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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 June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
Commission file number 000-23143
PROGENICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3379479
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 Old Saw Mill River Road
Tarrytown, New York 10591
(Address of principal executive offices)
(Zip Code)
(914) 789-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
As of June 30, 2002 there were 12,557,421 shares of common stock, par
value $.0013 per share, of the registrant outstanding.
PROGENICS PHARMACEUTICALS, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets........................................................................ 3
Condensed Statements of Operations.............................................................. 4
Condensed Statement of Stockholders' Equity..................................................... 5
Condensed Statements of Cash Flows.............................................................. 6
Notes to Condensed Financial Statements......................................................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk................................... 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 14
Item 6. Exhibits and Reports on Form 8-K............................................................. 14
2
PROGENICS PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
AT JUNE 30, 2002 AND DECEMBER 31, 2001 (Unaudited)
June 30, December 31,
2002 2001
------------------------ ------------------------
ASSETS:
Current assets:
Cash and cash equivalents...................................... $ 10,203,830 $ 10,759,636
Certificates of deposit........................................ 1,500,000
Marketable securities.......................................... 37,330,172 30,523,239
Accounts receivable............................................ 645,070 378,020
Interest receivable............................................ 865,703 1,245,890
Other current assets........................................... 368,576 840,695
---------------------- ---------------------
Total current assets...................................... 50,913,351 43,747,480
Marketable securities.............................................. 5,355,646 20,594,274
Fixed assets, at cost, net of accumulated
depreciation and amortization.................................. 3,624,335 2,560,199
Investment in joint venture........................................ 370,871 579,296
Restricted cash.................................................... 120,750
---------------------- ---------------------
Total assets.............................................. $ 60,384,953 $ 67,481,249
====================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities....................... $ 2,345,662 $ 2,597,089
Amount due to joint venture.................................... 12,270 500,000
---------------------- ---------------------
Total current liabilities................................. 2,357,932 3,097,089
Deferred lease liability........................................... 55,031 38,797
---------------------- ---------------------
Total liabilities......................................... 2,412,963 3,135,886
---------------------- ---------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000
authorized; none issued and outstanding
Common stock - $.0013 par value, 40,000,000
authorized; issued and outstanding - 12,557,421
in 2002, 12,429,916 in 2001................................ 16,324 16,159
Additional paid-in capital..................................... 90,708,726 89,664,075
Unearned compensation.......................................... (23,150)
Accumulated deficit............................................ (32,874,975) (25,518,834)
Accumulated other comprehensive income......................... 121,915 207,113
---------------------- ---------------------
Total stockholders' equity................................ 57,971,990 64,345,363
---------------------- ---------------------
Total liabilities and stockholders' equity................ $ 60,384,953 $ 67,481,249
====================== =====================
The accompanying notes are an integral part of these
financial statements.
3
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
June 30,
----------------------------------------------
Revenues: 2002 2001
------------------- -------------------
Contract research and development
and research grants................................... $ 2,647,960 $ 1,290,916
Product sales................................................ 5,911 3,000
Interest income.............................................. 472,465 112,814
------------------ ------------------
Total revenues........................................... 3,126,336 1,406,730
------------------ ------------------
Expenses:
Research and development..................................... 5,865,977 3,201,602
General and administrative................................... 1,762,019 2,103,784
Loss in joint venture........................................ 606,106 519,947
Interest expense............................................. 11,687
Depreciation and amortization................................ 247,360 170,870
------------------ ------------------
Total expenses........................................... 8,481,462 6,007,890
------------------ ------------------
Operating loss........................................... (5,355,126) (4,601,160)
Payment from insurance settlement...............................
Payment from collaborator....................................... 9,852,012
------------------ ------------------
Net income (loss)........................................ $ (5,355,126) $ 5,250,852
================== ==================
Net income (loss) per share - basic............................. $ (0.43) $ 0.42
================== ==================
Net income (loss) per share - diluted........................... $ (0.43) $ 0.38
================== ==================
For the six months ended
June 30,
---------------------------------------------
Revenues: 2002 2001
------------------- ------------------
Contract research and development
and research grants................................... $ 5,004,611 $ 6,208,221
Product sales................................................ 19,339 28,000
Interest income.............................................. 1,019,347 1,017,293
------------------- ------------------
Total revenues........................................... 6,043,297 7,253,514
------------------- ------------------
Expenses:
Research and development..................................... 10,432,526 6,932,647
General and administrative................................... 3,009,189 3,161,897
Loss in joint venture........................................ 1,108,425 937,967
Interest expense............................................. 23,767
Depreciation and amortization................................ 449,298 337,147
------------------- ------------------
Total expenses........................................... 14,999,438 11,393,425
------------------- ------------------
Operating loss........................................... (8,956,141) (4,139,911)
Payment from insurance settlement............................... 1,600,000
Payment from collaborator....................................... 9,852,012
------------------- ------------------
Net income (loss)........................................ $ (7,356,141) $ 5,712,101
=================== ==================
Net income (loss) per share - basic............................. $ (0.59) $ 0.46
=================== ==================
Net income (loss) per share - diluted........................... $ (0.59) $ 0.41
=================== ==================
The accompanying notes are an integral part of these
financial statements.
4
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2002 (Unaudited)
COMMON STOCK ADDITIONAL
------------ PAID-IN UNEARNED ACCUMULATED
Shares Amount CAPITAL COMPENSATION DEFICIT
------ ------ ------- ------------ -------
Balance at December 31, 2001 12,429,916 $16,159 $89,664,075 ($23,150) ($25,518,834)
Amortization of unearned compensation 23,150
Issuance of compensatory stock 185,898
options
Sale of Common Stock under employee
stock purchase plans and exercise 127,505 165 858,753
of stock options and warrants
Net loss (7,356,141)
Change in unrealized gain on
marketable securities
------------------------------------------------------------------------------
Balance at June 30, 2002 12,557,421 $16,324 $90,708,726 ($32,874,975)
==============================================================================
ACCUMULATED TOTAL
OTHER COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
INCOME EQUITY (LOSS)
------ ------ ------
Balance at December 31, 2001 $207,113 $64,345,363
Amortization of unearned compensation 23,150
Issuance of compensatory stock 185,898
options
Sale of Common Stock under employee
stock purchase plans and exercise 858,918
of stock options and warrants
Net loss (7,356,141) (7,356,141)
Change in unrealized gain on
marketable securities (85,198) (85,198) (85,198)
-----------------------------------------------------------------
Balance at June 30, 2002 $121,915 $57,971,990 ($7,441,339)
==================================================================
The accompanying notes are an integral part of these
financial statements.
5
PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Six months ended June 30,
-------------------------------------------------
2002 2001
---------------------- --------------------
Cash flows from operating activities:
Net (loss) income................................................ $ (7,356,141) $ 5,712,101
---------------------- --------------------
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization................................ 449,298 337,147
Amortization of discounts, net of premiums, on
marketable securities..................................... 606,380 98,160
Amortization of discount on amount due to joint venture...... 21,372
Realized loss on impairment of security...................... 782,400
Loss in joint venture........................................ 1,108,425 937,967
Noncash expenses incurred in connection with issuance of
common stock, stock options and warrants................... 209,048 212,331
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ................ (267,050) 1,590,486
Decrease in interest receivable and other current assets... 852,306 261,229
(Decrease) increase in accounts payable and accrued expenses 812,142) 42,461
Increase in investment in joint venture.................... (1,387,730) (898,908)
Increase in deferred lease liability....................... 16,234
---------------------- ---------------------
Total adjustments................................... 774,769 3,384,645
---------------------- ---------------------
Net cash (used in) provided by operating activities........ (6,581,372) 9,096,746
----------------------- ---------------------
Cash flows from investing activities:
Capital expenditures............................................. (952,719) (685,041)
(Purchase) maturity of certificate of deposit.................... (1,500,000) 1,000,000
Increase in restricted cash...................................... (120,750)
Sale of marketable securities.................................... 14,573,000 25,750,502
Purchase of marketable securities................................ (6,832,883) (20,321,830)
---------------------- ----------------------
Net cash provided by investing activities.................. 5,166,648 5,743,631
---------------------- ---------------------
Cash flows from financing activities:
Proceeds from the exercise of stock options and other adjustments to
stockholders' equity.......................................... 858,918 569,768
Payment of capital lease obligations............................. (3,226)
---------------------- ---------------------
Net cash provided by financing activities................. 858,918 566,542
---------------------- ---------------------
Net increase (decrease) in cash and cash equivalents...... (555,806) 15,406,919
----------------------- ---------------------
Cash and cash equivalents at beginning of period................... 10,759,636 5,628,987
---------------------- ---------------------
Cash and cash equivalents at end of period................ $ 10,203,830 $ 21,035,906
====================== =====================
Supplemental disclosure of noncash investing and financing activities:
Fixed assets included in accounts payable and accrued expenses... $ 586,067 $ 19,023
====================== =====================
The accompanying notes are an integral part of these
financial statements.
6
PROGENICS PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Interim Financial Statements
The interim Condensed Financial Statements of Progenics Pharmaceuticals, Inc.
(the "Company") have been prepared in accordance with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
information and disclosures necessary for a presentation of the Company's
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management, these
financial statements reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows for such periods. The results of
operations for interim periods are not necessarily indicative of the results for
the full year. The December 31, 2001 Condensed Balance Sheet data was derived
from audited financial statements, but as set forth herein does not include all
disclosures required by generally accepted accounting principles. 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, 2001.
2. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of June 30, 2002 and December
31, 2001 consist of the following:
June 30, December 31,
2002 2001
------------------- -------------------
Accounts payable $1,764,034 $ 916,711
Accrued consulting and clinical trial costs 280,255 703,508
Accrued payroll and related costs 126,317 543,283
Accrued legal and auditing fees payable 175,056 433,587
------------------- -------------------
$2,345,662 $2,597,089
=================== ===================
3. Net Income (Loss) Per Share
The Company's basic net income (loss) per share amounts have been
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the respective periods. For the three and six months
ended June 30, 2002, the Company reported net losses and, therefore, no common
stock equivalents were included in the computation of diluted per share amounts
since such inclusion would have been antidilutive. For the three and six months
ended June 30, 2001, the Company reported net income and, therefore, all common
stock equivalents with exercise prices less than the average fair market value
of the Company's Common Stock for the period have been included in the
calculation, as follows:
7
Net Income (Loss) Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
2002:
Three months ended June 30, 2002:
Basic and Diluted: ($5,355,126) 12,534,936 ($0.43)
============ ========== =======
Six months ended June 30, 2002:
Basic and Diluted: ($7,356,141) 12,494,835 ($0.59)
============ ========== =======
2001:
Three months ended June 30, 2001:
Basic: $5,250,852 12,372,596 $0.42
========== =====
Effect of Dilutive Securities:
Options 1,411,864
Warrants 52,299
------
Diluted: $5,250,852 13,836,758 $0.38
========== ========== =====
Six months ended June 30, 2001:
Basic: $5,712,101 12,342,980 $0.46
========== =====
Effect of Dilutive Securities:
Options 1,488,978
Warrants 68,210
------
Diluted: $5,712,101 13,900,168 $0.41
========== ========== =====
Options and warrants which have been excluded from the diluted per
share amounts because their effect would have been antidilutive include the
following:
Three Months Ended June 30,
-----------------------------------------------------------
2002 2001
-----------------------------------------------------------
Wtd. Avg. Wtd. Avg.
Wtd. Avg. Exercise Wtd. Avg. Exercise
Number Price Number Price
4,074,154 $8.60 562,700 $38.94
Six Months Ended June 30,
-----------------------------------------------------------
2002 2001
-----------------------------------------------------------
Wtd. Avg. Wtd. Avg.
Wtd. Avg. Exercise Wtd. Avg. Exercise
Number Price Number Price
4,080,126 $8.53 548,728 $39.34
4. PSMA Development Company LLC
The Company accounts for its investment in the 50% owned PSMA
Development Company LLC ("JV") in accordance with the equity method of
accounting. During the fourth quarter of 2001, the Company surpassed the $3.0
million threshold for its funding of costs for research and development
conducted by the Company on behalf of the JV. The Company recognizes contract
research and development revenue for all amounts earned for research and
development services rendered to the JV beyond that threshold. Selected
financial statement data of the JV are as follows:
8
Statement of Operations Data:
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------------- -------------------------------------
2002 2001 2002 2001
----------------- ----------------- ---------------- ----------------
Total revenue $ 1,226 $ 11,496 $ 3,076 $ 25,692
Total expenses 1,213,436 593,791 2,220,555 1,034,793
----------------- ----------------- ---------------- ----------------
Net loss (1) $ (1,212,210) $ (582,295) $ (2,216,850) $ (1,009,101)
================= ================= ================ ================
(1) The terms of the joint venture agreement provide for the Company to
fund up to $3.0 million in certain costs of the joint venture. During
2001, prior to reaching the $3.0 million threshold, the loss resulting
from such costs was allocated to the capital account of the Company
and accordingly, the Company's allocated share of the joint venture's
loss was greater than its ownership interest.
5. Collaboration Payment
In May 2001, the Company and Bristol-Myers Squibb Company ("BMS")
agreed to terminate their Joint Development and Master License Agreement to
develop vaccines to treat melanoma and other cancers (the "BMS Agreement"),
entered into in April 1997. Under the terms of the settlement agreement, BMS
relinquished all future rights to products resulting from the BMS Agreement. In
connection with the termination of the BMS Agreement, BMS paid the Company $15.5
million. Approximately $5.6 million of the payment related to contract work
performed prior to termination and the $9.9 million balance was a contract
termination payment. Under the terms of certain license agreements, a portion of
the termination payment was paid to certain licensors.
6. Insurance Settlement
In the first quarter of 2002, the Company received a $1.6 million
insurance settlement in connection with a casualty loss that had occurred in
2001.
7. Comprehensive (Loss) Income
Comprehensive (loss) income represents the change in net assets of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive (loss) income of the Company
includes net (loss) income adjusted for the change in net unrealized gain or
loss on marketable securities. The net effect of income taxes on comprehensive
(loss) income is immaterial. For the six months ended June 30, 2002 and 2001,
the components of comprehensive (loss) income are:
Six Months Ended June 30,
--------------------------------------
2002 2001
----------------- -----------------
Net (loss) income $ (7,356,141) $ 5,712,101
Change in net unrealized gain/loss
on marketable securities (85,198) 156,587
----------------- ------------------
Comprehensive (loss) income $ (7,441,339) $ 5,868,688
================= ==================
8. Income Taxes
For the year ending December 31, 2002, the Company currently estimates
a net loss and the effect of income taxes will be immaterial. Accordingly, no
provision for income taxes has been recorded for the period ended June 30, 2002.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any expected future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: technological uncertainties
related to early stage product development, uncertainties associated with
preclinical and clinical testing, risks relating to corporate collaborations,
the lack of product revenue and the uncertainty of future profitability, the
need for additional financing and other factors set forth more fully in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001
and other periodic filings with the Securities and Exchange Commission to which
investors are referred for further information.
General
Progenics is a biopharmaceutical company focusing on the development
and commercialization of innovative therapeutic products to address the unmet
medical needs of patients with debilitating conditions and life-threatening
diseases. The Company commenced principal operations in late 1988 and since that
time has been engaged primarily in research and development efforts, development
of its manufacturing capabilities, establishment of corporate collaborations and
raising capital. In order to commercialize the principal products that the
Company has under development, the Company will need to address a number of
technological challenges and comply with comprehensive regulatory requirements.
Accordingly, it is not possible to predict the amount of funds that will be
required or the length of time that will pass before the Company receives
revenues from sales of any of its products. To date, product sales have
consisted solely of limited revenues from the sale of research reagents. The
Company expects that sales of research reagents in the future will not
significantly increase over current levels. The Company's other sources of
revenues through June 30, 2002 have been payments received under its
collaboration agreements, research grants and contracts related to the Company's
cancer and HIV programs and interest income.
To date, a majority of the Company's expenditures have been for
research and development activities. The Company expects that its research and
development expenses will increase significantly as its programs progress and
the Company makes filings for related regulatory approvals. With the exception
of the years ended December 31, 1997 and 1998, the Company has had recurring
losses and had, at June 30, 2002, an accumulated deficit of approximately
$32,875,000. The Company will require additional funds to complete the
development of its products, to fund the cost of clinical trials, and to fund
operating losses that are expected to continue for the foreseeable future. The
Company does not expect its products under development to be commercialized in
the near future.
Results of Operations
Three Months Ended June 30, 2002 and 2001
Contract research and development revenue and research grants increased
to approximately $2,648,000 for the three months ended June 30, 2002 from
approximately $1,291,000 for the three months ended June 30, 2001. The Company
receives revenue for research and development services performed for the PSMA
Development Company, LLC, the Company's joint venture with Cytogen Corporation.
During the second quarter of 2002, the Company recognized approximately
$1,077,000 of revenues from the JV. No such revenue was recognized in the second
quarter of 2001 because the Company was required to fund the first $3.0 million
of research and development costs. That threshold was reached in the fourth
quarter of 2001. Revenues from research grants and contracts and other
collaborations increased to approximately $1,571,000 for the three months ended
June 30, 2002 from approximately $1,291,000 for the three months ended June 30,
2001. The increase resulted from the funding of a greater number of grants in
the second quarter of 2002 offset by a decrease in collaboration revenue.
Interest income increased to approximately $473,000 for the three months ended
June 30, 2002 from approximately $113,000 for the three months ended June 30,
2001 primarily due to a $782,000 temporary write-down of a debt security in the
second quarter of 2001, offset by lower interest rates in 2002. The Company also
received a non-recurring payment of approximately $9,852,000 from Bristol-Myers
Squibb Company ("BMS") during the second quarter of 2001 in connection with the
termination of a collaboration.
10
Research and development expenses increased to approximately $5,866,000
for the three months ended June 30, 2002 from approximately $3,202,000 for the
three months ended June 30, 2001. The increase was principally due to an
increase in headcount, related laboratory supplies and additional rent for new
laboratory space as the Company increased spending in its PSMA programs and
expanded its research and clinical development programs to include MNTX
(methylnaltrexone), which was in licensed by the Company in October 2001 and for
which the Company has initiated Phase II clinical trials.
General and administrative expenses decreased to approximately
$1,762,000 for the three months ended June 30, 2002 from approximately
$2,104,000 for the three months ended June 30, 2001. The decrease was
principally due to a decrease in professional fees for legal and patent work
partially offset by an increase in headcount, related benefits and operating
expenses.
Loss in joint venture increased to approximately $606,000 for the three
months ended June 30, 2002 from approximately $520,000 for the three months
ended June 30, 2001. The Company recognizes its share of the loss under the
terms of the joint venture with Cytogen Corporation. The increase was due to an
increase in the headcount assigned to the PSMA project and the related cost of
supplies. Additionally, prior to reaching the $3.0 million threshold, the
Company recognized 100% of the joint venture's research and development
expenses; that percentage was reduced to 50% subsequent to reaching that
threshold.
Interest expense decreased to $0 for the three months ended June 30,
2002 from approximately $12,000 for the three months ended June 30, 2001. The
decrease was due to the payoff of the remaining capital leases outstanding.
Depreciation expense increased to approximately $247,000 for the three
months ended June 30, 2002 from approximately $171,000 for the three months
ended June 30, 2001 as new capital equipment was purchased and leasehold
improvements were incurred in connection with the Company's growth.
The Company's net loss for the three months ended June 30, 2002 was
approximately $5,355,000 compared to net income of approximately $5,251,000 for
the three months ended June 30, 2001.
Six Months Ended June 30, 2002 and 2001
Contract research and development revenue and research grants decreased
to approximately $5,005,000 for the six months ended June 30, 2002 from
approximately $6,208,000 for the six months ended June 30, 2001. The Company
received no contract research and development funding during the six months
ended June 30, 2002 pursuant to the Company's terminated agreement with BMS
compared to $3,674,000 million for the six months ended June 30, 2001. The
Company receives revenue for research and development services performed for the
PSMA Development Company, LLC, the Company's joint venture with Cytogen
Corporation. During the first half of 2002, the Company recognized approximately
$2,084,000 of revenues from the JV. No such revenue was recognized in the first
half of 2001 because the Company was required to fund the first $3.0 million of
research and development costs. That threshold was reached in the fourth quarter
of 2001. Revenues from research grants increased to approximately $2,727,000 for
the six months ended June 30, 2002 from approximately $1,804,000 for the six
months ended June 30, 2001, resulting from the funding of a greater number of
grants in the first half of 2002, offset by a decrease in collaboration revenue.
Product sales decreased to approximately $19,000 for the six months ended June
30, 2002 from approximately $28,000 for the six months ended June 30, 2001.
Interest income increased slightly to approximately $1,019,000 for the six
months ended June 30, 2002 from approximately $1,017,000 for the six months
ended June 30, 2001. In the first half of 2002, the Company received a $1.6
million insurance settlement in connection with a casualty loss that had
occurred in 2001. The Company also received a non-recurring payment of
approximately $9,852,000 from BMS during the second quarter of 2001 in
connection with the termination of the collaboration.
11
Research and development expenses increased to approximately
$10,433,000 for the six months ended June 30, 2002 from approximately $6,933,000
for the six months ended June 30, 2001. The increase was principally due to an
increase in headcount, related laboratory supplies and additional rent for new
laboratory space as the Company expanded its research and development programs
to include MNTX (methylnaltrexone) and increased spending in its PSMA programs.
General and administrative expenses decreased to approximately
$3,009,000 for the six months ended June 30, 2002 from approximately $3,162,000
for the six months ended June 30, 2001. The decrease was principally due to a
decrease in professional fees for legal and patent work partially offset by an
increase in headcount, related benefits and operating expenses.
Loss in joint venture increased to approximately $1,108,000 for the six
months ended June 30, 2002 from approximately $938,000 for the six months ended
June 30, 2001. The Company recognized its share of the loss under the terms of
the joint venture with Cytogen Corporation. The increase was due to an increase
in the headcount assigned to the PSMA project and the related cost of supplies.
Additionally, prior to reaching the $3.0 million threshold, the Company
recognized 100% of the joint venture's research and development expenses; that
percentage was reduced to 50% subsequent to reaching that threshold.
Interest expense decreased to $0 for the six months ended June 30, 2002
from approximately $24,000 for the six months ended June 30, 2001. The decrease
was due to the payoff of the remaining capital leases outstanding.
Depreciation expense increased to approximately $449,000 for the six
months ended June 30, 2002 from approximately $337,000 for the three months
ended June 30, 2001 as new capital equipment was purchased and leasehold
improvements were incurred in connection with the Company's growth.
The Company's net loss for the six months ended June 30, 2002 was
approximately $7,356,000 compared to net income of approximately $5,712,000 for
the six months ended June 30, 2001.
Liquidity and Capital Resources
We have funded our operations since inception primarily through private
placements of equity securities, loans that were subsequently converted into
equity securities, a line of credit that was repaid and terminated, payments
received under collaboration agreements, such as those with BMS and Roche, two
public offerings of common stock, funding under government research grants and
contracts, interest on investments, and the proceeds from the exercise of
outstanding options and warrants. In May 2001, the Company and BMS mutually
agreed to terminate our cancer vaccine collaborative development agreement, and
as a result we regained all rights to the products and received a non-recurring
payment of approximately $9,852,000 from BMS. As a result of the termination of
the BMS Agreement, the Company will receive no additional payments from BMS.
12
At June 30, 2002, we had cash, cash equivalents and marketable
securities, including non-current portion, totaling approximately $54,390,000
compared with approximately $61,877,000 at December 31, 2001. For the six months
ended June 30, 2002, net cash used in operating activities was approximately
$6.6 million. The Company is required to fund 50% of the current and future
spending on the PSMA projects under the terms of the joint venture. Such amount
was approximately $1.4 million during the first half of 2002. Net cash provided
by investing activities was approximately $5.2 million resulting from the sale
of marketable securities offset by capital expenditures of approximately
$950,000 as we have acquired additional space and our facility lease has been
extended to June 2005. Net cash provided by financing activities was
approximately $859,000 due to the exercise of stock options under the Company's
Employee Stock Purchase Plans and Stock Option Plans.
We have no off-balance sheet arrangements and do not guarantee the
obligations of any other entity.
We believe that our existing capital resources should be sufficient to
fund operations at least through 2003. However, this is a forward-looking
statement based on our current operating plan and the assumptions on which it
relies. There could be changes that would consume our assets before such time.
We will require substantial funds to conduct research and development
activities, preclinical studies, clinical trials and other activities relating
to the commercialization of any potential products. In addition, our cash
requirements may vary materially from those now planned because of results of
research and development and product testing, changes in existing relationships
with, 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. We have no committed external sources of capital and, as
discussed above, expect no significant product revenues for a number of years as
it will take at least that much time, if ever, to bring our products to the
commercial marketing stage. We may seek additional financing, such as through
future offerings of equity or debt securities or agreements with corporate
partners and collaborators with respect to the development of our technology, to
fund future operations. We cannot assure you, however, that we will be able to
obtain additional funds on acceptable terms, if at all.
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, euro dollar bonds, and corporate notes.
Our investments totaled $51 million at June 30, 2002. Approximately $42.6
million of these investments had fixed interest rates, and $8.4 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. 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 value
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 June 30, 2002 market interest rates would result in a decrease of
approximately $0.25 million in the market values of these investments.
13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on June 18, 2002.
The matters voted upon at the meeting were (i) the election of eight directors
of the Company, (ii) an amendment to the Company's 1996 Stock Option Plan, (iii)
an amendment to the Company's Employee Stock Purchase Plans, and (iv) the
ratification of the Board of Directors' selection of PricewaterhouseCoopers LLP
to serve as the Company's independent auditors for the fiscal year ending
December 31, 2002. The number of votes cast for and against or withheld with
respect to each matter voted upon at the meeting and the number of abstentions
and broker non-votes are as follows:
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Votes Broker
Nominee: Votes For: Against: Abstentions: Non Votes:
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Paul J. Maddon, M.D., Ph.D. 10,446,930 197,375 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Ronald J. Prentki 10,446,930 197,375 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Charles A. Baker 10,619,993 23,930 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Kurt W. Briner 10,619,993 23,930 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Mark F. Dalton 10,619,993 23,930 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Stephen P. Goff, Ph.D. 10,595,193 48,730 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
Paul F. Jacobson 10,619,993 23,930 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
David A. Scheinberg, M.D., Ph.D. 10,595,193 48,730 0 0
- ------------------------------------------- ------------------ ----------------- ------------------ -----------------
As to the approval of an amendment to the Company's 1996 Stock Option
Plan, the matter was approved with 5,406,312 votes in favor, 2,198,239 votes
against, 26,136 abstentions and 3,772,192 broker non-votes.
As to the approval of an amendment to the Company's Employee Stock
Purchase Plans, the matter was approved with 7,279,728 votes in favor, 289,521
votes against, 26,638 abstentions and 3,772,192 broker non-vote.
As to the ratification of the Board of Director's selection of
PricewaterhouseCoopers, LLP to serve as the Company's independent auditors for
the fiscal year ending December 31, 2001, the matter was approved with
11,258,750 votes in favor, 123,274 votes against, 11,880 abstentions and 1
broker non-vote.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification of Paul J. Maddon, M.D., Ph.D., Chairman and
Chief Executive Officer of the Registrant pursuant to 18
U.S.C. Section 1350
99.2 Certification of Robert A. McKinney, Vice President,
Finance and Operations (Principal Finance and Accounting
Officer) of the Registrant pursuant to 18 U.S.C. Section
1350
(b) During the quarter ending June 30, 2002, the Registrant did not file any
Current Reports on Form 8-K.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROGENICS PHARMACEUTICALS, INC.
Date: August 14, 2002 by /s/ Robert A. McKinney
-------------------------------
Robert A. McKinney
Vice President
(Duly authorized officer of the Registrant
and
Principal Financial
and Accounting Officer)
15
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
99.1 Certification of Paul J. Maddon, M.D., Ph.D., Chairman and
Chief Executive Officer of the Registrant pursuant to 18
U.S.C. Section 1350
99.2 Certification of Robert A. McKinney, Vice President,
Finance and Operations (Principal Finance and Accounting
Officer) of the Registrant pursuant to 18 U.S.C. Section
1350
16