Interim Financial Statements

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements [Abstract]

Interim Financial Statements

1.  Interim Financial Statements

Progenics is a biopharmaceutical company focusing on the development and commercialization of innovative therapeutic products to treat the unmet medical needs of patients with debilitating conditions and life-threatening diseases. In recent years, our principal programs have been directed toward gastroenterology, oncology and virology, including development and regulatory approval of our first commercial product, RELISTOR� (methylnaltrexone bromide) subcutaneous injection, a first-in-class therapy for opioid-induced constipation which we have licensed to Salix Pharmaceuticals, Inc. worldwide except in Japan, where Ono Pharmaceutical Co., Ltd. is developing the subcutaneous formulation of the drug.

We have reoriented the Company's research and development focus on oncology. We are allocating additional financial and personnel resources to our PSMA ADC program, where we are conducting a phase 1 clinical trial of a proprietary, fully human monoclonal antibody-drug conjugate (ADC) directed against prostate-specific membrane antigen (PSMA) for the treatment of prostate cancer, and our pre-clinical development work on novel multiplex phosphoinositide 3-kinase (PI3K) inhibitors for the treatment of cancer, and are seeking to in-license or acquire complementary opportunities in the oncology field. The Company is looking to out-license existing programs not within its oncology focus.

Progenics commenced principal operations in 1988, became publicly traded in 1997 and throughout has been engaged primarily in research and development efforts, establishing corporate collaborations and related activities. All of our operations are conducted at our facilities in Tarrytown, New York.

RELISTOR subcutaneous injection has been approved for sale in the United States since 2008 and is approved in over 50 countries worldwide, including the European Union, Canada and Australia. Marketing applications are pending elsewhere throughout the world. In addition to the FDA-approved indication for advanced illness patients, a supplemental New Drug Application (sNDA) for subcutaneous RELISTOR in non-cancer pain patients, submitted to the FDA earlier this year, has been accepted for filing with an action date under the U.S. Prescription Drug User Fee Act (PDUFA) of April 27, 2012, and we expect Salix to announce top-line data from the ongoing phase 3 trial of oral methylnaltrexone in non-cancer pain patients late this year or in early 2012.

In connection with the Salix License Agreement, we have received through September 30, 2011, $60.2 million upfront cash payments and are eligible to receive (i) up to $40.0 million upon U.S. marketing approval for subcutaneous RELISTOR in non-cancer pain patients, (ii) up to $50.0 million upon U.S. marketing approval of an oral formulation of RELISTOR, (iii) up to $200.0 million of commercialization milestone payments upon achievement of specified U.S. sales targets, (iv) royalties ranging from 15 to 19 percent of net sales by Salix and its affiliates, and (v) 60% of any upfront, milestone, reimbursement or other revenue (net of costs of goods sold, as defined, and territory-specific research and development expense reimbursement) Salix receives from sublicensees outside the U.S. In the event that either marketing approval is subject to a Black Box Warning or Risk Evaluation and Mitigation Strategy (REMS), payment of a portion of the milestone amount would be deferred, and subject, to achievement of the first commercialization milestone.

RELISTOR was previously developed and commercialized by Progenics and Wyeth Pharmaceuticals, now a Pfizer Inc. subsidiary. Under our 2009 Transition Agreement, Wyeth continued to distribute RELISTOR in the U.S. until Salix assumed that responsibility on April 1, 2011. Salix, Progenics and Wyeth have transitioned European and other marketing authorizations and are transitioning additional ex-U.S. and ex-Japan commercialization on a country-by-country basis. Salix is continuing its efforts to secure a distribution partner for RELISTOR in the European territory and has granted a license to Link Medical Products Pty Limited for distribution in Australia, New Zealand, South Africa and markets in Asia.

Wyeth is providing financial resources to us and Salix of approximately $9.5 million, of which we have recognized $1.6 million for the nine months ended September 30, 2011 and $1.2 million in 2010, for development of a multi-dose pen for subcutaneous RELISTOR; $6.7 million remains available to support development activities assumed by Salix. Reimbursement from such financial support to us has been reported as collaboration revenue through September 30, 2011 under the Transition Agreement.

Financial and Funding. The Salix License Agreement entitles us to upfront, milestone and sales related (royalty and revenue sharing) payments, as well as reimbursement by Salix for full-time equivalents (FTE) and third-party development expenses incurred and paid at its direction after February 3, 2011. We recorded payments received from Salix as deferred revenue during the periods in which transfer activities were ongoing or future development work was being planned; as a result, the $60.0 million upfront payment received in February was recorded as deferred revenue as of March 31, 2011. Of this amount, we recognized $59.5 million and $0.1 million in collaboration revenue during the second and third quarters of 2011, respectively.

For the three and nine months ended September 30, 2011, we incurred approximately $3.5 million and $22.2 million, respectively, of RELISTOR related expenses for which we have received reimbursements from Salix and Wyeth totaling $14.7 million through September 30, 2011, and in respect of which we expect to receive $0.7 million during the fourth quarter. Now that we and Salix have agreed upon a RELISTOR development plan, we record paid expenses which are eligible for reimbursement from Salix in collaboration revenue. RELISTOR expenses and reimbursements have declined substantially in the second half of 2011 since Salix has assumed direct responsibility for expenses under third-party contracts we have assigned to it, and we continue to perform limited development tasks.

At September 30, 2011, we held $78.0 million in cash and cash equivalents, a $4.4 million decrease from the second quarter-end, and a $30.1 million increase from year-end 2010. We expect that this amount will be sufficient to fund operations as currently anticipated beyond one year. We may require additional funding in the future, and if we are unable to enter into favorable collaboration, license, asset sale, capital raising or other financing transactions, we will have to reduce, delay or eliminate spending on some current operations, and/or reduce salary and other overhead expenses, to extend our remaining operations. At September 30, 2011, cash, cash equivalents and auction rate securities decreased $4.5 million to $81.4 million from $85.9 million at June 30, 2011.

In April 2008, our Board of Directors approved a share repurchase program to acquire up to $15.0 million of our outstanding common shares, under which we have $12.3 million remaining available. Purchases may be discontinued at any time. We did not repurchase any common shares during the nine months ended September 30, 2011.

Our interim Consolidated Financial Statements included in this report have been prepared in accordance with applicable presentation requirements, and accordingly do not include all information and disclosures necessary for a presentation of our financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, these financial statements reflect all adjustments, consisting primarily of normal recurring accruals necessary for a fair statement of results for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for the full year. Our interim financial statements should be read in conjunction with the financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. The year-end consolidated balance sheet data in these financial statements were derived from audited financial statements, but do not include all disclosures required by GAAP.