees
We
have
no off-balance sheet arrangements and do not guarantee the obligations of any
other unconsolidated entity.
Critical
Accounting Policies
We
prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America. Our significant
accounting policies are disclosed in Note 2 to our financial statements included
in our Annual Report on Form 10-K for the year ended December 31, 2006. The
selection and application of these accounting principles and methods requires
us
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, as well as certain financial statement
disclosures. We evaluate our estimates on an ongoing basis. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. The results of our evaluation
form the basis for making judgments about the carrying values of assets and
liabilities that are not otherwise readily apparent. While we believe that
the
estimates and assumptions we use in preparing the financial statements are
appropriate, these estimates and assumptions are subject to a number of factors
and uncertainties regarding their ultimate outcome and, therefore, actual
results could differ from these estimates.
We
have
identified our critical accounting policies and estimates below. These are
policies and estimates that we believe are the most important in portraying
our
financial condition and results of operations, and that require our most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. We
have discussed the development, selection and disclosure of these critical
accounting policies and estimates with the Audit Committee of our Board of
Directors.
Revenue
Recognition
On
December 23, 2005, we entered into a license and co-development agreement with
Wyeth, which includes a non-refundable upfront license fee, reimbursement of
development costs, research and development payments based upon our achievement
of clinical development milestones, contingent payments based upon the
achievement by Wyeth of defined events and royalties on product sales. We began
recognizing contract research revenue from Wyeth on January 1, 2006. During
the
nine months ended September 30, 2007 and 2006, we also recognized revenue from
government research grants and contracts, which are used to subsidize a portion
of certain of our research projects (“Projects”), exclusively from the NIH. We
also recognized revenue from the sale of research reagents during those periods.
We recognize revenue from all sources based on the provisions of the Securities
and Exchange Commission’s Staff Accounting Bulletin No. 104 (“SAB 104”)
Revenue Recognition, Emerging Issues Task Force Issue No. 00-21 (“EITF
00-21”) Accounting for Revenue Arrangements with Multiple Deliverables
and EITF Issue No. 99-19 (“EITF 99-19”) Reporting Revenue Gross as a
Principal Versus Net as an Agent.
Non-refundable
upfront license fees are recognized as revenue when we have a contractual right
to receive such payment, the contract price is fixed or determinable, the
collection of the resulting receivable is reasonably assured and we have no
further performance obligations under the license agreement. Multiple element
arrangements, such as license and development arrangements, are analyzed to
determine whether the deliverables, which often include a license and
performance obligations, such as research and steering committee services,
can
be separated in accordance with EITF 00-21. We would recognize upfront license
payments as revenue upon delivery of the license only if the license had
standalone value and the fair value of the undelivered performance obligations,
typically including research or steering committee services, could be
determined. If the fair value of the undelivered performance obligations could
be determined, such obligations would then be accounted for separately as
performed. If the license is considered to either (i) not have standalone value
or (ii) have standalone value but the fair value of any of the undelivered
performance obligations could not be determined, the upfront license payments
would be recognized as revenue over the estimated period of when our performance
obligations are performed.
We
must
determine the period over which the performance obligations will be performed
and revenue related to upfront license payments will be recognized. Revenue
will
be recognized using either a proportionate performance or straight-line method.
We recognize revenue using the proportionate performance method provided that
we
can reasonably estimate the level of effort required to complete our performance
obligations under an arrangement and such performance obligations are provided
on a best-efforts basis. Direct labor hours or full-time equivalents will
typically be used as the measure of performance. Under the proportionate
performance method, revenue related to upfront license payments is recognized
in
any period as the percent of actual effort expended in that period relative
to
total effort estimated in the most current budget approved by both Wyeth and
us
for all of our performance obligations under the arrangement. Significant
management judgment is required in determining the level of effort required
under an arrangement and the period over which we expect to complete our
performance obligations under the arrangement. Those judgments are based on
the
expertise of our project leaders regarding the estimated amount of effort,
in
terms of full-time equivalent employees, required to accomplish the development
tasks specified in each approved budget. In turn, the approval by each party
of
the tasks that we are required to accomplish within the timeframe of an approved
budget is the result of a process of discussion between the
parties.
During
the period of an approved
budget, the amount of the upfront license payment that is recognized as revenue
in any period will increase or decrease as the percentage of actual effort
increases or decreases, as described above. When a new budget is approved,
generally annually, the remaining unrecognized amount of the upfront license
fee
will be recognized prospectively, using the methodology described above to
apply
any changes in the total estimated effort or period of development that is
specified in the revised approved budget. Although the amounts of the upfront
license payment that we recognized as revenue for each fiscal quarter prior
to
the third quarter of 2007 were based upon several revised approved budgets,
those amounts were not materially impacted by the revised budgets. During the
third quarter of 2007, the estimate of our total remaining effort to complete
our development obligations was increased based upon a revised development
budget approved by both us and Wyeth and the period over which those obligations
will extend and over which the upfront payment will be amortized was extended
from the end of 2008 to the end of 2009. As a result, the amount of revenue
recognized from the upfront payment in the third quarter of 2007 declined to
$3.2 million from $5.1 million in the third quarter of 2006. In prior quarters
during 2006 and 2007, we had recognized an amount of revenue similar to that
in
the third quarter of 2006. The decline in revenue recognized from the upfront
payment is expected to be similar in the fourth quarter of 2007. Due to the
significant judgments involved in determining the level of effort required
under
an arrangement and the period over which we expect to complete our
performance obligations under the arrangement, further changes in any of these
judgments are reasonably likely to occur in the future which could have a
material impact on our revenue recognition. If a collaborator terminates an
agreement in accordance with the terms of the agreement, we would recognize
any
unamortized remainder of an upfront payment at the time of the
termination.
If
we
cannot reasonably estimate the level of effort required to complete our
performance obligations under an arrangement and the performance obligations
are
provided on a best-efforts basis, then the total upfront license payments would
be recognized as revenue on a straight-line basis over the period we expect
to
complete our performance obligations.
In
addition, if we are involved in a steering committee as part of a multiple
element arrangement, we assess whether our involvement constitutes a performance
obligation or a right to participate.
Collaborations
may also contain substantive milestone payments. Substantive milestone payments
are considered to be performance payments that are recognized upon achievement
of the milestone only if all of the following conditions are met: (1) the
milestone payment is non-refundable; (2) achievement of the milestone involves
a
degree of risk and was not reasonably assured at the inception of the
arrangement; (3) substantive effort is involved in achieving the milestone;
(4)
the amount of the milestone payment is reasonable in relation to the effort
expended or the risk associated with achievement of the milestone; and (5)
a
reasonable amount of time passes between the upfront license payment and the
first milestone payment as well as between each subsequent milestone payment
(the “Substantive Milestone Method”).
Determination
as to whether a milestone meets the aforementioned conditions involves
management’s judgment. If any of these conditions are not met, the resulting
payment would not be considered a substantive milestone and, therefore, the
resulting payment would be recognized as revenue as such performance obligations
are performed under either the proportionate performance or straight-line
methods, as applicable, and in accordance with the policies described
above.
We
will
recognize revenue for payments that are contingent upon performance solely
by
our collaborator immediately upon the achievement of the defined event if we
have no related performance obligations.
Reimbursement
of costs is recognized as revenue provided the provisions of EITF 99-19 are
met,
the amounts are determinable and collection of the related receivable is
reasonably assured.
Royalty
revenue is recognized upon the sale of related products, provided that the
royalty amounts are fixed or determinable, collection of the related receivable
is reasonably assured and we have no remaining performance obligations under
the
arrangement. If royalties are received when we have remaining performance
obligations, the royalty payments would be attributed to the services being
provided under the arrangement and, therefore, would be recognized as such
performance obligations are performed under either the proportionate performance
or straight-line methods, as applicable, and in accordance with the policies
described above.
Amounts
received prior to satisfying the above revenue recognition criteria are recorded
as deferred revenue in the accompanying consolidated balance sheets. Amounts
not
expected to be recognized within one year of the balance sheet date are
classified as long-term deferred revenue. The estimate of the classification
of
deferred revenue as short-term or long-term is based upon management’s current
operating budget for the Wyeth collaboration agreement for our total effort
required to complete our performance obligations under that arrangement. That
estimate may change in the future and such changes to estimates would result
in
a change in the amount of revenue recognized in future periods.
NIH
grant
and contract revenue is recognized as efforts are expended and as related
subsidized Project costs are incurred. We perform work under the NIH grants
and
contract on a best-effort basis. The NIH reimburses us for costs associated
with
Projects in the fields of virology and cancer, including preclinical research,
development and early clinical testing of a prophylactic vaccine designed to
prevent HIV from becoming established in uninfected individuals exposed to
the
virus, as requested by the NIH. Substantive at-risk milestone payments are
uncommon in these arrangements, but would be recognized as revenue on the same
basis as the Substantive Milestone Method.
Share-Based
Payment Arrangements
Our
share-based compensation to employees includes non-qualified stock options,
restricted stock (nonvested shares) and shares issued under our Employee Stock
Purchase Plans (the “Purchase Plans”), which are compensatory under Statement of
Financial Accounting Standards No. 123 (revised 2004) Share-Based
Payment (“SFAS No. 123(R)”). We account for share-based compensation to
non-employees, including non-qualified stock options and restricted stock
(nonvested shares), in accordance with Emerging Issues Task Force Issue No.
96-18 Accounting for Equity Instruments that are Issued to Other Than
Employees for Acquiring, or in Connection with Selling, Goods or
Services.
We
adopted SFAS No. 123(R) using the modified prospective application, under which
compensation cost for all share-based awards that were unvested as of the
adoption date and those newly granted or modified after the adoption date are
recognized in our financial statements over the related requisite service
periods; usually the vesting periods for awards with a service condition.
Compensation cost is based on the grant-date fair value of awards that are
expected to vest. We apply a forfeiture rate to the number of unvested awards
in
each reporting period in order to estimate the number of awards that are
expected to vest. Estimated forfeiture rates are based upon historical data
on
vesting behavior of employees. We adjust the total amount of compensation cost
recognized for each award, in the period in which each award vests, to reflect
the actual forfeitures related to that award. Changes in our estimated
forfeiture rate will result in changes in the rate at which compensation cost
for an award is recognized over its vesting period. We have made an accounting
policy decision to use the straight-line method of attribution of compensation
expense, under which the grant date fair value of share-based awards will be
recognized on a straight-line basis over the total requisite service period
for
the total award.
Under
SFAS No. 123(R), the fair value of each non-qualified stock option award is
estimated on the date of grant using the Black-Scholes option pricing model,
which requires input assumptions of stock price on the date of grant, exercise
price, volatility, expected term, dividend rate and risk-free interest
rate.
·
|
We
use the closing price of our common stock on the date of grant, as
quoted
on The NASDAQ Stock Market LLC, as the exercise
price.
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Historical
volatilities are based upon daily quoted market prices of our common
stock
on The NASDAQ Stock Market LLC 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 nine months ended September 30, 2007 and 2006,
the
volatility of our common stock for periods equal to the expected
term of
options granted during those periods has been high, 52% -
85% and 88%, respectively, 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.
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The
expected term of options granted represents the period of time that
options granted are expected to be outstanding. For the nine months
ended
September 30, 2007, our expected term has been calculated based upon
historical data related to exercise and post-termination cancellation
activity for each of two groups of recipients of stock options: employees,
and officers and directors. Accordingly, for grants made to each
of the
groups mentioned above, we are using expected terms of 5.25 and 7.5
years,
respectively. For the nine months ended September 30,
2006, our expected term was calculated based upon
the simplified method as detailed in Staff Accounting
Bulletin No. 107 (“SAB 107”). We used an expected term of 6.5 years for
options granted in 2006, based upon the vesting period of the outstanding
options of four or five years and a contractual term of ten years.
Expected term for options granted to non-employee consultants was
ten
years, which is the contractual term of those options. A shorter
expected
term would result in a lower compensation
expense.
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We
have never paid dividends and do not expect to pay dividends in the
future. Therefore, our dividend rate is
zero.
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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.
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A
portion
of the options granted to our Chief Executive Officer on July 1, 2002, 2003,
2004 and 2005, on July 3, 2006 and July 2, 2007 cliff vests after nine years
and
eleven months from the respective grant date. Vesting of a defined portion
of
each award will occur earlier if a defined performance condition is achieved;
more than one condition may be achieved in any period. In accordance with SFAS
No. 123(R), at the end of each reporting period, we will estimate the
probability of achievement of each performance condition and will use those
probabilities to determine the requisite service period of each award. The
requisite service period for the award is the shortest of the explicit or
implied service periods. In the case of the executive’s options, the explicit
service period is nine years and eleven months from the respective grant dates.
The implied service periods related to the performance conditions are the
estimated times for each performance condition to be achieved. Thus,
compensation expense will be recognized over the shortest estimated time for
the
achievement of performance conditions for that award (assuming that the
performance conditions will be achieved before the cliff vesting occurs).
Changes in the estimate of probability of achievement of any performance
condition will be reflected in compensation expense of the period of change
and
future periods affected by the change.
The
fair
value of shares purchased under the Purchase Plans is estimated on the date
of
grant in accordance with FASB Technical Bulletin No. 97-1 Accounting under
Statement 123 for Certain Employee Stock Purchase Plans with a Look-Back
Option. The same option valuation model is used for the Purchase Plans as
for non-qualified stock options, except that the expected term for the Purchase
Plans is six months and the historical volatility is calculated over the six
month expected term.
In
applying the treasury stock method
for the calculation of diluted earnings per share (“EPS”), amounts of
unrecognized compensation expense and windfall tax benefits are required to
be
included in the assumed proceeds in the denominator of the diluted earnings
per
share calculation unless they are anti-dilutive. We incurred a net loss for
the
three and nine months ended September 30, 2007 and 2006, and, therefore, such
amounts have not been included for those periods in the calculation of diluted
EPS since they would be anti-dilutive. Accordingly, basic and diluted EPS are
the same for those periods. We have made an accounting policy decision to
calculate windfall tax benefits/shortfalls for purposes of diluted EPS
calculations, excluding the impact of pro forma deferred tax assets. This policy
decision will apply when we have net income.
For
the
nine months ended September 30, 2007, no tax benefit was recognized related
to
total compensation cost for share-based payment arrangements recognized in
operations because we had a net loss for the period and the related deferred
tax
assets were fully offset by a valuation allowance. Accordingly, no amounts
related to windfall tax benefits have been reported in cash flows from
operations or cash flows from financing activities for the nine months ended
September 30, 2007.
Research
and Development Expenses Including Clinical Trial
Expenses
Clinical
trial expenses, which are included in research and development expenses,
represent obligations resulting from our contracts with various clinical
investigators and clinical research organizations in connection with conducting
clinical trials for our product candidates. Such costs are expensed based on
the
expected total number of patients in the trial, the rate at which the patients
enter the trial and the period over which the clinical investigators and
clinical research organizations are expected to provide services. We believe
that this method best approximates the efforts expended on a clinical trial
with
the expenses we record. We adjust our rate of clinical expense recognition
if
actual results differ from our estimates. We expect that clinical trial expenses
will increase significantly during 2007 as clinical trials progress or are
initiated in the methylnaltrexone and HIV programs. Our collaboration agreement
with Wyeth regarding methylnaltrexone in which Wyeth has assumed all of the
financial responsibility for further development will mitigate those costs.
In
addition, we estimate the amounts of other research and development expenses,
for which invoices have not been received at the end of a period, based upon
communication with third parties that have provided services or goods during
the
period.
Impact
of Recently Issued Accounting Standards
On
September 15, 2006, the FASB issued FASB Statement No. 157, Fair Value
Measurements (“FAS 157”), which addresses how companies should
measure the fair value of assets and liabilities when they are required to
use a
fair value measure for recognition or disclosure purposes under generally
accepted accounting principles. FAS 157 does not expand the use of fair
value in any new circumstances. Under FAS 157, fair value refers to the price
that would be received to sell an asset or paid to transfer a liability in
an
orderly transaction between market participants in the market in which the
reporting entity transacts. FAS 157 clarifies the principle that fair value
should be based on the assumptions market participants would use when pricing
the asset or liability. In support of this principle, the standard establishes
a
fair value hierarchy that prioritizes the information used to develop those
assumptions. The fair value hierarchy gives the highest priority to quoted
prices in active markets and the lowest priority to unobservable data, for
example, the reporting entity’s own data. FAS 157 requires disclosures intended
to provide information about (1) the extent to which companies measure assets
and liabilities at fair value, (2) the methods and assumptions used to measure
fair value, and (3) the effect of fair value measures on earnings. We will
adopt
FAS 157 on January 1, 2008. We do not expect the impact of the adoption of
FAS
157 to be material to our financial position or results of
operations.
In
February, 2007, the FASB issued FASB Statement No. 159 The Fair Value Option
for Financial Assets and Financial Liabilities (“FAS 159”), which provides
companies with an option to report certain financial assets and liabilities
at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. FAS 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar
types
of assets and liabilities. The objective of FAS 159 is to reduce both
complexity in accounting for financial instruments and the volatility in
earnings caused by measuring related assets and liabilities differently. FAS159
is effective for fiscal years beginning after November 15, 2007. We do not
expect the impact of the adoption of FAS 159 to be material to our financial
position or results of operations.
The
Emerging Issues Task Force has issued an Exposure Draft on Issue 07-1,
Accounting for Collaborative Arrangements (“EITF 07-1”). This
issue impacts entities that have entered into arrangements, which are not
conducted through a separate legal entity. The Task Force reached a tentative
conclusion that a collaborative arrangement is within the scope of EITF
07-1 if the arrangement meets the following two criteria: (i) the parties are
active participants in the arrangement and (ii) the participants are exposed
to
significant risks and rewards that depend on the endeavor's ultimate commercial
success. The Task Force also reached a tentative conclusion that transactions
with third parties (i.e., revenue generated and costs incurred by the partners)
should be reported in the appropriate line item in each company's financial
statement pursuant to the guidance in EITF 99-19, Reporting Revenue Gross as
a Principal versus Net as an Agent. The Task Force also concluded
tentatively that the equity method of accounting under Accounting Principles
Board Opinion 18, The Equity Method of Accounting for Investments in Common
Stock, should not be applied to arrangements that are not conducted through
a separate legal entity. Comments
will be
considered by the Task Force at the November 28-29, 2007 EITF meeting. If
the tentative conclusions are approved as a consensus, the guidance in EITF
07-1 would go into effect for periods that begin after December 15, 2007 and
be
accounted for as a change in accounting principle through retrospective
application. We do not expect that there will be a material impact to our
financial position or results of operations if the Exposure Draft is approved
in
its current form.
On
September 27, 2007, the FASB reached a final consensus on Emerging Issues Task
Force Issue 07-3, Accounting for Advance Payments for Goods or Services to
Be Used in Future Research and Development Activities (“EITF 07-03”).
Currently, under FASB Statement No. 2, Accounting for Research and
Development Costs, non-refundable advance payments for future research and
development activities for materials, equipment, facilities, and purchased
intangible assets that have no alternative future use are expensed as incurred.
EITF 07-03 addresses whether such non-refundable advance payments for goods
or
services that have no alternative future use and that will be used or rendered
for research and development activities should be expensed when the advance
payments are made or when the research and development activities have been
performed. The consensus reached by the FASB requires companies involved in
research and development activities to capitalize such non-refundable advance
payments for goods and services pursuant to an executory contractual arrangement
because the right to receive those services in the future represents a probable
future economic benefit. Those advance payments will be capitalized until the
goods have been delivered or the related services have been
performed. Entities will be required to evaluate whether they expect the
goods or services to be rendered. If an entity does not expect the goods to
be
delivered or services to be rendered, the capitalized advance payment will
be
charged to expense. The consensus on EITF 07-03 is effective for financial
statements issued for fiscal years beginning after December 15, 2007, and
interim periods within those fiscal years. Earlier application is not permitted.
Entities are required to recognize the effects of applying the guidance in
EITF
07-03 prospectively for new contracts entered into after the effective date.
We
are in the process of evaluating the expected impact of EITF 07-03 on our
financial position and results of operations following adoption.
Item
3. Quantitative and
Qualitative Disclosures about Market Risk
Our
primary investment objective is to preserve principal while maximizing yield
without significantly increasing our risk. Our investments consist of taxable
auction securities, corporate notes and federal agency issues. Our investments
totaled $177.3 million at September 30, 2007. Approximately $92.7 million of
these investments had fixed interest rates, and $84.6 million had interest
rates
that were variable.
Due
to
the conservative nature of our short-term fixed interest rate investments,
we do
not believe that we have a material exposure to interest rate risk for those
investments. Our fixed-interest-rate long-term investments are sensitive to
changes in interest rates. Interest rate changes would result in a change in
the
fair values of these investments due to differences between the market interest
rate and the rate at the date of purchase of the investment. A 100 basis point
increase in the September 30, 2007 market interest rates would result in a
decrease of approximately $0.07 million in the market values of these
investments.
The
Company maintains “disclosure controls and procedures,” as such term is defined
under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange
Act of 1934, that are designed to ensure that information required to be
disclosed in the Company’s Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to the
Company’s management, including its Chief Executive Officer and Principal
Financial and Accounting Officer, as appropriate, to allow timely decisions
regarding required disclosures. In designing and evaluating the disclosure
controls and procedures, the Company’s management recognized that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and the
Company’s management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
We
also established a Disclosure Committee that consists of certain members of
the
Company’s senior management.
The
Disclosure Committee, under the supervision and with the participation of the
Company’s senior management, including the Company’s Chief Executive Officer and
Principal Financial and Accounting Officer, carried out an evaluation of the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures as of the end of the period covered by this report. Based upon
their evaluation and subject to the foregoing, the Chief Executive Officer
and
Principal Financial and Accounting Officer concluded that the Company’s
disclosure controls and procedures were effective.
There
have been no changes in the Company’s internal control over financial reporting
that occurred during the Company’s last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART
II — OTHER
INFORMATION
Our
business and operations entail a variety of serious risks and uncertainties,
including those described below.
Our
product development programs are inherently risky.
We
are
subject to the risks of failure inherent in the development of product
candidates based on new technologies.
Methylnaltrexone,
which is designed to reverse certain side effects induced by opioids and to
treat postoperative ileus and is being developed through a collaboration with
Wyeth, is based on a novel method of action that has not yet been proven to
be
safe or effective. No drug with methylnaltrexone’s method of action has ever
received marketing approval. Additionally, our principal HIV product candidate,
PRO 140, is designed to be effective by blocking viral entry. To our knowledge,
no drug designed to treat HIV infection by blocking viral entry (with one
exception) has been approved for marketing in the U.S. Our other research and
development programs, including those related to PSMA, involve similarly novel
approaches to human therapeutics. Consequently, there is little precedent for
the successful commercialization of products based on our technologies. There
are a number of technological challenges that we must overcome to complete
most
of our development efforts. We may not be able to develop successfully any
of
our products.
We
have granted to Wyeth the exclusive rights to develop and commercialize
methylnaltrexone, our lead product candidate, and our resulting dependence
upon
Wyeth exposes us to significant risks.
In
December 2005, we entered into a license and co-development agreement with
Wyeth. Under this agreement, we granted to Wyeth the exclusive worldwide right
to develop and commercialize methylnaltrexone, our lead product candidate.
As a
result, we are dependent upon Wyeth to perform and fund development, including
clinical testing, to make certain regulatory filings and to manufacture and
market products containing methylnaltrexone. Our collaboration with Wyeth may
not be scientifically, clinically or commercially successful.
Any
revenues from the sale of methylnaltrexone, if approved for marketing by the
FDA, will depend almost entirely upon the efforts of Wyeth. Wyeth has
significant discretion in determining the efforts and resources it applies
to
sales of the methylnaltrexone products and may not be effective in marketing
such products. In addition, Wyeth is a large, diversified pharmaceutical company
with global operations and its own corporate objectives, which may not be
consistent with our best interests. For example, Wyeth may change its strategic
focus or pursue alternative technologies in a manner that results in
reduced
revenues to us. In addition, we will receive milestone and contingent payments
from Wyeth only if methylnaltrexone achieves specified clinical, regulatory
and
commercialization milestones, and we will receive royalty payments from Wyeth
only if methylnaltrexone receives regulatory approval and is commercialized
by
Wyeth. Many of these milestone events will depend upon the efforts of Wyeth.
We
may not receive any milestone, contingent or royalty payments from
Wyeth.
The
Collaboration Agreement extends, unless terminated earlier, on a
country-by-country and product-by-product basis, until the last-to-expire
royalty period, as defined, for any product. Progenics may terminate the
Collaboration Agreement at any time upon 90 days of written notice to Wyeth
(30
days in the case of breach of a payment obligation) upon material breach that
is
not cured. Wyeth may, with or without cause, following the second anniversary
of
the first commercial sale, as defined, of the first commercial product in the
U.S., terminate the Collaboration Agreement by providing Progenics with at
least
360 days prior written notice of such termination. Wyeth may also terminate
the
agreement (i) upon 30 days written notice following one or more serious safety
or efficacy issues that arise, as defined, and (ii) at any time, upon 90 days
written notice of a material breach that is not cured by Progenics. Upon
termination of the Collaboration Agreement, the ownership of the license we
granted to Wyeth will depend on the party that initiates the termination and
the
reason for the termination.
If
our
relationship with Wyeth were to terminate, we would have to either enter into
a
license and co-development agreement with another party or develop and
commercialize methylnaltrexone ourselves. We may not be able to enter into
such
an agreement with another suitable company on acceptable terms or at all. To
develop and commercialize methylnaltrexone on our own, we would have to develop
a sales and marketing organization and a distribution infrastructure, neither
of
which we currently have. Developing these resources would be an expensive and
lengthy process and would have a material adverse effect on our revenues and
profitability.
Moreover,
a termination of our relationship with Wyeth could seriously compromise the
development program for methylnaltrexone. For example, we could experience
significant delays in the development of methylnaltrexone and would have to
assume full funding and other responsibility for further development and
eventual commercialization.
Any
of
these outcomes would result in delays in our ability to distribute
methylnaltrexone and would increase our expenses, which would have a material
adverse effect on our business, results of operations and financial
condition.
Our
collaboration with Wyeth is multi-faceted and involves a complex sharing of
control over decisions, responsibilities, costs and benefits. There are numerous
potential sources of disagreement between us and Wyeth, including with respect
to product development, marketing strategies, manufacturing and supply issues
and rights relating to intellectual property. Wyeth has significantly greater
financial and managerial resources than we do, which it could draw upon in
the
event of a dispute. A disagreement between Wyeth and us could lead to lengthy
and expensive litigation or other dispute-resolution proceedings as well as
to
extensive financial and operational consequences to us, and have a material
adverse effect on our business, results of operations and financial
condition.
If
testing does not yield successful results, our products will not be
approved.
We will need to obtain regulatory approval before we can market our product
candidates. To obtain marketing approval from regulatory authorities, we or
our
collaborators must demonstrate a product’s safety and efficacy through extensive
preclinical and clinical testing. Numerous adverse events may arise during,
or
as a result of, the testing process, including the following:
· the
results of preclinical studies may be inconclusive, or they may not be
indicative of results that will be obtained in
human
clinical trials;
·
|
potential products may not have the desired efficacy or may have
undesirable side effects or other characteristics
that
|
preclude marketing approval or limit their commercial use if
approved;
· after
reviewing test results, we or our collaborators may abandon projects, which
we
previously believed to be
promising;
and
· we,
our collaborators or regulators may suspend or terminate clinical trials if
we
or they believe that the participating
subjects
or patients are being exposed to unacceptable health risks.
Clinical testing is very expensive and can take many years. Results attained
in
early human clinical trials may not be indicative of results that are obtained
in later clinical trials. In addition, many of our products, such as PRO 140
and
the PSMA product candidates, are at an early stage of development. The
successful commercialization of early stage products will require significant
further research, development, testing, approvals by regulators and additional
investment. Our products in the research or preclinical development stage may
not yield results that would permit or justify clinical testing. Our failure
to
adequately demonstrate the safety and efficacy of a product under development
would delay or prevent marketing approval of the product, which could adversely
affect our operating results and credibility.
A
setback in our clinical development programs could adversely affect
us.
We
have
successfully completed two pivotal phase 3 clinical trials of subcutaneous
methylnaltrexone for the treatment of opioid-induced constipation in patients
receiving palliative care. We submitted a New Drug Application to the FDA in
March 2007 to market subcutaneous methylnaltrexone. We and Wyeth have initiated
two global pivotal phase 3 clinical trials to evaluate the safety and efficacy
of intravenous methylnaltrexone for the treatment of post-operative ileus.
We
had completed phase 1 clinical trials of oral methylnaltrexone in healthy
volunteers prior to our Collaboration Agreement with Wyeth. Wyeth is responsible
for the worldwide development of oral methylnaltrexone. Wyeth has conducted
certain additional phase 1 clinical trials of oral methylnaltrexone in
chronic-pain patients who experience opioid-induced constipation and in August
2006 initiated a phase 2 clinical trial to evaluate once-daily dosing of oral
methylnaltrexone. Preliminary results from this phase 2 trial, conducted by
Wyeth, showed that the initial formulation of oral methylnaltrexone was
generally well tolerated but did not exhibit sufficient clinical activity to
advance into phase 3 testing. In March 2007, Wyeth began clinical testing of
a
new oral formulation of methylnaltrexone for the treatment of opioid-induced
constipation and in July 2007 announced preliminary results from a phase 1
clinical trial of this new formulation. In October 2007, we and Wyeth announced
plans to initiate two, four-week phase 2 clinical trials to evaluate daily
dosing of oral methylnaltrexone in patients with chronic, non-malignant pain
who
are being treated with opioids and are experiencing opioid-induced constipation.
Each study will separately evaluate a different oral formulation of
methylnaltrexone, including the formulation that exhibited positive preliminary
results in a phase 1 study announced in July 2007. In September 2007, we and
Wyeth announced the commencement of three additional clinical trials of
methylnaltrexone in patients outside of the palliative care population included
in the first NDA submission.
If
the
results of any of these ongoing trials or of other future trials of
methylnaltrexone are not satisfactory, or if we encounter problems enrolling
patients, or if clinical trial supply issues or other difficulties arise, our
entire methylnaltrexone development program could be adversely affected,
resulting in delays in commencing or completing clinical trials or in making
our
regulatory filing for marketing approval. The need to conduct additional
clinical trials or significant revisions to our clinical development plan would
lead to delays in filing for the regulatory approvals necessary to market
methylnaltrexone. If the clinical trials indicate a serious problem with the
safety or efficacy of a methylnaltrexone product, then Wyeth has the right
under
our license and co-development agreement to terminate the agreement or to stop
the development or commercialization of the affected products. Since
methylnaltrexone is our most clinically advanced product, any setback of these
types would have a material adverse effect on our stock price and
business.
We
have
announced positive phase 1b clinical findings related to PRO 140. If the results
of our future clinical studies of PRO 140 or the preclinical and clinical
studies involving the PSMA vaccine and antibody candidates are not satisfactory,
we would need to reconfigure our clinical trial programs to conduct additional
trials or abandon the program involved.
We
have a history of operating losses, and we may never be
profitable.
We
have
incurred substantial losses since our inception. As of September 30, 2007,
we
had an accumulated deficit of $238.8 million. We have derived no significant
revenues from product sales or royalties. We may not achieve significant product
sales or royalty revenue for a number of years, if ever. We expect to incur
additional operating losses in the future, which could increase significantly
as
we expand our clinical trial programs and other product development
efforts.
Our
ability to achieve and sustain profitability is dependent in part on obtaining
regulatory approval to market our products and then commercializing, either
alone or with others, our products. We may not be able to develop and
commercialize products. Moreover, our operations may not be profitable even
if
any of our products under development are commercialized.
We
are likely to need additional financing, but our access to capital funding
is
uncertain.
As
of
September 30, 2007, we had cash, cash equivalents and marketable securities,
including non-current portion, totaling $183.6 million. During the nine months
ended September 30, 2007, we had a net loss of $28.4 million and cash used
in
operating activities was $24.9 million. Our net loss is expected to increase
in
the future.
Under
our
agreement with Wyeth, Wyeth is responsible for all future development and
commercialization costs relating to methylnaltrexone starting January 1, 2006.
As a result, although our spending on methylnaltrexone has increased and is
expected to continue to increase significantly from the amounts expended in
2006, our net expenses for methylnaltrexone have been and will continue to
be
reduced.
With
regard to our other product candidates, however, we expect that we will continue
to incur significant expenditures for their development, and we do not have
committed external sources of funding for most of these projects. These
expenditures will be funded from our cash on hand, or we may seek additional
external funding for these expenditures, most likely through collaborative
agreements, or other license or sale transactions, with one or more
pharmaceutical companies, through the issuance and sale of securities or through
additional government grants or contracts. We cannot predict with any certainty
when we will need additional funds or how much we will need or if additional
funds will be available to us. Our need for future funding will depend on
numerous factors, many of which are outside our control.
Our
access to capital funding is uncertain. We may not be able to obtain additional
funding on acceptable terms, or at all. Our inability to raise additional
capital on terms reasonably acceptable to us would seriously jeopardize the
future success of our business.
If
we
raise funds by issuing and selling securities, it may be on terms that are
not
favorable to our existing stockholders. If we raise additional funds by selling
equity securities, our current stockholders will be diluted, and new investors
could have rights superior to our existing stockholders. If we raise funds
by
selling debt securities, we could be subject to restrictive covenants and
significant repayment obligations.
Our
clinical trials could take longer than we expect.
Although
for planning purposes we forecast the commencement and completion of clinical
trials, and have included many of those forecasts in reports filed with the
SEC
and in other public disclosures, the actual timing of these events can vary
dramatically. For example, we have experienced delays in our methylnaltrexone
clinical development program in the past as a result of slower than anticipated
patient enrollment. These delays may recur. Delays can be caused by, among
other
things:
·
|
deaths
or other adverse medical events involving patients or subjects in
our
clinical trials;
|
·
|
regulatory
or patent issues;
|
·
|
interim
or final results of ongoing clinical
trials;
|
·
|
failure
to enroll clinical sites as
expected;
|
·
|
competition
for enrollment from clinical trials conducted by others in similar
indications;
|
·
|
scheduling
conflicts with participating clinicians and clinical institutions;
and
|
·
|
manufacturing
problems.
|
In
addition, we may need to delay or suspend our clinical trials if we are unable
to obtain additional funding when needed. Clinical trials involving our product
candidates may not commence or be completed as forecasted.
Moreover,
we have limited experience in conducting clinical trials, and we rely on others
to conduct, supervise or monitor some or all aspects of some of our clinical
trials. In addition, certain clinical trials for our products may be conducted
by government-sponsored agencies, and consequently will be dependent on
governmental participation and funding. Under our agreement with Wyeth relating
to methylnaltrexone, Wyeth has the responsibility to conduct some of the
clinical trials for that product candidate, including all trials outside of
the
United States. We will have less control over the timing and other aspects
of
these clinical trials than if we conducted them entirely on our
own.
As
a
result of these and other factors, our clinical trials may not commence or
be
completed as we expect or may not be conducted successfully, in which event
investors’ confidence in our ability to develop products may be impaired and our
stock price may decline.
We
are subject to extensive regulation, which can be costly and time consuming
and
can subject us to unanticipated fines and delays.
We
and
our products are subject to comprehensive regulation by the FDA in the U.S.
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, approval, manufacture, labeling, marketing,
export, storage, record keeping, advertising and promotion of pharmaceutical
products. If we violate regulatory requirements at any stage, whether before
or
after marketing approval is obtained, we may be subject to forced removal of
a
product from the market, product seizure, civil and criminal penalties and
other
adverse consequences.
Our
products do not yet have, and may never obtain, the regulatory approvals needed
for marketing.
None
of
our products has been approved by applicable regulatory authorities for
marketing. The process of obtaining FDA and foreign regulatory 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 and other submissions necessary to gain marketing
approvals. Our products under development may never obtain the marketing
approval from the FDA or any other regulatory authority necessary for
commercialization.
Even
if our products receive regulatory approval:
· they
might not obtain labeling claims necessary to make the product commercially
viable (in general, labeling claims
define
the medical conditions for which a drug product may be marketed, and are
therefore very important to the
commercial
success of a product);
· we
or our collaborators might be required to undertake post-marketing trials to
verify the product’s efficacy or safety;
· we,
our collaborators or others might identify side effects after the product is
on
the market, or we or our
collaborators might experience manufacturing problems, either of which could
result in subsequent withdrawal of
marketing approval, reformulation of the product, additional preclinical testing
or clinical trials, changes in labeling of
the product or the need for additional marketing applications; and
· we
and our collaborators will be subject to ongoing FDA obligations and continuous
regulatory review.
If
our products fail to receive marketing approval or lose previously received
approvals, our financial results would be adversely affected.
Even
if our products obtain marketing approval, 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 payers as clinically useful, cost effective
and safe. If health care providers believe that patients can be managed
adequately with alternative, currently available therapies, they may not
prescribe our products, especially if the alternative therapies are viewed
as
more effective, as having a better safety or tolerability profile, as being
more
convenient to the patient or health care providers or as being less expensive.
For pharmaceuticals administered in an institutional setting, the ability of
the
institution to be adequately reimbursed could also play a significant role
in
demand for our products. Even if our products obtain marketing approval, they
may not achieve market acceptance. 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 achieves market acceptance will depend
on
competitive factors. Competition in our industry is intense, and it is
accentuated by the rapid pace of technological development. There are products
currently in the market that will compete with the products that we are
developing, including AIDS drugs and chemotherapy drugs for treating cancer.
As
described below, Adolor Corporation is developing a drug that would compete
with
methylnaltrexone. Many of our competitors have substantially greater research
and development capabilities and experience and greater manufacturing,
marketing, financial and managerial resources than we do. 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 operating results and financial position would suffer.
One
or more competitors developing an opioid antagonist may reach the market ahead
of us and adversely affect the market potential for
methylnaltrexone.
We
are
aware that Adolor Corporation, in collaboration with Glaxo Group Limited, or
Glaxo, a subsidiary of GlaxoSmithKline plc, is developing an opioid antagonist,
EnteregTM (alvimopan), for postoperative ileus, which has completed phase 3
clinical trials, and for opioid-induced bowel dysfunction, which is in phase
3
clinical trials. Entereg is further along in the clinical development process
than methylnaltrexone, and Adolor Corporation has received an approvable letter
from the FDA for Entereg regarding the treatment of post-operative ileus. If
Entereg reaches the market before methylnaltrexone, it could achieve a
significant competitive advantage relative to our product. In any event, the
considerable marketing and sales capabilities of Glaxo may impair our ability
to
penetrate the market.
Under
the
terms of our collaboration with Wyeth with respect to methylnaltrexone, Wyeth
is
developing the oral form of methylnaltrexone worldwide. We are leading the
U.S.
development of the subcutaneous and intravenous forms of methylnaltrexone,
while
Wyeth is leading development of these parenteral products outside the U.S.
Decisions regarding the timelines for development of the three methylnaltrexone
formulations are being be made by a Joint Development Committee, and endorsed
by
the Joint Steering Committee, each committee formed under the terms of the
license and co-development agreement,
consisting of members from both Wyeth and Progenics.
If
we are unable to negotiate collaborative agreements, our cash burn rate could
increase and our rate of product development could
decrease.
Our
business strategy includes as an element entering into collaborations with
pharmaceutical and biotechnology companies to develop and commercialize our
products and technologies. We entered into such a collaboration with Wyeth.
However, we may not be successful in negotiating additional collaborative
arrangements. If we do not enter into new collaborative arrangements, we would
have to devote more of our resources to clinical product development and
product-launch activities, and our cash burn rate would increase or we would
need to take steps to reduce our rate of product development.
If
we do not remedy our failure to achieve milestones or satisfy conditions
regarding some of our product candidates, we may not maintain our rights under
our licenses relating to these product candidates.
We
are
required to make substantial cash payments, achieve specified milestones and
satisfy other conditions, including filing for and obtaining marketing approvals
and introducing products, to maintain rights under our intellectual property
licenses. We may not be able to maintain our rights under these
licenses.
If
we do
not comply with our obligations under our license agreements, the licensors
may
terminate them. Termination of any of our licenses could result in our losing
our rights to, and therefore being unable to commercialize, any related
product.
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 for large-scale production
and
subject to delays, inefficiencies and low yields of quality products. The cost
of manufacturing some of our products may make them prohibitively expensive.
If
adequate supplies of any of our product candidates or related materials are
not
available to us on a timely basis or at all, our clinical trials could be
seriously delayed, since these materials are time consuming to manufacture
and
cannot be readily obtained from third-party sources.
We
operate pilot-scale manufacturing facilities for the production of vaccines
and
recombinant proteins. We believe that, for these types of product candidates,
these facilities will be sufficient to meet our initial needs for clinical
trials. However, these facilities may be insufficient for late-stage clinical
trials for these types of product candidates, 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 may not be able to build a manufacturing facility that both
meets regulatory requirements and is sufficient for our clinical trials or
commercial scale manufacturing.
We
have
entered into arrangements with third parties for the manufacture of some of
our
products. Our third-party sourcing strategy may not result in a cost-effective
means for manufacturing products. In employing third-party manufacturers, we
will not control many aspects of the manufacturing process, including compliance
by these third parties with the FDA’s current Good Manufacturing Practices and
other regulatory requirements. We may not be able to obtain adequate supplies
from third-party manufacturers in a timely fashion for development or
commercialization purposes, and commercial quantities of products may not be
available from contract manufacturers at acceptable costs.
We
are dependent on our patents and other intellectual property 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 intellectual property 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, or the degree of protection afforded, under patents in this area.
Accordingly, the patent applications owned by or licensed to us may not result
in patents being issued. We are aware of other groups that have patent
applications or patents containing claims similar to or overlapping those in
our
patents and patent applications. We do not expect to know for several years
the
relative strength or scope of our patent position as compared to these other
groups. Furthermore, patents that we own or license may not enable us to
preclude competitors from commercializing drugs, and consequently may not
provide us with any meaningful competitive advantage.
We
own or
have licenses to several 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. Our patents may be successfully challenged. Moreover,
we may incur substantial costs in litigation to uphold the validity of patents
or to prevent infringement. If the outcome of litigation is adverse to us,
third
parties may be able to use our patented invention without payment to us.
Moreover, third parties may avoid our patents through design
innovation.
Most
of
our product candidates, including methylnaltrexone, PRO 140 and our PSMA and
HCV
program products, incorporate to some degree intellectual property licensed
from
third parties. We can lose the right to patents and other intellectual property
licensed to us if the related license agreement is terminated due to a breach
by
us or otherwise. Our ability, and that of our collaboration partners, to
commercialize products incorporating licensed intellectual property would be
impaired if the related license agreements were terminated.
Generally,
we have the right to defend and enforce patents licensed by us, either in the
first instance or if the licensor chooses not to do so. In addition, our license
agreement with the University of Chicago regarding methylnaltrexone gives us
the
right to prosecute and maintain the licensed patents. We bear the cost of
engaging in some or all of these activities with respect to our license
agreements with the University of Chicago for methylnaltrexone. Under our
Collaboration Agreement, Wyeth has the right, at its expense, to defend and
enforce the methylnaltrexone patents licensed to Wyeth by us. With most of
our
other license agreements, the licensor bears the cost of engaging in all of
these activities, although we may share in those costs under specified
circumstances. Historically, our costs of defending patent rights, both our
own
and those we license, have not been material.
We
also
rely on unpatented technology, trade secrets and confidential information.
Third
parties may independently develop substantially equivalent information and
techniques or otherwise gain access to our technology or disclose our
technology, and we may be unable to 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. However,
these agreements may not provide effective protection in the event of
unauthorized use or disclosure of confidential information.
If
we infringe third-party patent or other intellectual property rights, we may
need to alter or terminate a product development program.
There
may
be patent or other intellectual property rights belonging to others that require
us to alter our products, pay licensing fees or cease certain activities. If
our
products infringe patent or other intellectual property rights of others, the
owners of those rights 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 may not prevail in any action
brought against us, and any license required under any rights that we infringe
may not be available on acceptable terms or at all. We are aware of intellectual
property rights held by third parties that relate to products or technologies
we
are developing. For example, we are aware of other groups investigating
methylnaltrexone and other peripheral opioid antagonists, PSMA or related
compounds and CCR5 monoclonal antibodies and of patents held, and patent
applications filed, by these groups in those areas. While the validity of these
issued patents, patentability of these pending patent applications and
applicability of any of them to our programs are uncertain, if asserted against
us, any related patent or other intellectual property rights could adversely
affect our ability to commercialize our products.
The
research, development and commercialization of a biopharmaceutical often involve
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 we may need to obtain a license to a patent in order to pursue
the preferred development route of one or more of our products. The need to
obtain a license 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 dependent upon third parties for a variety of functions. These arrangements
may not provide us with the benefits we expect.
We
rely
in part on third parties to perform a variety of functions. We are party to
numerous agreements which place substantial responsibility on clinical research
organizations, consultants and other service providers for the development
of
our products. We also rely on medical and academic institutions to perform
aspects of our clinical trials of product candidates. In addition, an element
of
our research and development strategy is to in-license technology and product
candidates from academic and government institutions in order to minimize
investments in early research. Furthermore, we entered into an agreement under
which we will depend on Wyeth for the commercialization and development of
methylnaltrexone, our lead product candidate. We may not be able to maintain
any
of these relationships or establish new ones on beneficial terms. Furthermore,
we may not be able to enter new arrangements without undue delays or
expenditures, and these arrangements may not allow us to compete
successfully.
We
lack sales and marketing infrastructure and related staff, which will require
significant investment to establish and in the meantime may make us dependent
on
third parties for their expertise in this area.
We
have
no established sales, marketing or distribution infrastructure. If we receive
marketing approval, significant investment, time and managerial resources will
be required to build the commercial infrastructure required to market, sell
and
support a pharmaceutical product. Should we choose to commercialize any product
directly, we may not be successful in developing an effective commercial
infrastructure or in achieving sufficient market acceptance. Alternatively,
we
may choose to market and sell our products through distribution, co-marketing,
co-promotion or licensing arrangements with third parties. We may also consider
contracting with a third party professional pharmaceutical detailing and sales
organization to perform the marketing function for our products. Under our
license and co-development agreement with Wyeth, Wyeth is responsible for
commercializing methylnaltrexone. To the extent that we enter into distribution,
co-marketing, co-promotion, detailing or licensing arrangements for the
marketing and sale of our other products, any revenues we receive will depend
primarily on the efforts
of third parties. We will not control the amount and timing of marketing
resources these third parties devote to our products.
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. Paul J. Maddon, our Chief Executive Officer and Chief Science
Officer, could cause our management and operations to suffer. Our employment
agreement with Dr. Maddon, the initial term of which ran through June 30, 2005,
was automatically renewed for an additional period of two years through June
30,
2007, but has now expired. Dr. Maddon continues to be employed by us and is
receiving compensation from us at the same rate as was specified in the expired
contract. We are in discussions with Dr. Maddon regarding a new employment
agreement. Employment agreements do not assure the continued employment of
an
employee. We maintain key-man life insurance on Dr. Maddon in the amount of
$2.5
million.
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 may not be successful
in hiring or retaining qualified personnel.
If
we are unable to obtain sufficient quantities of the raw and bulk materials
needed to make our products, our product development and commercialization
could
be slowed or stopped.
In
accordance with our collaboration agreement with Wyeth, we have transferred
to
Wyeth the responsibility for manufacturing methylnaltrexone for clinical and
commercial use. In addition, we currently obtain supplies of critical raw
materials used in production of other of our product candidates from single
sources. We do not have long-term contracts with any of these other suppliers.
Wyeth may not be able to fulfill its manufacturing obligations, either on its
own or through third-party suppliers. Furthermore, our existing arrangements
with suppliers for our other product candidates may not result in the supply
of
sufficient quantities of our product candidates needed to accomplish our
clinical development programs, and we may not have the right or capability
to
manufacture sufficient quantities of these products to meet our needs if our
suppliers are unable or unwilling to do so. Any delay or disruption in the
availability of raw materials would slow or stop product development and
commercialization of the relevant product.
A
substantial portion of our funding comes from federal government grants and
research contracts. We cannot rely on these grants or contracts as a continuing
source of funds.
A
substantial portion of our revenues to date has been derived from federal
government grants and research contracts. During 2006 and 2007, we were awarded,
in the aggregate, approximately $4.4 million in NIH grants. During 2005, we
were
also awarded a $3.0 million and a $10.1 million grant from the NIH to partially
fund our hepatitis C virus and PRO 140 programs, respectively. Also, in 2004
we
were awarded, in the aggregate, approximately $9.2 million in NIH grants and
research contracts in addition to previous years’ awards. We cannot rely on
grants or additional contracts as a continuing source of funds. Moreover, funds
available under these grants and contracts must be applied by us toward the
research and development programs specified by the government rather than for
all our programs generally. For example, the $28.6 million contract awarded
to
us by the NIH in September 2003 must be used by us in furtherance of our efforts
to develop an HIV vaccine. The government’s obligation to make payments under
these grants and contracts is subject to appropriation by the U.S. 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 due to their own budgetary constraints.
Additionally, these grants and research contracts are subject to adjustment
based upon the results of periodic audits performed on behalf of the granting
authority. Consequently, the government may not award grants or research
contracts to us in the future, and any amounts that we derive from existing
grants or contracts may be less than those received to date.
If
health care reform measures are enacted, our operating results and our ability
to commercialize products could be adversely affected.
In
recent years, there have been numerous proposals to change the health care
system in the U.S. and in foreign jurisdictions. 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 some foreign countries, particularly countries of the European Union, the
pricing of prescription pharmaceuticals is subject to governmental control.
In
addition, as a result of the trend towards managed health care in the U.S.,
as
well as legislative proposals to reduce government insurance programs,
third-party payers 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 succeed in bringing one or more of our products to
market, third party payers may establish and maintain price levels insufficient
for us to realize an appropriate return on our investment in product
development. Significant changes in the health care system in the U.S. or
elsewhere, including changes resulting from adverse trends in third-party
reimbursement programs, could have a material adverse effect on our operating
results and our ability to raise capital and commercialize
products.
We
are exposed to product liability claims, and in the future we may not be able
to
obtain insurance against these claims at a reasonable cost or at
all.
Our
business exposes us to product liability risks, which are inherent in the
testing, manufacturing, marketing and sale of pharmaceutical products. We may
not be able to avoid product liability exposure. If a product liability claim
is
successfully brought against us, our financial position may be adversely
affected.
Product
liability insurance for the biopharmaceutical industry is generally expensive,
when available at all. We have obtained product liability insurance in the
amount of $10.0 million per occurrence, subject to a deductible and a $10.0
million annual aggregate limitation. In addition, where local statutory
requirements exceed the limits of our existing insurance or where local policies
of insurance are required, we maintain additional clinical trial liability
insurance to meet these requirements. Our present insurance coverage may not
be
adequate to cover claims brought against us. In addition, some of our license
and other agreements require us to obtain product liability insurance. Adequate
insurance coverage may not be available to us at a reasonable cost in the
future.
We
handle hazardous materials and must comply with environmental laws and
regulations, which can be expensive and restrict how we do business. If we
are
involved in a hazardous waste spill or other accident, we could be liable for
damages, penalties or other forms of censure.
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 procedures that we implement
for handling and disposing of these materials, we cannot eliminate the risk
of
accidental contamination or injury. In the event of a hazardous waste spill
or
other accident, we could be liable for damages, penalties or other forms of
censure. In addition, we may be required to incur significant costs to comply
with environmental laws and regulations in the future.
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. Between January 1, 2005
and
September 30, 2007, our stock price has ranged from $14.09 to $30.83 per share.
Historically, our stock price has fluctuated through an even greater range.
At
times, our stock price has been volatile even in the absence of significant
news
or developments relating to us. 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:
· the
results of clinical trials and preclinical studies involving our products
or
those of our competitors;
·
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changes in the status of any of our drug development programs,
including
delays in clinical trials or program
terminations;
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· 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;
·
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developments in patent or other proprietary
rights;
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·
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governmental regulation;
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·
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changes in reimbursement policies or health care
legislation;
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·
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public concern as to the safety and efficacy of products developed
by us,
our collaborators or our
competitors;
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·
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our ability to fund on-going
operations;
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·
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fluctuations in our operating results;
and
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·
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general market conditions.
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Our
principal stockholders are able to exert significant influence over matters
submitted to stockholders for approval.
At
September 30, 2007, Dr. Maddon and stockholders affiliated with Tudor Investment
Corporation together beneficially own or control approximately 16% of our
outstanding shares of common stock. These persons, should they choose to act
together, could exert significant influence in determining 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 us and, consequently, could adversely affect the market price
of
our common stock.
Anti-takeover
provisions may make the removal of our Board of Directors or management more
difficult and discourage hostile bids for control of our company that may be
beneficial to our stockholders.
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 that 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; and
· otherwise
dilute the rights of holders of our common stock and depress the market price
of
our common stock.
If
there are substantial sales of our common stock, the market price of our common
stock could decline.
Sales
of substantial numbers of shares
of common stock could cause a decline in the market price of our stock. We
require substantial external funding to finance our research and development
programs and may seek such funding through the issuance and sale of our common
stock. We have filed a shelf registration statement to permit the sale by us
of
up to 4.0 million shares of our common stock, pursuant to which we sold 2.6
million shares on September 25, 2007. We have filed additional shelf
registration statements to permit the public reoffer and sale from time to
time
of up to 286,000 shares of our common stock by certain stockholders. Sales
of
our common stock pursuant to these registration statements could cause the
market price or our stock to decline. In addition, some of our other
stockholders are entitled to require us to register their shares of common
stock
for offer or sale to the public. Also, we have filed Form S-8 registration
statements registering shares issuable pursuant to our equity compensation
plans. Any sales by existing stockholders or holders of options may have an
adverse effect on our ability to raise capital and may adversely affect the
market price of our common stock.
31.1
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Certification
of Paul J. Maddon, M.D., Ph.D., 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
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31.2
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Certification
of Robert A.
McKinney, Chief Financial Officer and Senior Vice President, Finance
and
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
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32
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Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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PROGENICS
PHARMACEUTICALS, INC.
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Date:
November 8, 2007
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By:
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/s/
Robert A. McKinney
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|
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Robert
A. McKinney
Chief
Financial Officer
Senior
Vice President, Finance & Operations and Treasurer
(Duly
authorized officer of the Registrant and Principal Financial and
Accounting Officer)
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