Acquisition of Molecular Insight Pharmaceuticals, Inc

6 Months Ended

Jun. 30, 2013

Acquisition of Molecular Insight Pharmaceuticals, Inc [Abstract]

Acquisition of Molecular Insight Pharmaceuticals, Inc

2. Acquisition of Molecular Insight Pharmaceuticals, Inc.

Molecular Insight's operations from January 18, 2013, the date we acquired this subsidiary, are included in the interim Consolidated Financial Statements. The acquisition consideration included 4,566,210 shares (500,000 of which were placed in escrow) of Progenics common stock in a private transaction not taxable to Progenics. 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 financial adjustment provisions of the agreement.

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 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, taking into account a deferred tax liability related to in process research and development (IPR&D) intangible assets, and has been recorded 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 and six months ended June 30, 2013, the Company incurred $40 and $790, respectively, in transaction costs related to the acquisition, which primarily consisted of legal, accounting and valuation-related expenses and reduced additional paid-in capital in the first quarter of 2013 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 those periods, Molecular's business contributed $417 and $746 of revenues and $3,184 and $6,359 of net loss, respectively.

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 current assets and assumed current 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 - in process research and development		32,300
Total tangible and intangible assets acquired and liabilities assumed		19,463
Goodwill	$	7,702

In connection with the acquisition of Molecular Insight, in process research and development and goodwill are initially measured at fair value and capitalized as an intangible asset. We perform an impairment test for these intangibles annually in the fourth quarter, unless impairment indicators require an earlier evaluation. Upon and subject to commercialization of the Company's product candidates, the IPR&D will be amortized over its estimated useful life.

Pro forma financial information (unaudited): The following unaudited pro forma information presents the results of operations of the combined companies for the periods indicated as if the acquisition had been consummated on January 1, 2012, combining the respective historical results of Progenics and Molecular for each period. Non-recurring transaction expenses of $40 and $790, incurred in the three and six months ended June 30, 2013, respectively, are reflected in the pro forma information as if these were incurred in the corresponding 2012 periods, due to the pro forma assumption of January 1, 2012 as the date of the acquisition consummation.

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues	$	1,801		$	1,836		$	4,032		$	4,148
Net loss		(12,223	)		(17,740	)		(24,685	)		(38,011	)
Basic and diluted loss per share		(0.24	)		(0.46	)		(0.49	)		(0.99	)