-----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, AjEwSmjDqZSBw+RTdvLGMDOl7VaiguUHPevx6ffCb6jU/Rk0B0VPmouR+Gb+9GJ8 AvknYKdIaRz+3AvrUb+PoQ== 0000912057-96-025789.txt : 19961113 0000912057-96-025789.hdr.sgml : 19961113 ACCESSION NUMBER: 0000912057-96-025789 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROGENICS PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000835887 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 133379479 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-13627 FILM NUMBER: 96660150 BUSINESS ADDRESS: STREET 1: 777 OLD SAW MILL RIVER ROAD CITY: TARRYTOWN STATE: NY ZIP: 10591 BUSINESS PHONE: 9147892800 MAIL ADDRESS: STREET 1: 777 OLD SAW MILL RIVER ROAD CITY: TARRYTOWN STATE: NY ZIP: 10591 S-1/A 1 FORM S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1996 REGISTRATION NO. 333-13627 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PROGENICS PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) DELAWARE 2834 13-3379479 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of Classification Code Number) Identification incorporation or organization) No.)
777 OLD SAW MILL RIVER ROAD TARRYTOWN, NEW YORK 10591 (914) 789-2800 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices) PAUL J. MADDON, M.D., PH.D. CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT PROGENICS PHARMACEUTICALS, INC. 777 OLD SAW MILL RIVER ROAD TARRYTOWN, NEW YORK 10591 (914) 789-2800 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR SERVICE, SHOULD BE SENT TO: MARK R. BAKER, ESQ. DAVID E. REDLICK, ESQ. DEWEY BALLANTINE HALE AND DORR 1301 AVENUE OF THE AMERICAS 60 STATE STREET NEW YORK, NEW YORK 10019 BOSTON, MASSACHUSETTS 02109 (212) 259-8000 (617) 526-6000 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. -------------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1996 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. 2,000,000 SHARES [COMPANY LOGO] Progenics Pharmaceuticals, Inc. COMMON STOCK -------------- All of the shares of Common Stock offered hereby are being sold by Progenics Pharmaceuticals, Inc. ("Progenics" or the "Company"). Prior to this offering, there has been no public market for the Common Stock of the Company. It is anticipated that the initial public offering price will be between $11.00 and $13.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Common Stock has been approved for quotation on the Nasdaq National Market, upon notice of issuance, under the symbol "PRGN." THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6. ----------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) Per Share.......................................... $ $ $ Total(3)........................................... $ $ $
(1) See "Underwriting" for information concerning indemnification of the Underwriters and other information. (2) Before deducting expenses of the offering payable by the Company estimated at $750,000. (3) The Company has granted the Underwriters an option, exercisable within 30 days of the date hereof, to purchase up to 300,000 additional shares of Common Stock at the Price to Public per share, less the Underwriting Discount, for the purpose of covering over-allotments, if any. If the Underwriters exercise such option in full, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." ------------------- The shares of Common Stock are offered severally by the Underwriters when, as and if delivered to and accepted by them, subject to their right to withdraw, cancel or reject orders in whole or in part and subject to certain other conditions. It is expected that delivery of the certificates representing the shares will be made against payment on or about , 1996 at the office of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281. ------------------- OPPENHEIMER & CO., INC. VECTOR SECURITIES INTERNATIONAL, INC. The date of this Prospectus is , 1996 GMK GANGLIOSIDE CONJUGATE VACCINE IS PROGENICS' LEAD CANCER THERAPEUTIC CANDIDATE. GMK HAS ENTERED PIVOTAL PHASE III CLINICAL TRIALS FOR THE TREATMENT OF MALIGNANT MELANOMA. [DIAGRAM DEPICTING THE COMPANY'S GANGLIOSIDE CONJUGATE VACCINE, GMK] ------------------------ The Company was incorporated in December 1986. Its principal executive offices are located at 777 Old Saw Mill River Road, Tarrytown, New York 10591 and its telephone number is (914) 789-2800. ------------------------ IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ------------------------ PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS: (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION; (II) GIVES EFFECT TO A THREE-FOR-FOUR REVERSE STOCK SPLIT WITH RESPECT TO THE COMPANY'S COMMON STOCK, PAR VALUE $.0013 (THE "COMMON STOCK"), TO BE EFFECTED PRIOR TO THE COMPLETION OF THIS OFFERING; AND (III) GIVES EFFECT TO THE AUTOMATIC CONVERSION OF ALL OUTSTANDING SHARES OF THE COMPANY'S PREFERRED STOCK, PAR VALUE $.001 PER SHARE (THE "PREFERRED STOCK"), INTO AN AGGREGATE OF 4,259,878 SHARES OF COMMON STOCK. SEE "CAPITALIZATION," "DESCRIPTION OF CAPITAL STOCK" AND "NOTES TO FINANCIAL STATEMENTS." INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. THE COMPANY Progenics Pharmaceuticals, Inc. ("Progenics" or the "Company") is a biopharmaceutical company focusing on the development and commercialization of innovative products for the treatment and prevention of cancer and viral diseases. The Company applies its immunology expertise to develop biopharmaceuticals that induce an immune response or that mimic natural immunity in order to fight cancers, such as malignant melanoma, and viral diseases, such as human immunodeficiency virus ("HIV") infection. Progenics' most advanced product candidate, GMK, is a therapeutic vaccine that is undergoing pivotal Phase III clinical trials for the treatment of melanoma, a deadly form of skin cancer. Progenics' second vaccine product, MGV, is being developed for the treatment of various cancers, and recently entered Phase I/II clinical trials. Based on its participation in the discoveries of two major receptors for HIV, the Company is engaged in research and development of several therapeutic products designed to block entry of the virus into human immune system cells. Progenics has completed preclinical studies on two HIV product candidates, PRO 542 and PRO 367, and plans to initiate Phase I/II clinical trials of these products in 1997. Progenics' most advanced product candidates are based on two proprietary technologies: ganglioside conjugate vaccine technology, which the Company uses in its cancer program; and universal antiviral binding agent ("UnAB") technology, which the Company uses in its HIV program. The Company has exclusively licensed from Memorial Sloan-Kettering Cancer Center ("Sloan-Kettering") several ganglioside conjugate vaccines designed to stimulate the immune system to destroy cancer cells. The Company applies its UnAB technology to produce antibody-like molecules designed to neutralize or destroy HIV or HIV-infected cells. CANCER THERAPEUTICS GMK is a therapeutic cancer vaccine designed to prevent recurrence of melanoma in patients who are at risk of relapse after surgery. Developed at Sloan-Kettering, GMK is composed of a ganglioside antigen which is abundant in melanoma cells, conjugated to an immunogenic carrier protein and combined with an adjuvant (an immunological stimulator). In August 1996, the Company commenced the first of three pivotal, randomized, multicenter Phase III clinical trials of GMK. These studies are being conducted in the United States by the Eastern Cooperative Oncology Group ("ECOG") and the Southwest Oncology Group ("SWOG"), which are cooperative cancer research groups supported by the National Cancer Institute ("NCI"). Two international Phase III clinical trials will be initiated in 1997 and will be conducted in Europe by the Institute of Cancer Research ("ICR") of the United Kingdom and the European Organization for Research and Treatment of Cancer ("EORTC"). MGV, the Company's second ganglioside conjugate vaccine, incorporates two ganglioside antigens that are abundant in a wide range of cancer cells. These cancers include colorectal cancer, lymphoma, small cell lung cancer, sarcoma, gastric cancer, neuroblastoma and melanoma. In September 1996, MGV entered Phase I/II clinical trials at Sloan-Kettering. 3 HIV THERAPEUTICS The Company is pursuing two approaches based on its HIV receptor technology in the research and development of products designed to block viral entry into human immune system cells. The Company's UnAB approach is based on the CD4 receptor while its HIV fusion approach is based on a recently discovered second receptor for the virus, CC-CKR-5 ("CKR-5"). Progenics is developing PRO 542 to selectively target HIV and prevent it from infecting healthy cells by binding to the sites on the virus that are required for entry into the cell. PRO 542 is based on Progenics' UnAB technology and has been shown IN VITRO to recognize a wide range of HIV strains, including those most prevalent in the United States and the rest of the world. PRO 542 is being developed as an immunotherapy to treat HIV-positive individuals and as an immunoprophylactic treatment to prevent infection of individuals who have been exposed to the virus. The Company plans to file an investigational new drug application ("IND") covering PRO 542 by the end of 1996 and initiate Phase I/II clinical trials in 1997. Progenics is developing PRO 367 as a therapeutic agent designed to kill HIV-infected cells. PRO 367 consists of a UnAB molecule linked to a therapeutic radioisotope and is designed to bind to and destroy HIV-infected cells by delivering a lethal dose of radioactivity. The Company plans to begin Phase I/II clinical trials of PRO 367 in 1997. In June 1996, the Company's scientists in collaboration with researchers at The Aaron Diamond AIDS Research Center ("ADARC") described in an article published in NATURE the discovery of a second receptor for HIV, CKR-5. This receptor enables fusion of HIV with the cell membrane, entry of the viral genetic information into the cell and initiation of viral replication. The Company is using its proprietary ProSys assay in a program to discover novel therapeutics that specifically inhibit the interaction of HIV with the CKR-5 receptor, thereby blocking viral fusion and entry. BUSINESS STRATEGY The Company's business strategy is to develop and commercialize innovative products for cancer and viral diseases which the Company believes would meet a significant need of those individuals suffering from these diseases and which the Company also believes have the potential to generate substantial revenues. The Company intends to accomplish this strategy by capitalizing on its proprietary technologies and its expertise in product development and clinical trials. Key elements of this strategy include: collaborating with leading academic and government-supported institutions and clinical groups to control the Company's research and clinical trial expenditures; licensing from institutions and other companies promising technologies and product candidates to minimize basic research costs and overhead; and, maximizing the Company's share of revenues from products that are brought to market by initiating clinical trials of product candidates, when appropriate, prior to establishing collaborations with pharmaceutical companies. Consistent with this strategy, Progenics has limited its corporate infrastructure and operating costs while developing four product candidates that have entered, or are about to enter, clinical trials. 4 THE OFFERING Common Stock offered by the Company.......... 2,000,000 shares Common Stock to be outstanding after the offering................................... 8,554,553 shares (1) Use of proceeds.............................. To fund clinical trials of its leading product candidates, research and development, in-licensing of late-stage technology and for working capital and general corporate purposes. Proposed Nasdaq National Market symbol....... PRGN Risk Factors................................. This offering involves a high degree of risk. See "Risk Factors."
- ------------------------ (1) Based on the number of shares outstanding at September 30, 1996. Excludes 2,051,691 shares of Common Stock reserved as of such date for issuance pursuant to outstanding options under the Company's stock option plans and pursuant to outstanding warrants and 62,775 shares subject to options to be granted prior to the completion of this offering at an exercise price equal to the initial public offering price. See "Capitalization" and "Description of Capital Stock." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 1, NINE MONTHS ENDED 1986 (INCEPTION) YEARS ENDED DECEMBER 31, SEPTEMBER 30, THROUGH ------------------------------- -------------------- SEPTEMBER 30, 1993 1994 1995 1995 1996 1996 --------- --------- --------- --------- --------- ------------- STATEMENT OF OPERATIONS DATA: Revenues: Research grants..................................... $ 84 $ 504 $ 725 $ 502 $ 268 $ 1,735 Product sales....................................... 50 52 50 40 67 358 Interest income..................................... 53 108 46 44 91 633 --------- --------- --------- --------- --------- ------------- Total revenues.................................... 187 664 821 586 426 2,726 --------- --------- --------- --------- --------- ------------- Expenses: Research and development............................ 1,547 2,859 3,853 2,585 2,654 15,505 General and administrative.......................... 748 878 1,094 790 984 6,257 Interest expense.................................... 38 50 87 53 40 440 Depreciation and amortization....................... 249 289 291 229 230 1,663 --------- --------- --------- --------- --------- ------------- Total expenses.................................... 2,582 4,076 5,325 3,657 3,908 23,865 --------- --------- --------- --------- --------- ------------- Net loss.............................................. $ (2,395) $ (3,412) $ (4,504) $ (3,071) $ (3,482) $ (21,139) --------- --------- --------- --------- --------- ------------- --------- --------- --------- --------- --------- ------------- Pro forma net loss per common share(2)................ $ (0.73) $ (0.57) --------- --------- --------- --------- Pro forma weighted average common shares outstanding(2)...................................... 6,135 6,135
SEPTEMBER 30, 1996 ------------------------- ACTUAL AS ADJUSTED(3) --------- -------------- BALANCE SHEET DATA: Cash and cash equivalents................................................................ $ 1,746 $ 23,316 Working capital.......................................................................... 894 22,464 Total assets............................................................................. 2,841 24,411 Capital lease obligations and deferred lease liability, long-term portion................ 181 181 Total stockholders' equity............................................................... 1,668 23,238
- ------------------------ (2) See Note 2 to the Company's Financial Statements for information concerning computation of the pro forma per share data. (3) As adjusted to reflect the sale of 2,000,000 shares of Common Stock offered by the Company hereby, assuming an initial public offering price of $12.00 per share, and the receipt of the net proceeds therefrom after deducting the underwriting discount and estimated offering expenses. See "Use of Proceeds." 5 RISK FACTORS AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY IS SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. FOR EXAMPLE, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS," "INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THERE ARE A NUMBER OF IMPORTANT FACTORS, INCLUDING THE RISK FACTORS SET FORTH BELOW, THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. EARLY STAGE OF PRODUCT DEVELOPMENT; TECHNOLOGICAL UNCERTAINTIES The Company is in the development stage, and the development of any products will require significant further research, development, testing and regulatory approvals and additional investment prior to commercialization. Substantially all of the Company's resources have been, and for the foreseeable future will continue to be, dedicated to the development of products for cancer and viral diseases, most of which are still in the early stages of development and testing. There are a number of technological challenges that the Company must successfully address to complete most of its development efforts. In addition, the product development programs conducted by the Company and its collaborators are subject to the risks of failure inherent in the development of product candidates based on new technologies. These risks include the possibility that the technologies used by the Company will prove to be ineffective or any or all of the Company's product candidates will prove to be unsafe or otherwise fail to receive necessary regulatory approvals; that the product candidates, if safe and effective, will be difficult to manufacture on a large scale or uneconomical to market; that the proprietary rights of third parties will preclude the Company or its collaborators from marketing the products utilizing the Company's technologies; or that third parties will market superior or equivalent products. To the Company's knowledge, no cancer or therapeutic vaccine and no genetically engineered antibody for the treatment of HIV infection has been approved for marketing and there can be no assurance that any of the Company's products will be successfully developed. The commercial success of the Company's products, when and if approved for marketing by the U.S. Food and Drug Administration (the "FDA"), will depend upon their acceptance by the medical community and third party payors as clinically useful, cost-effective and safe. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Product Development," "--Manufacturing," "--Government Regulation" and "--Competition." UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING The grant of regulatory approvals for the commercial sale of any of the Company's potential products will depend on the Company successfully conducting extensive preclinical and clinical testing to demonstrate their safety and efficacy in humans. The results of preclinical studies by the Company and/or its collaborators may be inconclusive and may not be indicative of results that will be obtained in human clinical trials. In addition, results attained in early human clinical trials relating to the products under development by the Company may not be indicative of results that will be obtained in later clinical trials. As results of particular preclinical studies and clinical trials are received by the Company, the Company may abandon projects which it might otherwise have believed to be promising, some of which may be described in this Prospectus. Although human clinical trials have commenced with respect to the development of GMK and MGV, the Company is developing other therapeutic products, including PRO 542 and PRO 367, on which it plans to file INDs with the FDA or make equivalent filings outside of the U.S., and there can be no assurance that necessary preclinical studies on these products will be completed satisfactorily or that the Company otherwise will be able to make its intended filings. Further, there can be no assurance that the Company 6 will be permitted to undertake and complete human clinical trials of any of the Company's potential products, either in the U.S. or elsewhere, or, if such trials are permitted, that such products will not have undesirable side effects or other characteristics that may prevent them from being approved or limit their commercial use if approved. Clinical testing is very expensive and the Company will have to devote substantial resources for the payment of clinical trial expenses. The rate of completion of the Company's human clinical trials, if permitted, will be dependent upon, among other factors, the rate of patient enrollment. Patient enrollment is a function of many factors, including the size of the patient population, the nature of the protocol, the availability of alternative treatments, the proximity to clinical sites and the eligibility criteria for the study. Delays in planned patient enrollment might result in increased costs and delays, which could have a material adverse effect on the Company. The Company or the FDA or other regulatory agencies may suspend clinical trials at any time if the subjects or patients participating in such trials are being exposed to unacceptable health risks. In addition, clinical trials are often conducted with patients having the most advanced stages of disease. During the course of treatment, these patients can suffer adverse medical effects or die for reasons that may not relate to the product being tested, but which can nevertheless affect adversely the clinical trials. In addition, there can be no assurance that clinical trials of products under development will demonstrate safety and efficacy at all or to the extent necessary to obtain regulatory approvals. Companies in the biotechnology industry have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials. Consequently, the period of time necessary to complete clinical testing and receive regulatory approval can be quite extensive and involve many years. The failure to adequately demonstrate the safety and efficacy of a therapeutic product under development could delay or prevent regulatory approval of the product and would have a material adverse effect on the Company. Lastly, the Company has limited experience in conducting clinical trials. The Company relies, in part, on academic institutions and on clinical research organizations to conduct and monitor certain clinical trials. There can be no assurance that such entities will conduct the clinical trials successfully. In addition, certain clinical trials for the Company's products will be conducted by government-sponsored agencies. Because the conduct of such trials will be dependent on government participation and funding, the Company will have less control over such trials than if the Company were the sole sponsor thereof. As a result, there can be no assurance that these trials will commence or be completed as planned. See "Business--Product Development," "--Cancer Therapeutics," "--HIV Therapeutics" and "--Government Regulation." HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT; NO PRODUCT REVENUE AND UNCERTAINTY OF FUTURE PROFITABILITY The Company has incurred substantial losses in each year since its inception. As of September 30, 1996, the Company had an accumulated deficit of approximately $21 million. Such losses have resulted principally from costs incurred in the Company's research and development programs and general and administrative costs associated with the Company's development. The Company has derived only limited revenues from federal research grants and from the sale of research reagents. No revenues have been generated by the Company from product sales (other than for research purposes) or royalties and no product sales (other than sales of research reagents) or royalties are likely for a number of years, if ever. The Company expects to incur additional operating losses over at least the next several years and expects losses in the future to increase significantly as the Company expands development and clinical trial efforts. The Company expects that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. The Company's ability to achieve profitability is dependent in part on obtaining regulatory approvals for products and entering into agreements for commercialization of such products. There can be no assurance that such regulatory approvals will be obtained or such agreements will be entered into. Further, there can be no assurances that the Company's operations will become profitable even if products 7 under development by the Company or any collaborators are commercialized. See "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." NEED FOR ADDITIONAL FINANCING AND UNCERTAIN ACCESS TO CAPITAL FUNDING Progenics' current development projects require substantial capital. The Company believes that the net proceeds of this offering, together with the Company's present capital resources, should be sufficient to fund operations through the end of 1998 based on the Company's current operating plan. No assurance can be given that there will be no change that would consume the Company's liquid assets before such time. Thereafter, the Company will require substantial funds in addition to the net proceeds of this offering to conduct development activities, preclinical studies, clinical trials and other activities relating to the commercialization of any potential products. The Company anticipates that these funds will be obtained from external sources and intends to seek additional financing to fund future operations. There can be no assurance, however, that the Company will be able to negotiate such arrangements or obtain the additional funds it will require on acceptable terms, if at all. In addition, the Company's cash requirements may vary materially from those now planned because of results of research and development, results of product testing, potential relationships with in-licensors and collaborators, changes in the focus and direction of the Company's research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory approval process, manufacturing, marketing and other costs associated with the commercialization of products following receipt of regulatory approvals and other factors. If adequate funds are not available, the Company may be required to delay, reduce the scope of or eliminate one or more of its programs; to obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates or products that the Company would otherwise seek to develop or commercialize itself; or to license the rights to such products on terms that are less favorable to the Company than might otherwise be available. If the Company raises additional funds by issuing equity securities, further dilution to stockholders may result and new investors could have rights superior to existing stockholders. The Company has no established banking arrangements through which it can obtain debt financing. See "Use of Proceeds," "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." COMPETITION AND TECHNOLOGICAL CHANGE Competition in the biopharmaceutical industry is intense. The Company faces competition from many companies and major universities and research institutions in the United States and abroad. Many of the Company's competitors have substantially greater resources, experience in conducting preclinical studies and clinical trials and obtaining regulatory approvals for their products, operating experience, research and development and marketing capabilities and production capabilities than those of the Company. There can be no assurance that the Company's competitors will not develop technologies and products that are safer or more effective than any being developed by the Company or which would render the Company's technology and products obsolete and noncompetitive, and the Company's competitors may succeed in obtaining FDA approval for products more rapidly than the Company. The Company will face competition from companies marketing existing products or developing new products for diseases targeted by the Company's technologies. The development of new products for those diseases for which the Company is developing products could render the Company's product candidates noncompetitive and obsolete. There can be no assurance that the products under development by the Company and its collaborators will be able to compete successfully with existing products or products under development by other companies, universities and other institutions or that they will attain regulatory approval in the United States or elsewhere. With respect to the Company's products for the treatment of HIV infection, two classes of products made by competitors of the Company have been approved for marketing by the FDA for the 8 treatment of HIV infection and AIDS: reverse transcriptase inhibitors and protease inhibitors. Both types of drugs are inhibitors of viral enzymes and have shown efficacy in reducing the concentration of HIV in the blood and prolonging asymptomatic periods in HIV-positive individuals, especially when administered in combination. However, it is not known whether HIV will develop resistance to these drugs over time. In addition, the use of these drugs presents problems of toxic side effects and compliance for some patients. A significant amount of research in the biopharmaceutical field is also being carried out at academic and government institutions. The Company's strategy is to in-license technology and product candidates from academic and government institutions. These institutions are becoming increasingly aware of the commercial value of their findings and are becoming more aggressive in pursuing patent protection and negotiating licensing arrangements to collect royalties for use of technology that they have developed. These institutions may also market competitive commercial products on their own or in collaboration with competitors and will compete with the Company in recruiting highly qualified scientific personnel. Any resulting increase in the cost or decrease in the availability of technology or product candidates from these institutions may affect the Company's business strategy. If the Company receives regulatory approvals to commence commercial sales of products, the Company will also be competing with respect to commercial scale manufacturing and marketing capabilities, areas in which the Company has limited or no experience. See "Business--Manufacturing" and "--Sales and Marketing." LIMITED MANUFACTURING CAPABILITIES In order to successfully commercialize its product candidates, Progenics must be able to manufacture its products in commercial quantities, in compliance with regulatory requirements, at acceptable costs and in a timely manner. The manufacture of the types of biopharmaceutical products being developed by the Company presents several risks and difficulties. For example, the manufacture of recombinant proteins used in certain of the Company's current HIV products in development is complex, can be difficult to accomplish even in small quantities, can be difficult to scale-up when large scale production is required and can be subject to delays, inefficiencies and poor or low yields of quality products. Although Progenics has constructed two pilot-scale manufacturing facilities which it believes will be sufficient to meet the Company's initial needs for clinical trials, these facilities may be insufficient for all of its late-stage clinical trials and for its commercial-scale manufacturing requirements. Accordingly, the Company expects to expand its manufacturing staff and facilities and obtain new facilities or to contract with third parties to assist with production. Manufacture of some of Progenics' initial products for commercialization is expected to require third party contract manufacturers at a significant cost to the Company. In employing third party manufacturers, Progenics will not control all aspects of the manufacturing process. There can be no assurance that the Company will be able to obtain from third party manufacturers adequate supplies in a timely fashion for commercialization, or that commercial quantities of any such products, if approved for marketing, will be available from contract manufacturers at acceptable costs. In the event the Company decides to establish a full-scale commercial manufacturing facility, the Company will require substantial additional funds and will be required to hire and train significant numbers of employees and comply with the extensive regulations applicable to such a facility. There is no assurance that Progenics will be able to develop a current Good Manufacturing Practices ("cGMP") manufacturing facility sufficient for all clinical trials or commercial-scale manufacturing. The cost of manufacturing certain products may make them prohibitively expensive. In addition, in order to successfully commercialize its product candidates, the Company may be required to reduce the cost of production, and there can be no assurance that the Company will be able to do so. See "Business--Manufacturing." AVAILABILITY OF MATERIALS Although Progenics has not experienced any significant difficulties in obtaining the raw materials necessary to perform its research, development and manufacturing activities to date, there can be no 9 assurance that sufficient quantities of these materials will be available to support continued research, development or commercial manufacture of any of the Company's planned products. The Company currently obtains supplies of critical materials used in production of GMK and MGV from single sources. Specifically, commercialization of the Company's GMK and MGV cancer vaccine candidates requires a certain adjuvant from Aquila Biopharmaceuticals Inc. ("Aquila"). The Company has entered into a license and supply agreement with Aquila pursuant to which Aquila agreed to supply the Company with all of its requirements for the QS-21 adjuvant for use in certain ganglioside-based cancer vaccines, including GMK and MGV. The agreement grants to the Company a license to use Aquila's patented technology to develop, manufacture and sell certain cancer vaccines using QS-21 and, if Aquila is unable to supply the Company with sufficient quantities of QS-21, the Company has the right to manufacture QS-21 itself or purchase it from third parties for so long as Aquila is unable to supply the Company with sufficient quantities. There can be no assurance that Aquila will be able to supply sufficient quantities of QS-21 to the Company. See "Business--Manufacturing." GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL The Company and its products are subject to comprehensive regulation by the FDA in the United States and by comparable authorities in other countries. These national agencies and other federal, state, and local entities regulate, among other things, the preclinical and clinical testing, safety, effectiveness, approval, manufacture, labeling, marketing, export, storage, record keeping, advertising, and promotion of the Company's products. See "--Uncertainty Associated with Preclinical and Clinical Testing." Among other requirements, FDA approval of the Company's products, including a review of the manufacturing processes and facilities used to produce such products, will be required before such products may be marketed in the United States. In order to obtain FDA approval of a product, the Company must demonstrate to the satisfaction of the FDA that such product is safe and effective for its intended uses and that the Company is capable of manufacturing the product with procedures that conform to the FDA's cGMP regulations, which must be followed at all times. The process of obtaining FDA approvals can be costly, time consuming, and subject to unanticipated delays and the Company has had only limited experience in filing and pursuing applications necessary to gain regulatory approvals. There can be no assurance that such approvals will be granted on a timely basis, or at all. The Company's analysis of the results of its clinical studies is subject to review and interpretation by the FDA, which may differ from the Company's analysis. There can be no assurance that the Company's data or its interpretation of data will be accepted by the FDA. In addition, delays or rejections may be encountered based upon changes in applicable law or FDA policy during the period of product development and FDA regulatory review. Any failure to obtain, or delay in obtaining, FDA approvals would adversely affect the ability of the Company to market its proposed products. Moreover, even if FDA approval is granted, such approval may include significant limitations on indicated uses for which a product could be marketed. Both before and after approval is obtained, a product, its manufacturer and the holder of the New Drug Application ("NDA") or Product License Application ("PLA") for the product are subject to comprehensive regulatory oversight. Violations of regulatory requirements at any stage, including the preclinical and clinical testing process, the approval process, or post-approval marketing activities may result in various adverse consequences, including the FDA's delay in approving or refusal to approve a product, withdrawal of an approved product from the market, and/or the imposition of criminal penalties against the manufacturer and/or the holder of the marketing approval for the product. In addition, later discovery of previously unknown problems relating to a marketed product may result in restrictions on such product, manufacturer, or the holder of the marketing approval for the product, including withdrawal of the product from the market. Also, new government requirements may be established that could delay or prevent regulatory approval of the Company's products under development. 10 The Company is also subject to numerous and varying foreign regulatory requirements governing the design and conduct of clinical trials and the manufacturing and marketing of its products. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval set forth above, and there can be no assurance that foreign regulatory approvals will be obtained on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other foreign countries. There can be no assurance that the Company or its partners will file for regulatory approvals or receive necessary approvals to commercialize its product candidates in any market. Delays in receipt of or failure to receive regulatory approvals, or the loss of previously received approvals, would have a material adverse effect on the Company's business, financial condition and results of operations. The Company relies, in part, on academic institutions and on clinical research organizations to conduct and monitor certain of its clinical trials. There can be no assurance that such entities will conduct the clinical trials successfully. In addition, certain clinical trials for the Company's products will be conducted by government-sponsored agencies. Because the conduct of such trials will be dependent on government participation and funding, the Company will have less control over such trials than if the Company were the sole sponsor. As a result, there can be no assurance that these trials will commence or be completed as planned. See "Business--Government Regulation." DEPENDENCE ON THIRD PARTIES The Company relies heavily on third parties for a variety of functions, including certain functions relating to research and development, manufacturing, clinical trials management and regulatory affairs. As of September 30, 1996, the Company had only 27 full-time employees. The Company is party to several collaborative research agreements which place substantial responsibility on the Company's partners for clinical development of products. The Company also in-licenses technology from medical and academic institutions in order to minimize investments in early research and enters into collaboration arrangements with certain of these entities with respect to clinical trials of product candidates. To date, the Company has derived most of its revenues from federal research grants. The government's obligation to make payments under these grants is subject to appropriation by the United States Congress for funding in each year. Moreover, it is possible that Congress or the government agencies that administer these government research programs will determine to scale back these programs or terminate them or that the government will award future grants to competitors of the Company instead of the Company. In addition, there can be no assurances that the Company will be awarded any such grants in the future or that any amounts derived therefrom will not be less than those received to date. Certain of the Company's clinical trials will be partially paid for by government funds. Any future reduction in the funding the Company receives either from federal research grants or with respect to clinical trials could adversely affect the Company's business, financial condition and results of operations. Progenics' business strategy includes entering into strategic alliances or licensing arrangements with corporate partners, primarily pharmaceutical and biotechnology companies, relating to the development and commercialization of certain of its potential products. There can be no assurance that such collaborations will be available to the Company on acceptable terms, if at all, or that any such relationships, if established, will be scientifically or commercially successful. The Company expects that under certain of these arrangements, the collaborative partner will have the responsibility for conducting human clinical trials and the submission for regulatory approval of the product candidate with the FDA and certain other regulatory agencies. Should the collaborative partner fail to develop a marketable product, the Company's business may be materially adversely affected. There can be no assurance that Progenics will be able to establish and maintain any of the corporate, academic or government relationships described above on terms acceptable to the Company, that the 11 Company can enter into these arrangements without undue delays or expenditures, or that these arrangements will allow the Company to compete successfully against other companies. LACK OF SALES AND MARKETING EXPERIENCE If FDA and other approvals are obtained with respect to any of its products, Progenics expects to market and sell its products through co-marketing, co-promotion or other licensing arrangements with third parties. Progenics has no experience in sales, marketing or distribution and its current management and staff are not trained in these areas. To the extent that the Company enters into co-marketing, co-promotion or other licensing arrangements for the marketing and sale of its products, any revenues received by the Company will be dependent on the efforts of third parties. The Company would not control the amount and timing of resources such third parties would devote to the Company's products. If any of such parties were to breach or terminate its agreement with the Company or otherwise fail to conduct its collaborative activities successfully and in a timely manner, the commercialization of product candidates would be delayed or terminated. Any such delay or termination could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, if the Company markets products directly, significant additional expenditures and management resources would be required to develop an internal sales force. There can be no assurance that the Company will be able to establish a successful sales force. See "Business--Business Strategy." DEPENDENCE ON AND UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS Progenics' policy is to protect its proprietary technology, and the Company considers the protection of such rights to be important to its business. In this regard, under a license agreement with Sloan-Kettering, the Company has obtained worldwide, exclusive rights to certain technology relating to ganglioside conjugate vaccines, including GMK and MGV, and their use to treat or prevent cancer. In addition, the Company has licensed from Columbia University worldwide, exclusive rights to certain technology relating to CD4 and its use to treat or prevent HIV infection including patents and patent applications. Progenics has also filed a number of U.S. and foreign patent applications on its UnAB, ProSys and ProVax technologies and uses of these technologies. The Company is required to make substantial cash payments and achieve certain milestones and requirements, including, without limitation, filing INDs, obtaining product approvals and introducing products, to maintain its rights under these licenses. In the past, the Company did not achieve a milestone under the Columbia University agreement and the Company and Columbia agreed to a modification of the agreement. There is no assurance that the Company will be able to make required cash payments when due or achieve the milestones and requirements in order to maintain its rights under these licenses. Termination of any of such licenses could result in the Company being unable to continue development of its product candidates and production and marketing of approved products, if any. Consequently, termination of the licenses could have a material adverse effect on the business, financial condition and results of operations of the Company. There can be no assurance that patent applications owned by or licensed to the Company will result in patents being issued or that, if issued, the patents will afford protection against competitors with similar technology. Although a patent has a statutory presumption of validity in the United States, the issuance of a patent is not conclusive as to such validity or as to the enforceable scope of the claims of the patent. There can be no assurance that the Company's issued patents or any patents subsequently issued to or licensed by the Company will not be successfully challenged in the future. The validity or enforceability of a patent after its issuance by the patent office can be challenged in litigation. The cost of litigation to uphold the validity of patents and to prevent infringement can be substantial. If the outcome of the litigation is adverse to the owner of the patent, third parties may then be able to use the invention covered by the patent without payment. There can be no assurance that the Company's patents will not be infringed or successfully avoided through design innovation. 12 The Company may not retain all rights to developments, inventions, patents and other proprietary information resulting from its collaborative arrangements, whether in effect as of the date hereof or which may be entered into at some future time with third parties. As a result, the Company may be required to license such developments, inventions, patents or other proprietary information from such third parties, possibly at significant cost to the Company. The Company's failure to obtain any such licenses could have a material adverse effect on the business, financial condition and results of operations of the Company. There may be patent applications and issued patents belonging to competitors that may require the Company to alter its products, pay licensing fees or cease certain activities. If the Company's products conflict with patents that have been or may be granted to competitors, universities or others, such other persons could bring legal actions against the Company claiming damages and seeking to enjoin manufacturing and marketing of the affected products. If any such actions are successful, in addition to any potential liability for damages, the Company could be required to obtain a license in order to continue to manufacture or market the affected products. There can be no assurance that the Company would prevail in any such action or that any license required under any such patent would be made available on acceptable terms or at all. There is significant litigation in the industry regarding patent and other intellectual property rights. If the Company becomes involved in such litigation, it could consume substantial resources. Progenics has also filed a number of U.S. and foreign patent applications (one of which is owned jointly with ADARC) relating to the discovery of a second HIV receptor, CKR-5. In addition to the risks described above, the Company is aware that other groups have claimed discoveries similar to that covered by the Company's patent applications. These groups may have made their discoveries prior to the discoveries covered by the Company's patent applications and may have filed their applications prior to the Company's patent applications. The Company does not expect to know for several years the relative strength of its patent position as compared to these other groups. In addition to the patents, patent applications, licenses and intellectual property processes described above, the Company also relies on unpatented technology, trade secrets and information. No assurance can be given that others will not independently develop substantially equivalent information and techniques or otherwise gain access to the Company's technology or disclose such technology, or that the Company can meaningfully protect its rights in such unpatented technology, trade secrets and information. The Company requires each of its employees, consultants and advisors to execute a confidentiality agreement at the commencement of an employment or consulting relationship with the Company. The agreements generally provide that all inventions conceived by the individual in the course of employment or in providing services to the Company and all confidential information developed by, or made known to, the individual during the term of the relationship shall be the exclusive property of the Company and shall be kept confidential and not disclosed to third parties except in limited specified circumstances. There can be no assurance, however, that these agreements will provide meaningful protection for the Company's information in the event of unauthorized use or disclosure of such confidential information. See "Business--Patents and Proprietary Technology." DEPENDENCE UPON KEY PERSONNEL Progenics is dependent upon certain key management and scientific personnel. In particular, the loss of Dr. Maddon could have a materially adverse effect on Progenics, unless a qualified replacement could be found. Progenics maintains a key-man life insurance policy on Dr. Maddon in the amount of $2.5 million. The Company's employment agreement with Dr. Maddon expires in 1998, and there can be no assurance that it will be renewed by the parties thereto. See "Management--Executive Compensation." 13 ATTRACTION AND RETENTION OF PERSONNEL Competition for qualified employees among companies in the biopharmaceutical industry is intense. Progenics' future success depends upon its ability to attract, retain and motivate highly skilled employees. Although Progenics has established relationships with the scientists who serve on its Scientific Advisory Boards, these individuals do not devote a substantial portion of their time to Progenics-related activities and do not participate directly in the development of Progenics' products on a daily basis. Attracting desirable employees will require Progenics to offer competitive compensation packages, including stock options. In order to successfully commercialize its products, the Company must substantially expand its personnel, particularly in the areas of manufacturing, clinical trials management, regulatory affairs, business development and marketing. There can be no assurance that the Company will be successful in hiring or retaining qualified personnel. Managing the integration of new personnel and Company growth generally could pose significant risks to the Company's development and progress. The addition of such personnel may result in significant changes in the Company's utilization of cash resources and its development schedule. See "Business--Human Resources." UNCERTAINTY RELATED TO HEALTH CARE REFORM MEASURES AND REIMBURSEMENT In recent years, there have been numerous proposals to change the health care system in the United States. Some of these proposals have included measures that would limit or eliminate payments for certain medical procedures and treatments or subject the pricing of pharmaceuticals to government control. Significant changes in the health care system in the United States or elsewhere might have a substantial impact on the manner in which the Company conducts its business. Such changes also could have a material adverse effect on the Company's ability to raise capital. Furthermore, the Company's ability to commercialize products may be adversely affected to the extent that such proposals have a material adverse effect on the business, financial condition and profitability of other companies that are collaborators or prospective collaborators of the Company. In addition, significant uncertainty exists as to the reimbursement status of newly-approved health care products. The Company's and its collaborators' success in generating revenue from sales of products may depend, in part, on the extent to which reimbursement for the costs of such products will be available from third-party payors, such as government health administration authorities, private health insurers and health maintenance organizations ("HMOs"). In addition, the trend towards managed health care in the United States and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and products, as well as legislative proposals to reduce government insurance programs, may all result in lower prices for products and could affect the market for products. If the Company succeeds in bringing one or more products to market, there can be no assurance that such products will be considered cost-effective or that adequate third-party insurance coverage will be available for the Company to establish and maintain price levels sufficient for realization of an appropriate return on its investment in product development. Third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new products approved for marketing by the FDA. If adequate coverage and reimbursement levels are not provided by government and third-party payors for uses of the Company's products, the market acceptance of such products would be adversely affected. RISK OF PRODUCT LIABILITY; LIMITED AVAILABILITY OF INSURANCE The Company's business exposes it to potential product liability risks which are inherent in the testing, manufacturing, marketing and sale of human vaccine and therapeutic products, and there can be no assurance that the Company will be able to avoid significant product liability exposure. Product liability insurance for the biopharmaceutical industry in generally expensive, if available at all. The Company has obtained product liability insurance coverage in the amount of $5 million per occurrence, subject to a $5 million aggregate limitation. However, there can be no assurance that the Company's present insurance 14 coverage is now or will continue to be adequate as the Company further develops products. In addition, certain of the Company's license and collaborative agreements require the Company to obtain product liability insurance and it is possible that license and collaborative agreements which the Company may enter into in the future may also include such a requirement. There can be no assurance that in the future adequate insurance coverage will be available in sufficient amounts or at a reasonable cost, or that a product liability claim or recall would not have a material adverse effect on the Company. HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS The Company's research and development work and manufacturing processes involve the use of hazardous, controlled and radioactive materials. The Company is subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although the Company maintains safety procedures for handling and disposing of such materials that it believes comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, the Company could be held liable for any damages that result and any such liability could exceed the resources of the Company. Although the Company believes that it is in compliance in all material respects with applicable environmental laws and regulations, there can be no assurance that the Company will not be required to incur significant costs to comply with environmental laws and regulations in the future, or that the operations, business or assets of the Company will not be materially or adversely affected by current or future environmental laws or regulations. The research and development efforts sponsored by the Company involve laboratory animals. The Company may be adversely affected by changes in laws, regulations or accepted clinical procedures or by social pressures that would restrict the use of animals in testing or by actions against the Company or its collaborators by groups or individuals opposed to such testing. ABSENCE OF PRIOR TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE Prior to this offering, there has been no public market for the Common Stock, and there is no assurance that an active market will develop or be sustained after this offering or that the market price of the Common Stock will not decline below the initial public offering price. The initial public offering price will be determined by negotiation between the Company and the representatives of the Underwriters and may bear no relationship to the price at which the Common Stock will trade after completion of this offering. See "Underwriting" for factors to be considered in determining such offering price. The market price of the shares of Common Stock, like that of the common stock of many other biopharmaceutical companies, is likely to be highly volatile. Factors such as the results of preclinical studies and clinical trials by the Company or its competitors, other evidence of the safety or efficacy of products of the Company or its competitors, announcements of technological innovations or new commercial products by the Company or its competitors, governmental regulation, changes in reimbursement policies, health care legislation, developments in patent or other proprietary rights, developments in the Company's relationships with existing and future collaborative partners, if any, public concern as to the safety and efficacy of products developed by the Company, fluctuations in the Company's operating results, and general market conditions may have a significant impact on the market price of the Common Stock. CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS Upon the completion of this offering, certain current stockholders of the Company, including Dr. Maddon and stockholders affiliated with Tudor Investment Corporation and Weiss, Peck & Greer, will beneficially own or control a substantial portion of the outstanding shares of Common Stock and therefore may have the ability, acting together, to elect all of the Company's directors, to determine the outcome of most corporate actions requiring stockholder approval and otherwise control the business of the Company. Such control could have the effect of delaying or preventing a change in control of the Company and 15 consequently adversely affect the market price of the Common Stock. In addition, the Company's Board of Directors is authorized to issue from time to time shares of Preferred Stock, without stockholder authorization, in one or more designated series or classes. The issuance of Preferred Stock, as well as certain provisions in certain of the Company's stock options which provide for acceleration of exercisability upon a change of control of the Company and certain provisions of the Delaware General Corporation Law (Section 203, in particular), could make the possible takeover of the Company or the removal of the Company's management more difficult, discourage hostile bids for control of the Company in which stockholders may receive a premium for their shares of Common Stock or otherwise dilute the rights of holders of Common Stock and depress the market price of the Common Stock. See "Principal Stockholders" and "Description of Capital Stock." FUTURE SALES OF COMMON STOCK; REGISTRATION RIGHTS; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET PRICE A substantial number of outstanding shares of Common Stock and shares of Common Stock issuable upon exercise of outstanding options and warrants will become eligible for future sale in the public market at prescribed times. Sales of substantial numbers of shares of Common Stock in the public market following this offering could adversely affect prevailing market prices. The Securities and Exchange Commission (the "Commission") has proposed an amendment to Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), that if adopted, would permit certain shares to be sold one year earlier than otherwise provided by the current version of Rule 144. Commencing one year after the date of this Prospectus, each stockholder who purchased shares of the Company's stock prior to this offering (which stockholders hold, as of September 30, 1996, 6,554,553 shares of Common Stock and have the right to acquire 260,455 shares of Common Stock upon the exercise of outstanding warrants) is entitled to certain rights with respect to the registration of such shares of Common Stock for offer or sale to the public. The Company plans to file a Form S-8 registration statement registering shares issuable pursuant to the Company's stock option plans. Any sales by existing shareholders or holders of options or warrants may have an adverse effect on the Company's ability to raise needed capital and may adversely affect the market price of the Common Stock. See "Description of Capital Stock," "Shares Eligible for Future Sale" and "Underwriting." DILUTION The initial public offering price will be substantially higher than the net tangible book value per share of the Company which, at September 30, 1996, was $0.25 per share. Investors purchasing shares of Common Stock in this offering will suffer immediate, substantial net tangible book value dilution of $9.28 per share, assuming an initial public offering price of $12.00 per share. In addition, this dilution will be increased to the extent that holders of outstanding options and warrants to purchase Common Stock at prices below the net tangible book value per share of the Company after this offering exercise such options or warrants. See "Dilution." ABSENCE OF DIVIDENDS The Company has never paid any cash dividends on its Common Stock and does not anticipate paying cash dividends in the foreseeable future. The Company currently intends to retain earnings, if any, for the development of its business. In addition, the Company has entered into certain capitalized leases that contain covenants which indirectly restrict the Company's ability to pay dividends. See "Dividend Policy." 16 USE OF PROCEEDS The net proceeds to the Company from the sale of the 2,000,000 shares of Common Stock offered hereby, at an assumed initial public offering price of $12.00 per share and after deducting the underwriting discount and estimated expenses payable by the Company, are estimated to be approximately $21,570,000 ($24,918,000 if the Underwriters' over-allotment option is exercised in full). The Company intends to use the net proceeds to fund clinical trials of its leading product candidates, research and development, in-licensing of late-stage technology and for working capital and general corporate purposes. The Company believes that the net proceeds of this offering, together with the Company's present capital resources, should be sufficient to fund operations through the end of 1998 based on the Company's current operating plan. No assurance can be given that there will be no change that would consume the Company's liquid assets before such time. Thereafter, the Company will require substantial funds in addition to the proceeds of this offering to conduct development activities, preclinical studies, clinical trials and other activities relating to the commercialization of any potential products. The Company anticipates that these funds will be obtained from external sources, such as future offerings of equity or debt securities or agreements with corporate partners and collaborators with respect to the development of the Company's technology, and intends to seek additional financing to fund future operations. There can be no assurance, however, that the Company will be able to negotiate such arrangements or obtain the additional funds it will require on acceptable terms, if at all. In addition, the Company's cash requirements may vary materially from those now planned because of results of research and development and product testing, potential relationships with in-licensors and collaborators, changes in the focus and direction of the Company's research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory approval process, manufacturing, marketing and other costs associated with commercialization of products following receipt of regulatory approvals and other factors. The Company's lease for all of its facilities expires in April 1998. If the Company elects to move to a new location, it may incur substantial expenses for leasehold improvements and relocation costs. If the Company renews its current lease, certain costs will be incurred to enhance its manufacturing capabilities. Pending such uses, the net proceeds from this offering will be temporarily invested by the Company in short-term, interest bearing investment grade securities. DIVIDEND POLICY The Company has not paid any dividends since its inception and presently anticipates that all earnings, if any, will be retained for development of the Company's business and that no dividends on its Common Stock will be declared in the foreseeable future. In addition, under the terms of certain equipment lease financing agreements, the Company is required to maintain a minimum level of tangible net worth of $625,000 and consequently would be prohibited from paying dividends which would reduce tangible net worth below such amount. 17 CAPITALIZATION The following table sets forth the actual, the pro forma and the pro forma as adjusted capitalization of the Company at September 30, 1996 as described below. This table should be read in conjunction with the Company's Financial Statements and related Notes included elsewhere in this Prospectus.
SEPTEMBER 30, 1996 ----------------------------------------- PRO FORMA ACTUAL PRO FORMA(1) AS ADJUSTED(2) ---------- ------------- -------------- (IN THOUSANDS) Long-term portion of capital lease obligations......................... $ 155 $ 155 $ 155 ---------- ------------- -------------- Stockholders' equity: Preferred Stock, $.001 par value; 20,000,000 shares authorized: Series A Preferred Stock; 4,000,000 shares designated; 2,308,000 shares issued and outstanding, actual; and no shares issued and outstanding, pro forma and pro forma as adjusted................... 2 -- -- Series B Preferred Stock; 2,500,000 shares designated; 1,982,830 shares issued and outstanding, actual; and no shares issued and outstanding, pro forma and pro forma as adjusted................... 2 -- -- Series C Preferred Stock; 3,750,000 shares designated; 1,388,996 shares issued and outstanding, actual; and no shares issued and outstanding, pro forma and pro forma as adjusted................... 1 -- -- Common Stock, $.0013 par value, 40,000,000 shares authorized, 2,294,675 shares issued and outstanding, actual; 6,554,553 shares issued and outstanding, pro forma; and 8,554,553 shares issued and outstanding, pro forma as adjusted(3)............................................. 3 8 11 Additional paid-in capital............................................. 22,799 22,799 44,366 Deficit accumulated during the development stage....................... (21,139) (21,139) (21,139) ---------- ------------- -------------- Total stockholders' equity........................................... 1,668 1,668 23,238 ---------- ------------- -------------- Total capitalization............................................... $ 1,823 $ 1,823 $ 23,393 ---------- ------------- -------------- ---------- ------------- --------------
- ------------------------ (1) Assumes the conversion of all outstanding shares of the Company's Preferred Stock into an aggregate of 4,259,878 shares of Common Stock pursuant to their terms. See "Description of Capital Stock." (2) Assumes (i) the sale of 2,000,000 shares of Common Stock offered hereby at an assumed initial public offering price of $12.00 per share and the receipt of the net proceeds therefrom after deducting the underwriting discount and estimated offering expenses and (ii) conversion of all outstanding shares of the Company's Preferred Stock into an aggregate of 4,259,878 shares of Common Stock pursuant to their terms. See "Use of Proceeds" and "Description of Capital Stock." (3) Excludes as of September 30, 1996: (i) 1,791,236 shares subject to outstanding options at a weighted average exercise price of $4.86 per share, of which options to purchase 686,552 shares at a weighted average exercise price of $4.16 per share were exercisable; (ii) 260,455 shares of Common Stock reserved for issuance upon the exercise of outstanding warrants at an exercise price of $6.67 per share, all of which were exercisable; (iii) 62,775 shares subject to options to be granted prior to the completion of this offering at an exercise price equal to the initial public offering price; and, (iv) 750,000 shares available for future issuance under the Company's stock option plans. 18 DILUTION The net tangible book value of the Company as of September 30, 1996 was $1,668,000 or $0.25 per share. Net tangible book value per share is determined by dividing the net tangible book value of the Company (total tangible assets less total liabilities) by the number of shares of Common Stock outstanding (on a pro forma basis to give effect to the conversion of all outstanding shares of Preferred Stock). Without taking into account any changes in the net tangible book value after September 30, 1996, other than to give effect to the sale of the 2,000,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $12.00 per share) and the application of the net proceeds therefrom, the pro forma net tangible book value of the Company at September 30, 1996 would have been $23,238,000, or $2.72 per share. This represents an immediate increase in net tangible book value of $2.47 per share to existing stockholders and an immediate dilution in net tangible book value of $9.28 per share to new investors. The following table illustrates this per share dilution: Assumed initial public offering price per share.............. $ 12.00 Net tangible book value per share before offering.......... $ 0.25 Increase in net tangible book value per share attributable to new investors............................................ 2.47 --------- Pro forma net tangible book value per share after offering... 2.72 --------- Dilution per share to new investors.......................... $ 9.28 --------- ---------
The following table sets forth, on the pro forma basis described above, as of September 30, 1996 the number and percentage of shares of Common Stock purchased from the Company, the total cash consideration (with respect to the new investors, at an assumed initial public offering price of $12.00 per share), and percentage of total cash consideration paid to the Company and the average price per share paid by existing stockholders and new investors:
TOTAL CASH CONSIDERATION SHARES PURCHASED ----------------------- -------------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ---------- ----------- ------------- ----------- ------------- Existing stockholders............................ 6,554,553 76.6% $ 22,781,000 48.7% $ 3.48 New investors.................................... 2,000,000 23.4 24,000,000 51.3 12.00 ---------- ----- ------------- ----- Total...................................... 8,554,553 100.0% $ 46,781,000 100.0% ---------- ----- ------------- ----- ---------- ----- ------------- -----
The foregoing tables do not assume the exercise of outstanding options or warrants. At September 30, 1996, there were outstanding options to purchase 1,791,236 shares of Common Stock under the Company's stock option plans at a weighted average exercise price of $4.86 per share, and outstanding warrants to purchase 260,455 shares of Common Stock at a price of $6.67 per share. The exercise of such options and warrants would result in further dilution to new investors. In addition, (i) effective prior to the completion of this offering, the Company plans to grant options to purchase 62,775 shares to employees having an exercise price equal to the initial public offering price in this offering and (ii) following the completion of this offering, there will be 750,000 shares of Common Stock reserved for future issuance under the Company's stock option plans. See "Capitalization," "Management--Stock Option Plans" and "Description of Capital Stock." 19 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The selected financial data presented below with respect to the balance sheet data as of December 31, 1994 and 1995 and September 30, 1996 and with respect to the statement of operations data for each of the three years in the period ended December 31, 1995, for the nine months ended September 30, 1996 and for the period from December 1, 1986 (inception) to September 30, 1996 are derived from the Company's financial statements, included elsewhere in this Prospectus, which have been audited by Coopers & Lybrand L.L.P. The selected financial data presented below with respect to the balance sheet data as of December 31, 1991, 1992 and 1993 and with respect to the statement of operations data for each of the years ended December 31, 1992, and November 30, 1991 and the one month ended December 31, 1991 are derived from the Company's audited financial statements, not included in this Prospectus. The selected financial data presented below with respect to the statement of operations data for the nine months ended September 30, 1995 have been derived from the Company's unaudited financial statements included elsewhere in this Prospectus. Operating results for the nine months ended September 30, 1996 are not necessarily indicative of results that may be expected for the entire year ending December 31, 1996. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and related Notes included elsewhere in this Prospectus.
NINE MONTHS ENDED YEAR ONE MONTH ENDED ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, NOVEMBER 30, DECEMBER 31, ------------------------------------------ -------------------- 1991 1991(1) 1992 1993 1994 1995 1995 1996 ------------- ------------- --------- --------- --------- --------- --------- --------- STATEMENT OF OPERATIONS DATA: Revenues: Research grants.......... $ 55 $ 8 $ 67 $ 84 $ 504 $ 725 $ 502 $ 268 Product sales............ 77 -- 38 50 52 50 40 67 Interest income.......... 86 7 32 53 108 46 44 91 ------------- ------------- --------- --------- --------- --------- --------- --------- Total revenues......... 218 15 137 187 664 821 586 426 ------------- ------------- --------- --------- --------- --------- --------- --------- Expenses: Research and development............ 957 53 1,207 1,547 2,859 3,853 2,585 2,654 General and administrative......... 665 45 942 748 878 1,094 790 984 Interest expense......... 62 4 59 38 50 87 53 40 Depreciation and amortization........... 207 9 151 249 289 291 229 230 ------------- ------------- --------- --------- --------- --------- --------- --------- Total expenses......... 1,891 111 2,359 2,582 4,076 5,325 3,657 3,908 ------------- ------------- --------- --------- --------- --------- --------- --------- Net loss................... $ (1,673) $ (96) $ (2,222) $ (2,395) $ (3,412) $ (4,504) $ (3,071) $ (3,482) ------------- ------------- --------- --------- --------- --------- --------- --------- ------------- ------------- --------- --------- --------- --------- --------- --------- Pro forma net loss per common share(2).......... $ (0.73) $ (0.57) --------- --------- --------- --------- Pro forma weighted average common shares outstanding(2)........... 6,135 6,135 DECEMBER 1, 1986 (INCEPTION) TO SEPTEMBER 30, 1996 ------------- STATEMENT OF OPERATIONS DATA: Revenues: Research grants.......... $ 1,735 Product sales............ 358 Interest income.......... 633 ------------- Total revenues......... 2,726 ------------- Expenses: Research and development............ 15,505 General and administrative......... 6,257 Interest expense......... 440 Depreciation and amortization........... 1,663 ------------- Total expenses......... 23,865 ------------- Net loss................... $ (21,139) ------------- ------------- Pro forma net loss per common share(2).......... Pro forma weighted average common shares outstanding(2)...........
DECEMBER 31, ----------------------------------------------------- 1991 1992 1993 1994 1995 --------- --------- --------- --------- --------- BALANCE SHEET DATA: Cash and cash equivalents....................................... $ 1,640 $ 1,351 $ 2,137 $ 2,275 $ 559 Working capital................................................. 1,412 837 1,882 2,019 19 Total assets.................................................... 2,366 1,976 2,858 3,489 1,736 Capital lease obligations and deferred lease liability, long-term portion............................................. 250 105 75 235 213 Total stockholders' equity...................................... 1,864 1,547 2,523 2,827 852 SEPTEMBER 30, 1996 --------------- BALANCE SHEET DATA: Cash and cash equivalents....................................... $ 1,746 Working capital................................................. 894 Total assets.................................................... 2,841 Capital lease obligations and deferred lease liability, long-term portion............................................. 181 Total stockholders' equity...................................... 1,668
- ------------------------ (1) Effective January 1, 1992, the Company changed its fiscal year end from November 30 to December 31. (2) See Note 2 to the Company's Financial Statements for information concerning computation of the pro forma per share data. 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Progenics is a biopharmaceutical company focusing on the development and commercialization of innovative products for the treatment and prevention of cancer and viral diseases. The Company commenced principal operations in late 1988 and since that time has been engaged primarily in research and development efforts, development of its manufacturing capabilities and organizational efforts, including recruitment of scientific and management personnel and raising capital. In order to commercialize the principal products that the Company has under development, the Company will need to address a number of technological challenges and comply with comprehensive regulatory requirements. Accordingly, it is not possible to predict the amount of funds that will be required or the length of time that will pass before the Company receives revenues from sales of any of its products. To date, product sales have consisted solely of limited revenues from the sale of research reagents. The Company expects that sales of research reagents in the future will not significantly increase over current levels. The Company's other sources of revenues to date have been research grants related to the Company's HIV programs and interest income. To date, substantially all of the Company's expenditures have been for research and development activities. The Company expects that its research and development expenses will be significantly higher during the balance of 1996 and in future years as its principal research and development programs progress and the Company makes filings for related regulatory approvals. The Company has incurred losses since its inception and had an accumulated deficit of $21,139,000 at September 30, 1996. The Company has financed its operations primarily through the private sale and issuance of equity securities. The Company will require additional funds to complete the development of its products, to fund the cost of clinical trials, and to fund operating losses which are expected to continue for the foreseeable future. The Company does not expect its products under development to be commercialized for the next several years. RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 Revenues from research grants decreased from $502,000 for the nine months ended September 30, 1995 to $268,000 for the nine months ended September 30, 1996. The decrease resulted from a fewer number of grants in the nine months ended September 30, 1996. Sales of research reagents increased from $40,000 for the nine months ended September 30, 1995 to $67,000 for the nine months ended September 30, 1996 resulting from increased orders for such reagents during the first three quarters of 1996. Interest income increased from $44,000 for the nine months ended September 30, 1995 to $91,000 for the nine months ended September 30, 1996 primarily due to the investment of $5,675,000 in net proceeds received from the Company's sale of preferred stock and warrants in the fourth quarter of 1995 and the first quarter of 1996. Research and development expenses increased from $2,585,000 for the nine months ended September 30, 1995 to $2,654,000 for the nine months ended September 30, 1996. The increase was principally due to additional costs of manufacturing GMK in 1996 for the Company's Phase III clinical trials, partially offset by reductions in scientific staff in the Company's HIV department and by a decrease in consulting expenses relating to procedures for manufacturing GMK. General and administrative expenses increased from $790,000 for the nine months ended September 30, 1995 to $984,000 for the nine months ended September 30, 1996. The increase was principally due to an increase in payroll and related costs to support the Company's growth. Interest expense incurred on the Company's capital lease obligations decreased from $53,000 for the nine months ended September 30, 1995 to $40,000 for the nine months ended September 30, 1996. Depreciation and amortization remained 21 relatively unchanged from $229,000 for the nine months ended September 30, 1995 to $230,000 for the nine months ended September 30, 1996. The Company's net loss for the nine months ended September 30, 1995 was $3,071,000 compared to a net loss of $3,482,000 for the nine months ended September 30, 1996. YEARS ENDED DECEMBER 31, 1994 AND 1995 Revenues from research grants increased from $504,000 in 1994 to $725,000 in 1995. The increase for 1995 resulted from a greater number of grants in that year. Sales of research reagents remained relatively unchanged from $52,000 in 1994 to $50,000 in 1995. Interest income decreased from $108,000 in 1994 to $46,000 in 1995 due to the reduction of cash available for investing as the Company continued to fund its operations. Research and development expenses increased from $2,859,000 for 1994 to $3,853,000 for 1995. The increase in 1995 primarily resulted from the Company's preparation for clinical trials for GMK, including outside consulting expenses. The Company hired a new Vice President of Medical Affairs in October 1994 and, during 1995, hired a Manager of Clinical Trials and other related staff. In addition, the Company incurred expenses in 1995 related to a new license and supply agreement with Aquila. Rent expense also increased by $115,000 in 1995 resulting from occupation of the Company's expanded laboratory space for the full fiscal year; the expanded space was occupied at the end of the second quarter of 1994. These increases were partially offset by a reduction in scientific staff in the Company's HIV department during the second half of 1995. General and administrative expenses increased from $878,000 in 1994 to $1,094,000 for 1995. The increase in 1995 was principally due to additional legal fees of $120,000 relating to in-licensing activities, filing new patent applications and personnel expenses, additional rent expense of $35,000 resulting from the expansion of the Company's office space at the end of the second quarter of 1994, and increased insurance costs related, in part, to coverage for the Company's clinical trials. Interest expense increased from $50,000 in 1994 to $87,000 in 1995 due, in part, to the financing of additional equipment under capitalized leases during 1994 and 1995. The Company also recognized interest expense of $24,000 on amounts advanced to the Company during 1995 in the aggregate principal amount of $1,200,000. Depreciation and amortization remained relatively unchanged from $289,000 in 1994 to $291,000 in 1995. The Company's net loss in 1994 was $3,412,000 compared to a net loss of $4,504,000 in 1995. YEARS ENDED DECEMBER 31, 1993 AND 1994 Revenues from research grants increased from $84,000 in 1993 to $504,000 in 1994, primarily due to an increase in the number of research grants from which the Company earned grant revenue in 1994. Interest income increased from $53,000 in 1993 to $108,000 in 1994, primarily due to the investment of $3,597,000 in net proceeds received from the exercise of Series B Preferred Stock warrants during 1994. Research and development expenses increased from $1,547,000 in 1993 to $2,859,000 in 1994. Sales of research reagents remained relatively unchanged from $50,000 in 1993 to $52,000 in 1994. The increase in 1994 was partly due to the expansion of the Company's research and development program to include the development of cancer vaccine products. The Company also intensified its HIV program efforts during 1994, adding additional scientific and quality assurance/quality control staff, including a Vice President of Medical Affairs in October 1994, purchased more laboratory supplies, entered into new consulting agreements and incurred additional rent expense of $124,000 by expanding its laboratory space at the end of the second quarter of 1994. General and administrative expenses increased from $748,000 in 1993 to $878,000 in 1994. In 1994, the Company incurred additional rent expense of $41,000 due to the expansion of its office space at the end of the second quarter of 1994, and incurred additional administrative expenses of $89,000 to support 22 the Company's increased level of research and development. Interest expense increased from $38,000 in 1993 to $50,000 in 1994, primarily due the acquisition of additional equipment through capitalized leases as the Company expanded its facilities. Depreciation and amortization increased from $249,000 in 1993 to $289,000 in 1994 primarily due to the expansion of the Company's laboratory facilities and the acquisition of additional equipment. The Company's net loss in 1993 was $2,395,000 compared to a net loss of $3,412,000 in 1994. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its operations since inception primarily through private placements of equity securities, which provided aggregate cash proceeds of $22,781,000 (including loans that were subsequently converted into equity securities). Through September 30, 1996, the Company had also received cash proceeds of $1,656,000 from research grants, $633,000 from interest on investments and $349,000 from the sale of research reagents. Through September 30, 1996, the Company had financed $1,228,000 of equipment purchases through capitalized leases and a promissory note. During the fourth quarter of 1995 and the first quarter of 1996, the Company raised $897,000 and $4,777,000 in net proceeds from the sale of approximately 44,900 units and 241,203 units, respectively, in a private placement of shares of the Company's Series C Preferred Stock in a unit offering. Each $20.00 unit ("Series C Unit") consisted of four shares of Series C Preferred Stock and one warrant entitling the holder to purchase one share of Series C Preferred Stock for $5.00 any time within five years of the date of issuance ("Series C Warrant"). In addition, during December 1995, a note payable in the aggregate principal amount of $1,200,000, plus accrued and unpaid interest of $24,000 was converted into approximately 61,200 Series C Units. At September 30, 1996, there were 347,249 Series C Warrants outstanding which if exercised in full would result in $1,736,000 of net proceeds to the Company and the issuance of 347,249 shares of Series C Preferred Stock or, if exercised subsequent to the offering, 260,455 shares of Common Stock. As of September 30, 1996, the Company had cash and cash equivalents totaling $1,746,000 compared with $559,000 at December 31, 1995. Planned operations for the remainder of 1996 currently contemplate expenditures for capital assets of approximately $150,000, mainly consisting of laboratory equipment and leasehold improvements to expand the Company's manufacturing capabilities. The Company plans to finance a significant portion of equipment purchases through capitalized leases. However, there can be no assurance that the Company will successfully enter into such new arrangements. The Company's lease for all of its facilities expires in April 1998. If the Company elects to move to a new location, it may incur substantial expenses for leasehold improvements and relocation costs. If the Company renews its current lease, certain costs will be incurred to enhance its manufacturing capabilities. The Company believes that the net proceeds of this offering, together with the Company's present capital resources, should be sufficient to fund operations through the end of 1998 based on the Company's current operating plan. No assurance can be given that there will be no change that would consume the Company's liquid assets before such time. Thereafter, the Company will require substantial funds to conduct development activities, preclinical studies, clinical trials and other activities relating to the commercialization of any potential products. In addition, the Company's cash requirements may vary materially from those now planned because of results of research and development and product testing, potential relationships with in-licensors and collaborators, changes in the focus and direction of the Company's research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory approval process, manufacturing and marketing and other costs associated with the commercialization of products following receipt of regulatory approvals and other factors. After the completion of the offering, the Company will have no committed external sources of capital, and, as discussed above, expects no significant product revenues for a number of years as it will take at 23 least that much time to bring the Company's products to the commerical marketing stage. Therefore, the Company intends to seek additional financing, such as through future offerings of equity or debt securities or agreements with corporate partners and collaborators with respect to the development of the Company's technology, to fund future operations. There can be no assurance, however, that the Company will be able to obtain the additional funds it will require on acceptable terms, if at all. If adequate funds are not available, the Company may be required to delay, reduce the scope of or eliminate one or more of its research or development programs; to obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain technologies, product candidates or products that the Company would otherwise seek to develop or commercialize itself; or to license the rights to such products on terms that are less favorable to the Company than might otherwise be available. See "Risk Factors--History of Operating Losses and Accumulated Deficit; No Product Revenue and Uncertainty of Future Profitability" and "--Need for Additional Financing and Uncertain Access to Capital Funding." IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARD The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") in October 1995. See Note 2 to the Company's Financial Statements included elsewhere in this Prospectus for a discussion of the impact of adoption of SFAS 123. 24 BUSINESS OVERVIEW Progenics is a biopharmaceutical company focusing on the development and commercialization of innovative products for the treatment and prevention of cancer and viral diseases. The Company applies its immunology expertise to develop biopharmaceuticals that induce an immune response or that mimic natural immunity in order to fight cancers, such as malignant melanoma, and viral diseases, such as HIV infection. Progenics' most advanced product candidate, GMK, is a therapeutic vaccine that is undergoing pivotal Phase III clinical trials for the treatment of melanoma, a deadly form of skin cancer. Progenics' second vaccine product, MGV, is being developed for the treatment of various cancers, and recently entered Phase I/II clinical trials. Based on its participation in the discoveries of two major receptors for HIV, the Company is engaged in research and development of several therapeutic products designed to block entry of the virus into human immune system cells. Progenics has completed preclinical studies on two HIV product candidates, PRO 542 and PRO 367, and plans to initiate Phase I/II clinical trials of these products in 1997. Progenics' most advanced product candidates are based on two proprietary technologies: ganglioside conjugate vaccine technology, which the Company uses in its cancer program; and UnAB technology, which the Company uses in its HIV program. The Company has exclusively licensed from Sloan-Kettering several ganglioside conjugate vaccines designed to stimulate the immune system to destroy cancer cells. The Company applies its UnAB technology to produce antibody-like molecules designed to neutralize or destroy HIV or HIV-infected cells. CANCER THERAPEUTICS GMK is a therapeutic cancer vaccine designed to prevent recurrence of melanoma in patients who are at risk of relapse after surgery. Developed at Sloan-Kettering, GMK is composed of a ganglioside antigen which is abundant in melanoma cells, conjugated to an immunogenic carrier protein and combined with an adjuvant (an immunological stimulator). In August 1996, the Company commenced the first of three pivotal, randomized, multicenter Phase III clinical trials of GMK. These studies are being conducted in the United States by ECOG and SWOG, which are cooperative cancer research groups supported by the NCI. Two international Phase III clinical trials will be initiated in 1997 and will be conducted in Europe by the ICR of the United Kingdom and the EORTC. MGV, the Company's second ganglioside conjugate vaccine, incorporates two ganglioside antigens that are abundant in a wide range of cancer cells. These cancers include colorectal cancer, lymphoma, small cell lung cancer, sarcoma, gastric cancer, neuroblastoma and melanoma. In September 1996, MGV entered Phase I/II clinical trials at Sloan-Kettering. HIV THERAPEUTICS The Company is pursuing two approaches based on its HIV receptor technology in the research and development of products designed to block viral entry into human immune system cells. The Company's UnAB approach is based on the CD4 receptor while its HIV fusion approach is based on a recently discovered second receptor for the virus, CKR-5. Progenics is developing PRO 542 to selectively target HIV and prevent it from infecting healthy cells by binding to the sites on the virus that are required for entry into the cell. PRO 542 is based on Progenics' UnAB technology and has been shown IN VITRO to recognize a wide range of HIV strains, including those most prevalent in the United States and the rest of the world. PRO 542 is being developed as an immunotherapy to treat HIV-positive individuals and as an immunoprophylactic treatment to prevent infection of individuals who have been exposed to the virus. The Company plans to file an IND covering PRO 542 by the end of 1996 and initiate Phase I/II clinical trials in 1997. 25 Progenics is developing PRO 367 as a therapeutic agent designed to kill HIV-infected cells. PRO 367 consists of a UnAB molecule linked to a therapeutic radioisotope and is designed to bind to and destroy HIV-infected cells by delivering a lethal dose of radioactivity. The Company plans to begin Phase I/II clinical trials of PRO 367 in 1997. In June 1996, the Company's scientists in collaboration with researchers at ADARC described in an article published in NATURE the discovery of a second receptor for HIV, CKR-5. This receptor enables fusion of HIV with the cell membrane, entry of the viral genetic information into the cell and initiation of viral replication. The Company is using its proprietary ProSys assay in a program to discover novel therapeutics that specifically inhibit the interaction of HIV with the CKR-5 receptor, thereby blocking viral fusion and entry. THE HUMAN IMMUNE SYSTEM The human immune system functions to protect the body from disease by specifically recognizing and destroying foreign invaders, including viruses and bacteria. In addition, the immune system is capable of recognizing and eliminating abnormal cells in the body, such as cancer cells and cells infected with viruses and bacteria. White blood cells, particularly B and T lymphocytes, have the ability to recognize antigens made by these infectious agents and abnormal cells and react to them. For example, B lymphocytes produce antibodies that recognize specific antigens. Antibodies can bind to these antigens and neutralize or eliminate infectious agents and cancer cells. Vaccines can induce the production of antibodies against antigens on infectious agents and abnormal cells and thereby protect the body from illness. Vaccines are also being developed as therapeutics to fight ongoing diseases. In addition, genetic engineering techniques have enabled the production of antibodies or antibody-like molecules in the laboratory. These genetically designed antibody molecules may function in situations where the immune response is failing or not present by mimicking the body's own immune response. PRODUCT DEVELOPMENT The Company applies its expertise in immunology to the development of therapeutic biopharmaceuticals that use components of the immune system, particularly antibodies, to fight diseases. The Company's two principal programs are directed towards cancer and HIV. In the case of cancer, the Company is developing vaccine products that are designed to induce specific antibody responses to cancer antigens in order to fight certain cancers. In the case of HIV, the Company is developing therapeutic products by genetically engineering molecules that function as antibodies and selectively target HIV and HIV-infected cells for neutralization or destruction. The Company also is actively engaged in research and discovery of therapeutic products based on a second HIV receptor, CKR-5, and its role in viral fusion and entry. 26 The following table summarizes the status of the principal development programs, product candidates and products of the Company:
PROGRAM/PRODUCT INDICATION/USE STATUS(1) - ---------------------------------- ---------------------------------- ---------------------------------- CANCER THERAPEUTICS GMK Vaccine for melanoma Pivotal Phase III clinical trials ongoing MGV Vaccine for colorectal cancer, Phase I/II clinical trials ongoing lymphoma, small cell lung cancer, sarcoma, gastric cancer, neuroblastoma and melanoma HIV THERAPEUTICS PRO 542 HIV therapy/prophylaxis Phase I/II clinical trials expected to commence in 1997 PRO 367 HIV therapy Phase I/II clinical trials expected to commence in 1997 CKR-5/Fusion HIV therapy Research (using ProSys) ProVax HIV vaccine Research ASSAYS, DRUG SCREENING PROGRAM AND REAGENTS ONCOTECT GM Clinical assay for cancer In clinical investigational use prognosis HIV Attachment Drug Screen High-throughput screening to In use identify small-molecule drugs to treat HIV infection sCD4 Research reagent On market gp120 Research reagent On market
-------------------------- (1) "Research" includes initial research related to specific molecular targets, synthesis of new chemical entities and assay development for the identification of lead compounds. Phase I-III clinical trials denote safety and efficacy tests in humans as follows: Phase I: Evaluation of safety. Phase II: Evaluation of safety, dosage and efficacy. Phase III: Larger scale evaluation of safety and efficacy potentially requiring larger patient numbers, depending on the clinical indication for which marketing approval is sought. "In clinical investigation use" means being used by the Company to measure antibody levels of patients in clinical trials. "In use" means being used by a collaborator of the Company to identify novel small-molecule therapeutics. See "Business--Government Regulation" and "--Assays, Drug Screening Program and Reagents." 27 CANCER THERAPEUTICS The Company is currently developing two therapeutic cancer vaccines, one specifically for melanoma and one for a variety of cancers, including colorectal cancer, lymphoma, small cell lung cancer, sarcoma, gastric cancer, neuroblastoma and melanoma. To date, the principal therapies for cancer have been surgery, radiation and chemotherapy. In contrast to these invasive and toxic approaches, cancer vaccines are now being developed to stimulate the natural defense mechanisms of the immune system to fight cancer. Unlike traditional infectious disease vaccines that are used to prevent infection in the general population, most cancer vaccines are therapeutic, meaning that they are being developed to prevent recurrence of cancer in people whose cancer is in remission. In some cases, cancer vaccines are also being designed for use in the prevention of cancer in individuals who are at high risk for the disease. A major challenge in cancer vaccine development is that the natural human immune response generally does not produce sufficient antibodies to fight cancer cells because the immune system often does not recognize the difference between normal cells and cancer cells. Consequently, a primary objective in the development of cancer vaccines is to train the immune system to recognize cancer cells as a threat. If this can be achieved and the immune system can produce sufficient antibodies to the cancer, then the recurrence of the cancer may be prevented. Most cancer vaccines of parties other than the Company that are in clinical development consist of dead cancer cells or crude extracts from cancer cells. Unlike the Company's vaccine technology, the limitations of these approaches include the inability to identify the active components of the vaccine and to measure specific immune responses. PROGENICS' TECHNOLOGY: GANGLIOSIDE CONJUGATE VACCINES Progenics' cancer vaccine program is different from other approaches in that it involves the use of purified gangliosides as cancer antigens. Gangliosides are chemically-defined molecules which are composed of carbohydrate and lipid components. Certain gangliosides are usually found in low amounts in normal human tissue, but are abundant in certain cancers, such as melanoma, colorectal cancer, lymphoma, small cell lung cancer, sarcoma, gastric cancer and neuroblastoma. Gangliosides alone, however, do not normally trigger an immune response in humans. To overcome this, Progenics attaches gangliosides to large, highly immunogenic carrier proteins to form "conjugate" vaccines designed to trigger specific immune responses to ganglioside antigens. The technique of conjugating carbohydrate molecules to carrier proteins has been successfully used by others in the past to create effective vaccines for certain infectious diseases. For example, conjugate vaccines have been approved for marketing by the FDA and are currently administered to infants and children to prevent certain bacterial infections. To further augment the immune response to gangliosides, Progenics adds a potent immunological stimulator known as an "adjuvant" to its ganglioside-carrier protein conjugate. The following diagram illustrates the components of the Company's ganglioside conjugate vaccines. 28 [DIAGRAM ILLUSTRATING THE COMPONENTS OF THE COMPANY'S GANGLIOSIDE CONJUGATE VACCINES] The Company's ganglioside conjugate vaccines stimulate the immune system to produce specific antibodies to ganglioside antigens. These antibodies have been shown IN VITRO to recognize and destroy cancer cells. Based on these tests and the clinical trial results described below, the Company believes that vaccination of cancer patients with ganglioside conjugate vaccines will prevent recurrence of cancer and prolong overall survival. The Company's cancer vaccines use known amounts of chemically-defined antigens, not dead cancer cells or crude extracts from cancer cells. As a result, Progenics is able to measure specific immune responses to the gangliosides in its vaccines. The Company also believes that there is a reduced likelihood of variability in its products as compared to vaccines which are prepared from dead cancer cells or crude extracts from cancer cells or which require complicated manufacturing processes. GMK: THERAPEUTIC VACCINE FOR MALIGNANT MELANOMA Progenics' most advanced product under development is GMK, a proprietary therapeutic vaccine for melanoma that is currently in pivotal Phase III clinical trials. GMK is the first cancer vaccine based on a defined cancer antigen to enter Phase III clinical trials. GMK was initially developed at Sloan-Kettering and is exclusively licensed to the Company. GMK is designed to prevent recurrence of melanoma in patients who are at risk of relapse after surgery. GMK is composed of the ganglioside GM2 conjugated to the carrier protein KLH (keyhole limpet hemocyanin) and combined with the adjuvant QS-21. QS-21 is the lead compound in the Stimulon-TM- family of adjuvants developed and owned by Aquila. TARGET MARKET Melanoma is a highly lethal cancer of the skin cells that produce the pigment melanin. In early stages melanoma is limited to the skin, but in later stages it spreads to the lungs, liver, brain and other organs. The Company estimates that there are 300,000 melanoma patients in the U.S. today. The American Cancer Society estimates that 38,000 patients in the U.S. will be newly diagnosed with melanoma in 1996. In the U.S., the incidence of melanoma is increasing at a rate of approximately 6% per year, an increase in incidence that is faster than that of any other cancer in men and second only to lung cancer in women. It is estimated that one in 87 Americans will develop melanoma in their lifetime. Increased exposure to the 29 ultraviolet rays of the sun may be an important factor contributing to the increase in new cases of melanoma. Melanoma patients are categorized according to the following staging system: MELANOMA STAGING
STAGE I STAGE II STAGE III STAGE IV - --------------------- --------------------- --------------------- --------------------- - - lesion less than - lesion greater - metastasis to - distant 1.5 mm thickness than 1.5 mm regional draining metastasis thickness lymph nodes - - no apparent - local spread from - regional spread metastasis primary cancer from primary site cancer site
GMK is designed for the treatment of patients with Stage II or Stage III melanoma. It is estimated that these patients comprise about 50% of the total number of melanoma patients and, accordingly, the Company estimates that there are currently 150,000 Stage II and III melanoma patients in the U.S. According to the American Cancer Society, an estimated 60% to 80% of Stage III melanoma patients will experience recurrence of their cancer and die within five years after surgery. CURRENT THERAPIES Standard treatment for all melanoma patients includes surgical removal of the cancer. Thereafter, therapy varies depending on the stage of the disease. For Stage I and II melanoma patients, treatment generally consists of close monitoring for recurrence. The only approved treatment for Stage III melanoma patients is high-dose alpha interferon, which received FDA marketing approval for this indication in December 1995. In a recently reported study, the median recurrence-free survival period after surgery for patients treated with high-dose alpha interferon was 20 months versus 12 months for patients who received no treatment. In addition, the median overall survival period after surgery was 46 months for the treated group versus 34 months for the untreated group. However, treatment with high-dose alpha interferon causes substantial toxicities, requires an intensive treatment over twelve months (intravenous injections five days a week for the first month followed by subcutaneous injections three times a week for the remaining eleven months) and costs about $35,000 per year. Other approaches for treatment of Stage II or III melanoma patients are currently under investigation, but none has been approved for marketing. These experimental therapies include chemotherapy, low-dose alpha interferon and other vaccines. CLINICAL TRIALS GMK entered pivotal Phase III clinical trials in the United States in August 1996. In addition, Progenics plans to initiate two international Phase III clinical trials of GMK in 1997. GMK is administered in the studies by 12 subcutaneous injections over a two-year period on an out-patient basis. The ongoing U.S. Phase III trial compares GMK with high-dose alpha interferon in Stage IIb (advanced Stage II) and Stage III melanoma patients who have undergone surgery but are at high risk for recurrence. This randomized trial, which is expected to enroll 850 patients, is being conducted nationally by ECOG in conjunction with SWOG and other major cancer centers, cooperative cancer research groups, hospitals and clinics. ECOG and SWOG are leading cooperative cancer research groups supported by the NCI and are comprised of several hundred participating hospitals and clinics in the United States. The primary endpoint of the trial is to compare the recurrence of melanoma in patients receiving GMK versus in patients receiving high-dose alpha interferon. The study will also compare quality of life and overall survival of patients in both groups. 30 The second Phase III clinical trial will be a double-blind, placebo-controlled study in Stage IIb and Stage III melanoma patients who have undergone surgery but are at high risk for recurrence. This trial will be conducted by major cancer centers, hospitals and clinics in Europe, Australia, and New Zealand. In the United Kingdom, the study will be conducted by the ICR, a major government-sponsored cancer research organization. Patients will be randomized to receive either GMK or a placebo (because high-dose alpha interferon has not been approved for use in melanoma in the countries involved in this trial). The primary endpoint of the trial is to compare the recurrence of melanoma in patients receiving GMK versus in patients receiving placebo. The study will also compare overall survival of patients in both groups. The third Phase III clinical trial will be a randomized study exclusively in Stage II melanoma patients who have undergone surgery but are at intermediate risk for recurrence. This trial will be conducted in Europe by the EORTC, the major cooperative cancer research group in Europe, and in the United States by ECOG. Patients will be randomized to receive either GMK or observation with no treatment. The primary endpoint of the trial is to compare the recurrence of melanoma in patients receiving GMK versus in patients receiving observation with no treatment. The study will also compare overall survival of patients in both groups. A predecessor of GMK, called GM2-BCG, which combined GM2 ganglioside with the adjuvant BCG, underwent clinical testing at Sloan-Kettering in the late 1980s. In a double-blind, randomized Phase II study in 122 Stage III melanoma patients, subjects in the treated group received GM2-BCG for six months after surgery; subjects in the control group received the same regimen with BCG alone. The median recurrence-free survival period after surgery for patients treated with GM2-BCG was 33 months versus 17 months for the patients in the control group. In addition, the median overall survival period after surgery for patients in the treated group was 70 months versus 30 months for patients in the control group. Approximately 85% of treated patients developed antibodies to GM2 ganglioside. The presence of these antibodies significantly correlated with improved recurrence-free and overall survival of patients. Phase I/II clinical trials of GMK under institutional INDs were conducted at Sloan-Kettering over the last five years. In these studies, approximately 120 patients, most of whom had Stage III melanoma, were treated with GMK. All patients receiving GMK at the dose level being used in the current Phase III trials of GMK developed antibodies to GM2 ganglioside. Patients treated with GMK had levels of antibody to GM2 ganglioside that were on average four times higher and also were longer lasting than in patients treated with GM2-BCG in the GM2-BCG Phase II trial. In addition, GMK was well tolerated by all patients in these studies, and no clinically significant side effects attributable to the vaccine were observed. MGV: THERAPEUTIC VACCINE FOR CERTAIN CANCERS Progenics' second ganglioside conjugate vaccine in development, MGV, is a proprietary therapeutic vaccine for cancers which express GD2 or GM2 gangliosides. These cancers include colorectal cancer, lymphoma, small cell lung cancer, sarcoma, gastric cancer, neuroblastoma and melanoma. MGV has three components: (i) GM2-KLH (GM2 ganglioside conjugated to KLH); (ii) GD2-KLH (GD2 ganglioside conjugated to KLH); and, (iii) QS-21 adjuvant. MGV is designed to prevent recurrence of cancer and prolong overall survival of patients after their cancer has been removed by surgery or reduced by chemotherapy or radiation therapy. CLINICAL TRIALS MGV entered Phase I/II clinical trials in September 1996 under an institutional IND at Sloan-Kettering. The primary objectives of the study are to establish the safety of MGV and the ability of the vaccine to induce specific immune responses to both GD2 and GM2 gangliosides in patients with different cancer types, beginning with melanoma patients. In addition, a goal of the study is to optimize the ratio of GD2 and GM2 gangliosides in MGV to be used in future clinical trials. The GM2-KLH/QS-21 (GMK) and GD2-KLH/QS-21 components of MGV have each undergone separate clinical testing. The results of clinical studies with GMK are discussed above. To date, six 31 melanoma patients have received GD2-KLH/QS-21 alone in Phase I/II clinical trials under an institutional IND at Sloan-Kettering. All six subjects developed antibodies to GD2 ganglioside following vaccination. In addition, the vaccine was well tolerated and no clinically significant side effects attributable to the vaccine were observed. Therefore, the Company expects that patients receiving MGV will develop antibodies to both GD2 and GM2 gangliosides. HIV THERAPEUTICS HIV infection causes a slowly progressive deterioration of the immune system which results in AIDS. AIDS is characterized by a general collapse of the immune system leading to a wasting syndrome, frequent opportunistic infections, rare forms of cancer, central nervous system degeneration, and eventual death. HIV infection is unusual in that individuals testing positive for the virus can survive for many years without symptoms of the disease. There are three major routes of transmission of the virus: sexual contact, exposure to HIV-contaminated blood or blood products and mother-to-child transmission. HIV specifically infects cells that have the CD4 receptor on their surface ("CD4+"). CD4+ cells are critical components of the immune system, and include T lymphocytes, monocytes, macrophages and dendritic cells. The deleterious effects of HIV are largely due to the replication of the virus in CD4+ T lymphocytes and the resulting destruction of these cells. HIV-positive individuals display both antibodies and other immune system responses which are specific to the virus. However, the high fatality rate of this disease makes it clear that these natural immune system responses do not provide adequate long-term protection. There are two reasons why these natural responses are inadequate. First, as described above, the CD4+ T lymphocytes required to mount an effective immune response against HIV are destroyed, leaving the immune system too weak to eliminate the virus. Second, HIV displays a remarkable degree of variability as a result of high rates of mutation that permit different strains of the virus to escape the immune system response and progressively replicate throughout the body. The Company's scientists and their collaborators have made important discoveries in understanding how HIV enters human cells and initiates viral replication. In the 1980s, Company scientists in collaboration with researchers at Columbia University, the ICR and the Centers for Disease Control and Prevention ("CDC") demonstrated that the initial step of HIV infection involves the specific attachment of the virus to the CD4 receptor on the surface of human immune system cells. These researchers also showed that the gp120 glycoprotein located on the HIV envelope binds with high affinity to the CD4 receptor. Although these researchers demonstrated that CD4 was necessary for HIV attachment, this step is not sufficient to enable the virus to enter the cell and initiate viral replication. In June 1996, Company scientists in collaboration with researchers at ADARC described in an article in NATURE the discovery of a second receptor for HIV on the surface of human immune system cells. This receptor, CKR-5, enables fusion of HIV with the cell membrane after binding of the virus to the CD4 receptor. This fusion step results in entry of the viral genetic information into the cell and subsequent viral replication. Recently, Company scientists in collaboration with researchers at ADARC demonstrated that it is the gp120 glycoprotein that binds to the newly discovered CKR-5 receptor as well as to the CD4 receptor. This process is shown below. 32 [DIAGRAM DEPICTING THE GP120 GLYCOPROTEIN BINDING TO THE NEWLY DISCOVERED CKR-5 RECEPTOR AND THE CD4 RECEPTOR AND ALSO THE FUSION OF THE VIRUS WITH THE HUMAN CELL MEMBRANE] PROGENICS' HIV RECEPTOR TECHNOLOGIES: UNABS AND CKR-5/FUSION Based on the Company's participation in the discoveries of two major receptors for HIV, Progenics is pursuing two approaches in the research and development of products designed to block entry of HIV into human immune system cells. The Company's UnAB approach is based on the CD4 receptor while its HIV fusion approach is based on a recently discovered second receptor, CKR-5. Because HIV must first attach to the CD4 receptor to infect human cells, the Company believes that the part of the gp120 glycoprotein that attaches to the CD4 receptor must remain constant across all strains of the virus. The gp120 glycoprotein is located on the exterior of both HIV and HIV-infected cells. Progenics' UnABs incorporate a part of the CD4 receptor into genetically-engineered molecules that function like antibodies and are designed to bind specifically to the gp120 glycoprotein of HIV or HIV-infected cells. In IN VITRO tests, the Company's UnABs have demonstrated the ability to bind with high affinity to gp120 glycoproteins from a wide range of HIV strains, including the strains most prevalent in the U.S. and the rest of the world. Because the Company's UnAB technology is targeted to a part of HIV that must remain constant in order for the virus to enter cells, the Company believes that its technology may address the obstacles presented by the high mutation rate of the virus. Two of the Company's HIV products under development are based on its proprietary UnAB technology, although they employ the technology in different ways. PRO 542 is designed to bind to the gp120 glycoprotein located on the virus itself, thereby preventing it from infecting healthy cells. PRO 367 is designed to bind to the gp120 glycoprotein located on the exterior of HIV-infected cells and destroy those cells by delivering a lethal dose of radioactivity. The two products also differ in that each molecule of PRO 542 has four binding sites for HIV while each molecule of PRO 367 has two binding sites. See the inside back cover of this Prospectus for diagrams of these products. In the area of HIV fusion, the Company is using its proprietary ProSys assay in a program to discover novel therapeutics that specifically inhibit the interaction of HIV with the CKR-5 receptor, thereby blocking viral fusion and entry. TARGET MARKET Progenics' therapeutic product candidates are designed primarily for use in asymptomatic HIV-positive individuals. Accordingly, the target population for these products is patients who are aware of their infection but do not yet have AIDS. Although there are few signs of disease in an HIV-positive individual during the asymptomatic period, the virus is replicating in the body by infecting healthy cells. The World Health Organization estimated that in 1994 more than 700,000 people in the U.S. and 17,000,000 people worldwide were infected with HIV. The CDC estimated that as of December 1995 more than 190,000 people in the U.S. had AIDS. AIDS is currently the leading cause of death in the U.S. in men between the ages of 25 and 44 and the third leading cause of death in the U.S. in women between those ages. 33 An additional potential market for the Company's HIV product candidates consists of individuals who are at risk of becoming HIV-positive because they have been exposed to the virus, such as: (i) health care workers exposed to HIV-contaminated body fluids through accidental needlestick injuries; and (ii) babies born to HIV-positive women. According to a recent academic study, in 1990 there were over 250,000 percutaneous needlestick injuries among U.S. hospital employees. The CDC reported that in 1993 there were approximately 7,000 children born to HIV-positive women in the U.S. CURRENT THERAPIES At present, two classes of products have received FDA marketing approval for the treatment of HIV infection and AIDS: reverse transcriptase inhibitors and protease inhibitors. Both types of drugs are inhibitors of viral enzymes and have shown efficacy in reducing the concentration of HIV in the blood and prolonging asymptomatic periods in HIV-positive individuals, especially when administered in combination. However, it is not known whether HIV will develop resistance to these drugs over time. In addition, the use of these drugs presents problems of toxic side effects and compliance for some patients. PRO 542: HIV THERAPY/PROPHYLAXIS Progenics is developing PRO 542 for the treatment and post-exposure prevention of HIV infection. PRO 542 is a proprietary UnAB-based product with four binding sites for the gp120 glycoprotein on HIV. PRO 542 is designed to neutralize infectious HIV through one of two mechanisms: (i) binding to and thereby blocking the gp120 glycoprotein; or (ii) binding to and detaching the gp120 glycoprotein from the virus. In IN VITRO and EX VIVO tests conducted by Progenics in collaboration with scientists at ADARC and the CDC, PRO 542 potently neutralized a wide variety of clinical strains of HIV as well as viruses in the plasma of HIV-positive individuals. In comparative IN VITRO studies at ADARC using a panel of neutralizing antibodies to HIV, PRO 542 was found to be more potent and broadly neutralizing than the antibodies to which it was compared. In further studies at ADARC, PRO 542 protected severe combined immune deficient ("SCID") mice transplanted with human peripheral blood lymphocytes against infection by the three HIV strains tested, including strains of the virus isolated from HIV-positive individuals. Progenics plans to file an IND for PRO 542 in 1996 and, subject to its IND becoming effective, initiate two dose-escalation Phase I/II clinical trials in 1997. The first study will be conducted in HIV-positive adult patients at Mount Sinai Medical Center and the Bronx V.A. Medical Center, both in New York City. The second trial will be conducted in HIV-positive children at Baylor College of Medicine in Houston by the AIDS Clinical Trials Group, ("ACTG"), a leading cooperative HIV research group supported by the National Institute of Allergy and Infectious Diseases ("NIAID"). Both trials will measure safety, pharmacokinetics and antiviral activity of PRO 542. PRO 367: HIV THERAPY Progenics is developing PRO 367 as a therapeutic agent designed to destroy HIV-infected cells. PRO 367 is composed of a proprietary UnAB molecule with two binding sites for the gp120 glycoprotein linked to a therapeutic radioisotope. PRO 367 is designed to specifically bind with high affinity to the gp120 glycoprotein on HIV-infected cells and to destroy these cells by delivering a lethal dose of radioactivity. The Company plans to initiate dose-escalation Phase I/II clinical trials of PRO 367 in 1997, subject to obtaining necessary regulatory approvals. The PRO 367 study will be conducted by the French Association Nationale de Recherches contre le SIDA at the Pitie-Salpetriere Hospital in Paris. The study will assess safety, pharmacokinetics, biodistribution and antiviral effects of PRO 367 in HIV-positive adult patients. In IN VITRO tests, PRO 367 specifically bound with high affinity to the gp120 glycoprotein on the cell surface. In addition, a pilot Phase I clinical trial in AIDS patients of a trace-labelled precursor of PRO 367 34 is being conducted under an institutional IND at Sloan-Kettering. This trial is assessing the safety, pharmacology and biodistribution of the compound with low doses of iodine-131. To date, the compound has been well tolerated by all patients and no clinically significant side effects attributable to the compound have been observed. CKR-5/FUSION (USING PROSYS): HIV THERAPY The Company's first application of its CKR-5 receptor technology is a proprietary assay known as ProSys. ProSys models fusion of HIV with human cells by means of a rapid, automated and sensitive assay that does not involve the use of infectious virus. Progenics is using ProSys in a program to discover novel biologic and small-molecule therapeutics that specifically inhibit the interaction between HIV and the CKR-5 receptor, thereby blocking viral fusion and entry. Progenics is currently seeking pharmaceutical company collaborators for this program. PROVAX: HIV VACCINE Progenics is conducting research with respect to ProVax, a vaccine candidate which it believes will be useful as a preventative or a therapeutic treatment for HIV-positive individuals. Progenics is currently performing government-funded research and development of ProVax in collaboration with ADARC, the Southwest Foundation for Biomedical Research in San Antonio and the University of Oklahoma Medical Center. ASSAYS, DRUG SCREENING PROGRAM AND REAGENTS Through its immunology expertise, Progenics has developed certain assays which are used both independently and in collaboration with partners, as well as certain reagents which are being sold for research use only. ONCOTECT GM Progenics has developed ONCOTECT GM, a clinical assay for assessing prognosis in patients with melanoma and other cancers. ONCOTECT GM measures the levels of antibody to GM2 ganglioside in the blood. In clinical trials of a therapeutic vaccine for melanoma, the presence of these antibodies significantly correlated with improved recurrence-free and overall survival of patients. The Company is currently using ONCOTECT GM in its cancer vaccine clinical trials. HIV ATTACHMENT DRUG SCREEN Progenics, as part of a collaborative development project with American Cyanamid Company ("American Cyanamid"), a subsidiary of American Home Products Corporation ("American Home Products"), has developed a proprietary drug screening assay designed to identify novel small-molecule therapeutics for HIV infection which inhibit attachment of the virus to the CD4 receptor. This assay has been used in a high-throughput screening program. The Company and American Cyanamid have agreed that all discoveries made in the course of their collaboration will be jointly owned. Progenics and the Wyeth-Ayerst Research Division of American Home Products plan to perform additional studies to evaluate the antiviral activity of the compounds discovered in the course of the screening program. RESEARCH REAGENTS: SCD4 AND GP120 Progenics manufactures the research reagents sCD4 and gp120 which it sells to DuPont de Nemours & Company ("DuPont") and Intracel Corporation ("Intracel") for resale. DuPont markets and sells gp120 and sCD4 under both the Progenics and the DuPont names. Intracel markets and sells gp120 and sCD4 under both the Progenics and Intracel names. These products are sold worldwide for research use. While the Company's only customers for these reagents are DuPont and Intracel, in light of the 35 limited revenues received from sales of these reagents, the Company does not believe that the loss of either of these customers would have a material adverse effect on the Company. BUSINESS STRATEGY Progenics' strategy is to develop innovative products for the treatment and prevention of cancer and viral diseases based upon its expertise in immunology. Key elements of the Company's strategy are as follows: LEVERAGE CORE PROPRIETARY TECHNOLOGIES. Progenics is developing a portfolio of therapeutic cancer vaccines and HIV treatments utilizing its proprietary ganglioside conjugate vaccine, UnAB and CKR-5/fusion technologies. Progenics has recently commenced pivotal Phase III clinical trials of GMK and Phase I/II clinical trials of MGV, and plans to initiate clinical trials of its HIV products in 1997. The Company also is actively involved in research based on the discovery of a second HIV receptor, CKR-5, and its role in viral fusion and entry. The Company is exploring additional applications of these existing core technologies. For example, the Company is continuing to screen additional cancers for the presence of specific gangliosides in order to develop vaccines to treat a variety of cancers and continues to perform additional research into the mechanism of HIV entry into the cell. IN-LICENSE ADDITIONAL PRODUCT CANDIDATES AND TECHNOLOGIES. The Company intends to continue to in-license technologies and product candidates that complement its existing capabilities. Sources for these technologies range from academic institutions and research organizations to other biotechnology and pharmaceutical companies. In particular, the Company's license agreement with Sloan-Kettering covers certain future developments in the cancer vaccine field resulting from work performed in a laboratory at Sloan-Kettering. The Company believes this in-licensing strategy will enable it to bring products to market more quickly, efficiently and at lower cost while it focuses its expertise on product development and pre-clinical and clinical trial design and implementation. ESTABLISH COLLABORATIONS TO MINIMIZE DEVELOPMENT COSTS AND ACCESS EXPERTISE. Progenics has carefully controlled its expenditures on early stage research, clinical trials and related infrastructure by establishing collaborations with leading research institutions and clinical research organizations. For example, Progenics currently has collaborations with academic and government institutions such as Sloan-Kettering, ADARC and the CDC, and clinical research groups such as ECOG, SWOG, ICR and EORTC. Many of the costs of basic research and clinical trials are funded directly by these organizations, which enables the Company to substantially reduce its financing requirements. In addition, collaboration with these groups allows the Company to access their substantial expertise. Finally, Progenics has funded, and plans to continue to fund, a significant portion of certain of its programs with government research grants and contracts. SELECT AN APPROPRIATE COMMERCIALIZATION STRATEGY FOR EACH PRODUCT. Progenics will determine what it believes to be the most expedient and cost-effective way to commercialize each product that it develops. Progenics may undertake to manufacture, market and sell the product itself, or may undertake one or more of these functions in conjunction with third-party manufacturers, marketers, distributors, representatives, licensors or others. To date, Progenics has retained all commercial rights to its four principal products, all of which have entered, or are about to enter, human clinical trials. As a result, the Company believes that it will be able to retain a greater share of the economic value of these products which it, or a collaborator selected by it, is able to bring to market. The key factors that will guide Progenics in making each of these decisions are the nature of the product, the facilities and skills required to manufacture the product, the anticipated distribution channels and required marketing capabilities and the resources and skills of prospective collaborators. 36 LICENSES The Company is a party to license arrangements under which it has obtained rights to use certain technologies in its cancer and HIV programs. Set forth below is a summary of those licenses that the Company believes to be important to its business. The Company is party to a license agreement with Sloan-Kettering under which the Company obtained the worldwide, exclusive rights to certain technology relating to ganglioside conjugate vaccines, including GMK and MGV, and their use to treat or prevent cancer. The Sloan-Kettering license terminates upon the expiration of the last of the licensed patents or 15 years from the date of the first commercial sale of a licensed product pursuant to the agreement, whichever is later. In addition to patent applications, the Sloan-Kettering license includes the exclusive rights to use certain relevant technical information and know-how, as well as rights to certain future developments. A number of Sloan-Kettering physician-scientists also serve as consultants to the Company. The Company is party to a license agreement with The Regents of the University of California under which the Company obtained the exclusive rights to an issued U.S. patent covering certain ganglioside conjugate vaccines. The license agreement terminates upon the expiration of the patent. The Company is party to a license agreement with Columbia University under which the Company has obtained exclusive, worldwide rights to certain technology and materials relating to CD4 and its use to treat or prevent HIV infection. The license agreement will terminate upon the expiration of the last of the licensed patents. The Company has entered into a license and supply agreement with Aquila pursuant to which Aquila agreed to supply the Company with all of its requirements for the QS-21 adjuvant for use in certain ganglioside-based cancer vaccines, including GMK and MGV. The agreement grants to the Company a license to use Aquila's patented technology to develop, manufacture and sell certain cancer vaccines using QS-21 and, if Aquila is unable to supply the Company with sufficient quantities of QS-21, the Company has the right to manufacture QS-21 itself or purchase it from third parties for so long as Aquila is unable to supply the Company with sufficient quantities of QS-21. QS-21 is the lead compound in the Stimulon-TM- family of adjuvants developed and owned by Aquila. The license terminates upon the expiration of the last of the licensed patents. The licenses to which the Company is a party impose various milestone, commercialization, sublicensing, royalty and other payment, insurance and other obligations on the Company. Failure by the Company to comply with these requirements could result in the termination of the applicable agreement, which could have a material adverse effect on the Company's business. RESEARCH AND DEVELOPMENT COLLABORATIONS The Company has entered into collaborative agreements with various parties relating to its cancer and HIV programs. Set forth below is a summary of those collaborations that the Company believes to be important to its business. The Company is working on a collaborative basis with ADARC with respect to the development of certain of the Company's HIV products. Under the agreement with ADARC, the Company is obligated to pay the salary of an ADARC technician who works on scientific projects of mutual interest to the Company and ADARC. The Company is party to a cooperative research and development agreement with the CDC to conduct collaborative research on certain of the Company's HIV products. Under the agreement with the CDC, the Company provides researchers with certain materials for investigation at the CDC. The agreement with the CDC terminates when the research plan, as described in the agreement, is completed, unless earlier terminated by the parties. 37 In general, the Company's collaborative research agreements require the payment by Progenics of various amounts in support of the research to be conducted. If the collaborator creates any invention during the course of its efforts, solely or jointly with the Company, the Company generally has an option to negotiate an exclusive, royalty-bearing license of the collaborator's rights in the invention for the purpose of commercializing any product incorporating such invention. Inventions developed solely by the Company's scientists as part of the collaboration generally are owned exclusively by the Company. Most of these collaborative agreements are non-exclusive and can be cancelled on relatively short notice. The Company has also entered into collaborative arrangements with Sloan-Kettering, ECOG, SWOG, ICR and EORTC with respect to its clinical trials. See "Business--Cancer Therapeutics--GMK: Therapeutic Vaccine for Malignant Melanoma--Clinical Trials" and "--Cancer Therapeutics--MGV: Therapeutic Vaccine for Certain Cancers--Clinical Trials." GOVERNMENT GRANTS Through September 30, 1996, the Company had been awarded government grants, aggregating approximately $2,359,000 under the Small Business Innovation Research ("SBIR") program of the NIH for the Company's commercial development of PRO 542, PRO 367, ProVax and ProSys. Through September 30, 1996 the Company had recognized approximately $1,298,000 of such amount as revenue. In addition, the Company has been awarded a $812,000 multi-year grant under a contract with the Department of Defense for work related to ProVax. Through September 30, 1996 the Company had recognized approximately $437,000 of such amount as revenue. Under the terms of these grants, the Company has, subject to certain rights of the government described below, all right, title and interest to all patents, copyrights and data pertaining to any product developed. However, under existing regulations, the government receives a royalty-free license for federal government use with respect to patents developed by grant recipients. In addition, the government may, in certain circumstances, require the Company to license technology resulting from the funded projects to third parties and may require that the Company manufacture substantially all of the products resulting from a particular grant in the United States. The government's obligation to make payments under these grants is subject to appropriation by the United States Congress for funding in each such year. Moreover, it is possible that Congress or the government agencies that administer these government research programs will determine to scale back these programs or terminate them or that the government will award future grants to competitors of the Company instead of the Company. In addition, while Progenics intends to pursue additional government grants related to its areas of research and development, there can be no assurances that the Company will be awarded any such grants in the future or that any amounts derived therefrom will not be less than those received to date. PATENTS AND PROPRIETARY TECHNOLOGY Progenics' policy is to protect its proprietary technology, and the Company considers the protection of such rights to be important to its business. In addition to seeking U.S. patent protection for many of its inventions, the Company generally files patent applications in Canada, Japan, Western European countries and additional foreign countries on a selective basis in order to protect the inventions deemed to be important to the development of its foreign business. Under a license agreement with Sloan-Kettering, Progenics obtained worldwide, exclusive rights to certain technology relating to ganglioside conjugate vaccines, including GMK and MGV, and their use to treat or prevent cancer. This technology is the subject of a patent application filed by Sloan-Kettering in the U.S. and 14 foreign countries claiming composition of matter and methods of production and use of certain ganglioside conjugate vaccines for the treatment or prevention of human cancer. 38 Under a license agreement with Columbia University, Progenics obtained worldwide, exclusive rights to certain technology relating to CD4 and its use to treat or prevent HIV infection. This technology is the subject of issued U.S. and European patents and several related U.S. and foreign patent applications filed by Columbia University. The issued patents and the patent applications claim composition of matter and methods of production and use of certain CD4-based products for the treatment or prevention of HIV infection. Progenics has also filed a number of U.S. and foreign patent applications on its UnAB, ProSys and ProVax technologies and clinical uses of these technologies. There can be no assurance that patent applications owned by or licensed to the Company will result in patents being issued or that, if issued, the patents will afford protection against competitors with similar technology. Although a patent has a statutory presumption of validity in the United States, the issuance of a patent is not conclusive as to such validity or as to the enforceable scope of the claims of the patent. There can be no assurance that the Company's issued patents or any patents subsequently issued to or licensed by the Company will not be successfully challenged in the future. The validity or enforceability of a patent after its issuance by the patent office can be challenged in litigation. The cost of litigation to uphold the validity of patents and to prevent patent infringement can be substantial. If the outcome of the litigation is adverse to the owner of the patent, third parties may then be able to use the invention covered by the patent without payment. There can be no assurance that the Company's patents will not be infringed or successfully avoided through design innovation. There may be patent applications and issued patents belonging to competitors that may require the Company to alter its products, pay licensing fees or cease certain activities. If the Company's products conflict with patents that have been or may be granted to competitors, universities or others, such other persons could bring legal actions against the Company claiming damages and seeking to enjoin manufacturing and marketing of the affected products. If any such actions are successful, in addition to any potential liability for damages, the Company could be required to obtain a license in order to continue to manufacture or market the affected products. There can be no assurance that the Company would prevail in any such action or that any license required under any such patent would be made available on acceptable terms or at all. The Company believes that there may be significant litigation in the industry regarding patent and other intellectual property rights. If the Company becomes involved in such litigation, it could consume substantial resources. Progenics has also filed a number of U.S. and foreign patent applications (one of which is owned jointly with ADARC) relating to the discovery of a second HIV receptor, CKR-5. In addition to the risks described above, the Company is aware that other groups have claimed discoveries similar to that covered by the Company's patent applications. These groups may have made their discoveries prior to the discoveries covered by the Company's patent applications and may have filed their applications prior to the Company's patent applications. The Company does not expect to know for several years the relative strength of its patent position as compared to these other groups. The enactment of the legislation implementing the General Agreement on Tariffs and Trade has resulted in certain changes to United States patent laws that became effective on June 8, 1995. Most notably, the term of patent protection for patent applications filed on or after June 8, 1995 is no longer a period of seventeen years from the date of grant. The new term of United States patents will commence on the date of issuance and terminate twenty years from the earliest effective filing date of the application. Because the time from filing to issuance of patent applications is often more than three years, a twenty-year term from the effective date of filing may result in a substantially shortened term of patent protection, which may adversely impact the Company's patent position. In addition to the patents, patent applications, licenses and intellectual property processes described above, the Company also relies on unpatented technology, trade secrets and information. No assurance can be given that others will not independently develop substantially equivalent information and techniques or otherwise gain access to the Company's technology or disclose such technology, or that the 39 Company can meaningfully protect its rights in such unpatented technology, trade secrets and information. The Company requires each of its employees, consultants and advisors to execute a confidentiality agreement at the commencement of an employment or consulting relationship with the Company. The agreements generally provide that all inventions conceived by the individual in the course of employment or in providing services to the Company and all confidential information developed by, or made known to, the individual during the term of the relationship shall be the exclusive property of the Company and shall be kept confidential and not disclosed to third parties except in limited specified circumstances. There can be no assurance, however, that these agreements will provide meaningful protection for the Company's information in the event of unauthorized use or disclosure of such confidential information. GOVERNMENT REGULATION The Company and its products are subject to comprehensive regulation by the FDA in the United States and by comparable authorities in other countries. These national agencies and other federal, state, and local entities regulate, among other things, the preclinical and clinical testing, safety, effectiveness, approval, manufacture, labeling, marketing, export, storage, record keeping, advertising, and promotion of the Company's products. FDA approval of the Company's products, including a review of the manufacturing processes and facilities used to produce such products, will be required before such products may be marketed in the United States. The process of obtaining approvals from the FDA can be costly, time consuming, and subject to unanticipated delays. There can be no assurance that approvals of the Company's proposed products, processes, or facilities will be granted on a timely basis, or at all. Any failure to obtain or delay in obtaining such approvals would adversely affect the ability of the Company to market its proposed products. Moreover, even if regulatory approval is granted, such approval may include significant limitations on indicated uses for which a product could be marketed. The process required by the FDA before the Company's products may be approved for marketing in the United States generally involves (i) preclinical laboratory and animal tests, (ii) submission to the FDA of an IND, which must become effective before clinical trials may begin, (iii) adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for its intended indication, (iv) submission to the FDA of an NDA or PLA and (v) FDA review of the NDA or PLA in order to determine, among other things, whether the drug or product is safe and effective for its intended uses. There is no assurance that the FDA review process will result in product approval on a timely basis, or at all. An IND is a submission which the sponsor of a clinical trial of an investigational new drug must make to the FDA, and which must become effective before clinical trials may commence. The IND submission must include, among other things, a description of the sponsor's investigational plan; protocols for each planned study; chemistry, manufacturing, and control information; pharmacology and toxicology information; and a summary of previous human experience with the investigational drug. A NDA is an application to the FDA to market a new drug. The NDA must contain, among other things, information on chemistry, manufacturing, and controls; nonclinical pharmacology and toxicology; human pharmacokinetics and bioavailability; and clinical data. The new drug may not be marketed in the United States until the FDA has approved the NDA. A PLA is an application to the FDA to market a biological product. The PLA must contain, among other things, data derived from nonclinical laboratory and clinical studies which demonstrate that the product meets prescribed standards of safety, purity and potency, and a full description of manufacturing methods. The biological product may not be marketed in the United States until a product license is issued, and until the establishment where the product is to be manufactured has been issued an establishment license. 40 Preclinical tests include laboratory evaluation of product chemistry and animal studies to gain preliminary information of a product's pharmacology and toxicology and to identify any safety problems that would preclude testing in humans. Products must generally be manufactured according to cGMP and preclinical safety tests must be conducted by laboratories that comply with FDA regulations regarding good laboratory practices. The results of the preclinical tests are submitted to the FDA as part of an IND application and are reviewed by the FDA prior to the commencement of human clinical trials. Unless the FDA objects to, or makes comments or raises questions concerning, an IND, the IND will become effective 30 days following its receipt by the FDA and initial clinical studies may begin, although companies often obtain affirmative FDA approval before beginning such studies. There can be no assurance that submission of an IND will result in FDA authorization to commence clinical trials. See "Risk Factors-- Uncertainty Associated with Preclinical and Clinical Testing." Clinical trials involve the administration of the investigational new drug to healthy volunteers and to patients under the supervision of a qualified principal investigator. Clinical trials must be conducted in accordance with the FDA's Good Clinical Practice requirements under protocols that detail, among other things, the objectives of the study, the parameters to be used to monitor safety, and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, each clinical study must be conducted under the auspices of an Institutional Review Board ("IRB"). The IRB will consider, among other things, ethical factors, the safety of human subjects, the possible liability of the institution and the informed consent disclosure which must be made to participants in the clinical trial. Clinical trials are typically conducted in three sequential phases, although the phases may overlap. During Phase I, when the drug is initially administered to human subjects, the product is tested for safety, dosage tolerance, absorption, metabolism, distribution, and excretion. Phase II involves studies in a limited patient population to (i) evaluate preliminarily the efficacy of the product for specific, targeted indications, (ii) determine dosage tolerance and optimal dosage, and (iii) identify possible adverse effects and safety risks. When a new product is found to have an effect and to have an acceptable safety profile in Phase II evaluation, Phase III trials are undertaken in order to further evaluate clinical efficacy and to further test for safety within an expanded patient population. The FDA may suspend clinical trials at any point in this process if it concludes that clinical subjects are being exposed to an unacceptable health risk. The results of the preclinical studies and clinical studies, the chemistry and manufacturing data, and the proposed labelling, among other things, are submitted to the FDA in the form of an NDA or PLA, approval of which must be obtained prior to commencement of commercial sales. The FDA may refuse to accept the NDA or PLA for filing if certain administrative and content criteria are not satisfied, and even after accepting the NDA or PLA for review, the FDA may require additional testing or information before approval of the NDA or PLA. In any event, the FDA must deny an NDA or PLA if applicable regulatory requirements are not ultimately satisfied. Moreover, if regulatory approval of a product is granted, such approval may be made subject to various conditions, including post-marketing testing and surveillance to monitor the safety of the product, or may entail limitations on the indicated uses for which it may be marketed. Finally, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. Under current FDA regulations, in addition to the licensing of a vaccine product itself through the PLA process, any establishment used to manufacture a vaccine product must also be licensed. To obtain the necessary establishment license, an establishment license application ("ELA") describing the facilities, equipment, processes, and personnel used to manufacture the product in question must be filed with the FDA. The establishment license will be granted only after the FDA inspects the establishment and determines that the establishment complies with all applicable standards, including, but not limited to, compliance with cGMP and the ability to consistently manufacture the product at the establishment in accordance with the PLA. FDA approval of both the PLA and ELA must be received prior to marketing of a vaccine product. Therefore, any delay in FDA's approval of the ELA, or refusal to approve the ELA, would delay or prevent the marketing of the product in question. 41 On May 14, 1996, the FDA adopted a new regulation, effective May 24, 1996, regarding the license application process for certain biological products. Those biological products that fall within the regulation will be reviewed on the basis of a single biologics license application ("BLA"), rather than a PLA/ELA. The BLA includes the same information as the current PLA, but certain of the data now required as part of the ELA do not have to be submitted or reviewed during the approval process. This new rule is intended, at least in part, to lessen the regulatory burden on manufacturers of certain biologics and accelerate the approval process. There can be no assurance, however, that the FDA will consider the new regulation applicable to any of the Company's products, or that the BLA process, if applicable to the Company's products, will have the intended effect of reducing review times. Both before and after approval is obtained, a product, its manufacturer, and the holder of the NDA or PLA for the product are subject to comprehensive regulatory oversight. Violations of regulatory requirements at any stage, including the preclinical and clinical testing process, the approval process, or thereafter (including after approval) may result in various adverse consequences, including FDA delay in approving or refusal to approve a product, withdrawal of an approved product from the market and/or the imposition of criminal penalties against the manufacturer and/or NDA or PLA holder. In addition, later discovery of previously unknown problems may result in restrictions on such product, manufacturer, or NDA or PLA holder, including withdrawal of the product from the market. Also, new government requirements may be established that could delay or prevent regulatory approval of the Company's products under development. The FDA has implemented accelerated approval procedures for certain pharmaceutical agents that treat serious or life-threatening diseases and conditions, and that provide meaningful therapeutic benefit over existing treatments. The Company believes that certain of its products in development may qualify for accelerated approval. The Company cannot predict the ultimate impact, however, of the FDA's accelerated approval procedures on the timing or likelihood of approval of any of its potential products or those of any competitor. In addition, the approval of a product under the accelerated approval procedures is subject to various conditions, including the requirement to verify clinical benefit in postmarketing studies, and the authority on the part of the FDA to withdraw approval under streamlined procedures if such studies do not verify clinical benefit or under various other circumstances. Whether or not FDA approval has been obtained, approval of a pharmaceutical product by comparable government regulatory authorities in foreign countries must be obtained prior to marketing such product in such countries. The approval procedure varies from country to country, and the time required may be longer or shorter than that required for FDA approval. Although there are some procedures for unified filing for certain European countries, in general, each country has its own procedures and requirements. The Company does not currently have any facilities or personnel outside of the United States. In addition to regulations enforced by the FDA, the Company also is subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state or local regulations. The Company's research and development involves the controlled use of hazardous materials, chemicals, viruses and various radioactive compounds. Although the Company believes that its safety procedures for storing, handling, using and disposing of such materials comply with the standards prescribed by applicable regulations, the risk of accidental contaminations or injury from these materials cannot be completely eliminated. In the event of such an accident, the Company could be held liable for any damages that result and any such liability could have a material adverse effect of the Company. See "Risk Factors --Government Regulation; No Assurance of Regulatory Approval" and "--Hazardous Materials; Environmental Matters." 42 MANUFACTURING Progenics has considerable expertise in the manufacture of its proprietary ganglioside conjugate vaccines and recombinant proteins. The Company currently manufactures GMK, MGV, PRO 542 and PRO 367 in its pilot production facilities in Tarrytown, New York. The Company believes that its existing production facilities will be sufficient to meet the Company's initial needs for clinical trials. However, these facilities may be insufficient for all of the Company's late-stage clinical trials and for its commercial-scale requirements. Accordingly, the Company expects to be required in the future to expand its manufacturing staff and facilities and obtain new facilities or to contract with third parties to assist with production. In general, Progenics plans to retain manufacturing rights and control during clinical trials and commercialization. In the event the Company decides to establish a full-scale commercial manufacturing facility, the Company will require substantial additional funds and will be required to hire and train significant numbers of employees and comply with the extensive cGMP regulations applicable to such a facility. In addition, if any of the Company's products produced at its facilities were regulated as biologics, the Company could be required to file an ELA and obtain an establishment license for its facilities. SALES AND MARKETING Progenics plans to market products for which it obtains regulatory approval through co-marketing, co-promotion, licensing and distribution arrangements with third party collaborators. The Company believes that this approach will both increase market penetration and commercial acceptance of its products and enable the Company to avoid expending significant funds to develop a large sales and marketing organization. The Company has entered into collaborative marketing arrangements with DuPont and Intracel with respect to the sCD4 and gp120 research reagents. COMPETITION Competition in the biopharmaceutical industry is intense. The Company faces competition from many companies, major universities and research institutions in the United States and abroad. Many of the Company's competitors have substantially greater resources, experience in conducting preclinical studies and clinical trials and obtaining regulatory approvals for their products, operating experience, research and development and marketing capabilities and production capabilities than those of the Company. The Company will face competition from companies marketing existing products or developing new products for diseases targeted by the Company's technologies. The development of new products for those diseases for which the Company is developing products could render the Company's product candidates noncompetitive and obsolete. A significant amount of research in this industry is also being carried out at academic and government institutions. These institutions are becoming increasingly aware of the commercial value of their findings and are becoming more aggressive in pursuing patent protection and negotiating licensing arrangements to collect royalties for use of technology that they have developed. These institutions may also market competitive commercial products on their own or in collaboration with competitors. Any resulting increase in the cost or decrease in the availability of technology or product candidates from these institutions may affect the Company's business strategy. Competition with respect to the Company's technologies and product candidates is and will be based, among other things, on effectiveness, safety, reliability, availability, price and patent position. Another important factor will be the timing of market introduction of the Company's or competitive products. Accordingly, the speed with which Progenics can develop products, complete the clinical trials and approval processes and ultimately supply commercial quantities of the products to the market is expected to be an important competitive factor. The Company's competitive position will also depend upon its 43 ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes, and to secure sufficient capital resources for the often substantial period between technological conception and commercial sales. PRODUCT LIABILITY The testing, manufacturing and marketing of the Company's products involves an inherent risk of product liability attributable to unwanted and potentially serious health effects. To the extent the Company elects to test, manufacture or market products independently, it will bear the risk of product liability directly. If the Company enters into collaborative agreements with third parties regarding commercialization of any products based on the Company's technologies, the Company will seek to obtain indemnification agreements from such partners, however there can be no assurance that corporate sponsors, if any, would agree to fully indemnify the Company against losses resulting from such collaborative efforts. The Company has obtained insurance in the amount of $5,000,000 against the risk of product liability. This insurance is subject to certain deductibles and coverage limitations. There is no guarantee that insurance will continue to be available at a reasonable cost, or at all, or that the amount of such insurance will be adequate. HUMAN RESOURCES At September 30, 1996, the Company had 27 full-time employees, four of whom hold Ph.D. degrees or foreign equivalents and two of whom hold M.D. degrees. Twenty-one employees are engaged in research and development, medical and regulatory affairs and manufacturing activities and six are engaged in finance, administration and business development. The Company considers its relations with its employees to be good. None of its employees is covered by a collective bargaining agreement. FACILITIES Progenics leases approximately 23,000 square feet of laboratory, manufacturing and office space in Westchester County, New York, approximately twenty-five miles north of New York City. The Company leases this space under an operating lease which terminates in April 1998. Progenics has two pilot production facilities within its leased facilities for the manufacture of products for clinical trials. LEGAL PROCEEDINGS The Company is not party to any material legal proceedings. 44 SCIENTIFIC ADVISORY BOARDS An important component of Progenics' scientific strategy is its collaborative relationship with leading researchers in cancer and virology. Certain of these researchers are members of the Company's two Scientific Advisory Boards (each an "SAB"), one in cancer and one in virology. The members of each SAB attend periodic meetings and provide Progenics with specific expertise in both research and clinical development. In addition, Progenics has collaborative research relationships with certain individual SAB members. All members of the SABs are employed by employers other than the Company and may have commitments to or consulting or advisory agreements with other entities that may limit their availability to the Company. These companies may also be competitors of Progenics. Several members of the SABs have, from time to time, devoted significant time and energy to the affairs of the Company. However, no member is regularly expected to devote more than a small portion of his time to Progenics. In general, Progenics' scientific advisors are granted stock options in the Company and receive financial remuneration for their services. CANCER SCIENTIFIC ADVISORY BOARD
NAME POSITION/AFFILIATION - --------------------------------------------- --------------------------------------------- Alan N. Houghton, M.D. (Chairman)............ Chairman, Immunology Program, Sloan-Kettering and Professor, Cornell University Medical College ("CUMC") Angus G. Dalgleish, M.D., Ph.D............... Chairman and Professor of Medical Oncology, St. George's Hospital, London David W. Golde, M.D.......................... Physician-in-Chief, Sloan-Kettering and Professor, CUMC David R. Klatzmann, M.D., Ph.D............... Professor of Immunology, Pitie-Salpetriere Hospital, Paris Philip O. Livingston, M.D.................... Associate Member, Sloan-Kettering and Associate Professor, CUMC John Mendelsohn, M.D......................... President, The University of Texas M.D. Anderson Cancer Center David A. Scheinberg, M.D., Ph.D.............. Chief, Leukemia Service, Sloan-Kettering and Associate Professor, CUMC
VIROLOGY SCIENTIFIC ADVISORY BOARD
NAME POSITION/AFFILIATION - --------------------------------------------- --------------------------------------------- Stephen P. Goff, Ph.D. (Chairman)............ Professor of Biochemistry, Columbia University Mark Alizon, M.D., Ph.D...................... Director of Research, Institut Cochin, Paris Lawrence A. Chasin, Ph.D..................... Professor of Biological Sciences, Columbia University Leonard Chess, M.D........................... Professor of Medicine, Columbia University Wayne A. Hendrickson, Ph.D................... Professor of Biochemistry, Columbia University Israel Lowy, M.D., Ph.D...................... Assistant Professor of Medicine, Mount Sinai Medical Center J. Steven McDougal, M.D...................... Chief, Immunology Branch, CDC, Atlanta Luc Montagnier, M.D.......................... Professor and Chairman of Virology, Pasteur Institute, Paris Sherie L. Morrison, Ph.D..................... Professor of Microbiology, UCLA Robin A. Weiss, Ph.D......................... Professor and Director of Research, ICR, Royal Cancer Hospital, London
45 MANAGEMENT DIRECTORS, EXECUTIVE OFFICERS AND KEY MANAGEMENT The directors, executive officers and key management of the Company are as follows:
NAME AGE POSITION - ----------------------------------------------------- --- ----------------------------------------------------- Paul J. Maddon, M.D., Ph.D........................... 37 Chairman of the Board, Chief Executive Officer, President and Chief Science Officer Robert J. Israel, M.D................................ 39 Vice President, Medical Affairs Robert A. McKinney................................... 40 Vice President, Finance and Operations and Treasurer Joel D. Sendek....................................... 29 Senior Director, Corporate Development and Investor Relations Graham P. Allaway, Ph.D.............................. 41 Associate Scientific Director and Head, Therapeutic Development Group Patricia C. Fazio.................................... 37 Director, Health & Safety and Project Management Charles A. Baker (1)................................. 64 Director Mark F. Dalton (1)................................... 46 Director Stephen P. Goff, Ph.D. (2)........................... 45 Director Elizabeth M. Greetham (2)............................ 47 Director Paul F. Jacobson (1)................................. 42 Director David A. Scheinberg, M.D., Ph.D. (2)................. 40 Director
- ------------------------------ (1) Member of Compensation Committee (2) Member of Audit Committee PAUL J. MADDON, M.D., PH.D. is the founder of the Company and has served in various capacities since its inception, including Chairman of the Board of Directors, Chief Executive Officer, President and Chief Science Officer. From 1981 to 1988, Dr. Maddon performed research at the Howard Hughes Medical Institute at Columbia University in the laboratory of Dr. Richard Axel. He received a B.A. in biochemistry and mathematics and an M.D. and a Ph.D. in biochemistry and molecular biophysics from Columbia University. Dr. Maddon has been an Adjunct Assistant Professor of Medicine at Columbia University since 1989. ROBERT J. ISRAEL, M.D. joined the Company in October 1994 and has been Vice President, Medical Affairs since that time. From 1991 to 1994, Dr. Israel was Director, Clinical Research-Oncology and Immunohematology at Sandoz Pharmaceuticals Corporation, a pharmaceutical company. From 1988 to 1991, he was Associate Director, Oncology Clinical Research at Schering-Plough Corporation, a pharmaceutical company. Dr. Israel is a licensed physician and is board certified in both internal medicine and medical oncology. He received a B.A. in physics from Rutgers University and an M.D. from the University of Pennsylvania and completed an oncology fellowship at Sloan-Kettering. Dr. Israel has been a consultant to the Solid Tumor Service at Sloan-Kettering since 1987. 46 ROBERT A. MCKINNEY joined the Company in September 1992. Mr. McKinney served as Director, Finance and Operations and Treasurer from 1992 to January 1993, when he was appointed Vice President, Finance and Operations and Treasurer of Progenics. From 1991 to 1992, he was Corporate Controller at VIMRx Pharmaceuticals, Inc., a biotechnology research company. From 1990 to 1991, Mr. McKinney was Manager, General Accounting at Micrognosis, Inc., a software integration company. From 1985 to 1990, he was an audit supervisor at Coopers & Lybrand L.L.P., an international accounting firm. Mr. McKinney studied finance at the University of Michigan, received a B.B.A. in accounting from Western Connecticut State University, and is a Certified Public Accountant. JOEL D. SENDEK joined the Company in July 1992. Mr. Sendek has served in various management positions at Progenics, most recently as Senior Director, Corporate Development and Investor Relations. From 1989 to 1992, he was an investment banker in the health care group of the Corporate Finance Department at Goldman, Sachs & Co., an international investment bank. Mr. Sendek received a B.A. in biochemistry from Rice University. GRAHAM P. ALLAWAY, PH.D. joined the Company in July 1990. Dr. Allaway has served in various management positions at Progenics, most recently as Associate Scientific Director and Head, Therapeutic Development Group. From 1984 to 1990, he was a Visiting Fellow and Visiting Associate at the NIH in the laboratory of Dr. Abner Notkins. From 1982 to 1984, Dr. Allaway performed post-doctoral research at Memorial University of Newfoundland, Canada. He received an M.A. in zoology from Oxford University and a Ph.D. in virology from the University of London. Dr. Allaway has been an Adjunct Associate Professor of Microbiology and Immunology at New York Medical College since 1996. PATRICIA C. FAZIO joined the Company in August 1992. Ms. Fazio has served in various management positions at Progenics, most recently as Director, Health & Safety and Project Management. From 1987 to 1992, she was Senior Research Technician and Laboratory Manager at the Howard Hughes Medical Institute at Columbia University. From 1982 to 1987, Ms. Fazio was Chief Laboratory Technologist in the Department of Pathology at Columbia Presbyterian Medical Center. She received a B.A. in biology and chemistry at the College of New Rochelle. CHARLES A. BAKER has been a Director of the Company since January 1994. Mr. Baker has been the Chairman, President and Chief Executive Officer of The Liposome Company, Inc., a biotechnology company located in Princeton, NJ, since 1989. Mr. Baker is currently a director of Regeneron Pharmaceuticals, Inc., a biotechnology company. He serves on the Scientific Advisory Council of Rutgers University and is a member of the Council of Visitors of the Marine Biological Laboratory at Woods Hole, MA. Mr. Baker has more than 30 years of pharmaceutical industry experience, and has held senior management positions at Pfizer, Abbott Laboratories, Squibb Corporation, and A.L. Laboratories. Mr. Baker received a B.A. from Swarthmore College and a J.D. from Columbia University. MARK F. DALTON has been a Director of the Company since July 1990. Mr. Dalton has been the President, Chief Operating Officer and a director of Tudor Investment Corporation, an investment advisory company, and its affiliates since 1988. From 1979 to 1988, he served in various senior management positions at Kidder, Peabody & Co. Incorporated, including Chief Financial Officer. Mr. Dalton is currently a director of several private companies in the U.S., Europe and Asia. Mr. Dalton received a B.A. from Denison University and a J.D. from Vanderbilt University. STEPHEN P. GOFF, PH.D. has been a Director of the Company since February 1993. Dr. Goff has been a member of the Virology Scientific Advisory Board since 1988 and has been its Chairman since April 1991. Dr. Goff has been the Higgins Professor in the Departments of Biochemistry and Microbiology at Columbia University since June 1990. He received an A.B. in biophysics from Amherst College and a Ph.D. in biochemistry from Stanford University. Dr. Goff performed post-doctoral research at the Massachusetts Institute of Technology in the laboratory of Dr. David Baltimore. 47 ELIZABETH M. GREETHAM has been a Director of the Company since January 1994. Ms. Greetham has been the Portfolio Manager for Weiss, Peck & Greer ("WPG") Life Sciences Fund, L.P. and WPG Institutional Life Sciences Fund, L.P. since 1992 and was a Health Care Analyst at WPG, L.L.C. from 1990 to 1992. Ms. Greetham is also a director of Repligen Corporation and Guilford Pharmaceuticals, both of which are biopharmaceutical companies, and ChiRex Inc. and Access Pharmaceuticals, Inc., both of which are pharmaceutical companies. She received an M.A. in Economics from Edinburgh University. PAUL F. JACOBSON has been a Director of the Company since July 1990. Mr. Jacobson has been a Managing Director of fixed income securities at Deutsche Bank since January 1996. He was President of Jacobson Capital Partners from 1993 to 1996. From 1986 to 1993, Mr. Jacobson was a partner at Goldman, Sachs, where he was responsible for government securities trading activities. Mr. Jacobson received a B.A. from Vanderbilt University and an M.B.A. from Washington University. DAVID A. SCHEINBERG, M.D., PH.D. has been a Director of the Company since May 1996 and a member of the Cancer Scientific Advisory Board since January 1994. Dr. Scheinberg has been associated with Sloan-Kettering since 1986, where he has held the positions of Associate Professor (since 1994) and Chief (since 1992), Leukemia Service, Member of the Clinical Immunology Service (since 1987) and Head, Laboratory of Hematopoietic Cancer Immunochemistry, Sloan-Kettering Institute (since 1989). He also has held the position of Associate Professor of Medicine and Molecular Pharmacology, Cornell University Medical College (since 1994). He received a B.A. from Cornell University, and an M.D. and a Ph.D. in pharmacology and experimental therapeutics from The Johns Hopkins University. All directors hold office until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve, subject to the discretion of the Board of Directors, until their successors are appointed. There are no family relationships among any of the executive officers or directors of the Company. COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors has a Compensation Committee, which makes recommendations concerning salaries and incentive compensation for employees of and consultants to the Company, establishes and approves salaries and incentive compensation for certain senior officers and employees and administers and grants stock options pursuant to the Company's stock option plans, and an Audit Committee, which reviews the annual financial statements of the Company prior to their submission to the Board of Directors, consults with the Company's independent auditors, and examines and considers such other matters in relation to the internal and external audit of the Company's account and in relation to the financial affairs of the Company and its accounts, including the selection and retention of independent auditors. COMPENSATION OF DIRECTORS Directors do not receive compensation in their capacities as directors. All of the directors are reimbursed for their expenses in connection with their attendance at Board and committee meetings. In addition, Dr. Goff and Dr. Scheinberg receive annual compensation in the amounts of $30,000 and $18,000, respectively, for their services as members of the Company's Virology Scientific Advisory Board and Cancer Scientific Advisory Board, respectively. See "Certain Transactions." COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No interlocking relationship exists between the Company's Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. The members of the Compensation Committee are Charles A. Baker, Mark F. Dalton and Paul F. Jacobson. 48 EXECUTIVE COMPENSATION SUMMARY COMPENSATION The following table sets forth certain information regarding compensation paid and accrued during fiscal 1995 to the Company's Chief Executive Officer and the other Executive Officers of the Company whose base compensation for fiscal 1996 equals or exceeds $100,000 (collectively, the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION -------------------------------------------------- OTHER ANNUAL NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION - ---------------------------------------------------------- --------- ---------- ------------ ------------- Paul J. Maddon, M.D., Ph.D................................ 1996 $ 165,000 (1) (1) Chairman of the Board, Chief Executive Officer, 1995 150,000 $ 20,000(2) $ 1,662(3) President and Chief Science Officer Robert J. Israel, M.D..................................... 1996 175,000 (1) (1) Vice President, Medical Affairs 1995 165,000 17,500 -- Robert A. McKinney........................................ 1996 1995 100,000 (1) (1) Vice President, Finance and Operations and Treasurer 80,641 7,000 --
- ------------------------ (1) Bonuses and other annual compensation for fiscal 1996 have not yet been determined. (2) In addition, Dr. Maddon was awarded a bonus of $35,000, the payment of which is contingent upon the Company's achievement of certain milestones. (3) Represents the premium paid by the Company on a long-term disability policy. OPTION GRANTS The Company did not grant any options during fiscal 1995 to any of the Named Executive Officers. OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES The following table sets forth certain information concerning the number and value of unexercised options held by each of the Named Executive Officers on December 31, 1995. No options were exercised by these individuals in fiscal 1995. FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1) -------------------------- -------------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---------------------------------------------------------- ----------- ------------- ----------- ------------- Paul J. Maddon, M.D., Ph.D.(2)............................ 225,000 525,000 $ 274,398 $ 685,432 Robert J. Israel, M.D.(3)................................. 11,250 45,000 15,075 60,300 Robert A. McKinney(3)..................................... 28,500 24,000 75,540 57,060
- ------------------------------ (1) The value of the unexercised, in-the-money options on December 31, 1995 is based on the difference between the fair market value per share of the Common Stock at such date as determined by the Board of Directors ($6.67), and the per share option exercise price, multiplied by the number of shares of Common Stock underlying the options. (2) The exercisability of 150,000 of these options will be accelerated upon the effectiveness of this offering (assuming an initial public offering price of $12.00 per share) and the exercisibility of all of these options shall be accelerated in the event of a change in control of the Company. (3) On May 15, 1996, additional options to purchase 18,750 shares of Common Stock were granted to Dr. Israel and additional options to purchase 15,000 shares of Common Stock were granted to Mr. McKinney. These options have an exercise price of $6.67 per share and are not reflected in the above table. 49 EMPLOYMENT AGREEMENTS Pursuant to the terms of the Employment Agreement (the "Employment Agreement") dated December 15, 1993 between the Company and Dr. Maddon, the Company has retained Dr. Maddon as Chairman of the Board, President, Chief Executive Officer and Chief Science Officer of the Company at an annual salary of $150,000. The Employment Agreement expires on December 15, 1998 but is automatically renewed annually thereafter for up to five successive one-year periods, unless either the Company or Dr. Maddon gives notice to the other party of its or his intention not to renew at least 90 days before the end of the initial term or any renewal term. Under the Employment Agreement, each year following the closing of this offering, Dr. Maddon's salary then in effect shall be increased at the rate of 10% per year, although the Board of Directors has authority to grant additional compensation increases. In addition, Dr. Maddon will be paid a bonus of not less than $15,000 per year. If Dr. Maddon's employment is terminated without "cause" (as defined in the Employment Agreement), he will be entitled to receive his annual salary for a period of two years (but in no event after December 14, 1998) and any of the 750,000 options granted to him under the 1993 Executive Stock Option Plan that have not previously vested will vest. Dr. Maddon is also bound by certain non-competition obligations. Pursuant to the terms of a letter dated August 25, 1994 between the Company and Robert J. Israel, M.D., the Company has retained Dr. Israel as Vice President of Medical Affairs of the Company at an annual salary of $165,000 per year. In addition, the Company paid Dr. Israel a $10,000 bonus upon his hire. Under the Letter Agreement, Dr. Israel is entitled to nine months salary if his employment is terminated without cause. STOCK OPTION PLANS The Company has historically maintained stock option plans as an integral component of its compensation program for key employees, directors and consultants. The Company believes that such plans provide long-term incentives to such persons and encourage the ownership of the Company's Common Stock. In May 1996, the Company adopted the 1996 Stock Incentive Plan (the "1996 Plan"), which provides for the grant of stock options as well as other types of stock and incentive awards. Outstanding stock options that were granted under the Company's previous stock incentive plans will remain subject to the terms and conditions of the plan pursuant to which they were originally granted. Stock options and other awards granted following the offering will be pursuant to the 1996 Plan. 1989 NON-QUALIFIED STOCK OPTION PLAN The Company's 1989 Non-Qualified Stock Option Plan (the "1989 Option Plan") was adopted by the Company in April 1989. The 1989 Option Plan provided for the grant of stock options to employees, consultants, directors of the Company and other individuals who render services to the Company. Under the 1989 Option Plan, the Company could grant options not intended to qualify as incentive stock options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). A total of 375,000 shares of Common Stock were originally authorized for issuance under the 1989 Option Plan. As of September 30, 1996 options to purchase 354,011 shares of Common Stock at exercise prices ranging from $1.33 to $5.33 per share were outstanding under the 1989 Option Plan, of which options to purchase 276,386 shares were exercisable. No options have been exercised to date and options outstanding expire at various dates through January 28, 2011. Payment of the option exercise price may be made in cash, shares of Common Stock, a combination of cash or stock or by any other method. Options are not assignable or transferable except by will or under the laws of descent and distribution. For a period of ten years following the termination for any reason of an optionee's employment or active involvement with the Company, as determined by the Board of Directors, the Company has the right to repurchase from the optionee any or all shares of Common Stock 50 held by the optionee and/or any or all of the vested but unexercised portion of any option granted under the 1989 Option Plan at a purchase price defined therein. The 1989 Option Plan terminated on April 1, 1994. However any options granted prior to such termination shall continue in effect until such option is exercised or expires in accordance with its terms and the terms of the 1989 Option Plan. 1993 STOCK OPTION PLAN The Company's 1993 Stock Option Plan (the "1993 Option Plan") was adopted by the Company in December 1993. The 1993 Option Plan provided for the grant of stock options to key employees (including officers who may be members of the Company's Board of Directors), directors who are not employees and other individuals who render services of a special importance to the management, operation or development of the Company. Under the 1993 Option Plan, the Company could grant options intended to qualify as incentive stock options within the meaning of Section 422 of the Code and options not intended to qualify as incentive stock options. A total of 750,000 shares of Common Stock were originally authorized for issuance under the 1993 Option Plan. As of September 30, 1996, options to purchase a total of 687,225 shares of Common Stock at exercise prices ranging from $5.33 to $6.67 per share were outstanding under the 1993 Option Plan, of which options to purchase 185,166 shares were exercisable. No options have been exercised to date and options outstanding expire at various dates through December 31, 2005. The remaining 62,775 shares of Common Stock available for grant under the 1993 Stock Option Plan (which includes certain options that expired prior to September 30, 1996 and which became available for regrant under the 1993 Stock Option Plan) will be granted to employees of the Company, prior to the completion of this offering, at an option price equal to the initial public offering price in this offering. Payment of the option exercise price may be made in cash, shares of Common Stock, a combination of cash or stock or by any other method. Options are not assignable or transferable except by will or under the laws of descent and distribution and, in the case of nonqualified options, to a designated transferee, subject to approval by the Compensation Committee. For a period of ten years following the termination for any reason of an optionee's employment or active involvement with the Company, as determined by the Board of Directors, the Company shall have the right to repurchase from the optionee any or all shares of Common Stock acquired under the 1993 Option Plan and held by the optionee and/or any or all of the vested but unexercised portion of any option granted under the 1993 Option Plan at a purchase price defined therein. In addition, the Company has certain rights of first refusal with respect to transfers of optionees' vested and unvested stock except in the case of a registered public offering. Following this offering, no further shares will be available for grant under the 1993 Option Plan and the Company does not anticipate that there will be any further grants of options under the 1993 Option Plan. However, any option outstanding under the 1993 Option Plan shall remain outstanding until such option is exercised or expires in accordance with its terms and the terms of the 1993 Option Plan. 1993 EXECUTIVE STOCK OPTION PLAN The Company's 1993 Executive Stock Option Plan (the "1993 Executive Option Plan") was adopted by the Company in December 1993. The 1993 Executive Option Plan provided for the grant of stock options to senior executive employees (including officers who may be members of the Company's Board of Directors). Under the 1993 Executive Option Plan, the Company may grant incentive stock options or nonqualified options. A total of 750,000 shares of Common Stock were originally authorized for issuance upon the exercise of options granted under the 1993 Executive Option Plan. As of September 30, 1996, options to purchase a total of 750,000 shares of Common Stock at exercise prices of $5.33 or $5.87 per share were outstanding under the 1993 Executive Option Plan, of which options to purchase 225,000 shares 51 were exercisable. No options have been exercised to date and options outstanding expire at various dates through December 15, 2007. Payment of the option exercise price may be made in cash, shares of Common Stock, a combination of cash or stock or by any other method. Options are not assignable or transferable except by will or under the laws of descent and distribution. No further shares are available for grant under the 1993 Executive Option Plan and the Company does not anticipate that there will be any further grants of options under the 1993 Executive Option Plan. However, any option outstanding under the 1993 Executive Option Plan shall remain outstanding until such option is exercised or expires in accordance with its terms and the terms of the 1993 Executive Option Plan. 1996 STOCK INCENTIVE PLAN The 1996 Plan was adopted by the Company in May 1996. The 1996 Plan permits the Compensation Committee of the Board of Directors to make awards to employees, advisors and consultants of the Company and its subsidiaries. The 1996 Plan provides for grant of stock options, including both incentive stock options and nonqualified options, as well as stock appreciation rights, restricted stock, performance shares and phantom stock, as described below. All awards under the 1996 Plan are nontransferable by the participant, except upon the participant's death in accordance with his will or applicable law. To date no awards of options have been made under the 1996 Plan. STOCK OPTIONS. The 1996 Plan authorizes the grant of nonqualified stock options to employees, consultants and advisors of the Company and its subsidiaries. Incentive stock options may only be granted to employees of the Company and its subsidiaries. The exercise price of a nonqualified stock option may be determined by the Compensation Committee in its discretion. The exercise price of an incentive stock option may not be less than the fair market value of the Common Stock on the date of grant (110% of the fair market value in the case of an incentive stock option granted to a stockholder owning in excess of 10% of the Common Stock). The value of Common Stock (determined at the time of grant) that may be subject to incentive stock options that become exercisable by any one employee in any one year is limited by the Code to $100,000. The maximum term of stock options granted under the 1996 Plan is 10 years from the date of grant. The Compensation Committee shall determine the extent to which an option shall become and/or remain exercisable in the event of the termination of employment or service of a participant under certain circumstances, including retirement, death or disability, subject to certain limitations for incentive stock options. Under the 1996 Plan, the exercise price of an option is payable by the participant in cash or, in the discretion of the Compensation Committee, in Common Stock or a combination of cash and Common Stock. STOCK APPRECIATION RIGHTS. A stock appreciation right may be granted in connection with an option, either at the time of grant or at any time thereafter during the term of the option. A stock appreciation right granted in connection with an option entitles the holder, upon exercise, to surrender the related option and receive a payment based on the difference between the exercise price of the related option and the fair market value of the Company's Common Stock on the date of exercise. A stock appreciation right granted in connection with an option is exercisable only at such time or times as the related option is exercisable and expires no later than the time when the related option expires. A stock appreciation right also may be granted without relationship to an option and will be exercisable as determined by the Compensation Committee, but in no event after ten years from the date of grant. A stock appreciation right granted without relationship to an option entitles the holder, upon exercise, to a payment based on the difference between the base price assigned to the stock appreciation right by the Compensation Committee on the date of grant and the fair market value of the Company's Common Stock on the date of exercise. Payment to the holder in connection with the exercise of a stock appreciation right may be in cash or shares of Common Stock or in a combination of cash and shares. 52 RESTRICTED STOCK AWARDS. The Committee may award shares of Common Stock to participants under the 1996 Plan, subject to such restrictions on transfer and conditions of forfeiture as it deems appropriate. Such conditions may include requirements as to the continued service of the participant with the Company, the attainment of specified performance goals or any other conditions determined by the Compensation Committee. Subject to the transfer restrictions and forfeiture restrictions relating to the restricted stock award, the participant will otherwise have the rights of a stockholder of the Company, including all voting and dividend rights, during the period of restriction. PERFORMANCE AWARDS. The Compensation Committee may grant performance awards denominated in specified dollar units ("Performance Units") or in shares of Common Stock ("Performance Shares"). Performance awards are payable upon the achievement of performance goals established by the Compensation Committee at the beginning of the performance period, which may not exceed ten years from the date of grant. At the time of grant, the Compensation Committee establishes the number of units or shares, the duration of the performance period, the applicable performance goals and, in the case of performance units, the potential payment or range of payments for the performance awards. At the end of the performance period, the Compensation Committee determines the payment to be made based on the extent to which the performance goals have been achieved. The Compensation Committee may consider significant unforeseen events during the performance period when making the final award. Payments may be made in cash or shares of Common Stock or in a combination of cash and shares. PHANTOM STOCK. An award of phantom stock gives the participant the right to receive cash at the end of a fixed vesting period based on the value of a share of Common Stock at that time. Phantom stock units are subject to such restrictions and conditions to payment as the Compensation Committee determines are appropriate. At the time of grant, the Compensation Committee determines, in its sole discretion, the number of units and the vesting period of the units, and it may also set a maximum value of a unit. If the participant remains employed by the Company throughout the applicable vesting period, he is entitled to receive payment of a cash amount for each phantom stock unit equal in value to the fair market value of one share of Common Stock on the last day of the vesting period, subject to any maximum value limitation. ADMINISTRATION. The 1996 Plan shall be administered by the Compensation Committee of the Board of Directors, or such other committee as may be appointed by the Board. Subject to the limitations set forth in the 1996 Plan, the Compensation Committee has the authority to determine the persons to whom awards will be granted, the time at which awards will be granted, the number of shares, units or other rights subject to each award, the exercise, base or purchase price of an award (if any), the time or times at which the award will become vested, exercisable or payable and the duration of the award. The Compensation Committee may provide for the acceleration of the vesting or exercise period of an award at any time prior to its termination or upon the occurrence of specified events. With the consent of the affected participant, the Compensation Committee has the authority to cancel and replace awards previously granted with new options for the same or a different number of shares and having a higher or lower exercise or base price, and may amend the terms of any outstanding awards to provide for an exercise or base price that is higher or lower than the current exercise or base price. RESERVATION OF SHARES. The Company has authorized and reserved 750,000 shares of Common Stock for issuance under the 1996 Plan. The shares may be unissued shares or treasury shares. If any shares of Common Stock that are the subject of an award are not issued or transferred and cease to be issuable or transferable for any reason, such shares will no longer be charged against such maximum share limitation and may again be made subject to awards under the 1996 Plan. In the event of certain corporate reorganizations, recapitalizations, or other specified corporate transactions affecting the Company or the Common Stock, proportionate adjustments may be made to the number of shares available for grant and to the number of shares and prices under outstanding awards made before the event. TERM AND AMENDMENT. The 1996 Plan has a term of 10 years, subject to earlier termination or amendment by the Board of Directors. All awards granted under the 1996 Plan prior to its termination 53 remain outstanding until exercised, paid or terminated in accordance with their terms. The Board of Directors may amend the 1996 Plan at any time, except that shareholder approval is required for certain amendments to the extent necessary for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 401(K) SAVINGS AND RETIREMENT PLAN In 1993 the Company adopted the provisions of the amended and restated Progenics 401(k) Plan (the "401(k) Plan"), a tax-qualified plan covering all eligible employees, as defined therein. Each eligible employee may elect to reduce his or her current compensation by 15%, subject to the statutory limit (a maximum of $9,500 in 1996) and have the amount of the reduction contributed to the 401(k) Plan. The Company has agreed to match 25% of up to the first 8% of compensation that eligible employees contribute to the 401(k) Plan. In addition, the Company may also make a discretionary contribution, as defined in the 401(k) Plan, each year on behalf of all participants who are non-highly compensated employees, as defined therein. The Company made matching contributions in an aggregate amount of approximately $12,000 to eligible employees under the 401(k) Plan in 1995. No matching contributions were made in 1995 to any of the Named Executive Officers. 54 CERTAIN TRANSACTIONS During 1995, the Company borrowed under a note an aggregate of $1,200,000 from certain affiliates of Tudor Investment Corporation, a shareholder of the Company. The note provided for the accrual of interest at the rate of 10% per annum, with interest and principal payable on demand. In December 1995, the principal amount of the note plus accrued interest of approximately $24,000 were exchanged for approximately 61,200 Series C Units. See "Principal Stockholders" and "Description of Capital Stock." Since January 1, 1993, the Company has sold securities in the following transactions with the following directors, officers, and stockholders who beneficially own more than 5% of the outstanding Common Stock of the Company ("5% Stockholders"), and affiliates of such directors, officers and 5% Stockholders.
SERIES B PREFERRED STOCK ISSUED UPON SERIES B EXERCISE OF SERIES C TOTAL NAME UNITS(1) WARRANTS(2) UNITS(3) CONSIDERATION - ------------------------------------------------------- ---------- ----------------- ---------- ------------- Entities affiliated with Tudor Investment Corporation(4)........................................ 758,750 375,000 180,000 $ 8,510,000 Entities affiliated with Weiss, Peck & Greer L.L.C.(5)............................................. 125,000 125,000 20,000 1,525,000 Paul F. Jacobson(6).................................... 12,500 12,500 5,000 212,500 David A. Scheinberg, M.D., Ph.D.(7).................... -- -- 1,250 25,000 ---------- -------- ---------- ------------- Total.................................................. 896,250 512,500 206,250 $ 10,272,500 ---------- -------- ---------- ------------- ---------- -------- ---------- -------------
- ------------------------------ (1) Each Series B Unit consisted of one share of Series B Preferred Stock and one warrant to purchase one share of Series B Preferred Stock ("Series B Warrant"). The purchase price per unit was $4.00. The sale of all the Series B Units occurred in 1993. (2) Shares issued upon exercise of Series B Warrants for an exercise price of $5.00 per share. The issuance of shares of Series B Preferred Stock upon exercise of Series B Warrants occurred in 1994. (3) Each Series C Unit consists of four shares of Series C Preferred Stock and one warrant to purchase one share of Series C Preferred Stock ("Series C Warrant"). The purchase price per unit was $20.00. The Series C Warrants remain outstanding. Except for 100,000 Series C Units sold during the fourth quarter of 1995, the Series C Units were sold in 1996. (4) The 180,000 Series C Units includes approximately 61,200 units issued in exchange for the note plus accrued interest held by Tudor Investment Corporation described above. Mr. Dalton, a director of the Company, is associated with Tudor Investment Corporation. See "Management." (5) Ms. Greetham, a director of the Company, is associated with Weiss, Peck & Greer. See "Management." (6) Mr. Jacobson is a director of the Company. See "Management." (7) Mr. Scheinberg is a director of the Company. See "Management." Various directors, officers, 5% Stockholders of the Company and affiliates of such persons are entitled to certain registration rights with respect to their securities of the Company. See "Shares Eligible for Future Sale." The Company believes that the transactions described above were entered into on terms no less favorable to the Company than could be obtained from third parties on an arm's length basis. 55 PRINCIPAL STOCKHOLDERS The following table sets forth the aggregate number of shares of Common Stock beneficially owned as of September 30, 1996, assuming conversion of all shares of the Company's Preferred Stock into an aggregate of 4,259,878 shares of Common Stock upon the closing of this offering, by: (i) each person (or group of affiliated persons) known by the Company to be a beneficial owner of more than 5% of the outstanding Common Stock of the Company; (ii) each director of the Company; (iii) each of the Named Executive Officers; and (iv) all directors and executive officers of the Company as a group.
PERCENTAGE OF SHARES BENEFICIALLY NUMBER OF SHARES OWNED(1)(2)(3) BENEFICIALLY ------------------------ OWNED BEFORE AFTER NAME AND ADDRESS OF BENEFICIAL OWNER (1)(2)(3) OFFERING OFFERING - -------------------------------------------------------------------------- ----------------- ----------- ----------- Entities affiliated with Tudor Investment Corporation(4)(5) 600 Steamboat Road Greenwich, CT 06830..................................................... 2,314,314 34.6% 26.6% Paul J. Maddon, M.D., Ph.D.(6) 777 Old Saw Mill River Road Tarrytown, NY 10591..................................................... 1,125,000 16.2% 12.6% Paul Tudor Jones, II(4)(5) 600 Steamboat Road Greenwich, CT 06830..................................................... 488,625 7.4% 5.7% Charles A. Baker(7)....................................................... 33,750 * * Mark F. Dalton(8)......................................................... 51,000 * * Stephen P. Goff, Ph.D.(9)................................................. 56,250 * * Elizabeth M. Greetham(10)................................................. 262,500 4.0% 3.1% Paul F. Jacobson(11)...................................................... 189,039 2.9% 2.2% David A. Scheinberg, M.D., Ph.D.(12)...................................... 47,545 * * Robert J. Israel, M.D.(13)................................................ 22,500 * * Robert A. McKinney(14).................................................... 36,000 * * All directors and executive officers as a group (9 persons)(15)........... 1,823,584 25.6% 20.0%
- ------------------------ * Less than 1% (1) Except as indicated in the footnotes to this table and pursuant to applicable community property laws, each stockholder possesses sole voting and investment power with respect to the shares of Common Stock listed. (2) The number of shares of Common Stock beneficially owned includes the shares issuable pursuant to stock options and warrants that may be exercised within 60 days after September 30, 1996. Shares issuable pursuant to such options and warrants are deemed outstanding for computing the percentage of beneficial ownership of the person holding such options and warrants but are not deemed outstanding for computing the percentage of beneficial ownership of any other person. The number of shares of Common Stock outstanding after this offering includes the 2,000,000 shares of Common Stock being offered for sale by the Company in this offering. Share amounts of the Company's Preferred Stock convertible into Common Stock (all of which will be converted to Common Stock upon the closing of this offering) are stated on an as converted basis. (3) Assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." (4) The number of shares owned by entities affiliated with Tudor Investment Corporation ("TIC") consists of 1,704,501 shares held of record by Tudor BVI Futures, Ltd., an international business company organized under the law of the British Virgin Islands ("Tudor BVI"), 88,251 shares of Common Stock issuable to Tudor BVI upon the exercise of currently exercisable warrants, 287,813 shares held of record by TIC, 164,499 shares held of record by Tudor Arbitrage Partners L.P. ("TAP") and 41,125 shares of Common Stock issuable to TAP upon the exercise of currently exercisable warrants, 22,500 shares of record held by Tudor Proprietary Trading, L.L.C., a UK-based limited liability corporation ("TPT"), and 5,625 shares of Common Stock issuable to TPT upon the exercise of currently exercisable warrants. In addition, because TIC provides investment advisory services to Tudor BVI, it may be deemed to beneficially own the shares held by such entity. TIC disclaims beneficial ownership of such shares. 56 (5) The shares held by Mr. Jones consist of 461,625 shares held of record by Mr. Jones and 27,000 shares subject to stock options held by Mr. Jones exercisable within 60 days of the date of this table. In addition, Mr. Jones is the Chairman and principal stockholder of TIC, the Chairman and indirect principal equity owner of the general partner of TAP, and the Chairman and indirect principal equity owner of TPT. Mr. Jones may be deemed to beneficially own the shares beneficially owned, or deemed beneficially owned, by such entities. Mr. Jones disclaims beneficial ownership of such shares. (6) Includes 225,000 shares subject to stock options held by Dr. Maddon exercisable within 60 days of the date of this table and an additional 150,000 shares subject to stock options which will accelerate upon the effectiveness of this offering (assuming an initial public offering price of $12.00 per share). (7) Includes 3,750 shares of Common Stock issuable to the Baker Family Limited Partnership ("BFLP") upon the exercise of currently exercisable warrants, 15,000 shares owned by the BFLP, and 15,000 shares subject to stock options held by Mr. Baker exercisable within 60 days of the date of this table. (8) Includes 34,500 shares held of record directly by Mr. Dalton and 16,500 shares of record held by DF Partners, a family partnership of which Mr. Dalton is the managing general partner with a 5% interest. The remaining 95% interest is held by trusts for the benefit of Mr. Dalton's children. As to such 95% interest, Mr. Dalton disclaims beneficial interest. See "Management -- Directors, Executive Officers and Key Management." (9) Includes 18,750 shares subject to stock options held by Dr. Goff exercisable within 60 days of the date of this table. (10) Consists of 131,250 shares held of record by Weiss, Peck & Greer ("WPG") Life Sciences Fund, L.P. ("WPGLSF") and 9,375 shares of Common Stock issuable to WPGLSF upon the exercise of currently exercisable warrants and 116,250 shares held of record by WPG Institutional Life Sciences Fund, L.P. ("WPGILSF") and 5,625 shares of Common Stock issuable to WPGILSF upon the exercise of currently exercisable warrants. Ms. Greetham, who is the Portfolio Manager for both WPGLSF and WPGILSF, disclaims beneficial ownership of all such shares except to the extent of her beneficial interest in WPGLSF. (11) Includes 3,750 shares of Common Stock issuable to Mr. Jacobson upon the exercise of currently exercisable warrants and 27,000 shares subject to stock options held by Mr. Jacobson exercisable within 60 days of the date of this table. (12) Includes 938 shares of Common Stock issuable to Dr. Scheinberg upon the exercise of currently exercisable warrants and 42,857 shares subject to stock options held by Dr. Scheinberg exercisable within 60 days of the date of this table. (13) Consists of 22,500 shares subject to stock options held by Dr. Israel exercisable within 60 days of the date of this table. (14) Consists of 36,000 shares subject to stock options held by Mr. McKinney exercisable within 60 days of the date of this table. (15) Includes shares held by affiliated entities as set forth in the above table, 387,107 shares subject to stock options held by all officers and directors exercisable within 60 days of the date of this table, 150,000 shares subject to stock options held by an officer and director which will accelerate upon the effectiveness of this offering (assuming an initial public offering price of $12.00 per share) and 23,438 shares issuable upon the exercise of currently exercisable warrants beneficially owned by certain directors. 57 DESCRIPTION OF CAPITAL STOCK AUTHORIZED STOCK; ISSUED AND OUTSTANDING SHARES Upon the completion of this offering, the authorized capital stock of the Company will consist of 40,000,000 shares of Common Stock, par value $.0013 per share, and 20,000,000 shares of Preferred Stock, par value $.001 per share. In October 1996 the Board of Directors and shareholders of the Company approved a three-for-four reverse stock split of the Company's Common Stock. All information in this Prospectus has been adjusted to reflect the reverse stock split. As of September 30, 1996, 2,294,675 shares of Common Stock and 5,679,826 shares of Preferred Stock were outstanding. Simultaneously with the closing of this offering, each outstanding share of Preferred Stock will automatically be converted into .75 shares of Common Stock, or an aggregate of 4,259,878 shares of Common Stock, pursuant to its terms. COMMON STOCK Assuming conversion of all outstanding Preferred Stock, at September 30, 1996 there were 6,554,553 shares of Common Stock outstanding held by approximately 130 stockholders of record. Holders of Common Stock are entitled to one vote for each share held of record on any matters voted upon by stockholders and do not have any cumulative voting rights. Subject to preferences that may be applicable to any outstanding Preferred Stock, holders of Common Stock are entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefor. See "Dividend Policy." In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding Preferred Stock. Holders of Common Stock have no preemptive rights and no right to convert their Common Stock into any other securities. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are, and all shares of Common Stock to be outstanding upon completion of this offering will be, validly issued, fully paid and nonassessable. All shares of Common Stock issuable upon conversion of the Preferred Stock and upon exercise of warrants will be, upon such conversion or exercise, validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock which the Company may designate and issue in the future. PREFERRED STOCK Upon the closing of this offering, the conversion of the outstanding Series A, Series B and Series C Preferred Stock and the filing of a Certificate of Amendment to Certificate of Incorporation removing the designation of those Series, the Company's Certificate of Incorporation will authorize the issuance of up to 20,000,000 shares of Preferred Stock, $.001 par value per share, and none of those shares will be outstanding or designated into any series. Under the terms of the Certificate of Incorporation, the Board of Directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue such shares of Preferred Stock in one or more series. Each such series of Preferred Stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Board of Directors. The purpose of authorizing the Board of Directors to issue Preferred Stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of Preferred Stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of the outstanding voting stock of the Company. The Company has no present plans to issue any shares of Preferred Stock. 58 WARRANTS The Company has issued warrants (the "Warrants") to purchase 347,249 shares of Series C Preferred Stock. Each Warrant entitles the holder to purchase one share of Series C Preferred Stock at a purchase price of $5.00 per share (subject to adjustment in certain circumstances) during the five-year period commencing on the warrant issuance date (December 8, 1995 or February 23, 1996). Following the closing of this offering, the Warrants will become exercisable for 260,455 shares of Common Stock at a purchase price of $6.67 per share of Common Stock (subject to adjustment in certain circumstances). If at any time after the date of this offering but before December 31, 1996 the Company issues: (i) additional shares of Common Stock; (ii) securities that are convertible into or exchangeable for shares of Common Stock; or (iii) warrants or other rights to subscribe for shares of Common Stock (collectively, "Additional Shares"), at a price lower than the current exercise price of the Warrant, then the exercise price of the Warrant will be reduced to such lower price and the number of shares subject to the Warrant shall be proportionally increased. After December 31, 1996, if the Company issues Additional Shares at a price per share that is lower than the then current market price (as defined) per share of the Common Stock, then the exercise price of the Warrant will be reduced to a price equal to (a) the sum of (i) the total number of shares of the Company outstanding immediately prior to the issuance of the Additional Shares multiplied by the then current exercise price of the Warrant, plus (ii) the consideration received by the Company for the Additional Shares, divided by (b) the total number of shares of capital stock of the Company outstanding immediately after the issuance of the Additional Shares. In such case the number of shares subject to the Warrant shall be proportionally increased. In no event is any adjustment of the exercise price of the Warrant or the number of shares subject to the Warrant required upon the grant of stock options or other stock incentives to employees of the Company or upon the exercise of such options or incentives. DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS The Company is subject to the provisions of Section 203 of the General Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of a corporation's voting stock. The Certificate of Incorporation contains certain provisions permitted under the General Corporation Law of Delaware relating to the liability of directors. The provisions eliminate a director's liability for monetary damages for a breach of fiduciary duty, except in certain circumstances involving wrongful acts, such as the breach of a director's duty of loyalty or acts or omissions which involve intentional misconduct or a knowing violation of law. Further, the Certificate of Incorporation contains provisions to indemnify the Company's directors and officers to the fullest extent permitted by the General Corporation Law of Delaware. The Company believes that these provisions will assist the Company in attracting and retaining qualified individuals to serve as directors. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is American Stock Transfer & Trust Company. 59 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, based upon the number of shares outstanding at September 30, 1996, there will be 8,554,553 shares of Common Stock of the Company outstanding (exclusive of 947,007 shares covered by vested options and warrants outstanding at September 30, 1996 and including 4,259,878 shares of Common Stock to be issued upon the automatic conversion of the outstanding shares of Preferred Stock upon consummation of this offering). Of these outstanding shares (and without taking into account the lock-up agreements described below), approximately 4,504,095 shares, including the 2,000,000 shares of Common Stock sold in this offering, will be immediately eligible for resale in the public market without restriction under the Securities Act, except that any shares purchased in this offering by "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act ("Affiliates"), may generally only be resold in compliance with applicable provisions of Rule 144. Beginning approximately 90 days after the date of this Prospectus (and without taking into account the lock-up agreements described below), approximately 2,963,711 additional shares of Common Stock and approximately 779,486 shares covered by options exercisable within the 90-day period following the date of this Prospectus will become eligible for immediate resale in the public market, subject to compliance as to certain of such shares with applicable provisions of Rules 144 and 701. The Company, the executive officers and directors of the Company, and certain securityholders, which executive officers, directors and securityholders in the aggregate hold approximately 8,353,912 shares of Common Stock and shares issuable upon the exercise of outstanding options and warrants (including 946,098 shares of Common Stock that may be acquired pursuant to the exercise of vested options or warrants held by them) at September 30, 1996, have agreed pursuant to certain agreements that they will not, without the prior written consent of Oppenheimer & Co., Inc., offer, sell or otherwise dispose of the shares of Common Stock beneficially owned by them for a period of 180 days from the date of this Prospectus (120 days with respect to 45,000 of such shares). The shares subject to the lock-up agreements include 2,189,897 of the shares of Common Stock that would otherwise have become immediately eligible for resale in the public market upon completion of this offering and approximately 2,963,711 of the shares of Common Stock and 778,577 of the shares covered by options exercisable within the 90-day period following the date of this Prospectus that would otherwise have become eligible for resale in the public market beginning approximately 90 days after the date of this Prospectus, subject to compliance as to certain of such shares with the applicable provisions of Rules 144 and 701. In general, under Rule 144 as currently in effect, beginning approximately 90 days after the effective date of the Registration Statement of which this Prospectus is a part, a stockholder, including an Affiliate, who has beneficially owned his or her restricted securities (as that term is defined in Rule 144) for at least two years from the later of the date such securities were acquired from the Company or (if applicable) the date they were acquired from an Affiliate is entitled to sell, within any three-month period, a number of such shares that does not exceed the greater of 1% of the then outstanding shares of Common Stock (approximately 85,546 shares immediately after this offering) or the average weekly trading volume in the Common Stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144, provided certain requirements concerning availability of public information, manner of sale and notice of sale are satisfied. In addition, under Rule 144(k), if a period of at least three years has elapsed between the later of the date restricted securities were acquired from the Company or (if applicable) the date they were acquired from an Affiliate of the Company, a stockholder who is not an Affiliate of the Company at the time of sale and has not been an Affiliate of the Company for at least three months prior to the sale is entitled to sell the shares immediately without compliance with the foregoing requirements under Rule 144. The Commission has proposed an amendment to Rule 144 which would reduce the holding period required for shares subject to Rule 144 to become eligible for sale in the public market from two years to one year, and from three years to two years in the case of Rule 144(k). 60 Rule 701 under the Securities Act provides an exemption from the registration requirements of the Securities Act for offers and sales of securities issued pursuant to certain compensatory benefit plans, such as the Company's stock option and stock incentive plans, of a company not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. Securities issued pursuant to Rule 701 are defined as restricted securities for purposes of Rule 144. However, 90 days after the issuer becomes subject to the reporting provisions of the Exchange Act, the Rule 144 resale restrictions, except for the broker's transaction requirement, are inapplicable for non-affiliates. Affiliates are subject to all Rule 144 restrictions after this 90-day period, but without a holding period. In addition, the Company plans to file a Form S-8 registration statement registering shares of stock issuable pursuant to the Company's stock option plans. Commencing on the first anniversary of the date of this Prospectus, all of the stockholders of the Company who purchased shares prior to this offering will be entitled to certain rights with respect to the registration under the Securities Act of a total of approximately 6,815,000 shares of Common Stock (the "Registrable Shares"), including 260,455 shares of Common Stock that may be acquired pursuant to the exercise of outstanding warrants, under the terms of agreements with the Company (the "Registration Agreements"). The holders of 20% of the Registrable Shares (the "Minimum Number of Holders") may trigger the obligation of the Company to use its best efforts to effect no more than two public offerings on Forms S-1 or S-2, provided that the offering price per share is at least $6.67 and the aggregate offering price to the public is at least $5 million. In addition, the Minimum Number of Holders shall have the right to demand an unlimited number of registrations on Form S-3, provided that the aggregate proposed public offering price of the securities to be included in such registration shall be at least $1 million. In addition, if the Company files a registration statement with the Commission, stockholders may elect to include therein their respective Registrable Shares. There is no limit with respect to the number of times holders of Registrable Shares may exercise such "piggyback" registration rights. In addition, pursuant to the Employment Agreement between the Company and Dr. Maddon, the Company granted to Dr. Maddon separate "piggyback" registration rights which may be exercised at any time with respect to his shares of Common Stock or shares of Common Stock issuable upon exercise of any options (as of September 30, 1996, Dr. Maddon held options to purchase 750,000 shares of Common Stock, of which options to purchase 225,000 shares of Common Stock were exercisable on that date or within 60 days thereafter). Aquila also has been granted "piggyback" registration rights with respect to the registration of shares of the Company's securities held by it, which rights may be exercised at any time. The Company's obligation to register shares pursuant to exercise of any of the foregoing "demand" or "piggyback" registration rights is subject in any underwritten offering to the right of the underwriters to exclude shares necessary to avoid interfering with the successful marketing of the underwritten offering. The Company is generally obligated to bear the expenses, other than underwriting discounts and commissions, of all of these registrations. Prior to this offering, there has been no public market for the Common Stock. No precise prediction can be made as to the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price of the Common Stock prevailing from time to time. The Company is unable to estimate the number of shares that may be sold in the public market pursuant to Rule 144, since this will depend on the market price of the Common Stock, the personal circumstances of the sellers and other factors. Nevertheless, sales of significant amounts of the Common Stock of the Company in the public market could adversely affect the market price of the Company's Common Stock and could impair the Company's ability to raise capital through an offering of its equity securities. 61 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Company has agreed to sell to each of the Underwriters named below, and each of the Underwriters, for whom Oppenheimer & Co., Inc. and Vector Securities International, Inc. are acting as Representatives, has severally agreed to purchase from the Company, the respective number of shares of Common Stock set forth opposite the name of each Underwriter below.
NUMBER NAME OF SHARES - --------------------------------------------------------------------------------- ---------- Oppenheimer & Co., Inc........................................................... Vector Securities International, Inc............................................. ---------- Total...................................................................... 2,000,000 ---------- ----------
The Underwriters propose to offer the shares of Common Stock directly to the public at the initial public offering price set forth on the cover page of this Prospectus and in part to certain securities dealers at such price less a concession of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other brokers and dealers. After the shares of Common Stock are released for sale to the public, the offering price and other selling terms may, from time to time, be varied by the Representatives. The Underwriters are obligated to take and pay for all of the shares of Common Stock offered hereby (other than those covered by the over-allotment option described below), if any are taken. The Company has granted to the Underwriters an option, exercisable for up to 30 days after the date of this Prospectus, to purchase up to an aggregate of 300,000 additional shares of Common Stock to cover over-allotments, if any. If the Underwriters exercise such option, the Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the number of shares to be purchased by each of them bears to the 2,000,000 shares of Common Stock offered hereby. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of the shares of Common Stock offered hereby. The Representatives have advised the Company that the Underwriters do not intend to confirm sales in excess of 5% of the shares offered hereby to any account over which they exercise discretionary authority. The Company has agreed to indemnify the Representatives of the Underwriters and the several Underwriters against certain liabilities, including, without limitation, liabilities under the Securities Act. The Company's officers and directors and certain stockholders who own an aggregate of 8,353,912 shares of Common Stock (including shares issuable upon exercise of outstanding options and warrants) have agreed that they will not directly or indirectly, sell, offer, contract to sell, make a short sale, pledge or otherwise dispose of any shares of Common Stock (or any securities convertible into or exchangeable or exercisable for any other rights to purchase or acquire Common Stock other than shares of Common Stock issuable upon exercise of outstanding options) owned by them, for a period of 180 days after the date of this Prospectus (120 days with respect to one stockholder who owns 45,000 shares of Common Stock), without the prior written consent of Oppenheimer & Co., Inc., subject to certain limited exceptions. The 62 Company has also agreed not to issue, sell or register with the Commission for its own account or otherwise dispose of, directly or indirectly, any equity securities of the Company (or any securities convertible into or exercisable or exchangeable for equity securities of the Company) for a period of 180 days after the date of this Prospectus, without the prior written consent of Oppenheimer & Co., Inc., subject to certain limited exceptions. Prior to this offering, there has been no public market for the Common Stock. The initial public offering price will be negotiated between the Company and the Representatives. Among the factors to be considered in determining the initial public offering price of the Common Stock, in addition to prevailing market conditions, will be the Company's historical performance, capital structure, estimates of the business potential and earnings prospects of the Company, an assessment of the Company's management and consideration of the above factors in relation to market values of companies in related businesses. 63 LEGAL MATTERS The validity of the Common Stock being offered hereby will be passed upon for the Company by Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019, and for the Underwriters by Hale and Dorr, 60 State Street, Boston, Massachusetts 02109. EXPERTS The balance sheets as of December 31, 1994, 1995 and September 30, 1996 and the statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995, for the nine months ended September 30, 1996 and for the period from December 1, 1986 (inception) to September 30, 1996, included in this Prospectus, have been included herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 under the Securities Act with respect to the Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and the schedules thereto. For further information with respect to the Company and such Common Stock, reference is made to the Registration Statement and exhibits and schedules thereto. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and, with respect to any contract or other document filed as an exhibit to the Registration Statement, each such statement is qualified in all respects by reference to such exhibit. Copies of the Registration Statement and the exhibits thereto are on file at the offices of the Commission and may be obtained upon payment of the prescribed fee or may be examined without charge at the Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at the Commission's Regional Offices at Seven World Trade Center, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained in person from the Public Reference Section of the Commission at its principal office located at 450 Fifth Avenue, N.W., Washington, D.C. 20549, upon payment of the prescribed fees. In addition, the Company is required to file electronic versions of these documents with the Commission through the Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Upon completion of the offering, the Company will be subject to the reporting requirements of the Exchange Act and in accordance therewith will file annual and quarterly reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information may be inspected, and copies of such material may be obtained upon payment of the prescribed fees, at the Commission's Public Reference Section at the addresses set forth above. 64 PROGENICS PHARMACEUTICALS, INC. INDEX TO FINANCIAL STATEMENTS
PAGE ----- Report of Independent Accountants.......................................................................... F-2 Financial Statements: Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996................................... F-3 Statements of Operations for the years ended December 31, 1993, 1994 and 1995, for the nine months ended September 30, 1995 (unaudited) and 1996 and for the period from December 1, 1986 (inception) to September 30, 1996..................................................................................... F-4 Statements of Stockholders' Equity (Deficit) for the period from December 1, 1986 (inception) to September 30, 1996, including the years ended December 31, 1993, 1994 and 1995 and the nine months ended September 30, 1996............................................................................... F-5 Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995, for the nine months ended September 30, 1995 (unaudited) and 1996 and for the period from December 1, 1986 (inception) to September 30, 1996..................................................................................... F-7 Notes to Financial Statements............................................................................ F-8
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Progenics Pharmaceuticals, Inc.: We have audited the accompanying balance sheets of PROGENICS PHARMACEUTICALS, INC. (the "Company") (a development stage enterprise) as of December 31, 1994 and 1995 and September 30, 1996, and the related statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995, for the nine months ended September 30, 1996 and for the period from December 1, 1986 (inception) to September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1994 and 1995 and September 30, 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, for the nine months ended September 30, 1996 and for the period from December 1, 1986 (inception) to September 30, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. New York, New York October 28, 1996. F-2 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEETS
DECEMBER 31, ------------------------------ SEPTEMBER 30, 1994 1995 1996 -------------- -------------- -------------- ASSETS: Current assets: Cash and cash equivalents...................................... $ 2,275,236 $ 559,294 $ 1,745,776 Certificates of deposit........................................ 103,850 -- -- Grant revenue receivable....................................... -- 112,749 79,638 Other current assets........................................... 67,967 18,445 60,370 -------------- -------------- -------------- Total current assets....................................... 2,447,053 690,488 1,885,784 Fixed assets, at cost, net of accumulated depreciation and amortization................................................... 959,136 966,118 890,391 Security deposits and other assets............................... 83,284 79,118 64,636 -------------- -------------- -------------- Total assets............................................... $ 3,489,473 $ 1,735,724 $ 2,840,811 -------------- -------------- -------------- -------------- -------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and accrued expenses.......................... $ 209,341 $ 487,089 $ 874,628 Capital lease obligations, current portion..................... 218,494 184,344 117,092 -------------- -------------- -------------- Total current liabilities.................................. 427,835 671,433 991,720 Capital lease obligations........................................ 204,916 162,824 154,687 Deferred lease liability......................................... 29,782 49,740 26,420 -------------- -------------- -------------- Total liabilities.......................................... 662,533 883,997 1,172,827 -------------- -------------- -------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.001 par value; 20,000,000 shares authorized: Series A Preferred Stock, convertible; 4,000,000 shares designated; shares issued and outstanding-- 2,308,000 in 1994, 1995 and 1996 (liquidation value, $6,055,750)................................................ 2,308 2,308 2,308 Series B Preferred Stock, convertible; 2,500,000 shares designated; shares issued and outstanding-- 1,982,830 in 1994, 1995 and 1996 (liquidation value, $8,650,630)........ 1,983 1,983 1,983 Series C Preferred Stock, convertible; 3,750,000 shares designated; shares issued and outstanding--424,184 in 1995 and 1,388,996 in 1996 (liquidation value, $2,120,920 in 1995 and $6,944,980 in 1996)............................... -- 424 1,389 -------------- -------------- -------------- Total preferred stock...................................... 4,291 4,715 5,680 Common Stock, $.0013 par value; 40,000,000 shares authorized; shares issued and outstanding--2,249,675 in 1994 and 2,294,675 in 1995 and 1996................................... 2,924 2,983 2,983 Additional paid-in capital..................................... 15,974,008 18,501,808 22,798,674 Deficit accumulated during the development stage............... (13,154,283) (17,657,779) (21,139,353) -------------- -------------- -------------- Total stockholders' equity................................. 2,826,940 851,727 1,667,984 -------------- -------------- -------------- Total liabilities and stockholders' equity................. $ 3,489,473 $ 1,735,724 $ 2,840,811 -------------- -------------- -------------- -------------- -------------- --------------
The accompanying notes are an integral part of the financial statements. F-3 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 1, 1986 YEARS ENDED DECEMBER 31, SEPTEMBER 30, (INCEPTION) ---------------------------------- ---------------------- THROUGH 1993 1994 1995 1995 1996 SEPTEMBER 30, 1996 ---------- ---------- ---------- ---------- ---------- ------------------ (UNAUDITED) Revenues: Research grants................... $ 84,000 $ 503,518 $ 725,348 $ 502,109 $ 267,606 $ 1,735,152 Product sales..................... 49,715 51,971 49,752 40,252 67,422 358,335 Interest income................... 53,500 108,036 46,378 43,663 91,300 632,719 ---------- ---------- ---------- ---------- ---------- ------------------ Total revenues................ 187,215 663,525 821,478 586,024 426,328 2,726,206 ---------- ---------- ---------- ---------- ---------- ------------------ Expenses: Research and development.......... 1,546,965 2,858,547 3,853,001 2,584,997 2,654,460 15,504,947 General and administrative........ 747,425 877,906 1,093,821 790,185 984,191 6,257,002 Interest expense.................. 38,071 50,399 87,279 52,347 39,564 440,717 Depreciation and amortization..... 249,371 288,407 290,873 229,135 229,687 1,662,893 ---------- ---------- ---------- ---------- ---------- ------------------ Total expenses................ 2,581,832 4,075,259 5,324,974 3,656,664 3,907,902 23,865,559 ---------- ---------- ---------- ---------- ---------- ------------------ Net loss...................... $(2,394,617) $(3,411,734) $(4,503,496) $(3,070,640) $(3,481,574) $(21,139,353) ---------- ---------- ---------- ---------- ---------- ------------------ ---------- ---------- ---------- ---------- ---------- ------------------ Pro forma net loss per share data: Pro forma net loss per share (unaudited)..................... $(0.73) $(0.57) ---------- ---------- ---------- ---------- Pro forma weighted average common shares outstanding (unaudited)..................... 6,134,721 6,134,721
The accompanying notes are an integral part of the financial statements. F-4 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD FROM DECEMBER 1, 1986 (INCEPTION) TO SEPTEMBER 30, 1996, INCLUDING THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996
DEFICIT ACCUMULATED PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE ---------------------- ---------------------- PAID-IN DEVELOPMENT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL ---------- ---------- ---------- ---------- ----------- ------------ ---------- Sale of Common Stock for cash ($.0013 per share)............................ 4,875,000 $ 6,338 $ 162 $ 6,500 Sale of Common Stock for cash ($.13 per share)................................ 180,000 234 23,766 24,000 Net loss for the year ended November 30, 1987.................................. $ (33,642) (33,642) ---------- ---------- ----------- ------------ ---------- Balance at November 30, 1987........ 5,055,000 6,572 23,928 (33,642) (3,142) Sale of Common Stock during May 1988 to an employee/stockholder for cash of $150 and services at estimated value ($1.07 per share)..................... 112,500 146 120,004 120,150 Sale of Common Stock for cash ($1.07 per share)................................ 1,026,574 1,335 1,093,665 1,095,000 Conversion of note payable to stockholder........................... 27,500 27,500 Purchase of treasury stock during June for cash of $20,000 and issuance of a note payable ($.53 per share)......... (75,000) (98) (39,902) (40,000) Sale of Common Stock during November in consideration for services rendered at estimated value ($1.33 per share)..... 2,476 3 3,297 3,300 Net loss for the year ended November 30, 1988.................................. (461,879) (461,879) ---------- ---------- ----------- ------------ ---------- Balance at November 30, 1988........ 6,121,550 7,958 1,228,492 (495,521) 740,929 Sale of Series A Preferred Stock units for cash ($2.50 per unit)............. 1,037,000 $ 1,037 2,591,463 2,592,500 Net loss for the year ended November 30, 1989.................................. (1,151,167) (1,151,167) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at November 30, 1989........ 1,037,000 1,037 6,121,550 7,958 3,819,955 (1,646,688) 2,182,262 Purchase of treasury stock during February for cash of $231,328 and issuance of a note payable (average $.08 per share)....................... (3,825,000) (4,973) (297,884) (302,857) Sale of Series A Preferred Stock units for cash ($2.50 per unit)............. 128,000 128 319,872 320,000 Net loss for the year ended November 30, 1990.................................. (1,709,728) (1,709,728) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at November 30, 1990........ 1,165,000 1,165 2,296,550 2,985 3,841,943 (3,356,416) 489,677 Purchase of treasury stock for cash ($.0016 per share).................... (46,875) (61) (14) (75) Exercise of Series A Preferred Stock warrants for cash ($2.75 per share)... 1,143,000 1,143 3,142,107 3,143,250 Net loss for the year ended November 30, 1991.................................. (1,673,439) (1,673,439) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at November 30, 1991........ 2,308,000 2,308 2,249,675 2,924 6,984,036 (5,029,855) 1,959,413 Net loss for the one-month period ended December 31, 1991..................... (95,675) (95,675) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at December 31, 1991........ 2,308,000 2,308 2,249,675 2,924 6,984,036 (5,125,530) 1,863,738
F-5 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
DEFICIT ACCUMULATED PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE ---------------------- ---------------------- PAID-IN DEVELOPMENT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL ---------- ---------- ---------- ---------- ----------- ------------ ---------- Sale of Series B Preferred Stock units for cash, net of expenses ($4.00 per unit)................................. 428,750 $ 429 $ 1,714,271 $1,714,700 Compensation expense in connection with the issuance of stock options......... 190,926 190,926 Net loss for the year ended December 31, 1992.................................. $ (2,222,402) (2,222,402) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at December 31, 1992........ 2,736,750 2,737 2,249,675 $ 2,924 8,889,233 (7,347,932) 1,546,962 Sale of Series B Preferred Stock units for cash, net of expenses ($4.00 per unit)................................. 834,770 835 3,333,245 3,334,080 Compensation expense in connection with the issuance of stock options......... 36,637 36,637 Net loss for the year ended December 31, 1993.................................. (2,394,617) (2,394,617) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at December 31, 1993........ 3,571,520 3,572 2,249,675 2,924 12,259,115 (9,742,549) 2,523,062 Exercise of Series B Preferred Stock warrants for cash ($5.00 per share)... 719,310 719 3,595,831 3,596,550 Compensation expense in connection with the issuance of stock options......... 119,062 119,062 Net loss for the year ended December 31, 1994.................................. (3,411,734) (3,411,734) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at December 31, 1994........ 4,290,830 4,291 2,249,675 2,924 15,974,008 (13,154,283) 2,826,940 Sale of Series C Preferred Stock units for cash ($20.00 per unit)............ 179,450 179 897,070 897,249 Compensation expense in connection with the issuance of stock options......... 107,363 107,363 Conversion of note payable and accrued interest of $23,671 into Series C Preferred Stock units ($20.00 per unit)................................. 244,734 245 1,223,426 1,223,671 Issuance of Common Stock in consideration for obtaining a license and supply agreement at estimated value ($6.67 per share)............... 45,000 59 299,941 300,000 Net loss for the year ended December 31, 1995.................................. (4,503,496) (4,503,496) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at December 31, 1995........ 4,715,014 4,715 2,294,675 2,983 18,501,808 (17,657,779) 851,727 Sale of Series C Preferred Stock units for cash, net of expenses ($20.00 per unit)................................. 964,812 965 4,776,359 4,777,324 Compensation expense in connection with the issuance of stock options......... 98,523 98,523 Deferred equity issuance costs.......... (578,016) (578,016) Net loss for the nine months ended September 30, 1996.................... (3,481,574) (3,481,574) ---------- ---------- ---------- ---------- ----------- ------------ ---------- Balance at September 30, 1996....... 5,679,826 $ 5,680 2,294,675 $ 2,983 $22,798,674 $(21,139,353) $1,667,984 ---------- ---------- ---------- ---------- ----------- ------------ ---------- ---------- ---------- ---------- ---------- ----------- ------------ ----------
Securities issued for non-cash consideration were valued based upon the Board of Directors' estimate of fair value of the securities issued at the time the services were rendered. The accompanying notes are an integral part of the financial statements. F-6 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED SEPTEMBER YEARS ENDED DECEMBER 31, 30, ---------------------------------------- ------------ 1993 1994 1995 1995 ------------ ------------ ------------ ------------ (UNAUDITED) Cash flows from operating activities: Net loss during development stage.............................. $ (2,394,617) $ (3,411,734) $ (4,503,496) $ (3,070,640) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.............................. 249,371 288,407 290,873 229,135 Compensation expense recognized in connection with issuance of stock options......................................... 36,637 119,062 107,363 80,522 Loss on disposal of fixed assets........................... -- -- -- -- Noncash operating expenses................................. -- -- -- -- Common stock issued in consideration for operating expenses................................................. -- -- 323,671 -- Changes in assets and liabilities: (Increase) decrease in grant revenue receivable.......... -- -- (112,749) -- (Increase) decrease in other current assets.............. (5,100) (62,867) 49,522 50,765 (Increase) decrease in security deposits and other assets................................................. (21,782) (2,663) (5,834) (4,428) Increase (decrease) in accounts payable and accrued expenses............................................... 18,615 69,165 273,399 159,102 (Decrease) increase in deferred lease liability.......... (19,646) 18,323 24,307 18,230 ------------ ------------ ------------ ------------ Net cash used in operating activities................................. (2,136,522) (2,982,307) (3,552,944) (2,537,314) ------------ ------------ ------------ ------------ Cash flows from investing activities: Proceeds on sale of fixed assets............................... -- -- -- -- Capital expenditures........................................... (229,710) (323,426) (158,445) (114,408) Redemption of certificates of deposit.......................... -- 10,000 113,850 113,850 Purchase of certificates of deposit............................ -- (10,000) -- -- Other.......................................................... -- -- -- -- ------------ ------------ ------------ ------------ Net cash used in investing activities................................. (229,710) (323,426) (44,595) (558) ------------ ------------ ------------ ------------ Cash flows from financing activities: Proceeds from issuance of equity securities, less offering expenses..................................................... 3,334,080 3,596,550 897,249 -- Payment of deferred equity issuance costs...................... -- -- -- -- Payment of capital lease obligations........................... (107,895) (132,414) (215,652) (166,281) Proceeds from notes payable.................................... -- -- 1,200,000 800,000 Repayments of notes payable.................................... (73,923) (20,638) -- -- Borrowings from stockholder.................................... -- -- -- -- Repayment of borrowings from stockholder....................... -- -- -- -- Payments to acquire treasury shares............................ -- -- -- -- ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities.... 3,152,262 3,443,498 1,881,597 633,719 ------------ ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents... 786,030 137,765 (1,715,942) (1,904,153) Cash and cash equivalents at beginning of period................. 1,351,441 2,137,471 2,275,236 2,275,236 ------------ ------------ ------------ ------------ Cash and cash equivalents at end of period............. $ 2,137,471 $ 2,275,236 $ 559,294 $ 371,083 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Supplemental disclosure of cash flow information: Cash paid for interest....................................... $ 38,071 $ 47,618 $ 90,060 $ 55,128 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ DECEMBER 1, 1986 (INCEPTION) THROUGH 1996 SEPTEMBER 30, 1996 ------------ ------------------ Cash flows from operating activities: Net loss during development stage.............................. $ (3,481,574) $ (21,139,353) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.............................. 229,687 1,662,893 Compensation expense recognized in connection with issuance of stock options......................................... 98,523 552,511 Loss on disposal of fixed assets........................... -- 17,550 Noncash operating expenses................................. -- 51,766 Common stock issued in consideration for operating expenses................................................. -- 446,971 Changes in assets and liabilities: (Increase) decrease in grant revenue receivable.......... 33,111 (79,638) (Increase) decrease in other current assets.............. (41,925) (60,370) (Increase) decrease in security deposits and other assets................................................. 14,482 (64,636) Increase (decrease) in accounts payable and accrued expenses............................................... (137,545) 345,195 (Decrease) increase in deferred lease liability.......... (3,262) 50,827 ------------ ------------------ Net cash used in operating activities................................. (3,288,503) (18,216,284) ------------ ------------------ Cash flows from investing activities: Proceeds on sale of fixed assets............................... -- 22,500 Capital expenditures........................................... (73,303) (1,336,287) Redemption of certificates of deposit.......................... -- 182,850 Purchase of certificates of deposit............................ -- (182,850) Other.......................................................... -- (29,326) ------------ ------------------ Net cash used in investing activities................................. (73,303) (1,343,113) ------------ ------------------ Cash flows from financing activities: Proceeds from issuance of equity securities, less offering expenses..................................................... 4,777,324 21,501,303 Payment of deferred equity issuance costs...................... (72,990) (72,990) Payment of capital lease obligations........................... (156,046) (892,113) Proceeds from notes payable.................................... -- 1,277,500 Repayments of notes payable.................................... -- (257,124) Borrowings from stockholder.................................... -- 200,000 Repayment of borrowings from stockholder....................... -- (200,000) Payments to acquire treasury shares............................ -- (251,403) ------------ ------------------ Net cash provided by (used in) financing activities.... 4,548,288 21,305,173 ------------ ------------------ Net increase (decrease) in cash and cash equivalents... 1,186,482 1,745,776 Cash and cash equivalents at beginning of period................. 559,294 -- ------------ ------------------ Cash and cash equivalents at end of period............. $ 1,745,776 $ 1,745,776 ------------ ------------------ ------------ ------------------ Supplemental disclosure of cash flow information: Cash paid for interest....................................... $ 39,564 $ 440,717 ------------ ------------------ ------------ ------------------
The accompanying notes are an integral part of the financial statements. F-7 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (1995 INTERIM DATA IS UNAUDITED) 1. ORGANIZATION AND BUSINESS Progenics Pharmaceuticals, Inc. (the "Company") is a biopharmaceutical company focusing on the development and commercialization of innovative products for the treatment and prevention of cancer and viral diseases, including human immunodeficiency virus ("HIV") infection. The Company was incorporated in Delaware on December 1, 1986. The Company has no products approved by the U.S. Food and Drug Administration and as a development stage enterprise, the Company's primary efforts to date have been devoted to research and development, raising capital, acquiring equipment, setting up laboratories, and clinical testing of product candidates. In addition to the normal risks associated with a new business venture, there can be no assurance that the Company's research and development will be successfully completed, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. In addition, the Company operates in an environment of rapid change in technology and is dependent upon the continued services of its current employees, consultants and subcontractors. The Company has sustained net losses and negative cash flows from operations since its inception and expects these conditions to continue for the foreseeable future. The Company has received assurances from a stockholder that it will provide the financing necessary to enable the Company to continue to operate through February 28, 1998 if alternative financing, as defined, such as an initial public offering, is not obtained. The Company will need to raise additional financing through public or private equity financings, collaborative or other arrangements with corporate sources, or other sources of financing to fund operations after February 28, 1998. There can be no assurance that such additional financing, if at all available, can be obtained on terms reasonable to the Company. In the event the Company is unable to raise additional capital, operations after February 28, 1998 will need to be scaled back or discontinued. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRODUCT SALES The Company has derived all of its product revenue from the sale of research reagents to primarily one customer. Product sales revenue is recognized at the time reagents are shipped. The reagents are products of the Company's research and development efforts. The Company maintains no inventory of reagent and cost of product sales is not material. RESEARCH GRANTS The Company has been awarded government research grants from two grantors ("Grantors"). The respective grants are used to subsidize the Company's research projects ("Projects") regarding HIV. Grant revenue is recognized on a pro rata basis as the underlying costs of the Project are incurred. This method approximates the straight-line basis over the lives of the Projects. Receivables from the Grantors represent a concentration of credit risk to the Company. For each of the three years in the period ended December 31, 1995 and the nine months ended September 30, 1996, all of the Company's research grant revenue came from the Grantors. In general, the grants provide the Company with substantially all the rights regarding any technology (the "Technology") developed as the result of the sponsored research except that the Grantor has the right to use the Technology on a royalty-free basis and the Grantor may require the Company to license the Technology to others, as defined. In addition, the Company may be required to manufacture any product using the Technology in the United States. Amounts paid to the Company are nonrefundable and the Company is not contractually obligated to deliver any product or result from its research. F-8 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FIXED ASSETS Leasehold improvements, furniture and fixtures, and equipment are stated at cost. Furniture, fixtures, and equipment are depreciated on a straight-line basis over their estimated useful lives. Leasehold improvements are amortized on a straight-line basis over the life of the lease or of the improvement, whichever is shorter. The estimated useful lives of fixed assets are as follows:
Computer equipment............................................ 5 years Machinery and equipment....................................... 5-7 years Furniture and fixtures........................................ 5 years Life of Leasehold improvements........................................ lease
PATENTS As a result of research and development efforts conducted by the Company, it has applied, or is applying, for a number of patents to protect proprietary inventions. All costs associated with patents are expensed as incurred. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments which have maturities of three months or less, when acquired, to be cash equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Cash, cash equivalents and certificates of deposit, subject the Company to concentrations of credit risk. At September 30, 1996, the Company had invested approximately $1,569,000 in funds with a major investment company and held approximately $177,000 in a single commercial bank. At December 31, 1995, the Company had invested approximately $33,000 in funds with a major investment company and held approximately $526,000 in a single commercial bank. At December 31, 1994, the Company had invested approximately $2,100,000 in funds and three month certificates of deposit with a major investment company and held approximately $267,000, including certificates of deposit totaling approximately $114,000, in a single commercial bank. NET LOSS PER SHARE PRO FORMA PER SHARE DATA (UNAUDITED) The pro forma per share data included in the Statements of Operations has been computed using the weighted average number of shares of common stock outstanding. Common stock issuable upon the exercise of outstanding stock options and warrants are excluded from the computation as their effect is anti-dilutive, except that, pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB No. 83"), equity securities, including options and warrants, issued at prices below the assumed public offering price of $12.00 during the 12-month period prior to the proposed offering have been included in the calculation as if they were outstanding for all periods presented. In addition, the weighted average number of shares of convertible preferred stock that will convert automatically into shares of common stock upon the closing of the Company's proposed initial public offering has been included in the calculation from their original date of issuance. F-9 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PER SHARE DATA IN ACCORDANCE WITH SAB NO. 83 The per share data found below has been computed in accordance with Accounting Principles Board Opinion No. 15 ("APB No. 15") adjusted for SAB No. 83. Such computation is based on the net loss for the period divided by the weighted average number of shares outstanding excluding the number of common shares issuable upon the exercise of outstanding options and warrants and the conversion of preferred stock since such inclusion would be anti-dilutive, except that, pursuant to SAB No. 83, equity securities including options and warrants, issued at prices below the assumed public offering price of $12.00 during the 12 month period prior to the proposed offering have been included in the calculation as if outstanding for all periods presented.
NINE MONTHS YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30, ----------------------------------------- -------------------------- 1993 1994 1995 1995 1996 ------------ ------------- ------------ ------------ ------------ (UNAUDITED) Net loss per share: Per APB No. 15.......................... $ (1.06) $ (1.52) $ (1.99) $ (1.36) $ (1.52) Effect of SAB No. 83.................... 0.24 0.35 0.45 0.31 0.33 ------------ ------------- ------------ ------------ ------------ Per SAB No. 83........................ $ (0.82) $ (1.17) $ (1.54) $ (1.05) $ (1.19) ------------ ------------- ------------ ------------ ------------ ------------ ------------- ------------ ------------ ------------ Shares used in calculating per share amounts: Per APB No. 15.......................... 2,249,675 2,249,675 2,264,839 2,254,784 2,294,675 Effect of SAB No. 83.................... 666,915 666,915 651,751 661,806 621,915 ------------ ------------- ------------ ------------ ------------ Per SAB No. 83........................ 2,916,590 2,916,590 2,916,590 2,916,590 2,916,590 ------------ ------------- ------------ ------------ ------------ ------------ ------------- ------------ ------------ ------------
INCOME TAXES The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires that the Company recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts ("temporary differences") at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. RISKS AND UNCERTAINTIES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. See also Note 7(c). F-10 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121") in March 1995. SFAS 121 requires companies to review their long-lived assets and certain identifiable intangibles (collectively, "Long-Lived Assets") for impairment whenever events or changes in circumstances indicate that the carrying value of a Long-Lived Asset may not be recoverable. The Company adopted the provisions of SFAS 121 as of January 1, 1996 which had no impact on the Company's financial position or results of operations. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") in October 1995. SFAS 123 requires companies to estimate the fair value of common stock, stock options, or other equity instruments ("Equity Instrument") issued to employees using pricing models which take into account various factors, such as the current price of the common stock, volatility, and the expected life of the Equity Instrument. SFAS 123 permits companies to elect either to provide pro forma note disclosure or adjust operating results for the amortization of the estimated value of the Equity Instrument as compensation expense over the vesting period of the Equity Instrument. The Company has elected to provide pro forma note disclosure which will appear in its annual financial statements for the year ending December 31, 1996 and, therefore, the adoption of SFAS 123 will have no effect on the Company's financial position or results of operations. STATEMENT OF CASH FLOWS Supplemental disclosure of noncash investing and financing activities: For the years ended December 31, 1993, 1994 and 1995: Capital lease obligations of approximately $71,000, $423,000 and $139,000 were incurred during the years ended December 31, 1993, 1994 and 1995, respectively, when the Company leased new equipment. In August 1995, the Company issued 45,000 restricted shares of Common Stock ("Restricted Shares") in consideration for obtaining a license and supply agreement. The estimated fair market value of such shares at the date of issuance was $300,000. In December 1995, a shareholder exchanged a note payable of $1,200,000 and accrued interest of approximately $24,000 for approximately 61,200 units. Each unit consists of four shares of Series C Preferred Stock and one five-year warrant to purchase one share of Series C Preferred Stock. (See Note 5.) Included in accounts payable, at December 31, 1993, were obligations for approximately $30,000 of fixed asset additions. For the nine months ended September 30, 1996: Capital lease obligations of approximately $81,000 were incurred during the nine months ended September 30, 1996 when the Company leased new equipment. F-11 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Included in accounts payable, at September 30, 1996, were deferred equity issuance costs of approximately $505,000. For the period from December 1, 1986 (inception) to September 30, 1996: Capital lease obligations of approximately $1,164,000 were incurred during the period from December 1, 1986 (inception) to September 30, 1996 when the Company leased new equipment. During 1991, the Company financed the acquisition of laboratory equipment by issuing a note payable totaling approximately $64,000 to the supplier. In February 1990, the Company issued a note payable, which at the time of issuance had a net present value of approximately $123,000, as partial consideration for the acquisition of approximately 3,800,000 shares of Common Stock and approximately $52,000 of operating expenses. The shares of Common Stock were held as treasury stock and then subsequently retired. In June 1988, the Company issued a note payable in the amount of $20,000 as partial consideration for the purchase of 75,000 shares of the Company's Common Stock. Such shares, at the time they were acquired, were held as treasury stock and then subsequently retired. During 1988, a stockholder/creditor forgave repayment of a note payable totaling approximately $28,000. This transaction was recorded as a contribution to capital. 3. FIXED ASSETS Fixed assets, including amounts under capitalized lease obligations, consist of the following:
DECEMBER 31, --------------------------- SEPTEMBER 30, 1994 1995 1996 ------------ ------------- ------------- Computer equipment.................................................... $ 279,445 $ 286,425 $ 167,654 Machinery and equipment............................................... 1,354,811 1,637,460 1,391,018 Furniture and fixtures................................................ 181,782 190,008 138,415 Leasehold improvements................................................ 29,702 29,702 29,702 ------------ ------------- ------------- 1,845,740 2,143,595 1,726,789 Less, accumulated depreciation and amortization....................... (886,604) (1,177,477) (836,398) ------------ ------------- ------------- $ 959,136 $ 966,118 $ 890,391 ------------ ------------- ------------- ------------ ------------- -------------
F-12 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following:
DECEMBER 31, ---------------------- SEPTEMBER 30, 1994 1995 1996 ---------- ---------- ------------- Accounts payable.......................................................... $ 69,515 $ 153,749 $ 112,104 Fees payable to Scientific Advisory Board members......................... 54,000 116,250 67,000 Accrued payroll and related costs......................................... 15,325 56,235 32,890 Legal and accounting fees payable......................................... 70,501 156,506 638,227 Deferred lease liability, current portion................................. -- 4,349 24,407 ---------- ---------- ------------- $ 209,341 $ 487,089 $ 874,628 ---------- ---------- ------------- ---------- ---------- -------------
5. STOCKHOLDERS' EQUITY On October 2, 1996, the Board of Directors (the "Board") of the Company approved a three-for-four reverse stock split of common stock. All common stock data, including loss per share and weighted average number of shares outstanding has been retroactively amended to reflect the stock split. The Company's Certificate of Incorporation, as amended, authorizes the Company to issue 60,000,000 shares, of which 40,000,000 shares are designated as common shares, par value $.0013, and 20,000,000 shares are designated as preferred shares, par value $.001. The Board has the authority to issue common and preferred shares, in series, with rights and privileges determined by the Board. 4,000,000 preferred shares are designated as Series A Preferred Stock ("Series A"), 2,500,000 shares are designated as Series B Preferred Stock ("Series B") and 3,750,000 shares are designated as Series C Preferred Stock ("Series C") (collectively the "Preferred Stock"). During June 1995, the Board rescinded the designation of unissued Class A Common Stock and designated all common shares as common stock ("Common Stock"). In the event that the Company declares and pays a dividend, the Preferred Stock and Common Stock will receive such dividend on a pro rata basis, as defined. Distributions in liquidation shall be pro rated to the Preferred Stock and Common Stock up to specified amounts, as defined and, thereafter, pro rata based upon the number of shares outstanding on a Common Stock equivalent basis, as defined. Each share of Preferred Stock is convertible, at the option of the holder, into .75 share of Common Stock, adjusted in accordance with a formula should the Company sell Preferred or Common Stock at a per share price below the original issuance price paid by existing Preferred Stock shareholders ("Preferred Stockholder"), as defined. Conversion is automatic at the earlier of (i) the closing of a public offering of the Company's Common Stock in which certain defined aggregate proceeds are raised and the per share selling price exceeds a defined level, or (ii) the date the Preferred Stockholders have converted a defined number of shares of Preferred Stock. The conversion rate is subject to anti-dilution provisions, as defined. Preferred Stockholders are entitled to vote with Common Stockholders as a single class. In addition, certain changes in the Company's capital structure, as defined, which includes, under certain situations, the issuance of additional series of Preferred or Common Stock (the "Proposal"), require a separate vote by Preferred Stockholders. If less than a majority of Preferred Stockholders vote in favor of the Proposal and if the Common Stockholders approve the Proposal, the Company has the right to redeem all outstanding shares of Preferred Stock at per share prices ranging from $3.46 to $8.84, as defined. The Preferred Stock also is subject to transfer restrictions, as defined, and the Company has the right of first refusal to acquire such F-13 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 5. STOCKHOLDERS' EQUITY (CONTINUED) shares in the event the holder proposes to sell any or all shares to any person other than a permitted transferee. During 1988, the Company entered into subscription agreements ("Agreements") in connection with the sale of approximately 1,000,000 shares of its Common Stock at a per share price of $1.07. The Agreements contain a provision whereby investors have the right to receive additional shares of Common Stock, as defined, in the event the Company sells Common Stock at a per share price below $1.07. This right terminates upon any registered public offering, any sale of the Company or its assets, or upon the Company selling an aggregate of 7,500,000 shares of Common Stock. During 1989 and 1990, the Company raised $2,913,000 from the sale of 1,165,000 Units (the "A Units") in a private placement. Each A Unit consisted of one share of Series A Preferred Stock and one warrant (the "A Warrant") which entitled the holder to purchase one share of Series A Preferred Stock at a price of $2.75 per share. During 1991, 1,143,000 A Warrants were exercised yielding $3,143,000 to the Company. The remaining unexercised A Warrants have expired. During 1992 and 1993, the Company raised $5,049,000, after expenses, from the sale of 1,263,520 Units (the "B Units") in a private placement. Each B Unit consisted of one share of Series B Preferred Stock and one warrant (the "B Warrant") which, as amended, entitled the holder to purchase one share of Series B Preferred Stock at a price of $5.00 per share. During 1994, 719,310 B Warrants were exercised yielding $3,597,000 to the Company. The remaining unexercised B Warrants have expired. During the fourth quarter of 1995 and the first quarter of 1996, the Company raised $897,000 and $4,777,000, net of expenses, from the sale of approximately 44,900 Units and 241,203 Units, respectively, (the "C Units") in a private placement. In addition, during December 1995, a stockholder converted a note payable (see Note 6). Each C Unit consists of four shares of Series C Preferred Stock and one five-year warrant (the "C Warrant") which entitles the holder to purchase one share of Series C Preferred Stock at $5.00 per share or, if exercised subsequent to an initial public offering, as defined, .75 share of Common Stock at $6.67 per share. The number of C Warrants and their exercise price are subject to adjustment in the event the Company issues additional shares of Common Stock at below defined per share prices. As of September 30, 1996, 347,249 C Warrants were issued and outstanding and fully exercisable. 6. NOTE PAYABLE--STOCKHOLDER During 1995, the Company borrowed $1,200,000 under a promissory note from a stockholder. The promissory note, as amended and restated, provided for interest to accrue at a rate of 10% per annum. Interest and principal were payable upon demand, but not before December 8, 1995. During December 1995, the promissory note plus accrued interest of $23,671 were exchanged for approximately 61,200 C Units (see Note 5). F-14 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 7. COMMITMENTS AND CONTINGENCIES: (A) OPERATING LEASES The Company leases office and laboratory space under a noncancelable sublease agreement expiring December 30, 1997 (the "sublease") and a lease agreement expiring April 30, 1998 (the "lease"). The sublease, as amended, and the lease provide for escalations of the minimum rent during the lease term as well as additional charges based upon usage of certain utilities in excess of defined amounts ("Additional Utility Charges"). The Company recognizes rental expense from the sublease and lease on the straight-line basis. During 1994 and 1995, the Company recognized rental expense in excess of amounts paid of approximately $18,000 and $24,000, respectively, while during the year ended December 31, 1993 and the nine months ended September 30, 1996, approximately $20,000 and $3,000 of previously recognized rent expense, which had been included as a deferred lease liability at December 31, 1992 and 1995, respectively, was paid. The Company also leases office equipment and an automobile under noncancelable operating leases. The leases expire at various times through July 1997. Future minimum annual payments under all operating lease agreements, including the sublease and lease, are as follows:
MINIMUM YEARS ENDING ANNUAL SEPTEMBER 30, PAYMENTS --------------- ------------ 1997............................................................................ $ 669,034 1998............................................................................ 403,685 ------------ $ 1,072,719 ------------ ------------
Rental expense totaled approximately $353,000, $506,000, $657,000, $481,000 and $2,854,000 for the years ended December 31, 1993, 1994 and 1995, for the nine months ended September 30, 1996 and for the period from December 1, 1986 (inception) to September 30, 1996, respectively. Additional Utility Charges, as defined above, were not material for these periods. (B) CAPITAL LEASES The Company leases certain equipment under various noncancelable capital lease agreements. The leases are for periods ranging from two to five years, after which the Company: (i) either has the option or is required to purchase the equipment at defined amounts or (ii) may extend the lease for up to one additional year at defined monthly payments or (iii) is required to return the equipment, as per the respective lease agreements. Certain capital leases, as amended, contain various covenants which include maintaining a minimum tangible net worth, as defined, of at least $625,000 during the term of the leases. This covenant indirectly restricts the Company's ability to pay dividends. F-15 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 7. COMMITMENTS AND CONTINGENCIES: (CONTINUED) As of September 30, 1996, minimum annual payments under all capital leases, including required payments to acquire leased equipment, are as follows:
MINIMUM YEARS ENDING ANNUAL SEPTEMBER 30, PAYMENTS --------------- ---------- 1997.............................................................................. $ 160,983 1998.............................................................................. 82,715 1999.............................................................................. 56,909 2000.............................................................................. 37,863 2001.............................................................................. 19,901 ---------- 358,371 Less, amounts representing interest............................................... 86,592 ---------- Present value of net minimum capital lease payments............................... $ 271,779 ---------- ----------
Leased equipment included as a component of fixed assets was approximately $591,000, $731,000 and $799,000 at December 31, 1994 and 1995 and September 30, 1996, respectively; related accumulated depreciation was approximately $119,000, $242,000 and $342,000 for the same respective periods. (C) LICENSING AGREEMENTS: (I) UNIVERSITIES In March 1989, the Company (as licensee) entered into a worldwide licensing agreement with Columbia University ("Columbia"). The license, as amended during October 1996, provides the Company with the exclusive right to use certain technology developed on behalf of Columbia. According to the terms of the agreement, the Company is required to pay nonrefundable licensing fees ("Licensing Fees"), payable in installments by defined dates or, if earlier, as certain milestones associated with product development ("Milestones") occur, as defined, which include the manufacture and distribution of a product which uses the licensed technology, at various times over the next eight years. The Company expenses Licensing Fees when they become payable by the Company to Columbia. In addition, the Company is required to remit royalties based upon the greater of minimum royalties, as defined, or a percentage of net sales of products which utilize the licensed technology and a portion of sublicensing income, as defined. The licensing agreement may be terminated by Columbia under certain circumstances which includes the Company's failure to achieve the Milestones; however, Columbia shall not unreasonably withhold its consent to revisions to the due dates for achieving the Milestones under certain circumstances. If not terminated early, the agreement shall continue until expiration, lapse or invalidation of Columbia's patents on the licensed technology. The Company has the right to terminate the agreement at any time upon 90 days prior written notice. The termination of the license could have a material adverse effect on the business of the Company. In January 1991, the Company (as licensee) also entered into a non-exclusive licensing agreement with Stanford University whereby the Company has the non-exclusive, non-transferable right to use certain technology owned by the university. According to the terms of the agreement, the Company will be F-16 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 7. COMMITMENTS AND CONTINGENCIES: (CONTINUED) required to remit royalties at various rates, as defined. Royalties shall continue to be payable, irrespective of termination of this license agreement, until such time as all sales of products which utilize the licensed technology shall have ceased. In September 1996, the Company (as licensee) entered into a licensing agreement with The Regents of the University of California ("U of C"). According to the terms of the agreement, the Company is required to remit royalties based upon the greater of minimum royalties or a percentage of product sales and a portion of sublicensing income, as defined. The agreement can be terminated by the Company upon 90 days notice or by U of C in the event the Company fails to perform, which includes the achievement of certain defined milestones; otherwise the agreement terminates upon the lapse of U of C's patent regarding the licensed technology. Early termination of the agreement could have a material adverse effect on the business of the Company. Although the Company intends to use its best efforts to comply with the terms of the agreement, there can be no assurances that the agreement will not be terminated. (II) SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH In November 1994, the Company (as licensee) entered into a worldwide exclusive licensing agreement with Sloan-Kettering Institute for Cancer Research ("Sloan-Kettering") whereby the Company has the exclusive right to use certain technology owned by Sloan-Kettering. Certain employees of Sloan-Kettering are consultants to the Company (see Note 7(d)). The agreement requires the Company to pay nonrefundable, noncreditable licensing fees in installments. The Company expenses such installments when they become payable by the Company to Sloan-Kettering. Commencing in 1995, the Company is required to remit royalties based upon the greater of minimum royalties, as defined, or as a percentage of sales of any licensed product, as defined ("Product Royalties"), and sublicense income, as defined, earned under sublicenses granted by the Company in accordance with this licensing agreement ("Sublicense Royalties"). In the event that no Product Royalties or Sublicense Royalties are due in a given calendar year, then a defined percentage of that year's minimum royalty will be creditable against future Product Royalties or Sublicense Royalties due Sloan-Kettering. The licensing agreement may be terminated by Sloan-Kettering in the event that the Company fails to achieve certain defined objectives, which include the manufacture and distribution of a product which uses the licensed technology, over the next six years, or if the Company fails to satisfy certain other contractual obligations ("Early Termination"); otherwise the agreement shall terminate either upon the expiration or abandonment of Sloan-Kettering's patents on the technology licensed, or 15 years from the date of first commercial sale, as defined, whichever is later. With regard to Early Termination, Sloan-Kettering shall not unreasonably withhold its consent to revisions to the due dates for achieving the defined objectives under certain circumstances. The Company has the right to terminate the agreement at any time upon 90 days prior written notice ("Company Termination"). In the event of Early Termination or Company Termination, all licensing rights under the agreement would revert to Sloan-Kettering. Early Termination of the license could have a material adverse effect on the business of the Company. Although the Company intends to use its best efforts to comply with the terms of the license, there can be no assurance that the licensing agreement will not be terminated. F-17 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 7. COMMITMENTS AND CONTINGENCIES: (CONTINUED) (III) AQUILA BIOPHARMACEUTICALS, INC. In August 1995, the Company (as licensee) entered into a license and supply agreement (the "L&S Agreement") with Aquila Biopharmaceuticals, Inc. ("Aquila"). Under the terms of the L&S Agreement, the Company obtained a coexclusive license to use certain technology and a right to purchase QS-21 adjuvant (the "Product") from Aquila for use in the Company's research and development activities. In consideration for the license, the Company paid a nonrefundable, noncreditable license fee and issued 45,000 restricted shares of the Company's Common Stock ("Restricted Shares") to Aquila. The Restricted Shares are nontransferable with this restriction lapsing upon the Company's achievement of certain milestones ("L&S Milestones"), as defined. In the event that any one or more L&S Milestones do not occur, the underlying Restricted Shares would be returned to the Company. The fair value of the Restricted Shares, combined with the noncreditable license fee, were expensed during 1995 as research and development. In addition, the Company will be required to remit royalties based upon the net sales of products sold using the licensed technology ("Licensed Products") and a defined percentage of any sublicense fees and royalties payable to the Company with respect to Licensed Products. The L&S Agreement may be terminated by Aquila in the event that the Company fails to achieve certain defined objectives, which include the manufacture and distribution of a Licensed Product, over the next seven years ("Early Termination"); otherwise the L&S Agreement shall terminate upon the expiration of Aquila's patents on the technology licensed. With regard to Early Termination, Aquila shall not unreasonably withhold its consent to revisions to the due dates for achieving the L&S Milestones under certain circumstances. The Company has the right to terminate the L&S Agreement at any time upon 90 days prior written notice ("Company Termination"), as defined. In the event of Early Termination or Company Termination, all licensing rights under the agreement would revert to Aquila. Early termination of the L&S Agreement would have a material adverse effect on the business of the Company. Although the Company intends to use its best efforts to comply with the terms of the L&S Agreement, there can be no assurance that the agreement will not be terminated. In connection with the above agreements, the Company has recognized expenses totaling approximately $10,000, $22,500, $382,500, $22,500 and $807,500 for the years ended December 31, 1993, 1994 and 1995, for the nine months ended September 30, 1996 and for the period from December 1, 1986 (inception) to September 30, 1996, respectively. Such expenses include the fair value of the Restricted Shares. In addition, remaining payments associated with milestones or defined objectives under the above agreements total $650,000. Future annual minimum royalties under the licensing agreements above are not significant. (D) CONSULTING AGREEMENTS As part of the Company's research and development efforts it enters into consulting agreements ("Agreements") with external scientific specialists ("scientists"). These Agreements contain varying terms and provisions which include fees to be paid by the Company and services to be provided by the scientists, some of whom are members of the Company's Scientific Advisory Board. Certain scientists have purchased Common Stock or received stock options which are subject to vesting provisions, as defined. The Company has recognized expenses with regards to these Agreements totaling approximately $136,000, $261,000, $245,000, $232,000 and $1,398,000 for the years ended December 31, 1993, 1994 and 1995, for the nine F-18 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 7. COMMITMENTS AND CONTINGENCIES: (CONTINUED) months ended September 30, 1996, and for the period from December 1, 1986 (inception) to September 30, 1996, respectively. Such expenses include the fair value of stock options. 8. STOCK OPTION PLANS: (A) 1989 NON-QUALIFIED STOCK OPTION PLAN On April 1, 1989, the Company adopted a Non-Qualified Stock Option Plan (the "89 Plan"), under which a maximum of 375,000 shares of Common Stock, adjusted for stock splits, stock dividends and other capital adjustments, as defined, are available for stock option awards to employees, consultants, directors and other individuals who render services to the Company. For a period of ten years following the termination for any reason of an optionee's employment or active involvement with the Company, as determined by the Board, the Company has the right to repurchase any or all shares of Common Stock held by the optionee and/or any or all of the vested but unexercised portion of any option granted under the 89 Plan to such optionee at a purchase price defined by the 89 Plan. The 89 Plan terminated on April 1, 1994, and any option granted before termination of the 89 Plan shall continue under the terms of the 89 Plan. Certain options issued from the 89 Plan entitle the holders to purchase shares of Common Stock at a per share price of $1.33, which was less than the estimated fair market value of the Common Stock, as determined by the Board of Directors, on the date of grant. As a result, the Company is recognizing compensation expense on a pro rata basis, over the respective options' vesting periods of three to ten years, for the difference between the estimated fair market value of the Common Stock on the date the option was granted and the exercise price. The Company recognized compensation expense of approximately $37,000, $33,000, $21,000, $17,000 and $299,000 for the years ended December 31, 1993, 1994 and 1995, for the nine months ended September 30, 1996, and for the period from December 1, 1986 (inception) to September 30, 1996, respectively, in connection with these options. Transactions involving stock option awards under the 89 Plan during 1993, 1994, 1995 and the nine months ended September 30, 1996 are summarized as follows:
NUMBER PRICE OF SHARES PER SHARE ----------- ---------------- Balance outstanding, December 31, 1992............................................... 311,332 $1.33 to $3.67 1993: Granted........................................................................ 54,188 $5.33 ----------- Balance outstanding, December 31, 1993.......................................... 365,520 $1.33 to $5.33 1994: Canceled....................................................................... (259) $1.33 ----------- Balance outstanding, December 31, 1994.......................................... 365,261 $1.33 to $5.33 1995: Canceled....................................................................... (11,250) $3.67 ----------- Balance outstanding, December 31, 1995 and September 30, 1996................... 354,011 $1.33 to $5.33 ----------- -----------
F-19 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 8. STOCK OPTION PLANS: (CONTINUED) The total number of options exercisable under the 89 Plan at September 30, 1996 was 276,386 at exercise prices of $1.33 to $5.33 per share. As of September 30, 1996, no shares are available for future grants. (B) 1993 STOCK OPTION PLAN On December 2, 1993, the Company adopted a Stock Option Plan (the "93 Plan"). Under the 93 Plan, as amended, a maximum of 750,000 shares of Common Stock, adjusted for stock splits, stock dividends, and other capital adjustments, as defined, are available for stock option awards. Awards issued under the 93 Plan may qualify as incentive stock options ("ISOs"), as defined by the Internal Revenue Code, or may be granted as non-qualified stock options. Under the 93 Plan, the Compensation Committee of the Board of Directors (the "Committee") may award options to employees, directors who are not employees and other individuals who render services to the Company. For a period of ten years following the termination for any reason of an optionee's employment or active involvement with the Company, as determined by the Board of Directors, the Company shall have the right to repurchase any or all shares of Common Stock acquired under the 93 Plan and held by the optionee and/or any or all of the vested but unexercised portion of any option granted under the 93 Plan to such optionee at a purchase price, as defined by the 93 Plan. This right will terminate upon the Company's completion of a public offering of securities, as defined. The 93 Plan will terminate on December 2, 2003; however, any option outstanding as of the termination date shall remain outstanding until such option expires in accordance with the terms of the respective grant. During 1994, the Committee granted 582,000 stock options under the 93 Plan. Included therein were 450,000 stock options ("94 Options") which entitle the holders to purchase shares of Common Stock at a per share price of $5.33, which was less than the estimated fair market value of the Common Stock, as determined by the Board of Directors, on the date of issuance. As a result, the Company is recognizing compensation expense on a pro rata basis, over the respective options' vesting periods of seven years, for the difference between the estimated fair market value of the Common Stock on the date the option was issued and the exercise price. In addition, during 1996, the Committee granted 94,500 options under the 93 Plan. Included therein were 15,000 options issued to consultants ("Consultants' Options") that are compensatory. Accordingly, the Company is recognizing compensation expense on a pro rata basis over the respective options' vesting periods of four to five years. The Company recognized compensation expense of approximately $86,000 for each of the years ended December 31, 1994 and 1995, approximately $82,000 for the nine months ended September 30, 1996 and approximately $254,000 for the period from December 1, 1986 (inception) to September 30, 1996, in connection with the 94 Options and the Consultants' Options. F-20 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 8. STOCK OPTION PLANS: (CONTINUED) The following table summarizes the activity in the 93 Plan:
NUMBER PRICE OF SHARES PER SHARE ----------- ---------------- 1993: Granted........................................................................ 63,975 $5.33 ----------- Balance outstanding, December 31, 1993.......................................... 63,975 $5.33 1994: Granted........................................................................ 582,000 $5.33 to $6.67 ----------- Balance outstanding, December 31, 1994.......................................... 645,975 $5.33 to $6.67 1995: Granted........................................................................ 4,500 $6.67 Cancelled....................................................................... (33,750) $5.33 to $6.67 ----------- Balance outstanding, December 31, 1995.......................................... 616,725 $5.33 to $6.67 1996: Granted........................................................................ 94,500 $5.33 to $6.67 Cancelled....................................................................... (24,000) $5.33 ----------- Balance outstanding, September 30, 1996......................................... 687,225 $5.33 to $6.67 ----------- -----------
The total number of options exercisable under the 93 Plan at September 30, 1996 was 185,166 at exercise prices of $5.33 to $6.67 per share. As of September 30, 1996, shares available for future grants under the 93 Plan amounted to 62,775. (C) 1993 EXECUTIVE STOCK OPTION PLAN On December 15, 1993, the Company adopted an Executive Stock Option Plan (the "Executive Plan"), under which a maximum of 750,000 shares of Common Stock, adjusted for stock splits, stock dividends, and other capital adjustments, as defined, are available for stock option awards. Awards issued under the Executive Plan may qualify as ISOs, as defined by the Internal Revenue Code, or may be granted as non-qualified stock options. Under the Executive Plan, the Board may award options to senior executive employees (including officers who may be members of the Board) of the Company, as defined. The Executive Plan will terminate on December 15, 2003; however, any option outstanding as of the termination date shall remain outstanding until such option expires in accordance with the terms of the respective grant. During December 1993, the Board awarded a total of 750,000 stock options under the Executive Plan to one officer, of which 664,774 were non-qualified options ("NQOs") and 85,226 were ISOs. The NQOs and ISOs entitle the officer to purchase an equal number of shares of Common Stock at prices of $5.33 and $5.87 per share, respectively, which represented the estimated fair market value and 110% of the estimated fair market value of the Company's Common Stock at the date of grant, as determined by the Board of Directors. 375,000 of the options vest over a period of five years, with the remaining 375,000 options vesting in full on the tenth anniversary of the date of grant; however, vesting will be accelerated in the event of the effective date of an initial public offering of the Company's Common Stock or immediately before the closing of an acquisition of the Company. F-21 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 8. STOCK OPTION PLANS: (CONTINUED) 750,000 options were outstanding at September 30, 1996 under the Executive Plan, of which 225,000 were exercisable. As of September 30, 1996, no shares were available for future grants under the Executive Plan. (D) 1996 STOCK INCENTIVE PLAN During May 1996, the Company adopted the 1996 Stock Incentive Plan (the "96 Plan"). The 96 Plan, as amended, provides for the award of 750,000 shares of Common Stock, adjusted for stock splits, stock dividends and other capital adjustments as defined. Under the 96 Plan, the Committee may award stock to eligible individuals which includes employees, advisors or consultants to the Company. The form of the award will be determined by the Committee and includes stock options, which may be ISOs, stock appreciation rights, restricted stock, performance awards or phantom stock as defined (collectively "Awards"). The Committee will also determine the term and vesting of the Award and the Committee may in its discretion accelerate the vesting of an award at any time. To date there have been no Awards issued from the 96 Plan. 9. EMPLOYEE SAVINGS PLAN The Company, during 1993, adopted the provisions of the amended and restated Progenics Pharmaceuticals 401(k) Plan (the "Amended Plan"). The terms of the Amended Plan, among other things, allow eligible employees, as defined, to participate in the Amended Plan by electing to contribute to the Amended Plan a percentage of their compensation to be set aside to pay their future retirement benefits, as defined. The Company has agreed to match 25% of up to the first 8% of compensation that eligible employees contribute to the Amended Plan, as defined. In addition, the Company may also make a discretionary contribution, as defined, each year on behalf of all participants who are non-highly compensated employees, as defined. The Company made matching contributions of approximately $3,000, $10,000, $12,000, $8,000 and $33,000 to the Amended Plan for the years ended December 31, 1993, 1994 and 1995, for the nine months ended September 30, 1996, and for the period from December 1, 1986 (inception) to September 30, 1996, respectively. 10. INCOME TAXES There is no provision (benefit) for federal or state income taxes for all periods presented, since the Company has incurred operating losses since inception and has established a valuation allowance equal to the total deferred tax asset. F-22 PROGENICS PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1995 INTERIM DATA IS UNAUDITED) 10. INCOME TAXES (CONTINUED) The tax effect of temporary differences, net operating loss carry-forwards and research and experimental tax credit carry-forwards as of December 31, 1994 and 1995 and September 30, 1996 are as follows:
DECEMBER 31, SEPTEMBER ---------------------- 30, 1994 1995 1996 ---------- ---------- ----------- Deferred tax assets and valuation allowance: Net operating loss carry-forwards... $4,022,832 $4,350,960 $ 5,136,183 Fixed assets........................ 93,877 133,225 163,470 Deferred charges.................... 1,228,617 2,666,772 3,291,562 Research and experimental tax credit carry-forwards.................... 426,234 491,681 524,323 Valuation allowance................. (5,771,560) (7,642,638) (9,115,538) ---------- ---------- ----------- -- -- -- ---------- ---------- ----------- ---------- ---------- -----------
As of September 30, 1996, the Company has available, for tax purposes, unused net operating loss carry-forwards of approximately $12,400,000 which will expire in various years from 2002 to 2011. The Company's research and experimental tax credit carry-forwards expire in various years from 2003 to 2011. Future ownership changes may limit the future utilization of these net operating loss and research and experimental tax credit carry-forwards as defined by the federal tax code. 11. NOTE TO INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) BASIS OF PRESENTATION The interim financial statements for the nine months ended September 30, 1995 are unaudited and reflect adjustments, consisting of only normal recurring accruals, which are, in the opinion of the Company's management, necessary for a fair presentation of the financial position and results of operations for the periods presented. Operating results for any interim period are not necessarily indicative of the results for the full year. STATEMENT OF CASH FLOWS Supplemental disclosure of noncash investing and financing activities: Capital lease obligations of approximately $63,000 were incurred during the nine months ended September 30, 1995 when the Company leased new equipment. Included in accounts payable, at September 30, 1995, were obligations for approximately $32,000 of fixed asset additions. F-23 PROGENICS PLANS TO INITIATE PHASE I/II CLINICAL TRIALS IN 1997 OF ITS TWO MOST ADVANCED HIV PRODUCT CANDIDATES, PRO 542 AND PRO 367. PRO 542 IS PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO NEUTRALIZE HIV. [DIAGRAM DEPICTING PRO 542, PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO NEUTRALIZE HIV] PRO 367 IS PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO DESTROY HIV- INFECTED CELLS. [DIAGRAM DEPICTING PRO 367, PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO DESTROY HIV-INFECTED CELLS] - ------------------------------------------------ ------------------------------------------------ - ------------------------------------------------ ------------------------------------------------ NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR A SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED. ------------------- TABLE OF CONTENTS
PAGE --------- Prospectus Summary............................................ 3 Risk Factors.................................................. 6 Use of Proceeds............................................... 17 Dividend Policy............................................... 17 Capitalization................................................ 18 Dilution...................................................... 19 Selected Financial Data....................................... 20 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 21 Business...................................................... 25 Management.................................................... 46 Certain Transactions.......................................... 55 Principal Stockholders........................................ 56 Description of Capital Stock.................................. 58 Shares Eligible for Future Sale............................... 60 Underwriting.................................................. 62 Legal Matters................................................. 64 Experts....................................................... 64 Additional Information........................................ 64 Index to Financial Statements................................. F-1
------------------- UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 2,000,000 SHARES [COMPANY LOGO] Pharmaceuticals, Inc. COMMON STOCK -------------- PROSPECTUS -------------- OPPENHEIMER & CO., INC. VECTOR SECURITIES INTERNATIONAL, INC. , 1996 - ------------------------------------------------ ------------------------------------------------ - ------------------------------------------------ ------------------------------------------------ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following is an itemized statement of the estimated amounts of all expenses payable by the Registrant in connection with the registration of the Common Stock offered hereby, other than underwriting discounts and commissions: Registration Fee--Securities and Exchange Commission.............. $ 9,061 NASD Filing Fee................................................... 3,490 Blue Sky fees and expenses........................................ 20,000 Accountants' fees and expenses.................................... 260,000 Legal fees and expenses........................................... 300,000 Printing and engraving expenses................................... 150,000 Transfer agent and registrar fees................................. 5,000 Miscellaneous..................................................... 2,449 --------- Total................................................. $ 750,000 --------- ---------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145(a) of the General Corporation Law of the State of Delaware (the "DGCL") provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no cause to believe his conduct was unlawful. Section 145(b) of the DGCL provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under similar standards, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine that despite the adjudication of liability, such person is fairly and reasonably entitled to be indemnified for such expenses which the court shall deem proper. Section 145 of the DGCL further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue, or matter therein, he shall be indemnified against expenses actually and reasonably incurred by him in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the corporation may purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status II-1 as such whether or not the corporation would have the power to indemnify him against such liabilities under such Section 145. Section 102(b)(7) of the DGCL provides that a corporation in its original certificate of incorporation or an amendment thereto validly approved by stockholders may eliminate or limit personal liability of members of its board of directors or governing body for breach of a director's fiduciary duty. However, no such provision may eliminate or limit the liability of a director for breaching his duty of loyalty, failing to act in good faith, engaging in intentional misconduct or knowingly violating a law, paying a dividend or approving a stock repurchase which was illegal, or obtaining an improper personal benefit. A provision of this type has no effect on the availability of equitable remedies, such as injunction or rescission, for breach of fiduciary duty. The Company's Restated Certificate of Incorporation contains such a provision. The Company's Certificate of Incorporation and By-Laws provide that the Company shall indemnify officers and directors, and to the extent authorized by the Board of Directors, employees and agents of the Company, to the full extent permitted by and in the manner permissible under the laws of the State of Delaware. In addition, the By-Laws permit the Board of Directors to authorize the Company to purchase and maintain insurance against any liability asserted against any director, officer, employee or agent of the Company arising out of his capacity as such. The Company has entered into Indemnification Agreements with each of its officers and directors, pursuant to which the Company has agreed to indemnify and advance expenses to such officers and directors to the fullest extent permitted by applicable law. The Company has obtained an insurance policy providing coverage for certain liabilities of its officers and directors. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES During the past three years, the Registrant has issued securities to a limited number of persons, as described below. No underwriter or underwriting discounts or commissions were involved. There was no public offering in any such transaction and the Company believes that each transaction was exempt from the registration requirements of the Securities Act of 1933 (the "Securities Act") by reason of Section 4(2) thereof based on the private nature of the transactions and the sophistication of the purchasers, all of whom had access to information concerning the Registrant and acquired the securities for investment and not with a view to the distribution thereof. From January 1993 through August 1993, the registrant issued a total of 272,270 shares of Series B Preferred Stock, $.001 par value per share, and warrants to purchase 272,270 shares of Series B Preferred Stock, to 33 individuals and entities of whom two entities are affiliates of the Company, one individual is a director and the rest are accredited investors for an aggregate purchase price of $1,089,080 in cash. In September 1993 and October 1993, the registrant issued a total of 562,500 shares of Series B Preferred Stock, and warrants to purchase 562,500 shares of Series B Preferred Stock, to three entities of whom two entities are affiliates of the Company and the remaining entity is an accredited investor for an aggregate purchase price of $2,250,000. In February 1994, the registrant issued a total of 719,310 shares of Series B Preferred Stock to 22 individuals and entities of whom one entity is an affiliate of the Company, one individual is a director and the remaining individuals and entities are accredited investors for an aggregate purchase price of $3,596,550 in cash. In November 1995 and December 1995, the registrant issued a total of 424,184 shares of Series C Preferred Stock, $.001 par value per share, and warrants to purchase 106,046 shares of Series C Preferred Stock, to seven individuals and entities of whom one individual is a director, two entities are affiliated with a director of the Company and the remaining individuals and entities are accredited investors for an II-2 aggregate purchase price of $897,249 in cash and conversion of a note payable in the principal amount of $1,200,000 plus accrued interest thereon of $23,671. In December 1995, the registrant issued 45,000 shares of Common Stock, $.0013 par value per share, to one entity which is a licensor as partial consideration for a license agreement. In January 1996 and February 1996, the registrant issued a total of 964,812 shares of Series C Preferred Stock, and warrants to purchase 241,203 shares of Series C Preferred Stock, to 59 individuals and entities of whom two entities are affiliates of the Company, two individuals are directors and the remaining individuals and entities are accredited investors for an aggregate purchase price of $4,824,060 in cash. From January 1, 1993 to September 30, 1996, the Company issued options to purchase 1,549,163 shares of Common Stock (of which options to purchase 57,750 shares of Common Stock subsequently have been cancelled) to employees and consultants of the Company pursuant to the 1989 Option Plan, the 1993 Option Plan and the 1993 Executive Option Plan. None of such options has been exercised. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 1.1 --Form of Underwriting Agreement 3.1 --Certificate of Incorporation, as amended, of the Registrant **3.2 --By-Laws of the Registrant 4.1 --Specimen Certificate for Common Stock, $0.0013 par value per share, of the Registrant 5.1 --Opinion of Dewey Ballantine **10.1 --Form of Registration Rights Agreement **10.2 --1989 Non-Qualified Stock Option Plan **10.3 --1993 Stock Option Plan, as amended **10.4 --1993 Executive Stock Option Plan **10.5 --Amended 1996 Stock Incentive Plan **10.6 --Form of Indemnification Agreement **10.7 --Employment Agreement dated December 15, 1993 between the Registrant and Dr. Paul J. Maddon **10.8 --Letter dated August 25, 1994 between the Registrant and Dr. Robert J. Israel **10.9 --Sublease dated July 13, 1988 between the Registrant and Union Carbide Corporation +10.10 --gp120 Supply Agreement dated July 19, 1995 between the Registrant and E. I. DuPont De Nemours and Company, as amended October 27, 1995 +10.11 --sCD4 Supply Agreement dated June 27, 1995 between the Registrant and E. I. DuPont De Nemours and Company +10.12 --Supply Agreement dated February 8, 1996 between the Registrant and Intracel Corporation +10.13 --License Agreement dated November 17, 1994 between the Registrant and Sloan-Kettering Institute for Cancer Research +10.14 --Clinical Trial Agreement dated December 12, 1994 between the Registrant and Sloan-Kettering Institute for Cancer Research +10.15 --QS-21 License and Supply Agreement dated August 31, 1995 between the Registrant and Aquila Biopharmaceuticals Inc. +10.16 --gp120 Sublicense Agreement dated March 17, 1995 between the Registrant and Aquila Biopharmaceuticals Inc. +10.17 --Cooperative Research and Development Agreement dated February 25, 1993 between the Registrant and the Centers for Disease Control and Prevention +10.18 --License Agreement dated March 1, 1989, as amended by a Letter Agreement dated March 1, 1989 and as amended by a Letter Agreement dated October 22, 1996 between the Registrant and the Trustees of Columbia University
II-3 +10.19 --License Agreement dated June 25, 1996 between the Registrant and The Regents of the University of California +10.20 --KLH Supply Agreement dated July 1, 1996 between the Registrant and PerImmune, Inc. +10.21 --sCD4 Supply Agreement dated November 3, 1993 between the Registrant and E.I. DuPont De Nemours and Company **10.22 --Lease dated June 30, 1994 between the Registrant and Keren Limited Partnership 11.1 --Statement of computation of loss per share for the years ended December 31, 1993, 1994 and 1995 11.2 --Statement of computation of loss per share for the nine months ended September 30, 1995 and 1996 11.3 --Pro forma statement of computation of loss per share 23.1 --Consent of Coopers & Lybrand L.L.P. 23.2 --Consent of Dewey Ballantine (contained in Exhibit 5.1) **24.1 --Power of Attorney (included on page II-5) **27.1 --Financial Data Schedule
- ------------------------ ** Previously filed. + Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. (b) Financial Statement Schedules All schedules have been omitted because they are not required or because the required information is given in the Financial Statements or Notes thereto. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes to provide to the underwriters, at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tarrytown, State of New York, on November 12, 1996. PROGENICS PHARMACEUTICALS, INC. BY: /S/ PAUL J. MADDON, M.D., PH.D. ----------------------------------------- Paul J. Maddon, M.D., Ph.D. Chairman of the Board, Chief Executive Officer and President POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment to the Registration Statement has been signed by the following persons on November 12, 1996 in the capacities indicated: SIGNATURE TITLE DATE - ------------------------------ --------------------------- ------------------- Chairman of the Board, * Chief Executive Officer - ------------------------------ and President (principal November 12, 1996 Paul J. Maddon, M.D., Ph.D. executive officer) Vice President, Finance and * Operations, Treasurer - ------------------------------ (principal accounting and November 12, 1996 Robert A. McKinney financial officer) * Director - ------------------------------ November 12, 1996 Charles A. Baker * Director - ------------------------------ November 12, 1996 Mark F. Dalton * Director - ------------------------------ November 12, 1996 Stephen P. Goff, Ph.D. * Director - ------------------------------ November 12, 1996 Elizabeth M. Greetham II-5
SIGNATURE TITLE DATE - ------------------------------ --------------------------- ------------------- * Director - ------------------------------ November 12, 1996 Paul F. Jacobson * Director - ------------------------------ David A. Scheinberg, M.D., November 12, 1996 Ph.D. *By: /s/ ROBERT A. MCKINNEY ------------------------------------------ Robert A. McKinney (As Attorney-in-Fact)
II-6 INDEX TO EXHIBITS
EXHIBITS DESCRIPTION PAGE - ----------------------------- ------------------------------------------------------------------------------- --------- 1.1 --Form of Underwriting Agreement 3.1 --Certificate of Incorporation, as amended, of the Registrant **3.2 --By-Laws of the Registrant 4.1 --Specimen Certificate for Common Stock, $.0013 par value per share, of the Registrant 5.1 --Opinion of Dewey Ballantine **10.1 --Form of Registration Rights Agreement **10.2 --1989 Non-Qualified Stock Option Plan **10.3 --1993 Stock Option Plan as amended **10.4 --1993 Executive Stock Option Plan **10.5 --Amended 1996 Stock Incentive Plan **10.6 --Form of Indemnification Agreement **10.7 --Employment Agreement dated December 15, 1993 between the Registrant and Dr. Paul J. Maddon **10.8 --Letter dated August 25, 1994 between the Registrant and Dr. Robert J. Israel **10.9 --Sublease dated July 13, 1988 between the Registrant and Union Carbide Corporation +10.10 --gp120 Supply Agreement dated July 19, 1995 between the Registrant and E. I. DuPont De Nemours and Company, as amended, October 27, 1995 +10.11 --sCD4 Supply Agreement dated June 27, 1995 between the Registrant and E. I. DuPont De Nemours and Company +10.12 --Supply Agreement dated February 8, 1996 between the Registrant and Intracel Corporation +10.13 --License Agreement dated November 17, 1994 between the Registrant and Sloan-Kettering Institute for Cancer Research +10.14 --Clinical Trial Agreement dated December 12, 1994 between the Registrant and Sloan-Kettering Institute for Cancer Research +10.15 --QS-21 License and Supply Agreement dated August 31, 1995 between the Registrant and Cambridge Biotech Corporation +10.16 --gp120 Sublicense Agreement dated March 17, 1995 between the Registrant and Cambridge Biotech Corporation +10.17 --Cooperative Research and Development Agreement dated February 25, 1993 between the Registrant and the Centers for Disease Control and Prevention +10.18 --License Agreement dated March 1, 1989, as amended by a Letter Agreement dated March 1, 1989 and as amended by a Letter Agreement dated October 22, 1996 between the Registrant and the Trustees of Columbia University +10.19 --License Agreement dated June 25, 1996 between the Registrant and The Regents of the University of California +10.20 --KLH Supply Agreement dated July 1, 1996 between the Registrant and PerImmune, Inc.
+10.21 --sCD4 Supply Agreement dated November 3, 1993 between the Registrant and E.I. DuPont De Nemours and Company **10.22 --Lease dated June 30, 1994 between the Registrant and Keren Limited Partnership 11.1 --Statement of computation of loss per share for the years ended December 31, 1993, 1994 and 1995 11.2 --Statement of computation of loss per share for the nine months ended September 30, 1995 and 1996 11.3 --Pro forma statement of computation of loss per share 23.1 --Consent of Coopers & Lybrand L.L.P. 23.2 --Consent of Dewey Ballantine (contained in Exhibit 5.1) **24.1 --Power of Attorney (included on page II-5) **27.1 --Financial Data Schedule
- ------------------------ ** Previously filed. + Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. EX-1.1 2 EXHIBIT 1.1 EXHIBIT 1.1 H&D DRAFT 11/11/96 2,000,000 Shares PROGENICS PHARMACEUTICALS, INC. Common Stock UNDERWRITING AGREEMENT ____________, 1996 Oppenheimer & Co., Inc. Vector Securities International, Inc. c/o Oppenheimer & Co., Inc. Oppenheimer Tower World Financial Center New York, New York 10281 On behalf of the Several Underwriters named on Schedule I attached hereto Ladies and Gentlemen: Progenics Pharmaceuticals, Inc., a Delaware corporation (the "Company"), proposes to sell to you and the other underwriters named on Schedule I to this Agreement (the "Underwriters"), for whom you are acting as Representatives, an aggregate of 2,000,000 shares (the "Firm Shares") of the Company's Common Stock, $0.0013 par value (the "Common Stock"). In addition, the Company proposes to grant to the Underwriters an option to purchase up to an additional 300,000 shares (the "Option Shares") of Common Stock from it for the purpose of covering over-allotments in connection with the sale of the Firm Shares. The Firm Shares and the Option Shares are together called the "Shares." 1. SALE AND PURCHASE OF THE SHARES. On the basis of the representations, warranties and agreements contained in, and subject to the terms and conditions of, this Agreement: (a) The Company agrees to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at $_____ per share (the "Initial Price"), the number of Firm Shares set forth opposite the name of such Underwriter on Schedule I to this Agreement. (b) The Company grants to the several Underwriters an option to purchase, severally and not jointly, all or any part of the Option Shares at the Initial Price. The number of Option Shares to be purchased by each Underwriter shall be the same percentage (adjusted by the Representatives to eliminate fractions) of the total number of Option Shares to be purchased by the Underwriters as such Underwriter is purchasing of the Firm Shares. Such option may be exercised only to cover over-allotments in the sales of the Firm Shares by the Underwriters and may be exercised in whole or in part at any time on or before 12:00 noon, New York City time, on the business day before the Firm Shares Closing Date (as defined below), and only once thereafter within 30 days after the date of this Agreement, in each case upon written or telegraphic notice, or verbal or telephonic notice confirmed by written or telegraphic notice, by the Representatives to the Company no later than 12:00 noon, New York City time, on the business day before the Firm Shares Closing Date or at least two business days before the Option Shares Closing Date (as defined below), as the case may be, setting forth the number of Option Shares to be purchased and the time and date (if other than the Firm Shares Closing Date) of such purchase. 2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm Shares to the Representatives for the respective accounts of the Underwriters, and payment of the purchase price by certified or official bank check or checks payable in New York Clearing House (next day) funds to the Company, shall take place at the offices of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019, at 10:00 a.m., New York City time, on the third business day following the date of this Agreement, or at such time on such other date, not later than 10 business days after the date of this Agreement, as shall be agreed upon by the Company and the Representatives (such time and date of delivery and payment are called the "Firm Shares Closing Date"). In the event the option with respect to the Option Shares is exercised, delivery by the Company of the Option Shares to the Representatives for the respective accounts of the Underwriters and payment of the purchase price by certified or official bank check or checks payable in New York Clearing House (next day) funds to the Company shall take place at the offices of Dewey Ballantine specified above at the time and on the date (which may be the same date as, but in no event shall be earlier than, the Firm Shares Closing Date) specified in the notice referred to in Section 1(b) (such time and date of delivery and payment are called the "Option Shares Closing Date"). The Firm Shares Closing Date and the Option Shares Closing Date are called, individually, a "Closing Date" and, together, the "Closing Dates." -2- Certificates evidencing the Shares shall be registered in such names and shall be in such denominations as the Representatives shall request at least two full business days before the Firm Shares Closing Date or, in the case of Option Shares, on the day of notice of exercise of the option as described in Section 1(b) and shall be made available to the Representatives for checking and packaging, at such place as is designated by the Representatives, on the full business day before the Firm Shares Closing Date (or the Option Shares Closing Date in the case of the Option Shares). 3. REGISTRATION STATEMENT AND PROSPECTUS: PUBLIC OFFERING. The Company has prepared in conformity with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the published rules and regulations thereunder (the "Rules") adopted by the Securities and Exchange Commission (the "Commission") a registration statement on Form S-1 (No. 333-13627), including a preliminary prospectus relating to the Shares, and has filed with the Commission the Registration Statement (as hereinafter defined) and such amendments thereof as may have been required to the date of this Agreement. Copies of such Registration Statement (including all amendments thereof) and of the related preliminary prospectus have heretofore been delivered by the Company to you. The term "preliminary prospectus" means any preliminary prospectus (as described in Rule 430 of the Rules) included at any time as a part of the Registration Statement. The Registration Statement as amended at the time and on the date it becomes effective (the "Effective Date"), including all exhibits and information, if any, deemed to be part of the Registration Statement pursuant to Rule 424(b) and Rule 430A of the Rules, together with any registration statement for the same offering filed by the Company that is to be effective upon filing pursuant to Rule 462(b) of the Securities Act, is called the "Registration Statement." The term "Prospectus" means the prospectus in the form first used to confirm sales of the Shares (whether such prospectus was included in the Registration Statement at the time of effectiveness or was subsequently filed with the Commission pursuant to Rule 424(b) of the Rules). The Company understands that the Underwriters propose to make a public offering of the Shares, as set forth in and pursuant to the Prospectus, as soon after the Effective Date and the date of this Agreement as the Representatives deem advisable. The Company hereby confirms that the Underwriters and dealers have been authorized to distribute or cause to be distributed each preliminary prospectus and are authorized to distribute the Prospectus (as from time to time amended or supplemented if the Company furnishes amendments or supplements thereto to the Underwriters). -3- 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Underwriter as follows: (a) On the Effective Date the Registration Statement complied, and on the date of the Prospectus, on the date any post-effective amendment to the Registration Statement shall become effective, on the date any supplement or amendment to the Prospectus is filed with the Commission and on each Closing Date, the Registration Statement and the Prospectus (and any amendment thereof or supplement thereto) will comply, in all material respects, with the applicable provisions of the Securities Act and the Rules and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder; the Registration Statement did not, as of the Effective Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the other dates referred to above neither the Registration Statement nor the Prospectus, nor any amendment thereof or supplement thereto, will contain any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. When any related preliminary prospectus was first filed with the Commission (whether filed as part of the Registration Statement or any amendment thereto or pursuant to Rule 424(a) of the Rules) and when any amendment thereof or supplement thereto was first filed with the Commission, such preliminary prospectus as amended or supplemented complied in all material respects with the applicable provisions of the Securities Act and the Rules and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. Notwithstanding the foregoing, the Company makes no representation or warranty as to the last paragraph on the cover page of the Prospectus, the paragraph with respect to stabilization on the inside front cover page of the Prospectus, the concession and reallowance figures appearing under the caption "Underwriting" in the Prospectus and the last sentence of the third full paragraph under the caption "Underwriting" in the Prospectus regarding the exercise of discretionary authority by the Underwriters. The Company acknowledges that the statements referred to in the previous sentence constitute the only information furnished in writing by the Representatives on behalf of the Underwriters specifically for inclusion in the Registration Statement, any preliminary prospectus or the Prospectus. -4- (b) All contracts and other documents required to be filed as exhibits to the Registration Statement have been filed with the Commission as exhibits to the Registration Statement. (c) The financial statements of the Company (including all notes and schedules thereto) included in the Registration Statement and Prospectus present fairly the financial position, results of operations and cash flows and the stockholders' equity and the other information purported to be shown therein of the Company at the respective dates and for the respective periods to which they apply; and such financial statements have been prepared in conformity with generally accepted accounting principles, consistently applied throughout the periods involved, and all adjustments necessary for a fair presentation of the results for such periods have been made; PROVIDED, HOWEVER, that the interim financial statements contained in the Registration Statement and Prospectus shall be subject to normal year-end adjustments in accordance with generally accepted accounting principles. (d) Coopers & Lybrand LLP, whose reports are filed with the Commission as a part of the Registration Statement, are and, during the periods covered by their reports, were independent public accountants as required by the Securities Act and the Rules. (e) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. The Company has no subsidiaries and does not control, directly or indirectly, any corporation, partnership, joint venture, association or business. The Company is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its assets or properties (owned, leased or licensed) or the nature of its business makes such qualification necessary except for such jurisdictions where the failure to so qualify would not have a material adverse effect on the assets or properties, business, results of operations or financial condition of the Company. Except as disclosed in the Registration Statement and the Prospectus, the Company does not own, lease or license any asset or property or conduct any business outside the United States of America. The Company has all requisite corporate power and authority, and all necessary authorizations, approvals, consents, orders, licenses, certificates and permits of and from all governmental or regulatory bodies or any other person or entity, to own, lease and license its assets and properties and conduct its businesses as now being conducted -5- and as described in the Registration Statement and the Prospectus except for such authorizations, approvals, consents, orders, material licenses, certificates and permits the failure to so obtain would not have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company; no such authorization, approval, consent, order, license, certificate or permit contains a materially burdensome restriction other than as disclosed in the Registration Statement and the Prospectus; and the Company has all such corporate power and authority, and such authorizations, approvals, consents, orders, licenses, certificates and permits to enter into, deliver and perform this Agreement and to issue and sell the Shares (except as may be required under state and foreign Blue Sky laws). To the Company's knowledge, all of the properties now or formerly owned or leased by the Company or any subsidiary, all research and manufacturing operations conducted thereon (including discharges and emissions therefrom) and all research and manufacturing equipment now or formerly used at said properties, have been and are in compliance with all Federal, state, local and foreign statutes, ordinances, regulations, rules and standards concerning or relating to industrial hygiene and the protection of health, safety, welfare and the environment (collectively, "the Environmental Laws"), except to the extent that any failure to be in compliance, singly or in the aggregate, would not have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. The Company has not received notice, and does not have knowledge, of any claim, demand, investigation, regulatory action, suit or other action instituted or threatened against it or said property relating to any of the Environmental Laws. (f) The Company has filed with the U.S. Food and Drug Administration (the "FDA"), and all applicable foreign, state and local regulatory bodies for, and received approval of, all registrations, applications, licenses, requests for exemptions, permits and other regulatory authorizations material to the conduct of the Company's business as it is now conducted; the Company is in compliance in all material respects with all such registrations, applications, licenses, requests for exemptions, permits and other regulatory authorizations, and all applicable FDA, foreign, state and local rules and regulations; the Company has no reason to believe that any party granting any such registration, application, license, request for exemption, permit or other authorization is considering limiting, suspending or revoking the same. -6- (g) The human clinical trials, animal studies and other preclinical tests conducted by the Company or in which the Company has participated that are described in the Registration Statement and Prospectus or the results of which are referred to in the Registration Statement or Prospectus, and such studies and tests conducted on behalf of the Company (including but not limited to studies and tests conducted under institutional INDs filed by Memorial Sloan-Kettering Cancer Center ("Sloan-Kettering"), were and, if still pending, are being conducted in all material respects in accordance with experimental protocols, procedures and controls generally used by qualified experts in the preclinical or clinical study of products comparable to those being developed by the Company; the descriptions of the results of such studies, tests and trials contained in the Registration Statement and Prospectus are accurate and complete in all material respects, and the Company has no knowledge of any other trials, studies or tests, the results of which reasonably call into question the results described or referred to in the Registration Statement and Prospectus; the Company has not received any notices or correspondence from the FDA or any other governmental agency requiring the termination, suspension or modification (other than such modifications as are normal in the regulatory process) of any animal studies, preclinical tests or clinical trials conducted by or on behalf of the Company (including but not limited to studies and tests conducted under institutional INDs filed by Sloan-Kettering) or in which the Company has participated that are described in the Registration Statement or Prospectus or the results of which are referred to in the Registration Statement or Prospectus. (h) The Company owns or possesses adequate and enforceable rights to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, know-how, proprietary techniques, including processes and substances, and other similar rights and proprietary knowledge (collectively, "Intangibles") necessary for the conduct of its business as described in the Registration Statement and the Prospectus. The Company has not received any notice of, and to its best knowledge is not aware of, any infringement of or conflict with asserted rights of others with respect to any Intangibles which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. The Company is not aware of any infringement of any of the Company's Intangibles by any third party which could -7- have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (i) The Company has good title to each of the items of personal property which are reflected in the financial statements referred to in Section 4(c) or are referred to in the Registration Statement and the Prospectus as being owned by it and valid and enforceable leasehold interests in each of the items of real and personal property which are referred to in the Registration Statement and the Prospectus as being leased by it, in each case free and clear of all liens, encumbrances, claims, security interests and defects, other than those described in the Registration Statement and the Prospectus and those which do not and will not have a material adverse effect upon the assets or properties, business, results of operations or financial condition of the Company. (j) There is no litigation or governmental or other proceeding or investigation before any court or before or by any public body or board pending or, to the Company's best knowledge, threatened (and the Company does not know of any basis therefor) against, or involving the assets, properties or business of, the Company which, if determined adversely to the Company, would materially adversely affect the value or the operation of any such assets or properties or the business, results of operations, prospects or condition (financial or otherwise) of the Company. (k) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as described therein, (i) there has not been any material adverse change in the assets or properties, business, results of operations, prospects or condition (financial or otherwise), of the Company, whether or not arising from transactions in the ordinary course of business; (ii) the Company has not sustained any material loss or interference with its assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree; and (iii) since the date of the latest balance sheet included in the Registration Statement and the Prospectus, except as reflected in the Registration Statement or the Prospectus, the Company has not (a) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money, except such liabilities or obligations incurred in the ordinary course of business, (b) entered into any transaction -8- not in the ordinary course of business or (c) declared or paid any dividend or made any distribution on any shares of its stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its stock. (l) There is no document or contract of a character required to be described in the Registration Statement or Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed as required. Each agreement listed in the exhibits to the Registration Statement is in full force and effect and is valid and enforceable by and against the Company in accordance with its terms, assuming the due authorization, execution and delivery thereof by each of the other parties thereto. Neither the Company, nor, to the best of the Company's knowledge, any other party is in default in the observance or performance of any term or obligation to be performed by it under any such agreement, and no event has occurred which with notice or lapse of time or both would constitute such a default, in any such case which default or event would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. No default exists, and no event has occurred which with notice or lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition, by the Company of any other agreement or instrument to which the Company is a party or by which it or its properties or business may be bound or affected which default or event would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (m) The Company is not in violation of any term or provision of its charter or by-laws or of any franchise, license, permit, judgment, decree, order, statute, rule or regulation, where the consequences of such violation would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (n) Neither the execution, delivery and performance of this Agreement by the Company nor the consummation of any of the transactions contemplated hereby (including, without limitation, the issuance and sale by the Company of the Shares) will give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach of any term or provision of, or constitute a default (or an event which with notice or lapse -9- of time or both would constitute a default) under, or require any consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to the terms of, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company is a party or by which it or any of its properties or businesses is bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company or violate any provision of the charter or by-laws of the Company, except for such consents or waivers which have already been obtained and are in full force and effect. (o) The Company has an authorized and outstanding capital stock as set forth under the caption "Capitalization" in the Prospectus. All of the outstanding shares of Common Stock have been duly and validly issued and are fully paid and nonassessable and none of them was issued in violation of any preemptive or other similar right. The Shares, when issued and sold pursuant to this Agreement, will be duly and validly issued, fully paid and nonassessable and none of them will be issued in violation of any preemptive or other similar right. Except as disclosed in the Registration Statement and the Prospectus, there is no outstanding option, warrant or other right calling for the issuance of, and there is no commitment, plan or arrangement to issue, any share of stock of the Company or any security convertible into, or exercisable or exchangeable for, such stock. The Common Stock and the Shares conform in all material respects to all statements in relation thereto contained in the Registration Statement and the Prospectus. (p) No holder of any security of the Company has the right to have any security owned by such holder included in the Registration Statement or to demand registration of any security owned by such holder during the period ending 180 days after the date of this Agreement. Each of the directors and executive officers of the Company, and other stockholders of the Company who beneficially own, in the aggregate, shares of Common Stock (the "Locked-up Holders") either have agreed with the Company or delivered to the Representatives his enforceable written agreement that he will not, for a period of 180 days after the date of this Agreement, offer for sale, sell, distribute, grant any option for the sale of, or otherwise dispose of, directly or indirectly, or exercise any registration rights with respect to, any shares of Common Stock (or any securities convertible into, exercisable for, or exchangeable for any shares of Common Stock) owned by him, without the prior written consent of Oppenheimer & Co., Inc. ("Oppenheimer"). -10- Oppenheimer agrees to notify Vector Securities International, Inc. of its intention to consent to any of the transactions prohibited by this paragraph. (q) All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Shares by the Company. This Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (A) as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles and (B) to the extent that rights to indemnity or contribution under this Agreement may be limited by Federal and state securities laws or the public policy underlying such laws. (r) The Company is not involved in any labor dispute nor, to the knowledge of the Company, is any such dispute threatened, which dispute would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (s) No transaction has occurred between or among the Company and any of its officers or directors or any affiliate or affiliates of any such officer or director that is required to be described in and is not described in the Registration Statement and the Prospectus. (t) The Company has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of any of the Shares. (u) The Company has filed all Federal, state, local and foreign tax returns which are required to be filed by it through the date hereof, or has received extensions thereof, and has paid all taxes shown on such returns and all assessments received by it to the extent that the same are material and have become due. (v) The Shares have been duly authorized for quotation on Nasdaq National Market. -11- (w) The Company has complied with all of the requirements and filed the required forms as specified in Florida Statutes Section 517.075. 5. CONDITIONS OF THE UNDERWRITERS OBLIGATIONS. The obligations of the Underwriters under this Agreement are several and not joint. The respective obligations of the Underwriters to purchase the Shares are subject to each of the following terms and conditions: (a) The Prospectus shall have been timely filed with the Commission in accordance with Section 6(A)(a) of this Agreement. (b) No order preventing or suspending the use of any preliminary prospectus or the Prospectus shall have been or shall be in effect and no order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for such purpose shall be pending before or threatened by the Commission, and any requests for additional information on the part of the Commission (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the satisfaction of the Representatives. (c) The representations and warranties of the Company contained in this Agreement and in the certificates delivered pursuant to Section 5(d) shall be true and correct when made and on and as of each Closing Date as if made on such date and the Company shall have performed all covenants and agreements and satisfied all the conditions contained in this Agreement required to be performed or satisfied by it at or before such Closing Date. (d) The Representatives shall have received on each Closing Date a certificate, addressed to the Representatives and dated such Closing Date, of the chief executive or chief operating officer and the chief financial officer or chief accounting officer of the Company to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus and this Agreement and that the representations and warranties of the Company in this Agreement are true and correct on and as of such Closing Date with the same effect as if made on such Closing Date and the Company has performed all covenants and agreements and satisfied all conditions contained in this Agreement required to be performed or satisfied by it at or prior to such Closing Date. -12- (e) The Representatives shall have received on the Effective Date, at the time this Agreement is executed and on each Closing Date a signed letter from Coopers & Lybrand LLP addressed to the Representatives and dated, respectively, the Effective Date, the date of this Agreement and each such Closing Date, in form and substance reasonably satisfactory to the Representatives. (f) The Representatives shall have received on each Closing Date from Dewey Ballantine, counsel for the Company, an opinion, addressed to the Representatives and dated such Closing Date, and stating in effect that: (i) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware. The Company is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its assets or properties (owned, leased or licensed) or the nature of its businesses makes such qualification necessary, except for such jurisdictions where the failure to so qualify would not have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (ii) The Company has all requisite corporate power and authority to own, lease and license its assets and properties and conduct its business as described in the Registration Statement and the Prospectus; and the Company has all requisite corporate power and authority and all necessary authorizations, approvals, consents, orders, licenses, certificates and permits to enter into, deliver and perform this Agreement and to issue and sell the Shares other than those required under state and foreign Blue Sky laws. (iii) The authorized and issued capital stock of the Company is as set forth in the Registration Statement and the Prospectus; the certificates evidencing the Shares are in due and proper legal form and have been duly authorized for issuance by the Company; all of the outstanding shares of Common Stock of the Company have been duly and validly authorized and have been duly and validly issued and are fully paid and nonassessable and none of them was issued in violation of any preemptive or other similar right, except for those violations which have since been validly waived. The Shares when issued and sold pursuant to this Agreement will be duly and validly issued, outstanding, -13- fully paid and nonassessable and none of them will have been issued in violation of any preemptive or other similar right. To the best of such counsel's knowledge, except as disclosed in the Registration Statement and the Prospectus, there is no outstanding option, warrant or other right calling for the issuance of, and no commitment, plan or arrangement to issue, any share of stock of the Company or any security convertible into, exercisable for, or exchangeable for stock of the Company. The Common Stock and the Shares conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus. (iv) To the best of such counsel's knowledge, no holder of any security of the Company has the right to have any security owned by such holder included in the Registration Statement or, except as described in the Registration Statement, to demand registration of any security during the period ending 180 days after the Effective Date, except for those rights which have been validly waived. (v) All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Shares. This Agreement has been duly and validly authorized, executed and delivered by the Company. (vi) Neither the execution, delivery and performance of this Agreement by the Company nor the consummation of any of the transactions contemplated hereby (including, without limitation, the issuance and sale by the Company of the Shares) will give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach of any term or provision of, or constitute a default (or any event which with notice or lapse of time, or both, would constitute a default) under, or require consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, note or other agreement or instrument known to such counsel and to which the Company is a party or by which it or any of its properties or businesses is bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation known to such counsel or violate any provision of the charter or by-laws of the Company. -14- (vii) No consent, approval, authorization or order of any court or governmental agency or body is required for the performance of this Agreement by the Company or the consummation of the transactions contemplated hereby, including without limitation the sale of the Shares, except such as have been obtained under the Securities Act and such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the several Underwriters. (viii) To the best of such counsel's knowledge, there is no litigation or governmental or other proceeding or investigation, before any court or before or by any public body or board pending or threatened against, or involving the assets, properties or businesses of, the Company which, if determined adversely to the Company, would have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (ix) The statements in the Prospectus under the captions "Risk Factors - Availability of Materials"; "Risk Factors - Dependence on Third Parties; "Risk Factors - Control by Existing Stockholders; Anti- Takeover Provisions"; "Risk Factors - Future Sales of Common Stock; Registration Rights; Possible Adverse Effect on Future Market Price"; "Business - Research and Development Collaborations"; "Business - Government Grants"; "Business -- Patents and Proprietary Technology" (describing the Columbia License Agreement (as defined below) and the patents and patent applications licensed to the Company thereby); "Certain Transactions"; "Description of Capital Stock"; and "Shares Eligible for Future Sale", insofar as such statements constitute a summary of documents referred to therein or matters of law, are fair summaries in all material respects and accurately present in all material respects the information called for with respect to such documents and matters. All contracts and other documents known to such counsel and required to be filed as exhibits to, or described in, the Registration Statement have been so filed with the Commission or are fairly described in the Registration Statement, as the case may be. (x) The Registration Statement, all preliminary prospectuses and the Prospectus and each amendment or supplement thereto (except for the financial statements -15- and schedules and other financial and statistical data included therein, as to which such counsel need not express an opinion) comply as to form in all material respects with the requirements of the Securities Act and the Rules. (xi) The Registration Statement has become effective under the Securities Act, and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are threatened, pending or contemplated. (xii) All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of the License Agreement dated March 1, 1989, as amended by a Letter Agreement dated March 1, 1989, and as amended by a Letter Agreement dated October 22, 1996, between the Company and the Trustees of Columbia University. The Columbia License Agreement (the "Columbia License Agreement") has been duly and validly authorized, executed and delivered by the Company. (xiii) To the best of such counsel's knowledge, neither the Company nor Columbia has received any notice of infringement or of conflict with asserted rights of others with respect to any patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses or know-how, proprietary techniques, including processes and substances, other similar rights and proprietary knowledge relating to the patents and patent applications licensed to the Company under the Columbia License Agreement (such patents and patent applications being collectively referred to herein as the "Columbia Licensed Patents"), which could result in any material adverse effect upon the Company. (xiv) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending relating to the Columbia Licensed Patents, other than review of pending applications for patents, and to the best of such counsel's knowledge no such proceedings are threatened or contemplated by governmental authorities or others. To the extent deemed advisable by such counsel, they may rely as to matters of fact on certificates of responsible officers of the Company and public officials and on the opinions of other -16- counsel satisfactory to the Representatives as to matters which are governed by laws other than the laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal laws of the United States; provided that such counsel shall state that in their opinion the Underwriters and they are justified in relying on such other opinions. Copies of such certificates and other opinions shall be furnished to the Representatives and counsel for the Underwriters. In addition, such counsel shall state that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the Representatives and representatives of the independent certified public accountants of the Company, at which conferences the contents of the Registration Statement and the Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus (except as specified in the foregoing opinion), on the basis of the foregoing, no facts have come to the attention of such counsel which lead such counsel to believe that the Registration Statement at the time it became effective (except with respect to the financial statements and notes and schedules thereto and other financial data, as to which such counsel need express no belief) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus as amended or supplemented (except with respect to the financial statements and notes and schedules thereto and other financial data, as to which such counsel need make no statement) on the date thereof contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) The Representatives shall have received on each Closing Date from Cooper & Dunham, patent counsel for the Company, an opinion addressed to the Representatives and dated such Closing Date, to the effect that such counsel is familiar with the technology used by the Company in its business and has read the portions of the Registration Statement and the Prospectus headed: "Risk Factors - Dependence on and Uncertainty of Protection of Patents and Proprietary Rights" and "Business - Patents and Proprietary Technology" (collectively, the "Technology Portion"), and that, except to the extent that the following opinions relate to the Company's ganglioside conjugate vaccine technology and products as to which such counsel provides no opinion: -17- (i) such counsel has no knowledge of any facts which would preclude the Company from having clear title to the Company's patents or patent applications referenced in the Technology Portion. To the best of such counsel's knowledge, the Company does not lack and will not be unable to obtain any rights or licenses to use any patent or know-how necessary to conduct the business now conducted or proposed to be conducted by the Company as described in the Prospectus, including without limitation the Company's business relating to HIV receptor technology and products (except with respect to the Columbia License Agreement and the Columbia Licensed Patents as to which such counsel expresses no opinion). To the best of such counsel's knowledge, the Company has not received any notice of infringement or of conflict with asserted rights of others with respect to any patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses or know-how, proprietary techniques, including processes and substances, and other similar rights and proprietary knowledge (except with respect to the Columbia Licensed Patents as to which such counsel expresses no opinion) which could result in any material adverse effect upon the Company. Such counsel is not aware of any patents of others (except with respect to the Columbia Licensed Patents as to which such counsel expresses no opinion) which are infringed by specific products or processes of the Company referred to in the Prospectus in such manner as to materially and adversely affect the Company; (ii) to the best of such counsel's knowledge, there are no legal or governmental proceedings pending relating to trade secrets, trademarks, service marks or other proprietary information or materials of the Company (except with respect to the Columbia Licensed Patents as to which such counsel expresses no opinion), other than review of pending applications for patents, and to the best of such counsel's knowledge no such proceedings are threatened or contemplated by governmental authorities or others; (iii) such counsel does not know of any material contracts or other material documents relating to the Company's proprietary information (except with respect to the Columbia Licensed Patents as to which such counsel expresses no opinion), other than those filed as exhibits to the Registration Statement; and (iv) the statements under the captions "Risk Factors - Dependence on and Uncertainty of Protection of Patents and Proprietary Rights" and "Business - Patents and Proprietary -18- Technology" (except with respect to those statements that describe the Columbia License Agreement and the Columbia Licensed Patents as to which such counsel expresses no opinion), insofar as such statements constitute a summary of documents referred to therein or matters of law, are accurate summaries and fairly and correctly present, in all material respects, the information called for with respect to such documents and matters and such counsel has no reason to believe that the statements therein are untrue or that there is an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that such counsel may rely on representations of the Company with respect to the factual matters contained in such statements, provided that such counsel shall state that nothing has come to the attention of such counsel which leads them to believe that such representations are not true and correct in all material respects. (h) The Representatives shall have received on each Closing Date from Wolf, Greenfield & Sacks, P.C., special patent counsel for the Company, an opinion addressed to the Representatives and dated such Closing Date, to the effect that such counsel is familiar with the HIV Receptor Technology and the Company's ganglioside conjugate vaccine technology and products and has read the portions of the Registration Statement and the Prospectus headed: "Risk Factors - Dependence on and Uncertainty of Protection of Patents and Proprietary Rights" and "Business - Patents and Proprietary Technology" (collectively, the "Technology Portion"), and that, solely with respect to the Company's ganglioside conjugate vaccine technology and products: (i) such counsel has no knowledge of any facts which would preclude the Company from having clear title to the Company's patents or patent applications referenced in the Technology Portion. To the best of such counsel's knowledge, the Company does not lack and will not be unable to obtain any rights or licenses to use any patent or know-how necessary to conduct the business now conducted or proposed to be conducted by the Company as described in the Prospectus. To the best of such counsel's knowledge, the Company has not received any notice of infringement or of conflict with asserted rights of others with respect to any patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses or know-how, proprietary techniques, including processes and substances, and other similar rights and proprietary knowledge which could result in any material adverse effect upon the Company. Such counsel is not aware of any patents of others which are -19- infringed by specific products or processes of the Company referred to in the Prospectus in such manner as to materially and adversely affect the Company; (ii) to the best of such counsel's knowledge, there are no legal or governmental proceedings pending relating to trade secrets, trademarks, service marks or other proprietary information or materials of the Company, other than review of pending applications for patents, and to the best of such counsel's knowledge no such proceedings are threatened or contemplated by governmental authorities or others; (iii) such counsel does not know of any material contracts or other material documents relating to the Company's proprietary information, other than those filed as exhibits to the Registration Statement; and (iv) the statements under the captions "Risk Factors - Dependence on and Uncertainty of Protection of Patents and Proprietary Rights" and "Business - Patents and Proprietary Technology", insofar as such statements constitute a summary of documents referred to therein or matters of law, are accurate summaries and fairly and correctly present, in all material respects, the information called for with respect to such documents and matters and such counsel has no reason to believe that the statements therein are untrue or that there is an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that such counsel may rely on representations of the Company with respect to the factual matters contained in such statements, provided that such counsel shall state that nothing has come to the attention of such counsel which leads them to believe that such representations are not true and correct in all material respects. (i) The Representatives shall have received on each Closing Date from Venable, Baetjer, Howard & Civiletti, L.L.P., FDA counsel for the Company, an opinion addressed to the Representatives and dated such Closing Date, to the effect that such counsel has read the portions of the Registration Statement and the Prospectus headed: "Risk Factors - Government Regulation; No Assurance of Regulatory Approval", "Risk Factors - Uncertainty Related to Health Care Reform Measures and Reimbursement", "Business - Government Regulation" and "Business - Product Liability" (collectively, the "Regulatory Portion"), that the statements under such captions, insofar as such statements constitute a summary of matters of law, are accurate summaries and fairly and correctly present, in all material respects, the information called for with respect to such matters and such -20- counsel has no reason to believe that the statements therein are untrue or that there is an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that such counsel may rely on representations of the Company with respect to the factual matters contained in such statements, provided that such counsel shall state that nothing has come to the attention of such counsel which leads them to believe that such representations are not true and correct in all material respects. (j) All proceedings taken in connection with the sale of the Firm Shares and the Option Shares as herein contemplated shall be reasonably satisfactory in form and substance to the Representatives and their counsel and the Underwriters shall have received from Hale and Dorr a favorable opinion, addressed to the Representatives and dated such Closing Date, with respect to the Shares, the Registration Statement and the Prospectus, and such other related matters, as the Representatives may reasonably request, and the Company shall have furnished to Hale and Dorr such documents as they may reasonably request for the purpose of enabling them to pass upon such matters. (k) The Representatives shall have received on each Closing Date a certificate, addressed to the Representatives, and dated such Closing Date, of an executive officer of the Company to the effect that the signer of such certificate has reviewed and understands the provisions of Section 517.075 of the Florida Statutes, and represents that the Company has complied, and at all times will comply, with all provisions of Section 517.075 and further, that as of such Closing Date, neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba. 6. COVENANTS OF THE COMPANY. (A) The Company covenants and agrees as follows: (a) The Company shall prepare the Prospectus in a form approved by the Representatives and file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act, and shall promptly advise the Representatives (i) when any amendment to the Registration Statement shall have become effective, (ii) of any request by the Commission for any amendment of the Registration Statement or the Prospectus or for any additional information, (iii) of the prevention or suspension of the use of any preliminary prospectus or the -21- Prospectus or of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company shall not file any amendment of the Registration Statement or supplement to the Prospectus unless the Company has furnished the Representatives a copy for its review prior to filing and shall not file any such proposed amendment or supplement to which the Representatives reasonably object. The Company shall use its best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Shares is required to be delivered under the Securities Act and the Rules, any event occurs as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend or supplement the Prospectus to comply with the Securities Act or the Rules, the Company promptly shall prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 6(A), an amendment or supplement which shall correct such statement or omission or an amendment which shall effect such compliance. (c) The Company shall make generally available to its security holders and to the Representatives as soon as practicable, but not later than 45 days after the end of the 12-month period beginning at the end of the fiscal quarter of the Company during which the Effective Date occurs (or 90 days if such 12-month period coincides with the Company's fiscal year), an earning statement (which need not be audited) of the Company, covering such 12-month period, which shall satisfy the provisions of Section 11(a) of the Securities Act or Rule 158 of the Rules. (d) The Company shall furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement (including all exhibits thereto and amendments thereof), and to each other Underwriter a copy of the Registration Statement (without including all exhibits thereto and all amendments thereof), and, so long as delivery of a prospectus by an underwriter or dealer may be required by the Securities Act or the Rules, as -22- many copies of any preliminary prospectus and the Prospectus and any amendments thereof and supplements thereto as the Representatives may reasonably request. (e) The Company shall cooperate with the Representatives and their counsel in endeavoring to qualify the Shares for offer and sale under the laws of such jurisdictions as the Representatives may designate and shall maintain such qualifications in effect so long as required for the distribution of the Shares; provided, however, that the Company shall not be required in connection therewith, as a condition thereof, to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation as doing business in any jurisdiction. (f) For a period of five years after the date of this Agreement, the Company shall supply to the Representatives and to each other Underwriter who may so request in writing, copies of such financial statements and other periodic and special reports as the Company may from time to time distribute generally to the holders of any class of its capital stock and to furnish to the Representatives a copy of each annual or other report it shall be required to file with the Commission (including the Report on Form SR required by Rule 463 of the Rules). (g) Without the prior written consent of the Representatives, for a period of 180 days after the date of this Agreement, the Company shall not issue, sell or register with the Commission (other than on Form S-8 or on any successor form), or otherwise dispose of, directly or indirectly, any equity securities of the Company (or any securities convertible into or exercisable or exchangeable for equity securities of the Company), except for the issuance of the Shares pursuant to the Registration Statement, and the issuance of shares pursuant to the Company's existing stock option plan or bonus plan. (h) On or before completion of this offering, the Company shall make all filings required under applicable securities laws and by the Nasdaq National Market (including any required registration under the Exchange Act). (i) Without the prior written consent of Oppenheimer, for a period of 180 days after the date of this Agreement, the Company shall not, by amending, terminating or waiving the agreement between the Locked-up Holder and the Company described in Section 4(p) or otherwise, permit any Locked-up Holder to offer for sale, sell, distribute, grant any option -23- for the sale of, or otherwise dispose of, directly or indirectly, any Shares of Common Stock (or any securities convertible into, exercisable for, or exchangeable for any Shares of Common Stock. (B) The Company agrees to pay, or reimburse if paid by the Representatives, whether or not the transactions contemplated hereby are consummated or this Agreement is terminated, all costs and expenses incident to the public offering of the Shares and the performance of the obligations of the Company under this Agreement including those relating to: (i) the preparation, printing, filing and distribution of the Registration Statement including all exhibits thereto, each preliminary prospectus, the Prospectus, all amendments and supplements to the Registration Statement and the Prospectus, and the printing, filing and distribution of this Agreement; (ii) the preparation and delivery of certificates for the Shares to the Underwriters; (iii) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the various jurisdictions referred to in Section 6(A)(e), including the reasonable fees and disbursements of counsel for the Underwriters in connection with such registration and qualification and the preparation, distribution and shipment of preliminary and supplementary Blue Sky memoranda; (iv) the furnishing (including costs of shipping and mailing) to the Representatives and to the Underwriters of copies of each preliminary prospectus, the Prospectus and all amendments or supplements to the Prospectus, and of the several documents required by this Section to be so furnished, as may be reasonably requested for use in connection with the offering and sale of the Shares by the Underwriters or by dealers to whom Shares may be sold; (v) the filing fees of the National Association of Securities Dealers, Inc. in connection with its review of the terms of the public offering; (vi) the furnishing (including costs of shipping and mailing) to the Representatives and to the Underwriters of copies of all reports and information required by Section 6(A)(f); (vii) inclusion of the Shares for quotation on the Nasdaq National Market; and (viii) all transfer taxes, if any, with respect to the sale and delivery of the Shares by the Company to the Underwriters. Subject to the provisions of Section 9, the Underwriters agree to pay, whether or not the transactions contemplated hereby are consummated or this Agreement is terminated, all costs and expenses incident to the performance of the obligations of the Underwriters under this Agreement not payable by the Company pursuant to the preceding sentence, including, without limitation, the fees and disbursements of counsel for the Underwriters. -24- 7. Indemnification. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all losses, claims, damages and liabilities, joint or several (including any reasonable investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other Federal or state law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment thereof or supplement thereto, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that such indemnity shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) on account of any losses, claims, damages or liabilities arising from the sale of the Shares to any person by such Underwriter if such untrue statement or omission or alleged untrue statement or omission was made in such preliminary prospectus, the Registration Statement or the Prospectus, or such amendment or supplement, in reliance upon and in conformity with information furnished in writing to the Company by the Representatives on behalf of any Underwriter specifically for use therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each director of the Company, and each officer of the Company who signs the Registration Statement, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only insofar as such losses, claims, damages or liabilities arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which was made in any preliminary prospectus, the Registration Statement or the Prospectus, or any amendment thereof or supplement thereto, contained in the last -25- paragraph relating to stabilization on the inside front cover page of the Prospectus, the concession and reallowance figures appearing under the caption "Underwriting" in the Prospectus and in the last sentence of the third full paragraph under the caption "Underwriting" in the Prospectus relating to the exercise of discretionary authority by the Underwriters; provided, however, that the obligation of each Underwriter to indemnify the Company (including any controlling person, director or officer thereof) shall be limited to the net proceeds received by the Company from such Underwriter. (c) Any party that proposes to assert the right to be indemnified under this Section will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section, notify each such indemnifying party of the commencement of such action, suit or proceeding, enclosing a copy of all papers served. No indemnification provided for in Section 7(a) or 7(b) shall be available to any party who shall fail to give notice as provided in this Section 7(c) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice but the omission so to notify such indemnifying party of any such action, suit or proceeding shall not relieve it from any liability that it may have to any indemnified party for contribution or otherwise than under this Section. In case any such action, suit or proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and the approval by the indemnified party of such counsel, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses, except as provided below and except for the reasonable costs of investigation subsequently incurred by such indemnified party in connection with the defense thereof. The indemnified party shall have the right to employ its counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of counsel by such indemnified party has been authorized in writing by the indemnifying parties, (ii) the indemnified party shall have reasonably concluded that there may be a conflict of -26- interest between the indemnifying parties and the indemnified party in the conduct of the defense of such action (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying parties shall not have employed counsel to assume the defense of such action within a reasonable time after notice of the commencement thereof, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying parties. An indemnifying party shall not be liable for any settlement of any action, suit, proceeding or claim effected without its written consent. 8. CONTRIBUTION. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Section 7(a) is due in accordance with its terms but for any reason is held to be unavailable from the Company, the Company and the Underwriters shall contribute to the aggregate losses, claims, damages and liabilities (including any investigation, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting any contribution received by the Company from persons other than the Underwriters, such as persons who control the Company within the meaning of the Securities Act, officers of the Company who signed the Registration Statement and directors of the Company, who may also be liable for contribution) to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in Section 7 hereof, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the offering (net of underwriting discounts but before deducting expenses) received by the Company, as set forth in the table on the cover page of the Prospectus, bear to (y) the underwriting discounts received by the Underwriters, as set forth in the table on the cover page of the Prospectus. The relative fault of the Company or the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact related to information supplied by the Company or the Underwriters and the parties' -27- relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 8, (i) in no case shall any Underwriter (except as may be provided in the Agreement Among Underwriters) be liable or responsible for any amount in excess of the underwriting discount applicable to the Shares purchased by such Underwriter hereunder, and (ii) the Company shall be liable and responsible for any amount in excess of such underwriting discount; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Underwriter, and each person, if any, who controls the Company within the meaning of the Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) in the immediately preceding sentence of this Section 8. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section, notify such party or parties from whom contribution may be sought, but the omission so to notify such party or parties from whom contribution may be sought shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise than under this Section. No party shall be liable for contribution, with respect to any action, suit, proceeding or claim settled without its written consent. The Underwriter's obligations to contribute pursuant to this Section 8 are several in proportion to their respective underwriting commitments and not joint. 9. TERMINATION. This Agreement may be terminated with respect to the Shares to be purchased on a Closing Date by the Representatives by notifying the Company at any time (a) in the absolute discretion of the Representatives at or before any Closing Date: (i) if on or prior to such date, any domestic or international event or act or -28- occurrence has materially disrupted, or in the opinion of the Representatives will in the future materially disrupt, the securities markets; (ii) if there has occurred any new outbreak or material escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in the judgment of the Representatives, inadvisable to proceed with the offering; (iii) if there shall be such a material adverse change in general financial, political or economic conditions or the effect of international conditions on the financial markets in the United States is such as to make it, in the judgment of the Representatives, inadvisable or impracticable to market the Shares; (iv) if trading in the Shares has been suspended by the Commission or trading generally on the New York Stock Exchange, Inc., on the American Stock Exchange, Inc. or on the Nasdaq National Market has been suspended or limited, or minimum or maximum ranges for prices for securities shall have been fixed, or maximum ranges for prices for securities have been required, by said exchanges or by order of the Commission, the National Association of Securities Dealers, Inc., or any other governmental or regulatory authority; or (v) if a banking moratorium has been declared by any state or Federal authority, or (b) at or before any Closing Date, that any of the conditions specified in Section 5 shall not have been fulfilled when and as required by this Agreement. If this Agreement is terminated pursuant to any of its provisions, except as set forth in Section 6(B), the Company shall not be under any liability to any Underwriter, and no Underwriter shall be under any liability to the Company, except that (y) if this Agreement is terminated by the Representatives or the Underwriters because of any failure, refusal or inability on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, the Company will reimburse the Underwriters for all out-of-pocket expenses (including the reasonable fees and disbursements of their counsel) incurred by them in connection with the proposed purchase and sale of the Shares or in contemplation of performing their obligations hereunder and (z) no Underwriter who shall have failed or refused to purchase the Shares agreed to be purchased by it under this Agreement, without some reason sufficient hereunder to justify cancellation or termination of its obligations under this Agreement, shall be relieved of liability to the Company or to the other Underwriters for damages occasioned by its failure or refusal. -29- 10. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters shall fail (other than for a reason sufficient to justify the cancellation or termination of this Agreement under Section 9) to purchase on any Closing Date the Shares agreed to be purchased on such Closing Date by such Underwriter or Underwriters, the Representatives may find one or more substitute underwriters to purchase such Shares or make such other arrangements as the Representatives may deem advisable or one or more of the remaining Underwriters may agree to purchase such Shares in such proportions as may be approved by the Representatives, in each case upon the terms set forth in this Agreement. If no such arrangements have been made by the close of business on the business day following such Closing Date, (a) if the number of Shares to be purchased by the defaulting Underwriters on such Closing Date shall not exceed 10% of the Shares that all the Underwriters are obligated to purchase on such Closing Date, then each of the nondefaulting Underwriters shall be obligated to purchase such Shares on the terms herein set forth in proportion to their respective obligations hereunder; provided, that in no event shall the maximum number of Shares that any Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant to this Section 10 by more than one-ninth of such number of Shares without the written consent of such Underwriter, or (b) if the number of Shares to be purchased by the defaulting Underwriters on such Closing Date shall exceed 10% of the Shares that all the Underwriters are obligated to purchase on such Closing Date, then the Company shall be entitled to an additional business day within which it may, but is not obligated to, find one or more substitute underwriters reasonably satisfactory to the Representatives to purchase such Shares upon the terms set forth in this Agreement. In any such case, either the Representatives or the Company shall have the right to postpone the applicable Closing Date for a period of not more than five business days in order that necessary changes and arrangements (including any necessary amendments or supplements to the Registration Statement or Prospectus) may be effected by the Representatives and the Company. If the number of Shares to be purchased on such Closing Date by such defaulting Underwriter or Underwriters shall exceed 10% of the Shares that all the Underwriters are obligated to purchase on such Closing Date, and none of the nondefaulting Underwriters or the Company shall make arrangements pursuant to this Section within the period stated for the purchase of the Shares that the defaulting Underwriters agreed to purchase, this Agreement shall terminate with respect to the Shares to be purchased on such Closing Date -30- without liability on the part of any nondefaulting Underwriter to the Company and without liability on the part of the Company, except in both cases as provided in Sections 6(B), 7, 8 and 9. The provisions of this Section shall not in any way affect the liability of any defaulting Underwriter to the Company or to the nondefaulting Underwriters arising out of such default. A substitute underwriter hereunder shall become an Underwriter for all purposes of this Agreement. 11. MISCELLANEOUS. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement shall remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors or controlling persons referred to in Sections 7 and 8 hereof, and shall survive delivery of and payment for the Shares. The provisions of Sections 6(B), 7, 8 and 9 shall survive the termination or cancellation of this Agreement. This Agreement has been and is made for the benefit of the Underwriters and the Company and their respective successors and assigns, and, to the extent expressed herein, for the benefit of persons controlling any of the Underwriters, or the Company, and directors and officers of the Company, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include any purchaser of Shares from any Underwriter merely because of such purchase. All notices and communications hereunder shall be in writing and mailed or delivered or by telephone or telegraph if subsequently confirmed in writing, (a) if to the Representatives, c/o Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281 Attention: Peter J. Crowley, and (b) if to the Company, to its agent for service as such agent's address appears on the cover page of the Registration Statement. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. -31- Please confirm that the foregoing correctly sets forth the agreement among us. Very truly yours, PROGENICS PHARMACEUTICALS, INC. By _____________________________ Name: Title: Confirmed: OPPENHEIMER & CO., INC. VECTOR SECURITIES INTERNATIONAL, INC. Acting severally on behalf of themselves and as Representatives of the several Underwriters named in Schedule I annexed hereto OPPENHEIMER & CO., INC. By:_________________________________ Name: Title: VECTOR SECURITIES INTERNATIONAL, INC. By:_________________________________ Name: Title: -32- SCHEDULE I Number of Firm Shares to Name Be Purchased ---- -------------- Oppenheimer & Co., Inc. Vector Securities International, Inc. _______________________ ________ Total -33- EX-3.1 3 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION CERTIFICATE OF ELIMINATION OF CLASS A COMMON STOCK OF PROGENICS PHARMACEUTICALS, INC. --------------- Pursuant to Section 151 of Title 8 of the Delaware Code of 1953 --------------- THE UNDERSIGNED, being the Vice President and Treasurer of Progenics Pharmaceuticals, Inc., a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that, pursuant to the provisions of Section 151 of Title 8 of the Delaware Code of 1953 and the authority conferred upon the Board of Directors by the provisions of the Certificate of Incorporation, as amended, of the Corporation (the "Certificate of Incorporation"), the Board of Directors of the Corporation duly adopted resolutions regarding the series of its Common Shares previously designated as Class A Common Stock in a Certificate of Designation dated October 5, 1989. These resolutions are as follows: RESOLVED, that 5,000,000 shares of Common Shares were previously designated as Class A Common Stock, par value $.001 per share (the "Class A Common Stock") in a Certificate of Designation dated October 5, 1989, that none of the authorized shares of Class A Common Stock are outstanding and that none of the shares designated as Class A Common Stock will be issued; and RESOLVED, that pursuant to the authority granted expressly to and vested in the Board of Directors of the Corporation by the provisions of the Certificate of Incorporation, as amended, of the Corporation (the "Certificate of Incorporation"), the number of shares designated as Class A Common Stock shall be decreased by 5,000,000 shares to zero and such shares shall resume the status of undesignated Common Shares. 2 IN WITNESS WHEREOF, the Certificate of Elimination has been signed by Robert A. McKinney of the Corporation, as of the 25th day of October, 1996. PROGENICS PHARMACEUTICALS, INC. By: /s/ Robert A. McKinney ---------------------- Name: Robert A. McKinney Title: Vice President and Treasurer 3 CERTIFICATE OF INCREASE OF COMMON STOCK OF PROGENICS PHARMACEUTICALS, INC. --------------- Pursuant to Section 151 of Title 8 of the Delaware Code of 1953 --------------- THE UNDERSIGNED, being the Vice President and Treasurer of Progenics Pharmaceuticals, Inc., a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that, pursuant to the provisions of Section 151 of Title 8 of the Delaware Code of 1953 and the authority conferred upon the Board of Directors by the provisions of the Certificate of Incorporation, as amended, of the Corporation (the "Certificate of Incorporation"), the Board of Directors of the Corporation duly adopted resolutions providing for an increase in the number of shares of authorized Common Shares which are designated as Common Stock from 12,000,000 to 40,000,000. These resolutions are as follows: RESOLVED, that the Board of Directors previously designated 12,000,000 Common Shares as Common Stock, par value $.001 per share (the "Common Stock") pursuant to a Certificate of Amendment of the Corporation's Certificate of Incorporation dated July 17, 1989; and RESOLVED, that pursuant to the authority granted expressly to and vested in the Board of Directors of the Corporation by the provisions of the Certificate of Incorporation, the number of Common Shares designated as Common Stock shall be increased by 28,000,000 shares to a total of 40,000,000 shares. 2 IN WITNESS WHEREOF, the Certificate of Increase has been signed by Robert A. McKinney of the Corporation, as of the 25th day of October, 1996. PROGENICS PHARMACEUTICALS, INC. By: /s/ Robert A. McKinney ---------------------- Name: Robert A. McKinney Title: Vice President and Treasurer 3 EX-4.1 4 STOCK CERTIFICATE Exhibit 4.1 COMMON STOCK COMMON STOCK Graphic Graphic [PROGENICS PHARMACEUTICALS, INC. LOGO] SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP 743187 10 6 INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS CERTIFIES THAT IS THE OWNER OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.0013 PAR VALUE, OF PROGENICS PHARMACEUTICALS, INC. transferable on the books of the Corporation by the holder hereof in parson or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: /s/Robert A. McKinney [PROGENICS PHARMACEUTICALS, INC. /s/Paul A. Maddon CORPORATE TREASURER SEAL CHAIRMAN AND CHIEF EXECUTIVE OFFICER 1986 DELAWARE]
___________________________________________________ AMERICAN BANK NOTE COMPANY NOV 8, 1996 dw 3504 ATLANTIC AVENUE SUITE 12 LONG BEACH, CA 90807 047397fc (310) 989-2333 (FAX) (310) 426-7450 proof /s/illegible NEW ____________ ___________________________________________________ The Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifictions, limitations or restrictions of such preferences and/or rights. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ______________Custodian____________________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act________________________________________ in common (State) UNIF TRF MIN ACT -- _______________Custodian (Until age________) (Cust) _______________under Uniform Transfers (minor) to Minors Act_________________________ (State) Additional abbreviations may also be used though not in the above list. For value received,________________________________________________________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ______________________________________ __________________________________________________________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) __________________________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________ Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________________________________________________________________________________________________________Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated________________________________________ ________________________________________________________________ Notice: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. Signature(s) Guaranteed: ______________________________________________________________ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIBIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15 ___________________________________________________ AMERICAN BANK NOTE COMPANY NOV 11, 1996 dw 3504 ATLANTIC AVENUE SUITE 12 LONG BEACH, CA 90807 047397bk (310) 989-2333 (FAX) (310) 426-7450 proof /s/illegible REV 1 ____________ ___________________________________________________
EX-5.1 5 EXHIBIT 5.1 Exhibit 5.1 November 12, 1996 Progenics Pharmaceuticals, Inc. 777 Old Saw Mill River Road Tarrytown, New York, 10591 Ladies and Gentlemen: We have acted as counsel to Progenics Pharmaceuticals, Inc., a Delaware corporation (the "Company"), in connection with the filing by the Company of a Registration Statement on Form S-1 on the date hereof (the "Registration Statement") relating to the public offering of up to 2,300,000 shares (the "Stock") of the Company's Common Stock, $.0013 par value per share. Based on the foregoing, it is our opinion that: 1. The issuance of the Stock has been lawfully and duly authorized; and 2. When the Stock has been issued, delivered and sold upon the terms stated in the Registration Statement, the Stock will be legally issued, fully paid and nonassessable. We consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the references to this firm on the cover of the Registration Statement and under the heading "Legal Matters" in the Prospectus included in such Registration Statement. Very truly yours, /s/ DEWEY BALLANTINE EX-10.10 6 GP120 SUPPLY AGMT DTD 10/27/95 Exhibit 10.10 gp120 SUPPLY AGREEMENT This Agreement, dated as of the 19th day of July, 1995, is between E. I. DU PONT DE NEMOURS AND COMPANY, a Delaware corporation with a place of business at 549 Albany St., Boston, MA 02118 ("DUPONT"), and PROGENICS PHARMACEUTICALS, INC., a Delaware corporation with its principal place of business at Old Saw Mill River Road, Tarrytown, New York 10591 ("PROGENICS"). 1. PURPOSE AND SCOPE OF THIS AGREEMENT A. During the term hereof, PROGENICS will manufacture and sell to DUPONT, and DUPONT shall purchase from PROGENICS, all of DUPONT's requirements for resale of recombinant HIV-1LAI gp120 (full length) produced in a CHO expression system (the "Product") for DUPONT's marketing, distribution and resale throughout the world. DUPONT will limit sales to customers who intend to use the Product only for research purposes and not for other purposes such as clinical diagnostics or vaccine development. B. DUPONT will resell the Product as packaged by PROGENICS, and DUPONT will not modify the Product or combine it with other components prior to resale. C. PROGENICS has developed Product specifications for the Product which are attached as Exhibit A. All PROGENICS manufacturing of Product will comply with the Product processing standards and specifications. PROGENICS may revise the processing standards and specifications as it deems necessary and will advise DUPONT as far in advance of any changes as is reasonably possible. If any change affects customer use or perceived performance of the Product, PROGENICS will give DUPONT at least 90 days advance notice of such change. D. PROGENICS will package the Product under specifications established by DUPONT with PROGENICS' consent. Both DUPONT's and PROGENICS' names shall appear on the Product label and promotional material, with the statement "Manufactured by Progenics Pharmaceuticals, Inc. for E. I. du Pont de Nemours and Company." All Product labeling and literature shall contain the phrase "For laboratory use only--not for vaccine or diagnostic use." Any labeling changes will require the prior approval of DUPONT. 2. IMPROVED PRODUCTS A. If during the term hereof PROGENICS develops an improved Product and the commercialization of the improved Product reaches the market evaluation stage, PROGENICS will give DUPONT written notice of its plans to commercialize the improved Product and offer to make available, at DUPONT's cost, sample of the improved Product for DUPONT's evaluation, but as testing materials only and not under circumstances that would commit PROGENICS or DUPONT to supply the improved Product or give customers an expectation that the improved Product will be commercialized. DUPONT may elect to add the improved Product to this Agreement at any time, subject to provisions of Paragraph 2-B below. The parties intend that DUPONT will have advance notice of the introduction of improved Product to enable DUPONT to sell remaining inventory of Product that may be replaced by the improved Product. B. PROGENICS may discontinue a Product that has, in PROGENICS' sole opinion, been replaced by an improved Product. If PROGENICS decides to discontinue a Product, PROGENICS will give DUPONT notice at least 90 days in advance of the discontinuance. 3. PRICE AND FORECASTING A. DUPONT will pay PROGENICS for Product as follows: 1. RAW MATERIALS COST DUPONT will pay PROGENICS for the Product raw material cost at [***] An example of Revenue Sharing is attached hereto as Exhibit B for purposes of illustration. DUPONT will provide worldwide Product sales reports each April and October during the term hereof. PROGENICS shall, on the basis of such reports, calculate the revenue sharing for such six-month period and invoice DUPONT for the amount owing. Such invoices shall include documentation of the method of establishing the amount owning. For purposes of revenue sharing. [***] 3. LARGE VOLUME PURCHASERS DUPONT may negotiate special pricing with large volume purchasers, in which event the parties shall negotiate in good faith a discounted raw materials cost. In no event shall the PROGENICS price to DUPONT be less than [***] 2 [***] Confidential Treatment Requested All prices are F.O.B. PROGENICS' plant. PROGENICS assumes all risks and costs of freight, insurance and similar shipping costs. B. The raw material prices stated in Paragraph 3-A may be revised by PROGENICS from time to time during the term hereof on at least 90 days' advance written notice to DUPONT. C. On execution of this Agreement and then on a semi-annual basis during the term of this Agreement, DUPONT will provide to PROGENICS a written non-binding forecast by month for purchases of Product by DUPONT during each month of the succeeding twelve months. 4. ORDERS FOR PRODUCT AND PAYMENT A. At least once each year during the term of this Agreement, DUPONT will issue a Blanket Purchase Order for anticipated Product purchases. DUPONT will then issue releases against the Blanket Purchase Order, on at least a monthly basis, at least 30 days in advance of the requested ship date. Releases will be firm orders. B. PROGENICS will manufacture and ship the Product to DUPONT within ten days of DUPONT's requested ship date. On shipment of an Order, PROGENICS will invoice DUPONT for the raw material cost of the Product. C. DUPONT will pay PROGENICS within 30 days of DUPONT's receipt of a correct PROGENICS invoice. D. DUPONT may request manufacture of Product using its standard purchase order forms or other written means (an "Order"). Purchases under this Agreement will be governed by the provisions of this Agreement, rather than the standard terms and conditions of DUPONT's purchase order form or any PROGENICS form. 5. QUALITY CONTROL, REJECTION OF NONCONFORMING PRODUCTS AND NOTICE OF CUSTOMER COMPLAINTS A. PROGENICS and DUPONT agree to exchange sufficient quality and Product release information to avoid duplication of testing of Product. PROGENICS and DUPONT will mutually agree on the types and amounts of information needed to reach this goal. B. PROGENICS will manufacture Product in accordance with the specification attached in Exhibit A and any amendments to Exhibit A. DUPONT may return any defective or nonconforming Product to PROGENICS. Nonconformance will mean any failure to meet specification or other manufacturing defect that renders the 3 Product unsuitable for sale or use. Risk of loss and expenses incurred in shipping any defective or nonconforming Product to PROGENICS will be borne by PROGENICS with a direct reimbursement to DUPONT or, at DUPONT's option, credit on subsequent purchases. C. DUPONT will notify PROGENICS of any customer complaint about a Product or Improved Product defect within ten days of confirmation of the defect. The notice will specify the Product and type of defect. 6. LIMITED WARRANTY AND LIMITATION OF REMEDIES A. PROGENICS warrants to DUPONT that all Product meets the specifications stated in Exhibit A and is free of defects in Material and manufacture at the time of shipment. If any Product is proven to be defective in material or manufacture, PROGENICS' entire liability and DUPONT's exclusive remedy will be, at PROGENICS' option, either replacement of the Product, or refund of the purchase price paid by DUPONT for the defective Product, within a reasonable time after written notification of the defect and return of the defective Product to PROGENICS. Notices of defect must be received by PROGENICS within 60 days of DUPONT's receipt of notice of a defect from the customer. B. THE WARRANTY STATED IN PARAGRAPH 6-A IS MADE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTY OF MERCHANTABILITY, THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, ANY IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING OR OF PERFORMANCE, CUSTOM OR USAGE OF TRADE, EXCEPT OF TITLE AND AGAINST PATENT INFRINGEMENT. C. PROGENICS has no obligations under this warranty with respect to Products that have been modified or damaged through misuse, abuse, accident, neglect, improper storage or mishandling by DUPONT, or if DUPONT holds Product in storage beyond the natural age of the Product. D. PROGENICS warrants and represents that (i) Product does not constitute the subject matter of any currently pending litigation and PROGENICS is not aware as of the effective date of this Agreement of any litigation contemplated by PROGENICS or any other third party with respect to the subject matter of this Agreement and (ii) sale and use of Product will not infringe any third party patents and that any patent rights necessary for DUPONT and its customers to use and sell Product have been acquired by PROGENICS. No warranty or representation is made with respect to use of Product for purposes other than research or for use in combination with other products. 4 7. LIMITATION OF LIABILITIES: TIME LIMIT FOR FILING ACTION A. Subject to the indemnity provisions set forth below, NEITHER PARTY WILL UNDER ANY CIRCUMSTANCES BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, REVENUE OR BUSINESS) RESULTING FROM OR IN ANY WAY RELATED TO THE PRODUCTS, ANY OF DUPONT'S PURCHASE ORDERS, THIS AGREEMENT, OR, THE TERMINATION OR NONRENEWAL OF THIS AGREEMENT. This limitation applies regardless of whether the damages are sought based on breach of warranty, breach of contract, negligence, strict liability in tort, or any other legal theory. B. Any action for breach of warranty or any other obligation under this Agreement must be commenced within one year after the breach occurs. 8. INDEMNIFICATION A. PROGENICS agrees to indemnify, defend and hold harmless DUPONT from any cost, loss, claim, liability and expense (including reasonable attorney's fees and expenses of litigation) by third parties for property damage, personal injury or death to the extent based on PROGENICS' breach of this Agreement or on PROGENICS' negligence with respect to manufacture of the Product. B. PROGENICS will defend DUPONT at PROGENICS' cost and expense, including reasonable attorney's fees, against any claim or suit for infringement of patent brought against DUPONT to the extent the claim concerns the Product. In addition, PROGENICS will indemnify DUPONT against any judgment awarded in such a suit, provided that DUPONT gives PROGENICS prompt written notice of the claim, the right to maintain sole control of the defense and all negotiations for settlement of the claim or suit, and cooperates with PROGENICS if requested in the defense of the claim of suit. C. DUPONT agrees to indemnify, defend and hold harmless PROGENICS from any cost, loss, claim, liability and expense (including reasonable attorney's fees and expenses of litigation) by third parties for property damage, personal injury or death to the extent based on DUPONT's breach of this Agreement or on DUPONT's negligence with respect to sale or distribution of the Product. D. (i) DUPONT will promptly advise PROGENICS in writing of any claim of infringement and of the commencement against it of any claim for infringement of a patent issued to a third party based upon the sale of any Product. PROGENICS will, if promptly requested in writing to do so, and subject to the other conditions and limitations of this Section, defend any such lawsuit. 5 (ii) PROGENICS shall have the control of the defense of such lawsuit. DUPONT agrees to assist PROGENICS in the defense of such suit or action by providing information and, if need be, fact witnesses. DUPONT shall have the right to be represented by its own attorneys at DUPONT's own expense, which attorneys will act only in an advisory capacity. (iii) If PROGENICS is requested to defend a lawsuit as described above, PROGENICS will defend DUPONT for any damages and costs that may become payable under a final judgment or decree by any court in such lawsuit. (iv) Nothing herein shall authorize PROGENICS to settle any lawsuit without the consent of Licensee, if by such settlement DUPONT is obligated to make any monetary payment, to transfer any property or any interest in property, to become subject to an injunction, or to grant any license or other rights under its intellectual property rights. (v) If DUPONT is unable to dispose of any inventory due to infringement of third party patent, then PROGENICS shall provide DUPONT with a credit equal to the amount of inventory which DUPONT cannot dispose of due to infringement of a third party patent. 9. CONFIDENTIALITY AND PATENT RIGHTS A. DUPONT will treat as confidential information and not disclose to third persons or use for its own benefit or the benefit of others, any of PROGENICS' developments, business knowledge, know-how, discoveries (including PROGENICS' Product formula, processing standards, specification, test procedures and other information concerning the design, composition and method of manufacture of the Product) and other confidential or proprietary information which may be disclosed to DUPONT in writing or confirmed in writing and specifically designated as "confidential". B. The obligation of nondisclosure and non-use set forth above shall not apply to any items which: 1. Are available to the public or become available to the public through no fault of the recipient; 2. are known by the recipient at the time of disclosure, as shown by prior written records; 3. are rightfully received by the recipient from a third party without a duty of nondisclosure; or 4. are developed by or for the recipient independent of the disclosure hereunder, as evidenced by the recipient's written records relating thereto. The obligation of nondisclosure and non-use set forth above shall continue for a period of five years from disclosure, notwithstanding any earlier termination of this Agreement. 6 E. Neither party acquires any intellectual property rights or licenses under this Agreement, or rights to use confidential information disclosed to it hereunder for purposes other than complying with its obligations hereunder. 10. TERM AND TERMINATION A. This Agreement commences on the date first above written and continues unless and until either party gives the other at least 120 days advance written notice of termination. B. Either party may terminate this Agreement if the other party breaches this Agreement by giving 30 days prior written notice, subject, however, to the other party's right to cure the breach within the notice period. C. Even after termination, the provisions of this Agreement still apply to all Product ordered, purchased and manufactured, all obligations created or arising, and all transactions and events occurring before the date of termination. 11. NOTICES A. All notices required by this Agreement must be in writing and sent by certified mail, with return receipt requested, Federal Express or other overnight service. The date of a notice is the date it is received. A facsimile copy of any notice shall be sent in addition to the written notice herein specified. B. DUPONT will send all notices under this Agreement to: Attn.: CEO Progenics Pharmaceuticals, Inc. Old Saw Mill River Road Tarrytown, NY 10591 Telex (914) 789-2817 C. PROGENICS will send all notices under this Agreement to: Attn.: Product Manager DuPont Medical Products 549 Albany Street Boston, MA 02118 Telex (617) 542-8463 D. A party may designate in writing other individuals or locations to receive notice. 7 12. DISPUTE RESOLUTION A. The parties agree to attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiations. 1. Either party may give the other party written notice of any dispute not resolved in the normal course of business. Executives of both parties at levels one step above the project personnel who have previously been involved in the dispute will meet at a mutually acceptable time and place within ten days after delivery of the notice, and thereafter as often as they reasonably deem necessary. The purpose of this meeting is for the executives to exchange relevant information and to attempt to resolve the dispute. 2. If the matter has not been resolved by the executives within 30 days of the notice, or if the parties fail to meet within the ten day period, the dispute will be referred to senior executives of both parties who have authority to settle the dispute to attempt to resolve the dispute. If the matter has not been resolved within 30 days from the referral of the dispute to the senior executives, or if no meeting has taken place within 15 days after referral to the senior executives, either party may initiate mediation or other mutually agreed to alternate dispute resolution mechanism. 3. If the dispute has not been resolved by negotiation as stated above, the parties agree to attempt to settle the dispute by mediation using a third party neutral; provided however, that if the dispute has not been resolved within ninety (90) days of the initial notice of dispute for whatever reason, either party may pursue such judicial relief as it deems appropriate. B. The procedures stated in Paragraph 12-A will be the sole and exclusive procedures for the resolution of disputes between the parties arising out of or relating to this Agreement. A party, however, may seek a preliminary injunction or other provisional judicial relief if in its judgment such action is necessary to avoid irreparable damage or to preserve the status quo. Despite such action the parties will continue to participate in good faith in the procedures specified in this Paragraph 12. C. Any questions, claims, disputes or litigation arising from or related to this Agreement are governed by the law of the state of New York, without regard to the principles of conflicts of law. 7 13. GENERAL TERMS A. No liability shall result from delay in performance, or nonperformance, caused by circumstances beyond the control of the party affected, including without limitation Act of God, fire, flood, war, government action, riot, civil disturbance, accident, inability to obtain labor, material, equipment or transportation. Quantities so affected by force majeure may be eliminated without liability, but the Agreement shall remain otherwise unaffected. B. The relationship of the parties under this Agreement is that of independent contractors. Nothing in this Agreement authorizes either party to act for the other as an agent. C. Neither party may assign any of its rights or delegate or subcontract any of its duties under this Agreement without first getting the other party's permission in writing. Notwithstanding the foregoing, assignment and delegation may be made by either party hereto without such prior permission in connection with the transfer by such party of the business to which this Agreement relates. D. This Agreement represents the entire agreement of the parties, and supersedes any and all prior agreements, conversations and understandings between the parties hereto with respect to the subject matter hereof. No modification of its provisions shall be valid unless it is in writing and signed by both parties. The provisions of this Agreement are severable. If any provision herein violates or anywhere contravenes any applicable law, it shall not be deemed a part of this Agreement. C. This Agreement shall be interpreted in accordance with the laws of New York. ACCEPTED AND AGREED TO: PROGENICS PHARMACEUTICALS, INC. E.I. DU PONT DE NEMOURS AND COMPANY By: Paul J. Maddon By: Janet J. Seal - --------------------------- ---------------------------- Title: Chairman & CEO Title: Non Business District 8 PROGENICS Sheet 1 [***] Page 1 [***] Confidential Treatment Requested PROGENICS [LOGO] [LETTERHEAD] PRODUCT SPECIFICATION SHEET [***] *** Confidential Treatment Requested [LOGO] [LETTERHEAD] E.I. DU PONT DE NEMOURS & CO. (INC.) MEDICAL PRODUCTS DEPARTMENT Reference is made to the Agreement entered into the 19th day of July, 1995, as amended between E.I. DuPont de Nemours and Company (DuPont) and Progenics Pharmaceuticals, Inc. (Progenics) relative to the purchase of HIV-1 (LAI) gp120 by DuPont. It is hereby mutually agreed to further amend the aforesaid Agreement in the following manner effective August 24, 1995. This amendment is being made to update specifications, extending stability from 6 months at -80DEG. C to 12 months from date of purification/repurification. Hence a new Product specification Exhibit A is attached, dated and effective August, 1995. This amendment is also being made to update the "Orders for Product and Payment" clause, to include Progenics' agreement to supply DuPont Product with at least nine (9) months shelf life upon receipt by DuPont. All other terms and conditions of the current Agreement, except as modified in the above manner, shall continue in full force and effect. Please indicate your acceptance of this amendment by signing both copies in the space provided below and return the copy marked "DuPont M&L Copy" to Robert Hand, DuPont Merck Pharmaceutical Co., Purchasing Department, 331 Treble Cove Road, Billerica, MA 01862. Very truly yours, PROGENICS PHARMACEUTICALS, INC. E.I. DUPONT de NEMOURS & CO. BY: /s/ Paul J. Maddon BY: /s/ R.M. Hand - -------------------------------- ---------------------------- TITLE: Chief Executive Officer TITLE: Sr. Purchasing Agent - -------------------------------- ---------------------------- DATE: October 27, 1995 DATE: September 10, 1995 - -------------------------------- ---------------------------- Attach. MATERIALS SPECIFICATION SHEET (PURCHASED MATERIALS) [***] NEA201-0995 SUPERCEDES: 081895 *** Confidential Treatment Requested EX-10.11 7 SCD4 SUPPLY AGMT DTD 6/27/95 Exhibit 10.11 [LOGO] E.I. DU PONT DE NEMOURS & CO. (INC.) MEDICAL PRODUCTS DEPARTMENT This document, when properly executed, shall constitute a Supply Agreement between Progenics Pharmaceuticals, Inc. with offices at Old Saw Mill River Road, Tarrytown, NY, (Progenics) and E.I. DuPont de Nemours and Company (DuPont), with offices at 549 Albany Street, Boston, MA. 1. PERIOD OF AGREEMENT: May 1, 1995 through April 30, 1998. After the original term, this Agreement will renew automatically for successive 12 month periods unless either party gives notice to the other of its intention not to renew at least 120 days prior to the expiration of the then current term. 2. MATERIAL: Recombinant Soluble sCD4, referred to hereafter as sCD4 or Product. 3. MATERIAL SPECIFICATIONS: Material shall be suppled in the form and manner, and must conform in all material respects to the specifications set out in Attachment A. Alterations to these specifications require the express written consent of each party. 4. INABILITY TO SUPPLY: Progenics recognizes the importance of its obligation to meet DuPont's material requirements in a timely and reliable manner. To enable such continuity of supply, Progenics will use its best efforts to arrange for sCD4 to be manufactured on Progenics' behalf if some unusual event causes Progenics' inability to supply. If at any time, Progenics for a continuous period of ten (10) days due to a force majeure event, or non-force majeure event, shall be unable or unwilling to deliver any Product subject to this Agreement and attachments hereto, then Progenics shall notify DuPont of the situation and use its best efforts to arrange for sCD4 to be manufactured to DuPont's material requirements hereunder. In the event that the failure to deliver sCD4 shall be as a result of the fault of Progenics, then Progenics shall bear all costs necessary to cause the sCD4 to be manufactured by another party ("Alternate Manufacturing Cost"). MEDICAL PRODUCTS DEPARTMENT 549 Albany Street, Boston, Massachusetts 02118 Telephone 617-482-9595 Fax (617) 542-8468 2 INABILITY TO SUPPLY (Cont'd): In the event that the failure to deliver sCD4 shall be as a result of the fault of DuPont, then DuPont shall bear all Alternate Manufacturing Costs. In all other events, Progenics shall arrange for the alternate manufacturer and each party shall bear its own costs. If Progenics corrects the cause for alternate manufacture, then Progenics may resume production of affected Product at any time. 5. PRICE [***] 6. PAYMENT TERMS: Net 30 days, following the receipt of a properly prepared and correct invoice. 7. QUANTITY: DuPont commits to purchase 100% of its purchase requirements for sCD4 during the term of this order from Progenics, and Progenics agrees to supply 100% of DuPont's purchase requirements. 8. DELIVERY TERMS: F.O.B. Destination, freight pre-paid and added. 9. RELEASE: DuPont will advise Progenics of its purchase requirements at least quarterly, or as may otherwise suit the parties by agreement. Progenics shall ship product as required by DuPont according to a mutually agreed upon schedule. Progenics shall advise DuPont at its earliest opportunity if it is unable to ship Product at an agreed upon time. Progenics will, on a best effort basis, attempt to fulfill any unscheduled, or spot requirements of DuPont. 10. LABELLING AND SHIPPING: Progenics' name and logo will appear on the main kit label (not on components) on manual and on promotional literature, along with DuPont's. All labels to be approved by both parties. Product will be shipped Federal Express Priority I on dry ice. In parallel, Progenics will perform stability studies on lyophilized product. Shelf life of the sCD4 will be no less than 6 months upon receipt by DuPont. [***] Confidential Treatment Requested 3 11. CONFIDENTIALITY: The parties hereto shall keep confidential all confidential technical information, supplied by one party to the other, shall not disclose or make known to any individual, firm, or corporation, except when authorized in writing to do so by the other party, and shall not use such information for any purpose other than the performance of the obligations provided in this Agreement. The provisions of this clause shall remain binding for five (5) years after the termination of this Agreement. Each party shall use the same degree of care to avoid disclosure of confidential technical information as the party employs with similar information of its own which it does not desire to publish or disclose. Any confidential information shared between the parties must be identified and labeled in writing as confidential. The confidentiality of and information disclosed verbally must be identified in writing as confidential no more than 14 days after disclosure. This obligation shall not apply to information and/or documents which: A) Are or come within the public domain otherwise than as a consequence of a breach of the obligations hereunder; B) Are known to the receiving party prior to disclosure by the other party as shown by the receiving party's records; C) Are lawfully disclosed to the receiving party by third parties; or D) Are subsequently independently developed by the receiving party through no reference whatsoever to disclosure hereunder. 12. WARRANTY: Progenics warrants and guarantees that DuPont will not be subject to any patent infringement with respect to sDC4 supplied by Progenics as set forth in paragraph 14. In addition, Progenics warrants and represents that it shall convey good and valid title to material(s) supplied 4 WARRANTY (Cont'd): hereunder and that material(s) supplied hereunder shall meet all of the specifications set forth in Attachment A and shall be free from defects except those caused by misuse or mishandling occurring after such delivery. Progenics shall notify DuPont prior to making any formulation changes in the Product. Progenics further warrants that packaged product will meet the warranty of merchantability and fitness for intended use. In the event of a recall of Product, Progenics agrees to reimburse DuPont for all reasonable costs incurred in the recall. 13. USE OF MATERIAL: Progenics as a co-exclusive licensee to a family of patents owned by Columbia University covering the CD4 gene and protein, will supply DuPont with quantities of sCD4 necessary to meet market demands. DuPont shall be entitled to use such sCD4 supplied by Progenics for the manufacturing of drug screening kits to be sold by DuPont to third parties. 14. PATENTS: [***] and all divisional, continuation, continuation-in-part applications thereof, any patent granted on any aforesaid patent application, and any extension, reissue, or reexamination of any patents that may issue thereon as well as any foreign counterparts thereof. [***] Progenics shall defend any suit or proceeding brought against DuPont based on a claim that materials or services purchased hereunder, or any part thereof, furnished by Progenics under this Agreement constitutes an infringement of any patent, copyright, or other proprietary right of any third party provided Progenics is notified promptly in writing and given authority, information, and assistance by DuPont to defend such suits or proceedings. *** Confidential Treatment Requested 5 PATENTS (Cont'd): Progenics shall assume the responsibility to pay all costs, to include such reasonable attorney fees of defending such suits or proceeding and any damages that may be awarded therein against DuPont, to settle any such claim on such terms and conditions it deems advisable. In case the materials purchased hereunder, or any part thereof, is in such suit or proceeding held to constitute infringement or any patent, copyright, or other proprietary right of any third party, and the use thereof is enjoined, or the settlement made requires the use of services or materials purchased hereunder to be discontinued, Progenics shall, at its own expense, and its option, either procure for DuPont the right to continue using such materials or services, replace the same with non-infringing materials which conform to the available specifications, modify such materials or services in a manner acceptable to DuPont so it becomes non-infringing, or terminate this Agreement. 15. RELATIONSHIP OF THE PARTIES: Nothing contained herein shall be construed to empower either party to act as agent for the other. The parties agree that each of them shall, in relation to its obligations hereunder, be acting as an independent contractor. RELATIONSHIP OF THE PARTIES (Cont'd) Notwithstanding, neither party shall, during the period of this Agreement, enter into discussions nor create an alternative arrangement with any third party concerning the subject matter herein, without first advising the other party of its intent. 16. ASSIGNMENT AND SUBCONTRACTING: Neither party shall assign or transfer this Agreement, in whole or in part, or any interest arising under this Agreement or subcontract any work hereunder without the prior written consent of the other party. Subject to the provisions of this clause, this Agreement shall insure the benefit of and be binding upon the successors and assigns of the parties. 17. DOCUMENTS/COMMUNICATIONS: Purchase Order Number(s), Line Number(s), and Release Number(s) are to appear on all paper work such as packing lists, invoices and correspondence. Also, Certificates of Analysis (C.O.A.) shall be submitted to DuPont by Progenics for each lot shipped by Progenics. 6 18. NOTICES: Any notices to be given hereunder shall be given in writing and shall be deemed to have been validly given when deposited in the United States mail, properly stamped and addressed to DuPont or Progenics, whichever the case may be, at the addresses shown below or at such other address as may from time to time be designated by such party in a notice to the other party. Progenics: Progenics Pharmaceutical, Inc. Old Saw Mill River Road Tarrytown, NY 10591 Attn: Joel Sendek DuPont: E.I. DuPont de Nemours and Company Medical Products Department 549 Albany Street Boston, MA 02118 Attn: Judith Lima-Ziegler Materials/Inventory Supervisor 19. NONDISCRIMINATION: Progenics warrants that it has complied with all applicable laws, rules, orders and regulations of governmental authority covering the production, sale and delivery of the Product specified herein, including, but not limited to, Executive Order 11246, and the rules and regulations promulgated thereunder, the Rehabilitation Act of 1973 and the Vietnam Era Veterans Readjustment Act of 1974. Further, Progenics warrants that in the performance of the services hereunder, it will comply with all applicable provisions of the Fair Labor Standards Act of 1938, as amended. 20. AUDITS: Progenics shall permit no less frequently than once per year, and upon reasonable notice by DuPont, inspections and audits by DuPont during regular business hours of all records and aspects of sCD4 manufacture, testing, packaging, labelling and shipping. 21. CANCELLATION: This Agreement may be cancelled by either party upon 120 days written notice to the other party. 7 22. ENTIRETY: This Agreement, together with the Attachments specifically referenced and attached hereto, embodies the entire understanding between DuPont and Progenics, and there are no contracts, warranties, or representations, oral or written, express or implied, with reference to the subject matter hereof which are not merged herein. Except as otherwise specifically stated, no modification hereto shall be of any force or effect unless reduced to writing and signed by both parties and expressly referred to as being modifications of this Agreement. AGREED & APPROVED: FOR PROGENICS: FOR DUPONT: Name: Paul J. Maddon, M.D., Ph.D. Name: Robert M. Hand Title: CEO and Scientific Dir. Title: Sr. Purchasing Agent Signature: /s/ Paul J. Maddon Signature: /s/ Robert M. Hand Date: June 27, 1995 Date: June 8, 1995 EX-10.12 8 SUPPLY AGMT DTD 2/8/96 Exhibit 10.12 This document, when properly executed, shall constitute a Supply Agreement between Progenics Pharmaceuticals, Inc. with offices at 777 Old Saw Mill River Road, Tarrytown, NY, 10591 ("Progenics") and Intracel Corporation, with offices at 359 Allston Street, Cambridge, MA 02139 ("Intracel"). 1. PERIOD OF AGREEMENT: February 1, 1996 through January 31, 1999. After the original term, this Agreement will renew automatically for successive 12 month periods unless either party gives notice to the other of its intention not to renew at least 120 days prior to the expiration of the then current term. 2. MATERIAL: Recombinant HIV-1LAI gp120 (full-length) and recombinant soluble human CD4 produced in a Chinese Hamster Ovary ("CHO") expression system referred to hereafter as "gp120" and "CD4" or together as "Product" (see attached Product Specification Sheets). 3. MATERIAL SPECIFICATIONS: Material shall be supplied in the form and manner, and must conform in all material respects to the specifications set out in the attached Product Specification Sheets. Alterations to these specifications require the express written consent of each party. 4. PRICE: [***] 5. MINIMUM PURCHASE: 10 milligrams of gp120 or CD4. 6. PAYMENT TERMS: Net 30 days, following the receipt of a properly prepared and correct invoice. 7. DELIVERY TERMS: F.O.B. Tarrytown, NY. 8. RELEASES: Intracel will advise Progenics of its purchase requirements at least quarterly, or as may otherwise suit the parties by agreement. Progenics shall ship Product as required by Intracel according to a mutually agreed upon schedule. Progenics shall advise Intracel at its earliest opportunity if it is unable to ship Product at an agreed upon time. Progenics will, on a best effort basis, attempt to fulfill any unscheduled, or spot requirements of Intracel. [***] Confidential Treatment Requested 9. LABELING AND PACKAGING: Both Intracel's and Progenics' names shall appear on the main product label, along with the following statement: "Manufactured by Progenics Pharmaceuticals, Inc." Both Intracel's and Progenics' names and logos shall appear on promotional literature, along with the following statement: "Manufactured by Progenics Pharmaceuticals, Inc." All labels to be approved by both parties. All product labeling and literature shall contain the phrase "For Laboratory Use." Progenics will package product as 100 micrograms per vial, or in other package sizes as mutually agreed upon by both parties. Product will be shipped on dry ice. Shelf life of the Product will be no less than six (6) months upon receipt by Intracel. 10. CONFIDENTIALITY: The parties hereto shall keep confidential all confidential technical information, shall not disclose or make known to any individual, firm, or corporation, except when authorized in writing to do so by the other party, and shall not use such information for any purpose other than the performance of the obligations provided in this Agreement. The provisions of this clause shall remain binding for five (5) years after the termination of this agreement. Each party shall use the same degree of care to avoid disclosure of confidential technical information as the party employs with similar information of its own which it does not desire to publish or disclose. Any confidential information shared between the parties must be identified and labeled in writing as confidential. The confidentiality of and information disclosed verbally must be identified in writing as confidential no more than 14 days after disclosure. This obligation shall not apply to information and/or documents which: A) Are or come within the public domain otherwise than as a consequence of a breach of the obligations hereunder; B) Are known to the receiving party prior to disclosure by the other party as shown by the receiving party's records; C) Are lawfully disclosed to the receiving party by third parties; or D) Are subsequently independently developed by the receiving party through no reference whatsoever to disclosure hereunder. 11. WARRANTY: Progenics warrants the packaged product hereunder shall meet the specifications set forth in the attached Product Specification Sheets and shall be free from defects except those caused by misuse or mishandling occurring after such delivery. Progenics agrees to notify Intracel prior to making any formulation changes in the Product. Progenics further warrants that packaged product will meet the warranty of merchantability and fitness for intended use. In the event of a recall of Product, Progenics agrees to reimburse Intracel for all reasonable costs incurred in the recall. 12. USE OF MATERIAL: Progenics shall supply Intracel sCD4 and gp120 to be sold by Intracel to third parties. The material will be used only for research purposes and not for other uses such as clinical diagnostics or therapeutic development. This Agreement is limited to resale of sCD4 and gp120 as packaged at Progenics and does not allow Intracel to modify the Product or combine the Product with other components, with the exception of labeling Product with biotin, HRP, or FITC, which is permitted. 13. RELATIONSHIP OF THE PARTIES: Nothing contained herein shall be construed to empower either party to act as agent for the other. The parties agree that each of them shall, in relation to its obligations hereunder, be acting as an independent contractor. 14. CANCELLATION: This Agreement may be canceled by either party upon 120 days written notice to the other party. 15. ENTIRETY: This Agreement, together with the Attachments specifically referenced and attached hereto, embodies the entire understanding between Intracel and Progenics, and there are no contracts, warranties, or representations, oral or written, express or implied, with reference to the subject matter hereof which are not merged herein. Except as otherwise specifically stated, no modification hereto shall be of any force or effect unless reduced to writing and signed by both parties and expressly referred to as being modifications of this Agreement. AGREED & APPROVED: For Progenics: For Intracel: ------------- ------------- Name: Paul J. Maddon, M.D., Ph.D. Name: Cheryl G. Cataldo Title: Chairman & CEO Title: Controller Signature: /s/ Paul J. Maddon Signature: /s/ Cheryl G. Cataldo Date: February 7, 1996 Date: February 8, 1996 EX-10.13 9 LICENSE AGMT DTD 11/17/94 EXHIBIT 10.13 License Agreement Between Sloan-Kettering Institute for Cancer Research and Progenics Pharmaceuticals, Inc. THIS LICENSE AGREEMENT, effective November 17, 1994, is entered into by Progenics Pharmaceuticals, Inc. a corporation of the State of Delaware, having its principal place of business at 777 Old Saw Mill River Road, Tarrytown, New York 10591 (herein called LICENSEE), and Sloan-Kettering Institute for Cancer Research, a not-for-profit membership corporation of the State of New York, having its principal place of business at 1275 York Avenue, New York, New York 10021 (herein called LICENSOR). I. BACKGROUND OF AGREEMENT 1.00 LICENSOR represents that it has certain technology, patent applications and technical information pertaining to cancer vaccines with respect to which it is prepared to grant an exclusive license to LICENSEE. 1.01 LICENSEE wishes to acquire an exclusive license under selected patents and technical information of LICENSOR for purposes of developing and commercializing vaccines for the treatment and prevention of human neoplastic disease worldwide. 1.02 LICENSOR acknowledges that commercialization of LICENSED PRODUCTS may require LICENSEE to obtain additional licenses and technologies from others. II. DEFINITIONS As used herein, the following terms shall have the meanings set forth below: 2.00 DEFINITIONS EXHIBIT means the Exhibit A attached to this LICENSE AGREEMENT which contains additional defined terms. 2.01 EFFECTIVE DATE means November 17, 1994 which is the date upon which this LICENSE AGREEMENT becomes effective. 2.02 LICENSED PATENT(s) shall mean a) the following patent applications and patents relating to ganglioside vaccines, intermediates or methods of producing them, or methods of, or compositions using, them which are owned by LICENSOR [***] (i) U.S. Patent Application No. 08/009,268 (Filed January 22, 1993) all patents issuing therefrom and all divisions, continuations, reissues, substitutes, and extensions thereof and the foreign equivalents thereof; [***] (ii) all patents and patent applications, whether filed before or after the EFFECTIVE DATE of this Agreement, which claim priority under 35 U.S.C. Sec. 119 or the benefit of the filing date under 35 U.S.C. Sec. 120 of the patent applications and patents of subparagraph (i), but only to the extent of subject matter in such applications and patents for which priority or benefit is claimed. [***] b) any developments related to or arising out of the subject matter described in a) above which are dominated by the patent applications or patents described in a) above or [***] 2.03 LICENSED TERRITORY means worldwide. 2.04 LICENSED FIELD means, and is limited to, the practice of the LICENSED PATENTS and TECHNICAL INFORMATION for a) the treatment or prevention of neoplastic human disease with any of the following: [***] -2- *** Confidential Treatment Requested [***] [***] b) the treatment or prevention of human cancer using other ganglioside vaccines [***] 2.05 LICENSED PRODUCT(S) means any and all products which fall within the LICENSED FIELD and which would infringe the claims of LICENSED PATENT(S) but for this LICENSE AGREEMENT or are produced or used using a process or method that would infringe but for this LICENSE AGREEMENT a claim of a LICENSED PATENT or were developed using TECHNICAL INFORMATION. 2.06 LICENSED TECHNOLOGY means the LICENSED PATENT(S) and the TECHNICAL INFORMATION. 2.07 LICENSE AGREEMENT means the license agreement, defined by the document in which this paragraph appears. This LICENSE AGREEMENT is between Sloan-Kettering Institute for Cancer Research, as LICENSOR, and Progenics Pharmaceuticals, Inc., as LICENSEE. Also included in this LICENSE AGREEMENT are all Exhibits attached hereto and all amendments which may be made thereto. 2.08 TECHNICAL INFORMATION means unpublished research and development information, unpatented inventions, know-how, trade secrets, and technical data in the possession of LICENSOR at the effective date of this LICENSE AGREEMENT which are needed to produce or gain government approvals to market LICENSED PRODUCT(S) and which LICENSOR has the right to and will provide to LICENSEE upon request. However, TECHNICAL INFORMATION does not include patient names. Information and materials shall no longer be considered to be TECHNICAL INFORMATION if such information or materials cease to be CONFIDENTIAL INFORMATION. -3- [***] Confidential Treatment Requested III. LICENSE GRANT 3.00 LICENSOR hereby grants to LICENSEE to the extent of the LICENSED FIELD and LICENSED TERRITORY, a license under LICENSED PATENTS and TECHNICAL INFORMATION to make, have made, use, sell, have sold and develop LICENSED PRODUCTS. No license under LICENSED PATENTS and TECHNICAL INFORMATION is granted, and no license should be implied, with respect to activities of LICENSEE outside the LICENSED FIELD. 3.01 The license granted to LICENSED PATENTS pursuant to paragraph 3.00 hereof shall be exclusive, with the right to grant sublicenses, subject to the provisions in Article VI of this LICENSE AGREEMENT. The license granted to TECHNICAL INFORMATION pursuant to paragraph 3.00 shall be exclusive for the LICENSED FIELD with the right to grant sublicenses, subject to the provisions in Article VI of this LICENSE AGREEMENT. 3.02 The license granted in Article III shall be granted to AFFILIATES of LICENSEE upon receipt of written notification to LICENSOR. On the EFFECTIVE DATE, the license is granted to LICENSEE's AFFILIATE Active Biotherapies, Inc., 777 Old Saw Mill River Road, Tarrytown, New York 10591. 3.03 Without limiting the foregoing license grants, LICENSOR agrees that this grant will extend to and authorize the manufacture, sale, lease or other transfer of LICENSED PRODUCTS, LICENSED PATENTS and TECHNICAL INFORMATION through an AFFILIATE or a DISTRIBUTOR and shall authorize END USERS' use of LICENSED PRODUCTS, LICENSED PATENTS AND TECHNICAL INFORMATION transferred by LICENSOR to LICENSEE's AFFILIATE or DISTRIBUTORS. 3.04 All rights granted in this LICENSE AGREEMENT are expressly granted subject to the rights of the GOVERNMENT pursuant to 35 U.S.C. Sections 200 ET SEQ., as amended, and the implementing regulations, and such rights are specifically reserved by this LICENSE AGREEMENT to the GOVERNMENT. If LICENSOR is required to grant licenses pursuant to the statutory and regulatory requirements referred to in this paragraph, or if the license granted to LICENSEE under this LICENSE AGREEMENT is otherwise modified or limited by the GOVERNMENT pursuant to such requirements, LICENSOR and LICENSEE shall negotiate in good faith -4- a reduction of the license fees and royalties payable hereunder and such other amendments of this LICENSE AGREEMENT as may be appropriate under the circumstances. 3.05 Notwithstanding the exclusive field license granted herein, LICENSOR specifically reserves the rights to manufacture, or use the LICENSED PATENTS, LICENSED PRODUCTS and TECHNICAL INFORMATION for its own internal purposes, including continuing research, development, testing, clinical use and all other internal uses. LICENSOR may have the LICENSED PRODUCTS manufactured by third parties solely for LICENSOR's internal use provided any such third party agrees in writing (a) not to use the TECHNICAL INFORMATION except for such purpose and (b) not to disclose the TECHNICAL INFORMATION to others. LICENSOR also reserves the right to permit other entities or individuals to use the LICENSED PATENTS, LICENSED PRODUCTS, and TECHNICAL INFORMATION solely for academic research purposes provided such other entities or individuals agree in writing (a) to use the same only for academic research purposes, (b) not to provide the same to other entities or individuals and (c) not to disclose the TECHNICAL INFORMATION to others. 3.06 Provided LICENSOR's AFFILIATE(S) is capable and accepts, LICENSEE hereby grants to LICENSOR's AFFILIATE(S) a right of first refusal to function as a site at which the clinical tests or trials of any LICENSED PRODUCT(S) are performed. Such right of first refusal shall mean that LICENSEE shall request a proposal from LICENSOR setting forth the procedures which LICENSOR would follow in the tests and the associated costs. If LICENSEE decides not to accept LICENSOR's proposal then LICENSEE may only contract with a clinical test site(s) whose proposal is more favorable (taken as a whole) to LICENSEE than that proposed by LICENSOR. IV. LICENSE FEES AND ROYALTY 4.00 LICENSEE shall, as a license fee, pay to LICENSOR the sum [***] -5- [***] Confidential Treatment Requested [***] 4.01 LICENSEE shall pay to LICENSOR a royalty of [***] 4.02 If at the time of the sale of a LICENSED PRODUCT a patent application is still pending and no valid claims have issued which such LICENSED PRODUCT would infringe then the royalty rate for such LICENSED PRODUCT shall be [***] Once such claim(s) issue the royalty rate for a LICENSED PRODUCT covered by such claim shall be as set forth in paragraph 4.01. 4.03 In the event that a LICENSED PATENT is abandoned or expires or if all of its claims are finally declared invalid by a non-appealable decision of a court of competent jurisdiction through no fault or cause of LICENSEE, [***] V. MINIMUM ROYALTIES AND DEVELOPMENT EFFORTS 5.00 LICENSEE shall pay to LICENSOR royalties and SUBLICENSE ROYALTIES as stated in Articles IV and VI, but in no event shall the sum of royalties and SUBLICENSE ROYALTIES for a calendar year for practice of the LICENSED PATENTS and or use of TECHNICAL INFORMATION in the LICENSED FIELD and LICENSED TERRITORY be less than the following minimum royalties during each of the calendar years indicated: Minimum Royalty, Calendar Year U.S. $ per Calendar Year* 1995 [***] 1996 1997 1998 1999 2000 -6- [***] Confidential Treatment Requested 2001 [***] 2002 and each calendar year thereafter during the term of this LICENSE AGREEMENT - ------------------------------ * Net to LICENSOR after taxes, if any, withheld at the source. [***] 5.01 LICENSEE shall use its best reasonable efforts to develop and market LICENSED PRODUCT(S) for commercial sale and distribution throughout the LICENSED TERRITORY, and to such end, LICENSEE, its AFFILIATES or its SUBLICENSEES shall achieve the following objectives within the designated years following the date of this LICENSE AGREEMENT in accordance with the following schedule: [***] Failure to achieve these objectives shall result in LICENSOR having the option to terminate the license granted hereunder, subject to LICENSEE's right to achieve the missed objective within -7- [***] Confidential Treatment Requested sixty (60) days of receipt of written notice of termination from LICENSOR. LICENSOR shall not unreasonably withhold its consent to any revision in the preceding schedule requested in writing by LICENSEE and supported by evidence of technical difficulties or delays in the clinical studies or regulatory process that could not have been reasonably avoided. Notwithstanding the foregoing, LICENSOR shall not have a right to terminate the license for the failure of LICENSEE to meet a goal if such failure is a result of (i) causes beyond LICENSEE's direct control; (ii) LICENSOR's failure to meet its obligations hereunder; (iii) infringement of third party patents; or (iv) actions or inactions of a federal or state agency whose approval is required for commercial sales. At intervals no longer than every twelve months LICENSEE shall report in writing to LICENSOR's Office of Industrial Affairs on progress made toward the objectives set forth above. LICENSED PRODUCT(s) used, sold, leased, or transferred within the United States shall be manufactured substantially in the United States. LICENSOR and LICENSEE acknowledge that each may be required to disclose to the other information which is CONFIDENTIAL INFORMATION. Each agrees to take reasonable precautions to protect such CONFIDENTIAL INFORMATION and preserve its confidential, proprietary, or trade secret status. Each shall use at least the same degree of care and precaution as is customarily used to protect its own CONFIDENTIAL INFORMATION. 5.02 LICENSOR may, by written notice to LICENSEE, terminate this LICENSE AGREEMENT during any February subsequent to the year 2002, if LICENSEE has not either (a) practiced the LICENSED PATENTS during the calendar year that precedes each such February to the extent of generating earned royalties or SUBLICENSE ROYALTIES as provided by Articles IV and VI of this LICENSE AGREEMENT in the amount of [***] -8- [***] Confidential Treatment Requested VI. SUBLICENSING 6.00 The license rights granted under this LICENSE AGREEMENT shall specifically include the right for LICENSEE to grant sublicenses. LICENSEE shall supply LICENSOR with an English language copy of the executed agreement within thirty (30) days after the execution of the sublicense agreement. 6.01 Sublicenses shall be transferable only from LICENSEE to an AFFILIATE of LICENSEE or in connection with a MAJOR CORPORATE TRANSACTION. 6.02 All sublicenses granted by LICENSEE shall expressly provide that Articles II (DEFINITIONS), III (LICENSE GRANT), IX (TERMINATION), X (LITIGATION), XI (RECORDS), XII, (NONASSIGNABILITY), XIV (NONUSE OF LICENSOR's NAME, etc.), XVI (MARKING) AND XVIII (EXPORTATION OF TECHNICAL INFORMATION) of this LICENSE AGREEMENT shall be binding upon the SUBLICENSEE, as if SUBLICENSEE were a party to this LICENSE AGREEMENT. 6.03 Each sublicense agreement shall include a provision stating that the sublicense agreement shall automatically be modified or terminated, in whole or in part, upon any modification or termination, in whole or in part, of the LICENSE AGREEMENT if, and to the extent, such modification or amendment to the LICENSE AGREEMENT is relevant to and affects the terms of the sublicense agreement. Such modification or termination of the sublicense agreement shall be consistent with and reflect the modifications or termination of the LICENSE AGREEMENT. Upon termination of this LICENSE AGREEMENT for any reason, any sublicensee not then in default shall have the right to seek a license from LICENSOR. LICENSOR agrees to negotiate such licenses in good faith under reasonable terms and conditions. [***] 6.04 LICENSEE shall pay to LICENSOR a portion ("SUBLICENSE ROYALTIES") of all accrued sublicense issue fees and sublicense royalties payable to LICENSEE from its SUBLICENSEES under this LICENSE AGREEMENT ("SUBLICENSE INCOME") from the Effective Date and during the term of the LICENSED PATENTS as follows: [***] -9- *** Confidential Treatment Requested [***] 6.05 In the event that SUBLICENSE INCOME becomes accrued and payable at a time when no valid claims of the LICENSED PATENTS have issued which would be infringed by the manufacture, sale or use of a LICENSED PRODUCT, then the SUBLICENSE ROYALTIES specified in Paragraph 6.04 shall be reduced as follows: [***] 6.06 In the event that a LICENSED PATENT is abandoned or expires or if all of its claims are finally declared invalid by a non-appealable decision of a court of competent jurisdiction through no fault or cause of LICENSEE, [***] 6.07 The SUBLICENSE ROYALTIES shall be paid by LICENSEE to LICENSOR in conjunction with LICENSEE's earned royalty payments and shall be accompanied by written reports, as required with the LICENSEE's earned royalty payments, sufficient to allow LICENSOR to audit the activities of each SUBLICENSEE. 6.08 The minimum royalty for a year will be creditable against SUBLICENSE ROYALTIES to the extent and as provided in paragraph 5.00. VII. PAYMENTS AND REPORTS, LICENSED PATENT EXPENSES 7.00 Not later than the last day of each November, March, May and August, LICENSEE shall furnish to LICENSOR a written -10- [***] Confidential Treatment Requested statement in such detail as LICENSOR may reasonably require of all amounts due pursuant to Articles IV and VI for the previous calendar quarter ended the last days of the preceding September, December, March and June, respectively, and shall pay to LICENSOR all amounts due to LICENSOR. In the event that the amounts due at the end of any calendar year do not equal the minimum royalties specified in paragraph 5.00 for said calendar year, LICENSEE shall pay to LICENSOR no later than the last day of March of the following calendar year, the amount required to satisfy the minimum royalty obligation for said calendar year. Such amounts are due at the dates the statements are due. If no amount is accrued during any calendar quarter, a written statement to that effect shall be furnished. 7.01 Payments provided for in this LICENSE AGREEMENT, when overdue, shall bear interest at a rate per annum equal to one percent (1%) in excess of the "PRIME RATE" published by "The Wall Street Journal" at the time such payment is due, and for the time period until payment is received by LICENSOR. 7.02 If this LICENSE AGREEMENT is for any reason terminated before all of the payments herein provided for have been made (including minimum royalties for the year in which the agreement is terminated), LICENSEE shall promptly submit a terminal report and pay to LICENSOR any remaining unpaid balance as of the termination date even though the due date as above provided has not been reached. 7.03 LICENSEE shall reimburse LICENSOR for all reasonable expenses incurred by LICENSOR after the EFFECTIVE DATE of this LICENSE AGREEMENT in connection with the filing, prosecution and maintenance of LICENSED PATENTS in the United States. At LICENSOR's option, LICENSOR's patent counsel may bill LICENSEE directly for such expenses and LICENSEE shall remit payment for any undisputed amounts directly and promptly (within 30 days) to LICENSOR's patent counsel. If the license should become non- exclusive then (a) LICENSEE shall only be responsible for its pro rata share of any patent prosecution expenses and fees incurred after the license becomes non-exclusive and (b) any person becoming a licensee thereafter will be required to pay a pro rata share of such expenses and fees and LICENSEE shall be entitled to the excess if any of any expenses and fees paid over its pro rata -11- portion assuming that the new licensee had become a licensee at the time that the license became non-exclusive. 7.04 LICENSOR shall apply for, seek prompt issuance of, and maintain during the term of this LICENSE AGREEMENT the LICENSED PATENTS in the United States. LICENSOR will consult with LICENSEE before seeking any foreign patent protection. If LICENSEE wants LICENSOR to seek such protection, LICENSOR shall apply for that protection and LICENSEE shall reimburse LICENSOR for all reasonable fees and costs as provided. The prosecution, filing and maintenance of all patents and applications comprising the LICENSED PATENTS shall be the primary responsibility of LICENSOR. LICENSOR shall keep LICENSEE fully informed concerning LICENSED PATENTS, and shall promptly provide to LICENSEE copies of all correspondence relating to LICENSED PATENTS from the patent offices in those countries in which patents are filed as well as copies of all responses thereto. So long as LICENSEE timely provides comments to LICENSOR concerning the preparation of responses to Office Actions, LICENSOR's counsel shall give due consideration to such comments. If LICENSEE does not want to support the filing, prosecution, or maintenance of any patent application or patent in a country, LICENSOR may do so, in which case LICENSEE's rights and obligations to such patent or patent application in such country shall terminate. VIII. DISCLAIMER OF WARRANTIES, INDEMNITY AND INSURANCE 8.00 NOTHING IN THIS LICENSE AGREEMENT SHALL BE DEEMED TO BE A REPRESENTATION OR WARRANTY BY LICENSOR OF THE VALIDITY OF ANY OF THE LICENSED PATENTS OR TECHNICAL INFORMATION. LICENSEE will indemnify and hold LICENSOR harmless against any and all actions, suits, claims, demands, prosecutions, costs and expenses (including actual reasonable attorneys' fees) based on or arising out of this LICENSE AGREEMENT, including, without limitation, the manufacture, packaging, use, sale, rental or lease of LICENSED PRODUCTS, even if altered or used for a purpose not intended, or the use of LICENSED PATENTS or TECHNICAL INFORMATION by LICENSEE, its AFFILIATES, its SUBLICENSEES or its (or their) customers and any representation made or warranty given by -12- LICENSEE, its AFFILIATES or SUBLICENSEES with respect to LICENSED PRODUCTS or LICENSED TECHNOLOGY. LICENSEE shall maintain, during the term of this LICENSE AGREEMENT, comprehensive general liability insurance, including products liability insurance, with reputable and financially secure insurance carriers reasonably acceptable to LICENSOR, to cover the activities of LICENSEE, its AFFILIATES and its SUBLICENSEES, for minimum limits of [***] combined single limit for bodily injury and property damage per occurrence and in the aggregate. Such insurance shall include LICENSOR, its trustees, directors, officers, employees, and agents as additional insureds. Prior to any administration of a LICENSED PRODUCT to a human being, LICENSEE shall furnish to LICENSOR a certificate of insurance evidencing such coverage, with thirty (30) days' written notice to LICENSOR of cancellation or material change. The insurance required of LICENSOR under this Article VIII shall be primary coverage; any insurance LICENSOR may purchase shall be excess and noncontributory. The insurance required of LICENSEE shall at all times comply with all statutory workers' compensation and employers' liability requirements covering its employees with respect to activities performed under this LICENSEE AGREEMENT. 8.01 Compliance with Governmental Obligations. a) LICENSEE, AFFILIATES and SUBLICENSEES shall comply upon reasonable notice from LICENSOR with all governmental requests directed to either LICENSOR or LICENSEE and provide all information and assistance necessary to comply with the governmental requests. b) LICENSEE shall insure that research, development, and marketing under this LICENSE AGREEMENT will comply with all government regulations in force and effect including, but not limited to, Federal, state and municipal legislation. -13- [***] Confidential Treatment Requested IX. TERMINATION 9.00 This LICENSE AGREEMENT shall terminate upon the expiration of the last to expire of the LICENSED PATENTS included herein, or upon the abandonment of the last to be abandoned of any patent applications included herein, or 15 years from the date of FIRST COMMERCIAL SALE, whichever is later, unless the LICENSE AGREEMENT is sooner terminated. Following termination of this LICENSE AGREEMENT pursuant to this paragraph, LICENSEE shall have the right to manufacture, have manufactured, use, sell, have sold, and develop LICENSED PRODUCTS without further obligations to LICENSOR. 9.01 LICENSEE may terminate this LICENSE AGREEMENT at any time upon ninety (90) days' written notice in advance to LICENSOR. If LICENSOR is not in material breach of the LICENSE AGREEMENT at the time of termination, then all of the rights, but not the then accrued liabilities of LICENSEE, its AFFILIATES and SUBLICENSEES, under the LICENSED TECHNOLOGY shall revert and belong to LICENSOR. If LICENSEE is not in material breach of the LICENSE AGREEMENT at the time of termination, then LICENSEE shall have the right for one year thereafter to dispose of all LICENSED PRODUCTS then in its inventory, and shall pay royalties thereon, in accordance with the provisions of this LICENSE AGREEMENT, as though this LICENSE AGREEMENT had not terminated. 9.02 If either party shall be in default of any obligation hereunder, or shall be adjudged bankrupt, or become insolvent, or make an assignment for the benefit of creditors, or be placed in the hands of a receiver or a trustee in bankruptcy, the other party may terminate this LICENSE AGREEMENT by giving sixty (60) days' notice by Registered Mail to the other party, specifying the basis for termination. If within sixty (60) days after the receipt of such notice, the party receiving notice shall remedy the condition forming the basis for termination, such notice shall cease to be operative, and this LICENSE AGREEMENT shall continue in full force. 9.03 The word "termination" and cognate words, such as "term" and "terminate," used in this Article IX and elsewhere in this LICENSE AGREEMENT are to be read, except where the contrary is specifically indicated, as omitting from their effect the -14- following rights and obligations, all of which survive any termination to the degree necessary to permit their complete fulfillment or discharge: a) LICENSEE's obligation to supply a terminal report as specified in paragraph 7.02 of this LICENSE AGREEMENT. b) LICENSOR's right to receive or recover and LICENSEE'S obligation to pay royalties (including minimum royalties) accrued or accruable for payment at the time of any termination. c) LICENSEE's obligation to maintain records under paragraph 11.00 of this LICENSE AGREEMENT. d) Licenses, releases, and agreements of nonassertion running in favor of customers or transferees of LICENSEE in respect to products sold or transferred by LICENSEE prior to any termination and on which royalties shall have been paid as provided in paragraph 4.01 of this LICENSE AGREEMENT. e) Any cause of action or claim of either party accrued or to accrue, because of any breach or default by the other party. f) The representation and disclaimer of warranties and indemnification obligations of paragraph 8.00. g) The confidentiality obligations under paragraph 5.01. 9.04 In the event LICENSEE is permanently enjoined from exercising its license rights granted hereunder pursuant to an infringement action brought by a third party, or if both LICENSEE and LICENSOR elect not to undertake the defense or settlement of such a claim of alleged infringement for a period of six months from notice of such claim or suit, then LICENSEE shall have the right to terminate this LICENSE AGREEMENT with respect to the infringing patent claims following thirty (30) days' written notice to LICENSOR. -15- X. LITIGATION 10.00 Each party shall notify the other party in writing of any suspected infringements of or by the LICENSED PATENTS in the LICENSED TERRITORY and shall inform the other party of any evidence of such infringements. 10.01 INFRINGEMENT OF LICENSED PATENTS DURING EXCLUSIVE PERIOD. So long as this LICENSE AGREEMENT remains exclusive the LICENSEE shall have the first right to defend the LICENSED PATENTS against infringement or interference by other parties in whole or in part in the LICENSED FIELD in any country in which a LICENSED PATENT is in effect hereunder, including by bringing any legal action for infringement or defending any counterclaim of invalidity or action of a third party for declaratory judgment of non-infringement or interference. LICENSOR agrees to join as a party plaintiff in any such lawsuit initiated by LICENSEE and to cooperate with LICENSEE in LICENSEE's prosecution, if requested by LICENSEE, with all reasonable costs, attorney fees, and expenses to be paid by LICENSEE. However, if LICENSEE does not institute suit for infringements within ninety (90) days of receipt of written notice from LICENSOR of LICENSOR's desire to bring suit for infringement in its own name and on its own behalf, then LICENSOR may, at its own expense, bring suit or take any other appropriate action. In the event that LICENSEE shall undertake the enforcement of the LICENSED PATENTS by litigation, LICENSEE may withhold [***] of the payments otherwise thereafter due LICENSOR and apply the same toward reimbursement of up to half of LICENSEE's expenses, including reasonable attorneys' fees, in connection therewith. Any recovery of damages by LICENSEE for each such suit shall be applied first in satisfaction of any unreimbursed expenses and legal fees of LICENSEE relating to such suit, and next toward reimbursement of LICENSOR for any payments past due or withheld and applied pursuant to this paragraph. The balance remaining from any such recovery shall be retained by LICENSEE. 10.02 INFRINGEMENT OF LICENSED PATENTS DURING NON-EXCLUSIVE PERIOD. If this LICENSE AGREEMENT is nonexclusive at the time of infringements, the sole right to institute suit for infringement and to recover damages shall rest with LICENSOR. -16- [***] Confidential Treatment Requested 10.03 LICENSEE shall be entitled to any recovery of damages resulting from a lawsuit brought by it pursuant to paragraph 10.01. LICENSOR shall be entitled to recovery of damages resulting from any lawsuit brought by LICENSOR to enforce any LICENSED PATENT, pursuant to paragraph 10.01 or 10.02. 10.04 Neither party may settle with any infringer without the prior approval of the other party if such settlement would affect the rights of the other party under the LICENSED PATENTS. 10.05 INFRINGEMENT BY LICENSED PATENTS. Each party shall promptly notify the other in writing in the event that a third party shall bring a claim of infringement against LICENSOR or LICENSEE, either in the United States or in any foreign country in which there is a LICENSED PATENT. So long as this LICENSE AGREEMENT is exclusive, LICENSEE in its own name and at its sole expense shall have the first right to defend the LICENSED PATENTS and may compromise, settle or otherwise pursue such defense in such a manner and on such terms as LICENSEE shall see fit. In the event that LICENSEE shall undertake such defense, LICENSEE may withhold [***] of the payments otherwise thereafter due LICENSOR and apply the same toward reimbursement of LICENSEE's expenses, including reasonable attorneys' fees, in connection therewith. Any recovery of damages by LICENSEE for each such suit shall be applied first in satisfaction of any unreimbursed expenses and legal fees of LICENSEE relating to such suit, and next toward reimbursement of LICENSOR for any payments past due or withheld and applied pursuant to this paragraph. The balance remaining from any such recovery shall be retained by LICENSEE. XI. RECORDS 11.00 LICENSEE shall keep accurate records of all operations affecting payments hereunder, and shall permit LICENSOR or its duly authorized agent to inspect all such records and to make copies of or extracts from such records during regular business hours throughout the term of this LICENSE AGREEMENT and for a reasonable period of not less than three (3) years thereafter. -17- [***] Confidential Treatment Requested XII. NONASSIGNABILITY 12.00 The parties agree this LICENSE AGREEMENT imposes personal obligations on LICENSEE. LICENSEE shall not assign any rights under this LICENSE AGREEMENT not specifically transferable by its terms (other than to an AFFILIATE or in connection with a MAJOR CORPORATE TRANSACTION) without the written consent of LICENSOR, which shall not be unreasonably withheld, delayed or conditioned. LICENSOR may assign its rights hereunder but not to a competitor of LICENSEE. XIII. SEVERABILITY 13.00 The parties agree that if any part, term, or provision of this LICENSE AGREEMENT shall be found illegal or in conflict with any valid controlling law, the validity of the remaining provisions shall not be affected thereby. XIV. NONUSE OF LICENSOR'S NAME AND LICENSOR EMPLOYEES AS CONSULTANTS, BOARD MEMBERS OR EMPLOYEES 14.00 In publicizing anything made, used, or sold under this LICENSE AGREEMENT, LICENSEE shall not use the name of LICENSOR or otherwise refer to any organization related to LICENSOR, except with the written approval of LICENSOR and except that LICENSEE may make statements to the effect that (a) it is licensed by LICENSOR under the LICENSED PATENTS and (b) [***] David A. Scheinberg, M.D., Ph.D. are staff of LICENSOR and there is a relationship between these individuals and LICENSEE. LICENSOR shall respond to any such LICENSEE'S request to use LICENSOR's name or otherwise refer to any organization related to LICENSOR within fourteen (14) days after receiving LICENSEE's request. LICENSOR shall respond to any such LICENSEE's request to use LICENSOR's name or otherwise refer to any organization related to LICENSOR within fourteen (14) days after receiving LICENSEE's request. 14.01 Neither LICENSEE, its AFFILIATES nor its SUBLICENSEES shall hire as consultants, board members or employees any individual who is at the same time also an employee of LICENSOR or its AFFILIATES without first obtaining LICENSOR's prior written consent to such hiring agreement.[***] LICENSOR hereby consents to the involvement of [***] -18- *** Confidential Treatment Requested [***] and David A. Scheinberg, M.D., Ph.D. with LICENSEE or its AFFILIATES, provided that their involvement is described in separate agreements that have been approved by LICENSOR as consistent with LICENSOR's policies. XV. WAIVER, INTEGRATION ALTERATION 15.00 The waiver of a breach hereunder may be effected only by a writing signed by the waiving party and shall not constitute a waiver of any other breach. 15.01 This LICENSE AGREEMENT represents the entire understanding between the parties, and supersedes all other agreements, express or implied, between the parties concerning LICENSED PATENTS and TECHNICAL INFORMATION. 15.02 A provision of this LICENSE AGREEMENT may be altered only by a writing signed by both parties, except as provided in paragraph 13.00 above. XVI. MARKING 16.00 LICENSEE shall place in a conspicuous location on LICENSED PRODUCTS that would infringe LICENSED PATENTS but for this LICENSE AGREEMENT, a patent notice in accordance with 35 U.S.C. Section 282. LICENSEE agrees to mark any products made using a process covered by any LICENSED PATENT with the number of each such patent and, with respect to such LICENSED PATENTS, to respond to any request for disclosure under 35 U.S.C. Section 287(b)(4)(B) by only notifying LICENSOR of the request for disclosure. XVII. APPLICABLE LAW 17.00 This LICENSE AGREEMENT shall be construed in accordance with the substantive laws of the State of New York of the United States of America. -19- [***] Confidential Treatment Requested XVIII. EXPORTATION OF TECHNICAL INFORMATION 18.00 LICENSEE agrees to comply with the laws and rules of the GOVERNMENT regarding prohibition of exportation of TECHNICAL INFORMATION furnished to LICENSEE either directly or indirectly by LICENSOR. XIX. NOTICES UNDER THE LICENSE AGREEMENT 19.00 For the purpose of all written communications and notices between the parties, their addresses shall be: LICENSOR: Mr. James S. Quirk Senior Vice President Research Resources Management Sloan-Kettering Institute for Cancer Research 1275 York Avenue New York, New York 10021 LICENSEE: Paul J. Maddon, M.D., Ph.D. Chairman, President and CEO Progenics Pharmaceuticals, Inc. 777 Old Saw Mill River Road Tarrytown, New York 10591 or any other addresses of which either party shall notify the other party in writing. -20- IN WITNESS WHEREOF the parties have caused this LICENSE AGREEMENT to be executed by their duly authorized officers on the respective dates hereinafter set forth. LICENSEE PROGENICS PHARMACEUTICALS, INC. By: /s/ Paul A. Maddon ------------------------------------------------------------------------- Title: Chairman and CEO ---------------------------------------------------------------------- Date: November 17, 1994 ----------------------------------------------------------------------- LICENSOR SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH By: /s/ Javier S. Furl ------------------------------------------------------------------------- Title: Senior Vice President ---------------------------------------------------------------------- Date: November 22, 1994 ----------------------------------------------------------------------- -21- Exhibit A DEFINITIONS EXHIBIT Part 1: Additional licensing terms. E1.01 AFFILIATES means, with respect to a party of this LICENSE AGREEMENT, any individual or entity which directly or indirectly controls, is controlled by, or is under common control with such party. The term "control" means possession, direct or indirect, of the powers to direct or cause the direction of the management or policies of a person or ENTITY; whether through ownership of equity participation, voting securities, or beneficial interests; by contract; by agreement; or otherwise. Also, with respect to LICENSOR, AFFILIATES includes Memorial Hospital for Cancer and Allied Diseases and Memorial Sloan- Kettering Cancer Center, each a not-for-profit membership corporation of the State of New York, each having its principal place of business at 1275 York Avenue, New York, New York 10021. E1.02 CONFIDENTIAL INFORMATION means the collection of technical information included in the LICENSED TECHNOLOGY or technical information of LICENSEE and confidential non-public information concerning LICENSEE's business plans, strategy and the like. All information which shall be disclosed in confidence by the disclosing party to the receiving party, and which affords a competitive advantage to the disclosing party or its AFFILIATES, shall be presumed to be CONFIDENTIAL INFORMATION, even though limited portions of such technical information may be in the public domain. The following information shall be excluded from the definition of CONFIDENTIAL INFORMATION: (a) information which the receiving party demonstrates was in the receiving party's possession in written or other tangible form prior to any disclosure; (b) information which the receiving party demonstrates was received from a third party without restriction and not in violation of any duty of nondisclosure on the part of such third party; (c) information which is independently discovered or invented by personnel of a party who do not have direct or -22- indirect access to the information provided to that party by the other party, or (d) from the time it becomes so known, any information which the receiving party demonstrates was generally known to the trade. Information shall not be considered to be generally known to the trade if, in order to acquire such information from publicly available sources, the receiving party used the disclosing party's CONFIDENTIAL INFORMATION to guide it in reviewing such sources in order to select therefrom a series of relatively unconnected information which may be fit together to match the CONFIDENTIAL INFORMATION first learned from the disclosing party. E1.03 DISTRIBUTOR means any person or ENTITY engaged by LICENSEE, or any agent or representative of LICENSEE, to distribute any LICENSED PRODUCT(S) either directly or indirectly through other distributors. E1.04 END USER means any person licensed or otherwise authorized to USE LICENSED PRODUCT(S) for his/her own personal use, or any ENTITY licensed to USE LICENSED PRODUCT(S) in the regular conduct of its own business and not for licensing to other entities or individuals. E1.05 ENTITY means a corporation, an association, a joint venture, a partnership, a trust, a business, an individual, a government or political subdivision thereof, including an agency, or other organization which can exercise independent legal standing. E1.06 FIRST COMMERCIAL SALE means the date that the LICENSED PRODUCT(S) are first sold, marketed or publicly made available. LICENSED PRODUCT(S) distributed or used for clinical trials or experimental purposes only shall not be considered marketed or made available and shall not establish the FIRST COMMERCIAL SALE. E1.07 GOVERNMENT means the Federal Government of the United States of America. E1.08 MAJOR CORPORATE TRANSACTION means (a) the sale of all or substantially all of the business to which the licenses granted under this LICENSE AGREEMENT relate or (b) the merger of the -23- LICENSEE with or into or the consolidation of the LICENSEE with another ENTITY. [***] E1.010 SUBLICENSEE means any ENTITY, not an AFFILIATE of LICENSEE, which is licensed by LICENSEE, pursuant to this authority granted in this LICENSE AGREEMENT, which has rights to LICENSED TECHNOLOGY beyond those rights commonly granted to an END USER. E1.011 USE means any form of practice or utilization of the LICENSED TECHNOLOGY, or any portion thereof. -24- [***] Confidential Treatment Requested Part 2: Technical Terms. [***] E2.01 BCG means bacille de Calmette et Guerin, a nonspecific immune stimulant. E2.02 DERIVATIVES means a chemical substance derived from another substance either directly or by modification or partial substitution. [***] E2.03 FDA means the Food and Drug Administration of the GOVERNMENT. [***] E2.06 GMP means good manufacturing practices as defined by the FDA of the GOVERNMENT. [***] E2.07 KHL means keyhole limpet hemocyanin. E2.08 NDA means New Drug Application as defined by the FDA of the GOVERNMENT. [***] -25- [***] Confidential Treatment Requested EX-10.14 10 CLINICAL TRIAL AGMT DATED 12/12/94 Exhibit 10.14 CLINICAL TRIAL AGREEMENT THIS AGREEMENT is made and entered into as of the 12th day of December, 1994 (hereinafter "Effective Date") by and between SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH and its affiliate, MEMORIAL HOSPITAL FOR CANCER AND ALLIED DISEASES, both having a principal place of business at 1275 York Avenue, New York, New York 10021, membership corporations of the State of New York (hereinafter "SKI/MEMORIAL") and ACTIVE BIOTHERAPIES, INC., a corporation of the State of Delaware having its principal place of business at 777 Old Saw Mill River Road, Tarrytown, New York 10591, (hereinafter "ABI"). WITNESSETH WHEREAS, SKI/MEMORIAL has established and maintains a Clinical Immunology Service, a Division of Hematologic Oncology, in the Department of Medicine and has acquired expertise in conducting research investigations, clinical trials and laboratory test evaluations; and WHEREAS, ABI conducts business in the development, manufacture and sale of therapeutic products; and WHEREAS, ABI desires SKI/MEMORIAL to conduct a clinical trial to determine the safety and efficacy of GM2 covalently attached to KLH plus the immunological adjuvant QS-21 in patients with melanoma (hereinafter "GM2-KLH conjugate"), said trial entitled VACCINATION OF MELANOMA PATIENTS WITH GM2 COVALENTLY ATTACHED TO KLH (GM2-KLH) PLUS THE IMMUNOLOGICAL ADJUVANT QS-21: TRIAL COMPARING DOSES OF GM2-KLH (hereinafter the "Study"). NOW, THEREFORE intending to be legally bound and upon the terms, conditions and covenants hereinafter set forth, SKI/MEMORIAL and ABI agree as follows: ARTICLE I - THE STUDY 1.1 The Study under this Agreement will be conducted under the protocol approved by SKI/MEMORIAL's Human Subject Institutional Review Board (hereinafter "IRB"), based on the protocol annexed hereto as Exhibit A (hereinafter "Protocol"). SKI/MEMORIAL shall submit the Protocol for approval to the IRB. ABI shall supply Study drug after ABI has: 1 a. received a mutually executed copy of this Agreement; b. received documentation from the Office of Industrial Affairs that SKI/MEMORIAL's IRB has approved the Protocol; Promptly after SKI/MEMORIAL's IRB has approved the final Protocol, the Principal Investigator shall forward a copy to the Office of Industrial Affairs, and the Office of Industrial Affairs shall forward a copy to ABI. The Principal Investigator shall also forward to the Office of Industrial Affairs any subsequent change to the Protocol, and the Office of Industrial Affairs shall forward the change to ABI. 1.2 As part of this Agreement, SKI/MEMORIAL shall appoint Dr. Paul B. Chapman and/or such other physicians as it may deem appropriate as investigators (hereinafter "Investigators") to oversee the Study. If Dr. Chapman should become unable to complete the Study, SKI/MEMORIAL shall consult with ABI regarding the appointment of a new principal investigator. SKI/MEMORIAL will negotiate in good faith to select a new principal investigator so that the Study can continue. 1.3 The Investigators on behalf of SKI/MEMORIAL shall prepare and maintain records and case histories with all pertinent data documented as required by the Protocol on case report forms supplied by ABI. All patient data shall be kept confidential. Information provided to ABI shall not disclose patient names, except to the extent that the patient consent form permits. 1.4 The Investigators shall also immediately notify ABI of any adverse reaction in the course of the Study of which they become aware. 1.5 All applicable government laws, rules, regulations and guidelines, including those of the United States Food and Drug Administration (hereinafter the "FDA"), shall be adhered to by SKI/MEMORIAL and ABI in the performance and documentation of the Study. 1.6 ABI shall provide SKI/MEMORIAL with any investigational protocols, pre-clinical or background information which are germane to the Study. 1.7 ABI shall provide, without cost to SKI/MEMORIAL, sufficient amounts of its GM2-KLH conjugate to SKI/MEMORIAL to conduct the Study. SKI/MEMORIAL may not use this GM2-KLH conjugate in any way other than as specified in the Protocol. 2 1.8 SKI/MEMORIAL shall use reasonable efforts to obtain an institutional IND for purposes of conducting the Study. At ABI's request any time in the three years after the Effective Date, SKI/MEMORIAL will assign the IND to ABI at no additional charge and write a letter to the FDA to inform them of the assignment of the IND to ABI. ABI shall indemnify SKI/MEMORIAL for any use ABI makes of the IND after SKI/MEMORIAL has assigned it to ABI, including attorney fees. ARTICLE II - SKI/MEMORIAL STAFF AND FACILITIES 2.1 The Study shall be carried out at SKI/MEMORIAL under the supervision of SKI/MEMORIAL's IRB and the Investigators indicated above. 2.2 SKI/MEMORIAL shall provide the physician, laboratory, statistical, and clinical support staff levels of effort required to complete the Study. ARTICLE III- REPORTS 3.1 SKI/MEMORIAL shall keep ABI advised of the status of the Study via periodic reports. The frequency of such reports shall be mutually agreed to by both parties. There shall also be a final report of the Study presented to ABI. 3.2 All reports submitted to ABI shall become the property of ABI and may be used by ABI without, however, making any reference to Memorial Sloan-Kettering Cancer Center, Memorial Hospital for Cancer and Allied Diseases or Sloan-Kettering Institute for Cancer Research, unless such reference appears in a communication with the FDA or as otherwise required by law. If ABI desires to make reference to any of the foregoing in utilizing the results of the Study, ABI must first obtain written consent from SKI/MEMORIAL. SKI/MEMORIAL shall respond to any such ABI's request for release of information within thirty (30) days after receiving ABI's request. ARTICLE IV - PUBLICATION 4.1 Notwithstanding anything contained herein to the contrary including without limitation Articles 5.1 and 9.6, SKI/MEMORIAL may freely publish the results of its investigative findings hereunder. The authorship and contents (including scientific conclusions and professional judgments) of any paper submitted shall be determined by SKI/MEMORIAL. SKI/MEMORIAL shall provide ABI with a copy of the papers prepared for publication prior to their submission to a scientific journal or presentation at scientific meetings. ABI shall have thirty (30) days to review the papers. ABI shall not make any editorial changes in the papers, but may delete any of its Confidential Information (as defined below) contained therein. ABI personnel shall be acknowledged with customary scientific practice. 3 ARTICLE V - CONFIDENTIAL INFORMATION 5.1 In order to effectively complete the Study, it may be necessary or desirable for the parties to disclose proprietary, trade secret and/or other confidential information (herein "Confidential Information") to one another. Each party agrees that any such Confidential Information disclosed to it or to its employees shall be used only in connection with the legitimate purposes of this Agreement; shall be disclosed only to those who have a need to know it, and shall be safeguarded with the same care normally afforded such Confidential Information in the possession, custody or control of the party receiving the Confidential Information provided, however, that the disclosing party specifies in writing the nature and identity of the Confidential Information and the manner and time of disclosure. The foregoing shall not apply when, after and to the extent the Confidential Information disclosed becomes generally available to the public through no fault of the receiving party, was already known to the receiving party at the time of disclosure as evidenced by written records in the possession of the receiving party prior to such time, or is subsequently received by the receiving party in good faith from a third party without breaching any confidential obligation between the third party and the disclosing party. ARTICLE VI - COMPENSATION [***] 6.2 SKI/MEMORIAL shall discuss, if ABI so requests, budgetary matters with ABI, but reserves the right to be the final control on budgetary categories and expenditures. SKI/MEMORIAL shall not be obligated to provide expenditure reports, or to submit to audits by ABI. 4 [***] Confidential Treatment Requested 6.3 The checks shall be made payable to SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH (Sloan-Kettering Institute Tax I.D. No. 13-1624182) and shall be forwarded to: Memorial Sloan-Kettering Cancer Center Office of Industrial Affairs 1275 York Avenue New York, New York 10021 ABI should note on its check stub or in its transmittal letter that the payment relates to a Clinical Trial Agreement, SK#1267, under the direction of Dr. Paul B. Chapman. ARTICLE VII - INDEPENDENT CONTRACTOR 7.1 Both parties shall, at all times during the performance of this Agreement, remain as independent contractors and the Agreement shall not make the parties partners, joint venturers, or agents of one another. No party to this Agreement shall have the power to bind or obligate the other party. ARTICLE VIII - TERM AND TERMINATION 8.1 This Agreement shall commence on the Effective Date of this Agreement and shall continue until completion as provided in the Protocol, which is estimated at about twelve (12) months from the date hereof. 8.2 This Agreement can be terminated by either SKI/MEMORIAL or ABI with or without cause upon thirty (30) days prior written notice without penalty to either party. 8.3 In the event that a.) SKI/MEMORIAL terminates this Agreement prior to completion of the Study, the amount due to SKI/MEMORIAL from ABI shall be [***] any time between the Effective Date and the date of termination of this Agreement and then completes the Protocol; or b.) ABI terminates this Agreement then in addition to [***] 8.4 If ABI terminates the Agreement prior to completion of the Study, ABI shall, if permitted by law and requested by SKI/MEMORIAL, supply SKI/MEMORIAL, free of charge, with sufficient GM2-KLH conjugate to allow SKI/MEMORIAL to complete the treatment of those patients participating in the Study on the date of SKI/MEMORIAL's receipt of ABI's termination notice. 5 *** Confidential Treatment Requested 8.5 Sections 3.2, 4.1, 5.1, 8.3, 8.4, 8.5, 9.1, 9.6 and 9.7 shall all survive the termination of this Agreement. ARTICLE IX - GENERAL 9.1 ABI shall indemnify, defend and hold SKI/MEMORIAL, and its affiliate corporation, Memorial Sloan-Kettering Cancer Center harmless from and against all claims, causes of action, suits, damages and costs arising out of, resulting from, or otherwise in respect of, the manufacture, sale and/or use of GM2-KLH conjugate except where such claims, causes of action, suits, damages and costs are the result of negligence on behalf of SKI/MEMORIAL, its staff or agents. ABI shall have no obligation to indemnify, defend or hold SKI/MEMORIAL harmless against liability, loss or damage arising from a failure by SKI/MEMORIAL, its staff or agents to; (i) comply with any applicable FDA or other governmental requirement or; (ii) adhere to the terms of the Protocol. SKI/MEMORIAL shall indemnify, defend and hold ABI harmless from and against all claims, causes of action, suits, damages and costs arising out of, resulting from, or otherwise in respect of, the manufacture, sale and/or use of GM2-KLH conjugate except where such claims, causes of action, suits, damages and costs are the result of negligence on behalf of ABI, its staff or agents. SKI/MEMORIAL shall have no obligation to indemnify, defend or hold ABI harmless against liability, loss or damage arising from a failure by ABI, its staff or agents to; (i) comply with any applicable FDA or other governmental requirement or; (ii) adhere to the terms of the Protocol. 9.2 No right or license is granted under this Agreement by either party to the other either expressly or by implication, except those specifically set forth herein. 9.3 Nothing contained within this Agreement shall impose an obligation of exclusivity on one party by the other. Both parties reserve the right to enter into and participate in other activities (either alone or with a third party) including, but not limited to, clinical trials and sponsored research projects. 9.4 All matters affecting the interpretation, validity and performance of this Agreement shall be governed by the laws of the State of New York applicable to agreements made and to be performed wholly within the State of New York. This Agreement, including the Protocol, sets forth the entire understanding between the parties 6 herein, and cannot be changed or amended except by written agreement executed by the parties. In the event of any inconsistency in this Agreement, the inconsistency shall be resolved by giving precedence first, to the Articles of this Agreement, and then, to the Protocol. This Agreement may not be assigned by either party without the prior written consent of the other party. 9.5 All notices to be given by either party to the other shall be made in writing by hand delivery or by registered or certified mail, return receipt requested and addressed to the parties at the following addresses respectively: Sloan-Kettering Institute for Cancer Research 1275 York Avenue New York, New York 10021 (Attention: Director, Office of Industrial Affairs) (Copy: James S. Quirk, Senior Vice President) Active Biotherapies, Inc. 777 Old Saw Mill River Road Tarrytown, New York 10591 (Attention: Paul J. Madddon, M.D., Ph.D. President and CEO) Any notice shall be effective as of its date of receipt. 9.6 Except as set forth in articles 5.1 and 4.1, as required by law and/or as may be required in order to maintain a party's status as an exempt organization under Section 501(c) (3) of the Internal Revenue Code and regulations thereunder, neither SKI/MEMORIAL nor ABI shall release any information, publicity, news releases or other public announcement, written or oral, with regard to the Agreement or any amendment thereto or to performance hereunder, to newspapers or any other mass communication media without the prior written approval of the other party. SKI/MEMORIAL shall respond to any such ABI's request for release of information within thirty (30) days after receiving ABI's request. ABI shall not use the name of Memorial Sloan-Kettering Cancer Center, Memorial Hospital for Cancer and Allied Diseases or Sloan-Kettering Institute for Cancer Research, or a variant of any of the foregoing in any advertising, packaging or other promotional material in connection with the GM2-KLH conjugate except as may be required by law. 7 IN WITNESS THEREOF, SKI/MEMORIAL and ABI have caused this Agreement to be executed in duplicate by their respective duly authorized officers. ACTIVE BIOTHERAPIES, INC. SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH, AND By: /s/ Paul J. Maddon MEMORIAL HOSPITAL FOR AND --------------------------- ALLIED DISEASES Paul J. Maddon, M.D., Ph.D. President and CEO Date: Dec. 23, 1994 By: /s/ James S. Quirk ---------- ------------------------------- James S. Quirk Senior Vice President Research Resources Management Date: Dec. 12, 1994 ------- By: /s/ Paul B. Chapman ------------------------------- Paul B. Chapman, M.D. Principal Investigator Date: Dec 4, 1994 ------- 8 EX-10.15 11 QS-21 LICENSE & SUPPLY AGMT DTD 8/31/95 Exhibit 10.15 LICENSE AND SUPPLY AGREEMENT This license and supply agreement is entered into as of August 31 , 1995 (the "Effective Date") between Cambridge Biotech Corporation, debtor and debtor in possession, Case No. 94-43054-IFQ, United States Bankruptcy Court for the District of Massachusetts, Western Division, a Delaware corporation, having offices at 365 Plantation Street, Worcester, Massachusetts 01605, and Progenics Pharmaceuticals, Inc., a Delaware corporation having offices at 777 Old Saw Mill River Road, Tarrytown, New York 10591 (each singularly a "Party" and collectively the "Parties") with reference to the following: RECITALS WHEREAS, CBC is performing research and development in the field of purified saponin extracts from the tree Quillaja saponaria, production processes therefor and uses thereof as an immune adjuvant; and WHEREAS, Progenics is performing research and development in the field of vaccines for human cancers and is interested in licensing CBC's rights to such purified saponin extracts for use as an immune adjuvant with such vaccines; THEREFORE, the parties agree as follows: 1. DEFINITIONS. The following terms shall have the following meanings for purposes of this Agreement: 1.1 "ACTIVE DEVELOPMENT EFFORT" is defined in Section 5.1. [***] -1- *** Confidential Treatment Requested 1.3 "ADJUVANT REQUIREMENTS" means the amount of Adjuvant in bulk which Progenics and its sublicensees may require pursuant to the provisions hereof for all research and development, pre-clinical and human clinical testing of Licensed Products and, after Commercial Introduction, production of Licensed Products for comme'rcial sales. 1.4 "AFFILIATE" means any corporation, firm, partnership or other entity, whether de jure or de facto, which directly or indirectly owns, is owned by, or is under common ownership with a party to this Agreement to the extent of at least fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct the affairs of the entity and any person, firm, partnership, corporation or other entity actually controlled by, controlling, or under common control with a party to this Agreement. 1.5 "AGREEMENT" means this License and Supply Agreement, including any exhibits, schedules or other attachments thereto, as any of the foregoing may be validly amended from time to time. 1.6 "CBC" means Cambridge Biotech Corporation, a Delaware corporation, its Affiliates, and its successors and permitted assigns. 1.7 "cGLPs" means the current Good Laboratory Practices for Finished Pharmaceuticals pursuant to 21 C.F.R. 58 et seq., as amended from time to time. 1.8 "cGMPs" means the current Good Manufacturing Practices for Finished Pharmaceuticals pursuant to 21 C.F.R. 210 et seq., as amended from time to time. 1.9 "COMMERCIAL INTRODUCTION" means on a country-by-country basis the date of first commercial sale (other than for purposes of obtaining regulatory approval) of a Licensed Product by Progenics or its sublicensees in such country. 1.10 "EFFECTIVE DATE" is defined in the introductory paragraph. 1.11 "FIELD OF USE" means vaccines containing purified GM2 and GD2 ganglioside preparations (whether alone or in combination with each other) for the prevention or treatment of human cancers. 1.12 "FULLY BURDENED MANUFACTURING COST" means the actual cost of Manufacture by CBC of the Adjuvant under a Manufacturing Process in compliance with cGMPs, if applicable, which actual cost shall be comprised of the cost of goods produced as determined in accordance with United States generally accepted accounting -2- principles, and shall include direct labor, direct material and allocable manufacturing overhead but shall exclude selling, general and administrative, research and development and interest expenses; Fully-Burdened Manufacturing Cost shall include, to the extent applicable, the cost to CBC of having some portion or all of the Manufacturing Process performed by a third party. [***] 1.15 "KNOWHOW" means materials, data, results, formulae, designs, specifications, methods, processes, improvements, techniques, ideas, discoveries, technical information, process information, clinical information and any other information, whether or not any of the foregoing is patentable, known to and which is confidential (in accordance with Section 9.1 hereof) and proprietary to CBC now or hereafter during the Term, to the extent that any of the foregoing relates to any Licensed Patent Rights or the development, manufacture, use or sale of Adjuvant in connection with the development, manufacture, use or sale of any Licensed Product; provided however, that the term "Knowhow" shall not include any of the foregoing that is subject to proprietary rights of third parties. 1.16 "LICENSED PATENT RIGHTS" means any and all patent applications and patents (including inventor's certificates and utility models) throughout the world, including any substitutions, extensions, reissues, reexaminations, renewals, divisions, continuations and continuation-in-parts of the foregoing, which CBC now or hereafter during the Term owns or controls (solely or jointly) or under which CBC has the fight to grant sublicenses (regardless of any royalty or other payments to a third party required of CBC), to the extent that any of the foregoing covers, in whole or in part, the development, manufacture, use or sale of Adjuvant in connection with the development, manufacture, use or sale of any Licensed Product. "Licensed Patent Rights" shall include, without limitation, the patent listed on Exhibit "A" attached and incorporated into this Agreement. 1.17 "LICENSED PRODUCT" means any vaccine or vaccines formulated using Licensed Patent Rights or Knowhow in the Field of Use. -3- *** Confidential Treatment Requested 1.18 "LICENSED TERRITORY" means the world. 1.19 "MANUFACTURE" OR "MANUFACTURING PROCESS" means the aseptic storage, handling, production, processing and packaging of Adjuvant in accordance with this Agreement. [***] 1.21 "OPTION" is defined in Section 3.2. 1.22 "PARTY" AND "PARTIES" are defined in the introductory paragraph. 1.23 "PLA-ENABLING HUMAN CLINICAL TRIAL" means as to a specific Licensed Product, a controlled and lawful study of the efficacy of such Licensed Product by administration of such Licensed Product to human beings where the principal purpose of such trial is to provide statistically significant efficacy data to serve as pivotal support for an application to the United States Food and Drug Administration for approval of a Licensed Product for the indication being investigated by the trial. 1.24 "PROGENICS" means Progenics Pharmaceuticals, Inc., a Delaware corporation, its Affiliates and its permitted successors and assigns. 1.25 "PROGENICS SHARES" is defined in Section 3.2. 1.26 "SPECIFICATIONS" is defined in Section 8.3(a). 1.27 "TERM" is defined in Section 10.1. 1.28 "VALID CLAIM" means a claim in an issued, unexpired patent in the Licensed Patent Rights, which has not been held invalid, unpatentable or unenforceable in an unappealed or unappealable decision of a court or other governmental body of -4- *** Confidential Treatment Requested competent jurisdiction, which has not been rendered unenforceable through disclaimer or otherwise, and which has not been lost through an interference proceeding. 2. LICENSE. 2.1 GRANT OF LICENSE RIGHTS. CBC hereby grants to Progenics a worldwide license that is exclusive as to all parties [***], to use the Knowhow and practice the Licensed Patent Rights to develop, manufacture, have manufactured, use, sell, and have sold Licensed Products. 2.2 SUBLICENSES. Progenies shall have the right to grant sublicenses of its rights under this Agreement with respect to Licensed Products (but not the Adjuvant alone) (a "Sublicense") only as follows: [***] (c) Progenies shall promptly notify CBC of the execution of each sublicensee and shall provide CBC with a copy of same. 2.3 ON-GOING TRANSFER OF KNOWHOW AND LICENSED PATENT RIGHTS. CBC shall promptly transfer to Progenics existing Knowhow and Licensed Patent Rights for purposes of Progenics' research and development (including but not limited to pre-clinical trials and human clinical trials but excluding Knowhow relating to the Manufacture of the Adjuvant) with respect to Licensed Products. On an on-going basis during the Term, CBC shall identify and disclose to Progenics in writing any and all Knowhow (exclusive of Knowhow relating to the Manufacturing the Adjuvant) then existent, whether or not potentially patentable, and any and all Licensed Patent Rights then existent. 3. SCHEDULE OF PAYMENTS TO CBC. [***] -5- *** Confidential Treatment Requested [***] 3.2 RESTRICTED SHARES. As additional consideration for the rights granted hereunder, Progenies shall issue to CBC simultaneously with the execution of this agreement sixty thousand (60,000) shares of Progenies' common stock (the "Progenies Shares). Each of the Progenies Shares shall be subject to the restriction (the "Transfer Restriction") that no holder of such share shall sell, assign or transfer (collectively a "Transfer") a Progenies Share during the period of time that the Transfer Restriction is in force and effect as to such share. Upon the occurrence of certain milestone events, as set forth below, the Transfer Restriction shall lapse as to the number of Progenies Shares which remain restricted set forth opposite the respective milestone. MILESTONE NUMBER OF PROGENICS SHARES AS TO WHICH RESTRICTION LAPSES [***] Progenies shall promptly give CBC notice of the occurrence of each milestone. Notwithstanding the foregoing, a holder of Progenies Shares may Transfer all (but not less than all) of the Progenies Shares which are subject to the Transfer Restriction to a transferee of all or substantially all of the business division to -6- *** Confidential Treatment Requested which this license pertains or to such holder's legal successor upon a merger, reorganization, consolidation, dissolution or liquidation of such holder. In the event that the license hereunder shall terminate pursuant to the provisions of either Section 5.1 or Section 10, then CBC (or its permitted transferee or successor pursuant to the next preceeding sentence) shall reconvey to Progenics all of the Progenics Shares which on the effective date of such termination remain subject to the Transfer Restriction. 3.3 ROYALTIES. Subject to the other terms of this agreement, Progenics shall pay to CBC royalties as follows: (a) [***] by Progenics of any Licensed Product covered by a Valid Claim of Licensed Patent Rights, payable on a country-by-country basis until the expiration of the last-to-expire of the Valid Claims covering a Licensed Product in the country of manufacture or sale. [***] (b) In the event that Progenics should enter into a Sublicense, CBC will receive [***] (c) If Licensed Patent Rights existing in a given country are not sufficient to afford a given Licensed Product sufficient protection from competition by a vaccine in the Field of Use manufactured by a third party using an adjuvant based on Quillaja Saponaria and such third party holds at least one-third of the market for such vaccine in the Field of Use in such country, then the royalty rate payable by Progenies to CBC will be [***] (d) In any country in which there are no Licensed Patent Rights, Progenics shall pay to CBC a royalty equal to [***] -7- *** Confidential Treatment Requested 4. ROYALTY PAYMENTS, REPORTS AND RECORDS. 4.1 COMMERCIAL INTRODUCTION. Progenies shall promptly give CBC notice of the occurrence of Commercial Introduction of each Licensed Product. 4.2 ROYALTY PAYMENTS. (a) PAYMENTS; DEDUCTION OF TAXES. After the date of Commercial Introduction of the first Licensed Product, royalties under this Agreement on Net Sales of any Licensed Product for a given calendar quarter will be due and payable from Progenies to CBC within thirty (30) days after the end of such calendar quarter. Royalties due under Section 3.3(b) attributable to sublicense fees shall be payable at the end of the quarter when such license fees are payable. Progenies will remit any such royalty payment due to CBC under this Agreement by check payable to CBC. Any tax paid or required to be withheld by Progenies on account of royalties payable to CBC under this Agreement shall be deducted from the amount of royalties otherwise due. Progenies shall make any applicable withholding payments due on behalf of CBC and shall promptly provide CBC with written documentation of any such taxes withheld and paid by Progenies or its sublicensees for the benefit of CBC. (b) FOREIGN CURRENCY CONVERSION. For sales of any Licensed Product that occur in a currency other than United States dollars ("foreign currency sales"), the quarterly royalty payment will be calculated as follows: (A/B) X C = United States dollars royalty payment on foreign currency sales, where A = foreign currency "Net Sales" per quarter B = foreign exchange conversion rate, expressed in local currency per United States dollar (using as the applicable foreign exchange conversion rate the average of the rate published in the Wall Street Journal or any other mutually agreed-upon source for the last business day of each of the three (3) months of the quarter); and C = the royalty rate applicable to such Net Sales under Section 3.2. 4.3 ROYALTY REPORTS. After the date of Commercial Introduction of the first Licensed Product Progenies shall render to CBC, together with the royalty payment due under Section 4.2 for a given calendar quarter, a written account for such calendar -8- quarter showing (a) total gross sales and Net Sales of Licensed Products sold by Progenics and its sublicensees, and the total gross royalty and license fee revenues paid to Progenies by any sublicensee(s) during such calendar quarter, and (b) a calculation of the royalty rate and royalties payable under Section 3.3 (including, in the case of foreign currency sales, the total foreign currency Net Sales during such calendar quarter, the applicable foreign exchange conversion rate(s) and the total United States dollar royalty payment amount). 4.4 PROGENICS' RECORDKEEPING AND INSPECTION. After the date of Commercial Introduction of the first Licensed Product, Progenics shall keep for at least three (3) years records of all sales of Licensed Products in sufficient detail to permit CBC to confirm the accuracy of Progenics' royalty calculations. At the request of CBC no more frequently than once per year, upon at least five (5) business days' prior written notice to Progenics from CBC, and at the expense of CBC (except as otherwise provided below), Progenics shall permit a nationally recognized, independent, certified public accountant selected by CBC and acceptable to Progenics to inspect, during regular business hours, any such Progenics records for the then-preceding three (3) years solely to the extent necessary to verify such calculations, provided that such accountant in advance has entered into a confidentiality agreement with Progenics (substantially similar to the confidentiality provisions of this Agreement) limiting the disclosure of such information to authorized representatives of the Parties. Results of any such inspection shall be made available to both Parties. If such inspection reveals a deficiency in the calculation of royalties resulting in an underpaymeat to CBC by five percent (5%) or more, Progenics shall pay all costs and expenses of such inspection. 5. DUE DILIGENCE. 5.1 Maintenance of License. In order to maintain the license granted pursuant to Section 2.1 with respect to a designated Licensed Product, Progenics agrees to use its best efforts to: [***] -9- *** Confidential Treatment Requested [***] If Progenics shall fail to achieve any of the above objectives and such failure shall remain unremedied for a period of sixty (60) days after notice of such failure to Progenics by CBC (the "Grace Period"), this license shall automatically terminate at the end of the Grace Period (except with respect to the first Licensed Product if Progenics has fulfilled the obligations set forth in subparagraphs (a)-(d) of this section 5.1). Notwithstanding the foregoing, if such failure is a result of Progenics not having obtained a third party license necessary to make, use or sell Licensed Products and reasonable evidence is submitted by Progenics to CBC that such license can be obtained in a reasonable period of time, Progenics may request that the Grace Period be extended for a period of time set forth in the request. CBC shall not unreasonably withhold its consent to such extension but in no event shall the Grace Period exceed one year. CBC shall not unreasonably withhold its consent to any reasonable revision in the preceding schedule requested in writing by Progenics and supported by reasonable evidence of technical difficulties or delays in the clinical studies or regulatory process that could have not have been reasonably anticipated or avoided, (as for example, should the clinical studies for the first Licensed Product be unsuccessful, the parties shall establish a reasonable schedule for the second Licensed Product). Notwithstanding the foregoing, CBC shall not have the right to terminate the license for failure of Progenics to meet a goal if such failure is a result of.' (i) CBC's failure to meet its obligations hereunder, or (ii) an action brought by a third party claiming that the use of the Adjuvant in Licensed Products infringed a patent of such third party. 5.2 PRE-CLINICAL AND CLINICAL PROGRAMS. Subject to the other terms of this Agreement (including but not limited to Section 8.7), with respect to all Licensed Products, Progenics or its sublicensees shall be solely responsible for the conduct of pre-clinical and human clinical testing, regulatory filings, applications and approvals, and expenses in connection with all of the foregoing. In connection with all of the foregoing: -10- *** Confidential Treatment Requested (a) CBC COOPERATION. CBC shall cooperate with and assist Progenies in the preparation and filing of information with respect to the Adjuvant for use in any Investigational New Drug application, Product License Application or any other regulatory filings throughout the Licensed Territory with respect to any Licensed Product. Without limiting the generality of the foregoing, for purposes of supporting all pre-clinical and human clinical trials and all regulatory filings, applications and approvals on the part of Progenics with respect to any Licensed Product, CBC hereby agrees that on an on-going basis during the Term: (i) CBC shall permit Progenics and its sublicensees to reference CBCs drug master file for the Adjuvant with the United States Food and Drug Administration; (ii) to the extent not subject to the proprietary rights of third parties, CBC shall provide Progenics with all pre-clinical and clinical data, results and other relevant information with respect to the Adjuvant (including but not limited to information regarding the toxicity, safety and stability of the Adjuvant) that is (A) submitted by CBC in connection with any Investigational New Drug application or other regulatory filing with respect to the Adjuvant from time to time during the Term or (B) otherwise in CBC's possession from time to time during the Term; and (iii) a CBC representative, at Progenics' request, shall attend periodic meetings to discuss the progress of clinical trials of any Licensed Products. Progenies will reimburse CBC for the foregoing assistance only (i) for its reasonable out-of-pocket expenses, including but not limited to travel, and (ii) CBC's fully burdened costs of performing technical studies or engaging outside services subject to the prior approval of Progenies. (b) ADVERSE EVENTS REPORTING. On an on-going basis during the Term and for at least ten (10) years after the expiration or termination of this Agreement, each Party agrees to provide the other Party with any written information in its possession which indicates adverse effects in humans associated with the Adjuvant or any products using the Adjuvant (including but not limited to Licensed Products). (c) PROGENICS' ERGULATORY REPORTS. Within thirty (30) days of the Effective Date and on an annual basis thereafter (commencing with the first anniversary of the Effective Date), Progenics will provide CBC with (i) a written report summarizing the regulatory filings, applications and approvals with respect to any Licensed Product that Progenics or its sublicensees (a) have made, sought or obtained in the prior twelve (12)-month period, and (b) reasonably expect to make, seek or attempt to obtain in the ensuing twelve (12)- month period following the date of the report,and (ii) results of clinical trials conducted by Progenics using QS-21. Any -11- and all such reports shall be considered confidential and proprietary information of Progenics in accordance with Section 9, provided, however, that CBC may share relevant safety data with its other QS-21 licensees in a manner intended not to disclose any other proprietary information of Progenics. 6. REPRESENTATIONS AND WARRANTIES OF PROGENICS; REGISTRATION RIGHTS. 6.1 Progenics represent and warrants to CBC as follows: (a) ORGANIZATION, STANDING AND AUTHORITY. Progenics is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. Progenics has all requisite corporate power to own and operate its properties and assets and to carry on its business as presently being conducted and as proposed to be conducted. Progenics has, and will have on all relevant dates, all requisite legal and corporate power to execute and deliver this Agreement, to issue the Progenics Shares, and to carry out and perform its obligations under the terms of this Agreement. The execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate Progenics corporate action. The performance by Progenics of any of the terms and conditions of this Agreement on its part to be performed does not and will not constitute a breach or violation of any other agreement or understanding, written or oral, to which it is a party. (b) CAPITALIZATION. The authorized capital stock of Progenics at December 31, 1994 consisted of: (i) 40,000,000 common shares, par value of $.001 per share, of which 12,000,000 shares have been designated Common Stock, of which 2,999,550 shares are issued and outstanding and 5,000,000 shares have been designated Class A Common Stock, of which no shares are issued and outstanding; and (ii) 20,000,000 preferred shares, par value $.001 per share, of which 4,000,000 shares have been designated Series A Preferred Stock, of which 2,308,000 shares are issued and outstanding and 2,500,000 shares have been designated Series B Preferred Stock, of which 1,982,830 shares are issued and outstanding. Progenics has reserved 2,348,313 shares of Progenies Common stock for stock options outstanding at December 31, 1994. Progenics has reserved 150,000 shares of Progenics Common Stock for a warrant outstanding at December 31, 1994. -12- Except as set forth above, there are (i) no share of capital stock or other voting securities of Progenics authorized or outstanding, (ii) no subscriptions, options, conversation or exchange rights, warrants, repurchase or redemption agreements or other agreements, claims or commitments of any nature whatsoever obligating Progenies to issue, transfer, deliver or sell, repurchase or redeem or cause to be issued, transferred, delivered, sold, repurchased or redeemed, additional shares of its capital stock or other securities or obligating Progenics to grant, extend or enter into any such agreement or commitment: (iii) no voting trusts or other agreements or understandings with respect to the voting of the capital stock of Progenics or agreements or understandings, restrictions on disposition of the capital stock of Progenics to which Progenics is a party or is bound or, to the actual knowledge of Progenics, to which any other party is bound; and (iv) except as set forth herein, no agreements granting any registration fights including "piggy-back" fights to any person or entity. All issued and outstanding shares of common stock have been duly authorized and validly issued and are fully paid and nonassessable. (c) FINANCIAL STATEMENTS. Progenics has delivered to CBC copies of the following financial statements: (i) Progenics' audited balance sheet at December 31, 1994, and its audited statements of operations, stockholders' equity and cash flows for the year then ended certified by Coopers & Lybrand LLP. 6.2 Registration Rights. (a) INCIDENTAL REGISTRATION. IfProgenics at any time proposes to file a registration statement under the Securities Act with respect to an offering for its own account or on behalf of holders of its securities of any class of equity security (excluding an initial public offering which does not include securities registered for the account of so-called "selling shareholders" or a registration relating solely either to the sale of securities to employees of Progenics pursuant to a stock purchase, stock option or similar plan or a merger, recapitalization or reorganization), Progenics shall promptly give CBC or any holder of Progenies Shares pursuant to a transfer permitted under Section 3.2 (collectively a "Holder") written notice of such registration at least 10 days prior to the anticipated filing date and such notice shall offer the Holder the opportunity to register such number of Progenics Shares as the Holder may request. Upon the written request of Holder given within 10 days after receipt of such notice delivered by Progenies, Progenics shall use its best efforts to cause to be registered -13- under the Securities Act all of the Progenics Shares that Holder has requested to be registered. (b) UNDERWRITING REQUIREMENTS. In connection with any offering involving an underwriting of shares herein issued by Progenics, Progenics shall not be required under paragraph 6.2(a) to include any of the Progenics Shares in such underwriting unless Holder accepts the terms of the underwriting as agreed upon between Progenics and the underwriters selected by it, and then only in such quantity as will not, in the written opinion of the underwriters, jeopardize the success of the offering by Progenics. In connection with any offering pursuant to paragraph 6.2(a). if the total amount of shares requested by Holder to be included in such offering exceeds the amount of securities sold other than by Progenics that the underwriters reasonably believe is compatible with the success of the offering, then Progenics shall be required to include in the offering only that number of shares that the underwriters believe will not jeopardize the success of the offering, (the shares so included to be apportioned pro rata among all stockholders of Progenics selling in the offering according to the total amount of shares owned by each such stockholder or in such other proportions as shall be agreed upon by such stockholders). (c) EXPENSES OF REGISTRATION. Progenics shall bear and pay all expenses incurred in connection with any registration, filing or qualification of shares with respect to registrations pursuant to this paragraph 6.2 for Holder, including, without limitation, all registration, filing, qualification, printing and accounting fees relating or apportionable thereto, but excluding underwriting discounts and commissions relating to shares being registered, applicable transfer taxes and expenses of counsel to any of the Holders, which shall be borne by the stockholders selling shares being registered. (d) PROGENICS WITHDRAWAL OF REGISTRATION. Progenics shall have no liability to Holder for Progenics' withdrawal of any registration as to which Holder has registration rights under the paragraph 6.2 provided such withdrawal is made in good faith by Progenies and not for the purpose of impairing any of Holder's rights under this paragraph 6.2. (e) OBLIGATIONS OF PROGENICS. Whenever required under this paragraph 6.2 to effect the registration of any shares, Progenies shall, as expeditiously as reasonably possible: -14- (i) prepare and file with the SEC a registration statement with respect to such shares and use its best efforts to cause such registration statement to become effective; (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; (iii) furnish to Holder such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirement of the Securities Act and such other documents as they may reasonably request in order to facilitate the disposition of the shares owned by them and covered by a registration statement flied under this paragraph 6.2; (iv) use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdiction as shall be reasonably requested by Holder, provided that Progenics shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions; (v) in the event of any underwritten public offering, enter into and perform its Obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering who shall be chosen by Progenics (and Holder shall also enter into and perform its obligations under such an underwriting agreement); and (vi) notify Holder as promptly as possible at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (f) OBLIGATIONS OF HOLDER. In connection with any registration required to be effected pursuant to this paragraph 6.2, Holder shall furnish to Progenies -15- such information regarding itself, the shares held by it and the intended method of disposition of such securities as shall be required to effect the registration of their shares. (g) LOCK-UP AGREEMENT. CBC hereby agrees that in connection with any registration of equity securities relating to an underwritten offering thereof to the general public, CBC shall not, whether or not CBC is participating in such registration, to the extent requested by Progenies or the underwriter of such offering, sell or otherwise transfer or dispose of (other than to donors who agree to be similarly bound) any Progenies Shares (other than those shares which are in fact included, in such registration) without the prior written consent of Progenics or such underwriters. as the case may be, for such period of time (not to exceed 120 days) from the effective date of the registration statement for such registration as Progenies or such underwriters may specify in writing. (h) INDEMNIFICATION. Progenies may require, as a condition to including any Progenies Shares in any registration statement filed pursuant to this paragraph 6.2, that Progenics shall have received an undertaking satisfactory to it from (i) the prospective seller of such securities, to indemnify and hold harmless Progenics, each officer and director of each such underwriter and each other person, if any, who controls Progenies or the underwriter, and (ii) each such underwriter of such securities, to indemnify and hold harmless Progenics, each officer and director of Progenics, each prospective seller, each officer and director or each prospective seller and each other person, if any, who controls Progenies or any such prospective seller within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, with respect to any statement in or omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus included therein, or any amendment or supplement thereto, if such statement or omission was made in reliance upon and in conformity with written information furnished by such prospective seller or underwriter, as the ease may be, to Progenics for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Progenics or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. -16- 7. CBC REPRESENTATIONS AND WARRANTIES. 7.1 CBC represents and warrants to Progenies as follows: (a) ORGANIZATION, STANDING AND AUTHORITY. CBC is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. CBC has all requisite corporate power to own and operate its properties and assets and to carry on its business as presently being conducted and as proposed to be conducted. CBC has, and will have on all relevant dates, all requisite legal and corporate power to execute and deliver this Agreement. The execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate CBC corporate action. The performance by CBC of any of the terms and conditions of this Agreement on its part to be performed does not and will not constitute a breach or violation of any other agreement or understanding, written or oral, to which it is a party. CBC has the full right and legal capacity to provide in the Licensed Territory all rights to the Knowhow and Licensed Patent Rights granted to Progenics hereunder. (b) PROCEEDINGS OR CLAIMS. There are no adverse proceedings, claims or actions pending, or to the best of CBC's knowledge, threatened, relating to the Knowhow and/or Licensed Patent Rights and at the time of disclosure and delivery thereof to Progenies, CBC shall have the full right and legal capacity to disclose and deliver the Knowhow and Licensed Patent Rights to Progenics without violating the fights of third parties. (c) INVESTMENT. CBC is acquiring the Progenics Shares for investment and not with a view to the distribution thereof nor with any present intention of distributing or selling any Progenics Shares except in compliance with the Securities Act. 8. MANUFACTURE AND SUPPLY. 8.1 GENERAL. The terms of the exclusive license granted to Progenics under Section 2 notwithstanding, Progenics agrees that CBC retains the right to Manufacture the Adjuvant for use in Licensed Products. CBC agrees to supply Progenies with one hundred percent (100%) of its Adjuvant Requirements for purposes of research and development, pre-clinical and human clinical trials and commercial sales of all Licensed Products. CBC also agrees to supply each of Progenics sublicensees with all of its Adjuvant Requirements provided such sublicensee enters a supply -17- agreement with CBC containing substantially the same terms pertaining to supplyas set forth herein. CBC hereby agrees, at its sole expense, to commit allreasonably necessary facilities, appropriately trained personnel, machinery, equipment, utilities and other CBC resources required to satisfy its obligations under this Agreement. CBC may contract with a third party to fulfill its obligations hereunder and/or may assign or sublicense all or any portion of its rights and obligations under this Section 8 with respect to Manufacture and supply of Adjuvant Requirements. For all purposes under this Section 8, the term CBC,.shall be deemed to include any such third party, assignee or sublicensee of CBC. 8.2 CBC TRANSFER PRICE OF ADJUVANT. (a) THROUGH FILING OF PRODUCT LICENSE APPLICATION. With respect to each and every Licensed Product, CBC shall supply one hundred percent (100%) of Adjuvant Requirements prior to Commercial Introduction of such Licensed Product, including for purposes of all research and development, pre-clinical trials and human clinical trials (including PLA-Enabling Human Clinical Trials) of such Licensed Product. CBC agrees to supply Adjuvant under this Section 8.2(a) at a transfer price to Progenics [***]. In order to verify the production cost of the Adjuvant, Progenics will have the right to pay for an independent certified public accountant to inspect the records of CBC once per year during regular business hours, provided that such accountant has entered into a confidentiality agreement with CBC limiting the disclosure of such information to authorized representatives of the Parties. (b) COMMERCIAL INTRODUCTION AND SALES. With respect to each and every Licensed Product, CBC shall supply [***] of Adjuvant Requirements for commercial sales of suchLicensed Product upon and after its Commercial Introduction. CBC agrees to supply Adjuvant under this Section 8.2(b) at a transfer price [***]. 8.3 CBC'S REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING MANUFACTURING. CBC hereby represents and warrants to Progenics and its sublicensees as follows: (a) PRE-CLINICAL TRIAL USE. CBC shall Manufacture or cause to be Manufactured all Adjuvant Requirements for use in any vaccine used in -18- *** Confidential Treatment Requested connection with any pre-clinical trial of any Licensed Product (i) strictly in compliance with (A) this Agreement, (B) the specifications for the Manufacture of Adjuvant, as may from time to time be required by the Food and Drug Administration (the "Specifications") the current version of which is set forth in Exhibit B, and (C) all applicable laws and regulations. (b) HUMAN CLINICAL TRIAL USE. CBC shall Manufacture or cause to be Manufactured all Adjuvant Requirements for use in any vaccine used in connection with any human clinical trial of any Licensed Product (i) strictly in compliance with (A) this Agreement, (B) all Specifications, and (C) all applicable laws and regulations, including but not. limited to cGMPs, to the extent applicable. Notwithstanding the foregoing, the parties acknowledge and agree that the Adjuvant which is being delivered to Progenics in the first lot (approximately one gram) has been manufactured by CBC for use in Phase 1 and Phase 2 clinical trials in a manner which CBC believes to be appropriate for such level of clinical trial. It shall be the responsibility of Progenics to obtain such assurances from regulatory authorities as it may deem necessary or appropriate for the use of such Adjuvant in the trials it is planning to conduct. (c) COMMERCIAL USE. CBC shall Manufacture or cause to be Manufactured all Adjuvant Requirements for use in the commercialization of any Licensed Product (i) strictly in compliance with (A) this Agreement, (B) all Specifications, and (C) all applicable laws and regulations, including but not limited to cGMPs, to the extent applicable. (d) CERTIFICATE OF ANALYSIS; NON-COMPLYING ADJUVANT. Before, during and after Manufacture of Adjuvant Requirements, CBC shall obtain samples, monitor the Manufacturing Process and the environment of such Manufacture, and keep such technical books and records of all of the foregoing as are required under the Specifications and all applicable laws and regulations, including but not limited to cGLPs or cGMPs (as appropriate and applicable). CBC shall test each lot of Adjuvant Requirements Manufactured for Progenics as required under the Specifications. Together with each such lot of Adjuvant Requirements, CBC shall provide a written certificate of analysis which shall set forth the results of such testing by CBC and CBC's quality control approval of such lot of Adjuvant Requirements. CBC's obligations under this Section 8.3(d) shall be at CBC's sole expense. Progenies shall be entitled to test any such Adjuvant Requirements in accordance with the Specifications, at Progenics' sole expense. Without limiting any of Progenics' other rights or remedies under this Agreement, with respect to any Adjuvant Requirements supplied -19- hereunder that do not comply with applicable representations and warranties under this Section 8.3, the Parties agree that: (i) neither Progenies nor its sublicensees shall be obligated to pay CBC the transfer price applicable to such non-complying Adjuvant Requirements; (ii) if Progenies or its sublicensee has already paid for such non-complying Adjuvant Requirements, Progenies or its sublicensee shall be entitled to a credit against future purchases for the amount paid to CBC therefor; (iii) CBC on a priority basis shall Manufacture and supply to Progenics or its sublicensee, as applicable, replacement Adjuvant Requirements in full compliance with this Section 8.3; and (iv) CBC shall bear the full cost of returning or destroying the non-complying Adjuvant Requirements. Progenies shall be deemed to have accepted any Adjuvant provided hereunder and such Adjuvant shall be deemed to comply with the provisions hereof unless Progenies shall notify CBC of the rejection of such Adjuvant and the reasons for such rejection within the forty-five days (45) of delivery of such Adjuvant. 8.4 PROCEDURES FOR ESTIMATING, ORDERING AND SUPPLYING ADJUVANT REQUIREMENTS. Subject to the other terms of this Agreement: (a) ANNUAL DEMAND FORECAST FOR EACH MANUFACTURING YEAR. During the Term, commencing on October 1, 1995 and on an on-going quarterly basis as described below, Progenics will provide CBC with a written rolling annual demand forecast of Adjuvant Requirements for each calendar year which shall be binding as to the first quarter and non-binding as to the remaining three (3) quarters. Thereafter, Progenics shall provide an updated annual demand forecast on a quarterly basis no later than ninety (90) days in advance of the commencement of the first (and binding) quarter covered by such annual demand forecast. The Parties also agree that the variance, if any, between the binding forecast of a given quarter and the last non-binding forecast for such quarter shall be between [***] and [***], meaning that Progenies' binding forecast for such quarter must be at least [***] but not more than [***] of such last non-binding forecasted amount for such quarter. (b) PURCHASE ORDERS. Except as set forth in Section 8.4(a), Progenics shall place a firm purchase order or purchase orders with CBC setting forth (i) the quantities of Adjuvant Requirement to be Manufactured and supplied hereunder, (ii) the schedule for receipt from CBC of such batch(es) of Adjuvant Requirements, and (iii) instructions for shipping and packaging. Each such firm purchase order shall be submitted no later than thirty (30) -20- *** Confidential Treatment Requested days in advance of the first scheduled date of receipt thereof. Subject to the other terms of this Agreement, Progenics shall be obligated to place firm purchase orders with CBC for, and CBC hereby commits to Manufacture and supply hereunder pursuant to such firm purchase orders, no less than one hundred percent (100%) of the amount of Adjuvant Requirements in the then-binding quarter of each annual demand forecast under Section 8.4(b); provided, however, that: (A) the Parties may mutually agree in writing to amend any such firm purchase order; (B) CBC, in its discretion, may agree to supply additional amounts of Adjuvant Requirements in excess of the then-binding amount, provided that Progenies place firm purchase order(s) for such excess Adjuvant Requirements on a timely basis; and (C) CBC agrees to provide Progenics with as much advance written notice as possible (and in any case at least thirty (30) days' written advance notice) ifCBC determines that any scheduled delivery of Adjuvant Requirements pursuant to any purchase order will be delayed for any reason of which CBC becomes aware. (c) [***] *** Confidential Treatment Requested -21- 8.5 ALLOCATION. (a) ALLOCATION AMONG CUSTOMERS. CBC and Progenics hereby agree and acknowledge that, in the event that CBC is unable to satisfy in full its obligations under this Agreement to supply one hundred percent (100%) of Adjuvant Requirements as well as CBC's obligations to third parties with respect to supply of Adjuvant, CBC shall allocate proportionately all available Adjuvant among Progenies and its sublicensees and such third parties with highest priority for the supply of Adjuvant given to outstanding firm purchase orders for comparable delivery time frames. (b) INABILITY TO SUPPLY. In the event CBC shall fail to fill one hundred percent (100%) of Progenics' allowable finn purchase orders for two successive calendar quarters (an "Inability to Supply") then, notwithstanding Section 8.1, Progenics may either purchase its Adjuvant Requirements from a third party or manufacture for its own use its Adjuvant Requirements, in either case only until such time as CBC shall demonstrate (if such demonstration shall be made within one (I) year after the end of the second consecutive quarter of such shortfall) that it is willing and able to supply Progenics' Adjuvant Requirements (provided that Progenics shall not be require. d to purchase additional Adjuvant from CBC until such time as it has satisfied commitments of reasonable scope and duration made for purchase or manufacture of Adjuvant during such period). In the event Progenics elects to manufacture the Adjuvant, CBC shall transfer to Progenics all information and Knowhow reasonably necessary to manufacture the Adjuvant and CBC shall fully cooperate with regulatory authorities to qualify Progenics as a manufacturer of the Adjuvant. Progenics' fight to manufacture under this section shall be its exclusive remedy for any damages or losses it incurs as a result of any interruption in the supply of Adjuvant under this Agreement. Without limiting the generality of the foregoing, CBC shall not be liable to Progenics for consequential damages or lost profits. 8.6 REGULATORY APPROVAL OF MANUFACTURING. CBC shall be responsible, at sole cost and expense, for obtaining all necessary regulatory approvals particular to the Adjuvant for Manufacture and supply of Adjuvant Requirements. Progenics shall advise CBC of any new requirements specified by the United States Food and Drug Administration or the Federal Food, Drug and Cosmetic Act (or the equivalent regulatory authority or law in other countries) with respect to any Licensed Product. At any time when any portion of the Adjuvant Requirements is being Manufactured by CBC for Progenics, Progenics shall have the right to have its personnel observe all phases and areas of such Manufacture and the CBC facility, -22- and CBC shall not modify in any manner any Specifications without Progenics' prior written consent (which consent shall not be unreasonably withheld). 8.7 CBC RECORDKEEPING AND INSPECTION. (a) TECHNICAL RECORDS. With respect to any Manufacture and supply of Adjuvant Requirements, CBC shall, at its expense, keep properly completed technical books and records, test data and reports as required under the Specifications and all applicable laws and regulations, including but not limited to cGLPs or cGMPs (as appropriate), and in any case shall maintain such technical information for at least two (2) years from the expiration date of the relevant Licensed Product or longer if required under applicable laws and regulations (including but not limited to cGLPs and cGMPs, as applicable). During regular business hours and upon reasonable advance written request, CBC shall make any such technical information available to Progenics for inspection and copying. (b) FINANCIAL RECORDS. During the Term, CBC shall keep for at least three (3) years records of its Fully Burdened Manufacturing Costs, and the calculations thereof in sufficient detail to permit Progenics to confirm the accuracy thereof. At the request of Progenics, and not more frequently than once per year, upon at least five (5) business days' prior written notice, and at the expense of Progenics (except as otherwise provided below), CBC shall permit a nationally recognized, independent, certiffied public accountant selected by Progenics and acceptable to CBC to inspect (during regular business hours) any such CBC records for the then-preceding three (3) years solely to the extent necessary to verify such costs, margins and calculations, provided that such accountant in advance has entered into a confidentiality agreement with CBC and Progenics substantially similar to the confidentiality provisions of this Agreement, limiting the use and disclosure of such information to authorized representatives of the Parties. Results of any such inspection shall be made available to both Parties. If such inspection reveals a deficiency in the calculation of CBC's Fully Burdened Manufacturing Cost resulting in an overpayment to CBC of the transfer price by five percent (5%) or more, CBC shall pay all costs and expenses of such inspection. (c) QUALITY AUDIT. To the extent required by law, CBC shall permit Progenics to audit, in cooperation with CBC's personnel, production, packaging, and quality control facilities of CBC and any of its significant suppliers as they relate to production of the Adjuvant to allow Progenics to verify CBC's compliance with its responsibilities under this Agreement. -23- 8.8 LIABILITY. (a) INDEMNIFICATION BY PROGENIES. Except as otherwise provided in Sections 8.8(b) or (c), Progenics will defend, indemnify and hold harmless CBC against any and all claims, actions, liabilities, damages, loses, costs or expenses, including reasonable attorneys' fees, based upon or arising out of the sales or use of any Licensed Product by Progenics or a sublicensee, unless CBC should fail to give Progenics prompt notice thereof in writing and such failure materially prejudices CBC's abilities to defend against such claim. CBC shall permit Progenics to control the investigation, preparation and defense thereof(including any compromise or settlement thereof and any appeal) and provide reasonable assistance to Progenics, at Progenics' expense, in that regard. (b) LIABILITY. Each Party assumes full responsibility and liability for any injury, damage or expense which it or its employees, agents and invitees incur and which arise from its manufacture, handling and use of the Adjuvant or Licensed Products, except to the extent such injury, damage or expense arises from the negligence or willful misconduct of the other Party. (c) INDEMNIFICATION BY CBC. CBC will defend, indemnify and hold harmless Progenics against any and all claims, actions, liabilities, damages, losses, costs or expense (including reasonable attorneys' fees) based upon the failure of the Adjuvant to conform to the Specifications; of CBC, unless Progenics shall fail to give CBC prompt notice thereof in writing and such failure materially prejudices Progenics' ability to defend against said claim. Progenics shall permit CBC to control the investigation, preparation and defense thereof (including any compromise or settlement thereof and any appeal) and provide reasonable assistance to CBC, at CBC's expense, in that regard. 9. CONFIDENTIALITY. 9.1 CONFIDENTIALITY. The Parties acknowledge that during the Term, either Party may receive from the other Party information which is proprietary, confidential and of significant commercial value to the disclosing Party. Except to the extent expressly authorized by this Agreement, the Parties agree that, for the Term and for five (5) years thereafter, the receiving Party shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose (except those related to this agreement) any information furnished to it by the other Party pursuant to this Agreement, except to the extent that it can be -24- established by the receiving Party by competent proof (including written records) that such information: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; (d) was subsequently lawfully disclosed to the receiving Party by a third party; or (e) was subsequently independently developed by receiving Party. 9.2 PERMITTED DISCLOSURES. Each Party may disclose the other Party's information to the extent such disclosure is reasonably necessary in prosecuting or defending litigation, filing, prosecuting or maintaining patent applications or patents, complying with applicable laws or regulations, or, in the case of Progenics and its sublicensees, conducting preclinical or clinical trials or preparing or filing regulatory filings with respect to Licensed Products; provided, however, that if a Party is required to make any disclosure of the other Party's information furnished pursuant to this Agreement, it will give reasonable advance notice of such disclosure requirements to the other Party and, except to the extent inappropriate as in the case of patent applications, will use its best efforts to secure confidential treatment of such information required to be disclosed. 10. TERM; TERMINATION. 10.1 TERM. This Agreement shall commence as of the Effective Date and, unless sooner terminated as provided in this Section 10, shall expire on the date royalties are not longer payable by Progenics to CBC under Section 3.3 (the "Term"), upon which expiration Progenics shall thereafter have in perpetuity a royalty-free license in the Licensed Territory to use the Knowhow and practice the Licensed Patent Rights to develop, make, have made, use and sell Licensed Products without any accounting to CBC. 10.2 MATERIAL BREACH. Subject to Section 13.6, failure by either Party to comply with any of the material obligations contained in this Agreement shall entitle the other -25- Party to give to the Party in default notice specifying the nature of the default and requiring it to cure such default. If such default is not cured within sixty (60) days after the receipt of such notice, the notifying Party shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement and in addition to any other remedies available to it by law or in equity, to terminate this Agreement effective upon written notice to the other Party. The right of a Party to terminate this Agreement, as hereinabove provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous default. 10.3 ACCRUED RIGHTS, SURVIVING OBLIGATIONS; SUBLICENSEES. Expiration or any termination of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such expiration or termination. Such expiration or termination shall not relieve either Party from obligations which are expressly indicated to survive expiration or termination of this Agreement, which obligations include, without limitation, those under Sections 4.4, 5,2(b), 7, 8.7, 8.8, 9, 11 and 12. [***] 10.4 TERMINATION BY PROGENICS. Progenics may terminate this Agreement by giving 90 days written notice to CBC: provided Progenics shall be obligated to fulfill its obligations under any binding purchase order outstanding; and further provided that upon such termination all rights to Know-how and Licensed Patent Rights shall revert to CBC. 11. PATENTS. 11.1 INVENTIONS. Title to any Licensed Patent Rights will follow inventorship, which will in turn be determined in accordance with United States laws of inventorship and written evidence of the Parties. Designation of inventors on any patent application is a matter of law and will be solely within the discretion of qualified patent counsel of CBC and Progenics. 11.2 PATENT PROSECUTION STRATEGY. Subject to the other terms of this Agreement: (a) CBC SOLELY OWNED LICENSED PATENT RIGHTS. During the Term, the filing, prosecution and maintenance of Licensed Patent Rights solely owned by CBC will be under the control of CBC, at its sole cost and expense. (b) JOINTLY OWNED LICENSED PATENT RIGHTS. During the Term, the filing, prosecution and maintenance of any Licensed Patent Rights jointly owned *** Confidential Treatment Requested -26- by the Parties will be under the control of the Party from whom the majority of the data underlying such Licensed Patent Rights arose (the "controlling Party"), and the controlling Party is authorized to undertake such filings, prosecutions and maintenance at its sole cost and expense, using patent counsel reasonably satisfactory to the non-controlling Party and with the reasonable cooperation of the non-controlling Party and its employees, provided that: (i) the controlling Party notifies the non-controlling Party reasonably prior to the filing of any such Licensed Patent Rights by the controlling Party and permits review of such proposed Licensed Patent Rights by the non-controlling Party; (ii) the controlling Party provides the non-controlling Party promptly with copies of all communications received by the controlling Party; (iii) the controlling Party keeps the non-controlling Party reasonably informed of the status of such Licensed Patent Rights, and (iv) the controlling Party provides the non-controlling Party notice at least thirty (30) days in advance of taking or failing to take any action that would affect the scope or validity of any such Licensed Patent Rights (including but not limited to substantially narrowing or canceling any claim, abandoning any such Licensed Patent Rights or not filing or perfecting the filing of any such Licensed Patent Rights in any country), with prior written notice of such proposed action or inaction so that the non-controlling Party has a reasonable opportunity to review and make comments. Either Party may assign its rights to any jointly owned Licensed Patent Rights to the other Party, who will have the right, in its discretion, to assume the prosecution and maintenance thereof at its sole expense and as the sole owner thereof. (c) [***] *** Confidential Treatment Requested -27- [***] 11.3 THIRD PARTY INFRINGEMENT. Either Party promptly shall notify the other Party in writing of any alleged infringement of the Licensed Patent Rights and of any available evidence thereof. The Parties shall consult as to a potential litigation strategy or strategies against any alleged infringer. If the Parties commence and prosecute a suit jointly, they shall share all associated attorneys' fees and out-of-pocket litigation expenses equally. If the Parties do not decide to jointly commence an action within thirty (30) days of the notice specified above, or otherwise terminate the alleged infringement, CBC shall have the right, at its expense, to bring suit against the allegedly infringing party. [***] 11.4 TRADEMARKS. Progenics, at its expense, shall be responsible for the selection, registration and maintenance of all trademarks and tradenames which it employs in connection with Licensed Products. The terms "trademark" or "tradename" shall include, without limitation, the name or names of any Licensed Products, the design of the packaging of any Licensed Products, and the appearance of dosage forms of any Licensed Product. Progenics shall own such tradenames and trademarks and shall retain such ownership upon termination of this Agreement. 12. ARBITRATION. Any dispute, controversy or claim between the Parties, arising out of or relating to this Agreement or the Parties' respective rights and obligations hereunder either during or after the Term (including the question as to whether any such matter is arbitrable) shall be subject to binding arbitration in accordance with then-existing commercial arbitration rules of the American Arbitration Association. The Parties agree that, in the course of any such *** Confidential Treatment Requested -28- arbitration, service of any notice at their respective addresses in accordance with Section 13.11 of this Agreement shall be valid and sufficient, and any arbitration hereunder shall be in the jurisdiction of the defendant Party, which in the case of Progenics shall be New York and in the case of CBC shall be Massachusetts. In any such arbitration, an award shall be rendered by a majority of the members of a board of arbitration consisting of three (3) members, one (1) of whom shall be chosen by each of Progenics and CBC and the third of whom shall be appointed by mutual agreement of such two (2) arbitrators. In the event of failure of such two (2) arbitrators to agree within sixty (60) days after the commencement of arbitration (as defined below) upon appointment of the third arbitrator, or in the event that either Party shall fail to appoint an arbitrator within thirty (30) days after the commencement of the arbitration proceedings, the third arbitrator or (upon request of the other Party) the second arbitrator and the third arbitrator, as the case may be, shall be appointed by the American Arbitration Association in accordance with its then existing commercial arbitration rules. For purposes of this Section, the "commencement of the arbitration proceeding" shall mean the date upon which the defendant Party receives from the American Arbitration Association a copy of the request for arbitration filed by the party desiring to have recourse to arbitration. The decision of the arbitrators shall be in writing and shall set forth the basis therefor. The Parties shall abide by all awards rendered in arbitration proceedings, and such awards may be enforced and executed upon in any court having jurisdiction over the Party against whom enforcement of such award is to be sought. The Parties shall divide equally the administrative charges, arbitrators' fees, and related expenses of arbitration, but each Party shall pay its own legal fees incurred in connection with any such arbitration; provided, however, if the arbitrators determine that one Party prevailed clearly and substantially over the other Party, then the non-prevailing Party shall also pay the reasonable attorneys' fees and expert witness costs and other arbitration costs of the prevailing Party. 13. MISCELLANEOUS PROVISIONS. 13.1 NO PARTNERSHIP. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, distributorship, agency, employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein. 13.2 ASSIGNMENTS. Except as set forth in Section 8 hereof, neither Party shall assign any of its right or obligations hereunder or this Agreement, except that either Party may do so: (a) as incident to the merger, consolidation, reorganization or acquisition of stock or assets affecting substantially all of the assets or voting control of such Party; (b) to any wholly-owned subsidiary if such Party remains liable and responsible for the performance and observance of all of the subsidiary's duties and obligations hereunder; (c) with the prior written consent of the other -29- Party; (d) as incident to a joint venture between Progenics and a major corporate partner; or (e) as incident to any reorganization of CBC; including any reorganization under the provisions of Chapter 11 of the United States Bankruptcy Code and any merger, spin-off, sale of assets or other transaction. This Agreement shall be binding upon the successors and permitted assigns of the Parties and the name of a Party appearing herein shall be deemed to include the names of such Party's successors and permitted assigns to the extent necessary to carry out the intent of this Agreement. Any assignment not in accordance with this Section 13.2 shall be void. 13.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. Without limiting the generality of the foregoing, CBC agrees to provide a letter to FDA authorizing Progenics to cross reference CBC's drug master flies for QS-21. 13.4 NO NAME OR TRADEMARK RIGHTS. Except as otherwise provided herein, no right, express or implied, is granted by this Agreement to use in any manner the names "Cambridge Biotech Corporation" or "Progenics Pharmaceuticals, Inc." or any contraction thereof or any other trade name or trademark of CBC or Progenics in connection with the performance of this Agreement. 13.5 PUBLIC ANNOUNCEMENTS. Except as may otherwise be required by applicable law or regulation, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other Party (not to be unreasonably withheld). 13.6 FORCE MAJEURE. If any default or delay occurs which prevents or materially impairs a Party's performance and is due to a cause beyond the Party's reasonable control, including but not limited to any act of any god, flood, fire, explosion, earthquake, casualty, accident, war, revolution, civil commotion, blockade or embargo, injunction, law, proclamation, order, regulation or governmental demand, the affected Party promptly shall notify the other Party in writing of such cause and shall exercise diligent efforts to resume performance under this Agreement as soon as possible. Neither Party shall be liable to the other Party for any loss or damage due to such cause. Neither Party may terminate this Agreement because of such default or delay. 13.7 ENTIRE AGREEMENT OF THE PARTIES; AMENDMENTS. This Agreement, including the exhibits attached hereto which are incorporated herein, constitutes and contains the entire understanding and agreement of the Parties and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, -30- whether verbal or written, between the Parties respecting the subject matter hereof. No waiver, modification or amendment of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each of the Parties. 13.8 SEVERABILITY. In the event that any of the provisions of this Agreement shall for any reason be held by any court or authority of competent jurisdiction to be invalid, illegal or unenforceable, such provision or provisions shall be validly reformed to as nearly as possible approximate the intent of the Parties and, if unreformable, shall be divisible and deleted in such jurisdiction; elsewhere, this Agreement shall not be affected so long as the Parties are still able to realize the principal benefits bargained for in this Agreement. 13.9 CAPTIONS. The captions to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. 13.10 APPLICABLE LAW. This Agreement shall be governed by and interpreted in accordance with the laws of The Commonwealth of Massachusetts applicable to agreements made and performed wholly within such state without regard to its principles of conflicts of laws. 13.11 NOTICES AND DELIVERIES. Any notice, requests, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted by telecopy (with written confirmation to follow via United States first class mail) or five (5) days after being sent by United States certified mail to the Party to whom it is directed at its address shown below or such other address as such Party shall have last given by written notice to the other Party in accordance with this Section. If to CBC, addressed to: Cambridge Biotech Corporation 365 Plantation Street Worcester, MA 01605 Attention: President Telecopy: 508-797-4014 with a copy to: Attention: General Counsel Telecopy: 508-797-4014 -31- If to Progenics, addressed to: Progenics Pharmaceuticals, Inc. 777 Old Saw Mill River Road Tarrytown, NY 10591 Attention: Paul J. Maddon, M.D., Ph.D., CEO Telecopy: 914-789-2817 13.12 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.13 COMPLIANCE WITH LAWS. Progenics and CBC each shall comply with all applicable laws in connection with its own performance under this Agreement. Without limiting the generality of the foregoing, Progenics shall be responsible for compliance with all applicable product safety, product testing, product labeling, package marking, and product advertising laws and regulations, except with respect to efforts performed by CBC in which case CBC shall be responsible for its activities as governed by such laws and regulations. 13.14 SURVIVAL. The representations, warranties, covenants and agreements made herein shall survive any investigation made by a Party and shall be able to be relied fully on by the Parties. 13.15 BANKRUPTCY COURT APPROVAL: ESCROW. The performance of either party of its obligations hereunder is subject to approval of this Agreement by the United States Bankruptcy Court for the District of Massachusetts, Western Division. Within thirty days following execution of this Agreement, CBC will deliver to a mutually agreeable escrow agent all documentation set forth on EXHIBIT C, attached hereto and made a part hereof, (the "Escrow Documentation") necessary for Progenics to manufacture the Adjuvant pursuant to the provisions of Section 8.5(b) of this Agreement. [***] At Progenics' expense, Progenics shall obtain a verification from Coopers & Lybrand, L.L.P. that the documentation delivered to the Escrow Agent conforms with the definition of Escrow Documentation as set forth in Exhibit C. The Escrow Documentation shall be held by the escrow agent pursuant to the terms of a mutually agreeable escrow agreement which shall *** Confidential Treatment Requested -32- provide INTER ALIA for the updating of the Escrow Documentation as necessary by CBC to insure that the Escrow Documentation is current and for the delivery of the Escrow Documentation to CBC upon the effective date of CBC's reorganization plan and prior to such date for delivery of the Escrow Documentation to Progenics in the event of the occurrence of an Inability to Supply or in the event that CBC's Chapter 11 bankruptcy proceeding is converted to a Chapter 7 bankruptcy proceeding. The procedures set forth in this Section 13.15 respecting escrow shall apply each and every time, if any, that CBC enters into reorganization or bankruptcy in the future. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective corporate officers, duly authorized as of the day and year first above written. CAMBRIDGE BIOTECH CORPORATION PROGENICS PHARMACEUTICALS, INC. By: /s/ Alison Taunton-Rigby By: /s/ Paul J. Maddon -------------------------- --------------------------------- Name: Alison Taunton-Rigby Name: Paul J. Maddon, M.D., Ph.D. ----------------------- ------------------------------- Title: President and CEO Title: CEO and Scientific Director ---------------------- ------------------------------ -33- EXHIBIT A LICENSED PATENT RIGHTS U.S. Patent No. 5,057,540, entitled "Saponin Adjuvant" inventors Charlotte A. Kensil and Dante J. Marciani, issued October 15, 1991 (filed August 27, 1990). COUNTRY SERIAL NUMBER Australia 19340/88 Canada 568,119 Denmark 6029/89 Europe 88905332.8 Japan 504974/1988 PCT PCT/US88/01842 EXHIBIT B CAMBRIDGE BIOTECH CORPORATION 365 PLANTATION ST. WORCESTER, MA 01605 CERTIFICATE OF ANALYSIS [***] *** Confidential Treatment Requested EXHIBIT C [***] *** Confidential Treatment Requested [LOGO] PROGENICS Progenics Pharmaceuticals, Inc. Old Saw Mill River Road Tarrytown, New York 10591 (914) 789-2800 Telefax:(914) 789-2817 September 6, 1995 Alison Taunton-Rigby, Ph.D. Chief Executive Officer Cambridge Biotech Corporation 365 Plantation Street Worcester, MA 01605 Re: Cambridge Biotech Corporation/Progenics License and Supply Agreement (August 1995) Dear Dr. Rigby, This letter confirms our understanding that if pursuant to Paragraph 8.5(b) of the above-referenced agreement Progenics finds it necessary to manufacture the Adjuvant, CBC agrees that it will immediately execute and deliver a letter as set forth in Appendix A (attached). Sincerely, /s/ Paul J. Maddon Paul J. Maddon, M.D., Ph.D. Chairman and CEO Scientific Director Accepted: /s/ Alison Tauton-Rigby Alison Taunton-Rigby, Ph.D. Chief Executive Officer Cambridge Biotech Corporation PJM/em EX-10.16 12 GP120 SUBLICENCE AGMT DTD 8/31/95 Exhibit 10.16 FINAL CAMBRIDGE BIOTECH CORPORATION and PROGENICS PHARMACEUTICALS, INC. SUBLICENSE TABLE OF CONTENTS BACKGROUND .........................................................1 1. DEFINITIONS ........................................................2 2. GRANT ..............................................................3 3. ROYALTIES ..........................................................3 4. PAYMENTS AND REPORTS ...............................................4 5. BOOKS AND RECORDS ..................................................5 6. NOTICES ............................................................5 7. TERM AND TERMINATION ...............................................5 8. NEGATION OF WARRANTIES AND INDEMNITY ...............................6 9. LAWS AND REGULATIONS ...............................................7 10. USE OF NAMES .......................................................7 11. PATENT NOTICE ......................................................8 12. MISCELLANEOUS PROVISIONS ...........................................8 APPENDIX A ........................................................10 APPENDIX B ........................................................11 -i- SUBLICENSE AGREEMENT This is a SUBLICENSE AGREEMENT to be effective on the last date of the signature dates provided hereinbelow, by and between CAMBRIDGE BIOTECH CORPORATION (CBC), debtor and debtor in possession, Case No. 94-43054-JFQ, United States Bankruptcy Court for the District of Massachusetts, Western Division, a Delaware corporation, having offices at 365 Plantation Street, Worcester, Massachusetts 01605, and PROGENICS PHARMACEUTICALS, INC., a Delaware corporation having offices at 777 Old Saw Mill River Road, Tarrytown, New York 10591 (SUBLICENSEE). BACKGROUND In the course of research conducted at Harvard University, Department of Cancer Biology, Harvard School of Public Health, certain inventions were made relating to the HIV-1 envelope glycoprotein, designated gp120. Additional inventions relating to the HIV-1 envelope glycoprotein include gp160 and methods for assay. The President and Fellows of Harvard College ("Harvard") is the owner of these inventions, subject to rights reserved by the United States Government, pursuant to various assignments by Myron E. Essex and Tun-Hou Lee to Harvard of all their right, title and interest in and to the inventions and any patents resulting therefrom. Harvard has been granted U.S. Patent No. 4,725,669 entitled "Assay for Detecting Infection by Human T-Cell Lymphotrophic Virus-III" issued on February 16, 1988 directed to gp120 and cross-reactive peptides. Currently pending is a divisional application, U.S. Serial No. 056,134, filed May 29, 1987, directed to gp160 and cross-reactive peptides and to methods for assaying for the glycoproteins. CBC is the exclusive, worldwide licensee of these inventions and the issued patent and pending patent applications by way of an exclusive license agreement from Harvard, and has the right to grant sublicenses thereunder for making, using or selling of the inventions which are disclosed and claimed in the issued patent and pending patent applications. SUBLICENSEE desires to use LICENSED PATENT RIGHTS in a commercial diagnostic, therapeutic, or vaccine application for public use and benefit or for selling products for research applications only. NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows: 1 1. DEFINITIONS 1.1. LICENSED PATENT RIGHTS shall mean U.S. Patent No. 4,725,669, issued February 16, 1988, and pending U.S. Patent Application Serial No. 056,134, filed May 29, 1987, and any divisionals, continuations, continuations-in-part based thereon, and any patents which may issue therefrom and any reissues, re-examinations, or extensions thereof; and any and all foreign patents and patent applications corresponding to any of the foregoing patents and patent applications, as well as such other patents or patent applications as are listed in Appendix A, effective as of the date said patents or patent applications are added to Appendix A, and the inventions described or claimed therein. 1.2. FIELD OF USE shall mean products for research applications only. [***] 1.3. LICENSED PRODUCT(S) shall mean goods covered by or made in accordance with LICENSED PATENT RIGHTS. For purposes of example only, LICENSED PRODUCT(S) may include bulk glycoprotein for use in research applications only. 1.4. [***] 1.5. FIRST USE shall mean the date of the initial transfer by SUBLICENSEE of LICENSED PRODUCTS to any third party in exchange for cash or some equivalent to which value can be assigned for the purpose of determining the NET SALES. 2 [***] Confidential Treatment Requested 1.6. EARNED ROYALTIES shall mean royalties paid or payable by SUBLICENSEE to CBC determined with respect to NET SALES. 1.7. EFFECTIVE DATE shall mean the date of the last signature date(s) provided hereinbelow. 1.8. PRIME LICENSE shall mean the exclusive license agreement between Harvard and CBC. 1.9. SUBLICENSEE is understood to include all of its AFFILIATES. AN AFFILIATE of SUBLICENSEE shall mean any corporation or other business entity controlled by, controlling, or under common control with SUBLICENSEE. For this purpose, "control" means direct or indirect beneficial ownership of at least fifty percent (50%) of the voting stock or equity, or at least fifty percent (50%) interest in the income of such corporation or other business. 2. GRANT 2.1. CBC grants to SUBLICENSEE, subject to all the terms and conditions of this Agreement, a non-exclusive, worldwide right and license to make, have made, use, and sell LICENSED PRODUCTS under LICENSED PATENT RIGHTS in the Field of Use. 2.2. CBC hereby grants to SUBLICENSEE the right to extend the license granted herein to an Affiliate, subject to the terms and conditions of this Agreement. CBC shall receive prompt written notice of each such extension and of any termination of such AFFILIATE license. SUBLICENSEE is expressly not granted a right to sublicense anyone other than an Affiliate under this Agreement. 3. ROYALTIES As consideration for the rights granted hereunder, SUBLICENSEE shall make the following payments to CBC: [***] 3 [***] Confidential Treatment Requested [***] 3.3. Only one royalty shall be payable with respect to any LICENSED PRODUCT regardless of whether it or its use is covered by one or more LICENSED PATENT RIGHTS. On sales between SUBLICENSEE and its AFFILIATES for resale, the royalty shall be paid on the resale to any third-party purchaser. 4. PAYMENTS AND REPORTS 4.1. SUBLICENSEE agrees to notify CBC promptly, in writing, of the date of the FIRST USE of LICENSED PRODUCT(S). 4.2. Beginning with date of FIRST USE, SUBLICENSEE shall pay to CBC EARNED ROYALTIES within sixty (60) days from the end of each calendar quarter, which is the end of March, June, September, and December. Any royalties not paid within this time period shall be deemed past due royalties. Any past due royalties shall bear interest at the rate of [***] PER ANNUM from their due date, which interest shall be paid by SUBLICENSEE to CBC. 4.3. SUBLICENSEE shall also prepare for each calendar quarter a written report in the form substantially as set forth in Appendix B setting forth the NET SALES and the EARNED ROYALTIES payable thereon, including a detailed listing of all LICENSED PRODUCTS sold and all deductions from NET SALES. The reports required by this Agreement shall be certified by an officer of SUBLICENSEE to be correct to the best of SUBLICENSEE's knowledge and information. 4.4. All amounts payable to CBC shall be paid in United States Dollars. In the event any LICENSED PRODUCT shall be sold for funds other than United States funds, the NET SALES of such product shall first be determined in the foreign funds and then converted into the equivalent United States funds at: (i) the rate applicable to the transfer of funds arising from royalty payments as established by the exchange control authorities of the country of which such funds are the national currency, for the last business day of the accounting period for which payment is thus made; or (ii) if there is no rate so applicable, then the buying rate for such foreign funds as published by the Wall Street Journal on the last business day of such calendar accounting period. 4 [***] Confidential Treatment Requested 5. BOOKS AND RECORDS 5.1. SUBLICENSEE shall keep, and shall require its AFFILIATES to keep, accurate and correct records of calculations for determining EARNED ROYALTIES on sales of LICENSED PRODUCTS made, used and sold under this Agreement, appropriate to determine the amount of EARNED ROYALTIES based on NET SALES at least three (3) years following a given reporting period. The records shall be available during normal business hours for inspection at the expense of CBC by a certified public accountant, selected by CBC and acceptable to SUBLICENSEE, for the sole purpose of verifying reports and payments hereunder. The accountant shall not disclose to CBC any financial information other than that information relating to the accuracy of reports and payments made under this Agreement. 6. NOTICES 6.1. Any notice required by this Agreement shall be sent by registered or certified mail properly addressed or by telex or facsimile, with a mailed confirmation copy, properly addressed to the other party at the address designated below, or to another address as may be designated in writing by the party. The notice shall be effective as of the date of the postmark of such mailed notice. For CBC: CAMBRIDGE BIOTECH CORPORATION 365 Plantation Street Worcester, Massachusetts 01605 Attn: President with a copy Attn: General Counsel FOR SUBLICENSEE: PROGENICS PHARMACEUTICALS, INC. 777 Old Saw Mill River Road Tarrytown, NY 10591 Attn: Chief Executive Officer 7. TERM AND TERMINATION 7.1. The term of this Agreement, unless sooner terminated as provided herein, shall extend from the EFFECTIVE DATE until expiration of the last to expire patents included in LICENSED PATENT RIGHTS. 5 7.2. Upon any breach of, or default under, this Sublicense Agreement by SUBLICENSEE, CBC may terminate this Agreement by giving ninety (90) days written notice to SUBLICENSEE. The termination shall take effect at the end of the ninety-day period, unless during the period SUBLICENSEE cures such breach or default to CBC's satisfaction. 7.3. SUBLICENSEE has the right to terminate this Agreement at any time upon giving ninety (90) days written notice to that effect to CBC. 7.4. Termination of this Agreement shall not affect any rights or obligations accrued prior to the date of the termination, including SUBLICENSEE's obligation to pay all EARNED ROYALTIES and SUBLICENSEE's obligation to indemnify CBC. Upon termination of this Agreement all unpaid EARNED ROYALTIES due to CBC shall become immediately due and payable. 7.5. Waiver by CBC of a single default or breach or of succession of defaults or breaches shall not deprive CBC of any right to terminate this Agreement pursuant to the terms hereof upon the occasion of any subsequent default or breach. [***] 7.6. If the PRIME LICENSE between Harvard and CBC is terminated, this Agreement between CBC and SUBLICENSEE shall, assigned to Harvard, and Harvard shall accept such assignment. CBC shall notify SUBLICENSEE if the PRIME LICENSE is terminated. 8. NEGATION OF WARRANTIES AND INDEMNITY 8.1. CBC has the right to enter into this Agreement notwithstanding its bankruptcy filings. CBC makes no representations or warranties as to the validity or scope of any LICENSED PATENT RIGHTS. 8.2. CBC makes no representations or warranties that the manufacture, use, sale or other disposal of the LICENSED PRODUCTS is or will be free from infringement of patents of third parties. 8.3. CBC makes no representations or warranties whatsoever, either express or implied, as to the merchantability or fitness of the LICENSED PRODUCTS for a particular purpose, and SUBLICENSEE shall make no statements, representations or warranties whatsoever to any third parties which are inconsistent with such disclaimer by CBC. 8.4. SUBLICENSEE shall defend, indemnify and hold harmless CBC and Harvard, their directors, officers, employees, and agents, from and against any and all claims, demands, damages, losses, and expenses of any nature, including attorney's fees, for but not limited to death, personal injury, illness, property damage or products liability arising from or in 6 [***] Confidential Treatment Requested connection with any of the following: (1) the use by SUBLICENSEE of any method or process related to the LICENSED PATENT RIGHTS; or (2) any use, sale or other disposition of any of the LICENSED PRODUCTS by SUBLICENSEE or any statement, representation or warranty of SUBLICENSEE with respect thereto; or (3) the use by any person of the LICENSED PRODUCTS made by SUBLICENSEE. CBC shall reasonably cooperate with SUBLICENSEE in defending any such claim. CBC shall be entitled to receive information regarding the status of any such matter and shall be entitled to retain counsel on its own behalf and at its sole expense if CBC is named as a party or if CBC is not satisfied with the defense provided by SUBLICENSEE for any reason, the rights and obligations of this paragraph shall survive termination or expiration of the Agreement. CBC and/or Harvard may, at its option, require SUBLICENSEE to name CBC and/or Harvard as a co-insured on a product liability insurance policy deemed sufficient by CBC. 9. LAWS AND REGULATIONS 9.1. SUBLICENSEE shall comply with all foreign and United States federal, state, and local laws, regulations, rules and orders applicable to the testing, production, transportation, packaging, labeling, sale and use of the LICENSED PRODUCTS. 10. USE OF NAMES 10.1. SUBLICENSEE shall not use the names "Harvard College" or "Harvard," the names of the inventors, "Myron E. Essex," or "Tun-Hou Lee," or the name "Cambridge Biotech Corporation" or any other name or mark by which Harvard or CBC may be identified for any purpose without prior written consent obtained from the respective parties in each instance. 10.2. CBC shall not use the names "Progenics" or "Progenics Pharmaceuticals, Inc." or any other name or mark by which SUBLICENSEE may be identified for any purpose without prior written consent obtained from SUBLICENSEE in each instance. 7 11. PATENT NOTICE 11.1. SUBLICENSEE shall apply the patent marking notices required by the laws of the United States and relevant countries. 12. MISCELLANEOUS PROVISIONS 12.1. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes and replaces all prior agreements, understandings, writings, and discussions between the parties relating to said subject matter. 12.2. This Agreement may be amended only by a written instrument executed by the parties. 12.3. Without prior written approval of CBC and Harvard, the license granted pursuant to this Agreement shall not be assigned or transferred by SUBLICENSEE to any other party other than to a successor to the entire business interest of SUBLICENSEE. 12.4. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns. [Balance of page intentionally left blank] 8 12.5. This Agreement shall be governed and construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts. IN WITNESS WHEREOF, this Agreement is executed by the parties hereinbelow: CAMBRIDGE BIOTECH CORPORATION By: /s/ Jeffrey Beaver March 13, 1995 ----------------------- ----------------------- Jeffrey T. Beaver Date Chief Executive Officer PROGENICS PHARMACEUTICALS, INC. By: /s/ Paul J. Maddon March 7, 1995 ------------------------ ----------------------- Paul J. Maddon, M.D. Ph.D. Date Chairman and CEO AGREED AS TO SECTION 7.6: PRESIDENT AND FELLOWS HARVARD COLLEGE By: /s/ Joyce Brinton 3/17/95 ------------------------- ------------------------ Joyce Brinton, Director Date Office for Technology and Trademark Licensing 9 APPENDIX A 1. U.S. PATENT NO. 4,725,669 Title: ASSAY FOR DETECTING INFECTION BY HUMAN T-CELL LYMPHOTROPHIC VIRUS-III Inventors: Myron E. Essex and Tun-Hou Lee Filed: November 9, 1984 Issued: February 16, 1988 The claims of this patent are directed to gp120 and cross-reactive peptides. 2. U.S. PATENT APPLICATION SERIAL NO. 056,134 Title: ASSAY FOR DETECTING INFECTION BY HUMAN T-CELL LYMPHOTROPHIC VIRUS-III Inventors: Myron E. Essex and Tun-Hou Lee Filed: May 29, 1987 Cross-Reference: division of U.S. 4,725,669 Issued: currently pending This is a divisional application of U.S. 4,725,669, directed to methods of assay using the proteins covered by the patent and to gp160 and cross-reactive peptides. 10 APPENDIX B FORM OF ROYALTY REPORT For each Licensed Product, SUBLICENSEE shall report the following information: Gross amount billed or invoiced Deductions allowable under Section 1.4 Resulting Net Sales Amount received Effective royalty rate Amount of Earned Royalties payable with report 11 EX-10.17 13 COOP. R&D AGMT DTD 2/25/93 Exhibit 10.17 COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT ARTICLE 1. INTRODUCTION This Cooperative Research and Development Agreement (CRADA) between the Centers for Disease Control and Prevention (CDC) and the Collaborator will be effective when signed by all parties. By signing this CRADA, the Collaborator acknowledges that it has received and read a copy of the Policy Statement on Cooperative Research and Development Agreements and Intellectual Property Licensing which is attached as Appendix A. The Research and Development project(s) which will be undertaken by each of the Parties in the course of this CRADA is detailed in the Research Plan (RP) which is attached as Appendix B. The funding and staffing commitments of the Parties are set forth in Appendix C. Any exceptions or changes to the CRADA are set forth in Appendix D. ARTICLE 2. DEFINITIONS As used in this CRADA, the following terms shall have the indicated meanings: 2.1 "COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT" or "CRADA" means this Agreement, entered into by CDC pursuant to the Federal Technology Transfer Act of 1986 and Executive Order 12591 of October 10, 1987. 2.2 "PROPRIETARY INFORMATION" means confidential scientific, business or financial information provided that such information: 2.2.1 Is not publicly known or available from other sources who are not under a confidentiality obligation to the source of the information; 2.2.2 Has not been made available by its owners to others without a confidentiality obligation; 2.2.3 Is not already available to the receiving Party without a confidentiality obligation; and 2.2.4 Does not relate to potential hazards or cautionary warnings associated with the production, handling or use of the subject matter of the Research Plan of this CRADA. 2.3 "SUBJECT DATA" means all recorded information first produced in the performance of this CRADA. 2.4 "RESEARCH RESULTS" means all tangible materials other than Subject Data first produced in the performance of this CRADA. 2.5 "SUBJECT INVENTION" means any invention conceived and reduced to practice in the performance of research under this CRADA that may be patentable under 35 U.S.C. Section 101 or Section 161, protectable under 7 U.S.C. Section 2321, or otherwise protectable by other types of U. S. or foreign Intellectual Property (IP) fight. 2.6 "GOVERNMENT" means the U. S. Government and any of its agencies. 2.7 "RESEARCH PLAN" or "RP" means the statement in Appendix B of the respective research and development commitments of the Parties to this CRADA. 2.8 "PRINCIPAL INVESTIGATOR" or "PI" means each of the persons designated respectively by the Parties to this CRADA who will be responsible for the scientific and technical conduct of the RP. 2 ARTICLE 3. COOPERATIVE RESEARCH 3.1 RESEARCH TEAM. The Parties agree to establish a joint research and development team (hereinafter referred to as the "Team") comprising at least the Principal Investigators designated pursuant to Article 3.3 to conduct and monitor the research in accordance with the RP. Although members of the Team shall be considered as having been delegated to the Team, they shall continue to remain employed by their respective employers under their respective terms of employment. 3.2 REVIEW OF WORK. Periodic conferences shall be held by the Team to review work progress; it is understood that the nature of this cooperative research precludes guarantee of its completion within the specified period of performance or limits of allocated financial or staffing support. Accordingly, research under this CRADA is to be performed on a best efforts basis. 3.3 PRINCIPAL INVESTIGATORS. CDC research work under this CRADA will be performed by the Laboratory identified in the RP, and the CDC Principal Investigator (PI) designated in the RP will be responsible for the scientific and technical conduct of this project on behalf of CDC. Also designated in the RP is the Collaborator PI who will be responsible for the scientific and technical conduct of this project on behalf of the Collaborator. 3.4 RESEARCH PLAN CHANGE. The RP may be modified by mutual written consent of the Principal Investigators. Substantial changes in the scope of the RP will be treated as amendments under Article 14.6 ARTICLE 4. REPORTS 4.1 INTERIM REPORTS. The Parties shall exchange formal written interim progress reports on a schedule agreed to by the PIs, but at least within six (6) months after this CRADA becomes effective and at least within every six (6) months thereafter. Such reports shall set forth the technical progress made, identifying such problems as may have been encountered and establishing goals and objectives requiring further effort. 4.2 FINAL REPORTS. The Parties shall exchange final reports of their results within four (4) months after completing the projects described in the RP or after the termination of this CRADA. ARTICLE 5. FINANCIAL AND STAFFING OBLIGATIONS 5.1 CDC AND COLLABORATOR CONTRIBUTIONS. The CDC contribution to the RP in the form of personnel, services and property is designated in Appendix C. The Collaborator contribution to the RP in the form of personnel, services, property, support for staffing and/or funding is designated in Appendix C. Payment schedules, if applicable, are also indicated in Appendix C. 5.2 INSUFFICIENT AND EXCESS FUNDS. CDC shall not be obligated to perform any of the research specified herein or to take any other action required by this CRADA if the funding is not provided as set forth in Appendix C. CDC shall return excess funds to the Collaborator when it sends its final fiscal report pursuant to Article 5.3, except for staffing support pursuant to Article 11.3. 5.3 ACCOUNTING RECORDS. CDC shall maintain separate and distinct current accounts, records, and other evidence supporting all its obligations under this CRADA, and shall provide the Collaborator with an annual report reflecting the use of the Collaborator's funds and a final fiscal report at the time that final reports are exchanged pursuant to Article 4.2. 3 ARTICLE 6. TITLE TO PROPERTY 6.1 CAPITAL EQUIPMENT. The purchase or use of capital equipment to carry out this CRADA does not affect the ownership rights that would otherwise apply. Equipment purchased by CDC with funds provided by the collaborator shall be the property of CDC. All capital equipment provided under this CRADA by one party for the use of another Party remains the property of the providing Party unless other disposition is mutually agreed upon in writing by the collaborating parties. If title to this equipment remains with the providing Party, that Party is responsible for maintenance of the equipment and the costs of its transportation to and from the site where it will be used. ARTICLE 7. INTELLECTUAL PROPERTY RIGHTS AND APPLICATIONS 7.1 REPORTING. The Parties shall promptly report to each other in writing each Subject Invention resulting from the research conducted under this CRADA that is reported to them by their respective employees. Such reports shall be treated in confidence by the receiving Party until such time as a patent or other Intellectual Property (IP) application, as appropriate, claiming that Subject Invention has been filed. Because of the royalty sharing provisions for Government inventors in the Federal Technology Transfer Act of 1986, and in view of Article 8.4 of this CRADA which grants the Government a research license on inventions made solely by the Collaborator, the Collaborator acknowledges a special duty to report all Subject Inventions to CDC so that CDC may determine whether or not inventors properly includes CDC investigators. 7.2 COLLABORATOR EMPLOYEE INVENTIONS. The Collaborator may elect to retain IP rights to any Subject Invention made solely by a Collaborator employee. The Collaborator shall notify CDC promptly upon making this election. If the Collaborator does not elect to retain its IP rights, the Collaborator shall offer to assign these IP rights to the Subject Invention to CDC pursuant to Article 7.5. If CDC declines such assignment, the Collaborator may release its IP rights to its employee inventors pursuant to Article 7.6. 7.3 CDC EMPLOYEE INVENTION. CDC, on behalf of the U.S. Government, may elect to retain IP fights to each Subject Invention made solely by CDC employees. If CDC does not elect to retain IP rights, CDC shall offer to assign these IP rights to such Subject Invention to the Collaborator pursuant to Article 7.5. If the Collaborator declines such assignment, CDC may release IP rights in such Subject Invention to its employee inventors pursuant to Article 7.6. 7.4 JOINT INVENTIONS. Each Subject Invention made jointly by CDC and Collaborator employees shall be jointly owned by CDC and the Collaborator. The Collaborator may elect to file the joint patent or other IP application(s) thereon and shall notify CDC promptly upon making this election. If the Collaborator decides to file such applications, it shall do so in a timely manner and at its own expense. If the Collaborator does not elect to file such application(s), CDC on behalf of the U.S. Government, shall have the right to file the joint applications in a timely manner and at its own expense. If either Party decides not to retain its IP rights to a jointly owned Subject Invention, it shall offer to assign such rights to the other Party pursuant to Article 7.5. If the other Party declines such assignment, the offering Party may release its IP rights to employee inventors pursuant to Article 7.6. 7.5 FILING OF PATENT APPLICATIONS. With respect to Subject Inventions made by the Collaborator as described in Article 7.2 or by CDC as described in Article 7.3, a Party exercising its right to elect to retain IP rights to a Subject Invention agrees to file patent or other IP applications in a timely manner and at its own expense. The Party may elect not to file a patent or other IP application thereon in any particular country or countries provided it so advises the other Party ninety (90) days prior to the expiration of any applicable filing deadline, priority period or statutory bar date, and hereby agrees to assign its IP rights, title and interest in such country or countries to the Subject Invention to the other Party and to cooperate 4 in the preparation and filing of a patent or other IP applications. In any countries in which title to patent or other IP fights is transferred from CDC to the Collaborator, the Collaborator agrees that CDC inventors will share in any royalty distribution that the Collaborator pays to its own inventors. 7.6 RELEASE TO INVENTORS. In the event neither of the Parties to this CRADA elects to file a patent or other IP application on a Subject Invention, either or both (if a joint invention) may release their IP rights to their respective employee inventor(s) with a nonexclusive, non-transferrable, royalty-free license being retained by each Party. 7.7 PATENT EXPENSES. The expenses attendant to the filing of patent or other IP applications generally shall be paid by the Party filing such application. If an exclusive license to any Subject Invention is granted to the Collaborator by CDC, the Collaborator shall reimburse CDC for the reasonable past and ongoing funds expended worldwide for filing prosecuting and maintaining any applications. The Collaborator may waive its exclusive license fights on any application, patent or other IP grant at any time, and incur no subsequent compensation obligation for that application, patent or IP grant. 7.8 PROSECUTION OF INTELLECTUAL PROPERTY APPLICATIONS. Each Party shall provide the other Party with copies of the applications it files on any Subject Invention along with the power to inspect and make copies of all documents retained in the patent or other IP application files by the applicable patent or other IP office. The Parties agree to consult with each other with respect to the prosecution of Subject Inventions described in Article 7.3 and joint Subject Inventions described in Article 7.4. If the Collaborator elects to file and prosecute IP applications on joint Subject Inventions pursuant to Article 7.4, CDC will be granted an associate power of attorney (or its equivalent) on such IP applications. ARTICLE 8. LICENSING 8.1 OPTION FOR EXCLUSIVE COMMERCIALIZATION LICENSE. With respect to Government IP rights to any Subject Invention not made solely by the Collaborator's employees for which a patent or other IP application is filed, CDC grants to the Collaborator an option to negotiate, in good faith, the terms of an exclusive or nonexclusive commercialization license that fairly reflects the relative contributions of the Parties to the invention and the CRADA, the risks incurred by the Collaborator, and the costs of subsequent research and development needed to bring the invention to the marketplace. The license will specify the licensed fields of use, breadth of exclusivity and royalties. Royalty rates will be based on product sales and the rates conventionally granted in the field identified in the RP for inventions with reasonably similar commercial potential Royalty rates generally will not exceed a rate within the range of [***] for extensive commercialization licenses. Contingent royalty schemes based on, e.g., patent issuance or nonissuance, and provisions treating the stacking of royalties or packaging of other licensed inventions developed under this CRADA may be provided. Extensive licensees will be expected to reimburse CDC for IP expenses related to each licensed intellectual property, and may be permitted to offset such reimbursement against future product royalties. 8.2 EXERCISE OF LICENSE OPTION. The option of Article 8.1 must be exercised by written notice mailed within three (3) months after the patent or other IP application is filed to: CDC Technology Transfer Coordinator Centers for Disease Control 1600 Clifton Road, N.E. Building 1, B72, Mailstop A20 Atlanta, Georgia 30333 5 [***] Confidential Treatment Requested Exercise of this option by the Collaborator initiates a negotiation period that expires nine (9) months after the patent or other IP application filing date. If the last proposal by the Collaborator has not been responded to in writing by CDC within this nine (9) month period, the negotiation period shall be extended to expire one (1) month after CDC so responds, during which month the Collaborator may accept in writing the final license proposal of CDC. After that time, CDC will be free to license such IP rights to others. 8.3 PRICING. CDC has a concern that there be a reasonable relationship between the pricing of a licensed product, the public investment in that product, and the health and safety needs of the public. Accordingly, extensive commercialization licenses granted for CDC intellectual property rights may require that this relationship be supported by reasonable evidence. 8.4 GOVERNMENT INTELLECTUAL PROPERTY RIGHTS. For inventions developed wholly by CDC investigators or jointly with a Collaborator under this CRADA, CDC is required by the Federal Technology Transfer Act of 1986, 15 U.S.C. at Section 3710a(b)(2), to retain at least a nonexclusive, irrevocable, paid-up license to practice the invention or to have the invention practiced throughout the world by or on behalf of the U.S. Government. For inventions developed wholly by the Collaborator under this CRADA, the Collaborator agrees to grant a research license as described in Article 8.5 to the Government. 8.5 RESEARCH LICENSES. CDC reserves the right under any IP license granted by CDC to the Collaborator under this CRADA to grant nonexclusive licenses to third parties to make and to use the licensed invention for purposes of research involving the invention ifself, and not for purposes of commercial manufacture or in lieu of purchase as a commercial product for use in other research. CDC intends to consult with their exclusive commercialization licensee(s) before granting research licenses to commercial entities. 8.6 JOINT INVENTIONS NOT EXCLUSIVELY LICENSED. In the event that the Collaborator does not choose to acquire an exclusive commercialization license to IP rights in joint Subject Inventions described in Article 7.4, then each Party shall have the right to use the joint Subject Invention and to license its use to others. The Parties may agree to a joint licensing approach for such IP rights. ARTICLE 9. PROPRIETARY RIGHTS AND PUBLICATION 9.1 RIGHT OF ACCESS. CDC and the Collaborator agree to exchange all Subject Data and Research Results produced in the course of research under this CRADA, whether developed solely by CDC, jointly with the Collaborator, or solely by the Collaborator. Tangible research products developed under a CRADA will be shared equally by the Parties to the CRADA unless other disposition is agreed to by the Principal Investigators. All Parties to this CRADA will be free to utilize Subject data and Research Results for their own purposes, consistent with their obligations under this CRADA. 9.2 OWNERSHIP OF SUBJECT DATA IN RESEARCH RESULTS. Subject to the sharing requirements of Article 9.1, the producing Party will retain ownership of and title to all Subject Inventions, all Subject Data and all Research Results produced solely by their investigators. Jointly developed Subject Inventions, Subject Data and Research Results will be jointly owned. However, except as may be afforded through IP rights that require public disclosure of the protected subject matter (e.g., patents), CDC does not have statutory authority to limit (or agree with the Collaborator to limit) dissemination of Subject Data or Research Results developed solely by CDC investigators or jointly with the Collaborator. Accordingly, CDC may not agree to exclude others from utilizing or commercializing such Subject Data or Research Results. 6 9.3 PROPRIETARY AND CONFIDENTIAL INFORMATION. Each Party agrees to limit its disclosure of Proprietary Information to the amount necessary to carry out the Research Plan of this CRADA, and shall place a confidentiality notice on all such information. Research materials required for the RP may also be designated as Proprietary Information. Each Party receiving Proprietary Information agrees that any information so designated shall be used by it only for the purposes described in the attached Research Plan. Any Party may object to the designation of information as Proprietary Information by another Party and may decline to accept such information. Data and research products developed solely by the Collaborator may be designated as Proprietary Information when they are wholly separable from the data and research product categories as set forth in the RP. The exchange of confidential information should be similarly limited and treated. Unless disclosure is otherwise mutually agreed upon, all Parties to this CRADA agree to keep CRADA Subject Data and Research Results confidential, to the extent permitted by law, until they arc published or corresponding patent or other IP application(s) have been filed. 9.4 PROTECTION OF PROPRIETARY INFORMATION. Proprietary Information shall not be disclosed, copied, reproduced or otherwise made available to any other person or entity without the consent of the owning Party except as may be required under court order or the Freedom of Information Act (5 U.S.C. Section 552). Each Party agrees to use its best efforts to main- tain the confidentiality of Proprietary Information. Each Party agrees that another Party is not liable for the disclosure of Proprietary Information which, after notice to and consultation with the concerned Party, another Party in possession of the Proprietary Information determines the information may not lawfully bc withheld, provided the concerned Party has been given an opportunity to obtain a court order to enjoin disclosure. 9.5 DURATION OF CONFIDENTIALITY OBLIGATION. The obligation to maintain the confidentiality of Proprietary Information shall expire at the earlier of the date when the information is no longer Proprietary Information as defined in Article 2.2 or three (3) years after the expiration or termination date of this CRADA. The Collaborator may request an extension to this term when necessary to protect Proprietary Information relating to products not yet commercialized. 9.6 PUBLICATION. The Parties are encouraged to make publicly available the results of their research. Before either Party submits a paper or abstract for publication or otherwise intends to publicly disclose information about a Subject Invention, Subject Data or Research Results, the other Party shall be provided thirty (30) days to review the proposed publication or disclosure to assure that Proprietary Information is protected. The publication or other disclosure shall be delayed for up to (thirty) 30 additional days upon written request by any Party as necessary to preserve U.S. or foreign patent or other IP rights. ARTICLE 10. REPRESENTATIONS AND WARRANTIES 10.1 REPRESENTATIONS AND WARRANTIES OF CDC. CDC hereby represents and warrants to the Collaborator that the Official signing this CRADA has authority to do so. 10.2 REPRESENTATIONS AND WARRANTIES OF THE COLLABORATOR. The Collaborator hereby represents and warrants to CDC that the Collaborator has the requisite power and authority to enter into this CRADA and to perform according to its terms, and that the Collaborator's Official signing this CRADA has authority to do so. The Collaborator further represents that it is financially able to satisfy any funding commitments made in Appendix C. 7 ARTICLE 11. TERMINATION 11.1 TERMINATION BY MUTUAL CONSENT. The CDC and the Collaborator may terminate this CRADA, or portions thereof, at any time by mutual written consent. In such event the Parties shall specify the disposition of all property, inventions, patents and other IP applications and other results of work accomplished or in progress, arising from or performed under this CRADA. 11.2 UNILATERAL TERMINATION. Either CDC or the Collaborator may unilaterally terminate this entire CRADA at any time by giving the written notice at least thirty (30) days prior to the desired termination date, and any rights accrued in property, patents or other IP shall be disposed of as in 11.1. 11.3 STAFFING. If this CRADA is mutually or unilaterally terminated prior to its expiration, funds will nevertheless remain available to CDC for continuing any staffing commitment made by the Collaborator pursuant to Article 5.1 above and Appendix C, ff applicable, for a period of six (6) months after such termination. If there are insufficient funds to cover this expense, the Collaborator agrees to pay the difference. 11.4 NEW COMMITMENTS. No party shall make new commitments related to this CRADA after a mutual or unilateral termination and shall, to the extent feasible, cancel all outstanding commitments and contracts by the termination date. 11.5 TERMINATION COSTS. Concurrently with the exchange of final reports pursuant to Articles 4.2 and 5.3, CDC shall submit to the Collaborator for payment a statement of all costs incurred prior to the date of termination and for all reasonable termination costs including the cost of returning Collaborator property or removal of abandoned property. ARTICLE 12. DISPUTES 12.1 SETTLEMENT. Any dispute arising under the CRADA which is not disposed of by agreement of the Principal Investigators shall bc submitted jointly to the signatories of this CRADA. If the signatories are unable to jointly resolve the dispute within thirty (30) days after notification thereof, the Assistant Secretary of Health (or his/her designee) shall propose a resolution. Nothing in this section shall prevent any Party from pursuing any and all administrative and/or judicial remedies which may be available. 12.2 CONTINUATION OF WORK. Pending the resolution of any dispute or claim pursuant to this Article, the Parties agree that performance of all obligations shall be pursued diligently in accordance with the direction of the CDC signatory. ARTICLE 13. LIABILITY 13.1 PROPERTY. The U.S. Government shall not be responsible for damages to any property of the Collaborator provided to CDC or acquired by CDC pursuant to this CRADA. 13.2 NO WARRANTY. Except as specifically stated in Article 10, the Parties make no express or implied warranty as to any matter whatsoever, including the conditions of the research or any invention or product, whether tangible or intangible, made, or developed under this CRADA, or the ownership, merchantability, or fitness for a particular purpose of the research or any invention or product. 8 13.3 INDEMNIFICATION. The Collaborator agrees to hold the U.S. Government harmless and to indemnify the Government for all liabilities, demands, damages, expenses and losses arising out of the use by the Collaborator for any purpose of the Subject Data, Research results and/or Subject Inventions produced in whole or part by CDC employees under this CRADA, unless due to the negligence of CDC, its employees or agents. The Collaborator shall be liable for any claims or damages it incurs in connection with this CRADA. CDC has no authority to indemnify the Collaborator. 13.4 FORCE MAJEURE. Neither party shall be liable for any unforeseeable event beyond its reasonable control not caused by the fault or negligence of such Party, which causes such Party to be unable to perform its obligations under this CRADA, and which it has been unable to overcome by the exercise of due diligence. In the event of the occurrence of such a force majeure event, the Party unable to perform shall promptly notify the other Party. It shall further use its best efforts to resume performance as quickly as possible and shall suspend performance only for such period of time as necessary as a result of the force majeure event. ARTICLE 14. MISCELLANEOUS 14.1 GOVERNING LAW. The construction, validity, performance and effect of this CRADA shall be governed by Federal Law, as applied by the Federal Courts. Federal law and regulations will preempt any conflicting or inconsistent provisions in this CRADA. 14.2 ENTIRE AGREEMENT. This CRADA constitutes the entire agreement between the Parties concerning the subject matter of this CRADA and supersedes any prior understanding of written or oral agreement. 14.3 HEADINGS. Titles and headings of the sections and subsections of this CRADA are for the convenience of references only and do not form a part of this CRADA and shall in no way affect its interpretation. 14.4 WAIVERS. None of the provisions of this CRADA shall be considered waived by any Party unless such waiver is given in writing to the other Party. The failure of a Party to insist upon strict performance of any of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or by law, shall not be deemed a waiver of any rights of any Party. 14.5 SEVERABILITY. The illegality or invalidity of any provisions of this CRADA shall not impair, affect or invalidate the other provisions of this CRADA. 14.6 AMENDMENTS. If either party desires a modification to this CRADA, the Parties shall, upon reasonable notice of the proposed modification or extension by the Party desiring the change, confer in good faith to determine the desirability of such modification or extension. Such modification shall not be effective until a written amendment is signed by the signatories to this CRADA or by their representatives duly authorized to execute such amendment. 14.7 ASSIGNMENT. Neither this CRADA nor any rights or obligations of any Party hereunder shall be assigned or otherwise transferred by either Party without the prior written consent of the other Party. 14.8 NOTICES. All notices pertaining to or required by this CRADA shall be in writing and shall be signed by an authorized representative and shall be delivered by hand or sent by certified mail, return receipt requested, with postage prepaid, to addresses indicated on the signature page for each Party. Notices regarding the exercise of license options shall be made pursuant to Article 8.2. Any Party may change such address by notice given to the other Party in the manner set forth above. 9 14.9 INDEPENDENT CONTRACTORS. The relationship of the Parties to this CRADA is that of independent contractors and not as agents of each other or as joint venturers or partners. Each Party shall maintain sole and exclusive control over its personnel and operations. Collaborator employees who will be working at CDC facilities may be asked to sign a Guest Researcher or Special Volunteer Agreement appropriately modified in view of the terms of this CRADA. 14.10 USE OF NAME OR ENDORSEMENTS. By entering into this Agreement, CDC does not directly or indirectly endorse any product or service provided, or to be provided, whether directly or indirectly related to either this CRADA or to any patent license or other IP license or agreement which implements this CRADA by its successors, assignees, or licensees. The Collaborator shall not in any way state or imply that this CRADA is an endorsement of any such product or service by the U.S. Government or any of its organizational units or employees. 14.11 EXCEPTIONS TO THIS CRADA. Any exceptions or modifications to this CRADA that are agreed to by the Parties prior to their execution of this CRADA are set forth in Appendix D. 14.12 REASONABLE CONSENT. Whenever a Party's consent or permission is required under this CRADA, such consent or permission shall not be unreasonably withheld. ARTICLE 15. DURATION OF AGREEMENT 15.1 DURATION. It is mutually recommended that this project cannot be rigidly defined in advance and that the contemplated time periods for various phases of the RP are only good faith guidelines subject to adjustment by mutual agreement to fit circumstances as the RP proceeds. In no case will the term of this CRADA extend beyond the term indicated in the RP unless it is revised in accordance with Article 14.6. 15.2 SURVIVABILITY. The provisions of Articles 4.2, 5.2, 5.3, 6.1, Articles 7-9, 11.3, 11.5, 12.1, 13.3 and 14.10 shall survive the termination of this CRADA. CRADA #: CID-93-045-00 FOR THE CDC: FOR THE COLLABORATOR: /s/Joseph McDade 2/25/93 /s/Paul J. Maddon 2/19/93 - --------------------------------- -------------------------------- SIGNATURE DATE SIGNATURE DATE Joseph McDade Paul J. Maddon, M.D., Ph.D. - --------------------------------- -------------------------------- TYPED NAME TYPED NAME Associate Director for Laboratory Chairman and CEO - --------------------------------- -------------------------------- TITLE TITLE 10 APPENDIX A CENTERS FOR DISEASE CONTROL AND PREVENTION (CDC) AND THE AGENCY FOR TOXIC SUBSTANCES AND DISEASE REGISTRY POLICY STATEMENT ON COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS AND INTELLECTUAL PROPERTY LICENSING This Statement sets forth the policies of the Centers for Disease Control and Prevention (CDC) and the Agency for Toxic Substances and Disease Registry (ATSDR) on various aspects of cooperative research and intellectual property licensing. These policies apply to the negotiation of CDC and ATSDR Cooperative Research and Development Agreements (CRADAs). License agreements for intellectual property rights to inventions developed under a CRADA or through the CDC and ATSDR intramural research programs, whether negotiated by CDC and ATSDR or by the National Technical Information Service on its behalf, will also incorporate these policies. This statement may be revised as appropriate. The Federal Technology Transfer Act of 1986 (FTTA, 15 U.S.C. at Section 3710), Executive Order 12591 of April 10, 1987, orders Federal laboratories to assist universities and the private sector in broadening our national technology base by moving new knowledge from the research laboratory into the development of new products and processes. While Federal patent law (35 U.S.C. at Sections 200-212) authorizes the licensing of Government-owned patent rights, the FTTA seeks to facilitate technological collaboration at an earlier stage. Thus the FTTA authorizes Federal laboratories to enter into CRADAs and to agree to grant intellectual property rights in advance to collaborators for inventions made in whole or part by Federal employees under the CRADA. Besides assisting in the transfer of commercially useful technologies from Federal laboratories to the marketplace, CRADAs make outside resources more accessible to Federal investigators. The CDC and ATSDR, agencies of the U.S. Public Health Service (PHS) within the Department of Health and Human Services (HHS), are lead Federal agencies for prevention and control of disease and disability in the U.S. and throughout the world. The CDC and ATSDR primary goals are to prevent disease, illness, injuries, and disability before they occur, and to promote health. Under the FTTA, 15 U.S.C. at Section 3710(a)2, technology transfer, consistent with mission responsibilities, is also a responsibility of each laboratory science and engineering professional. To achieve its goals, CDC and ATSDR have developed an interdisciplinary research environment and service program that promotes and encourages the free exchange of ideas and information. In order to safeguard the collegiality and integrity of, as well as public confidence in, the CDC/ATSDR research programs, the following research and technology transfer policies have been adopted. 1. RESEARCH FREEDOM The CDC and ATSDR investigators generally are free to choose the subject matter of their research, consistent with the mission of their Center/Institute/Office (CIO) and the research programs of their laboratories. No CRADA or license agreement may contravene this freedom. 2. RESEARCH POLICY The CDC and ATSDR research results generally are disseminated freely through publication in the scientific literature and presentations at public fora. Brief delays in the dissemination of research results may be permitted under a CRADA as necessary in order to file corresponding patent or other intellectual property applications. The CDC and ATSDR consider the filing of such applications to be an important component of its research efforts. 3. COOPERATIVE RESEARCH AND DEVELOPMENT UNDER A CRADA As defined by the FTTA, 15 U.S.C. at Section 3710(d)(1), a CRADA means any agreement between one or more Federal laboratories and one or more non-Federal parties, under which the Government provides personnel, services, facilities, equipment or other resources (but not funds), and the non-Federal parties provide funds, personnel, services, facilities, equipment or other resources toward the conduct of specified research or development efforts. Cooperative research and development activities are intended to facilitate the transfer of federally funded research and development for use by State and local governments, universities, and the private sector, particularly small business. 4. CDC AND ATSDR CRADAS FOR COOPERATIVE RESEARCH As adopted by CDC and ATSDR, a CRADA is a standardized agreement intended to provide an appropriate legal framework for, and to expedite the approval of, cooperative research and development projects. The use of CRADAs is encouraged for cooperative efforts because they permit CDC and ATSDR to accept, retain, and use funds, personnel, services, and property from collaborating parties and to provide personnel, services, and property to collaborating parties. The CDC and ATSDR may permit its investigator to enter into CRADAs with collaborators who will make significant intellectual contributions to the research project undertaken or who will contribute essential research materials not otherwise reasonably available. While CDC and ATSDR welcome contributions to its gift funds for research purposes, it does not view CRADAs as a general funding source or a mechanism for sponsored research. This approach to implementing the FTTA has been chosen in order to maintain the public's confidence in CDC and ATSDR through maintaining an independence from reliance on industry funding. 5. SELECTION OF COLLABORATORS UNDER A CRADA Collaborators under a CRADA may be suggested by potential collaborators or by CDC and ATSDR investigators. Generally, the decision to initiate the approval process for a CRADA is made by the involved CDC or ATSDR investigator and laboratory chief with the approval of Division and CIO directors. Approval is based on scientific considerations and the desire for the public to benefit from the application by the private sector of particular CDC and ATSDR research. For some cooperative projects, where the development and commercialization potential is more immediate relative to the basic research aspects, CDC and ATSDR may seek a collaborator(s) which has both scientific expertise and commercialization capabilities. In certain areas of research, e.g. where the Government has the intellectual lead or where both scientific and commercialization capabilities are deemed essential at the outset, CDC and ATSDR may competitively seek a collaborator(s) through Federal Register notification. The PHS has also developed policy guidelines for ensuring fairness of access to PHS laboratories such as CDC in the process of initiating and developing CRADAs. Additionally, from time to time, CDC and ATSDR may sponsor industry collaboration fora to publicize opportunities for collaboration to a wide audience. 2 6. PROPRIETARY OR CONFIDENTIAL INFORMATION AND MATERIALS The CDC and ATSDR recognize that an effective collaborative research program may require the disclosure of proprietary information to CDC and ATSDR investigators. Although agreements to maintain confidentiality are permitted under a CRADA, collaborators should limit their disclosure of proprietary information to the amount necessary to carry out the research plan of the CRADA. The mutual exchange of confidential information, e.g. patient identification data, should be similarly limited. The CDC and ATSDR also recognize that cooperative research may require the exchange of proprietary research materials. Such materials may be used only for the purposes specified in the research plan set forth in the CRADA. All parties to the CRADA will agree to keep CRADA research results confidential until they are published or presented at a scientific meeting. 7. TREATMENT OF DATA AND RESEARCH PRODUCTS PRODUCED UNDER A CRADA The CDC and ATSDR investigator and the collaborator will agree to exchange all data and research products developed in the course of research under a CRADA whether developed solely by CDC and ATSDR, jointly with the collaborator, or solely by the collaborator. In general, tangible research products developed under a CRADA will be shared equally by the parties to the CRADA. All parties to a CRADA will be free to utilize such data and research products for their own purposes. Data and research products developed solely by the collaborator may be designated as proprietary by the collaborator when they are wholly separable from the data and research products developed jointly with CDC and ATSDR investigators. However, except as may be afforded through intellectual property rights that require public disclosure of the protected subject matter (e.g. patents), the CDC and ATSDR will not agree to exclude others from utilizing or commercializing the data or research products developed solely by CDC and ATSDR investigators or jointly with the collaborator under a CRADA. Thus, intellectual property which is not patented is not to be afforded trade secret status. 8. OWNERSHIP OF AND LICENSING OF CDC INTELLECTUAL PROPERTY RIGHTS Pursuant to the FTTA, 15 U.S.C. at Section 3710(b)(2), a Federal laboratory is authorized to own and license patent rights to inventions made in whole or part by its employees under a CRADA. The term "invention" is defined at Section 3703(9) to mean any invention or discovery which is or may be patentable or otherwise protected under Title 35 or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act (PVPA), 7 U.S.C. Section 2321 et seq. The patent law, 35 U.S.C. Section 207, authorizes the ownership and licensing of intramural inventions. Executive Order 12591 at Section 1(b)(1)(B) further authorizes the transfer of Government intellectual property rights. Although the FTTA speaks broadly of the transfer of "technology", CDC and ATSDR do not have statutory authority to license (or to agree to limit dissemination) of technology developed in whole or part by their investigators under a CRADA unless a patent, PVPA certificate or other intellectual property application has been filed for that technology. The CDC and ATSDR will retain the Government ownership interest in, but license rights to, all intellectual property rights to inventions developed solely by their investigators through intramural research or developed in whole or in part under a CRADA. 9. GENERAL LICENSING POLICY The CDC and ATSDR recognize that under the FTTA and the patent licensing law to which it refers, Congress and the President have chosen to utilize the patent system as the primary mechanism for transferring Government inventions to the private sector. The importance of patents to commercialization in the biomedical field is further reflected by the Drug Price Competition and Patent Term Restoration Act of 1984 (Pub. L. 98-417). A fundamental principle of the patent system is that the owner of a patent has a time-limited "right to exclude others from making, using, or selling the [patented] invention." The reason for such a period of exclusivity is to encourage industry to invest the resources necessary to bring an invention from the discovery stage through subsequent development, clinical trials, regulatory approvals, and ultimately into commercial production. The CDC and ATSDR accordingly are willing to grant exclusive commercialization licenses under their patent or other intellectual property rights in cases where substantial additional risks, time, and costs must be 3 undertaken by a licensee prior to commercialization. Under a CRADA, CDC and ATSDR are also willing to agree to grant exclusive commercialization licenses in advance to collaborators. The CDC and ATSDR will attempt, however, to license their intramural inventions nonexclusively in cases where an invention reflects a relatively more advance stage in its commercial development, e.g. when a CDC and ATSDR investigator invents a patentable new therapeutic use for a known and FDA approved compound. Federal laboratories are authorized to negotiate license agreements for Government-owned patent rights in intramural inventions pursuant to 35 U.S.C. Section 207. Although Section 207 does not apply to intellectual property license agreements authorized by the FTTA for inventions made under a CRADA, CDC and ATSDR have adopted the following approach of Section 207 for all license agreements: Each Federal Agency [may] ... grant nonexclusive, exclusive or partially exclusive licenses under federally owned patent applications, patents, or other forms of protection ... on such terms and conditions ... as determined appropriate in the public interest. The CDC and ATSDR have determined it to be appropriate and in the public interest to grant nonexclusive research licenses and either exclusive or nonexclusive commercialization licenses to HHS owned intellectual property rights according to the plan discussed below. 10. GOVERNMENT INVENTION RIGHTS For inventions developed wholly by CDC and ATSDR investigators or jointly with a collaborator under a CRADA, CDC and ATSDR are required by the FTTA at 15 U.S.C. Section 3710(a)(b)(2) to retain at least a nonexclusive, irrevocable, paid-up license to practice the invention or to have the invention practiced throughout the world by or on behalf of the U.S. Government. When granting exclusive or partially exclusive licenses to CDC and ATSDR intramural inventions, 35 U.S.C. Section 208, as implemented by 37 C.F.R. Section 404.7(2)(i), required the reservation of similar Government rights. The CDC and ATSDR will not assert an ownership right in inventions made solely by a collaborator under a CRADA, but will require the grant of a research license, as described below, to the Government for inventions made wholly by collaborator under a CRADA. 11. RESEARCH LICENSES The CDC and ATSDR will reserve the right under any CRADA and intellectual property license to grant nonexclusive licenses to make and to use such property, for purposes of research involving the invention itself and not for purposes of commercial manufacture or in lieu of purchase as a commercial product for use in other research. The purpose of the research license is to facilitate basic academic research. The CDC and ATSDR intends to consult with any involved commercialization licensee(s) before granting research licenses to commercial entities. The grant of any research license hereunder does not permit CDC and ATSDR to grant any license to third parties to use the invention for any commercial purpose. 12. COMMERCIALIZATION LICENSES The CDC and ATSDR are willing to consider requests for nonexclusive or exclusive commercialization licenses to intellectual property rights to inventions developed under a CRADA or in the course of intramural research pursuant to applicable statutes and regulations. Under a CRADA, CDC and ATSDR generally will grant a time-limited option to negotiate, in good faith, the terms of a license that fairly reflects the relative contributions of the parties, the risks incurred by the collaborator and the costs of subsequent research and development needed to bring the results of CRADA research to the marketplace. The CDC and ATSDR consider the drafting of a model invention license to serve as the starting point for license negotiations. It is contemplated further that such a model will reduce negotiations essentially to matters of execution fees, royalty rates, and minimum annual royalties. Royalty rates will be based on product sales and the rates conventionally granted in the field identified in the CRADA's research plan for inventions with reasonably similar commercial 4 potential. Royalty rates generally will not exceed a rate [***] for exclusive commercialization licenses. Contingent royalty schemes based on, e.g. patent issuance or nonissuance, and clauses treating the stacking of royalties or packaging of other inventions developed under the CRADA may be provided. Exclusive licensees will be expected to reimburse CDC and ATSDR for intellectual property related expenses and may be permitted to offset such reimbursement against future product royalties. 13. NONEXCLUSIVE COMMERCIALIZATION LICENSES Unless a request for exclusive commercialization license is made under a CRADA or submitted for an intramural invention, CDC and ATSDR will attempt to license their inventions nonexclusively. Such nonexclusive licenses generally will follow the guidelines of 37 C.F.R. Part 404. 14. EXCLUSIVE COMMERCIALIZATION LICENSES The CDC and ATSDR exclusive commercialization requires the submission by a prospective licensee of an acceptable development and commercialization plan as described by 35 U.S.C. Section 209(a) and subsequent, periodic reports on utilization of the invention as described by Section 209(f)(1). All such plans and reports will be treated in confidence and as privileged from disclosure under the Freedom of Information Act. Modification provisions as described by Section 209(f)(2-4) may apply. In appropriate cases, CDC and ATSDR may also reserve the right to grant separate exclusive commercialization licenses in various fields of use. The remaining provisions of 35 U.S.C. Section 200-212 will also apply to licenses to CDC and ATSDR intramural inventions. The CDC and ATSDR also consider the following provisions for exclusive commercialization licenses to be necessary and appropriate in the public interest: (i) the exclusive licensee must pledge its reasonable best efforts to commercialize a licensed invention and the development and commercialization plan mentioned above may serve as the measure of such efforts; (ii) the CDC and ATSDR shall have the right, after notice and opportunity to cure, to terminate or render nonexclusive any license granted: (1) if the licensee is not reasonably engaged in research, development, clinical trials, manufacturing, marketing, sublicensing, or other activities reasonably necessary to the expeditious commercial dissemination of the licensed invention; or (2) when the licensee cannot reasonably satisfy unmet health and safety needs; (iii) in order to maximize the commercialization of the licensed invention in other fields of use not utilized by the exclusive licensee through ongoing development, manufacturing, or sublicensing, CDC and ATSDR reserve the right to require the licensee to grant sublicenses to responsible applicants, on reasonable terms, in such other fields of use unless the licensee can reasonably demonstrate that such a sublicense would be contrary to sound and reasonable business practice and the granting of the sublicense would not materially increase the availability to the public of the licensed invention; and (iv) exclusive licensees to HHS inventions, whether developed under a CRADA or through intramural research, must agree to not unreasonably deny requests for sublicense or cross license rights from future CRADA collaborators when the possibility of acquiring such derivative rights is necessary in order to permit a proposed cooperative research project with CDC and ATSDR to go forward, and the exclusive licensee has been given a reasonable opportunity to join as a party to the proposed CRADA. The grant of any sublicense or cross license rights hereunder does not grant future CRADA collaborators a license to use or CDC and ATSDR the right to grant to future CRADA collaborators a license to use any inventions of the instant CRADA for any commercial purpose. 5 [***] Confidential Treatment Requested 15. COMPLIANCE UNDER CRADAS WITH OTHER POLICIES For research conducted pursuant to a CRADA, collaborators must agree to comply with PHS, CDC, and ATSDR policies and guidelines concerning, e.g. human subjects research, the use of research animals, recombinant DNA and other policy statements as may be promulgated from time to time. 16. PRICING HHS has the responsibility for funding basic biomedical research, for funding medical treatment through programs such as medicare and medicaid, for providing direct medical care, and more generally, for protecting the health and safety of the public. Because of these responsibilities, and the public investment in the research that contributes to a product licensed under a CRADA, HHS has a concern that there be a reasonable relationship between the pricing of a licensed product, the public investment in the product, and the health and safety needs of the public. 17. WAIVERS The CDC and ATSDR will consider requests to modify any of the foregoing policies in special cases where public health exigencies or commercial situations warrant such a modification. Modifications dealing with business terms such as royalties are not decided by the CDC and ATSDR investigators and should be discussed with the appropriate CDC and ATSDR technology management personnel. 18. SPECIAL CONSIDERATION AND PREFERENCE UNDER A CRADA The CDC and ATSDR will give special consideration to entering into CRADAs with small business firms and consortia involving small business firms; and will give preference to business units located in the United States which agree to manufacture substantially in the United States products which embody inventions developed in the course of research under CRADAs. 6 CRADA #: CID-93-045-00 [***] 1 [***]Confidential Treatment Requested [***] 2 [***]Confidential Treatment Requested [***] 3 [***]Confidential Treatment Requested [***] 4 [***]Confidential Treatment Requested [***] 5 [***]Confidential Treatment Requested [***] 6 [***]Confidential Treatment Requested [***] 7 [***]Confidential Treatment Requested [***] 8 [***]Confidential Treatment Requested [***] 9 [***]Confidential Treatment Requested [***] 10 [***]Confidential Treatment Requested [***] 11 [***]Confidential Treatment Requested [***] 12 [***]Confidential Treatment Requested [***] 13 [***]Confidential Treatment Requested [***] 14 [***]Confidential Treatment Requested [***] 15 [***]Confidential Treatment Requested CRADA CID-93-045-00 APPENDIX C STAFFING AND MONETARY COMMITMENTS [***] [***]Confidential Treatment Requested [DIAGRAM] [DIAGRAM] Figure 1 [DIAGRAM] [DIAGRAM] Figure 2 EX-10.18 14 LICENSE AGMT BTWN PROGENICS & TRUSTEES OF COLUMBIA LICENSE AGREEMENT AGREEMENT, effective March 1, 1989, between THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, a New York corporation ("Columbia") and PROGENICS PHARMACEUTICALS, INC., a Delaware corporation ("Progenics"). 1. DEFINITIONS. a. "Affiliate" shall mean any corporation, firm, partnership or other entity which directly or indirectly owns, is owned by or is under common ownership with a party to this Agreement to the extent of at least fifty percent of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct the affairs of the entity, and any person, firm, partnership, corporation or other entity actually controlled by, controlling or under common control with a party to this Agreement. b. "Licensed Columbia Patents" shall mean: (i) the following patent applications and patents relating to soluble T4-based peptides and fragments thereof, intermediates or methods of producing them, or methods of, or compositions using, them which are owned solely by Columbia and on which Richard Axel, Paul Maddon, Dan Littman, Leonard Chess, Robin Weiss, or Steven McDougal, or any combination thereof, are named as inventor or co-inventor: (A) the patent applications listed in Appendix A hereto, all divisions or continuations thereof, all patents issuing therefrom and all reissues of all such patents; (B) all patents and patent applications, whether filed before or after the effective date of this Agreement, which claim priority under 35 U.S.C. Section 119 or the benefit of the filing date under 35 U.S.C. Section 120 of the patent applications and patents of subparagraph (A), but only to the extent of subject matter in such applications and patents for which priority or benefit is claimed. (ii) any claim in any patent application pending as of the effective date of this Agreement or any patent issuing - 2 - therefrom relating to soluble T4-based peptides and fragments thereof, intermediates or methods of producing them, or methods of, or compositions using, them which is owned in part by Columbia and on which Richard Axel or Paul Maddon, or both, are named as inventor or co-inventor, and any claim in any patent application, or any patent issuing therefrom, whether filed before or after the effective date of this Agreement, which claims priority under 35 U.S.C. Section 119 or the benefit of the filing date under 35 U.S.C. Section 120 of any such patent application or patent, but only to the extent of subject matter in such application or patent for which priority or benefit is claimed, to the extent that such claim is: (A) directed to a soluble T4-based peptide or fragment thereof which contains an amino acid sequence identical to the amino acid sequence 3-94, which is shown in Figure 6A of PCT International Publication No. W088/01304, published February 25, 1988 or an amino acid sequence - 3 - identical to that amino acid sequence, except that at position 3 lysine replaces asparagine, and/or at position 64 arginine replaces tryptophan; or (B) broadly directed to methods of making the soluble T4-based peptide or fragment thereof of subparagraph (A) in transformed hosts, but not otherwise; but excluding any claim directed to a soluble T4-based peptide which has an amino acid sequence which is identical to any of the following amino acid sequences which are shown in Figure 6A of PCT International Publication No. W088/01304: (i) the amino acid sequence 3-185; (ii) the amino acid sequence 3-185 fused to the amino acid sequence 353-371, or (iii) the amino acid sequence 3-106 fused to the amino acid sequence 353-371, or an amino acid sequence which is identical to any such amino acid sequence, except that at position 3 lysine replaces asparagine. c. "Products" shall mean any product (i) the manufacture, use or sale of which would, but for the - 4 - license granted herein, infringe a claim of an existing Licensed Columbia Patent or (ii) that is described by a claim of a pending patent application within Licensed Columbia Patents. [***] *** Confidential Treatment Requested - 5 - [***] 2. LICENSE GRANT. a. Columbia grants to Progenics and its Affiliates, upon and subject to all the terms and conditions of this Agreement, a worldwide, coexclusive license under the Licensed Columbia Patents to manufacture, have manufactured, use and sell Products, provided, however, that Columbia shall grant no more than three other coexclusive licenses which shall not be granted more than 90 days after the effective date of this Agreement. Columbia will inform Progenics of the names of each coexclusive licensee. b. Progenics may not grant any sublicenses under this Agreement. c. All rights granted by Columbia to Progenics under this Agreement are subject to the requirements, to the extent applicable, of 35 U.S.C. Sections 200 ET SEQ. and implementing regulations. If Columbia is required to grant licenses, in addition to the three other coexclusive licenses provided for in Section 2(a), pursuant to the statutory and regulatory requirements referred to in this Section 2(c), or if the license granted to Progenics under this Agreement is otherwise modified or limited by the U.S. Government pursuant to such requirements, Columbia and Progenics shall negotiate in good faith a reduction of the license fees and royalties payable hereunder and such *** Confidential Treatment Requested - 6 - other amendments of this Agreement as may be appropriate under the circumstances. 3. LICENSE FEE AND ROYALTIES. a. In consideration of the license granted under Section 2(a) of this Agreement, Progenics shall pay to Columbia: [***] *** Confidential Treatment Requested - 7 - 4. PATENT PROSECUTION. Progenics shall reimburse Columbia within thirty days of the effective date of this Agreement for a proportionate share of all expenses incurred to date and shall pay a proportionate share of all expenses incurred during the term of this Agreement, for filing, prosecuting and maintaining licensed columbia patents. Progenics, proportionate share shall be one fourth of such expenses if there are three other coexclusive licenses, one third of such expenses if there are two other coexclusive licensees, one half of such expenses if there is one other coexclusive licensee, and all of such expenses if there is no other coexclusive licensee of Licensed Columbia Patents. The preparation, filing, prosecution and maintenance of the Licensed Columbia Patents will be conducted by Columbia in Columbia's name, by counsel selected by Columbia in countries designated by Columbia. Columbia shall keep Progenics fully informed concerning Licensed Columbia Patents, and shall promptly provide to Progenics copies of all correspondence relating to Licensed Columbia Patents from the patent offices in those countries in which Licensed Columbia Patents are filed as well as copies of all responses thereto. So long as Progenics timely provides comments to Columbia concerning the preparation of responses to Office Actions, Columbia's counsel shall give due consideration to such comments. - 8 - 5. REPORTS AND PAYMENTS. a. On or before the last business day of February, May, August and November of each year of this Agreement, Progenics shall submit to Columbia a written report with respect to the preceding calendar quarter (the "Payment Report") stating: (i) Net Sales made by Progenics and any Affiliate during such quarter for Products; and (ii) A calculation under Section 3 of the amount due to Columbia. b. Simultaneously with the submission of each Payment Report, Progenics shall make payment to Columbia of the amount due for the calendar quarter covered by the Payment Report. c. Progenics shall maintain at its principal office usual books of account and records showing its actions under this Agreement. Upon reasonable notice, such books and records shall be open to inspection and copying at Columbia's expense, during usual business hours, by an independent certified public accountant to whom Progenics has no reasonable objection, for two years after the calendar quarter to which they pertain, for purposes of verifying the accuracy of the amounts paid by Progenics under this Agreement. d. Any tax paid or required to be withheld by Progenics on account of royalties payable to Columbia under - 9 - this License Agreement shall be deducted from the amount of royalties otherwise due. Progenics shall secure and send to Columbia proof of any such taxes withheld and paid by Progenics for the benefit of Columbia. e. All royalties due under this Agreement shall be payable in U.S. dollars. If governmental regulations prevent remittances from a foreign country with respect to sales made in that country, the obligation of Progenics to pay royalties on sales in that country shall be suspended until such remittances are possible. Columbia shall have the right, upon giving written notice to Progenics, to receive payment in that country in local currency. f. Monetary conversions from the currency of a foreign country in which Products are sold into United States currency shall be made at the official exchange rate in force in that country for financial transactions on the last business day of the calendar quarter for which the royalties are being paid. If there is no such official exchange rate, the conversion shall be made at the rate for such remittances on that date as certified by Citibank, N.A., New York, New York, U.S.A. 6. USE FOR RESEARCH PURPOSES OF LICENSES GRANTED. Columbia reserves the right to use the Licensed Columbia Patents solely for academic research purposes and to permit other entities or individuals to use the same - 10 - solely for academic research purposes provided such other entities or individuals agree in writing to use the same for academic research purposes and not to provide the same to other entities or individuals 7. BEST EFFORTS. a. Progenics shall use its reasonable best efforts to develop and market Products for commercial sale and distribution throughout the world. To such end, Progenics shall use its reasonable best efforts to achieve the following objectives within the following time periods measured from the effective date of this Agreement: [***] b. Failure to achieve these objectives shall result in Columbia having the option to terminate the license granted hereunder, subject to Progenics' right to achieve the missed objective within 60 days of receipt of written notice of termination from Columbia. Columbia shall not unreasonably withhold its consent to any revision in the preceding schedule requested in writing by Progenics and supported by evidence of technical difficulties or delays in the clinical studies or regulatory process that *** Confidential Treatment Requested - 11 - could not have been reasonably avoided. 8. INFRINGEMENT OF LICENSED COLUMBIA PATENTS. a. Columbia will protect the Licensed Columbia Patents from infringement and prosecute infringers at its own expense when in its sole judgment such action may be reasonably necessary, proper and justified. b. Progenics shall notify Columbia if it becomes aware of any infringement of a claim of a Licensed Columbia Patent by a third party selling products in competition with Progenics or its Affiliates. c In the event Columbia shall initiate or carry on legal proceedings to enforce any Licensed Columbia Patent against an alleged infringer, Progenics shall use its reasonable best efforts to fully cooperate with and shall supply all assistance reasonably requested by Columbia. Columbia shall have sole control of that proceeding and shall bear the reasonable expenses incurred by Progenics in providing such assistance and cooperation as is requested pursuant to this paragraph. d. If Columbia does not initiate and use reasonable efforts to carry on such a legal proceeding or otherwise cause the infringement of claims of Licensed Columbia Patents to cease within one year of receipt of notice from Progenics of the infringement, Progenics shall be entitled thereafter to pay license fees and royalties due to Columbia into an interest-bearing, escrow account. - 12 - As soon as Columbia initiates and uses reasonable efforts to carry on such a legal proceeding or otherwise causes the infringement to cease, whichever is earlier, Progenics shall resume payments directly to Columbia if Progenics had previously paid license fees and royalties into such an escrow account and shall further pay to Columbia all monies, including interest, in such escrow account. If Columbia fails to initiate and carry on such a legal proceeding or to otherwise cause such infringement to cease, Progenics shall be entitled to recover from such escrow account all monies, including interest, which have been in such escrow account for more than two years and shall have no further obligation to Columbia with respect to such monies. 9. REPRESENTATIONS AND WARRANTIES. Columbia represents and warrants that, to the best of its knowledge, it has good title to the Licensed Columbia Patents and that it has the right to grant the license granted to Progenics hereunder and that it has taken all action necessary under the statute and regulations referred to in Section 2(c) above in order to vest in Columbia such title to the Licensed Columbia Patents and in order to grant such license. Nothing in this Agreement shall be construed as a warranty or representation by either party as to the validity of any Licensed Columbia Patent. Nothing in this agreement shall be construed as a warranty or - 13 - representation by either party that anything made, used, sold or otherwise disposed of under any license granted under this Agreement is or will be free from infringement of domestic or foreign patents of other parties. Nothing in this Agreement shall be construed as a license under any other patent or patent application owned in whole or in part by Columbia, including specifically U.S. Patent Number 4,399,216 related U.S. and foreign patents and patent applications under which a separate license is required. 10. PROHIBITION AGAINST USE OF NAME. Progenics will not use the name, insignia or symbols of Columbia, its faculties or departments, or any variation or combination thereof, or the name of any trustee, faculty member, other employee or student of Columbia for any purpose whatsoever without Columbia's prior written consent. 11. COMPLIANCE WITH GOVERNMENTAL OBLIGATIONS. a. Notwithstanding any provisions in this Agreement, Columbia disclaims any obligations or liabilities arising under the license provisions of this Agreement if Progenics is charged in a governmental action for not complying with or fails to comply with governmental regulations in the course of taking effective steps to bring any Product to a point of practical application. b. Progenics shall comply upon reasonable notice from Columbia with all lawful governmental requirements directed to either Columbia or Progenics and - 14 - provide all information and assistance necessary to comply with the governmental requirements. c. Progenics shall conduct its research, development, and marketing activities under this Agreement in compliance with all government regulations in force and effect including, but not limited to, Federal, state and municipal legislation. 12. INDEMNITY AND INSURANCE. a. Progenics will indemnify and hold Columbia and the Howard Hughes Medical Institute harmless against any and all actions, suits, claims, demands, prosecutions, liabilities, costs and expenses (including reasonable attorneys' fees) based on or arising out of the manufacture, packaging, use, or sale of Products by Progenics and its Affiliates, even if altered for use for a purpose not intended, or use of Licensed Columbia Patents by Progenics or its Affiliates, or its (or their) customers and any representation made or warranty given by Progenics or, its Affiliates, with respect to Products, provided Columbia or the Howard Hughes Medical Institute gives prompt written notice to Progenics of any claim against it for which indemnification is sought and promptly discloses to Progenics a true copy of any summons or other process, pleading or notice issued in any lawsuit or other proceeding to assert such claim and further provided that Progenics has the right to control - 15 - the investigation, trial and defense of such lawsuit or other proceeding (including all settlement negotiations) and any appeal arising therefrom and to retain attorneys of its choosing. b. Progenics shall maintain, during the term of this Agreement, comprehensive general liability insurance, including product liability insurance, with reputable and financially secure insurance carriers and in a form reasonably acceptable to Columbia to cover the activities of Progenics and its Affiliates for minimum limits of [***] combined single limit for bodily injury and property damage per occurrence and in the aggregate. Such insurance shall include Columbia, its trustees, officers, and employees as additional insureds. Prior to any administration of a Product to a human being, Progenics shall furnish to Columbia a certificate of insurance evidencing such coverage. Progenics shall provide to Columbia thirty days prior written notice of any cancellation or material change in such insurance. Progenics' insurance shall be primary coverage; any insurance Columbia may purchase shall be excess and noncontributory. Such insurance shall be written to cover claims made during or after the expiration of this Agreement. Progenics shall have the option of self insuring for such coverage, on the condition that it provides - 16 - *** Confidential Treatment Requested Columbia, before any Product is administered to a human being, with an audited financial statement that evidences its ability to self insure for such amounts. Progenics shall at all times comply with all statutory workers' compensation and employers' liability requirements covering its employees with respect to activities performed under this Agreement. Progenics, no later than each anniversary of the effective date of this Agreement, shall provide to Columbia written assurance that Progenics is in compliance with its obligations under this Section 12. Such assurance shall be sent by certified mail (return receipt requested), postage prepaid to: Columbia University Risk Management Office 225 Broadway New York, New York 10007 13. MARKING. Prior to the issuance of patents, Progenics will, as appropriate, mark Products made, sold, or otherwise disposed of by it under the license granted in this Agreement with the words "Patent Pending", and following the issuance of one or more patents, with the numbers of such patents. 14. BREACH AND CURE. a. In addition to applicable legal standards, Progenics shall be considered to be in material - 17 - breach of this Agreement for (i) failure to pay fully and promptly amounts due pursuant to Section 3 and payable pursuant to Section 5, (ii) failure to pay patent prosecution expenses pursuant to Section 4, (iii) failure to comply with governmental requests directed to Columbia or Progenics pursuant to Section 11(b), or (iv) failure to maintain the required insurance pursuant to Section 12. b. Either party shall have the right to cure its material breach. The cure shall be effected within a reasonable period of time but in no event later than sixty days after notice of breach given by the non-breaching party. 15. TERM OF AGREEMENT. a. This Agreement and the royalty obligations incident thereto shall be effective as of the date first set forth above and shall continue in full force and effect until its expiration or termination in accordance with this Section 15. b. Unless terminated earlier under any other provision of this Agreement, the Agreement shall expire upon the expiration, lapse or invalidation of the last Licensed Columbia Patent to expire, lapse or be invalidated. Following termination of this Agreement pursuant to this Section 15(b), Progenics shall have the right to manufacture, have manufactured, use and sell Products without further obligations to Columbia. - 18 - c. This Agreement may be terminated by Columbia (i) upon sixty days' written notice to Progenics if Columbia elects to terminate in accordance with Section 7(b), (ii) upon thirty days' written notice to Progenics for Progenics's material breach of the Agreement and Progenics's failure to cure such material breach in accordance with Section 14(b), or (iii) should Progenics commit any act of bankruptcy, become insolvent, file a petition under any bankruptcy or insolvency act or have any such petition filed against it. Following termination of this Agreement pursuant to this Section 15(c), Progenics shall have the right to sell off existing inventory subject to the obligations of this Agreement. d. Progenics may terminate this Agreement at any time upon 90 days prior written notice. 16. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if sent by certified mail (return receipt requested), postage prepaid, if to Columbia, to: Office of Science and Technology Development Columbia University 411 Low Memorial Library New York, New York 10027 copy to: General Counsel Columbia University 110 Low Memorial Library New York, New York 10027 - 19 - if to Progenics, to: Mr. Terrence C. Burnham Progenics Pharmaceuticals, Inc. Old Saw Mill River Road Tarryton, New York 10591 copy to: Mackler, Cooper & Gibbs 1120 Vermont Avenue, N.W. Suite 600 Washington, D.C. 20005 or to such other address as a party may specify by notice hereunder. 17. ASSIGNMENT. This Agreement and the licenses herein granted shall be binding upon and inure to the benefit of the successors in interest of the respective parties. Neither this Agreement nor any interest hereunder shall be assignable by either party without the written consent of the other, provided, however, that commencing two years after the effective date of this Agreement, Progenics may assign this Agreement to any corporation with which it may merge or consolidate, or to which it may transfer all or substantially all of its assets to which this Agreement relates with Columbia's written consent, such consent not to be unreasonably withheld. 18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof and supersedes all previous writings and understandings. No terms or provisions of this Agreement shall be varied or modified by any prior or subsequent statement, conduct or act of either of the - 20 - parties. This Agreement may only be amended by a written instrument signed by Progenics and Columbia, specifically referring to and executed in the same manner as this Agreement, and no such amendment shall be entered into without the written consent of all other licensees under Licensed Columbia Patents, such consent not to be unreasonably withheld. 19. GOVERNING LAW. This Agreement shall be governed by New York law applicable to agreements made and to be performed in New York. IN WITNESS THEREOF, Columbia and Progenics have caused this Agreement to be executed by their duly authorized representatives as of the day and year first written above. THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK By /s/ Jack M. Granowitz -------------------------------------- Director, Office of Science and Technology Development PROGENICS PHARMACEUTICALS, INC. By /s/ Gerard M. Housey -------------------------------------- Gerard M. Housey, Ph.D. President - 21 - APPENDIX A LICENSED COLUMBIA PATENTS U.S. Serial no. 898,587, filed August 21, 1986 U.S. Serial no. 114,244, filed October 23, 1987 Australian Appln. No. 78792/87, filed April 13, 1988, based upon PCT International Appln. No. PCT/US87/02050, filed August 20, 1987. Canadian Appln. No. 544,986, filed August 20, 1987 Danish Appln. No. 2172/88, filed April 21, 1988, based upon PCT International Appln. No. PCT/US87/02050, filed August 20, 1987. European Appln. No. 87 905 848.5, filed April 21, 1988, based upon PCT International Appln. No. PCT/US87/02050, filed August 20, 1987. Japanese Appln. No. 505271/87, filed April 21, 1988, based upon PCT International Appln. No. PCT/US87/02050, filed August 20, 1987. [LETTERHEAD] March 1, 1989 Director Office of Science and Technology Development Columbia University 411 Low Memorial Library New York, New York 10027 Progenics Pharmaceuticals - Columbia License Agreement (March 1, 1989) Soluble T.-Based Peptides ------------------------------------ Dear Sir: This concerns the above-identified License Agreement. THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK ("Columbia") and PROGENICS PHARMACEUTICALS, INC. ("Progenics") agree to and understand that the above-identified License Agreement, now in force and executed on even date herewith, shall be interpreted consistently with the following: 1. Columbia shall not, pursuant to Section 7(b), terminate the license granted to Progenics under the March 1, 1989 License Agreement notwithstanding Progenics' failure to achieve the objectives specified in Section 7(a), within the corresponding time periods there specified, provided that: (i) Progenics makes the corresponding licensee fee payments set forth in Section 3(a)(i) no later than the last day of each such time period; and (ii) Progenics, as of the date of each such payment, demonstrates that it has used, and is continuing to use, reasonable efforts to develop and market Products for commercial sale and distribution. 2. In the last sentence of Section 17 of the License Agreement, the phrase "such consent not to be unreasonably withheld" shall be interpreted to mean that Columbia shall not withhold its consent in the event that Progenics merges or consolidates with, or sells all or substantially all of its assets to, a major pharmaceutical company of recognized standing in the industry. Sincerely, Progenics Pharmaceuticals, Inc. By: /s/ Gerard M. Housey ------------------------------ Gerard M. Housey President Dated: March 1, 1989 The foregoing is in accordance with Columbia's interpretation of the License Agreement now in force, and executed on even date herewith, between Columbia and Progenics THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK By: /s/ Jack M. Granowitz ----------------------------------- Director, Office of Science and Technology Development October 22, 1996 Paul A. Madden, M.D., Ph.D. Chairman and CEO Progenics Pharmaceuticals, Inc. Old Saw Mill River Road Tarrytown, New York 10591 Dear Paul: Re: Columbia-Progenics CD4 license agreement Columbia and Progenics have agreed to supersede the existing coexclusive license agreement between THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK ("Columbia") and PROGENICS PHARMACEUTICALS, INC., ("Progenics") of March 1, 1989 as amended by the letter agreement of March 1, 1989 (hereinafter the, "Coexclusive Agreement) with a new exclusive license agreement (hereinafter the "Exclusive Agreement"). The Exclusive Agreement will include the terms in this letter agreement (hereinafter the, "Letter Agreement of October 22, 1996." Columbia and Progenics will work diligently and in good faith to draft, finalize and sign the Exclusive Agreement within 90 days of this Letter Agreement of October 22, 1996. This Letter Agreement of October 22, 1996 shall become binding and effective upon its execution by Columbia and Progenics, shall supersede the Coexclusive Agreement, and shall, until the execution of the Exclusive Agreement by Columbia and Progenics, govern the relationship of Columbia and Progenics as to the subject matter hereof. 1. Scope of Grant. a. Subject to any residual rights of the third parties under previous agreements with Columbia to sell inventory that was made prior to termination of those agreements, Columbia grants to Progenics and its Affiliates, upon and subject to all the terms and conditions of this Letter Agreement of October 22, 1996, a world-wide, exclusive license, with the right to sublicense, under the Licensed Columbia Patents set forth in Exhibit C to manufacture, have manufactured, use and sell Products as defined herein. The patent rights relating to CD4 that are jointly owned by Columbia with SmithKline Beecham will be included in Licensed Columbia Patents to the extent of Columbia's right therein. "Products" shall mean any product (i) the manufacture, use or sale of which would, but for the license granted herein, infringe a claim of an existing Licensed Columbia Patent, or (ii) that is described in a claim of a pending patent application within Licensed Columbia Patents, or (iii) that uses, or is derived from the use of, Licensed Technical Information. "Licensed Technical Information" shall mean all information and materials (including any chemical 1 compound or substance, biological cell, or component thereof) owned by Columbia, solely or jointly with Progenics, and related to soluble T-4 based peptides which is not covered by Licensed Columbia Patents. b. Columbia grants to Progenics a world-wide exclusive license, with the right to sublicense, for commercial purposes to the [***]. There exists no other license (except for any residual rights of the third parties under previous agreements with Columbia to sell inventory that was made prior to termination of those agreements) and Columbia will not grant licenses in the future for commercial development of the [***] though Columbia does not warrant that no commercial entity has received [***]. [***] *** Confidential Treatment Requested 2 [***] 4. Annual Research and Development Plans. Progenics has provided Columbia with an annual Research and Development Plans for each Defined Product which is attached as Exhibit D. The research and development plans for each Defined Product shall contain at least the following: a. Resources previously expended and to be expended during the next calendar year for each Defined Product. b. Current status and progress expected to be made during the next calender year with regard to each Defined Product, c. A list of patents and patent applications owned or controlled by Progenics with respect to each Defined Product, d. A description of at least one specific product embodying each Defined Product that is under development by Progenics. Beginning in 1997, Progenics shall provide an updated annual research and development plan for each Defined Product at least 90 days prior to the beginning of the next calender year. If Progenics fails to timely provide, or diligently pursue, an annual research and development plan on a specific Defined Product, then that Defined Product shall cease to be a Defined Product. Columbia shall provide Progenics with 30 days notice when Columbia believes a product is no longer a Defined Product. If there is a dispute whether a product continues to be a Defined Product, then the parties shall meet and negotiate in good faith in an attempt to resolve the dispute. 5. A new schedule of payments by Progenics to Columbia shall be adopted as follows: *** Confidential Treatment Requested 3 [***] g. In addition to the foregoing, Progenics will pay: [***] h. Failure to make the payments described in this Section 5 or Section 6 of this Letter Agreement of October 22, 1996 would entitle Columbia at its sole option do any of the following: I. terminate the Exclusive Agreement in whole or in part, or ii. convert one or more Defined Products to a non-exclusive license, 6. Patent Expenses and Infringement. a. Progenics will reimburse Columbia for all reasonable patent expenses from December 21, *** Confidential Treatment Requested 4 1995 forward. Progenics will remain responsible for a pro rata share of patent expenses prior to that date depending on how many parties had coexclusive licenses. If Columbia so requests, Progenics will make such reimbursement directly to Columbia's patent counsel and Progenics will accept invoices directly from Columbia's patent counsel. b. Columbia shall have the first right to sue infringers. In the event that Columbia shall not commence an action within 90 days of receipt from Progenics of evidence establishing a prima facie case of infringement, then Progenics shall have the right to commence an action against the infringer at Progenics' expense. In the event that Progenics finances the suit, then Progenics may credit litigation expenses against the running royalty owed to Columbia up to [***] of the royalty with respect to the relevant product or Defined Product. In the event of an award or settlement, Progenics shall first reimburse itself for its expenses and Columbia on a pro rata basis for any amounts withheld from or paid by Columbia. Any excess shall be divided [***] to Progenics and [***] to Columbia, such reimbursement of Progenics and Columbia to be on a pro rata basis. Section 8(d) of the Coexclusive Agreement is hereby deleted. 7. Best Efforts. Progenics shall have obligations identical to those in Section 7(ii),(iii) and (iv) of the Coexclusive Agreement except that the dates shall be revised to read as follows: [***] 8. Except as modified by this Letter Agreement of October 22, 1996, substantially all of the terms in the Coexclusive Agreement apply to, and are hereby incorporated into, this Letter Agreement of October 22, 1996. If Progenics is in agreement with the above please execute both copies of this Letter Agreement of October 22, 1996, and return them to me. I shall have it executed here at Columbia and return one fully executed copy to you. Sincerely yours, /s/ SCOT G. HAMILTON Scot G. Hamilton Director, Health Sciences Columbia Innovation Enterprise Agreed to: *** Confidential Treatment Requested 5 PROGENICS PHARMACEUTICALS, INC. By: /s/ PAUL J. MADDON ----------------------------------- Paul J. Maddon, M.D., Ph.D. Chairman and CEO THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK By: /s/ JACK M. GRANOWITZ ----------------------------------- Jack M. Granowitz Executive Director Columbia Innovation Enterprise 6 EXHIBIT A [***] *** Confidential Treatment Requested 7 [***] *** Confidential Treatment Requested 8 EXHIBIT B. [***] *** Confidential Treatment Requested 9 EXHIBIT C [***] *** Confidential Treatment Requested -1- EXHIBIT C [***] *** Confidential Treatment Requested -2- EXHIBIT C [***] *** Confidential Treatment Requested -3- EXHIBIT C [***] *** Confidential Treatment Requested -4- EXHIBIT C [***] *** Confidential Treatment Requested -5- CONFIDENTIAL EXHIBIT D Progenics Pharmaceuticals, Inc. 9 October, 1996 [***] *** Confidential Treatment Requested EXHIBIT D CONTINUED [***] *** Confidential Treatment Requested [***] *** Confidential Treatment Requested [***] *** Confidential Treatment Requested EX-10.19 15 LICENSE AGMT DTD 6/25/96 BTWN PROGENICS & REGENTS Exhibit 10.19 LICENSE AGREEMENT NO. W 960625 ANTIGENIC COMPOSITIONS AND METHODS FOR USING SAME PROGENICS PHARMACEUTICALS AND THE REGENTS OF THE UNIVERSITY OF CALIFORNIA LICENSE AGREEMENT No. W 960625 TABLE OF CONTENTS ARTICLE PAGE NUMBER - ------- ----------- RECITALS ...............................................................1 1. DEFINITIONS ....................................................1 2. GRANT ..........................................................2 3. SUBLICENSES ....................................................3 4. CONSIDERATION ..................................................3 5. ROYALTIES ......................................................3 6. DILIGENCE ......................................................4 7. PATENT FILING, PROSECUTION AND MAINTENANCE .....................5 8. PATENT INFRINGEMENT ............................................6 9. PROGRESS AND ROYALTY REPORTS ...................................7 10. BOOKS AND RECORDS ..............................................7 11. LIFE OF THE AGREEMENT ..........................................7 12. TERMINATION BY THE REGENTS .....................................8 13. TERMINATION BY PROGENICS .......................................8 14. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION ......8 15. PATENT MARKING .................................................9 16. USE OF NAMES AND TRADEMARKS ....................................9 17. LIMITED WARRANTY ...............................................9 18. INDEMNIFICATION ...............................................10 19. NOTICES .......................................................10 20. ASSIGNABILITY .................................................11 21. LATE PAYMENTS .................................................11 22. WAIVER ........................................................11 23. FAILURE TO PERFORM ............................................11 24. GOVERNING LAWS ................................................11 25. GOVERNMENT APPROVAL OR REGISTRATION ...........................12 26. EXPORT CONTROL LAWS ...........................................12 27. PREFERENCE FOR UNITED STATES INDUSTRY .........................12 28. FORCE MAJEURE .................................................12 29. ARBITRATION ...................................................12 30. CONFIDENTIALITY ...............................................12 31. MISCELLANEOUS .................................................13 LICENSE AGREEMENT No. W 960625 This Agreement is made and is effective this 25th day of June 1996, (the "Effective Date") between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA ("The Regents"), a California corporation having its corporate offices located at 300 Lakeside Drive, 22nd Floor, Oakland, California 94612-3550, acting through its offices located at Box 951525, 405 Hilgard Avenue, Los Angeles, California 90095-1525, and PROGENICS PHARMACEUTICALS, INC. ("Progenics"), a corporation having a principal place of business at Old Saw Mill River Road, Tarrytown, NY 10591. RECITALS WHEREAS, a certain invention (the "Invention"), generally characterized as "Antigenic Compositions and Methods for Using Same" (U.S. Case No. 92-078-01), was made in the course of research at the University of California, Los Angeles by Reiko Irie, Tadashi Tai, Donald L. Morton, James C. Paulson and Leslie Cahan, and is covered by Regents' Patent Rights as defined below; WHEREAS, the Invention was developed with United States Government funds, and The Regents granted a royalty-free nonexclusive license to the United States Government on January 18, 1983, as required under 35 U.S.C. Section 201-212; WHEREAS, Progenics is a "small business firm" as defined in 15 U.S.C. Section 42; and WHEREAS, The Regents wishes that Regents' Patent Rights be developed and utilized to the fullest extent so that the benefits can be enjoyed by the general public. The parties agree as follows: 1. DEFINITIONS 1.1 "Regents' Patent Rights" means patent rights to any subject matter claimed in or covered by the patent entitled "Antigenic Compositions and Methods for Using Same", U.S. patent no. 4,557,931 (filed December 10, 1985), assigned to The Regents (UCLA Case No. LA92-078-01), including reissues and reexaminations. 1.2 "Licensed Product" means any article, composition, apparatus, substance, chemical, or any other material covered by Regents' Patent Rights or whose manufacture, use or sale would constitute an infringement of any claim within Regents' Patent Rights, or any service, article, composition, apparatus, chemical, substance, or any other material made, used, or sold by or utilizing or practicing a Licensed Method. 1.3 "Licensed Method" means any process or method which is covered by Regents' Patent Rights or whose use or practice would constitute an infringement of any claim within Regents' Patent Rights. 1 1.4 The "Licensed Field" shall mean all fields of use. 1.5 "Affiliate" means any corporation or other business entity in which Progenics owns or controls, directly or indirectly, at least 50% of the outstanding stock or other voting rights entitled to elect directors. In any country where the local law does not permit foreign equity participation of at least 50%, then "Affiliate" means any company in which Progenics owns or controls, directly or indirectly, the maximum percentage of outstanding stock or voting rights that is permitted by local law. 1.6 "First Commercial Sale" means the first sale of any Licensed Product by Progenics or any Affiliate or Sublicensee, following approval of its marketing by the appropriate governmental agency for the country in which the sale is to be made. When governmental approval is not required, "First Commercial Sale" means the first sale in that country. 1.7 [***] 1.8 "Sublicensee" means any third party sublicensed by Progenics to make, have made, use, sell, or have sold any Licensed Product or to practice any Licensed Method. 1.9 [***] 2. GRANT 2.1 The Regents hereby grants to Progenics an exclusive license (the "License") under Regents' Patent Rights, in jurisdictions where Regents' Patent Rights exist, to make, have made, use, sell, have sold and offer to sell Licensed Products and to practice Licensed Methods in the Licensed Field. 2.2 The License is subject to all the applicable provisions of any license to the United States Government executed by The Regents. The License is subject to any overriding obligations to the United States Federal Government under 35 U.S.C. Section 201-212. 2.3 The Regents expressly reserves the right to use Regents' Patent Rights and associated technology for educational, research and clinical purposes and for any other purpose that is not inconsistent with the rights granted to Progenics in this Agreement. 2 [***] Confidential Treatment Requested 3. SUBLICENSES 3.1 The Regents also grants to Progenics the right to issue exclusive or nonexclusive sublicenses ("Sublicenses") to third parties to make, have made, use, sell, and have sold Licensed Products and to practice Licensed Methods in any jurisdiction under which Progenics has exclusive rights under this Agreement. All Sublicenses will be subject to the rights of The Regents under this Agreement. Sublicenses will also be subject to the rights of the United States Federal Government under 35 U.S.C. Section 201-212. 3.2 Progenics must pay to The Regents [***] 3.3 Progenics must provide to The Regents a copy of each Sublicense within 30 days of execution, and a copy of all information submitted to Progenics by Sublicensee relevant to the computation of the payments due to The Regents under this Article 3. 3.4 If this Agreement is terminated for any reason, all outstanding Sublicenses will be assigned by Progenics to The Regents. The Sublicenses will remain in full force and effect with The Regents as the licensor or sublicensor instead of Progenics, but the duties of The Regents under the assigned Sublicenses will not be greater than the duties of The Regents under this Agreement, and the rights of The Regents under the assigned Sublicenses will not be less than the rights of The Regents under this Agreement, including all financial consideration and other rights of The Regents. 4. CONSIDERATION 4.1 In consideration for the License, Progenics will pay to The Regents [***] within 30 days of the Effective Date. This fee is nonrefundable and is not an advance against royalties. 4.2 Progenics must pay to The Regents [***] beginning on the one-year anniversary date of the Effective Date of this Agreement and continuing annually on each anniversary date of the Effective Date. The maintenance fee will not be due and payable on any anniversary date of the Effective Date if on that date Progenics is commercially selling a Licensed Product and paying an earned royalty to The Regents on the sales of that Licensed Product. The license maintenance fees are non-refundable and are not an advance against royalties. 5. ROYALTIES 5.1 Progenics must pay to The Regents for sale of Licensed Product(s) sold by Progenics or its Affiliates an earned royalty of [***] 5.2 Paragraphs 1. 1, 1.2 and 1.3 define Regents' Patent Rights, Licensed Products and Licensed Methods so that royalties are payable on products covered by issued patents. Royalties accrue for the duration of this Agreement. 3 [***] Confidential Treatment Requested 5.3 Progenics must pay royalties owed to The Regents on a quarterly basis. Progenics must pay the royalties within two months of the end of the calendar quarter in which the royalties accrued. 5.4 All monies due The Regents must be paid in United States funds. When Licensed Products are sold for monies other than United States dollars, the royalties will first be determined in the foreign currency of the country in which those Licensed Products were sold and, second, converted into equivalent United States funds. Progenics must use the exchange rate established by the Bank of America in San Francisco, California on the last day of the calendar quarter. 5.5 Any tax for the account of The Regents required to be withheld by Progenics under the laws of any foreign country must be promptly paid by Progenics for and on behalf of The Regents to the appropriate governmental authority. Progenics will use its best efforts to furnish The Regents with proof of payment of any tax. Progenics is responsible for all bank transfer charges. All payments made by Progenics in fulfillment of The Regents' tax liability in any particular country will be credited against fees or royalties due The Regents for that country. 5.6 If legal restrictions in any country prevent the prompt remittance by Progenics of some or all royalties, then Progenics will have the right and option to make those payments by depositing them in local currency to The Regents' account in a bank or other depository in that country. If the royalties still cannot be returned to the United States after one year of good-faith efforts by The Regents to recover them, Progenics will be responsible for payment in the United States. 5.7 If any patent or any claim included in Regents' Patent Rights is held invalid or unenforceable in a final decision by a court of competent jurisdiction from which no appeal has or can be taken, all obligation to pay royalties based on that patent or claim or any claim patentably indistinct from it will cease as of the date of that final decision. Progenics will not, however, be relieved from paying any royalties that accrued before that decision or that are based on another patent or claim not involved in that decision. 5.8 If Progenics transfers Licensed Products for end-use to itself or an Affiliate or Sublicensee, that transfer is considered a sale at list price, and Progenics must pay a royalty in accordance with this Article 5 (Royalties). If Progenics sells a Licensed Product to an Affiliate or Sublicensee at a price lower than that customarily charged to an unrelated third party, the royalties paid to The Regents will be based on the Net Sales of Licensed Products by the Affiliate or Sublicensee to their customers. 6. DILIGENCE 6.1 Upon the execution of this Agreement, Progenics must diligently proceed with the development, manufacture and sale ("Commercialization") of Licensed Products and must earnestly and diligently endeavor to market them within a reasonable time after execution of this Agreement and in quantities sufficient to meet the market demands for them. 6.2 Progenics must endeavor to obtain all necessary governmental approval for the Commercialization of Licensed Products. 4 6.3 The Regents has the right and option to terminate this Agreement if Progenics fails to perform any of the terms in this Paragraph 6.3. This right, if exercised by The Regents, supersedes the rights granted in Article 2 (Grant). [***] 6.4 To exercise its right under Paragraph 6.3 to terminate this Agreement, The Regents must give Progenics written notice of the deficiency. Progenics thereafter has 60 days to cure the deficiency or to request arbitration. If The Regents does not receive within the 60 days either a written request for arbitration or satisfactory tangible evidence that Progenics has cured the deficiency, then The Regents may, at its option, terminate this Agreement by giving written notice to Progenics. 6.5 Progenics has the sole discretion for making all decisions as to how to commercialize any Licensed Product. 7. PATENT FILING, PROSECUTION AND MAINTENANCE 7.1 The Regents will maintain the patents comprising Regents' Patent Rights. These patents will be held in the name of The Regents and will be maintained with counsel of The Regents' choice. The Regents must provide Progenics with copies of each patent request for terminal disclaimer, and request for reissue or reexamination of any patent under Regents' Patent Rights. The Regents will consider any comments or suggestions by Progenics. The Regents is entitled to take action to preserve rights and minimize costs whether or not Progenics has commented. 7.2 Progenics will bear all costs incurred during the term of this Agreement in the maintenance of patents in Regents' Patent Rights. Progenics will reimburse The Regents for the maintenance fees for the Patent and the reasonable attorney's fees for services in connection with the payment of the maintenance fees. Progenics must send payment to The Regents within 30 days of Progenics's receipt of an invoice. 7.3 Progenics' obligation to underwrite and to pay all United States patent costs will continue for as long as this Agreement remains in effect. Progenics may terminate its obligations with respect to any given patent upon three months written notice to The Regents. The Regents will use its best efforts to curtail patent costs chargeable to Progenics under this Agreement after this notice is received from Progenics. The Regents may continue prosecution or maintenance of these application(s) or patent(s) at its sole discretion and expense, and Progenics will have no further rights or licenses to them. 5 [***] Confidential Treatment Requested 7.4 The Regents will use its best efforts to not allow any Regents' Patent Rights for which Progenics is licensed and is underwriting the costs of to lapse or become abandoned without Progenics' authorization or reasonable notice. The Regents must notify Progenics 90 days prior to the proposed abandonment. Within 30 days after receipt of the notice, Progenics must, in writing, either (a) concur in the abandonment or (b) elect to assume responsibility for the prosecution and maintenance of all Patent Rights that The Regents proposes to abandon. Lack of written response to The Regents within 30 days will constitute concurrence. 8. PATENT INFRINGEMENT 8.1 In the event that Progenics learns of the substantial infringement of any patent in Regents' Patent Rights, Progenics will inform The Regents in writing and will provide The Regents with reasonable evidence of the infringement. During the period and in a jurisdiction where Progenics has exclusive rights under this Agreement, neither party will notify a third party of the infringement of any of Regents' Patent Rights without first obtaining consent of the other party, which consent must not be unreasonably denied. Both parties will use their best efforts to cooperate to terminate the infringement without litigation. 8.2 Progenics may request that The Regents take legal action against the infringement of Regents' Patent Rights. This request must be in writing and must include reasonable evidence of the infringement and the damages to Progenics. If the infringing activity has not been abated within 90 days following the effective date of the request, The Regents has the right to (a) commence suit on its own account or (b) refuse to participate in a suit. The Regents must give notice of its election in writing to Progenics by the end of the 100th day after receiving notice of the request from Progenics. Progenics may thereafter bring suit for patent infringement in its own name if and only if The Regents elected not to commence suit and if the infringement occurred during the period and in a jurisdiction where the third party had allegedIy infringed Progenics's exclusive rights under this Agreement. However, in the event Progenics elects to bring suit in accordance with this Paragraph 8.2, The Regents may thereafter join the suit at its own expense. Progenics has the right to join any litigation brought by The Regents at Progenics's cost and expense and with counsel of Progenics's choice. 8.3 Any legal action will be at the expense of the party that brings the suit and, with the exception of Paragraph 8.5, all recoveries will belong to that party. Legal action brought jointly by The Regents and Progenics and fully participated in by both, however, will be at the joint expense of the parties and all recoveries will be shared jointly by them in proportion to the share of expense paid by each party. 8.4 Each party must cooperate with the other in litigation proceedings instituted under this Article but at the expense of the party who brings the suit. The litigation will be controlled by the party bringing the suit, although The Regents may be represented by counsel of its choice if The Regents joins a suit brought by Progenics. 8.5 If Progenics undertakes the enforcement or defense of any Regents' Patent Rights by litigation, any recovery of damages by Progenics will be applied first toward Progenics's unreimbursed expenses and legal fees relating to the suit. Progenics will retain the balance of the recovery but will pay The Regents [***] 6 [***] Confidential Treatment Requested 9. PROGRESS AND ROYALTY REPORTS 9.1 Beginning January 31, 1997, Progenics must submit to The Regents semiannual progress reports covering Progenics's activities related to the development and testing of all Licensed Products and the obtaining of the governmental approvals necessary for marketing. These progress reports must be made for each Licensed Product until its First Commercial Sale. 9.2 The progress reports submitted under Paragraph 9.1 must include the following topics: 9.2(a) Summary of work completed. 9.2(b) Key scientific discoveries. 9.2(c) Summary of work in progress. 9.2(d) Current schedule of anticipated events or milestones. 9.2(e) Market plans for introduction of Licensed Products. 9.2(f) A summary of resources (dollar value) spent in the reporting period. 9.3. Progenics must notify The Regents if Progenics or any of its Sublicensees or Affiliates ceases to be a small entity (as defined by the United States Patent and Trademark Office) under the provisions of 35 U.S.C. Section 41(h). 9.4 Progenics must report the date of the First Commercial Sale in the royalty report immediately following that Sale. 9.5 After the First Commercial Sale of each Licensed Product, Progenics must make quarterly royalty reports to The Regents by February 28, May 31, August 31 and November 30 of each year (i.e., within two months from the end of each calendar quarter). Each royalty report must cover Progenics's most recently completed calendar quarter and must show: 9.5(a) Gross sales and Net Sales of any Licensed Product. 9.5(b) Number of each type of Licensed Product sold. 9.5(c) Royalties payable to The Regents. 9.6 Progenics must state in its royalty report if it had no sales of any Licensed Product. 10. BOOKS AND RECORDS 10.1 Progenics must keep accurate books and records of all Licensed Products manufactured, used or sold. Progenics must preserve these books and records for at least five years from the date of the royalty payment to which they pertain. 10.2 The Regents' representatives or agents are entitled to inspect these books and records at reasonable times. The Regents will pay the fees and expenses of these inspections. If an error favoring Progenics of more than 5% of the total annual royalties is discovered, then Progenics will pay the fees and expenses of these inspections. 11. LIFE OF THE AGREEMENT 7 11.1 Unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of this Agreement, this Agreement is in force from the Effective Date recited on page one and remains in effect for the life of the last-to-expire patent in Regents' Patent Rights. 11.2 Upon termination of this Agreement, Progenics will have no further right to make, have made, use or sell any Licensed Product except as provided in Article 14 (Disposition of Licensed Products on Hand Upon Termination). 11.3 Any expiration or termination of this Agreement will not affect the rights and obligations set forth in the following Articles: Article 10 Books and Records. Article 14 Disposition of Licensed Products on Hand upon Termination. Article 16 Use of Names and Trademarks. Article 18 Indemnification. Article 23 Failure to Perform. 12. TERMINATION BY THE REGENTS 12.1 If Progenics violates or fails to perform any material term or covenant of this Agreement, then The Regents may give written notice of the default ("Notice of Default") to Progenics. If Progenics does not repair the default within 90 days after the effective date of the Notice of Default, then The Regents has the right to terminate this Agreement and the License by a second written notice ("Notice of Termination") to Progenics. If The Regents sends a Notice of Termination to Progenics, then this Agreement automatically terminates on the effective date of this notice. Termination does not relieve Progenics of its obligation to pay any royalty or fees owing at the time of termination and does not impair any accrued right of The Regents. 12.2 The provisions of Article 6 (Diligence), and not Paragraph 12.1, will apply to termination for lack of diligence. 13. TERMINATION BY LICENSEE 13.1 Progenics has the right at any time to terminate this Agreement in whole or with respect to any portion of Regents' Patent Rights by giving written notice to The Regents. This notice of termination will be subject to Article 19 (Notices) and will be effective 90 days after the effective date of the notice. 13.2 Any termination in accordance with Paragraph 13.1 does not relieve Progenics of any obligation or liability accrued prior to termination. Nor does termination rescind anything done by Progenics or any payments made to The Regents prior to the effective date of termination. Termination does not affect in any manner any rights of The Regents arising under this Agreement prior to termination. 14. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION 8 14.1 Upon termination of this Agreement, Progenics will have the right to dispose of all previously made or partially made Licensed Products, but no more, within a period of six months. But Progenics must submit royalty reports on the sale of these Licensed Products and must pay royalties at the rate and at the time provided in this Agreement. 15. PATENT MARKING 15.1 Progenics and their Sublicensees must mark all Licensed Products made, used or sold under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws. 16. USE OF NAMES AND TRADEMARKS 16.1 Neither party is permitted to use any name, trade name, trademark or other designation of the other party or its employees (including contraction, abbreviation or simulation of any of the foregoing) in advertising, publicity or other promotional activity. Unless required by law, Progenics is expressly prohibited from using the name "The Regents of the University of California" or the name of any campus of the University of California. 17. LIMITED WARRANTY 17.1 The Regents warrants that it has the lawful right to grant this license to Progenics. 17.2 This License and the associated Invention are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT ANY LICENSED PRODUCT OR LICENSED METHOD WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT. 17.3 IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF THE INVENTION OR LICENSED PRODUCTS OR THE USE OR THE PRACTICE OF LICENSED METHODS. 17.4 Nothing in this Agreement will be construed as: 17.4(a) A warranty or representation by The Regents as to the validity or scope of any Regents' Patent Rights. 17.4(b) A warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents of third parties. 17.4(c) An obligation to bring or prosecute actions or suits against third parties for patent infringement except as provided in Article 8 (Patent Infringement). 9 17.4(d) Conferring by implication, estoppel or otherwise any license or rights under any patents of The Regents other than Regents' Patent Rights as defined herein, regardless of whether such patents are dominant or subordinate to Regents' Patent Rights. 17.4(e) An obligation to furnish any know-how not provided in Regents' Patent Rights. 18. INDEMNIFICATION 18.1 Progenics must indemnify, hold harmless and defend The Regents, its officers, employees, and agents, the inventors of the patents and patent applications in Regents' Patent Rights and their respective employers from and against any and all liability, claims, suits, losses, damages, costs, fees and expenses resulting from or arising out of exercise of this License. 18.2 Progenics, at its sole cost and expense, must insure its activities in connection with the work under this Agreement and obtain, keep in force and maintain Comprehensive or Commercial Form General Liability Insurance (contractual liability included) with limits as follows: 18.2(a) Each occurrence [***] 18.2(b) Products/completed operations aggregate [***] 18.2(c) Personal and advertising injury [***] 18.2(d) General aggregate (commercial form only) [***] 18.3 Progenics expressly understands, however, that the coverages and limits in Paragraph 18.2 do not in any way limit the Progenics's liability. Progenics must furnish The Regents with certificates of insurance evidencing compliance with all requirements. Progenics is not required to insure its activities pertaining to the products' liability risks until it begins to use Licensed Products in human subjects. Progenics's insurance must: 18.3(a) Provide for 30-day advance written notice to The Regents of any modification. 18.3(b) Indicate that The Regents of the University of California is endorsed as an Insured under the coverages listed in Paragraph 18.2. 18.3(c) Include a provision that the coverages will be primary and will not participate with nor will be excess over any valid and collective insurance or program of self-insurance carried or maintained by The Regents. 19. NOTICES 19.1 Any notice or payment required to be given to either party must be sent to the respective address given below and is effective: (a) on the date of delivery if delivered in person, (b) five days after mailing if mailed by first-class certified mail, postage paid, or (c) on the next business day if sent by overnight delivery. Either party may change its designated address by written notice. For Licensee: PROGENICS PHARMACEUTICALS. INC. 777 Old Saw Mill River Road Tarrytown, NY 10591 (914) 789-2800 10 [***] Confidential Treatment Requested Attention: Joel Sendek For The Regents: The Regents of the University of California Business Research Partnerships Box 951525, 1106 Ueberroth Building University of California, Los Angeles Los Angeles, California 90095-1525 Attention: Fredrica S. Reiter VIA OVERNIGHT DELIVERY: The Regents of the University of California Business Research Partnerships Box 951525, 1106 Ueberroth Building University of California, Los Angeles Los Angeles, California 90095-1525 Attention: Fredrica S. Reiter 20. ASSIGNABILITY 20.1 This Agreement is binding upon and inures to the benefit of The Regents, its successors and assigns. But it is personal to Progenics and assignable by Progenics only with the written consent of The Regents, which consent may not be unreasonably withheld. The consent of The Regents will not be required if the assignment is in conjunction with the transfer of all or substantially all of the business of Progenics to which this license relates. 21. LATE PAYMENTS 21.1 For each royalty payment or fee not received by The Regents when due, Progenics must pay to The Regents a simple interest charge of [***] per annum to be calculated from the date payment was due until it was actually received by The Regents. 22. WAIVER 22.1 The waiver of any breach of any term of this Agreement does not waive any other breach of that or any other term. 23. FAILURE TO PERFORM 23.1 If either party takes legal action against the other because of a failure of performance due under this Agreement, then the prevailing party is entitled to reasonable attorney's fees in addition to costs and necessary disbursements. 24. GOVERNING LAWS 11 [***] Confidential Treatment Requested 24.1 THIS AGREEMENT IS TO BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or patent application will be governed by the applicable laws of the country of the patent or patent application. 25. GOVERNMENT APPROVAL OR REGISTRATION 25.1 If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, Progenics will assume all legal obligations to do so. Progenics will notify The Regents if it becomes aware that this Agreement is subject to a United States or foreign government reporting or approval requirement. Progenics will make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process. 26. EXPORT CONTROL LAWS 26.1 Progenics must observe all applicable United States and foreign laws with respect to the transfer of Licensed Products and related technical data to foreign countries, including the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations. 27. PREFERENCE FOR UNITED STATES INDUSTRY 27.1 Because this Agreement grants an exclusive right to a particular use of the Invention, Progenics must manufacture in the United States any products embodying this Invention or produced through the Invention's use to the extent required by 35 U.S.C. Section 201-212. 28. FORCE MAJEURE 28.1 The parties will be excused from any performance required under this Agreement if performance is impossible or unfeasible due to any catastrophe or other major event beyond their reasonable control, including war, riot, or insurrection; laws, proclamations, edicts, ordinances or regulations; strikes, lockouts or other serious labor disputes; and floods, fires, explosions, or other natural disasters. When such events abate, the parties' respective obligations will resume. 29. ARBITRATION 29.1 At the request of either party, any controversy or claim arising out of or relating to the diligence provisions of this Agreement (Article 6) will be settled by arbitration conducted in Los Angeles, California in accordance with the then current Licensing Agreement Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the Arbitrator(s) will be binding on the parties and may be entered by either party in the court or forum, state or federal, having jurisdiction. 30. CONFIDENTIALITY 30.1 If either party discloses confidential information to the other party, the disclosing party will designate this information as confidential by appropriate legend or instruction, and the receiving party will: 12 30.1(a) Use the same degree of care to maintain the secrecy of the confidential information as it uses to maintain the secrecy of its own information of like kind. 30.1(b) Use the confidential information only to accomplish the purposes of this Agreement. 30.2 Neither party will disclose confidential information received from the other party except to its employees, customers, distributors and other agents who are bound to it by similar obligations of confidence and only as required to accomplish the purposes of this Agreement. 30.3 Neither party will have any confidentiality obligation with respect to the confidential information belonging to or disclosed by the other party that: 30.3(a) The receiving party can demonstrate by written records was previously known to it. 30.3(b) The receiving party lawfully obtained from sources under no obligation of confidentiality. 30.3(c) Is or becomes publicly available other than through an act or omission of the receiving party or any of its employees. 30.3(d) Is required to be disclosed under the California Public Records Act or other requirement of law. 30.4 The provisions of this Article 30 will continue in effect for five years after expiration or termination of this Agreement. 31. MISCELLANEOUS 31.1 The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. 31.2 This Agreement is not binding upon the parties until it has been signed below on behalf of each party, in which event it becomes effective as of the date recited on page one. 31.3 No amendment or modification of this Agreement will be valid or binding upon the parties unless made in writing and signed by each party. 31.4 This Agreement embodies the entire understanding of the parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof. 31.5 If any part of this Agreement is for any reason found to be unenforceable, all other parts nevertheless remain enforceable as long as a party's rights under this Agreement are not materially affected. In lieu of the unenforceable provision, the parties will substitute or add as part of this Agreement a provision that will be as similar as possible in economic and business objectives as was intended by the unenforceable provision. 13 Both The Regents and Progenics have executed this Agreement in duplicate originals by their authorized offficers on the dates written below: PROGENICS PHARMACEUTICALS, INC. THE REGENTS OF THE UNIVERSITY OF CALIFORNIA By /s/ PAUL J. MADDON By /s/ FREDRICA S. REITER - --------------------- ------------------------- Signature Signature Name Paul J. Maddon, M.D., Ph.D. Name Fredrica S. Reiter -------------------------- Title Chairman and CEO Title Licensing Associate ---------------- Date September 10, 1996 Date 9-6-96 ------------------ THE REGENTS OF THE UNIVERSITY OF CALIFORNIA By /s/ EMILY E. WALDRON -------------------- Signature Name Emily E. Waldron Title Licensing Associate Date 9-6-96 Approval as to legal form: /s/ HOWARD B. SCHECKMAN 9/9/96 ----------------------- ------- Howard B. Scheckman Date Assistant Resident Counsel Office of Technology Transfer University of California 14 EX-10.20 16 KLH SUPPLY AGMT DTD 7/1/96 Exhibit 10.20 SUPPLY AGREEMENT This supply agreement is entered into as of July 1, 1996 (the "Effective Date") between PerImmune, Inc. ("PerImmune") and Progenics Pharmaceuticals, Inc. (each singularly a "Party" and collectively the "Parties") with reference to the following: RECITALS WHEREAS, PerImmune, Inc. manufactures purified keyhole limpet hemocyanin ("KLH"); and WHEREAS, Progenics Pharmaceuticals, Inc. is performing research and development in the field of vaccines for human cancers and is interested in purchasing KLH from PerImmune, Inc. for use as a carrier protein for such vaccines; THEREFORE, the parties agree as follows: 1. DEFINITIONS. The following terms shall have the following meanings for purposes of this Agreement: 1.1 "AFFILIATE" means any corporation, firm, partnership or other entity, whether de jure or de facto, which directly or indirectly owns, is owned by, or is under common ownership with a party to this Agreement to the extent of at least fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct the affairs of the entity and any person, firm, partnership, corporation or other entity actually controlled by, controlling, or under common control with a party to this Agreement. For example, Akzo, N.Y. is an Affiliate of PerImmune pursuant to this definition. 1.2 "AGREEMENT" means this Supply Agreement, including any exhibits, schedules or other attachments thereto, as any of the foregoing may be validly amended and agreed to in writing by the Parties from time to time. 1.3 "COMMERCIAL INTRODUCTION" means the date of first commercial sale (other than for purposes of obtaining regulatory approval) of a Ganglioside Vaccine by Progenies Pharmaceuticals, Inc. 1.4 "EFFECTIVE DATE" is defined in the introductory paragraph. 1.5 "FULLY BURDENED MANUFACTURING COST" means the actual cost of Manufacture by PerImmune of KLH under a Manufacturing Process in compliance with Page 2 cGMPs, which actual cost shall be comprised of the cost of goods produced as determined in accordance with United States generally accepted accounting principles, [***] 1.6 "cGLPs" means the current Good Laboratory Practices for Finished Pharmaceuticals pursuant to 21 C.F.R. 58 et sea., as amended from time to time. 1.7 "cGMPs" means the current Good Manufacturing Practices for Finished Pharmaceuticals pursuant to 21 C.F.R. 210 et seci., as amended from time to time. 1.8 "KLH" means keyhole limpet hemocyanin. 1.9 "KLH REQUIREMENTS" means the amount of KLH in bulk which Progenics Pharmaceuticals, Inc. may require for all research and development, pre-clinical and human clinical testing of Ganglioside Vaccines and, after Commercial Introduction, production of Ganglioside Vaccines for commercial sales. 1.10 "KNOW-HOW" means materials, data, results, formulae, designs, specifications, methods, processes, improvements, techniques, ideas, discoveries, technical information, process information, clinical information and any other information, whether or not any of the foregoing is patentable, which is confidential (in accordance with Section 5 hereof and proprietary to PerImmune now or hereafter during the Term of this Agreement, to the extent that any of the foregoing relates to the development, manufacture, use or sale of KLH in connection with the development, manufacture, use or sale of any Gangiloside Vaccine, provided however, that the term "Know-how" shall not include any of the foregoing that is subject to proprietary rights of third parties. 1.11 "GANGLIOSIDE VACCINE" means any vaccine or vaccines comprising purified gangliosides (whether alone or in combination) conjugated to KLH for the prevention or treatment of human cancers. A ganglioside is a neuraminic acid containing glycolipids. 1.12 "MANUFACTURE" OR "MANUFACTURING PROCESS" means the aseptic-storage, handling, production, processing and packaging of KLH in accordance with this Agreement. 1.13 ."MANUFACTURING YEAR" means each calendar year commencing on or after January 1, 1995. 1.14 "PARTY" and "PARTIES" are defined in the introductory paragraph. 1.15 "PERIMMUNE" means PERIMMUNE, INC., (formerly Organon Teknika Corporation Biotechnology Research Institute) , a Delaware corporation, its Affiliates and its successors and permitted assigns. [***] Confidential Treatment Requested Page 3 1.16 "SPECIFICATIONS" is defined in Exhibit A 1.17 "TERM" is defined in Section 4.1. 1.18 "PROGENICS" means Progenics Pharmaceuticals, Inc., a Delaware corporation, its Affiliates and its permitted successors and assigns. 2. MANUFACTURE AND SUPPLY. 2.1 GENERAL. [***] PerImmune hereby agrees, at its sole expense, to commit all reasonably necessary facilities, appropriately trained personnel, machinery, equipment, utilities and other PerImmune resources required to satisfy its obligations under this Agreement. PerImmune hereby agrees, at its sole expense, to commit all reasonably necessary facilities, appropriately trained personnel, machinery, equipment, utilities and other PerImmune resources required to satisfy its obligations under this Agreement. 2.2 PERIMMUNE TRANSFER PRICE OF KLH. [***] In addition, in order to verify the production cost of KLH, Progenics will have the right to pay for an independent certified public accountant, ("CPA") to inspect the records of PerImmune once per year during regular business hours, provided that such accountant has entered into a confidentiality agreement with PerImmune which is satisfactory to PerImmune. The CPA shall then compile a report which states only PerImmune's Fully Burdened manufacturing Cost for KLH which may be used by the Parties for negotiating the transfer price. In addition, in order to verify the production cost of KLH, Progenics will have the right to pay for an independent certified public accountant, ("CPA") to inspect the records of PerImmune once per year during regular business hours, provided that such accountant has entered into a confidentiality agreement with PerImmune which is satisfactory to PerImmune. The CPA shall then compile a report which states only PerImmune's Fully Burdened Manufacturing Cost for KLH which may be used by the Parties for negotiating the transfer price. 2.3 PERlMMUNE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. PerImmune hereby represents and warrants to Progenics as follows: (a) PRE-CLINICAL STUDY AND HUMAN CLINICAL TRIAL USE, PerImmune shall Manufacture all KLH Requirements for use in any vaccine used in connection with any pre-clinical study or human clinical trial of any Ganglioside Vaccine (i) strictly in compliance with (A) this Agreement, (B) all Specifications, and (C) all applicable laws [***] Confidential Treatment Requested Page 4 and regulations, including but not limited to cGMPs to the extent applicable, and (ii) in a PerImmune facility holding all applicable licenses in the jurisdiction of Manufacture. (b) COMMERCIAL USE. PerImmune shall Manufacture all KLH Requirements for use in the commercialization of any Ganglioside Vaccine (i) strictly in compliance with (A) this Agreement, (B) all Specifications, and (C) all applicable laws and regulations, including but not limited to cGMPs to the extent applicable, and (ii) in a PerImmune facility holding all applicable licenses in the jurisdiction of Manufacture. (c) CERTIFICATE OF ANALYSIS: NON-COMPLYING KLH. Before, during and after Manufacture of KLH Requirements, PerImmune shall obtain samples, monitor the Manufacturing Process and the environment of such Manufacture, and keep such technical books and records of all of the foregoing as are required under the Specifications and Procedures and all applicable laws and regulations, including but not limited to cGLPs or cGMPs (as appropriate and applicable). PerImmune shall test each lot of KLH requirements Manufactured for Progenics or as required under the Specifications. Together with each such lot of KLH Requirements, PerImmune shall provide a written certificate of analysis which shall set forth the results of such testing by PerImmune and PerImmune's quality control approval of such lot of KLH Requirements. PerImmune's obligations under this section 2.3(c) shall be performed at PerImmune's sole expense. Progenics shall be entitled to test any such KLH Requirements in accordance with the Specifications, at Progenics' sole expense. Without limiting any of Progenics' other rights or remedies under this Agreement with respect to any KLH Requirements supplied hereunder that do not comply with applicable representations and warranties under this Section 2.3, and provided PerImmune reasonably confirms Progenics' test results, the Parties agree that; (i) Progenics shall not be obligated to pay PerImmune the transfer price applicable to such non-complying KLH Requirements; (ii) if Progenics has already paid for such non-complying KLH Requirements, Progenics shall be entitled to a credit against future purchases for the amount paid to PerImmune therefor; (iii) PerImmune shall, on a priority basis, Manufacture and supply to Progenics, as applicable, replacement KLH Requirements in full compliance with this Section 2.3; and (iv) PerImmune shall bear the full cost of returning or destroying the non-complying KLH Requirements. 2.4 Procedures for Estimating, Ordering and Supplying - KLH REQUIREMENTS. Subject to the other terms of this Agreement: (a) ANNUAL DEMAND FORECAST FOR EACH MANUFACTURING YEAR. During the Term, commencing on July 1 , 1996 and on an on-going quarterly basis as described below, Progenics will provide PerImmune with a written rolling annual demand forecast of KLH Requirements for each manufacturing Year which shall be binding as to the first quarter and non-binding as to the remaining three (3) quarters. Thereafter, Progenics shall provide an updated annual demand forecast on a quarterly Page 5 basis no later than ninety (90) days in advance of the commencement of the first (and binding) quarter covered by such annual demand forecast. The Parties also agree that the variance, if any, between the binding forecast of a given quarter and the last nonbinding forecast for such quarter shall be between [***] and [***] meaning that Progenics' binding forecast for such quarter must be at least [***] but not more than [***] of such last non-binding forecasted amount for such quarter. (b) PURCHASE ORDERS. Progenics shall place a firm purchase order or purchase orders with PerImmune setting forth (i) the quantities of KLH Requirements to be Manufactured and supplied hereunder, (ii) the schedule for receipt from PerImmune of such batch(es) of KLH Requirements, and (iii) instructions for shipping and packaging. Each such firm purchase order shall be submitted no later than thirty (30) days in advance of the first scheduled date of receipt thereof. Subject to the other terms of this Agreement, Progenics shall be obligated to place firm purchase orders with PerImmune for, and PerImmune hereby commits to Manufacture and supply hereunder pursuant to such firm purchase orders, [***] of the amount of KLH Requirements in the then-binding quarter of each annual demand forecast under Section 2.4(b); provided, however, that: (A) the Parties may mutually agree in writing to amend any such firm purchase order; (B) PerImmune in its discretion may agree to Manufacture and supply hereunder additional amounts of KLH Requirements in excess of the then-binding amount, provided that Progenics places firm purchase order(s) for such excess KLH Requirements on a timely basis; and (C) PerImmune agrees to provide Progenics with as much advance written notice as possible (and in any case at least thirty (30) days' written advance notice) if PerImmune determines that any scheduled delivery of KLH Requirements pursuant to any purchase order will be delayed by more than fifteen (15) days for any reason of which PerImmune becomes aware. 2.5 PRIORITY. a) PRIORITY AMONG CUSTOMERS. PerImmune hereby agrees and acknowledges that, in the event that PerImmune is unable to satisfy in full its obligations under this Agreement to Manufacture and supply [***] of KLH Requirements as well as PerImmune's obligations to third parties with respect to Manufacture and supply of KLH, PerImmune shall use reasonable efforts to satisfy its obligations under this Agreement and, in the event of any shortage of KLH available to meet all such obligations, PerImmune shall allocate proportionately all available KLH among Progenics and such third parties with highest priority for the Manufacture and supply of KLH for purposes of outstanding firm purchase orders for comparable delivery time frames. In such event PerImmune, shall be permitted to invoice, and Progenics agrees to pay, the additional expenses of PerImmune for such efforts. [***] Confidential Treatment Requested Page 6 (b) INABILITY TO SUPPLY. In the event that PerImmune is unable to supply [***] of Progenics' purchase orders for two consecutive quarters, then PerImmune agrees to provide Progenics the right and license to use the relevant Know-how to manufacture or have manufactured KLH for use in producing Ganglioside Vaccine, and to fully cooperate with regulatory authorities to qualify Progenics and/or its designee as a manufacturer of KLH. In such event, at Progenics' request, PerImmune shall promptly disclose to Progenics all Know-how and information reasonably necessary to manufacture KLH and the parties shall mutually agree upon a reasonable schedule for gradually reducing the amount of KLH purchased by Progenics from PerImmune, until such time PerImmune is able to reasonably demonstrate the ability to supply Progenics with its requirements. (c) ASSURANCE OF SUPPLY. Progenics and PerImmune will cooperate to anticipate Progenics' long-term requirements for KLH Requirements supply, and PerImmune will take reasonable measures to assure that Progenics' and its Partners' KLH Requirements can be met, which measures may include the maintenance of adequate safety stocks of KLH. 2.6. REGULATORY APPROVAL OF MANUFACTURING. PerImmune shall be solely responsible, at its sole cost and expense, for obtaining all necessary regulatory approvals particular to KLH for Manufacture and supply of KLH Requirements. Progenics shall advise PerImmune of any new Specifications required by the United States Food and Drug Administration or the Federal Food, Drug and Cosmetic Act (or the equivalent regulatory authority or law In other countries) with respect to any Ganglioside Vaccine. PerImmune shall not modify in any manner any Specifications without Progenics prior written consent (which consent shall not be unreasonably withheld). 2.7 REGULATORY FILINGS. Without limiting the generality of the foregoing, for purposes of supporting all preclinical studies and human clinical trials and all regulatory filings, applications and approvals on the part of Progenics with respect to any Ganglioside Vaccine, PerImmune hereby agrees that on an on-going basis during the Term: (1) PerImmune shall permit Progenics to reference PerImmune's drug master file and/or Investigational New Drug Applications (IND's) for KLH with the United States Food and Drug Administration; (ii) to the extent not subject to the proprietary rights of third parties, PerImmune shall provide Progenics with all pre-clinical and clinical data, results and other relevant information with respect to KLH (including but not limited to information regarding the toxicity, safety and stability of KLH) that is (A) submitted by PerImmune in connection with any Investigational New Drug application or other regulatory filing with respect to KLH from time to time during the Term or (B) otherwise in PerImmune's possession from time to time during the Term; and (iii) a PerImmune representative, at Progenics' request, shall attend periodic meetings to discuss the progress of clinical trials of any Ganglioside Vaccines. Progenics will reimburse [***] Confidential Treatment Requested Page 7 PerImmune for the foregoing assistance only (i) for its reasonable out-of pocket expenses, including but not limited to travel, and (ii) PerImmune's fully burdened costs of performing technical studies or engaging outside services subject to the prior approval of Progenics. a) ADVERSE EVENTS REPORTING. On an on-going basis during the Term and for at least ten (10) years after the expiration or termination of this Agreement, each Party agrees to provide the other Party with any written information in its possession which indicates adverse effects in humans associated with KLH or any products using KLH. 2.8 PERIMMUNE RECORDKEEPING AND INSPECTION. (a) TECHNICAL RECORDS. With respect to any Manufacture and supply of KLH Requirements, PerImmune shall, at its expense, keep properly completed technical books and records, test data and reports as required under the Specifications and all applicable laws and regulations, including but not limited to cGLPs or cGMPs (as appropriate), and in any case shall maintain such technical Information for at least two (2) years from the expiration date of the relevant Ganglioside Vaccine or longer if required under applicable laws and regulations (including but not limited to cGLPs and cGMPs, as applicable). During regular business hours and upon reasonable advance written request, PerImmune shall make any such technical information available to Progenics for inspection. (b) FINANCIAL RECORDS. During the Term, PerImmune shall keep for at least three (3) years records of its Fully Burdened Manufacturing Costs, and the calculations thereof in sufficient detail to permit Progenics designee, reasonably acceptable to PerImmune, to confirm the accuracy thereof. At the request of Progenics, and not more frequently than once per year, upon at least five (5) business days' prior written notice, and at the expense of Progenics (except as otherwise provided below), PerImmune shall permit a nationally recognized, independent, certified public accountant selected by Progenics and acceptable to PerImmune to inspect (during regular business hours) any such PerImmune records for the then-preceding three (3) years solely to the extent necessary to verify such costs, margins and calculations, provided that such accountant in advance has entered into a confidentiality agreement with PerImmune and Progenics substantially similar to the confidentiality provisions of this Agreement, limiting the use and disclosure of such information to authorized representatives of the Parties. Results of any such inspection shall be made available to both Parties. If such inspection reveals a deficiency in the calculation of PerImmune's Fully Burdened Manufacturing Cost to PerImmune resulting in an overpayment to PerImmune of the transfer price by [***] , PerImmune shall pay all costs and expenses of such inspection. [***] Confidential Treatment Requested Page 8 (c) QUALITY AUDIT. Upon submission of a proposal by Progenics which is approved by PerImmune, PerImmune shall permit Progenics to audit, in cooperation with PerImmune's personnel, production, packaging, and quality control facilities of PerImmune and any of its significant suppliers as they relate to production of KLH to allow Progenics to verify PerImmune's compliance with its responsibilities under this Agreement. 2.9 LIABILITY. (a) INDEMNIFICATION BY PROGENICS. Except as otherwise provided in Sections 2.9(b) or (c), Progenics will defend, indemnify and hold harmless PerImmune against any and all claims, actions, liabilities, damages, losses, costs or expenses, including reasonable attorney's fees, based upon or arising out of the sales or use of any Ganglioside Vaccine by Progenics, provided that PerImmune gives Progenics prompt notice thereof in writing, permits Progenics to control the investigation, preparation and defense thereof (including any compromise or settlement thereof and any appeal) and provides reasonable assistance to Progenics, at Progenics expense, in that regard. (b) LIABILITY. Each Party assumes full responsibility and liability for any injury, damage or expense which it or its employees, agents and invitees incur and which arise from its manufacture, handling and use of KLH or Ganglioside Vaccines, except to the extent such injury, damage or expense arises from the negligence or willful misconduct of the other Party. (c) INDEMNIFICATION BY PERIMMUNE. PerImmune will defend, indemnify and hold harmless Progenics against any and all claims, actions, liabilities, damages, losses, costs or expense (including reasonable attorneys' fees) including without limitation expenses of total or partial product recalls in connection with the manufacture, use or sale of Ganglioside Vaccines (i) based upon the gross negligence or willful misconduct of PerImmune or its employees arising out of the Manufacture or shipment of KLH Requirements by PerImmune or based upon a manufacturing defect in KLH Requirements manufactured by PerImmune; or (ii) the failure of PerImmune to comply with governmental regulations with respect to KLH, provided that Progenics or its Partners give PerImmune prompt notice thereof in writing, permits PerImmune to control the investigation, preparation and defense thereof (including any compromise or settlement thereof and any appeal) and provides reasonable assistance to PerImmune, at PerImmune's expense, in that regard. 3. CONFIDENTIALITY. 3.1. Each party agrees to take such steps and, when necessary to protect the rights of the other, shall cause its employees and agents and its Affiliates employees and agents, to take such steps as are reasonably required to protect and keep Page 9 confidential, and shall not use, publicize or otherwise disclose to third parties other than Affiliates, Confidential Information (as defined below) of the other party, which was acquired from the other party pursuant to this Agreement, including, without limitation, following procedures designed to limit access of such information to those persons having a need to know it. The parties agree not to disclose or use such Confidential Information except as they may be entitled to do so or if necessary pursuant to or in the performance of this Agreement. 3.2 The obligation of confidentiality and restriction on use imposed by the foregoing Subsection 3.1 shall not apply to any particular item of Confidential Information that: 3. 2.1 is known or generally available, or subsequently becomes known or generally available, to the public, or is otherwise at the time of disclosure or subsequently becomes part of the public domain, whether by printed publication or otherwise through no fault of the receiving parties; 3.2.2 the receiving party can demonstrate by competent evidence, based in substance upon writings and/or physical evidence, (i) was known to the receiving party at the time of receipt or (ii) is furnished to the receiving party without obligation of confidentiality or non-use by a third party, either before or after the time of its disclosure by the disclosing party, which third party is not restricted by a confidential undertaking to the disclosing party at the time of the disclosure; 3.2.3 the receiving party can demonstrate by competent evidence, based in substance upon writings and/or physical evidence, has been developed independently for the receiving party by persons not having access to the Confidential information; or 3.2.4 is the Confidential Information of the disclosing party and that the disclosing party discloses to a non-Affiliate party without restriction. 3.3 The obligations of confidentiality and restriction on use under this Section 3 shall continue to be binding upon the parties for a period of five years following termination of this Agreement. 3.4 Either party may also disclose Confidential Information disclosed to it by the other party to the extent, and only to the extent, such disclosure is necessary for such party to comply with applicable governmental laws or regulations. The party that desires to so disclose Information shall give the other party reasonable advance notice of any such proposed disclosure pursuant to such compliance with law or regulation, shall use its best efforts to secure confidential treatment of the Information thus disclosed, and shall advise the other party in writing of the manner in which that was done. Page Page 10 3.5 For purposes of this Agreement, Confidential Information shall mean: (a) data, inventions, Information, processes, know-how, patent applications, trade secrets and similar intellectual property rights of a party, including, without limitation, the original and copies of all documents, inventions, laboratory notebooks, drawings, specifications, devices, equipment, prototype models and tangible manifestations embodying any technology disclosed hereunder, (b) a party's customer lists and marketing, sales, costs, royalty and similar information related to the manufacture or sale of KLH or other part of the Parties' business, and (c) any other information disclosed in writing and marked as "Confidential Information" or, if disclosed orally, reduced to writing and marked as "Confidential Information" and submitted within thirty (30) days of the original oral disclosure. 3.6 PERMITTED DISCLOSURES. Each Party may disclose the other Party's information to the extent such disclosure is reasonably necessary in prosecuting or defending litigation, filing, prosecuting or maintaining patent applications or patents, complying with applicable laws or regulations, or, in the case of Progenics, conducting preclinical or clinical trials or preparing or filing regulatory filings with respect to Ganglioside Vaccines; provided, however, that if a Party is required to make any disclosure of the other Party's information furnished pursuant to this Agreement, it will give reasonable advance notice of such disclosure requirements to the other Party and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such information required to be disclosed. 4. TERM: TERMINATION. 4.1 TERM. The term of this Agreement shall be for three years from the Effective Date and will renew automatically for successive 12 month periods unless sooner terminated as provided in this Section 4. 4.2 MATERIAL BREACH. Subject to Section 8.6, failure by either Party to comply with any of the material obligations contained in this Agreement shall entitle the other Party to give to the Party in default notice specifying the nature of the default and requiring it to make good such default. If such default is not cured within sixty (60) days after the receipt of such notice, the notifying Party shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement and in addition to any other remedies available to it by law or in equity, to terminate this Agreement effective upon written notice to the other Party. The right of a Party to terminate this Agreement, as herein above provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous default. 4.3 INSOLVENCY OR BANKRuPTCY. Either Party may, in addition to any other remedies available to it by law or in equity, terminate this Agreement, in whole or in part as the terminating Party may determine, effective upon written notice to the other Party, in the event the other party shall have become insolvent or bankrupt, or shall have Page 11 made an assignment for the benefit of its creditors, or there shall have been appointed a trustee or receiver of the other Party for all or a substantial part of its property, or any case or proceeding shall have been commenced seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction now or hereafter in effect, or there shall have been issued a warrant of attachment, execution, disdain or similar process against, any substantial part of the property of the other Party, and any such event shall have continued for sixty (60) days undismissed, unbounded and undischarged. 4.4 ACCRUED RIGHTS, SURVIVING OBLIGATIONS: PARTNERS. Expiration or any termination of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such expiration or termination. Such expiration or termination shall not relieve either Party from obligations which are expressly indicated to survive expiration or termination of this Agreement, which obligations include, without limitation, those under Sections 2.8, 2.9, 3, 5, 6 and 7. 5. PERIMMUNE PATENT RIGHTS. PerImmune shall not assert against Progenics or its customers any patents now or hereinafter owned or controlled by PerImmune which concern KLH or any Ganglioside Vaccine of Progenics which incorporates KLH. This Section shall continue to apply to any Affiliate of PerImmune which ceases to be an Affiliate of PerImmune as defined by this Agreement. 6. PERiMMUNE REPRESENTATIONS AND WARRANTIES. PerImmune represents and warrants that: (a) the execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by PerImmune; (b) the performance by PerImmune of any of the terms and conditions of this Agreement on its part to be performed does not and will not constitute a breach or violation of any other agreement or understanding, written or oral, to which it is a party; (c) To the best of PerImmune's knowledge, there are no adverse proceedings, claims or actions pending, or threatened, relating to KLH and at the time of disclosure and delivery thereof to Progenics and PerImmune shall have the full right Page 12 and legal capacity to disclose and deliver KLH without violating the rights of third parties. 7. ARBITRATION. Any dispute, controversy or claim between the Parties, arising out of or relating to this Agreement or the Parties' respective rights and obligations hereunder either during or after the Term (including the question as to whether any such matter is arbitrable) shall be subject to binding arbitration in accordance with then-existing commercial arbitration rules of the American Arbitration Association. The Parties agree that, in the course of any such arbitration, service of any notice at their respective addresses in accordance with Section 8.11 of this Agreement shall be valid and sufficient, and any arbitration hereunder shall be in the jurisdiction of the defendant Party, which in the case of Progenics shall be New York and in the case of PerImmune shall be Maryland. In any such arbitration, an award shall be rendered by a majority of the members of a board of arbitration consisting of three (3) members, one (1) of whom shall be chosen by each of Progenics and PerImmune and the third of whom shall be appointed by mutual agreement of such two (2) arbitrators. In the event of failure of such two (2) arbitrators to agree within sixty (60) days after the commencement of arbitration (as defined below) upon appointment of the third arbitrator, or, in the event that either Party shall fail to appoint an arbitrator within thirty (30) days after the commencement of the arbitration proceedings, the third arbitrator or (upon request of the other Party) the second arbitrator and the third arbitrator, as the case may be, shall be appointed by the American Arbitration Association in accordance with its then existing commercial arbitration rules. For purposes of this Section, the "commencement of the arbitration proceeding" shall mean the date upon which the defendant Party receives from the American Arbitration Association a copy of the request for arbitration filed by the party desiring to have recourse to arbitration. The decision of the arbitrators shall be in writing and shall set forth the basis therefor. The Parties shall abide by all awards rendered in arbitration proceedings, and such awards may be enforced and executed upon in any court having jurisdiction over the Party against whom enforcement of such award is to be sought. The Parties shall divide equally the administrative charges, arbitrators' fees, and related expenses of arbitration, but each Party shall pay its own legal fees incurred in connection with any such arbitration; provided, however, if the arbitrators determine that one Party prevailed clearly and substantially over the other Party, then the non-prevailing Party shall also pay the reasonable attorneys' fees and expert witness costs and other arbitration costs of the prevailing Party. Page 13 8. MISCELLANEOUS PROVISIONS. 8.1 NO PARTNERSHIP. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, distributorship, agency employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein. 8.2 ASSIGNMENTS. Neither Party shall assign any of its rights or obligations hereunder or this Agreement, except that either Party may do so: (a) as incident to the merger, consolidation, reorganization or acquisition of stock or assets affecting substantially all of the assets or voting control of such Party; (b) to any wholly owned subsidiary if such Party remains liable and responsible for the performance and observance of all of the subsidiary's duties and obligations hereunder; (c) with the prior written consent of the other Party; or (d) as incident to an agreement between Progenics and a major corporate partner. This Agreement shall be binding upon the successors and permitted assigns of the Parties and the name of a Party appearing herein shall be deemed to include the names of such Party's successors and permitted assigns to the extent necessary to carry out the intent of this Agreement. Any assignment not in accordance with this Section 8.2 shall be void. 8.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. 8.4 NO NAME OR TRADEMARK RIGHTS. Except as otherwise provided herein, no right, express or implied, is granted by this Agreement to use in any manner the names "PerImmune, Inc." or "Progenics Pharmaceuticals, Inc." or any contraction thereof or any other trade name or trademark of PerImmune or Progenics in connection with the performance of this Agreement. 8.5 PUBLIC ANNOUNCEMENT. Except as may otherwise be required by applicable law or regulation, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other Party (not to be unreasonably withheld). 8.6 FORCE MAJEURE. If any default or delay occurs which prevents or materially impairs a Party's performance and is due to a cause beyond the Party's reasonable control, including but not limited to any act of any god or demon, flood, fire, explosion, earthquake, casualty, accident, war, revolution, civil commotion, blockade or embargo, injunction, law, proclamation, order, regulation or governmental demand, the affected Party promptly shall notify the other Party in writing of such cause and shall exercise diligent efforts to resume performance under this Agreement as soon as possible. Neither Party shall be liable to the other Party for any loss or damage due to such cause. Neither Party may terminate this Agreement because of such default or delay. Page 14 8.7 ENTIRE AGREEMENT OF THE PARTIES: AMENDMENTS. This Agreement, including the exhibits attached hereto which are incorporated herein, constitutes and contains the entire understanding and agreement of the Parties and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether verbal or written, between the Parties respecting the subject matter hereof. No waiver, modification or amendment of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each of the Parties. 8.8 SEVERABILITY. In the event that any of the provisions of this Agreement shall for any reason be held by any court or authority of competent jurisdiction to be invalid, illegal or unenforceable, such provision or provisions shall be validly reformed to as nearly as possible approximate the intent of the Parties and, if unreformable, shall be divisible and deleted in such jurisdiction; elsewhere, this Agreement shall not be affected so long as the Parties are still able to realize the principal benefits bargained for in this Agreement. 8.9 CAPTIONS. The captions to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. 8.10 APPLICABLE LAW. This Agreement shall be governed by and interpreted in accordance with the laws of Maryland. 8.11 NOTICE. All notices and other communications shall be deemed to have been duly given when delivered in person or by registered or certified mail (postage prepaid, returned receipt requested) to the respective parties as follows: If To Progenics: Paul J. Maddon, M.D., Ph.D. Chairman and CEO - --------------------------- 777 Old Saw Mill River Road - --------------------------- Tarrytown, NY 10591 - ---------------------------- Page 15 If To PerImmune: Michael G. Hanna, Jr. - ------------------------ President & CEO 1330 Piccard Drive - ------------------------ Rockville, MD 20850 - ------------------------ 8.12 SURVIVAL. The representations, warranties, covenants and agreements made herein shall survive any investigation made by a Party and shall be able to be relied fully on by the Parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective corporate officers, duly authorized as of the day and year first above written. PerImmune, Inc., represents and warrants that it has the right and authority to provide to Progenics the material and rights set forth in this agreement pursuant to the transfer of relevant right and authority from Akzo Nobel to PerImmune. PERIMMUNE, INC. PROGENICS PHARMACEUTICALS, INC. By: /s/ Michael G. Hanna, Jr. By: Paul J. Maddon - ---------------------------- ---------------------- Name: Michael G. Hanna, Jr. Name: Paul J. Maddon - --------------------------- ----------------------- Title: President & CEO Title: Chairman and CEO - --------------------------- ----------------------- As set forth in this Exhibit A, the following are the specifications for the Manufacture of KLH, as may from time to time be required by the Food and Drug Administration (the "Specifications"). EXHIBIT A ORGANON TEKNIKA [GRAPHIC] AKZO CERTIFICATE OF ANALYSIS KEYHOLE LIMPET HEMOCYANIN [***] [***] Confidential Treatment Requested EX-10.21 17 SCD4 SUPPLY AGMT DTD 11/3/93 Exhibit 10.21 This document, when properly executed, shall constitute a Supply Agreement between Progenics Pharmaceuticals, Inc. with offices at Old Saw Mill River Road, Tarrytown, NY, (Progenics) and E.I. Du Pont de Nemours and Company (Du Pont), with offices at 549 Albany Street, Boston, MA. 1. PERIOD OF AGREEMENT: July 1, 1993 through June 30, 1996. After the original term, this Agreement will renew automatically for successive 12 month periods unless either party gives notice to the other of its intention not to renew at least 120 days prior to the expiration of the then current term. 2. MATERIAL: Recombinant Soluble sCD4, referred to hereafter as sCD4 or Product. 3. MATERIAL SPECIFICATIONS: Material shall be supplied in the form and manner, and must conform in all material respects to the specifications set out in Attachment A. Alterations to these specifications require the express written consent of each party. 4. [***] 5. PAYMENT TERMS: Net 30 Days, following the receipt of a properly prepared and correct invoice. 6. QUANTITY: Du Pont commits to purchase 100% of its purchase requirements for sCD4 during the term of this order from Progenics, and Progenics agrees to supply 100% of Du Pont's purchase requirements. 7. DELIVERY TERMS: F.O.B. Destination, freight collect. 8. RELEASES: Du Pont will advise Progenics of its purchase requirements at least quarterly, or as may otherwise suit the parties by agreement. Progenics shall ship product as required by Du Pont according to a mutually agreed upon schedule. Progenics shall advise Du Pont at its earliest opportunity if it is unable to ship Product at an agreed upon time. Progenics will, on a best effort basis, attempt to fulfill any unscheduled, or spot requirements of Du Pont. 9. LABELLING AND PACKAGING: Both Du Pont's and Progenics' names and logos shall appear on the main product label and on promotional literature, along with the following statement: "Manufactured by Progenics Pharmaceuticals, Inc." [***] Confidential Treatment Requested -2- All labels to be approved by both parties. All product labelling and literature shall contain the phrase "For Laboratory Use." Progenics will package product as 100 micrograms per vial, or in other package sizes as mutually agreed upon by both parties. Product will be shipped on dry ice. In parallel, Progenics will perform stability studies on lyophilized product. Shelf life of the sCD4 will be no less than 6 months upon receipt by Du Pont. 10. CONFIDENTIALITY: The parties hereto shall keep confidential all confidential technical information, shall not disclose or make known to any individual, firm, or corporation, except when authorized in writing to do so by the other party, and shall not use such information for any purpose other than the performance of the obligations provided in this Agreement. The provisions of this clause shall remain binding for five (5) years after the termination of this agreement. Each party shall use the same degree of care to avoid disclosure of confidential technical information as the party employs with similar information of its own which it does not desire to publish or disclose. Any confidential information shared between the parties must be identified and labeled in writing as confidential. The confidentiality of and information disclosed verbally must be identified in writing as confidential no more than 14 days after disclosure. This obligation shall not apply to information and/or documents which: A) Are or come within the public domain otherwise than as a consequence of a breach of the obligations hereunder; B) Are known to the receiving party prior to disclosure by the other party as shown by the receiving party's records; C) Are lawfully disclosed to the receiving party by third parties; or D) Are subsequently independently developed by the receiving party through no reference whatsoever to disclosure hereunder. 11. WARRANTY: Progenics warrants the packaged product hereunder shall meet the specifications set forth in Attachment A and shall be free from defects except those caused by misuse or mishandling occurring after such delivery. Progenics agrees to notify Du Pont prior to -3- making any formulation changes in the Product. Progenics further warrants that packaged product will meet the warranty of merchantability and fitness for intended use. In the event of a recall of Product, Progenics agrees to reimburse Du Pont for all reasonable costs incurred in the recall. 12. USE OF MATERIAL: Progenics shall supply Du Pont sCD4 to be sold by Du Pont to third parties. The material will be used only for research purposes and not for other uses such as clinical diagnostics or therapeutic development. This Agreement is limited to resale of sCD4 as packaged at Progenics and does not allow Du Pont to modify sCD4 or combine sCD4 with other components. [***] [***] Confidential Treatment Requested -4- 13. RELATIONSHIP OF THE PARTIES: Nothing contained herein shall be construed to empower either party to act as agent for the other. The parties agree that each of them shall, in relation to its obligations hereunder, be acting as an independent contractor. Not withstanding, neither party shall, during the period of this Agreement, enter into discussions nor create an alternative arrangement with any third party concerning the subject matter herein, without first advising the other party of its intent. 14. AUDITS: Progenics shall permit no less frequently than once per year, and upon reasonable notice by Du Pont, inspections and audits by Du Pont during regular business hours of all records and aspects of sCD4 manufacture, testing, packaging, labeling and shipping. 15. CANCELLATIONS: This Agreement may be cancelled by either party upon 120 days written notice to the other party. 16. ENTIRETY: This Agreement, together with the Attachments specifically referenced and attached hereto, embodies the entire understanding between Du Pont and Progenics, and there are no contracts, warranties, or representations, oral or written, express or implied, with reference to the subject matter hereof which are not merged herein. Except as otherwise specifically stated, no modification hereto shall be of any force or effect unless reduced to writing and signed by both parties and expressly referred to as being modifications of this Agreement. AGREED & APPROVED: FOR PROGENICS: FOR DU PONT: Name Paul J. Maddon, M.D., Ph.D. Name: Robert M. Hand ------------------------------- ------------------------------ Title Chairman and CEO Title: Senior Purchasing Agent ------------------------------ ----------------------------- Signature: /s/ Paul J. Maddon Signature: /s/ Robert M. Hand ------------------------- ------------------------- Date: November 3, 1993 Date: October 27, 1993 ------------------------------ ------------------------------ ATTACHMENT "A" PRODUCT SPECIFICATION SHEET PRODUCT: Recombinant Soluble CD4 PRODUCT Full-length extracellular domain of human CD4 DESCRIPTION: produced in a CHO expression system. CONCENTRATION: GREATER THAN = 1.0 mg/ml AMOUNT GREATER THAN = 100 micrograms/vial STORAGE BUFFER: 50 mM MES, pH 6.0, 0.35M NaCl SHIP: DRY ICE STORE: -80 DEG. C STABILITY: 6 months at -80 DEG. C QUALITY CONTROL CONCENTRATION Determined by Optical Density and AND PURITY: SDS-PAGE/Silver stain (Purity GREATER THAN 95%) AUTHENTICITY: Reactive with gp 120 and anti-CD4 monoclonal and polyclonal antibodies. Glycosylation pattern identical to natural human product. ACTIVITY: Binds HIV gp 120; inhibits binding of HIV to CD4+ lymphocytes and infection of CD4+ lymophoeytes with HIV. [LETTERHEAD] Reference is made to the Agreement entered into the 3rd day of November, 1993, as amended between NEN Life Science Products, a division of E.I. DuPont de Nemours and Company (NEN) and Progenics Pharmaceuticals, Inc. (Progenics) relative to the purchase of sCD4 by NEN. It is hereby mutually agreed to further amend the aforesaid Agreement in the following manner effective July 1, 1996. This amendment is being made to update pricing for a three year period as follows: [***] All other terms and conditions of the current Agreement, except as modified in the above manner, shall continue in full force and effect. Please indicate your acceptance of this amendment by signing both copies in the space provided below and return the copy marked "NEN M&L Copy" to Judy Lima-Ziegler, E.I.DuPont de Nemours and Company, Purchasing Department, 549 Albany Street, Boston, MA 02118, keeping the original for your files. Very truly yours, ProgensPharmaceuticals, Inc. NEN LIFE SCIENCE PRODUCTS BY: BY: /s/ Robert M. Hand TITLE: SR DIRECTOR, GRP. DEV. TITLE: Sr. Purchasing Agent ----------------------------- DATE: June 26, 1996 DATE: June 13, 1996 ------------------------------ [*** Confidential Treatment Requested] EX-11.1 18 EXHIBIT 11.1
EXHIBIT 11.1 PROGENICS PHARMACEUTICALS, INC. STATEMENT OF COMPUTATION OF LOSS PER SHARE Year Ended December 31, ------------------------------------------------------------------------------------------- 1993 1994 1995 --------------------------- ----------------------------- ------------------------------- Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted ------------- ------------- ------------- -------------- ------------- --------------- Net loss $(2,394,617) $(2,394,617) $(3,411,734) $(3,411,734) $(4,503,496) $(4,503,496) Interest expense recognized in connection with convertible debt assumed to have been converted 23,671 Reduction of net loss assuming a portion of the proceeds from the exercise of options and warrants was used to repay a term note and capital lease obligations and to invest in short-term government securities in accordance with the treasury stock method 42,700 365,597 312,360 ------------------------------------------------------------------------------------------- Net loss $(2,394,617) $(2,351,917) $(3,411,734) $(3,046,137) $(4,503,496) $(4,167,465) ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 2,249,675 2,249,675 2,249,675 2,249,675 2,264,839 2,264,839 Shares issuable upon assumed conversion of convertible debt and preferred stock 2,339,948 2,953,554 3,272,943 Common and preferred shares issued within one year of the Company's proposed offering 1,086,747 1,086,747 1,071,583 Shares issuable upon exercise of outstanding options and warrants 355,687 1,087,748 355,687 2,462,494 355,687 2,052,306 Shares assumed to be repurchased under the treasury stock method (775,519) (449,935) (775,519) (449,935) (775,519) (458,935) ------------------------------------------------------------------------------------------- Weighted average number of common shares used in computing per share data 2,916,590 5,227,436 2,916,590 7,215,788 2,916,590 7,131,153 ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- Net loss per share $ (0.82) $ (0.45) $ (1.17) $ (0.42) $ (1.54) $ (0.58) ------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------
EX-11.2 19 EXHIBIT 11.2
EXHIBIT 11.2 PROGENICS PHARMACEUTICALS, INC. STATEMENT OF COMPUTATION OF LOSS PER SHARE Nine Months Ended September 30, ------------------------------------------------------------------------------------------ 1995 1996 ------------------------------------------ ------------------------------------------- Primary Fully Diluted Primary Fully Diluted ----------------- -------------------- -------------------- ------------------ Net loss $ (3,070,640) $ (3,070,640) $ (3,481,574) $ (3,481,574) Reduction of net loss assuming a portion of the proceeds from the exercise of options and warrants was used to repay a term note and capital lease obligations and to invest in short-term government securities in accordance with the treasury stock method 326,578 257,487 ------------------------------------------------------------------------------------------ Net loss $ (3,070,640) $ (2,744,062) $ (3,481,574) $ (3,224,087) ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Weighted average number of common shares outstanding 2,254,784 2,254,784 2,294,675 2,294,675 Shares issuable upon assumed conversion of convertible debt and preferred stock 3,230,650 4,152,563 Common and preferred shares issued within one year of the Company's proposed offering 1,081,638 1,041,747 Shares issuable upon exercise of outstanding options and warrants 355,687 2,110,938 355,687 1,993,063 Shares assumed to be repurchased under the treasury stock method (775,519) (458,935) (775,519) (458,935) ------------------------------------------------------------------------------------------ Weighted average number of common shares used in computing per share data 2,916,590 7,137,437 2,916,590 7,981,366 ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Net loss per share $ (1.05) $ (0.38) $ (1.19) $ (0.40) ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------
EX-11.3 20 EXHIBIT 11.3
EXHIBIT 11.3 PROGENICS PHARMACEUTICALS, INC. PRO FORMA STATEMENT OF COMPUTATION OF LOSS PER SHARE Year Ended Nine Months December 31, Ended September 30, 1995 1996 ------------- ------------------- PRO FORMA IN ACCORDANCE WITH THE SECURITIES AND EXCHANGE COMMISSION STAFF ACCOUNTING BULLETIN NO. 83 Net loss $ (4,503,496) $ (3,481,574) ------------- ------------- ------------- ------------- Weighted average number of common shares outstanding 2,294,675 2,294,675 Shares issuable upon assumed conversion of preferred stock 4,259,878 4,259,878 Shares issuable upon exercise of outstanding options and warrants 355,687 355,687 Shares assumed to be repurchased under the treasury stock method (775,519) (775,519) ------------- ------------- Weighted average number of common shares used in computing per share data 6,134,721 6,134,721 ------------- ------------- ------------- ------------- Net loss per share $ (0.73) $ (0.57) ------------- ------------- ------------- -------------
EX-23.1 21 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-1 (Amendment No. 2) (File No. 333-13627) of our report dated October 28, 1996 on our audits of the financial statements of Progenics Pharmaceuticals, Inc. We also consent to the reference to our firm under the captions "Selected Financial Data" and "Experts." Coopers & Lybrand L.L.P. New York, New York November 8, 1996 EX-27.1 22 FDS
5 0000835887 PROGENICS 1,000 YEAR 9-MOS DEC-31-1995 DEC-31-1996 DEC-31-1995 SEP-30-1996 559 1,746 0 0 0 0 0 0 0 0 690 1,886 2,144 1,727 1,178 837 1,736 2,841 671 992 0 0 0 0 5 6 3 3 844 1,659 1,736 2,841 50 67 821 426 0 0 0 0 5,238 3,868 0 0 87 40 (4,504) (3,482) 0 0 (4,504) (3,482) 0 0 0 0 0 0 (4,504) (3,482) (1.99) (1.52) (0.58) (0.40)
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