Note 1. Summary of Significant Accounting Policies

Business

Progenics Pharmaceuticals, Inc. and its subsidiaries ("the Company," "Progenics," "we," or "us") develops innovative medicines for targeting and treating cancer, with a pipeline that includes several product candidates in later-stage clinical development. These products in development include therapeutic agents designed to precisely target cancer (AZEDRA^® and 1095), and imaging agents (1404 and PyL^TM) intended to enable clinicians and patients to accurately visualize and manage their disease. In April 2016, we entered into an agreement with a subsidiary of Bayer AG ("Bayer") granting Bayer exclusive worldwide rights to develop and commercialize products using our prostate specific membrane antigen ("PSMA") antibody technology in combination with Bayer's alpha-emitting radionuclides. In addition, as part of our acquisition of EXINI Diagnostics AB ("EXINI") in late 2015, we acquired the EXINI Bone BSI bone scan index product, which is approved for use in Europe, Japan, and the U.S. (though not yet available in the U.S.). (See additional information in Note 3. Business Acquisition.)

We licensed our first commercial drug, RELISTOR^® (methylnaltrexone bromide) for the treatment of opioid induced constipation ("OIC"), to Salix Pharmaceuticals, Inc. (a wholly-owned subsidiary of Valeant Pharmaceuticals International, Inc. ("Valeant")). On July 19, 2016, the U.S. Food and Drug Administration ("FDA") approved RELISTOR Tablets for the treatment of OIC in adults with chronic non-cancer pain, which entitles us to a $50 million development milestone payment from Valeant. We have partnered other internally-developed or acquired compounds and technologies with third parties. We continue to consider opportunities for strategic collaborations, out-licenses, and other arrangements with biopharmaceutical companies involving proprietary research, development, and clinical programs, and may in the future also in-license or acquire additional oncology compounds and/or programs.

Our current principal sources of revenue from operations are royalty, development and commercialization milestones, and sublicense revenue-sharing payments from Valeant relating to RELISTOR. Royalty and milestone payments from RELISTOR depend on success in development and commercialization, which is dependent on many factors, such as Valeant's efforts, decisions by the FDA and other regulatory bodies, competition from drugs for the same or similar indications, and the outcome of clinical and other testing of RELISTOR.

Under the agreement with Bayer, we received an upfront payment of $4 million and could receive up to an additional $49 million in potential clinical and regulatory development milestones. We are also entitled to single digit royalties on net sales, and potential net sales milestone payments up to an aggregate total of $130 million. During the second quarter of 2016, we recognized collaboration revenue of $5 million, of which $4 million related to the upfront payment and $1 million related to the achievement of a preclinical development milestone. We determined that the exclusive rights of the license agreement had standalone value and, accordingly, we recognized revenue for the upfront payment immediately (upon receipt in April 2016).

We commenced principal operations in 1988, became publicly traded in 1997, and throughout have been engaged primarily in research and development efforts, establishing corporate collaborations and related activities. Certain of our intellectual property rights are held by wholly-owned subsidiaries. All of our U.S. operations are presently conducted at our new facility in New York, New York, and our international operations are conducted at our facilities in Lund, Sweden. We operate under a single research and development business segment.

Liquidity

At June 30, 2016, we had $60.1 million of cash and cash equivalents, a decrease of $14.0 million from $74.1 million at December 31, 2015. We expect that this amount, together with the milestone payment of $50.0 million from Valeant (See additional information in Note 12. Subsequent Event), will be sufficient to fund operations as currently anticipated beyond one year. We have historically funded our operations to a significant extent from capital-raising and we expect to require additional funding in the future, the availability of which is never guaranteed and may be uncertain. We expect that we may continue to incur operating losses for the foreseeable future.

Basis of Presentation

Our interim condensed consolidated financial statements 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 U.S. ("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 condensed consolidated 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 year ended December 31, 2015. 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. Certain prior period amounts in our condensed consolidated financial statements have been reclassified to conform to the current period presentation. Accounts payable, which was historically combined with accrued expenses on our consolidated balance sheet, has been presented as a separate line item for all periods presented in these unaudited condensed consolidated financial statements.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Progenics as well as its wholly-owned and controlled subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Foreign Currency Translation

Our international subsidiaries generally consider their local currency to be their functional currency. Assets and liabilities of these international subsidiaries are translated into U.S. dollars at quarter-end exchange rates and revenues and expenses are translated at average exchange rates during the quarter and year-to-date period. Foreign currency translation adjustments for the reported periods are included in accumulated other comprehensive loss in our condensed consolidated statements of comprehensive loss, and the cumulative effect is included in the stockholders' equity section of our condensed consolidated balance sheets. Realized gains and losses from currency exchange transactions are recorded in operating expenses in our condensed consolidated statements of operations and were not material to our consolidated results of operations in the three and six months ended June 30, 2016 or 2015.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Property and Equipment

Property and equipment is recorded at historical cost, net of accumulated depreciation and amortization of $6.8 million and $10.3 million as of June 30, 2016 and December 31, 2015, respectively. The following table summarizes our property and equipment (in thousands):

	June 30, 2016			December 31, 2015
Machinery and equipment	$	886		$	5,706
Leasehold improvements		5,028			5,027
Computer equipment		1,713			1,727
Furniture and fixtures		129			131
Construction in progress		2,728			87
Property and equipment, gross		10,484			12,678
Less - accumulated depreciation and amortization		(6,782	)		(10,271	)
Property and equipment, net	$	3,702		$	2,407

On December 31, 2015, in connection with our decision to relocate our headquarters, we entered into a lease (the "Lease") for approximately 26,000 square feet of office space located in New York City. The term of the Lease commenced on August 1, 2016, the date we first occupied the leased premises. The Lease term expires on September 30, 2030, and we have an option to renew the term for an additional five years. The Lease contains customary default provisions that could result in the early termination of the Lease in the event the Company defaults under the terms and conditions of the Lease.

As a result of our decision to relocate our headquarters, on January 1, 2016, we revised the estimated useful lives of our leasehold improvements at the leased premises in Tarrytown, New York. The remaining amortization period of our leasehold improvements was shortened from 5 years (original lease expiring in December 2020) to 7 months (based on our relocation in August 2016). During the six months ended June 30, 2016, we recognized incremental amortization expense of $1.1 million related to our leasehold improvements.

On May 6, 2016, we entered into an assignment and assumption agreement with BMR-Landmark at Eastview LLC (the "Landlord") and Regeneron Pharmaceuticals, Inc. ("Regeneron") pursuant to which we assigned to Regeneron the amended and restated lease agreement dated as of October 28, 2009 between the Landlord and us for our headquarters at 771 Old Saw Mill River Road, Tarrytown, New York.