Acquisition of Molecular Insight Pharmaceuticals, Inc

3 Months Ended

Mar. 31, 2013

Acquisition of Molecular Insight Pharmaceuticals, Inc [Abstract]

Acquisition of Molecular Insight Pharmaceuticals, Inc [Text Block]

2.  Acquisition of Molecular Insight Pharmaceuticals, Inc.

Progenics acquired all of the outstanding capital stock of Molecular Insight, significantly expanding the Company's focus on PSMA as an oncology target while broadening the oncology pipeline. The acquisition consideration included the issuance by Progenics to Molecular's stockholders of 4,566,210 shares (500,000 of which were placed in escrow) of Progenics common stock in a private transaction not taxable to Progenics. (The closing NASDAQ market price of Progenics' freely transferable common shares on January 18, 2013 was $2.83 per share.) Under the acquisition agreement, Progenics also agreed to pay to the stockholders potential milestones, in cash or Progenics stock at Progenics' option, of up to $23 million contingent upon achieving specified commercialization events and up to $70 million contingent upon achieving specified sales targets relating to all Molecular products. 93,847 of the escrow shares have been returned to Progenics to date pursuant to adjustment provisions of the agreement, resulting in the number of shares currently issued to Molecular's stockholders being 4,472,363.

The acquisition was accounted for using the acquisition method of accounting, under which assets and liabilities of Molecular were recorded at their respective fair values as of the January 18^th acquisition date and added to those of Progenics.  The difference between the estimated fair value of the acquisition consideration and fair value of the identifiable net assets represents potential future economic benefits arising from combining Progenics and Molecular, and has been recorded, as described below, as goodwill. The results of operations of Molecular's business, the estimated fair market values of the assets acquired and liabilities assumed, and goodwill are included in our consolidated financial statements since the date of the acquisition.

During the three months ended March 31, 2013, the Company incurred $750 in transaction costs related to the acquisition, which primarily consisted of legal, accounting and valuation-related expenses and reduced additional paid-in capital by $45 for acquisition-related equity issuance costs. The transaction costs were recorded in general and administrative expenses in the accompanying consolidated statements of operations. During the three months ended March 31, 2013, Molecular's business contributed $329 of revenues and $3,175 of net loss.

Preliminary Purchase Price Allocation: We have accounted for the Molecular acquisition by preliminarily allocating our estimate of the fair market value of the consideration we paid to the fair values of the assets acquired and liabilities assumed at the effective date of the acquisition, as summarized below. This preliminary allocation may change if, as and when additional information, primarily pertaining to the acquired assets and assumed liabilities, becomes available. Under applicable accounting requirements, we must make the final determination within one year of the acquisition date. Acquired intangible assets, including goodwill, are not deductible for tax purposes.

	Amount
Consideration:
Progenics common stock consideration	$	11,265
Contingent consideration (pursuant to future milestone obligations)		15,900
Total consideration		27,165
Tangible assets acquired and liabilities assumed:
Cash and cash equivalents		1,888
Accounts receivable		56
Other current assets		529
Fixed assets		249
Accounts payable, accrued expenses and deferred revenue - current		(2,876	)
Deferred tax liability – long term		(12,683	)
Total tangible assets acquired and liabilities assumed		(12,837	)
Intangible assets		32,300
Total tangible and intangible assets acquired and liabilities assumed		19,463
Goodwill	$	7,702

Pro forma financial information (unaudited): The following unaudited pro forma information presents the results of operations of the combined companies for the three months ended March 31, 2013 and 2012 as if the acquisition had been consummated on January 1, 2012, combining the respective historical results of Progenics and Molecular for the three months ended March 31, 2013 and 2012. Non-recurring transaction expenses of $750, incurred in 2013, are reflected in the pro forma information as if these were incurred in 2012 due to the pro forma assumption of January 1, 2012 as the date of the acquisition consummation.

	Three Months Ended March 31,
	2013			2012
Revenues	$	2,231		$	2,312
Net loss		(12,462	)		(20,271	)
Basic and diluted loss per share		(0.25	)		(0.53	)