-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JKLtYA8jBYJE1tbGcNhpoNA0bENbF3U/NJ0zTBqs1ahm7hOCaCqvux8c3JAY54gZ Q5WMAXsM7X9WxAtL04G9ug== 0000725058-04-000035.txt : 20040809 0000725058-04-000035.hdr.sgml : 20040809 20040809124304 ACCESSION NUMBER: 0000725058-04-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYTOGEN CORP CENTRAL INDEX KEY: 0000725058 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 222322400 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14879 FILM NUMBER: 04960269 BUSINESS ADDRESS: STREET 1: 650 COLLEGE RD EAST STE 3100 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6099878200 MAIL ADDRESS: STREET 1: 650 COLLEGE RD EAST STE 3100 CITY: PRINCETON STATE: NJ ZIP: 08540 10-Q 1 q2-2004form10q.txt 2ND QTR 2004 FORM 10-Q 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, 2004 ------------- 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 000-14879 --------- Cytogen Corporation ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Delaware 22-2322400 - ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 650 College Road East, Suite 3100, Princeton, NJ 08540-5308 ----------------------------------------------------------- (Address of Principal Executive Offices and Zip Code) Registrant's Telephone Number, Including Area Code: (609) 750-8200 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No . --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No . --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at August 1, 2004 - ------------------------------ -------------------------------- Common Stock, $.01 par value 15,509,293 CYTOGEN CORPORATION TABLE OF CONTENTS -----------------
Page ---- PART I. FINANCIAL INFORMATION................................................. 1 Item 1. Consolidated Financial Statements (unaudited)..................... 1 Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003............................................. 2 Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2004 and 2003....................... 3 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003 ................................. 4 Notes to Consolidated Financial Statements........................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 27 Item 4. Controls and Procedures........................................... 27 PART II. OTHER INFORMATION..................................................... 27 Item 1. Legal Proceedings................................................. 27 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....... 29 Item 4. Submission of Matters to a Vote of Security Holders............... 29 Item 5. Other Information................................................. 30 Item 6. Exhibits and Reports on Form 8-K.................................. 31 SIGNATURES...................................................................... 32
-i- PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1
CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share and per share data) (Unaudited) JUNE 30, DECEMBER 31, 2004 2003 --------- ----------- ASSETS: Current assets: Cash and cash equivalents .................................................... $ 20,900 $ 13,630 Short-term investments ....................................................... 23,940 16,585 Accounts receivable, net ..................................................... 1,946 1,445 Inventories .................................................................. 1,432 1,887 Other current assets ......................................................... 1,130 975 --------- --------- Total current assets ....................................................... 49,348 34,522 Property and equipment, net .................................................... 747 595 Quadramet license fee, net ..................................................... 7,372 7,720 Other assets ................................................................... 456 858 --------- --------- $ 57,923 $ 43,695 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current portion of long-term liabilities ..................................... $ 58 $ 76 Accounts payable and accrued liabilities ..................................... 4,002 5,125 --------- --------- Total current liabilities .................................................. 4,060 5,201 --------- --------- Long-term liabilities .......................................................... 2,457 2,454 --------- --------- Commitments and Contingencies Stockholders' equity: Preferred stock, $.01 par value, 5,400,000 shares authorized - Series C Junior Participating Preferred Stock, $.01 par value, 200,000 shares authorized, none issued and outstanding ..................... - - Common stock, $.01 par value, 25,000,000 shares authorized, 15,434,211 and 12,857,488 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively ....................... 155 129 Additional paid-in capital ................................................... 425,655 401,649 Accumulated deficit .......................................................... (374,404) (365,738) --------- --------- Total stockholders' equity ................................................. 51,406 36,040 --------- --------- $ 57,923 $ 43,695 ========= =========
The accompanying notes are an integral part of these statements. 2
CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except per share data) (Unaudited) THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- -------------------- 2004 2003 2004 2003 -------- -------- -------- -------- REVENUES: Product related: Quadramet ..................................... $ 1,616 $ - $ 3,470 $ - ProstaScint ................................... 2,312 1,599 4,039 3,219 Others ........................................ - 98 1 363 -------- -------- -------- -------- Total product revenues .................. 3,928 1,697 7,510 3,582 Quadramet royalties ........................... - 465 - 914 -------- -------- -------- -------- Total product related revenues .......... 3,928 2,162 7,510 4,496 License and contract .......................... 24 164 43 307 -------- -------- -------- -------- Total revenues .......................... 3,952 2,326 7,553 4,803 -------- -------- -------- -------- OPERATING EXPENSES: Cost of product related revenues ................ 2,396 900 4,795 1,810 Selling, general and administrative ............. 4,914 2,967 8,805 5,366 Research and development ........................ 541 718 1,345 1,530 Equity in loss of joint venture ................. 542 1,086 1,351 1,966 -------- -------- -------- -------- Total operating expenses ................ 8,393 5,671 16,296 10,672 -------- -------- -------- -------- Operating loss .......................... (4,441) (3,345) (8,743) (5,869) INTEREST INCOME .................................. 106 23 170 59 INTEREST EXPENSE .................................. (49) (46) (93) (93) -------- -------- -------- -------- Loss before income taxes ................ (4,384) (3,368) (8,666) (5,903) INCOME TAX BENEFIT ................................ - - - (584) -------- -------- -------- -------- NET LOSS .......................................... $ (4,384) $ (3,368) $ (8,666) $ (5,319) ======== ======== ======== ======== BASIC AND DILUTED NET LOSS PER SHARE .............. $ (0.30) $ (0.37) $ ((0.63) $ (0.60) ======== ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ........ 14,848 9,051 13,859 8,909 ======== ======== ======== ========
The accompanying notes are an integral part of these statements. 3
CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited) SIX MONTHS ENDED JUNE 30, ------------------------- 2004 2003 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ................................................... $ (8,666) $ (5,319) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization .......................... 534 306 Stock-based compensation expenses ...................... 11 502 Amortization of deferred revenue ....................... - (192) Non-cash interest income ............................... 28 - Loss on disposition of assets .......................... 3 - Write down of property and equipment ................... 100 - Changes in assets and liabilities: Receivables, net ..................................... (501) 488 Inventories .......................................... 455 (767) Other assets ......................................... 247 (293) Accounts payable, accrued liabilities and other liabilities ................................... (1,127) (574) -------- -------- Net cash used in operating activities .................. (8,916) (5,849) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ........................... (371) (2) Increase in short-term investments ............................ (7,383) - -------- -------- Net cash used in investing activities .................. (7,754) (2) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock ........................ 24,021 4,739 Payment of long-term liabilities .............................. (81) (84) -------- -------- Net cash provided by financing activities .............. 23,940 4,655 -------- -------- Net increase (decrease) in cash and cash equivalents .......... 7,270 (1,196) Cash and cash equivalents, beginning of period ................ 13,630 14,725 -------- -------- Cash and cash equivalents, end of period ...................... $ 20,900 $ 13,529 ======== ======== Supplemental disclosure of non-cash information: Capital leases of equipment................................. $ 70 $ - ======== ======== Supplemental disclosure of cash information: Cash paid for interest...................................... $ 93 $ 93 ======== ========
The accompanying notes are an integral part of these statements. 4 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. THE COMPANY BACKGROUND Founded in 1980, Cytogen Corporation (the "Company" or "Cytogen") of Princeton, New Jersey is a product-driven, oncology-focused biopharmaceutical company that develops and commercializes a balanced portfolio of oncology products that address the unmet medical needs of patients and the physicians that serve them. The Company directly markets Quadramet(TM) (samarium Sm-153 lexidronam injection), ProstaScint(R) (capromab pendetide) kit for the preparation of Indium In-111 capromab pendetide and NMP22(R) BladderChek(R) (nuclear matrix protein 22) in the United States. The Company has exclusive United States marketing rights to Combidex(R) (ferumoxtran-10), an investigational molecular imaging agent consisting of iron oxide nanoparticles for use in conjunction with magnetic resonance imaging to aid in the differentiation of cancerous from non-cancerous lymph nodes, which is under review by the U.S. Food and Drug Administration (the "FDA"). The Company is also developing therapeutics targeting prostate-specific membrane antigen ("PSMA"), a protein highly expressed on the surface of prostate cancer cells and the neovasculature of solid tumors. Cytogen has had a history of operating losses since its inception. The Company currently relies on two products, ProstaScint and Quadramet, for substantially all of its revenues. In addition, the Company has, from time to time, stopped selling certain products, such as OncoScint(R) CR/OV and the BrachySeed(TM) products, that the Company previously expected would generate significant revenues for its business. The Company's products are subject to significant regulatory review by the FDA and other federal and state agencies, which requires significant time and expenditures in seeking, maintaining and expanding product approvals. In addition, the Company relies on collaborative partners to a significant degree to, among other things, manufacture its products, secure raw materials, and provide licensing rights to their proprietary products for the Company to sell and market to others. BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of Cytogen and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. BASIS OF PRESENTATION The consolidated financial statements and notes thereto of Cytogen are unaudited and include all adjustments, which in the opinion of management, are necessary to present fairly the financial condition and results of operations as of and for the periods set forth in the Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows. All such accounting adjustments are of a normal, recurring nature. The consolidated financial statements do not include all of the information and 5 footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission, which includes financial statements as of and for the year ended December 31, 2003. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full year. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, cash in banks and all highly-liquid investments with a maturity of three months or less at the time of purchase. SHORT-TERM INVESTMENTS Short-term investments at June 30, 2004 and December 31, 2003 were $23.9 million and $16.6 million, respectively, and consisted of investments in U.S. government agency notes. The Company has the ability and intent to hold these investments until maturity. Held-to-maturity investments are recorded at amortized cost, adjusted for the accretion of discounts or premiums. Discounts or premiums are accreted into interest income over the life of the related investment on a straight-line basis. Dividend and interest income are recognized when earned. These investments mature at various times through April 15, 2005. IMPAIRMENT OF LONG-LIVED ASSETS In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," if indicators of impairment exist, management assesses the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows and eventual disposition of the asset. If impairment is indicated, management measures the amount of such impairment by comparing the carrying value of the assets to the present value of the expected future cash flows associated with the use of the asset. During the second quarter of 2004, the Company recorded a non-cash charge of $100,000 for equipment impairment associated with the planned closure of the facilities at the Company's AxCell BioSciences subsidiary in July 2004 (see Note 7, "Subsequent Event"). This charge is included in selling, general and administrative expenses for the three and six month periods ended June 30, 2004 in the accompanying consolidated statement of operations. COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES In accordance with the SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," the Company is required to record a liability for costs associated with an exit or disposal activity, measured at fair value, in the period in which the liability is incurred. A liability related to one-time termination benefits provided to severed employees as a result of the exit or disposal activity will be recorded when certain criteria have been met and the employees are notified of the details of the plan. A liability for costs 6 to terminate a lease or other contract before the end of its term shall be recognized and measured at its fair value when the Company terminates the contract in accordance with the contract terms. If the contract is an operating lease, the fair value of the liability at the cease-use date shall be determined based on the remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property, even if the Company does not intend to enter into a sublease. In July 2004, as part of our continuing effort to reduce non-strategic expenses, the Company initiated a closure of facilities at the Company's AxCell BioSciences subsidiary, which will be accounted for pursuant to SFAS No. 146 (see Note 7, "Subsequent Event"). INVENTORIES The Company's inventories are primarily related to ProstaScint. Inventories are stated at the lower of cost or market using the first-in, first-out method and consisted of the following (all amounts in thousands): JUNE 30, 2004 DECEMBER 31, 2003 ------------- ----------------- Raw materials........................... $ - $ 11 Work-in-process......................... 1,229 1,089 Finished goods.......................... 203 787 --------- --------- $ 1,432 $ 1,887 ========= ========= NET LOSS PER SHARE Basic net loss per common share is calculated by dividing net loss by the weighted average common shares outstanding during each period. Diluted net loss per common share is the same as basic net loss per share for each of the three and six month periods ended June 30, 2004 and 2003 because the inclusion of common stock equivalents, which consist of warrants and options to purchase shares of the Company's common stock, would be antidilutive due to the Company's losses. VARIABLE INTEREST ENTITIES In December 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46 (revised December 2003) ("FIN 46R"), "Consolidation of Variable Interest Entities" ("VIEs"), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaced FASB Interpretation No. 46 ("FIN 46") which was issued in January 2003. The Company is required to apply FIN 46R to variable interests in VIEs created after December 31, 2003. For variable interests in VIEs created before January 1, 2004, FIN 46R applied beginning on March 31, 2004. For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and noncontrolling interests of the VIE initially are measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at 7 the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest of the VIE. In June 1999, Cytogen entered into a joint venture with Progenics Pharmaceuticals Inc. ("Progenics," and collectively with Cytogen, the "Members"), to form the PSMA Development Company LLC (the "Joint Venture"). The Joint Venture is currently developing antibody-based and vaccine immunotherapeutic products utilizing Cytogen's exclusively licensed prostate-specific membrane antigen ("PSMA") technology. The Joint Venture is owned equally by the Members (see Note 2, "Equity Loss in the PSMA Development Company LLC"). Cytogen accounts for the Joint Venture using the equity method of accounting. The Company believes it is not required to consolidate the Joint Venture under the requirements of FIN 46R. STOCK-BASED COMPENSATION The Company follows the intrinsic value method of accounting for stock-based employee compensation in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. The Company records deferred compensation for option grants to employees for the amount, if any, by which the market price per share exceeds the exercise price per share at the measurement date, which is generally the grant date. The Company follows the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." Had compensation cost for options been recognized in the consolidated statements of operations using the fair value method of accounting, the Company's net loss and net loss per share would have been as follows (all amounts in thousands, except per share data):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- ---------------------- 2004 2003 2004 2003 ---- ---- ---- ---- Net loss, as reported............................. $(4,384) $(3,368) $ (8,666) $ (5,319) Add: Stock-based employee compensation expense included in reported net loss ......... - - 11 1 Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards......... (341) (361) (574) (712) ------- ------- -------- -------- Pro forma net loss................................ $(4,725) $(3,729) $ (9,229) $ (6,030) ======= ======= ======== ======== Basic and diluted net loss per share, as reported............................. $ (0.30) $ (0.37) $ (0.63) $ (0.60) ======= ======= ======== ======== Pro forma basic and diluted net loss per share................................. $ (0.32) $ (0.41) $ (0.67) $ (0.68) ======= ======= ======== ========
8 RECLASSIFICATION Certain amounts in prior years' consolidated financial statements have been reclassified to conform to the current year presentation. 2. EQUITY LOSS IN THE PSMA DEVELOPMENT COMPANY LLC In June 1999, Cytogen entered into a joint venture with Progenics to form the PSMA Development Company LLC. The Joint Venture is owned equally by Cytogen and Progenics. Cytogen accounts for the Joint Venture using the equity method of accounting. Cytogen has recognized 50% of the Joint Venture's operating results in its consolidated statements of operations. The Joint Venture is expected to continue to incur losses in future years provided an agreement between the Members is reached on research program goals and budgets for periods after 2004 and the Joint Venture's operations are funded. In 2004, the Members each expect to provide $4.2 million in funding for the development of the PSMA technologies through the Joint Venture. Cytogen has funded $950,000 as of June 30, 2004 and an additional $1.0 million in July 2004 of its $4.2 million commitment. The Members have not committed to fund the Joint Venture beyond December 31, 2004 at this time, except for obligations under existing contractual commitments as of that date. For the three months ended June 30, 2004 and 2003, Cytogen recognized $542,000 and $1.1 million, respectively, of the Joint Venture's losses. For the six months ended June 30, 2004 and 2003, Cytogen recognized $1.4 million and $2.0 million, respectively, of the Joint Venture's losses. As of June 30, 2004 and December 31, 2003, the carrying value of Cytogen's investment in the Joint Venture was $148,000 and $550,000, respectively, which represents Cytogen's investment to date in the Joint Venture less its cumulative share of losses and is recorded in other assets. Selected financial statement information of the Joint Venture is as follows (all amounts in thousands): BALANCE SHEET DATA:
JUNE 30, DECEMBER 31, 2004 2003 ---------- -------------- Cash ........................................................ $ 523 $ 1,173 Prepaid expenses............................................. 31 - Accounts receivable from Progenics, a related party.......... - 108 -------- -------- Total assets......................................... $ 554 $ 1,281 ======== ======== Accounts payable to Progenics, a related party............... $ 14 $ - Other accounts payable and accrued expenses.................. 260 199 -------- -------- Total liabilities.................................... 274 199 -------- -------- Capital contributions........................................ 21,298 19,398 Accumulated deficit.......................................... (21,018) (18,316) -------- -------- Total stockholders' equity........................... 280 1,082 -------- -------- Total liabilities and stockholders' equity........... $ 554 $ 1,281 ======== ========
9 INCOME STATEMENT DATA:
THREE SIX MONTHS ENDED MONTHS ENDED FOR THE PERIOD JUNE 30, JUNE 30, FROM JUNE 15, 1999 ---------------------- ----------------------- (INCEPTION) TO 2004 2003 2004 2003 JUNE 30, 2004 ---------- --------- ---------- ---------- ------------------ Interest income.............. $ 2 $ 1 $ 5 $ 1 $ 239 Total expenses............... 1,086 2,173 2,707 3,932 21,257 --------- --------- --------- --------- --------- Net loss..................... $ (1,084) $ (2,172) $ (2,702) $ (3,931) $ (21,018) ========= ========= ========= ========= =========
3. BRISTOL-MYERS SQUIBB MEDICAL IMAGING, INC. As a result of the Company's reacquisition of marketing rights to Quadramet from Berlex Laboratories Inc. ("Berlex") in August 2003, the Company assumed all of Berlex's obligations under a manufacturing and supply agreement with Bristol-Myers Squibb Medical Imaging, Inc. ("BMSMI"). Effective January 1, 2004, the Company entered into a new manufacturing and supply agreement with BMSMI whereby BMSMI manufactures, distributes and provides order processing and customer services for Cytogen relating to Quadramet. Under the terms of the new agreement, Cytogen is obligated to pay at least $4.2 million annually through 2008, unless terminated by BMSMI or Cytogen on two years prior written notice. This agreement will automatically renew for five successive one-year periods unless terminated by BMSMI or Cytogen on two years prior written notice. During the three and six month periods ended June 30, 2004, Cytogen incurred $1.0 million and $2.1 million, respectively, of manufacturing costs for Quadramet, all of which is included in cost of product related revenues. The Company also pays BMSMI a variable amount per month for each order of Quadramet placed to cover the costs of customer service, which is included in selling, general and administrative expenses. 4. LITIGATION AND OTHER RELATED MATTERS On March 17, 2000, the Company was served with a complaint filed against us in the United States District Court for the District of New Jersey by M. David Goldenberg and Immunomedics, Inc. (collectively "Plaintiffs"). The litigation claims that the Company's ProstaScint product infringes a patent purportedly owned by Goldenberg and licensed to Immunomedics. The patent sought to be enforced in the litigation has now expired; as a result, the claim, even if successful, would not result in an injunction barring the continued sale of ProstaScint or affect any other of the Company's products or technology. The Company believes that ProstaScint did not infringe this patent, and that the patent was invalid and unenforceable. On December 17, 2001, Cytogen filed a motion for summary judgment of non-infringement of the asserted claims of the patent-in-suit. The Plaintiffs opposed that motion and filed their own cross-motion for summary judgment of infringement. On July 3, 2002, the District Court denied both parties' summary judgment motions, with leave to renew those motions after presenting expert testimony and legal argument based upon that testimony. The parties subsequently presented expert testimony and submitted additional briefing. On April 29, 2003, the Company's motion for summary 10 judgment of non-infringement of all asserted claims was granted, Plaintiffs' motion for summary judgment of infringement was denied and the case was ordered closed. On May 12, 2003, Plaintiffs filed a Notice of Appeal regarding this decision to the U.S. Court of Appeals for the Federal Circuit ("Federal Circuit"), and subsequently filed their opening brief on July 28, 2003. On September 22, 2003, Cytogen filed its responsive brief. On October 23, 2003, Plaintiffs filed their reply brief. The appeal was fully briefed and oral argument was held on March 2, 2004. The Federal Circuit on June 23, 2004 issued a ruling on the appeal in which it affirmed the District Court's claim construction ruling and summary judgment of no literal infringement by the Company. However, the Federal Circuit determined that there was an issue of material fact as to infringement under the doctrine of equivalents. As a result, it reversed the District Court's grant of summary judgment of no infringement under the doctrine of equivalents and remanded the case to the District Court for further proceedings on this issue. Given the uncertainty associated with litigation, the Company cannot give any assurance that the litigation could not result in a material adverse effect on the Company's financial condition, results of operations or liquidity. In connection with a recent review of certain of the Company's intellectual property, it was determined that the Company was the recipient, beginning in 1998, of correspondence from legal counsel representing the former employer of Dr. Julius Horoszewicz, the sole inventor on the principal United States patent covering ProstaScint. Such correspondence alleged that the patent rights to Dr. Horoszewicz's discoveries were the property of such former employer and that Dr. Horoszewicz had no right to assign them to the Company. The Company vigorously disputed those allegations, and the Company has no record of the matter having been pursued by such former employer subsequent to August 2000. The Company believes that in view of the marketing of the technology covered by the patent through the sale of ProstaScint by the Company, the Company's right to use the underlying technology in its continuing production and sale of ProstaScint should not be at risk. However, if such claims were reasserted, and if it were to be concluded that Dr. Horoszewicz in fact had no right to assign the patent to the Company, a court could determine that the Company has no right to use the technology covered by the patent or that any royalties paid by or payable by the Company in respect of the use of the patent should have been paid in the past, and should in the future be payable, to Dr. Horoszewicz's former employer in lieu of Dr. Horoszewicz. The amount of any such payments, and the Company's liability for them, is not presently determinable, and the Company cannot give any assurance that an adverse determination could not result in a material expenditure to the Company or have a material adverse effect on the Company's financial condition, results of operations or liquidity. The Company has certain rights to indemnification against litigation and litigation expenses from the inventor of technology used in ProstaScint, which may be offset against royalty payments on sales of ProstaScint. However, given the uncertainty associated with litigation, the Company may incur material expenditures. 11 5. SALE OF COMMON STOCK In April 2004, the Company issued and sold through a registered direct offering 2,570,000 shares of its common stock at $10.10 per share, resulting in net proceeds to the Company of approximately $24.0 million after the payment of placement agency fees and expenses related to the offering. 6. STOCK INCENTIVE PLANS At the Company's 2004 Annual Meeting of Stockholders held on June 15, 2004, the stockholders of the Company approved the adoption of the Company's 2004 Stock Incentive Plan (the "2004 Plan") and the Company's 2004 Non-Employee Director Stock Incentive Plan (the "2004 Director Plan" and together with the 2004 Plan, collectively, the "2004 Incentive Plans"). An aggregate of 1,200,000 and 375,000 shares of the Company's common stock have been reserved for issuance upon the exercise of option grants or restricted stock awards (as applicable) under the 2004 Plan and 2004 Director Plan, respectively. The 2004 Plan provides for the grant of incentive stock options, non-qualified stock options or restricted stock to the Company's employees, officers, consultants and advisors. The 2004 Director Plan provides for the grant of non-qualified stock options and shares of the Company's common stock, in certain circumstances, to members of the Company's Board of Directors who are not employees of the Company. The Company intends to file a registration statement on Form S-8 with the Securities and Exchange Commission to register the shares of the Company's common stock underlying option grants or other awards under the 2004 Incentive Plans. Furthermore, upon approval of the 2004 Incentive Plans by our stockholders, no further option grants or awards were, or will be, made under the Company's existing 1995 Stock Option Plan or 1999 Non-Employee Director Stock Option Plan. Any unissued and unallocated options previously reserved under these plans were released from reserves. 7. SUBSEQUENT EVENT Planned Closure of AxCell BioSciences Facilities In July 2004, the Company initiated the closure of the facilities at its AxCell BioSciences subsidiary as part of the Company's continuing efforts to reduce non-strategic expenses. As a result of the closure, the Company will record additional charges in the third quarter of 2004 related to employee severance costs and the potential charge for future rental payments on leased facilities that will no longer be used in operations. Research projects through academic, governmental and corporate collaborators will continue to be supported and additional applications for the intellectual property and technology at AxCell are being pursued. 12 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management including, without limitation, our expectations regarding results of operations, selling, general and administrative expenses, research and development expenses and the sufficiency of our cash for future operations. Forward-looking statements may be identified by the use of forward-looking terminology such as "may," "will," "expect," "estimate," "anticipate," "continue," or similar terms, variations of such terms or the negative of those terms. These forward-looking statements include statements regarding our intent to hold our investments until maturity, additional funding of the PSMA technologies, potential charges resulting from the closure of AxCell Biosciences, growth and market penetration for Quadramet and ProstaScint, revenues, if any, from NMP22 BladderChek and from our joint venture with Progenics Pharmaceuticals Inc., increased expenses resulting from our sales force and marketing expansion, including sales and marketing expenses for Quadramet, the sufficiency of our capital resources, our need for additional capital and other statements included in this Quarterly Report on Form 10-Q that are not historical facts. Such forward-looking statements involve a number of risks and uncertainties and investors are cautioned not to put any undue reliance on any forward-looking statement. We cannot guarantee that we will actually achieve the plans, intentions or expectations disclosed in any such forward-looking statements. Factors that could cause actual results to differ materially, include, market acceptance of our products, the results of our clinical trials, our ability to hire and retain employees, economic and market conditions generally, our receipt of requisite regulatory approvals for our products and product candidates, the continued cooperation of our marketing and other collaborative and strategic partners, our ability to protect our intellectual property, and the other risks identified in our Annual Report on Form 10-K for the year ended December 31, 2003 under the caption "Additional Factors That May Affect Future Results" and those under the caption "Risk Factors," as included in certain of our other filings, from time to time, with the Securities and Exchange Commission. Any forward-looking statements made by us do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume, and specifically disclaim, any obligation to update any forward-looking statements, and these statements represent our current outlook only as of the date given. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes thereto contained elsewhere herein, as well as in our Annual Report on Form 10-K for the year ended December 31, 2003 and from time to time in our other filings with the Securities and Exchange Commission. OVERVIEW Founded in 1980, Cytogen Corporation of Princeton, New Jersey is a product-driven, oncology-focused biopharmaceutical company that develops and commercializes a balanced portfolio of oncology products that address the unmet 13 medical needs of patients and the physicians that serve them. We directly market Quadramet(TM) (samarium Sm-153 lexidronam injection), ProstaScint(R) (capromab pendetide) kit for the preparation of Indium In-111 capromab pendetide and NMP22(R) BladderChek(R) (nuclear matrix protein 22) in the United States. We have exclusive United States marketing rights to Combidex(R) (ferumoxtran-10), an investigational molecular imaging agent consisting of iron oxide nanoparticles for use in conjunction with magnetic resonance imaging to aid in the differentiation of cancerous from non-cancerous lymph nodes, which is under review by the U.S. Food and Drug Administration. We are also developing therapeutics targeting prostate-specific membrane antigen (PSMA), a protein highly expressed on the surface of prostate cancer cells and the neovasculature of solid tumors. Full prescribing information for our products is available at www.cytogen.com or by calling 1-800-833-3533. ProstaScint(R) and OncoScint(R) are registered United States trademarks of Cytogen Corporation. We are the owner of a pending United States trademark application, Serial No. 78374967, relating to Quadramet. All other trade names, trademarks or servicemarks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners, and not the property of Cytogen Corporation or any of our subsidiaries. SIGNIFICANT EVENTS IN 2004 ADDITION TO SENIOR MANAGEMENT In April 2004, Thomas S. Lytle joined the Company as Senior Vice President of Sales and Marketing. Mr. Lytle has over 25 years of experience in the pharmaceutical industry and has held senior level positions at Amgen, Inc., Pfizer and Lederle Laboratories. At Cytogen, Mr. Lytle is responsible for overseeing strategic sales and marketing initiatives for our existing and future oncology products. CAPITAL RAISING In April 2004, we issued and sold 2,570,000 shares of our common stock for $10.10 per share through a registered direct offering resulting in net proceeds of approximately $24.0 million after the payment of placement agency fees and expenses related to the offering. The shares in this transaction were registered under our existing shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission on October 30, 2003. PATENT INFRINGEMENT LITIGATION UPDATE In June 2004, we announced a ruling by the U.S. Court of Appeals for the Federal Circuit regarding the recent decision of the U.S. District Court for the District of New Jersey in a patent infringement suit filed by Immunomedics, Inc. The U.S. Court of Appeals for the Federal Circuit determined that the district court correctly construed the claims and, under that construction, our ProstaScint product was not an "intracellular marker substance," and affirmed the district court's grant of summary judgment of no literal infringement. Regarding infringement under the doctrine of equivalents, however, the U.S. Court of Appeals for the Federal Circuit disagreed with the district court's conclusion that there is no issue of material fact and reversed the district court's grant of summary judgment on this point and remanded for further proceedings on the issue. 14 ADVANCED MAGNETICS SUBMITS RESPONSE TO APPROVABLE LETTER FOR COMBIDEX In June 2004, Advanced Magnetics, Inc. and Cytogen announced that Advanced Magnetics submitted a response to the approvable letter received from the U.S. Food and Drug Administration for Combidex, Advanced Magnetics' investigational molecular imaging agent to aid in the non-invasive diagnosis of metastatic lymph nodes that Cytogen will market upon receipt of all appropriate regulatory approvals. In response to the submission, the FDA requested that Advanced Magnetics provide certain additional details underlying the existing supporting data submitted. The FDA subsequently communicated that the data Advanced Magnetics is in the process of gathering, look encouraging to provide a complete response to the approvable letter. PLANNED CLOSURE OF AXCELL BIOSCIENCES FACILITIES In July 2004, as part of our continuing efforts to reduce non- strategic expenses, we initiated the closure of facilities at our AxCell BioSciences subsidiary. As a result of the closure, we will record additional charges in the third quarter 2004 related to employee severance costs and the potential charge for future rental payments on leased facilities that will no longer be used in operations. Research projects through academic, governmental and corporate collaborators will continue to be supported and additional applications for the intellectual property and technology at AxCell are being pursued. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2004 AND 2003 REVENUES
INCREASE/(DECREASE) 2004 2003 $ % ---- ---- --------- ------- (ALL AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA) Quadramet Product Sales (commenced August 2003)..... $ 1,616 $ - $ 1,616 n/a Royalties (ceased July 2003).............. - 465 (465) (100)% ProstaScint................................. 2,312 1,599 713 45% NMP22 BladderChek........................... - 98 (98) (100)% License and Contract........................ 24 164 (140) (85)% -------- -------- -------- $ 3,952 $ 2,326 $ 1,626 70% ======== ======== ========
Total revenues for the second quarter of 2004 were $4.0 million compared to $2.3 million for the same period in 2003. Product related revenues, which include product sales and royalties in 2003, accounted for 99% and 93% of total revenues for the second quarters of 2004 and 2003, respectively. License and contract revenues accounted for the remainder of revenues. QUADRAMET. Cytogen recorded Quadramet sales of $1.6 million for the second quarter of 2004 compared to $465,000 of Quadramet royalty revenue during the second quarter of 2003. Quadramet sales and royalties accounted for 41% and 22% of product related revenues for the second quarters of 2004 and 2003, 15 respectively. Berlex Laboratories marketed Quadramet in the United States through July 31, 2003. On August 1, 2003, we reacquired marketing rights to Quadramet from Berlex and began marketing Quadramet through our internal specialty sales force. Effective upon the reacquisition of such marketing rights, we no longer receive royalty revenue from Berlex for Quadramet and we pay royalties to Berlex on our sales of Quadramet. On August 1, 2003, we began recognizing product revenue from our sales of Quadramet. Currently, we market Quadramet only in the United States and have no rights to market Quadramet in Europe. We believe that the future growth and market penetration of Quadramet is dependent upon, among other things: (i) new clinical data supporting the expanded and earlier use of Quadramet in various cancers; (ii) novel research supporting combination uses with other therapies, such as chemotherapeutics and bisphosphonates; and (iii) establishing the use of Quadramet at higher doses to target and treat primary bone cancers. We cannot provide any assurance that we will be able to successfully market Quadramet or that Quadramet will achieve greater market penetration on a timely basis or result in significant revenues for us. PROSTASCINT. ProstaScint sales were $2.3 million for the second quarter of 2004, an increase of $713,000 from $1.6 million in the second quarter of 2003. Sales of ProstaScint accounted for 59% and 74% of product related revenues for the second quarters of 2004 and 2003, respectively. We believe that such increase in ProstaScint sales is due to a combination of factors. First, we believe that customer demand for ProstaScint has increased due to our focused marketing programs and a higher ProstaScint reimbursement value established for 2004 compared to 2003 that appropriately accounts for the cost of the ProstaScint kit, requisite radioisotope, and compounding costs. Furthermore, we identified new distribution channels to better accommodate customer needs. Finally, for the first time in several years, we implemented price increases for both ProstaScint and Quadramet in late June 2004, while limiting the quantities of ProstaScint that could be purchased by distributors at the pre-increase price. ProstaScint has historically been a challenging product for physicians and technologists to use, in part due to inherent limitations in nuclear medicine imaging. We believe that future growth and market penetration of ProstaScint is dependent upon, among other things, the implementation and continued research relating to advances in imaging technology, new product applications and the validation of PSMA as an independent prognostic indicator. We cannot provide any assurance that we will be able to successfully market ProstaScint, or that ProstaScint will achieve greater market penetration on a timely basis or result in significant revenues for us. NMP22 BLADDERCHEK. There were no sales of NMP22 BladderChek during the second quarter of 2004 compared to $98,000 in the second quarter of 2003. We began promoting NMP22 BladderChek to both urologists and oncologists in the United States in November 2002 using our internal sales force. On October 30, 2003, we entered into an amended and restated distribution agreement with Matritech whereby, effective November 8, 2003, we had the right to non-exclusively market NMP22 BladderChek to urologists through December 31, 2003 and have the right to exclusively market NMP22 BladderChek to oncologists through December 31, 2004. We do not expect that sales of NMP22 BladderChek will result in significant revenues for us. LICENSE AND CONTRACT REVENUES. License and contract revenues were $24,000 and $164,000 for the second quarters of 2004 and 2003, respectively. Under SAB 101, which we adopted in 2000, license revenues from certain up-front, non-refundable license fees previously recognized were deferred and were being amortized over the estimated performance period. During the second quarter of 16 2003, we recognized $96,000 of previously deferred license revenue. The deferred revenue was fully recognized as of December 31, 2003. During the second quarter of 2004, we recognized $15,000 of contract revenues compared to $53,000 in the second quarter of 2003 for limited research and development services provided by us to the PSMA Development Company LLC, our joint venture with Progenics Pharmaceuticals Inc. We expect that the level of future revenues for the remainder of 2004, if any, for contract services provided to the joint venture may vary and will depend upon the extent of research and development services required by the joint venture. OPERATING EXPENSES
INCREASE/(DECREASE) 2004 2003 $ % ---- ---- --------- -------- (ALL AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA) Cost of product related revenues............. $ 2,396 $ 900 $ 1,496 166% Selling, general and administrative.......... 4,914 2,967 1,947 66% Research and development..................... 541 718 (177) (25)% Equity in loss of joint venture.............. 542 1,086 (544) (50)% -------- -------- -------- $ 8,393 $ 5,671 $ 2,722 48% ======== ======== ========
Total operating expenses for the second quarter of 2004 were $8.4 million compared to $5.7 million in the same quarter of 2003. COST OF PRODUCT RELATED REVENUES. Cost of product related revenues for the second quarter of 2004 were $2.4 million compared to $900,000 in the same period of 2003. The increase from the prior year period is due primarily to our assumption, in August 2003, of the responsibility for manufacturing costs for Quadramet including contractual increases in 2004 related to our new agreement with Bristol Myers Squibb Medical Imaging, royalties to Berlex on our sales of Quadramet and the amortization of the up-front payment to Berlex to reacquire Quadramet. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses for the second quarter of 2004 were $4.9 million compared to $3.0 million in the same period of 2003. The increase from the prior year period is due primarily to the expansion of our sales force and the implementation of other marketing initiatives for our existing products, including Quadramet, which we reacquired from Berlex in August 2003. As of August 1, 2004, we employed 38 people in sales and marketing. The employees in sales and marketing included 8 Clinical Oncology Specialists and 22 Regional and Territory Managers. By comparison, we had 31 employees in sales and marketing as of December 31, 2003. We anticipate that expenditure levels will continue to increase as we continue this expansion. RESEARCH AND DEVELOPMENT. Research and development expenses for the second quarter of 2004 were $541,000 compared to $718,000 in the same period of 2003. The current year expenses reflect the reduction in certain research activities at AxCell, which were partially offset by our increased product development efforts in support of new and expanded uses for Quadramet and ProstaScint. During the second quarter of 2004 and 2003, we incurred $167,000 and $357,000, respectively, in expenses relating to AxCell's operations. 17 EQUITY IN LOSS OF JOINT VENTURE. Our share of the loss of the PSMA Development Company LLC, our joint venture with Progenics, was $542,000 and $1.1 million during the second quarters of 2004 and 2003, respectively. Such amounts represented 50% of the joint venture's operating losses. We may incur significant and increasing costs in the future to fund our share of the development costs from the joint venture, although we cannot provide any assurance that any further agreements between us and Progenics will be reached regarding the joint venture. INTEREST INCOME/EXPENSE. Interest income for the second quarter of 2004 was $106,000 compared to $23,000 in the same period of 2003. The increase in 2004 from the prior year period was due to higher average cash balances in 2004. Interest expense for the second quarter of 2004 was $49,000 compared to $46,000 in the same period of 2003. Interest expense includes interest on outstanding debt and finance charges related to various equipment leases that are accounted for as capital leases. NET LOSS. Net loss for the second quarter of 2004 was $4.4 million compared to $3.4 million reported in the second quarter of 2003. The basic and diluted net loss per share for the second quarter of 2004 was $0.30 based on 14.8 million weighted average common shares outstanding, compared to a basic and diluted net loss per share of $0.37 based on 9.1 million weighted average common shares outstanding for the same period in 2003. SIX MONTHS ENDED JUNE 30, 2004 AND 2003 REVENUES
INCREASE/(DECREASE) ----------------------- 2004 2003 $ % ---- ---- --------- --------- (ALL AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA) Quadramet Product Sales (commenced August 2003)............ $ 3,470 $ - $ 3,470 n/a Royalties (ceased July 2003)..................... - 914 (914) (100)% ProstaScint.......................................... 4,039 3,219 820 25% NMP22 BladderChek.................................... 1 123 (122) (99)% BrachySeed (ceased January 2003)..................... - 240 (240) (100)% License and Contract................................. 43 307 (264) (86)% -------- -------- ------- $ 7,553 $ 4,803 $ 2,750 57% ======== ======== ========
Total revenues for the first half of 2004 were $7.6 million compared to $4.8 million for the same period in 2003. Product related revenues, which include product sales and royalties, accounted for 99% and 94% of total revenues for the first half of 2004 and 2003, respectively. License and contract revenues accounted for the remainder of revenues. QUADRAMET. Cytogen recorded Quadramet sales of $3.5 million for the first half of 2004 compared to $914,000 of Quadramet royalty revenue during the first half of 2003. Quadramet sales and royalties accounted for 46% and 20% of product related revenues for such periods, respectively. Berlex Laboratories marketed Quadramet in the United States through July 31, 2003. On August 1, 2003, we reacquired marketing rights to Quadramet from Berlex and began marketing Quadramet through our internal specialty sales force. Effective upon 18 the reacquisition of such marketing rights, we no longer receive royalty revenue from Berlex for Quadramet and we pay royalties to Berlex on our sales of Quadramet. On August 1, 2003, we began recognizing product revenue from our sales of Quadramet. Currently, we market Quadramet only in the United States and have no rights to market Quadramet in Europe. We believe that the future growth and market penetration of Quadramet is dependent upon, among other things: (i) new clinical data supporting the expanded and earlier use of Quadramet in various cancers; (ii) novel research supporting combination uses with other therapies, such as chemotherapeutics and bisphosphonates; and (iii) establishing the use of Quadramet at higher doses to target and treat primary bone cancers. We cannot provide any assurance that we will be able to successfully market Quadramet or that Quadramet will achieve greater market penetration on a timely basis or result in significant revenues for us. PROSTASCINT. ProstaScint sales were $4.0 million for the first half of 2004, an increase of $820,000 from $3.2 million in the first half of 2003. Sales of ProstaScint accounted for 54% and 72% of product related revenues for such periods, respectively. We believe that such increase in ProstaScint sales is due to a combination of factors. First, we believe that customer demand for ProstaScint has increased due to our focused marketing programs and a higher ProstaScint reimbursement value established for 2004 compared to 2003 that appropriately accounts for the cost of the ProstaScint kit, requisite radioisotope, and compounding costs. Furthermore, we identified new distribution channels to better accommodate customer needs. Finally, for the first time in several years, we implemented price increases for both ProstaScint and Quadramet in late June 2004, while limiting the quantities of ProstaScint that could be purchased by distributors at the pre-increase price. ProstaScint has historically been a challenging product for physicians and technologists to use, in part due to inherent limitations in nuclear medicine imaging. We believe that future growth and market penetration of ProstaScint is dependent upon, among other things, the implementation and continued research relating to advances in imaging technology, new product applications and the validation of PSMA as an independent prognostic indicator. We cannot provide any assurance that we will be able to successfully market ProstaScint, or that ProstaScint will achieve greater market penetration on a timely basis or result in significant revenues for us. NMP22 BLADDERCHEK. NMP22 BladderChek sales during the first half of 2004 were $1,000 compared to $123,000 in the same period in 2003. We began promoting NMP22 BladderChek to both urologists and oncologists in the United States in November 2002 using our internal sales force. On October 30, 2003, we entered into an amended and restated distribution agreement with Matritech whereby, effective November 8, 2003, we had the right to non-exclusively market NMP22 BladderChek to urologists through December 31, 2003 and have the right to exclusively market NMP22 BladderChek to oncologists through December 31, 2004. We do not expect that sales of NMP22 BladderChek will result in significant revenues for us. BRACHYSEED. There were no BrachySeed sales during the first half of 2004 compared to $240,000 during the first half of 2003, which represented 5% of product related revenues. Effective January 24, 2003, we stopped accepting and filling new orders for the BrachySeed products. LICENSE AND CONTRACT REVENUES. License and contract revenues were $43,000 and $307,000 for the first half of 2004 and 2003, respectively. Under SAB 101, which we adopted in 2000, license revenues from certain up-front, 19 non-refundable license fees previously recognized were deferred and were being amortized over the estimated performance period. During the first half of 2003, we recognized $193,000 of previously deferred license revenue. The deferred revenue was fully recognized as of December 31, 2003. During the first half of 2004, we recognized $28,000 of contract revenues compared to $100,000 in the first half of 2003 for limited research and development services provided by us to the PSMA Development Company LLC, our joint venture with Progenics Pharmaceuticals Inc. We expect that the level of future revenues for the remainder of 2004, if any, for contract services provided to the joint venture may vary and will depend upon the extent of research and development services required by the joint venture. OPERATING EXPENSES
INCREASE/(DECREASE) --------------------- 2004 2003 $ % --------- --------- --------- -------- (ALL AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA) Cost of product related revenues............. $ 4,795 $ 1,810 $ 2,985 165% Selling, general and administrative.......... 8,805 5,366 3,439 64% Research and development..................... 1,345 1,530 (185) (12)% Equity in loss of joint venture.............. 1,351 1,966 (615) (31)% -------- -------- -------- $ 16,296 $ 10,672 $ 5,624 53% ======== ======== ========
Total operating expenses for the first half of 2004 were $16.3 million compared to $10.7 million in the same period of 2003. COST OF PRODUCT RELATED REVENUES. Cost of product related revenues for the first half of 2004 were $4.8 million compared to $1.8 million in the same period of 2003. The increase from the prior year period is due primarily to our assumption, in August 2003, of the responsibility for manufacturing costs for Quadramet including contractual increases in 2004 related to our new agreement with Bristol Myers Squibb Medical Imaging, royalties to Berlex on our sales of Quadramet and the amortization of the up-front payment to Berlex to reacquire Quadramet. The increase is partially offset by lower costs associated with our discontinuation of BrachySeed products in January 2003. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses for the first half of 2004 were $8.8 million compared to $5.4 million in the same period of 2003. The increase from the prior year period is due primarily to the expansion of our sales force and the implementation of other marketing initiatives for our existing products, including Quadramet, which we reacquired from Berlex in August 2003. As of August 1, 2004, we employed 38 people in sales and marketing. The employees in sales and marketing included 8 Clinical Oncology Specialists and 22 Regional and Territory Managers. By comparison, we had 31 employees in sales and marketing as of December 31, 2003. We anticipate that expenditure levels will continue to increase as we continue this expansion. RESEARCH AND DEVELOPMENT. Research and development expenses for the first half of 2004 were $1.3 million compared to $1.5 million in the same period of 2003. The current year expenses reflect the reduction in certain research activities at AxCell, which were partially offset by our increased product development efforts in support of new and expanded uses for Quadramet and 20 ProstaScint. During the first half of 2004 and 2003, we incurred $418,000 and $807,000, respectively, in expenses relating to AxCell's operations. EQUITY IN LOSS OF JOINT VENTURE. Our share of the loss of the PSMA Development Company LLC, our joint venture with Progenics, was $1.4 million during the first half of 2004 compared to $2.0 million in the same period of 2003 and represented 50% of the joint venture's operating losses. We may incur significant and increasing costs in the future to fund our share of the development costs from the joint venture, although we cannot provide any assurance that any further agreements between us and Progenics will be reached regarding the joint venture. INTEREST INCOME/EXPENSE. Interest income for the first half of 2004 was $170,000 compared to $59,000 in the same period of 2003. The increase in 2004 from the prior year period was due to higher average cash balances in 2004. Interest expense was $93,000 for each of the first halves of 2004 and 2003. Interest expense includes interest on outstanding debt and finance charges related to various equipment leases that are accounted for as capital leases. INCOME TAX BENEFIT. During the first half of 2003, we sold a portion of our New Jersey state net operating losses and research and development credit carryforwards, which resulted in the recognition of $584,000 in income tax benefit. No such sales occurred in the first half of 2004. Assuming the State of New Jersey continues to fund this program, which is uncertain, the future amount of net operating losses and research and development credit carryforwards which we may sell will also depend upon the allocation among qualifying companies of an annual pool established by the State of New Jersey. NET LOSS. Net loss for the first half of 2004 was $8.7 million compared to $5.3 million reported in the first half of 2003. The basic and diluted net loss per share for the first half of 2004 was $0.63 based on 13.9 million weighted average common shares outstanding, compared to a basic and diluted net loss per share of $0.60 based on 8.9 million weighted average common shares outstanding for the same period in 2003. 21 COMMITMENTS We have entered into various contractual obligations and commercial commitments. The following table summarizes our contractual obligations as of June 30, 2004 (all amounts in thousands):
LESS THAN 1 TO 3 4 TO 5 MORE THAN 1 YEAR YEARS YEARS 5 YEARS TOTAL -------- ------- -------- --------- ------- Long-term debt(1) ................................. $ - $ 2,280 $ - $ - $ 2,280 Capital lease obligations.......................... 58 39 16 - 113 Facility leases.................................... 567 849 113 - 1,529 Other.............................................. 10 16 1 - 27 Manufacturing and research and development contracts(2) ......................... 4,494 4,447 200 750 9,891 Investor relations and consulting services......... 492 - - - 492 Capital contribution to joint venture(3) .......... 3,250 - - - 3,250 Minimum royalty payments(4)........................ 1,314 2,000 2,000 4,333 9,647 ------- ------- ------- ------- ------- Total........................................ $10,185 $ 9,631 $ 2,330 $ 5,083 $27,229 ======= ======= ======= ======= =======
(1) In August 1998, we received $2.0 million from Elan Corporation, plc in exchange for a convertible promissory note. The note is convertible into shares of our common stock at $28 per share, subject to adjustments, and matures in August 2005. The note bears annual interest of 7%, compounded semi-annually, however, such interest was not payable in cash but was added to the principal through August 2000; thereafter, interest is payable in cash. The note contains certain non-financial covenants, with which we were in compliance as of June 30, 2004. (2) As a result of the August 2003 reacquisition of marketing rights to Quadramet, we assumed all of Berlex's obligations under a manufacturing and supply agreement with BMSMI, including an obligation to pay manufacturing costs. Effective January 1, 2004, we entered into a new manufacturing and supply agreement with BMSMI whereby BMSMI manufactures, distributes and provides order processing and customer services for us relating to Quadramet. Under the terms of the new agreement, we are obligated to pay at least $4.2 million annually through 2008, unless terminated by BMSMI or us on a two year prior written notice. This agreement will automatically renew for five successive one-year periods unless terminated by BMSMI or us on a two-year prior written notice. Accordingly, we have not included commitments beyond June 30, 2006. (3) In 2004, each of Cytogen and Progenics expects to provide $4.2 million in funding for the development of the PSMA technologies through our joint venture with Progenics. Cytogen has funded $950,000 as of June 30, 2004 and an additional $1.0 million in July 2004 of its $4.2 million commitment. Cytogen and Progenics have not yet committed to fund the joint venture beyond December 31, 2004 at this time, except for obligations under existing contractual commitments as of that date. We may incur significant and increasing costs in the future to fund our share of the development costs from the joint venture, although we cannot be sure that any further agreements between us and Progenics will be reached regarding the joint venture. (4) We acquired an exclusive license from The Dow Chemical Company for Quadramet for the treatment of osteoblastic bone metastases in certain territories. The agreement requires us to pay Dow royalties based on a percentage of net sales of Quadramet, or a guaranteed contractual minimum payment, whichever is greater, and future payments upon achievement of certain milestones. Future annual minimum royalties due to Dow are $1.0 million per year in 2004 through 2012 and $833,000 in 2013. 22 In addition to the above, we are obligated to make certain royalty payments based on sales of the related product and certain milestone payments if our collaborative partners achieve specific development milestones or commercial milestones. LIQUIDITY AND CAPITAL RESOURCES CONDENSED STATEMENT OF CASH FLOWS: 2004 ------------- (ALL AMOUNTS IN THOUSANDS) Net loss........................................ $ (8,666) Adjustment to reconcile net loss to net cash used in operating activities................ (250) ----------- Net cash used in operating activities........... (8,916) Net cash used in investing activities........... (7,754) Net cash provided by financing activities....... 23,940 ----------- Net increase in cash and cash equivalents....... $ 7,270 =========== OVERVIEW Our cash and cash equivalents were $20.9 million as of June 30, 2004, compared to $13.6 million as of December 31, 2003. The increase in cash and cash equivalents from the December 31, 2003 balance was primarily due to our receipt of net proceeds of approximately $24.0 million from a registered direct offering of our common stock in April 2004, offset by increased operating expenditures in 2004, including costs to manufacture, promote and support our existing oncology products and to expand our internal sales force. During the first half of 2004 and 2003, net cash used for operating activities was $8.9 million and $5.8 million, respectively. In 2004, we expect operating expenditures to increase over 2003 levels. As of June 30, 2004, our total cash, cash equivalents and short-term investments were $44.8 million compared to $30.2 million as of December 31, 2003. Historically, our primary sources of cash have been proceeds from the issuance and sale of our stock through public offerings and private placements, product related revenues, revenues from contract research services, fees paid under license agreements and interest earned on cash and short-term investments. Our financial objectives are to meet our capital and operating requirements through revenues from existing products and licensing arrangements. To achieve these objectives, we may enter into research and development partnerships and acquire, in-license and develop other technologies, products or services. Certain of these strategies may require payments by us in either cash or stock in addition to the costs associated with developing and marketing a product or technology. However, we believe that, if successful, such strategies may increase long-term revenues. There can be no assurance as to the success of such strategies or that resulting funds will be sufficient to meet cash requirements until product revenues are sufficient to cover operating expenses, if ever. To fund these strategic and operating activities, we may sell equity or debt securities as market conditions permit or enter into credit facilities. 23 We have incurred negative cash flows from operations since our inception, and have expended, and expect to continue to expend in the future, substantial funds to implement our planned product development efforts, including acquisition of products and complementary technologies, research and development, clinical studies and regulatory activities, and to further our marketing and sales programs. We expect that our existing capital resources should be adequate to fund our operations and commitments into 2007. We cannot assure you that our business or operations will not change in a manner that would consume available resources more rapidly than anticipated. We expect that we will have additional requirements for debt or equity capital, irrespective of whether and when we reach profitability, for further product development costs, product and technology acquisition costs, and working capital. Our future capital requirements and the adequacy of available funds will depend on numerous factors, including: (i) the successful commercialization of our products; (ii) the costs associated with the acquisition of complementary products and technologies; (iii) progress in our product development efforts and the magnitude and scope of such efforts; (iv) progress with clinical trials; (v) progress with regulatory affairs activities; (vi) the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; (vii) competing technological and market developments; and (viii) the expansion of strategic alliances for the sales, marketing, manufacturing and distribution of our products. To the extent that the currently available funds and revenues are insufficient to meet current or planned operating requirements, we will be required to obtain additional funds through equity or debt financing, strategic alliances with corporate partners and others, or through other sources. There can be no assurance that the financial sources described above will be available when needed or at terms commercially acceptable to us. If adequate funds are not available, we may be required to delay, further scale back or eliminate certain aspects of our operations or attempt to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates, products or potential markets. If adequate funds are not available, our business, financial condition and results of operations will be materially and adversely affected. 2004 CAPITAL RAISING In April 2004, we sold 2,570,000 shares of our common stock to certain institutional investors for $10.10 per share through a registered direct offering, resulting in net proceeds of approximately $24.0 million after the payment of placement agency fees and expenses related to the offering. OTHER LIQUIDITY EVENTS In 2003, we reacquired the marketing rights to Quadramet from Berlex. Accordingly, effective August 1, 2003, we began recording all revenue from sales of Quadramet. Effective upon the reacquisition of such marketing rights, we no longer receive royalty revenue from Berlex and pay Berlex royalties on our sales of Quadramet. As a result of the reacquisition, we assumed all of Berlex's obligations under a manufacturing and supply agreement with BMSMI. Effective January 1, 2004, we entered into a new manufacturing and supply agreement with BMSMI whereby BMSMI manufactures, distributes and provides order processing and 24 customer services for us relating to Quadramet. Under the terms of the new agreement, we are obligated to pay at least $4.2 million annually through 2008, unless terminated by BMSMI or us on two years prior written notice. For the first half of 2004, we incurred $2.1 million of manufacturing costs for Quadramet. This agreement will automatically renew for five successive one-year periods unless terminated by BMSMI or us on a two year prior written notice. We also pay BMSMI a variable amount per month for each Quadramet order placed to cover the costs of customer service. In addition, we expect our Quadramet sales and marketing expenses to increase in 2004. Beginning in December 2001, we began to equally share the costs of the joint venture with Progenics. Cytogen and Progenics each expect to provide funding of $4.2 million in 2004. Cytogen has funded $950,000 as of June 30, 2004 and an additional $1.0 million in July 2004 of its $4.2 million commitment. Cytogen and Progenics have not committed to fund the joint venture beyond December 31, 2004 at this time, except for obligations under existing contractual commitments as of that date. We may incur significant and increasing costs in the future to fund our share of the development costs from the joint venture although we cannot provide any assurance that any further agreements between us and Progenics will be reached regarding the joint venture. Any funding amount in subsequent periods may vary dependent upon, among other things, the results of the clinical trials and research and development activities, competitive and technological developments, and market opportunities. We acquired an exclusive license from The Dow Chemical Company for Quadramet for the treatment of osteoblastic bone metastases in certain territories. The agreement requires us to pay Dow royalties based on a percentage of net sales of Quadramet, or a guaranteed contractual minimum payment, whichever is greater, and future payments upon achievement of certain milestones. Future annual minimum royalties due to Dow are $1.0 million per year in 2004 through 2012 and $833,000 in 2013. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Note 1 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2003 includes a summary of our significant accounting policies and methods used in the preparation of our Consolidated Financial Statements. The following is a brief discussion of the more significant accounting policies and methods used by us. The preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ materially from those estimates. REVENUE RECOGNITION Product related revenues include product sales by Cytogen to its customers and Quadramet royalties. Product sales are recognized when the customer takes ownership and assumes risk of loss, and when the collection of the relevant receivable is probable, persuasive evidence of an agreement exists 25 and the sales price is fixed and determinable. Product sales are recorded net of discounts, rebates and estimated allowances for product returns based on our historical experience and any specific product return issues that we may have identified. Prior to the reacquisition of marketing rights to Quadramet from our marketing partner, Berlex Laboratories, in August 2003, we recognized royalty revenue on Quadramet sales made by Berlex during each period as Berlex sold the product. As a result of our reacquisition, effective August 1, 2003, we began recognizing revenue from the sales of Quadramet and no longer receive Quadramet royalty revenue. License and contract revenues include milestone payments and fees under collaborative agreements with third parties, revenues from research services, and revenues from other miscellaneous sources. In 2003, Staff Accounting Bulletin No. 104, "Revenue Recognition" replaced Staff Accounting Bulletin No. 101, "Revenue Recognition In Financial Statements," which the Company adopted in 2000. The provisions related to non-refundable, up-front license fees were unchanged in SAB 104 compared to SAB 101. Accordingly, we defer non-refundable, up-front license fees and recognize them over the estimated performance period of the related agreement, when we have continuing involvement. Since the term of performance periods is subject to management's estimates, future revenues to be recognized could be affected by changes in such estimates. ACCOUNTS RECEIVABLE Our accounts receivable balances are net of an estimated allowance for uncollectible accounts. We continuously monitor collections and payments from our customers and maintain an allowance for uncollectible accounts based upon our historical experience and any specific customer collection issues that we have identified. While we believe our reserve estimate to be appropriate, we may find it necessary to adjust our allowance for uncollectible accounts if the future bad debt expense exceeds our estimated reserve. We are subject to concentration risks as a limited number of our customers provide a high percent of total revenues, and corresponding receivables. INVENTORIES Inventories are stated at the lower of cost or market, as determined using the first-in, first-out method, which most closely reflects the physical flow of our inventories. Our products and raw materials are subject to expiration dating. We regularly review quantities on hand to determine the need for reserves for excess and obsolete inventories based primarily on our estimated forecast of product sales. Our estimate of future product demand may prove to be inaccurate, in which case we may have understated or overstated our reserve for excess and obsolete inventories. CARRYING VALUE OF FIXED AND INTANGIBLE ASSETS Our fixed assets and certain of our acquired rights to market our products have been recorded at cost and are being amortized on a straight-line basis over the estimated useful life of those assets. If indicators of 26 impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we measure the amount of such impairment by comparing the carrying value of the assets to the present value of the expected future cash flows associated with the use of the asset. Adverse changes regarding future cash flows to be received from long-lived assets could indicate that an impairment exists, and would require the write down of the carrying value of the impaired asset at that time. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We do not have operations subject to risks of foreign currency fluctuations, nor do we use derivative financial instruments in our operations or investment portfolio. As of June 30, 2004, we had $2.3 million of debt outstanding with a fixed interest rate of 7%. We do not have exposure to market risks associated with changes in interest rates, as we have no variable interest rate debt outstanding. However, downward changes in interest rates could expose us to market risk associated with our fixed interest rate debt. ITEM 4 - CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2004. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2004, our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. (b) Changes in internal controls. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On March 17, 2000, we were served with a complaint filed against us in the United States District Court for the District of New Jersey by M. David Goldenberg and Immunomedics, Inc. (collectively "Plaintiffs"). The litigation claims that our ProstaScint product infringes a patent purportedly owned by 27 Goldenberg and licensed to Immunomedics. The patent sought to be enforced in the litigation has now expired; as a result, the claim, even if successful, would not result in an injunction barring the continued sale of ProstaScint or affect any other of our products or technology. We believe that ProstaScint did not infringe this patent, and that the patent was invalid and unenforceable. On December 17, 2001, we filed a motion for summary judgment of non-infringement of the asserted claims of the patent-in-suit. The Plaintiffs opposed that motion and filed their own cross-motion for summary judgment of infringement. On July 3, 2002, the District Court denied both parties' summary judgment motions, with leave to renew those motions after presenting expert testimony and legal argument based upon that testimony. The parties subsequently presented expert testimony and submitted additional briefing. On April 29, 2003, our motion for summary judgment of non-infringement of all asserted claims was granted, Plaintiffs' motion for summary judgment of infringement was denied and the case was ordered closed. On May 12, 2003, Plaintiffs filed a Notice of Appeal regarding this decision to the U.S. Court of Appeals for the Federal Circuit ("Federal Circuit"), and subsequently filed their opening brief on July 28, 2003. On September 22, 2003, we filed our responsive brief. On October 23, 2003, Plaintiffs filed their reply brief. The appeal was fully briefed and oral argument was held on March 2, 2004. The Federal Circuit on June 23, 2004 issued a ruling on the appeal in which it affirmed the District Court's claim construction ruling and summary judgment of no literal infringement by Cytogen. However, the Federal Circuit determined that there was an issue of material fact as to infringement under the doctrine of equivalents. As a result, it reversed the District Court's grant of summary judgment of no infringement under the doctrine of equivalents and remanded the case to the District Court for further proceedings on this issue. Given the uncertainty associated with litigation, we cannot give any assurance that the litigation could not result in a material adverse effect on the Company's financial condition, results of operations or liquidity. In connection with a recent review of certain of our intellectual property, it was determined that we were the recipient, beginning in 1998, of correspondence from legal counsel representing the former employer of Dr. Julius Horoszewicz, the sole inventor on the principal United States patent covering ProstaScint. Such correspondence alleged that the patent rights to Dr. Horoszewicz's discoveries were the property of such former employer and that Dr. Horoszewicz had no right to assign them to us. We vigorously disputed those allegations, and we have no record of the matter having been pursued by such former employer subsequent to August 2000. We believe that in view of the marketing of the technology covered by the patent through the sale of ProstaScint by us, our right to use the underlying technology in our continuing production and sale of ProstaScint should not be at risk. However, if such claims were reasserted, and if it were to be concluded that Dr. Horoszewicz in fact had no right to assign the patent to us, a court could determine that we have no right to use the technology covered by the patent or that any royalties paid by or payable by us in respect of the use of the patent should have been paid in the past, and should in the future be payable, to Dr. Horoszewicz's former employer in lieu of Dr. Horoszewicz. The amount of any such payments, and our liability for them, is not presently determinable, and we cannot give any assurance that an adverse determination could not result in a material expenditure to us or have a material adverse effect on our financial condition, results of operations or liquidity. In addition, we have certain rights to indemnification against litigation and litigation expenses from the inventor of technology used in ProstaScint, which may be offset against royalty payments on sales of 28 ProstaScint. However, given the uncertainty associated with litigation, we may incur material expenditures. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS CHANGES IN SECURITIES The following information relates to all of the securities sold by us within the past quarter that were not registered under the securities laws at the time of grant, issuance and/or sale: OPTION GRANTS During the second quarter of 2004, we granted stock options pursuant to our 2004 Stock Incentive Plan and 2004 Non-Employee Director Stock Incentive Plan, both of which were approved by our stockholders at our Annual Meeting of Stockholders on June 15, 2004. Such options were not registered under the Securities Act of 1933, as amended, or the Securities Act. The Company intends to file a registration statement on Form S-8 with the Securities and Exchange Commission to register the shares of the Company's common stock underlying option grants or other awards under the 2004 Stock Incentive Plan and 2004 Non-Employee Director Stock Incentive Plan. All of such option grants were granted at the then current fair value of the common stock. The following table sets forth certain information regarding such grants during the quarter: Number Weighted Average Plan of Shares Exercise Price Per Share ---- --------- ------------------------ 2004 Stock Incentive Plan.............. 160,000 $11.50 2004 Non-Employee Director Stock Incentive Plan................... 147,500 $11.51 We did not employ an underwriter in connection with the issuance of the securities described above. We believe that the issuance of the foregoing securities was exempt from registration under either (i) Section 4(2) of the Securities Act as transactions not involving any public offering and such securities having been acquired for investment and not with a view to distribution, or (ii) Rule 701 under the Securities Act as transactions made pursuant to a written compensatory benefit plan or pursuant to a written contract relating to compensation. All recipients had adequate access to information about the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 15, 2004, we held our Annual Meeting of Stockholders to: (i) elect eight directors; (ii) consider and vote upon a proposal to adopt the Company's 2004 Stock Incentive Plan; (iii) consider and vote upon a proposal to adopt the Company's 2004 Non-Employee Director Stock Incentive Plan; and (iv) transact such other business as may come before the meeting. There were represented at the our annual meeting, either in person or by proxy 13,552,506 shares of our common stock out of a total number of 15,214,249 shares of common stock issued and outstanding and entitled to vote at the meeting. 29 The following tables set forth information regarding the number of votes cast for, withheld, abstentions and broker non-votes, with respect to each matter presented at the meeting. Under the rules of the Nasdaq Stock Market, brokers who hold shares in street name for customers who are beneficial owners of those shares may be prohibited from giving a proxy to vote shares held for such customers on certain matters without specific instructions from such customers (broker non-votes). Under Delaware law, abstentions and broker non-votes are counted as shares represented at the meeting for purposes of determining the presence or absence of a quorum at a stockholders meeting. The election of directors is decided by a plurality of the votes cast, and therefore, votes that are withheld have no effect on the outcome of the vote. Adoption of the proposals relating to our 2004 Stock Incentive Plan and 2004 Non-Employee Director Stock Incentive Plan, required the affirmative vote of a majority of shares cast at the meeting. Therefore, abstentions and broker non-votes have no effect on the vote. (i) Election of Directors:
BROKER NON- NOMINEES FOR WITHHELD ABSTENTIONS VOTES ---------------------- ---------- ----------- ----------- ----------- James A. Grigsby 13,241,502 311,004 N/A N/A Michael D. Becker 13,298,108 254,398 N/A N/A John E. Bagalay, Jr. 11,755,093 1,797,413 N/A N/A Allen Bloom 13,202,905 349,601 N/A N/A Stephen K. Carter 13,299,637 252,869 N/A N/A Robert F. Hendrickson 13,209,732 342,774 N/A N/A Kevin G. Lokay 13,204,050 348,456 N/A N/A H. Joseph Reiser 13,237,927 314,579 N/A N/A
(ii) Proposal to approve the adoption of our 2004 Stock Incentive Plan: BROKER NON- FOR AGAINST ABSTENTIONS VOTES --------------- ---------------- --------------- -------------- 4,052,703 2,708,281 40,910 6,750,612 (iii) Proposal to approve the adoption of our 2004 Non-Employee Director Stock Incentive Plan: BROKER NON- FOR AGAINST ABSTENTIONS VOTES --------------- ---------------- --------------- -------------- 3,896,138 2,864,779 40,977 6,750,612 ITEM 5. OTHER INFORMATION On April 14, 2004, Thomas S. Lytle joined Cytogen as our Senior Vice President of Sales and Marketing. On June 15, 2004, we entered into a Change of Control Severance Agreement, in the form we utilize with our executive officers, with Mr. Lytle. 30 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibit No. Description ----------- ----------- 10.1 Cytogen Corporation 2004 Stock Incentive Plan. Filed herewith. 10.2 Cytogen Corporation 2004 Non-Employee Director Stock Incentive Plan. Filed herewith. 31.1 Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 31.2 Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32.1 Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350. Filed herewith. 32.2 Certification of Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. Filed herewith. (b) Reports on Form 8-K On April 14, 2004, we filed a Current Report on Form 8-K disclosing correspondence related to the technology underlying our ProstaScint product. On April 15, 2004, we filed a Current Report on Form 8-K relating to our sale and issuance of 2,570,000 shares of our common stock to certain investors. On May 4, 2004, we furnished a Current Report on Form 8-K dated May 4, 2004, containing a copy of our earnings release for the period ended March 31, 2004 (including financial statements) pursuant to Item 12 (Results of Operations and Financial Condition). On June 25, 2004, we filed a Current Report on Form 8-K relating to Advanced Magnetics, Inc.'s submission of a response to the approvable letter received from the United States Food and Drug Administration for Combidex. On August 5, 2004, we furnished a Current Report on Form 8-K dated August 5, 2004, containing a copy of our earnings release for the period ended June 30, 2004 (including financial statements) pursuant to Item 12 (Results of Operations and Financial Condition). 31 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. CYTOGEN CORPORATION Date: August 9, 2004 By: /s/ Michael D. Becker -------------------------------------------- Michael D. Becker President and Chief Executive Officer (Principal Executive Officer) Date: August 9, 2004 By: /s/ Christopher P. Schnittker ------------------------------------------- Christopher P. Schnittker Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) EX-10 3 ex10_1-063004.txt EXHIBIT 10.1 2004 STOCK INCENTIVE PLAN EXHIBIT 10.1 CYTOGEN CORPORATION 2004 STOCK INCENTIVE PLAN ------------------------- 1. Purpose ------- The purpose of this 2004 Stock Incentive Plan (the "Plan") of Cytogen Corporation, a Delaware corporation (the "Company"), is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company's stockholders. Except where the context otherwise requires, the term "Company" shall include any of the Company's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the "Code") and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the "Board"). 2. Eligibility ----------- All of the Company's employees, officers, consultants and advisors are eligible to be granted options and restricted stock awards (each, an "Award") under the Plan. Each person who has been granted an Award under the Plan shall be deemed a "Participant." 3. Administration and Delegation ----------------------------- (a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board's sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith. (b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a "Committee"). All references in the Plan to the "Board" shall mean the Board or a Committee of the Board or the executive officers referred to in Section 3(c) to the extent that the Board's powers or authority under the Plan have been delegated to such Committee or executive officers. (c) Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company, the power to grant Awards to non-officer employees of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of the Awards to be granted by such executive officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to Awards that the executive officers may grant; provided further, however, that no executive officer shall be authorized to grant Awards to any "executive officer" of the Company (as defined in Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or to any "officer" of the Company (as defined by Rule 16a-1 under the Exchange Act). 4. Stock Available for Awards -------------------------- (a) Subject to adjustment under Section 7, Awards may be made under the Plan for up to one million two hundred thousand (1,200,000) shares of common stock, $0.01 par value per share, of the Company (the "Common Stock"). No more than 200,000 shares of Common Stock (subject to adjustment under Section 7) may be issued pursuant to all Awards other than Options (as hereinafter defined). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan, subject, however, in the case of Incentive Stock Options (as hereinafter defined), to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) Per-Participant Limit. Subject to adjustment under Section 7, the maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 50,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder ("Section 162(m)"). 5. Stock Options ------------- (a) General. The Board may grant options to purchase Common Stock (each, an "Option") and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock Option". (b) Incentive Stock Options. An Option that the Board intends to be an "incentive stock option" as defined in Section 422 of the Code (an "Incentive Stock Option") shall only be granted to employees of the Company, any of its present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option. -2- (c) Exercise Price. --------------- (1) The exercise price shall be the Fair Market Value (as hereafter defined) of the Common Stock, as determined by the Board at the time the Option is granted, unless a higher exercise price is specified by the Board at the time of grant. (2) All Option grants shall be made in accordance with the provisions of the Company's Bylaws. (3) Fair Market value shall mean: (i) if the Common Stock is traded in a market in which actual transactions are reported, the average of the high and low prices at which the Common Stock is reported to have traded on the relevant date in all markets on which trading in the Common Stock is reported, or if there is no reported sale of the Common Stock on the relevant date, the mean of the highest reported bid price and lowest reported asked price for the Common Stock on the relevant date, (ii) if the Common Stock is publicly traded but only in markets in which there is no reporting of actual transactions, the mean of the highest reported bid price and the lowest reported asked price for the Common Stock on the relevant date, or (iii) if the Common Stock is not publicly traded, the value of a share of Common Stock as determined by the Board. (d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement; provided, however, that no Option will be granted for a term in excess of 10 years. (e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised. (f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows: (1) in cash or by check, payable to the order of the Company; (2) except as the Board may, in its sole discretion, otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding; (3) when the Common Stock is registered under the Securities Exchange Act of 1934 (the "Exchange Act"), by delivery of shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (i) such method of payment is then permitted under applicable law and (ii) such Common Stock, if acquired directly from the Company was owned by the Participant at least six months prior to such delivery; -3- (4) to the extent permitted by applicable law and by the Board, in its sole discretion by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or (5) by any combination of the above permitted forms of payment. (g) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based Options granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2. (h) Delivery of Stock Certificates. As promptly as practicable after an Option is exercised, the Company will deliver to the person who exercises the Option certificates, registered in that person's name, representing the number of shares of Common Stock which were purchased by the exercise of the Option. Each certificate may bear a legend to indicate, if applicable, that (i) the Common Stock represented by the certificate was issued in a transaction which was not registered under the Securities Act of 1933, as amended, and may only be sold or transferred in a transaction which is registered under that Act or is exempt from the registration requirements of that Act, and (ii) the Common Stock represented by the certificate is subject to the obligation of the holder to pay any unpaid balance of the Exercise Price (whether pursuant to a promissory note or otherwise), and/or that the Common Stock is pledged to secure such an obligation. 6. Restricted Stock ---------------- (a) Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a "Restricted Stock Award"). (b) Terms and Conditions. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any. (c) Stock Certificates. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant's death (the -4- "Designated Beneficiary"). In the absence of an effective designation by a Participant, "Designated Beneficiary" shall mean the Participant's estate. (d) Deferred Delivery of Shares. The Board may, at the time any Restricted Stock Award is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant shall instead receive an instrument evidencing the right to future delivery of Common Stock at such time or times, and on such conditions, as the Board shall specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock shall take place. 7. Adjustments for Changes in Common Stock and Certain Other Events ---------------------------------------------------------------- (a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(b), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, and (iv) the repurchase price per share subject to each outstanding Restricted Stock Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable). If this Section 7(a) applies and Section 7(c) also applies to any event, Section 7(c) shall be applicable to such event, and this Section 7(a) shall not be applicable. (b) Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date. (c) Reorganization Events. ---------------------- (1) Definition. A "Reorganization Event" shall mean (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction. (2) Consequences of a Reorganization Event on Options. Upon the occurrence of a Reorganization Event, or the execution by the Company of any agreement with respect to a Reorganization Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a -5- choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event. Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by the Participants before the consummation of such Reorganization Event; provided, however, in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the "Acquisition Price"), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Reorganization Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. (3) Consequences of a Reorganization Event on Restricted Stock Awards. Upon the occurrence of a Reorganization Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company's successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. 8. General Provisions Applicable to Awards --------------------------------------- (a) Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. (b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan. (c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly. -6- (d) Termination of Service of Holder of Award Other Than Because of Disability or Death. If there is a termination of service of a person to whom an Award has been granted, other than by reason of the person's death or disability, each Award held by the person may be exercised (if otherwise exercisable) until the earlier of (i) the end of the three-month period immediately following the date of the termination of service, (ii) the expiration of the term specified in the Award, or (iii) such earlier time as may be determined at the time of granting the Award. (e) Total Disability of Holder of Award. If there is a termination of service of a person to whom an Award has been granted by reason of his or her disability, each Award held by the person may be exercised (if otherwise exercisable) until the earlier of (i) the end of the one-year period immediately following the date of the termination of service, (ii) the expiration of the term specified in the Award, or (iii) such earlier time as may be determined at the time of granting the Award. (f) Death of Holder of Award. If there is a termination of service of a person to whom an Award has been granted by reason of his or her death, or a Participant dies following the date of his or her termination of service but at a time when an Award still would be exercisable by that person but for the death of the person, each Award held by the person at the time of his or her death may be exercised by the person or persons to whom the Award passed by will or by the laws of descent and distribution (but by no other persons) until the earlier of (i) the end of the one-year period immediately following the date of death (or such other period as may be determined at the time of granting the Award), or (ii) the expiration of the term specified in the Award. In the event of a Participant's death, all of such person's outstanding Options will transfer to the maximum extent permitted by law to such person's designated beneficiary. Each Participant may name, from time to time, any beneficiary or beneficiaries (which may be named contingently or successively) as his or her beneficiary for purposes of this Plan. Each designation shall be on a form prescribed by the Company, will be effective only when delivered to the Company, when effective will revoke all prior designations by the Participant and will be allowed only to the extent permitted by applicable law. If a Participant dies with no such beneficiary designation in effect, such person's Options will be transferable by will or pursuant to the laws of descent and distribution applicable to such person. (g) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, when the Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company's minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant. -7- (h) Amendment of Award. Subject to the provisions of the Company's Bylaws, the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, or converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. (i) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations. (j) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be. (k) Deferred Delivery of Shares Issuable Pursuant to an Award. The Board may, at the time any Award is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant shall instead receive an instrument evidencing the right to future delivery of Common Stock at such time or times, and on such conditions, as the Board shall specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock shall take place. 9. Miscellaneous ------------- (a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or designated beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common -8- Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend. (c) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Award granted to a Participant that is intended to comply with Section 162(m) shall become exercisable, vested or realizable, as applicable to such Award, unless and until the Plan has been approved by the Company's stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m) (including the vote required under Section 162(m)). No Awards shall be granted under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company's stockholders, but Awards previously granted may extend beyond that date. (d) Amendment of Plan. Subject to the provisions of the Company's Bylaws, the Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company's stockholders if required by Section 162(m) (including the vote required under Section 162(m)). (e) Reservation of Shares. The Company will at all times keep reserved for issuance on exercise of Awards a number of authorized but unissued or reacquired shares of Common Stock equal to the maximum number of shares the Company may be required to issue on exercise of outstanding Awards (assuming no subsequent adjustments under Section 7). (f) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law. -9- EX-10 4 ex10_2-063004.txt EXHIBIT 10.2 2004 NON-EMPLOYEE DIRECTOR SIP EXHIBIT 10.2 CYTOGEN CORPORATION 2004 NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN ----------------------------------------------- 1. Purpose ------- The purpose of this 2004 Non-Employee Director Stock Incentive Plan (the "Plan") of Cytogen Corporation, a Delaware corporation (the "Company"), is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who act as Non-Employee Directors of the Company (as such term is defined in the Securities Exchange Act of 1934, as amended), by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company's stockholders. Except where the context otherwise requires, the term "Company" shall include any of the Company's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the "Code") and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the "Board"). 2. Eligibility ----------- All of the Company's Non-Employee Directors are eligible to be granted options (each, an "Option") and Compensation Shares, as defined in Section 5(a)(5) hereof, under the Plan. Each person who has been granted an Option or Compensation Shares under the Plan shall be deemed a "Participant." 3. Administration and Delegation ----------------------------- (a) Administration by Board. The Plan will be administered by the Board. The Board shall have authority to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any award of options or issuance of Compensation Shares in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board's sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Option or Compensation Shares. No Director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith. (b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a "Committee"). All references in the Plan to the "Board" shall mean the Board or a Committee of the Board to the extent that the Board's powers or authority under the Plan have been delegated to such Committee. 4. Stock Available Under the Plan ------------------------------ Subject to adjustment under Section 6, Options and Compensation Shares may be made under the Plan for up to three hundred seventy five thousand (375,000) shares of common stock, $0.01 par value per share, of the Company (the "Common Stock"). If any Option expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Option being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Option shall again be available for the grant of Options under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. 5. Stock Options ------------- (a) Option Grants. -------------- (1) Each person who is newly-elected a Director of the Company at an annual meeting of the stockholders of the Company, such person not having previously served as a Director of the Company and such person not being an employee of the Company, shall, as of the date of such annual meeting, be granted an Option to purchase ten thousand (10,000) shares of Common Stock; provided, however, that the Board may, from time to time, by resolution of the Board, increase or decrease the number of shares granted to such newly elected Directors. (2) Each person who is appointed a Director of the Company after the date of the most recent annual meeting of the stockholders of the Company, and who is not an employee of the Company as of such date of appointment, shall be granted on such date an Option to purchase a pro rata portion of ten thousand (10,000) shares of Common Stock, based upon the number of full calendar months remaining after the date of appointment until but not including the one year anniversary month of such preceding annual meeting; provided, however, the Board may, from time to time, by resolution of the Board, increase or decrease such number of shares of Common Stock. (3) Effective upon approval of the Plan by the stockholders, each person who, upon the conclusion of such meeting of stockholders, is a Director and not an employee of the Company (an "Eligible Director"), shall be granted an option to purchase ten thousand (10,000) shares of Common Stock. (4) On the day following each annual meeting of the stockholders of the Company, commencing with the 2004 annual meeting, each person who is on that date an Eligible Director and who was re-elected at that meeting shall be granted an Option to purchase ten thousand (10,000) shares of Common Stock; provided, however, that the Board may, from time to time, by resolution of the Board, increase or decrease the number of shares granted to such re-elected Directors. In addition, on each such date, the then Chairman of the Board shall receive an Option to purchase an additional seven thousand five hundred (7,500) shares of Common Stock; provided, however, that the Board may, from time to time, by resolution of the Board, increase or decrease the number of shares so granted to the Chairman of the Board. -2- (5) Eligible Directors shall receive, at the sole discretion of and after formal action by the Board, Compensation Shares, as defined below, in such number of shares of Common Stock that is equal to each respective Eligible Director's Cash Component, as defined below, compensation divided by the Fair Market Value of the Company's Common Stock as of the date of issuance of such Compensation Shares, which shall be no earlier than the date on which the applicable Cash Component compensation becomes due and payable by the Company, subject to the terms and conditions set forth herein. Compensation Shares shall not be issued for services not yet rendered by an Eligible Director to the Company. As used herein: (i) Compensation Shares means any shares of Common Stock issued to Eligible Directors hereunder in payment of such Eligible Director's Cash Component of compensation; and (ii) Cash Component means Director cash compensation, including but not limited to annual services fees, fees payable for board and committee meetings attended and fees for committees chaired. (6) Subject to Section 5(a)(5) hereof, and subject to adjustment under Section 6, Eligible Directors shall receive Compensation Shares in lieu of the Cash Component of such Eligible Director's compensation until at least such time as: (i) such Eligible Director owns two thousand (2,000) shares of the Company's Common Stock, excluding options or other rights to acquire shares of the Company's Common Stock, whether exercisable or unexercisable; or (ii) if fewer than 2,000 shares are so owned, such smaller number of shares having a Fair Market Value, as defined below, of in excess of one hundred thousand dollars ($100,000), excluding the value, if any, of options to purchase Common Stock, whether exercisable or unexercisable, or other rights to acquire Common Stock of the Company. (7) Upon achieving either of the milestones (i) or (ii) set forth in Section 5(a)(6) hereof, each such Eligible Director may, at his or her option, elect to cease receiving his or her Cash Component to which he or she is entitled in shares of Common Stock under the Plan; provided, however, that such Eligible Director must make such election by providing notice of such election to the Company. Additionally, any Director who has reached either of the milestones (i) or (ii) set forth in Section 5(a)(6) hereof may thereafter choose to receive subsequent compensation in cash or Compensation Shares upon written election made from time to time and to the Company in advance of the provision of all services provided therefor. (8) Each Option and Compensation Shares provided for in this Section 5 shall be granted automatically and without further action by the Board or the Company's stockholders. Promptly after the date of grant of each Option provided for in this Section 5, the Company shall cause an Option Agreement to be executed and delivered to the holder of the Option. No other Options may be granted at any time under this Plan. All Compensation Shares required to be issued pursuant to the terms of this Section 5 shall be valued at, and issued on, the next business day immediately following the date upon which the Cash Component becomes due and payable to such Eligible Director. (b) Exercise Price. The exercise price of each Option will be 100% of the Fair Market Value of the Common Stock on the date of grant of the Option (the "Exercise Price"). Fair Market value shall mean: (i) if the Common Stock is traded in a market in which actual transactions are reported, the average of the high and low prices at which the Common Stock is reported to have traded on the relevant date in all markets on which trading in the Common Stock is reported, or if there is no reported sale of the Common Stock on the relevant date, the -3- mean of the highest reported bid price and lowest reported asked price for the Common Stock on the relevant date, (ii) if the Common Stock is publicly traded but only in markets in which there is no reporting of actual transactions, the mean of the highest reported bid price and the lowest reported asked price for the Common Stock on the relevant date, or (iii) if the Common Stock is not publicly traded, the value of a share of Common Stock as determined by the Board. (c) Duration of Options. -------------------- (1) No Option granted under this Plan may be exercised more than 10 years after the date of grant of the option. (2) Except as provided in Sections 5(f) and 5(g), Options shall become exercisable in full on the first anniversary of the date of grant. (d) Exercise of Option. Options may be exercised, in whole or in part, at any time, by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(e) for the number of shares for which the Option is exercised. (e) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for in cash, which may be satisfied by a check, in an amount equal to Exercise Price of the Option. (f) Termination of Service of Director Holding an Option Other Than Because of Death, Disability Retirement or Certain Voluntary Resignations. Subject to the provisions of Section 5(c), if there is a termination of service of a Director to whom an Option has been granted, other than by reason of the Director's death or disability or retirement or voluntary resignation, after three years' service as an Eligible Director, upon or after turning age 55, each Option held by the Director may be exercised until the earlier of (x) the end of the three-month period immediately following the date of termination of service, or (y) the expiration of the term of the option. (g) Death or Disability of Director Holding an Option. Notwithstanding the provisions of Section 5(c), if there is a termination of service of a Director to whom an option has been granted by reason of the Director's death or disability, or a former Director dies within three months following the date of his or her termination of service, each option held by the Director on the date of the Director's termination of service may be exercised in full (i.e., in respect of up to 100% of the Option shares, regardless of the time elapsed since the date of grant) until the earlier of (x) the end of the one-year period immediately following the date of termination of service or (y) the expiration of the term of the Option. In the event of an Eligible Director's death, all of such person's outstanding Options will transfer to the maximum extent permitted by law to such person's designated beneficiary. Each Eligible Director may name, from time to time, any beneficiary or beneficiaries (which may be named contingently or successively) as his or her beneficiary for purposes of this Plan. Each designation shall be on a form prescribed by the Company, will be effective only when delivered to the Company, when effective will revoke all prior designations by the Eligible Director and will be allowed only to the extent permitted by applicable law. If an Eligible Director dies with no such -4- beneficiary designation in effect, such person's Options will be transferable by will or pursuant to the laws of descent and distribution applicable to such person. (h) Retirement or Certain Voluntary Resignations. If there is a termination of service of a Director by reason of the Director's retirement or voluntary resignation at any time after the Director has reached age 55 and, in each such case, such Director has provided a minimum of three years' service as an Eligible Director, each Option held by the Director on the date of the Director's termination of service may be exercised in full (i.e., in respect of up to 100% of the option shares, regardless of the time elapsed since the date of grant) until the earlier of (x) the end of the five year period immediately following the date of termination of service or (y) the expiration of the term of the option. 6. Adjustments for Changes in Common Stock and Certain Other Events. ----------------------------------------------------------------- (a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the number of shares received under Section 5(a)(6) and (iii) the number and class of securities and exercise price per share subject to each outstanding Option shall be appropriately adjusted by the Company (or substituted Options may be made, if applicable). If this Section 6(a) applies and Section 6(d) also applies to any event, Section 6(d) shall be applicable to such event, and this Section 6(a) shall not be applicable. (b) Company Discretion. The existence of outstanding Options or Compensation Shares shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business or any other corporate act or proceeding, whether of a similar character or otherwise. Except as expressly provided herein, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or on conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, class or price of shares of Common Stock then subject to outstanding options. (c) Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before the effective date. -5- (d) Corporate Transactions; Major Events. ------------------------------------- (1) If as a result of any (i) reorganization, (ii) merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property, or (iii) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction (each of (i), (ii) and (iii) being a "Corporate Transaction") while an Option is outstanding, or the execution by the Company of any agreement with respect to a Corporate Transaction, then (regardless of whether the transaction will also constitute a Major Event (as defined below)) the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Corporate Transaction, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Corporate Transaction, the consideration (whether cash, securities or other property) received as a result of the Corporate Transaction by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Corporate Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Corporate Transaction is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Corporate Transaction. Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, or in the event of a liquidation or dissolution of the Company, the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Corporate Transaction and will terminate immediately prior to the consummation of such Corporate Transaction, except to the extent exercised by the Participants before the consummation of such Corporate Transaction; provided, however, that in the event of a Corporate Transaction under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Corporate Transaction (the "Acquisition Price"), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Corporate Transaction and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable) exceeds (B) the aggregate exercise price of such Options. In the event of a Corporate Transaction, Compensation Shares shall be adjusted in the same manner as the Company's Common Stock. -6- (2) Upon the occurrence of a Major Event (regardless of whether such event also constitutes a Corporate Transaction), all of the Option Shares covered by an Option shall become immediately available for purchase upon exercise of the option, without regard to the vesting provisions of Section 5(c)(2). "Major Event" shall mean when (i) the Company enters into one or more definitive agreements to merge or consolidate the Company with or into another corporation, or to sell or otherwise dispose of all or substantially all of the Company's assets, or to effect any other transaction, share exchange consolidation or reorganization having similar results or effect; (ii) any person other than the Company makes a tender or exchange offer for more than 50% of Common Stock pursuant to which purchases of any amount of Common Stock are made; (iii) stock representing more than 50% of the voting power of the Company is acquired by any person other than the Company in any one or more transactions occurring in any 24 month period. 7. General Provisions Applicable to Options and Compensation Shares. ----------------------------------------------------------------- (a) (i) Transferability of Options. Except as the Board may otherwise determine or provide in an Option, Options shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. (ii)Transferability of Compensation Shares. For one year after the date of issuance of Compensation Shares to any Eligible Director, such Compensation Shares shall not be transferable by such Eligible Director. During this one year period, Compensation Shares may not be assigned, pledged or hypothecated in any way, and will not be transferable otherwise than by will or the laws of descent and distribution. The Company will not recognize any attempt to assign, transfer, pledge, hypothecate or otherwise dispose of Compensation Shares contrary to the provisions of this Plan, or any levy of any attachment or similar process upon any Compensation Shares, and, except as expressly stated in this Plan, the Company will not be required to, and will not, remove any related restrictive legend from the Compensation Shares until such one year period has expired. The Compensation Shares shall bear a restrictive legend evidencing such lock-up (the "Lock-up Legend"). Upon the expiration of such one year lock-up period, Compensation Shares shall become fully transferable by the holder, subject to the terms of the Securities Act of 1933, as amended and state securities laws. The Company shall take reasonable steps to remove the Lock-up Legend from the Compensation Shares within a reasonable time after the expiration of such period upon the request of an Eligible Director. Notwithstanding such lock-up provision, upon the occurrence of a Corporate Transaction, all of the Compensation Shares issued hereunder to Eligible Directors shall be treated in a like manner as are the outstanding shares of the Company's Common Stock upon the occurrence of such Corporate Transaction. (b) Documentation. Each Option shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Option may contain terms and conditions in addition to those set forth in the Plan. -7- (c) Amendment of Option. Subject to the provisions of the Company's Bylaws, the Board may amend, modify or terminate any outstanding Option, including but not limited to, substituting therefor another Option of the same or a different type, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. (d) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Option have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations. (e) Deferred Delivery of Shares Issuable Pursuant to an Option. The Board may, at the time any Option is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Option, the Participant shall instead receive an instrument evidencing the right to future delivery of Common Stock at such time or times, and on such conditions, as the Board shall specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock shall take place. (f) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be. 8. Miscellaneous ------------- (a) No Rights As Stockholder. Subject to the provisions of the applicable Option, no Participant or designated beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Option until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend. (b) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Option granted to a Participant that is intended to comply with Section 162(m) shall become exercisable, vested or realizable, as applicable to such Option, unless and until the Plan has been approved by the Company's stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m) (including the vote required under Section 162(m)). No Options shall be granted -8- under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company's stockholders, but Options previously granted may extend beyond that date. (c) Amendment of Plan. Subject to the provisions of the Company's Bylaws, the Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Option granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Option, unless and until such amendment shall have been approved by the Company's stockholders if required by Section 162(m) (including the vote required under Section 162(m)). (d) Governing Law. The provisions of the Plan and all Options made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law. -9- EX-31 5 ex31-1_q2.txt EXHIBIT 31.1 CERTIFICATION - MICHAEL D. BECKER EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael D. Becker, Chief Executive Officer of Cytogen Corporation, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Cytogen Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986]; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Michael D. Becker --------------------------------------- Dated: August 9, 2004 Michael D. Becker, President and Chief Executive Officer (Principal Executive Officer) EX-31 6 ex31-2_q2.txt EXHIBIT 31.2 CERTIF. - CHRISTOPHER P. SCHNITTKER EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Christopher P. Schnittker, Senior Vice President and Chief Financial Officer of Cytogen Corporation, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Cytogen Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986]; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Christopher P. Schnittker ------------------------------------------------ Dated: August 9, 2004 Christopher P. Schnittker, Senior Vice President and Chief Financial Officer (Principal Accounting Officer) EX-32 7 ex32-1q2.txt EXHIBIT 32.1 CERT. MICHAEL D. BECKER EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Cytogen Corporation (the "Company") for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Michael D. Becker, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that, based upon my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to Cytogen Corporation and will be retained by Cytogen Corporation and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Michael D. Becker -------------------------------------- Dated: August 9, 2004 Michael D. Becker, President and Chief Executive Officer (Principal Executive Officer) EX-32 8 ex32-2q2.txt EXHIBIT 32.2 CERT. CHRISTOPHER P. SCHNITTKER EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Cytogen Corporation (the "Company") for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Christopher P. Schnittker, Senior Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that, based upon my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to Cytogen Corporation and will be retained by Cytogen Corporation and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Christopher P. Schnittker ------------------------------------------------ Dated: August 9, 2004 Christopher P. Schnittker, Senior Vice President and Chief Financial Officer (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----