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