-----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, Ook/x2IVOqbEM0h7ZJ99U6xkw9bvDg55YFpfTvRnIkQQvUaAVyuym5kaQCehv4T+ 9bDQLMVXL/PGwJJ9t3Topg== 0001125282-01-501458.txt : 20010810 0001125282-01-501458.hdr.sgml : 20010810 ACCESSION NUMBER: 0001125282-01-501458 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010809 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23143 FILM NUMBER: 1702327 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 10-Q 1 b313015_10q.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ---------------- Commission file number 000-23143 PROGENICS PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3379479 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 777 Old Saw Mill River Road Tarrytown, New York 10591 (Address of principal executive offices) (Zip Code) (914) 789-2800 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of June 30, 2001 there were 12,390,468 shares of common stock, par value $.0013 per share, of the registrant outstanding. PROGENICS PHARMACEUTICALS, INC. INDEX Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets............................................ 3 Condensed Statements of Operations.................................. 4 Condensed Statement of Stockholders' Equity......................... 5 Condensed Statements of Cash Flows.................................. 6 Notes to Condensed Financial Statements............................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 13 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.............. 15 Item 6. Exhibits and Reports on Form 8-K................................. 15 2 PROGENICS PHARMACEUTICALS, INC. CONDENSED BALANCE SHEETS AT JUNE 30, 2001 AND DECEMBER 31, 2000 (Unaudited)
June 30, December 31, 2001 2000 ------------------------ ------------------------ ASSETS: Current assets: Cash and cash equivalents...................................... $ 21,035,906 $ 5,628,987 Certificates of deposit........................................ 1,000,000 Marketable securities - short term............................. 32,949,903 40,089,556 Accounts receivable............................................ 1,061,193 2,651,679 Interest receivable............................................ 1,084,912 1,225,763 Other current assets........................................... 346,903 467,281 ---------------------- --------------------- Total current assets...................................... 56,478,817 51,063,266 Marketable securities.............................................. 14,692,216 13,705,208 Fixed assets, at cost, net of accumulated depreciation and amortization.................................. 2,493,105 2,215,519 Investment in joint venture........................................ 29,361 ---------------------- --------------------- Total assets.............................................. $ 73,664,138 $ 67,013,354 ====================== ===================== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Accounts payable and accrued liabilities....................... $ 1,762,347 $ 1,790,194 Amount due to joint venture.................................... 478,623 457,251 Capital lease obligations, current portion..................... 8,743 7,445 Investment deficiency in joint venture......................... 9,698 ---------------------- --------------------- Total current liabilities................................. 2,259,411 2,254,890 Capital lease obligations.......................................... 4,524 ---------------------- --------------------- Total liabilities......................................... 2,259,411 2,259,414 ---------------------- --------------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.001 par value, 20,000,000 authorized; none issued and outstanding Common stock - $.0013 par value, 40,000,000 authorized; issued and outstanding - 12,390,468 in 2001, 12,267,180 in 2000................................ 16,108 15,947 Additional paid-in capital..................................... 89,131,541 88,419,150 Unearned compensation.......................................... (92,697) (162,244) Accumulated deficit............................................ (17,908,583) (23,620,684) Accumulated other comprehensive loss........................... 258,358 101,771 ---------------------- --------------------- Total stockholders' equity......................................... 71,404,727 64,753,940 ---------------------- --------------------- Total liabilities and stockholders' equity......................... $ 73,664,138 $ 67,013,354 ====================== =====================
The accompanying notes are an integral part of these financial statements. 3 PROGENICS PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended For the six months ended June 30, June 30, ------------------------------------------ --------------------------------- 2001 2000 2001 2000 ------------------- ------------------- --------------- ------------- Revenues Contract research and development, and research grants ................. $ 1,290,916 $ 2,324,160 $ 6,208,221 $ 4,668,634 Product sales .............................. 3,000 4,392 28,000 6,392 Investment income, net ..................... 112,814 1,022,947 1,017,293 2,050,720 ------------ ------------ ------------ ------------ Total revenues ......................... 1,406,730 3,351,499 7,253,514 6,725,746 ------------ ------------ ------------ ------------ Expenses: Research and development ................... 3,201,602 3,103,655 6,932,647 6,561,436 General and administrative ................. 2,103,784 1,225,810 3,161,897 2,222,186 Loss in joint venture ...................... 519,947 221,856 937,967 409,769 Interest expense ........................... 11,687 24,890 23,767 47,389 Depreciation and amortization .............. 170,870 170,028 337,147 351,673 ------------ ------------ ------------ ------------ Total expenses ......................... 6,007,890 4,746,239 11,393,425 9,592,453 ------------ ------------ ------------ ------------ Operating loss ......................... (4,601,160) (1,394,740) (4,139,911) (2,866,707) Payment from collaborator ..................... 9,852,012 9,852,012 ------------ ------------ ------------ ------------ Net income (loss) ...................... $ 5,250,852 $ (1,394,740) $ 5,712,101 $ (2,866,707) ============ ============ ============ ============ Net income (loss) per share - basic ........... $ 0.42 $ (0.11) $ 0.46 $ (0.24) ============ ============ ============ ============ Net income (loss) per share - diluted ......... $ 0.38 $ (0.11) $ 0.41 $ (0.24) ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 4 PROGENICS PHARMACEUTICALS, INC. CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2001 (Unaudited)
COMMON STOCK ADDITIONAL ACCUMULATED ------------ PAID-IN UNEARNED ACCUMULATED OTHER COMPREHENSIVE Shares Amount CAPITAL COMPENSATION DEFICIT (LOSS) ------ ------ ---------- ------------ ----------- ------------------- Balance at December 31, 2000 12,267,180 $15,947 $88,419,150 ($162,244) ($23,620,684) $101,771 Amortization of unearned compensation 69,547 Issuance of compensatory stock 142,784 options Sale of Common Stock under employee 123,288 161 569,607 stock purchase plans and exercise of stock options and warrants Net loss 5,712,101 Change in unrealized gain on 156,587 marketable securities ------------------------------------------------------------------------------------- Balance at June 30, 2001 12,390,468 $16,108 $89,131,541 ($92,697) ($17,908,583) $258,358 =====================================================================================
TOTAL STOCKHOLDERS' COMPREHENSIVE EQUITY INCOME ------------- -------------- Balance at December 31, 2000 $64,753,940 Amortization of unearned compensation 69,547 Issuance of compensatory stock 142,784 options Sale of Common Stock under employee 569,768 stock purchase plans and exercise of stock options and warrants Net loss 5,712,101 5,712,101 Change in unrealized gain on 156,587 156,587 marketable securities ------------------------------- Balance at June 30, 2001 $71,404,727 $5,868,688 ===============================
The accompanying notes are an integral part of the financial statements. 5 PROGENICS PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Six months ended June 30, ---------------------------- 2001 2000 ------------ ------------- Cash flows from operating activities: Net income (loss) .................................................. $ 5,712,101 $ (2,866,707) ------------ ------------ Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization .................................. 337,147 351,673 Amortization of discounts, net of premiums, on marketable securities ....................................... 98,160 195,716 Amortization of discount on amount due to joint venture ........ 21,372 43,752 Realized loss on impairment of security ........................ 782,400 Loss in joint venture .......................................... 937,967 409,769 Noncash expenses incurred in connection with issuance of common stock, stock options and warrants ..................... 212,331 378,925 Changes in assets and liabilities: Decrease (increase) in accounts receivable ................... 1,590,486 (329,956) Decrease (increase) in other current assets .................. 261,229 (434,835) Increase (decrease) in accounts payable and accrued expenses . 42,461 (1,006,799) Increase in investment in joint venture ...................... (898,908) (389,799) ------------ ------------ Total adjustments ..................................... 3,384,645 (781,554) ------------ ------------ Net cash provide by (used in) operating activities ........... 9,096,746 (3,648,261) ------------ ------------ Cash flows from investing activities: Capital expenditures ............................................... (685,041) (171,386) Maturity of certificate of deposit ................................. 1,000,000 Sales of marketable securities ..................................... 25,750,502 14,895,000 Purchase of marketable securities .................................. (20,321,830) (23,559,110) ------------ ------------ Net cash provided by (used in) investing activities .......... 5,743,631 (8,835,496) ------------ ------------ Cash flows from financing activities: Proceeds from the exercise of stock options and other adjustments to stockholders' equity ............................................ 569,768 1,421,932 Payment of capital lease obligations ............................... (3,226) (100,528) ------------ ------------ Net cash provided by financing activities ................... 566,542 1,321,404 ------------ ------------ Net increase (decrease) in cash and cash equivalents ........ 15,406,919 (11,162,353) ------------ ------------ Cash and cash equivalents at beginning of period ..................... 5,628,987 24,212,448 ------------ ------------ Cash and cash equivalents at end of period .................. $ 21,035,906 $ 13,050,095 ============ ============ Supplemental disclosure of noncash investing and financing activities: Fixed assets included in accounts payable and accrued expenses ..... $ 19,023 $ 35,856 ============ ============
The accompanying notes are an integral part of these financial statements. 6 PROGENICS PHARMACEUTICALS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. Interim Financial Statements The interim Condensed Financial Statements of Progenics Pharmaceuticals, Inc. (the "Company") have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and disclosures necessary for a presentation of the Company's financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company's financial position, results of operation and cash flows for such periods. The results of operations for interim periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. 2. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses as of June 30, 2001 and December 31, 2000 consist of the following: June 30, December 31, 2001 2000 ----------- ------------ Accounts payable $ 869,297 $ 391,367 Accrued expenses 275,000 579,992 Accrued payroll and related costs 264,602 486,549 Legal and accounting fees payable 353,448 332,286 ----------- ------------ $ 1,762,347 $ 1,790,194 =========== =========== 3 Net Income (Loss) Per Share The Company's basic net income (loss) per share amounts have been computed by dividing net income (loss) by the weighted average number of common shares outstanding during the respective periods. For the three and six months ended June 30, 2000, the Company reported net losses and, therefore, no common stock equivalents were included in the computation of diluted per share amounts since such inclusion would have been antidilutive. For the three and six months ended June 30, 2001, the Company reported net income and, therefore, all common stock equivalents with exercise prices less than the average fair market value of the Company's Common Stock for the period have been included in the calculation, as follows:
Net Income (Loss) Shares Per Share (Numerator) (Denominator) Amount ----------------- ------------- ---------- 2001: Three months-ended June 30, 2001: Basic: $5,250,852 12,372,596 $0.42 ========== ===== Effect of Dilutive Securities: Options 1,411,864 Warrants 52,299 ------
7 Diluted: $5,250,852 13,836,758 $0.38 ========== ========== ===== Six months-ended June 30, 2001: Basic: $5,712,101 12,342,980 $0.46 ========== ===== Effect of Dilutive Securities: Options 1,488,978 Warrants 68,210 ------ Diluted: $5,712,101 13,900,168 $0.41 ========== ========== ===== 2000: Three months-ended June 30, 2000: Basic and Diluted: ($1,394,740) 12,139,008 ($0.11) ============ ========== ======= Six months-ended June 30, 2000: Basic and Diluted: ($2,866,707) 12,084,039 ($0.24) ============ ========== =======
Options and warrants which have been excluded from the diluted per share amounts because their effect would have been antidilutive include the following: Three Months Ended June 30, ----------------------------------------------------------- 2001 2000 ----------------------------- ----------------------------- Wtd. Avg. Wtd. Avg. Wtd. Avg. Exercise Wtd. Avg. Exercise Number Price Number Price 562,700 $38.94 3,273,676 $12.04 Six Months Ended June 30, ----------------------------------------------------------- 2001 2000 ----------------------------- ----------------------------- Wtd. Avg. Wtd. Avg. Wtd. Avg. Exercise Wtd. Avg. Exercise Number Price Number Price 548,728 $39.34 3,297,758 $11.59 4. PSMA Development Company LLC The Company accounts for its investment in the PSMA Development Company LLC ("JV") in accordance with the equity method of accounting. Selected financial statement data of the JV are as follows: Statement of Operations Data:
Three Months Ended June 30, Six Months Ended June 30, -------------------------------------- ------------------------------------- 2001 2000 2001 2000 ----------------- ----------------- ---------------- ---------------- Total revenue $ 11,496 $ 21,876 $ 25,692 43,752 Total expenses 593,791 254,523 1,034,793 $ 473,491 ----------------- ----------------- ---------------- ---------------- Net loss (1) $ (582,295) $ (232,647) $ (1,009,101) $ (429,739) ================= ================= ================ ================
(1) The terms of the joint venture agreement provide for the Company to fund certain costs of the joint venture. The loss resulting from such costs have therefore been allocated to the capital account of the Company and accordingly, the Company's allocated share of the joint venture's loss is greater than its ownership interest. 8 5. Collaboration Payment In May 2001, the Company and Bristol Myers Squibb Company ("BMS") agreed to terminate their Joint Development and Master License Agreement to develop vaccines to treat melanoma and other cancers (the "BMS Agreement"), entered into in April 1997. Under the terms of the settlement agreement, BMS relinquished all future rights to products resulting from the BMS Agreement. In connection with the termination of the BMS Agreement, BMS paid the Company $15.5 million. Approximately $5.6 million of the payment related to contract work performed prior to termination and the balance was a contract termination payment. Under the terms of certain license agreements, a portion of the termination payment was paid to certain licensors. 6. Comprehensive Income (Loss) Comprehensive income (loss) represents the change in net assets of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) of the Company includes net income (loss) adjusted for the change in net unrealized gain or loss on marketable securities. The net effect of income taxes on comprehensive income (loss) is immaterial. For the six months ended June 30, 2001 and 2000, the components of comprehensive income (loss) are: Six Months Ended June 30, ----------------------------------- 2001 2000 -------------- ----------------- Net income (loss) $ 5,712,101 $ (2,866,707) Change in net unrealized gain/loss on marketable securities 156,587 (32,861) -------------- ----------------- Comprehensive income (loss) $ 5,868,688 $ (2,899,568) ============== ================= 7. Income Taxes For the year ending December 31, 2001, the Company currently estimates a net loss and the effect of income taxes will be immaterial. Accordingly, no provision for income taxes has been recorded for the period ended June 30, 2001. 8. Reclassifications Certain reclassifications have been made to the 2000 Financial Statements to conform with the 2001 presentation. 9. Recently Issued Accounting Standards In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 141 Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. These statements are effective for all business combinations that are completed after June 30, 2001 and for business combinations that are completed before July 1, 2001 the effective date is the first fiscal year beginning after December 15, 2001. The Company will adopt FAS 141 and 142 on January 1, 2002. Management does not expect such adoption to have a material impact on the Company's financial statements. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Form 10-Q constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any expected future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: technological uncertainties related to early stage product development, uncertainties associated with preclinical and clinical testing, risks relating to corporate collaborations, the lack of product revenue and the uncertainty of future profitability, the need for additional financing and other factors set forth more fully in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and other periodic filings with the Securities and Exchange Commission to which investors are referred for further information. The following discussion should be read in conjunction with the Company's Condensed Financial Statements and the related notes thereto. General Progenics is a biopharmaceutical company focusing on the development and commercialization of innovative products for the treatment and prevention of viral, cancer and other life-threatening diseases. The Company commenced principal operations in late 1988 and since that time has been engaged primarily in organizational efforts, including recruitment of scientific and management personnel, research and development efforts, development of its manufacturing capabilities, establishment of corporate collaborations 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 through June 30, 2001 have been payments received under its collaboration agreements, research grants and contracts related to the Company's cancer and HIV programs and interest income. To date, a majority of the Company's expenditures have been for research and development activities. The Company expects that its research and development expenses will increase significantly as its programs progress and the Company makes filings for related regulatory approvals. With the exception of the years ended December 31, 1997 and 1998, the Company has had recurring losses and had, at June 30, 2001, an accumulated deficit of approximately $17,909,000. 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 that are expected to continue for the foreseeable future. The Company does not expect its products under development to be commercialized in the near future. 10 Results of Operations Three Months Ended June 30, 2001 and 2000 Contract research and development revenue, and research grants decreased to approximately $1,291,000 for the three months ended June 30, 2001 from approximately $2,324,000 for the three months ended June 30, 2000. The Company received no contract research and development funding for the three months ended June 30, 2001 pursuant to the Company's recently terminated agreement with the Bristol-Myers Squibb Company ("BMS") compared to approximately $1,609,000 for the three months ended June 30, 2000. The Company received a non-recurring payment of approximately $9,852,000 from BMS in connection with the termination of the BMS Agreement. As the result of the termination of the BMS Agreement, the Company expects no additional payments from BMS. Revenues from research grants increased to approximately $842,000 for the three months ended June 30, 2001 from approximately $309,000 for the three months ended June 30, 2000. The increase resulted from the funding of a greater number of grants in the second quarter of 2001. Investment income decreased to approximately $113,000 for the three months ended June 30, 2001 from approximately $1,023,000 for the three months ended June 30, 2000 primarily due a $782,000 write-down of a debt security currently in default to its fair value since the impairment was deemed to be other than temporary. Research and development expenses increased to approximately $3,202,000 for the three months ended June 30, 2001 from approximately $3,104,000 for the three months ended June 30, 2000. The increase was principally due to additional costs in 2001 in the Company's existing development programs including the manufacture of PRO 542, and an increase in headcount, related laboratory supplies and additional rent as the Company expanded its research and development programs to include PSMA and DHA. General and administrative expenses increased to approximately $2,103,000 for the three months ended June 30, 2001 from approximately $1,226,000 for the three months ended June 30, 2000. The increase was principally due to an increase in headcount, related benefits and increased professional fees. Loss in joint venture increased to approximately $520,000 for the three months ended June 30, 2001 from approximately $222,000 for the three months ended June 30, 2000. The Company recognized its share of the loss under the terms of the joint venture with Cytogen Corp. The increase was due to an increase in the headcount assigned to the PSMA project and the related cost of supplies. Interest expense decreased to approximately $12,000 for the three months ended June 30, 2001 from approximately $25,000 for the three months ended June 30, 2000. The decrease was principally due to the recognition of less interest expense as the Company discounted future capital contributions to the joint venture, and a reduction in the number of capital leases outstanding. Depreciation and amortization expense remained constant. The Company's net income for the three months ended June 30, 2001 was approximately $5,251,000 compared to a net loss of approximately $1,395,000 for the three months ended June 30, 2000. Six Months Ended June 30, 2001 and 2000 Contract research and development revenue, and research grants increased to approximately $6,208,000 for the six months ended June 30, 2001 from approximately $4,669,000 for the six months ended June 30, 2000. Contract research and development includes approximately $3,674,000 for the six months ended June 30, 2001 received pursuant to the Company's recently terminated agreement with the Bristol-Myers Squibb Company ("BMS") compared to $3,272,000 million for the six months ended June 30, 2000. The increase was attributable to the inclusion of a milestone payment related to clinical 11 development activities in 2001. The Company also received a non-recurring payment of approximately $9,852,000 from BMS in connection with the termination of the BMS Agreement. As the result of the termination of the BMS Agreement, the Company expects no additional payments from BMS. Product sales increased to approximately $28,000 for the six months ended June 30, 2001 from approximately $6,000 for the six months ended June 30, 2000. Investment income decreased to approximately $1,017,000 for the six months ended June 30, 2001 from approximately $2,051,000 for the six months ended June 30, 2000 primarily due a $782,000 write-down of a debt security currently in default to its fair value since the impairment was deemed to be other than temporary. Research and development expenses increased to approximately $6,933,000 for the six months ended June 30, 2001 from approximately $6,561,000 for the six months ended June 30, 2000. The increase was principally due to additional costs in 2001 in the Company's existing development programs including the manufacture of PRO 542, and an increase in headcount, related laboratory supplies and additional rent as the Company expanded its research and development programs to include PSMA and DHA. General and administrative expenses increased to approximately $3,162,000 for the six months ended June 30, 2001 from approximately $2,222,000 for the six months ended June 30, 2000. The increase was principally due to an increase in headcount, related benefits and increased professional fees. Loss in joint venture increased to approximately $938,000 for the six months ended June 30, 2001 from approximately $410,000 for the six months ended June 30, 2000. The Company recognized its share of the loss under the terms of the joint venture with Cytogen Corp. The increase was due to an increase in the headcount assigned to the PSMA project and the related cost of supplies. Interest expense decreased to approximately 24,000 for the six months ended June 30, 2001 from approximately $47,000 for the six months ended June 30, 2000. The decrease was principally due to the recognition of less interest expense as the Company discounted future capital contributions to the joint venture, and a reduction in the number of capital leases outstanding. Depreciation and amortization expense remained constant. The Company's net income for the six months ended June 30, 2001 was approximately $5,712,000 compared to a net loss of approximately $2,867,000 for the six months ended June 30, 2000. Liquidity and Capital Resources The Company has financed its operations primarily through the private sale and issuance of equity securities, a line of credit that has since been repaid and terminated, payments received under a collaboration with the Bristol-Myers Squibb Company ("BMS") beginning in July 1997 and terminated in May 2001, payments received under its collaboration with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche, Inc. ("Roche") beginning in January 1998, funding under research grants and contracts, the proceeds from public offerings of common stock in November 1997 and November 1999 and the proceeds from the exercise of outstanding options and warrants. Pursuant to the Company's recently terminated collaboration with BMS, the clinical development costs of the Company's GMK and MGV cancer vaccine programs had been funded by BMS. In May 2001, the Company and BMS agreed to terminate their collaborative development agreement and the Company regained full rights with respect to the GMK and MGV cancer vaccine programs. In connection with this termination, BMS agreed to pay the Company $15.5 million. The Company intends to pursue the further development of these programs, which are likely to entail significant costs, and also recently announced the commencement of a GMK vaccine Phase III trial in Europe involving patients with Stage II melanoma. While self-funding these programs will require 12 significant capital, the Company believes that the payment from BMS in connection with the termination, with proper allocation of existing resources, will enable continuation of the vaccines programs. At June 30, 2001, the Company had cash, cash equivalents and marketable securities totaling approximately $68,700,000 compared with approximately $60,400,000 at December 31, 2000. In June 2000, the Company extended its facility lease to June 2005. In connection with the extended facility lease, the Company expects that approximately $1,000,000 will be spent to expand its administrative offices and enhance its manufacturing capabilities for clinical trials during 2001, of which approximately $800,000 has been expended through June 30, 2001. We believe that our existing capital resources should be sufficient to fund operations at least through the end of 2002. However, this is a forward-looking statement based on our current operating plan and the assumptions on which it relies. There could be changes that would consume our assets before such time. We will require substantial funds to conduct research and development activities, preclinical studies, clinical trials and other activities relating to the commercialization of any potential products. In addition, our cash requirements may vary materially from those now planned because of results of research and development and product testing, relationships with in-licensors and collaborators, changes in the focus and direction of our 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. We have no committed external sources of capital and, as discussed above, expect no significant product revenues for a number of years as it will take at least that much time to bring our products to the commercial marketing stage. We may 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 our technology, to fund future operations. We cannot assure you, however, that we will be able to obtain additional funds on acceptable terms, if at all. Recently Issued Accounting Standard In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 141 Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. These statements are effective for all business combinations that are completed after June 30, 2001 and for business combinations that are completed before July 1, 2001 the effective date is the first fiscal year beginning after December 15, 2001. The Company will adopt FAS 141 and 142 on January 1, 2002. Management does not expect such adoption to have a material impact on the Company's financial statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Our primary investment objective is to preserve principal while maximizing yield without significantly increasing our risk. Our investments consist of taxable auction securities, euro dollar bonds, and corporate notes. Our investments totaled $47.6 million at June 30, 2001 none of which had interest rates that were variable. Due to the conservative nature of our short-term fixed interest rate investments, we do not believe that we have a material exposure to interest rate risk. Our fixed interest rate long-term investments are sensitive to changes in interest rates. Interest rate changes would result in a change in the fair value of these investments due to differences between the market interest rate and the rate at the 13 date of purchase of the investment. A 100 basis point increase in the June 30, 2001 market interest rates would result in a decrease of approximately $0.3 million in the market values of these investments. 14 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on June 27, 2001. The matters voted upon at the meeting were (i) the election of eight directors of the Company, and (ii) the ratification of the Board of Directors' selection of PricewaterhouseCoopers LLP to serve as the Company's independent auditors for the fiscal year ending December 31, 2001. The number of votes cast for and against or withheld with respect to each matter voted upon at the meeting and the number of abstentions and broker non-votes are as follows: Nominee: Votes For: Votes Against: ------- ---------- -------------- Paul J. Maddon, M.D., Ph.D. 10,053,319 492,819 Charles A. Baker 10,542,582 3,556 Kurt W. Briner 10,542,882 3,256 Mark F. Dalton 10,540,682 5,456 Stephen P. Goff, Ph.D. 10,517,032 29,106 Paul F. Jacobson 10,541,832 4,306 Ronald J. Prentki 10,054,519 441,619 David A. Scheinberg, M.D., Ph.D. 10,516,332 29,806 As to the ratification of the Board of Director's selection of PricewaterhouseCoopers, LLP to serve as the Company's independent auditors for the fiscal year ending December 31, 2001, the matter was approved with 10,489,611 votes in favor, 54,628 votes against, 1,898 abstentions and 0 broker non-votes. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.37 -- Employment Agreement dated as of May 16, 2001 between the Registrant and Ronald J. Prentki (b) Reports on Form 8-K During the quarter ending June 30, 2001, the Registrant filed a Current Report on Form 8-K, dated May 15, 2001 in which Item 5 Other Events were reported and no financial statements were filed. - ----------------------------------- 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PROGENICS PHARMACEUTICALS, INC. Date: August 9, 2001 by /s/ Robert A. McKinney ------------------------------- Robert A. McKinney Vice President (Duly authorized officer of the Registrant and Principal Financial and Accounting Officer) 16 EXHIBIT INDEX Exhibit Description Page - ------- ----------- ---- 10.37 -- Employment Agreement dated as of May 16, 2001 between the Registrant and Ronald J. Prentki 17 EX-10.37 3 b313015_ex10-37.txt EMPLOYMENT AGREEMENT Exhibit 10.37 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement") is made as of May 16, 2001, between Progenics Pharmaceuticals, Inc., a Delaware corporation (the "Company") with its principal place of business at 777 Old Saw Mill River Road, Tarrytown, New York 10591, and Ronald J. Prentki (the "Executive"). WHEREAS, the Company is engaged in the development and commercialization of pharmaceuticals; WHEREAS, the Executive has been employed as President of the Company pursuant to that certain Employment Agreement dated as of June 10, 1998, as amended by Amendment No. 1 to Employment Agreement dated as of October 8, 1998, between the Company and the Executive (as so amended, the "Prior Employment Agreement"); and WHEREAS, the Company wishes to continue to employ the Executive as President of the Company, and the Executive wishes to continue to serve the Company in such capacity; NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree as follows: 1. Employment. On and subject to the terms and conditions hereinafter set forth, the Company hereby agrees to employ the Executive as President of the Company and the Executive hereby agrees to serve the Company in such capacity. 2. Term. (a) The period of this Agreement (the "Agreement Term") shall commence as of the date hereof (the "Effective Date") and shall expire on March 31, 2004 (the "Initial Expiration Date"). The Agreement Term shall be automatically extended for an additional period of 12 months on the Initial Expiration Date and on each successive anniversary of the Initial Expiration Date, unless written notice of non-extension is provided by either party to the other party at least 180 days prior to the Initial Expiration Date or any such anniversary. (b) The period of the Executive's employment by the Company under this Agreement (the "Employment Period") shall be deemed to have commenced as of April 1, 2001 and shall expire at the end of the Agreement Term, unless sooner terminated in accordance with the terms and conditions of this Agreement. 3. Position, Duties and Responsibilities. The Executive shall be employed by the Company during the Employment Period as President of the Company. The Executive shall have general responsibility for the management of the business and affairs of the Company with respect to business development, strategic planning, sales and marketing, human resources, finance and accounting, legal (except with regard to patent matters), corporate communications (including investor and media relations) and general administration, and the Executive shall have such powers and duties usually incident to the office of President and necessary to effectuate the foregoing, subject only to the authority of the Board of Directors (the "Board of Directors") and the Chief Executive Officer of the Company. The Executive shall have such additional responsibilities as may be delegated to him by the Board of Directors or the Chief Executive Officer of the Company; provided, however, that in connection with any material increase in responsibilities, the Board of Directors shall consider increasing the Executive's compensation hereunder. The Executive shall report directly to the Chief Executive Officer of the Company. Except for vacation in accordance with the Company's policy in effect from time to time and absences due to temporary illness or other personal matters (as permitted hereunder), the Executive shall devote his full time, attention and energy during the Employment Period to the business of the Company. During the Employment Period, the Executive will not engage in any business activity which, in the judgment of the Board of Directors, conflicts with the duties of the Executive hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. 4. Place of Performance. The Executive shall perform his duties at the principal offices of the Company, which are currently located at 777 Old Saw Mill River Road, Tarrytown, New York 10591, but from time to time the Executive may be required to travel to other locations in the proper conduct of his responsibilities under this Agreement. 5. Compensation and Benefits. In consideration of the services rendered by the Executive during the Employment Period, the Company shall pay or provide the Executive the amounts and benefits set forth below. (a) Base Salary. During the Employment Period, the Company will pay to the Executive an annual base salary (the "Base Salary") of $317,000, payable in accordance with the Company's normal payroll policy. The Executive's Base Salary shall be reviewed annually by the Board of Directors or any Committee of the Board of Directors (a "Committee") to which the Board of Directors has delegated such authority and shall be subject to increase (but not decrease) at the option and sole discretion of the Board of Directors or any such Committee. (b) Annual Bonus. During the Employment Period, the Executive shall be eligible to receive, at the sole discretion of the Board of Directors or any Committee to 2 which the Board of Directors has delegated such authority, bonuses based on such performance standards or other criteria as the Board of Directors or any such Committee shall, in its sole discretion, determine. (c) Stock Option Grant. The Company shall grant the Executive a non-qualified option pursuant to the Company's 1996 Stock Incentive Plan (the "Traditional Option") to purchase 225,000 shares of common stock of the Company ("Common Stock") at an exercise price equal to $14.06 per share, representing the fair market value per share of the Common Stock as of the Effective Date. The Traditional Option shall have a ten-year term and shall vest as follows:
New Shares Vesting on Cumulative Number of Shares Vesting Date Vesting Date Vested as of Vesting Date --------------------------- -------------------------- ------------------------------- May 16, 2001 32,143 32,143 September 30, 2001 32,143 64,286 March 31, 2002 32,143 96,429 September 30, 2002 32,143 128,572 March 31, 2003 32,143 160,715 September 30, 2003 32,143 192,858 March 31, 2004 32,142 225,000
In addition, the Company shall grant the Executive a non-qualified valuation-based option pursuant to the Company's 1996 Stock Incentive Plan (the "Valuation-Based Option") to purchase 100,000 shares of Common Stock at an exercise price equal to $14.06 per share. The Valuation-Based Option shall have a ten-year term and, subject to the following sentence, shall vest on May 16, 2010. Vesting of the Valuation-Based Option shall be subject to acceleration as follows: (A) if at any time the Average Price (as defined herein) is $22.88 per share or more, then the vesting of the Valuation-Based Option as to 25,000 shares of Common Stock shall accelerate, and such option may be exercised as to such shares at any time prior to its expiration or earlier termination; (B) if at any time the Average Price is $28.60 per share or more, then the vesting of the Valuation-Based Option as to an additional 25,000 shares of Common Stock shall accelerate, and such option may be exercised as to such shares at any time prior to its expiration or earlier termination; (C) if at any time the Average Price is $34.32 per share or more, then the vesting of the Valuation-Based Option as to an additional 25,000 shares of Common 3 Stock shall accelerate, and such option may be exercised as to such shares at any time prior to its expiration or earlier termination; and (D) if at any time the Average Price is $40.04 per share or more, then the vesting of the Valuation-Based Option as to an additional 25,000 shares of Common Stock shall accelerate, and such option may be exercised in full at any time prior to its expiration or earlier termination. "Average Price" shall mean the average of the daily last reported sales price of the Common Stock on the NASDAQ National Market (or such other exchange as may be the principal exchange on which the Common Stock is listed) during any period of 90 consecutive calendar days. The Options shall be subject to one or more stock option agreements entered into between the Company and the Executive on terms not inconsistent with the foregoing. Such agreement(s) shall provide that upon any Change in Control (as hereinafter defined) of the Company, the Traditional Option and the Valuation-Based Option (collectively the "Options") will immediately become 100% vested regardless, in the case of the Valuation-Based Option, of whether the Average Price conditions stated above have been satisfied. For purposes of this Agreement, a "Change in Control" shall mean: (i) a change in the composition of the Board of Directors such that during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (ii) or (iii) of this paragraph) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members thereof; (ii) the approval by the stockholders of the Company of a merger, consolidation, reorganization or similar corporate transaction, whether or not the Company is the surviving corporation in such transaction, in which outstanding shares of Common Stock are converted into (A) shares of stock of another company, other than a conversion into shares of voting common stock of the successor corporation (or a holding company thereof) representing more than 50% of the voting power of all capital stock thereof outstanding immediately after the merger or consolidation or (B) other securities (of either the Company or another company) or cash or other property; or (iii) the approval by the stockholders of the Company of (A) the sale or other disposition of all or substantially all of the assets of the Company or (B) a complete liquidation or dissolution of the Company. (d) Equity Participation. During the Employment Period, the Executive shall be eligible to receive awards under any stock option, stock purchase or equity-based 4 incentive compensation plan or arrangement adopted by the Company from time to time for which senior executives of the Company are eligible to participate. The level of the Executive's participation in any such plan or arrangement shall be at the sole discretion of the Board of Directors or any committee to which the Board of Directors has delegated such authority. (e) Employee Benefits. During the Employment Period, the Executive shall be eligible to participate in all employee benefit plans and programs of the Company in which other senior executives of the Company are eligible to participate from time to time, including, without limitation, any qualified or non-qualified pension, 401(k), profit sharing and savings plans, any death benefit and disability benefit plans and any medical, dental, health and welfare plans, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and programs. The Executive shall be entitled to participate in such plans and programs on terms no less favorable to the Executive than those on which senior executives of the Company generally participate. Without limiting the generality of the foregoing, the Company shall provide the Executive with such long-term disability benefits as are made generally available to senior executives of the Company. During the Employment Period, the Executive shall be entitled to such fringe benefits and perquisites as are made generally available to senior executives of the Company from time to time. Notwithstanding the foregoing, the Executive shall be entitled during the Employment Period to five weeks of combined vacation, sick and personal days per calendar year. Of these five weeks, the Executive shall be entitled to carry over into a subsequent calendar year and use two (but not more than two) weeks of previously accrued but unused vacation, sick or personal days. The Executive acknowledges and agrees that the Company does not guarantee the adoption or continuance of any particular employee benefit plan or program or other fringe benefit during the Employment Period, and participation by the Executive in any such plan or program shall be subject to the rules and regulations applicable thereto. (f) Reimbursement of Expenses. The Company shall provide the Executive with reimbursement of all reasonable travel and other business expenses and disbursements incurred by the Executive in the performance of his duties under this Agreement, upon proper accounting in accordance with the Company's normal practices and procedures for reimbursement of business expenses. The Executive acknowledges and agrees that no reimbursement of relocation expenses shall be payable to the Executive in connection with the entering into of this Agreement. (g) Indemnification. The Company shall indemnify the Executive to the full extent permitted by Delaware law with respect to any losses, damages, expenses (including the reasonable fees and expenses of counsel) or liabilities paid or incurred by the Executive as a result of the good-faith performance by the Executive of his duties hereunder. 5 6. Death; Disability. If the Executive dies, or is incapacitated or disabled so as to render the Executive mentally or physically incapable of performing the services required to be performed by the Executive under this Agreement (as determined by a medical professional mutually acceptable to the Company and the Executive) for a period that would entitle the Executive to qualify for long-term disability benefits under the Company's then-current long-term disability insurance program or, in the absence of such a program, for a period of 90 consecutive days or longer, or for 120 days within any 180 day period (such condition being herein referred to as a "Disability"), then (i) in the case of the Executive's death, the Employment Period shall terminate on the date of the Executive's death or (ii) in the case of a Disability, the Company, at its option, may terminate the Employment Period at any time after such Disability upon 30 days' written notice to the Executive to that effect. In the case of a Disability, until the Company shall have terminated the Employment Period hereunder in accordance with the foregoing, the Executive shall be entitled to receive compensation as provided for herein notwithstanding any such physical or mental disability. As specified in Section 5(e) above, the Company shall provide the Executive with such long-term disability benefits as are made generally available to senior executives of the Company. 7. Termination for Cause. The Company may terminate the Employment Period at any time for "Cause" (such termination being hereinafter called a "Termination for Cause") by giving the Executive written notice of such termination, upon the giving of which such termination will take effect immediately. For purposes of this Agreement, "Cause" means (i) the Executive's willful and substantial misconduct, (ii) the Executive's willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from death or Disability), (iii) the Executive's breach in any material respect of any of the agreements contained in Sections 12, 13, 14, 15 or 16 hereof, (iv) the commission by the Executive of any fraudulent act with respect to the business and affairs of the Company or any subsidiary or affiliate thereof or the conviction of (or plea of nolo contendere to) a crime constituting a felony, (v) habitual drunkenness, use of illegal drugs or abuse of controlled substances by the Executive, (vi) excessive absenteeism not related to sick leave, accidental physical injury or vacations, (vii) the improper exploitation by the Executive of a conflict of interest between the Executive and the Company or (viii) the commission of any act involving moral turpitude that a reasonable person would consider damaging to the reputation of the Company; provided, however, that, in the case of clauses (i), (ii), (v), (vi) or (vii), the Company shall have given the Executive written notice identifying in reasonable detail the acts or omissions constituting "cause" and such acts or omissions shall not have been cured by the Executive within 30 days, and that in the case of clause (iii), the Company shall provide such notice of, and allow the opportunity to cure any, breach of Section 13, 14 or 15 hereof unless any such breach has adversely affected the Company. 6 8. Termination Without Cause. The Company may terminate the Employment Period without Cause by giving the Executive written notice of such termination, upon the giving of which such termination will take effect on the date specified on such notice. Any such termination, or any other termination of the Employment Period by the Company other than a termination for death or Disability or a Termination for Cause shall be deemed hereinafter to be a "Termination Without Cause." 9. Termination for Good Reason. The Executive shall have the right at any time to terminate the Employment Period for "Good Reason" (such termination being hereinafter called a "Termination for Good Reason"). "Good Reason" shall exist if there shall have occurred and be continuing: (a) a material diminution during the Employment Period in the Executive's position, title, responsibilities, authority or reporting relationship from that provided for in this Agreement; or (b) a material breach by the Company of its obligations under this Agreement, including the Company's obligations under Section 5 hereof. in either case that has not been cured within a period of 30 days following the giving of notice by the Executive to the Company identifying in reasonable detail the acts or omissions constituting "Good Reason" (unless such acts or omissions cannot be cured or remedied within 30 days, in which case the period for cure or remedy shall be extended for a reasonable time (not to exceed 30 additional days), so long as the Company has made and continues to make a diligent effort to effect such cure or remedy). Notwithstanding the foregoing, the reduction or elimination of responsibilities as to one (but only one) of the areas of responsibilities identified in the second sentence of Section 3 hereof (deeming, for these purposes, sales and marketing to be one area, finance and accounting to be one area and investor and media relations to be one area) shall not be deemed to constitute "Good Reason" or give rise to the right to terminate this Agreement under this Section 9. 10. Voluntary Termination. Any termination of the Employment Period by the Executive other than a Termination for Good Reason or for death or Disability will be deemed to be a "Voluntary Termination." A Voluntary Termination will be deemed to be effective immediately upon such termination or, at the Company's option, up to 30 days following a notice of voluntary termination being given by the Executive. 11. Effect of Termination of Employment. (a) Voluntary Termination; Termination For Cause. Upon the termination of the Employment Period pursuant to a Voluntary Termination or a Termination For Cause, 7 neither the Executive nor the Executive's beneficiaries or estate will have any further rights or claims against the Company under this Agreement except the right to receive (i) the unpaid portion of the Base Salary provided for in Section 5(a) hereof, computed on a pro rata basis to the date of termination, (ii) any unpaid bonus declared payable pursuant to Section 5(b) hereof, (iii) payment of any previously accrued but unpaid benefits that are then payable in accordance with the terms of any incentive compensation, stock option, retirement, employee welfare or other employee benefit plans or programs of the Company in which the Executive is then participating, but only to the extent such benefits have accrued in accordance with the terms of any such plans and programs, and (iv) reimbursement for any expenses for which the Executive shall not have theretofore been reimbursed as provided in Section 5 hereof. (b) Termination Without Cause; Termination for Good Reason. Upon the termination of the Employment Period pursuant to a Termination Without Cause or Termination for Good Reason, neither the Executive nor the Executive's beneficiaries or estate will have any further rights or claims against the Company under this Agreement except the right to receive (i) the payments and other rights provided for in Section 11(a) hereof and (ii) severance payments in the form of a continuation of the Base Salary as in effect immediately prior to such termination payable in accordance with the Company's normal payroll policy (and not in a lump sum), and the continuation of the medical and life insurance benefits to which the Executive was entitled at the time of termination, until the expiration of 12 months following the effective date of such termination. In addition, the Executive shall be entitled to (y) a cash payment, to be made when the Company makes its regular end-of-year bonus payment to its senior executives in respect of the year of termination (but in any event not later than March 31 in the calendar year next succeeding the year of termination), in an amount equal to the annual bonus paid to the Executive in respect of the calendar year immediately preceding the year of termination (the "Prior Year Bonus") and (z) a cash payment, to be made when the Company makes its regular end-of-year bonus payment to its senior executives in respect of the year following the year of termination (but in any event not later than March 31 of the second year following the year of termination), in an amount equal to the Prior Year Bonus multiplied by a fraction, the number of which is the number of days in the calendar year of termination through and including the day of termination and the denominator of which is 365. (c) Termination Upon Death or Disability. Upon the termination of the Employment Period as a result of death or Disability, neither the Executive nor the Executive's beneficiaries or estate will have any further rights or claims against the Company under this Agreement except the right to receive the payments and other rights provided for in Section 11 (a) hereof. (d) Forfeiture of Rights. In the event that, subsequent to termination of employment hereunder, the Executive breaches any of the provisions of Section 12, 13, 14, 15 or 16 hereof all payments and benefits to which the Executive may otherwise have been entitled pursuant to this Section 11 shall immediately terminate and be forfeited. In the event that the Company breaches any provision of this Section 11 or 13(d) hereof, and such breach has not been cured within 15 days after the giving by the Executive to the 8 Company of a written notice, specifying in reasonable detail the factual basis for such breach, all obligations of the Executive under Section 13 hereof shall immediately terminate and be of no force or effect. 12. Nondisclosure of Information. The Executive will not, at any time during or after the Employment Period, disclose to any person, firm, corporation or other business entity, except as required by law, any Proprietary Information (as hereinafter defined) for any reason or purpose whatsoever, nor will the Executive make use of any of such Proprietary Information for personal purposes or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Notwithstanding the foregoing, the Executive shall not be deemed to have violated the provisions of this Section 12 as a result of an inadvertent disclosure of Proprietary Information that is not reasonably likely to adversely affect the Company. For purposes of the foregoing, "Proprietary Information" shall mean any non-public information concerning the business, products, technology, collaborators, employees and consultants or affairs of the Company or any subsidiary or affiliate thereof, including trade secrets, formulae, data and know-how, improvements and inventions, techniques, marketing plans, strategies, forecasts and customer lists. 13. Noncompetition and Non-Solicitation. (a) The Executive hereby acknowledges and recognizes that, during the Employment Period, the Executive will be privy to trade secrets and confidential proprietary information critical to the Company's business, and the Executive further acknowledges and recognizes that the Company would find it extremely difficult or impossible to replace the Executive and, accordingly, the Executive agrees that, in consideration of the benefits to be received by the Executive hereunder, the Executive will not from and after the date hereof until 18 months after the termination of the Employment Period (i) engage in the development, production, marketing or sale of products or services that directly compete or, upon commercialization, would directly compete with products of the Company being developed (so long as such development has not been abandoned), marketed or sold at the time of the Executive's termination (a "Conflicting Product or Service," and such business or activity being hereinafter called a "Competing Business"), whether such engagement shall be as an officer, director, owner, employee, partner, affiliate, consultant or other participant in any Competing Business or (ii) assist others in engaging in any Competing Business in the manner described in the foregoing clause (i); provided, however, that in the case of a Termination Without Cause, a Termination for Good Reason or, subject to Section 13(d) hereof, the non-extension of the Agreement Term as a result of a notice to such effect (a "Non-Extension Notice") given by the Executive in accordance with the second sentence of Section 2(a) hereof, the prohibitions of the foregoing clauses (i) and (ii) shall terminate upon the first anniversary of the termination of the Employment Period and that, subject to Section 13(d) hereof, in the case of the nonextension of the Agreement Term as a result of a Non-Extension Notice given by the Company, the prohibitions of the foregoing clauses (i) and (ii) shall terminate upon the six-month anniversary of the termination of the Employment Period. 9 Notwithstanding the foregoing, in the event the Executive's employment is terminated pursuant to a Termination Without Cause or a Termination for Good Reason within one year following a Change in Control, the term "Competing Business" as used in this Agreement shall not include any business or activity that was not conducted or under development by the Company immediately prior to the effective date of a Change in Control. The foregoing provisions of this clause (a) shall not (y) prohibit the Executive from working for a division or other business unit of an organization involved with a Conflicting Product or Service provided such division or business unit is not itself involved with a Conflicting Product or Service, or (z) apply to the ownership by the Executive of publicly-traded voting securities of any corporation representing less than one percent (1%) of the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors. (b) During any period subsequent to the Employment Period that the restrictive provisions of this Section 13 apply to the Executive, the Executive obtains employment, or the employment responsibilities of the Executive change in any material respect, the Executive shall, within 15 days of obtaining such employment or of any such change, notify the Company of the facts and circumstances of such employment or change in responsibility and provide the Company with such additional information as the Company may reasonably request in order for the Company to verify compliance by the Executive with the provisions of this Section 13. (c) The Employee will not, at any time during or after the Employment Period, induce other employees of the Company or any subsidiary thereof to terminate their employment with the Company or any subsidiary thereof or engage in any Competing Business; provided, however, that the foregoing shall not prohibit the Executive from terminating the employment of an employee of the Company during the Employment Period in the good-faith exercise of the Executive's duties hereunder. (d) In the event that the Executive's employment with the Company terminates as of result of a Non-Extension Notice given by the Company or the Executive, the Company shall have the option of either: (i) requiring compliance by the Executive with the restrictive covenants set forth in Section 13(a) hereof for the periods specified therein, in which event the Executive shall be entitled to payments from the Company during the respective periods specified in the form of continuation of the Base Salary as in effect immediately prior to such termination payable in accordance with the Company's normal payroll policy (and not in a lump sum); provided, however, that the Company shall be entitled to reduce on a dollar-for-dollar basis any payment to be made under this Section 13(d)(i) if the Executive is employed during the applicable payment period, with such reduction to be equal to any cash compensation earned by the Executive as a result of such employment, or (ii) waiving compliance by the Executive with the restrictive covenants set forth in Section 11(a) hereof, in which event no such payments shall be due. 10 14. Company Right to Inventions. The Executive will promptly disclose, grant and assign to the Company, for its sole use and benefit, any and all inventions, improvements, technical information and suggestions relating in any way to the business of the Company which the Executive may develop or acquire during his employment by the Company (whether prior to, during or after the Employment Period and whether or not during usual working hours), together with all patent applications, patents, copyrights and reissues thereof that may at any time be granted for or upon any such invention, improvement or technical information. In connection therewith: (A) the Executive shall, without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such inventions, improvements, technical information, patent applications, patents, copyrights or reissues thereof in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; and (B) the Executive shall render to the Company, at the Company's expense (including a reasonable payment for the time involved in case the Executive is not then in its employ), all such assistance as it may require in the prosecution of applications for said patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such patents, inventions, improvements or technical information. 15. Return of Documents, Etc. All documents, data, records, apparatus, equipment and other physical property furnished to the Executive by the Company or produced by the Executive or others in connection with his employment by the Company (whether prior to, during or after the Employment Period) shall be and remain the sole property of the Company and shall be returned promptly to the Company as and when requested by the Company. Should the Company not so request, the Executive shall return and deliver all such property upon termination of his employment with the Company for any reason, and the Executive will not take with him any such property or any reproduction of such property upon such termination. Upon the termination of the Employment Period, the Executive shall promptly surrender to the Company all of the Company's books, records, documents and customer lists and/or other of the Company's materials or records he may have in his possession, including but not limited to the materials described in the immediately preceding paragraph. 11 16. Adverse Public Statements and Disclosures. The parties hereto agree that at no time during or subsequent to the Employment Period will either party directly or indirectly make or facilitate the making of any adverse public statements or disclosures with respect to the other (including, with respect to the Company, regarding its business or securities or its Board of Directors, management or other personnel). 17. Employment Taxes. All compensation paid pursuant to this Agreement shall be subject to reduction by all applicable withholding, social security and other federal, state and local taxes and deductions. 18. No Conflicting Arrangements of Executive. The Executive hereby represents and warrants to the Company that the Executive is not a party or subject to any contractual or legal constraint, nor is he aware of any other presently existing fact, circumstance or event, that would preclude or restrict him from entering into this Agreement or providing to the Company the services contemplated by this Agreement. In the event of any breach of this representation, this Agreement shall be null and void. 19. Key-Man Life Insurance. The Executive hereby agrees to cooperate with the Company with respect to the procurement by the Company of key-man life insurance on the Executive's life in an amount determined to be appropriate by the Company. 20. Enforcement. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforceable to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of any jurisdiction where this Agreement may be subject to review and interpretation, the terms of such restriction, for the purpose only of the operation of such restriction in such jurisdiction, will be the maximum restriction allowed by the laws of such jurisdiction and such restriction will be deemed to have been revised accordingly herein. 21. Remedies; Survival. (a) The Executive acknowledges and understands that the provisions of the covenants contained in Sections 12, 13, 14, 15 or 16 hereof, the violation of which cannot be accurately compensated for in damages by an action at law, are of crucial importance to the Company, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or 12 threatened breach by the Executive in any material respect of the provisions of Section 12, 13, 14, 15 or 16 hereof, the Company will be entitled to an injunction (without the posting of any bond) restraining the Executive from such breach. Nothing herein contained will be construed as prohibiting the Company from pursuing any other remedies available for any breach or threatened breach of this Agreement. (b) Notwithstanding anything contained in this Agreement to the contrary, the provisions of Section 12, 13, 14, 15, 16, 17 and 20 hereof will survive the expiration or other termination of this Agreement until, by their terms, such provisions are no longer operative. 22. Notices. Notices and other communications hereunder will be in writing and will be delivered personally or sent by air courier or first class certified or registered mail, return receipt requested and postage prepaid, to the addresses stated above. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement will be deemed to have been given on the date of delivery, if personally delivered; on the business day after the date when sent, if sent by air courier; and on the third business day after the date when sent, if sent by mail, in each case addressed to such party as provided in this Section 22 or in accordance with the latest unrevoked direction from such party. 23. Binding Agreement; Benefit. The provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives and successors of the parties hereto. 24. Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of New York, without reference to conflict of law principles. 25. Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement by the other must be in writing and will not operate or be construed as a waiver of any subsequent breach by such other party. 26. Entire Agreement; Amendments; Prior Agreement. (A) This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings among the parties with respect thereof. This Agreement may be amended only by an agreement in writing signed by the parties hereto. 13 (B) This Agreement shall supercede in all respects the Prior Employment Agreement, except with respect to (i) any rights the Executive may have for accrued but unpaid compensation, for reimbursement of expenses or for indemnification, (ii) any rights or liabilities the parties may have with respect to any breach of Section 12, 13, 14 or 16 thereof and (iii) the stock option contemplated thereby, which shall survive in accordance with its terms. The Prior Employment Agreement shall otherwise be terminated. 27. Headings. The section headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. 28. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. 29. Assignment. This Agreement is personal in its nature and the parties hereto shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, that the provisions hereof (including, without limitation, Sections 12, 13, 14, 15 and 16) will inure to the benefit of, and be binding upon, each successor of the Company, whether by merger, consolidation, transfer of all or substantially all of its assets or otherwise. 14 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. PROGENICS PHARMACEUTICALS, INC. By: /s/ Paul J. Maddon -------------------------------------------------- Paul J. Maddon, M.D., Ph.D. Title: Chairman and Chief Executive Officer /s/ Ronald J. Prentki -------------------------------------------------- Ronald J. Prentki 15 -----END PRIVACY-ENHANCED MESSAGE-----