Note

Fair Value Measurements

To estimate the fair values of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into

three

levels based on the source of inputs as follows:

●	Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access

●	Level 2 – Valuations for which all significant inputs are observable, either directly or indirectly, other than Level 1 inputs

●	Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value

may

fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.

We believe the carrying amounts of our cash equivalents, accounts receivable, other current assets, other assets, accounts payable and accrued expenses approximated their fair values as of

March

31,

2017

and

December

31,

2016.

We record the contingent consideration liability resulting from our acquisition of Molecular Insight Pharmaceuticals, Inc. ("MIP") at fair value in accordance with Accounting Standards Codification ("ASC")

820

(Topic

820,

Fair Value Measurement

The following tables summarize each major class of our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated, classified by valuation hierarchy (in thousands):

			Fair Value Measurements at March 31, 2017
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	Balance at		Identical Assets		Inputs		Inputs
	March 31, 2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	122,351	$	122,351	$	-	$	-
Total assets	$	122,351	$	122,351	$	-	$	-

Liabilities:
Contingent consideration liability	$	16,100	$	-	$	-	$	16,100
Total liabilities	$	16,100	$	-	$	-	$	16,100

PROGENICS PHARMACEUTICALS, INC

NOTES TO

CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

naudited)

- Continued

			Fair Value Measurements at December 31, 2016
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	Balance at		Identical Assets		Inputs		Inputs
	December 31, 2016		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	137,340	$	137,340	$	-	$	-
Total assets	$	137,340	$	137,340	$	-	$	-

Liabilities:
Contingent consideration liability	$	14,200	$	-	$	-	$	14,200
Total liabilities	$	14,200	$	-	$	-	$	14,200

The estimated fair value of the contingent consideration liability of

$16.1

million as of

March

31,

2017,

represents future potential milestone payments to former MIP stockholders. We consider this liability a Level

instrument

(one

with significant unobservable inputs) in the fair value hierarchy. The estimated fair value was determined based on probability adjusted discounted cash flow and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success and discount rates.

Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement, respectively. We record the contingent consideration liability at fair value with changes in estimated fair values recorded in change in contingent consideration liability in our condensed consolidated statements of operations.

The following table summarizes quantitative information and assumptions pertaining to the fair value measurement of the Level

inputs at

March

31,

2017

and

December

31,

2016

(in thousands). The increase in the contingent consideration liability of

$1.9

million during the

three

months ended

March

31,

2017

was primarily attributable to an increase in the estimated probability of success for AZEDRA given our successful completion of the registrational study and a reduction in the discount period.

	Fair Value at
	March 31,				Range
	2017		Valuation Technique	Unobservable Input	(Weighted-Average)
Contingent Consideration Liability:
AZEDRA commercialization	$	5,100	Probability adjusted discounted	Probability of success			72%
			cash flow model	Period of expected milestone achievement			2018
				Discount rate			10%
1404 commercialization		4,800	Probability adjusted discounted	Probability of success			59%
			cash flow model	Period of expected milestone achievement			2019
				Discount rate			10%
1095 commercialization		400	Probability adjusted discounted	Probability of success			16%
			cash flow model	Period of expected milestone achievement			2024
				Discount rate			10%
Net sales targets		5,800	Monte-Carlo simulation	Probability of success		16%	-	72%
				Discount rate			10%
Total	$	16,100

PROGENICS PHARMACEUTICALS, INC

NOTES TO

CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

naudited)

- Continued

	Fair Value at
	December 31,				Range
	2016		Valuation Technique	Unobservable Input	(Weighted-Average)
Contingent Consideration Liability:
AZEDRA commercialization	$	3,800	Probability adjusted discounted	Probability of success		54%
			cash flow model	Period of expected milestone achievement		2018
				Discount rate		10%
1404 commercialization		4,700	Probability adjusted discounted	Probability of success		59%
			cash flow model	Period of expected milestone achievement		2019
				Discount rate		10%
1095 commercialization		400	Probability adjusted discounted	Probability of success		16%
			cash flow model	Period of expected milestone achievement		2024
				Discount rate		10%
Net sales targets		5,300	Monte-Carlo simulation	Probability of success	16%	-	59%
				Discount rate		10%
Total	$	14,200

For those financial instruments with significant Level

inputs, the following tables summarize the activities for the periods indicated:

	Liability - Contingent Consideration
	Fair Value Measurements Using
	Significant Unobservable Inputs
	(Level 3)
	For the Three Months Ended March 31,
	2017		2016
Balance at beginning of period	$	14,200	$	18,800
Fair value change included in net loss		1,900		200
Balance at end of period	$	16,100	$	19,000

Changes in unrealized gains or losses for the period
included in earnings (or changes in net assets) for
liabilities held at the end of the reporting period	$	1,900	$	200