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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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PROGENICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3379479
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
777 Old Saw Mill River Road
Tarrytown, NY 10591
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (914) 789-2800
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to
Section 12(g) of the Act: Common Stock, par value $0.0013 per share
(Title of Class)
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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 |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 27, 2002, based upon the closing price of the Common Stock
on the Nasdaq National Market of $15.25 per share, was approximately
$120,930,823.(1) As of March 27, 2002, 12,458,696 shares of Common Stock, par
value $.0013 per share, were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of the Registrant's definitive Proxy Statement with
respect to the Registrant's Annual Meeting of Stockholders, to be filed not
later than 120 days after the close of the Registrant's fiscal year.
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(1) Calculated by excluding all shares that may be deemed to be beneficially
owned by executive officers, directors and five percent stockholders of the
Registrant, without conceding that any such person is an "affiliate" of the
Registrant for purposes of the Federal securities laws.
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TABLE OF CONTENTS
Page
----
PART I .................................................................. 2
Item 1. Business .................................................. 2
Item 2. Properties ................................................ 35
Item 3. Litigation ................................................ 35
Item 4. Submission of Matters to a Vote of Security Holders ....... 35
PART II ................................................................. 36
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ....................................... 36
Item 6. Selected Financial Data ................................... 37
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 37
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 42
Item 8. Financial Statements and Supplementary Data ............... 42
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ....................... 42
PART III ................................................................ 43
Item 10. Directors and Executive Officers of the Registrant ........ 43
Item 11. Executive Compensation .................................... 43
Item 12. Security Ownership of Certain Beneficial Owners and
Management ................................................ 43
Item 13. Certain Relationships and Related Transactions ............ 43
PART IV ................................................................. 44
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K .................................................. 44
SIGNATURES .............................................................. 45
INDEX TO FINANCIAL STATEMENTS ........................................... F-1
EXHIBIT INDEX
PART I
This Annual Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements. Factors that may cause
such differences include, but are not limited to, the uncertainties associated
with product development, the risk that clinical trials will not commence when
planned, the risks and uncertainties associated with dependence upon the
actions our corporate, academic and other collaborators, and of government
regulatory agencies, the risk that products that appeared promising in early
clinical trials do not demonstrate efficacy in larger-scale clinical trials
and the other risks described in this report, including those described under
the caption "Business-Risk Factors."
We file annual, quarterly and current reports, proxy statements and other
information with the U.S. Securities and Exchange Commission ("SEC"). You may
read and copy any document we file at the SEC's Public Reference Rooms at 450
Fifth Street, N.W., Washington, D.C. 20549. You can also request copies of our
documents, upon payment of a duplicating fee, by writing the Public Reference
Section of the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. These SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
Item 1. Business
GENERAL
Overview
Progenics Pharmaceuticals, Inc. is a biopharmaceutical company focusing on
the development and commercialization of innovative therapeutic products to
address the unmet medical needs of patients with debilitating conditions and
life-threatening diseases. The Company applies its expertise in immunology and
molecular biology to develop biopharmaceuticals to fight viral diseases, such
as human immunodeficiency virus ("HIV") infection, and cancers, including
malignant melanoma and prostate cancer. The Company is conducting Phase II
clinical studies with methylnaltrexone, a compound designed to block the
debilitating side effects of opioid analgesics without interfering with pain
palliation. The Company has initiated Phase II clinical trials with its lead
HIV product, PRO 542, a viral-entry inhibitor and is in preclinical
development with PRO 140 and in research and discovery of follow-on product
candidates in HIV infection. Progenics' most clinically advanced product, GMK,
is a cancer vaccine in Phase III clinical trials for the treatment of
malignant melanoma. The Company is developing cancer immunotherapies based on
PSMA (prostate specific membrane antigen) technology. Dehydroascorbic acid
("DHA"), a novel small-molecule antioxidant, is the subject of preclinical
studies to treat stroke.
Product Development
We apply our expertise in immunology and molecular biology to the
development of therapeutic biopharmaceuticals that use components of the
immune system, particularly antibodies, to fight diseases. Our principal
programs are directed toward HIV and cancer and, most recently, symptom
management and supportive care. In the case of HIV, we are developing
therapeutic products by genetically engineering molecules that function as
antibodies and selectively target HIV for neutralization. We are also actively
engaged in research, discovery, and preclinical development of compounds based
on the primary HIV receptor, CD4, and HIV co-receptors, including CCR5 and
CXCR4, and their roles in viral attachment, fusion and entry. In the case of
cancer, we are developing monoclonal antibodies as well as therapeutic
vaccines that are designed to induce specific immune responses to cancer
antigens. Through our joint venture with Cytogen Corporation, we are pursuing
parallel programs for the development of antibodies directed against PSMA and
the development of vaccines designed to stimulate an immune response to PSMA.
In the palliative care area, since our recent licensing of methylnaltrexone
("MNTX"), we have embarked on a late-stage clinical development program. MNTX
is being tested in the clinic for the prevention or reversal of the
debilitating side effects of opioid analgesics without interfering with
analgesia and for treating post surgical bowel dysfunction.
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We are actively seeking out other promising products and technologies around
which to build development programs. Our in-licensing strategy has resulted in
our preclinical development program for DHA, a novel antioxidant which has
shown potential in preclinical models as a treatment for ischemic stroke and
neurological deficits attributable to stroke.
The following table summarizes the current status of our principal
development programs and product candidates and identifies any related
corporate collaborator:
Corporate
Program/Product Indication/Use Status(1) Collaborator
--------------- -------------- --------- ------------
Symptom Management
and Supportive Care
Methylnaltrexone Reversing opioid side Phase IIb in malignant pain --
effects; treating to be completed 2002, Phase
postoperative bowel III expected to commence late
dysfunction 2002; Phase II in post-
surgical bowel dysfunction
expected to begin in late
2002; Phase II in chronic
pain expected to begin in
2003.
HIV Therapeutics
PRO 542 HIV therapy Phase II --
PRO 140 HIV therapy Preclinical; Phase I/II --
expected to commence in 2003
Small-molecule drugs:
Co-receptor/fusion HIV therapy Research Roche
inhibition (CCR5/
CXCR4)
HIV attachment/fusion HIV therapy Research
inhibition (GP 41)
ProVax HIV vaccine Research --
Cancer Immunotherapeutics
GMK Vaccine for melanoma Phase III (Stages IIb and III --
disease)
Phase III (Stage II disease) --
MGV Vaccine for multiple cancers Phase I/II --
PSMA: Immunotherapeutics for Preclinical; Phase I/II Cytogen(2)
Vaccines prostate and other cancers of rsPSMA vaccine expected to
Monoclonal commence in 2002
Antibodies
Stroke
DHA Stroke Preclinical --
(1) "Research" means initial research related to specific molecular targets,
synthesis of new chemical entities, assay development or screening for
the identification of lead compounds.
"Preclinical" means that a lead compound is undergoing toxicology,
formulation and other testing in preparation for clinical trials.Testing
in the research and preclinical phases is often referred to as in vitro,
in vivo or ex vivo. In vitro refers to tests conducted in an artificial
environment, such as a test tube or culture media, as opposed to in-vivo,
which refers to tests in animals or otherwise in a living body, or ex
vivo, which refers to tests conducted outside the body on samples of
blood or other tissue that have been removed from the patient.
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Phase I-III clinical trials are safety and efficacy tests in humans as
follows:
"Phase I": Evaluation of safety.
"Phase I/II": Evaluation of safety with some measure of activity.
"Phase II": Evaluation of safety, dosing and activity or efficacy.
"Phase III": Larger scale evaluation of safety and efficacy.
See "Business--Government Regulation." The actual timing of events can
vary dramatically due to a variety of factors. See "--Risk Factors--Our
clinical trials could take longer to complete than we expect."
(2) Collaboration is in the form of a joint venture.
Symptom Management and Supportive Care
Opioids are the mainstay in controlling severe pain, with approximately 170
million prescriptions written annually in the U.S. To relieve pain, narcotic
medications such as morphine, codeine, and other opioid derivatives interact
with receptors that are located in the brain and spinal cord. Opioids also
activate receptors outside the central nervous system resulting in many cases
in undesirable side effects, including constipation, delayed gastric emptying,
nausea and vomiting, pruritis and urinary retention. Reversing the peripheral
side effects of opioid pain therapy, while maintaining analgesia, represents a
major treatment dilemma and a large, unmet medical need.
Methylnaltrexone
In October 2001, we entered into an agreement with UR Labs, Inc., to obtain
the worldwide exclusive rights to methylnaltrexone ("MNTX"), an
investigational drug in late-stage clinical development designed to reverse
certain side effects of opioid pain medications. UR Labs licensed MNTX from
the University of Chicago, where it was discovered. MNTX is designed to block
opioids from activating the peripheral receptors in the body that cause side
effects, such as constipation, delayed gastric emptying, nausea and vomiting,
pruritis and urinary retention. As MNTX does not cross the blood-brain barrier
in humans, it does not interfere with brain-centered pain relief.
Under the auspices of the University of Chicago, MNTX has been studied in
over 350 patients and volunteers in 14 clinical trials. Published studies have
reported that the compound was well tolerated and highly active in blocking
opioid-associated side effects without interfering with analgesia. In
addition, in October 2001, the University of Chicago Medical Center initiated
a double-blind, randomized Phase II study evaluating subcutaneous doses of
MNTX in cancer patients for the treatment of opioid-induced constipation.
Constipation is one of the debilitating complications of opioid pain therapy
that is not adequately treated with currently available laxatives and stool
softeners.
Subsequent to our entering into the UR Labs Agreement, we announced in
October 2001 statistically significant, positive results from additional Phase
II clinical studies of MNTX. Clinicians at the University of Chicago reported
that administration of MNTX prevented morphine-induced bowel paralysis and
reduced, in the aggregate, 12 common side effects of morphine. Investigators
further reported that subcutaneous administration of MNTX produced clinical
activity similar to that of intravenous or oral administration of the drug.
In February 2002, we initiated a Phase IIb clinical trial of subcutaneous
MNTX directed to the reversal of narcotic-induced constipation, a problem for
many patients treated with opioid pain medication. The clinical trial, using
subcutaneous doses of MNTX, is being conducted with patients being treated in
a hospice setting. Approximately 550,000 patients die from cancer in the U.S.
each year with the vast majority of these patients treated with opioids for
pain. An estimated 50% to 70% of such patients develop constipation. The goal
of the study is to gather more information about dosing and tolerability of
MNTX in preparation for Phase III clinical trials that we are scheduling to
begin in late 2002.
We believe that preclinical studies and clinical results support expanded
clinical testing of MNTX as a potential treatment for post-surgical bowel
dysfunction, a paralysis of the gastrointestinal tract that frequently occurs
after abdominal surgery and is accompanied by nausea, vomiting, and urinary
retention. An estimated
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five-million patients annually in the US are at high risk for developing post-
surgical bowel dysfunction. We intend to initiate in late 2002 Phase II
clinical studies of intravenous MNTX in post-surgical bowel dysfunction.
Another clinical development opportunity we plan to pursue for MNTX is the
reversal of opioid-induced bowel dysfunction in ambulatory patients with
chronic pain, including those suffering from headaches, joint pain, lower-back
pain, sickle-cell disease, fibromyalgia, and other disorders. According to a
recent national survey conducted for the American Pain Society and American
Academy of Pain Medicine, approximately four-million patients take opioids for
chronic pain relief associated with various diseases and conditions. We expect
to initiate Phase II clinical trials with oral MNTX for bowel dysfunction in
patients who must take opioids for chronic pain in 2003.
Given the extent of MNTX clinical testing completed or planned to date, the
Company believes it will be able to chart a development path that is designed
for timely submission of this compound for regulatory consideration. Pending
successful clinical trials and medical and regulatory reviews, we believe that
MNTX may be the first product candidate in our pipeline to be approved for
marketing.
The Human Immune System
The human immune system protects the body from disease by specifically
recognizing and destroying invading viruses, bacteria and other pathogens. In
addition, the immune system is capable of recognizing and eliminating from the
body abnormal cells, such as cells infected with viruses and bacteria, and
cancer cells. This recognition function relies on the immune system's ability
to identify as foreign specific molecular configurations which are generically
called antigens. White blood cells, particularly B and T lymphocytes, have the
ability to recognize antigens made by infectious agents and abnormal cells and
react to them. For example, B lymphocytes produce antibodies that recognize
specific antigens. Antibodies are complex protein molecules that can bind to
these antigens and neutralize or eliminate infectious agents and cancer cells.
Vaccines are designed to induce the production of antibodies against
specific antigens on infectious agents and abnormal cells and thereby protect
the body from illness. Although vaccines have historically been used
prophylactically to prevent the contraction of an infectious disease, more
recently vaccines are being developed as therapeutic agents to fight ongoing
diseases. In addition, genetic engineering techniques have enabled the
production of antibodies or antibody-like molecules in the laboratory. These
genetically designed molecules are intended to mimic the body's own immune
response and are administered in situations where the immune response has been
suppressed or is otherwise inadequate.
HIV Therapeutics
HIV (human immunodeficiency virus) infection causes a slowly progressive
deterioration of the immune system which results in AIDS (Acquired Immune
Deficiency Syndrome). HIV specifically infects cells that have the CD4
receptor on their surface. Cells with the CD4 receptor are critical components
of the immune system and include T lymphocytes, monocytes, macrophages and
dendritic cells. The devastating effects of HIV are largely due to the
multiplication of the virus in these cells resulting in their dysfunction and
destruction.
Viral infection occurs when the virus binds to a host cell, enters the cell,
and by commandeering the cell's own reproductive machinery, creates thousands
of copies of itself within the host cell. This process is called viral
replication. Our scientists and their collaborators have made important
discoveries in understanding how HIV enters human cells and initiates viral
replication.
In the 1980s, our scientists, in collaboration with researchers at Columbia
University in New York City, the Institute of Cancer Research in London, and
the Centers for Disease Control and Prevention in Atlanta, demonstrated that
the initial step of HIV infection involves the specific attachment of the
virus to the CD4 receptor on the surface of human immune system cells. These
researchers also showed that a specific glycoprotein, gp120, located on the
surface of the virus, binds with high affinity to the CD4 receptor. Although
these researchers demonstrated that binding to CD4 was necessary for HIV
attachment, further discoveries have shown that attachment alone is not
sufficient to enable the virus to enter the cell and initiate viral
replication.
Subsequently, our scientists, in collaboration with researchers at the Aaron
Diamond AIDS Research Center (ADARC), described in an article in Nature the
discovery of a co-receptor for HIV on the surface of human
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immune system cells. This co-receptor, CCR5, enables fusion of HIV with the
cell membrane after binding of the virus to the CD4 receptor. This fusion step
results in entry of the viral genetic information into the cell and subsequent
viral replication. These scientists further determined that the gp120 binding
site on CCR5 is a discrete region at one end of the CCR5 molecule. Further
work by other scientists has established the existence of a second co-
receptor, CXCR4.
The HIV therapy research and development programs we are pursuing alone and
in collaboration with our academic and commercial partners, have been
recognized by the award of $4.9 million in National Institutes of Health
grants and research contracts in 2001.
Progenics' HIV Receptor Technologies
Based on our participation in the discoveries of CD4 and CCR5, we are
pursuing several approaches in the research and development of products
designed to block entry of HIV into human immune system cells. Our PRO 542
product candidate and our viral-entry inhibition programs are based on the CD4
receptor, and our PRO 140 and HIV co-receptor/fusion programs are based on the
CCR5 and CXCR4 co-receptors.
Because HIV must first attach to the CD4 receptor to infect human cells, we
believe that the part of the HIV gp120 glycoprotein that attaches to the CD4
receptor on immune system cells must remain constant across all strains of the
virus. The gp120 glycoprotein is located on the exterior of HIV. PRO 542
incorporates a part of the CD4 receptor into genetically engineered molecules
that function like antibodies and are designed to bind specifically to the
gp120 glycoprotein of HIV. In in vitro tests, these molecules have
demonstrated the ability to bind with high affinity to gp120 glycoproteins
from a wide range of HIV strains, including the strains most prevalent in the
U.S. and the rest of the world. Our technology is targeted to a part of HIV
that is believed to be necessary for the virus to enter cells. Mutation at
this site would likely render the virus non-infectious, as it would be unable
to attach and infect immune-system cells. By targeting this attachment site of
the virus, we believe that our technology may address the viral resistance
seen with other HIV therapeutics caused by the high mutation rate of the
virus.
In another program, we have developed a panel of monoclonal antibodies
against CCR5 that have been shown to block the ability of HIV to infect cells
isolated from healthy individuals by inhibiting virus-to-cell fusion. One of
these monoclonal antibodies, which we have designated PRO 140, is designed to
inhibit HIV fusion in vitro at concentrations that have no apparent effect on
the normal function of CCR5.
Target Market
Our HIV therapeutic product candidates are designed primarily for use in
asymptomatic HIV-positive individuals. Accordingly, the target population for
these products is patients who are aware of their infection but do not yet
have AIDS. Although there are few signs of disease in an HIV-positive
individual during the asymptomatic period, the virus is replicating in the
body by infecting healthy cells. The World Health Organization (WHO) estimated
that as of the end of 2001, 1.5 million people in North America, Western
Europe, and Australia and 40 million people worldwide were living with HIV.
According to WHO, approximately 75,000 people in high-income developed
countries were newly infected with HIV during 2001.
Current Therapies
At present, two classes of products have received marketing approval from
the U.S. Food & Drug Administration (FDA), the agency that regulates new drug
approvals in the United States, for the treatment of HIV infection and AIDS:
reverse transcriptase inhibitors and protease inhibitors. Both types of drugs
are inhibitors of viral enzymes and have shown efficacy in reducing the
concentration of HIV in the blood and prolonging asymptomatic periods in HIV-
positive individuals, especially when administered in multi-drug combination.
While combination therapy slows the progression of disease, it is not a
cure. HIV's rapid mutation rate results in the development of viral strains
that are resistant to reverse transcriptase and protease inhibitors. The
potential for resistance is exacerbated by interruptions in dosing which lead
to lower drug levels and permit increased viral replication. Non-compliance is
common in patients on combination therapies, since these drug regimens often
require more than a dozen tablets to be taken at specific times each day. An
additional problem is
6
that currently approved drugs produce toxic side-effects in many patients,
affecting a variety of organs and tissues, including the peripheral nervous
system and gastrointestinal tract. These side-effects may result in patients
interrupting or discontinuing therapy.
PRO 542: HIV Therapy
We are developing PRO 542 for the treatment of HIV infection. PRO 542 is a
proprietary antibody-like product with four binding sites for the gp120
glycoprotein on HIV. PRO 542 is designed to neutralize HIV through one of two
mechanisms: (i) binding to the gp120 glycoprotein and thereby preventing
infection of healthy cells; or (ii) binding to and detaching the gp120
glycoprotein from the virus.
In in vitro and ex vivo tests that we conducted in collaboration with
scientists at the Aaron Diamond AIDS Research Center and the Centers for
Disease Control and Prevention, PRO 542 neutralized a wide variety of clinical
strains of HIV as well as viruses from the blood of HIV-positive individuals.
In studies at ADARC, PRO 542 protected severe-combined-immune-deficient mice
transplanted with human peripheral blood lymphocytes against infection by the
three HIV strains tested, including strains of the virus isolated from HIV-
positive individuals.
We completed two dose-escalation Phase I/II clinical trials of PRO 542 in
1999. Both trials were designed to measure the safety, pharmacokinetics,
immunogenicity, and antiviral activity of PRO 542. Pharmacokinetic studies
analyze how the body acts on a drug once the drug is administered and will
determine, for example, how long the drug persists in the body. Immunogenicity
studies analyze to what extent a patient's immune system mounts a response to
the drug, which could impair the drug's ability to have its desired
therapeutic effect and could, in some cases, have serious health consequences
to the patient. Immunogenicity can be a serious problem, particularly for
antibody-based drugs.
Our first dose-escalation clinical trial of PRO 542 was conducted in 15 HIV-
positive adult patients at Mount Sinai Medical Center in New York City.
Findings indicated peak and one-week serum concentrations of PRO 542 compared
favorably with preclinical models, approximating drug levels previously shown
to neutralize clinical HIV strains in vitro. Data from this trial demonstrated
that in patients receiving the highest dosage of PRO 542, infectious HIV was
reduced to undetectable levels for prolonged periods following treatment. Data
from this trial also indicated that administration of a single dose of PRO 542
was able to produce a statistically significant reduction in viral load in
patients treated with the highest dose. Viral load is the concentration of
virus nucleic acid, or genetic material, in the blood and is a widely used
indicator of infection levels. PRO 542 serum concentrations remained above HIV
inhibitory levels for greater than one week. In addition, PRO 542 was well
tolerated and non-immunogenic in all patients treated. We believe that these
results support expanded clinical testing of this agent as a potentially non-
toxic therapy for HIV infection.
The second dose-escalation Phase I/II clinical trial was conducted in HIV-
positive children at Baylor College of Medicine in Houston, the University of
California at San Francisco, and the University of Pennsylvania by the AIDS
Clinical Trials Group, a leading cooperative HIV research group supported by
the National Institute of Allergy and Infectious Diseases. This trial was the
first time PRO 542 was tested on children or in multiple doses. All patients
treated demonstrated a decrease in viral load. Additionally, the drug was well
tolerated by all patients tested. During 2000 we initiated, in cooperation
with the Pediatric AIDS Clinical Trial Group (PACTG) of the National
Institutes of Health, a new Phase II trial to define the dose and frequency of
administration of PRO 452 for HIV-infected children, including those resistant
to available antiviral therapies. We are presently conducting Phase II
clinical trials of PRO 542 in adults and children.
We also determined in preclinical in vitro testing that the combination of
PRO 542 and T-20, another investigational drug being developed by Trimeris,
Inc. in collaboration with F. Hoffmann-La Roche Ltd., demonstrated
significantly enhanced anti-HIV activity in blocking the entry of HIV into
healthy cells. In further preclinical in vitro studies, it was also shown that
a "triple cocktail" of PRO 542, PRO 140 and T-20, each of which inhibits a
different step in the sequence of events leading to the entry of HIV into
targeted cells, acted synergistically to block HIV infection of healthy cells.
A scientific article regarding this research subsequently appeared in the
Journal of Infectious Diseases.
In October 2001, we announced the results of preclinical studies that
demonstrated that PRO 542 possesses potent antiviral activity when given by
multiple routes of administration, including subcutaneous injection. The
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studies demonstrated that PRO 542 reduced viral load to undetectable levels in
a well-recognized animal model of HIV infection and may point the way towards
simplified dosing regimens in man.
In addition, in June 2001, the Company entered into an agreement with
Formatech, Inc. whereby it engaged Formatech to assist in the development of
improved product formulations for subcutaneous and intramuscular delivery of
PRO 542. This agreement is subject to expansion based on the results and
successful completion of the first phase of the product formulation work.
In February 2000, we entered into a development and supply agreement with
Genzyme Transgenics Corporation, continuing the collaboration we commenced in
September 1997. The objective of this program is to develop a transgenic
source of PRO 542 using Genzyme Transgenics' proprietary technology. This
collaboration is designed to result in commercial-scale manufacture by
producing PRO 542 in the milk of transgenic goats. The expanded agreement was
entered into upon the successful outcome of transgenic feasibility studies
conducted by Genzyme Transgenics. During 2001, the first transgenic goats
containing the PRO 542 gene were born, and Genzyme Transgenics is in the
process of breeding transgenic animals that express sufficient concentrations
of the PRO 542 protein. The development of transgenic animals that express
adequate concentrations of PRO 542 to be commercially viable has taken longer
than initially anticipated. However, we believe that further pursuit of this
method of production is warranted.
In March 2002, we announced that PRO 542 produced a significant antiviral
response in HIV-infected individuals who were no longer responding to
currently available antiretroviral medications. In treatment-experienced
patients, a single dose of PRO 542 reduced viral concentrations by 60% to 80%
on average. In these clinical studies, PRO 542 was well tolerated and produced
statistically significant acute reductions in viral load in patients who
received a single 25 mg/kg intravenous infusion of the drug. These findings
extend previous studies of four intravenous doses ranging to 10 mg/kg. In
addition, an analysis of data from 22 adults treated with single-dose PRO 542
in a Phase I/II study identified a subgroup of patients who were the most
highly responsive to therapy. These patients were failing conventional
therapies and had evidence of advanced disease as measured by low numbers of
CD4 T cells (5200 cells/mm3) and/or high viral loads (4100,000 copies/mL)
before treatment with PRO 542. The viral load reductions in these patients
ranged from 0.4 to 0.8 log10 copies/mL, were dose-dependent, and were
sustained for two to four weeks. We expect to complete the Phase II clinical
program for PRO 542 in 2003.
PRO 140: HIV Therapy
In May 1999, we announced the development of a panel of proprietary anti-
CCR5 monoclonal antibodies created at Progenics and evaluated in collaboration
with the Aaron Diamond AIDS Research Center (ADARC). These antibodies are
designed to block the ability of HIV to infect cells isolated from healthy
individuals by inhibiting virus-cell fusion, an approach not targeted by
current HIV therapies. One murine monoclonal antibody, which we have
designated PRO 140, inhibited HIV infection at concentrations that had no
apparent effect on the normal function of CCR5. We believe that these
properties were correlated with PRO 140's ability to bind to a distinct site
on CCR5 that does not interfere with the normal receptor function of CCR5.
During 2000, we announced the findings from a preclinical study carried out
in collaboration with ADARC in which PRO 140 potently blocked each of 17
primary HIV isolates that use CCR5 as a fusion co-receptor. These viruses are
typical of those associated with person-to-person transmission of HIV and
predominate during the early stages of infection, when antiviral therapies
have proven to be most effective. PRO 140 was shown in these in vitro models
to be effective at protecting both primary T-cells and macrophages, immune
system cells that provide the major targets for HIV infection in vivo. We also
announced in 2000 the results of preclinical in vitro studies where it was
shown that a "triple cocktail" of PRO 542, PRO 140 and T-20, each of which
inhibits a different step in the sequence of events leading to the entry of
HIV into targeted cells, acted synergistically to potently block HIV infection
of healthy cells. T-20 is an investigational drug being developed by Trimeris,
Inc., in collaboration with F. Hoffmann-La Roche Ltd.
In January 2001, we announced the publication of a scientific article in the
Journal of Virology describing how PRO 140 demonstrated potent, broad-spectrum
antiviral activity against more than forty genetically diverse "primary" HIV
viruses isolated directly from infected individuals in vitro. In April 2001,
we announced that single doses of a murine-based PRO 140 reduced viral burdens
to undetectable levels in a well-recognized animal
8
model of HIV infection. In mice treated with PRO 140, initially high HIV
concentrations became undetectable for up to nine days after a dose of the
experimental drug.
In 2001, we also reported that we had elucidated the molecular basis for the
synergistic antiviral activity observed for HIV entry inhibitors PRO 542, PRO
140 and the fusion inhibitor T-20. T-20 is being developed by Trimeris, Inc.
and F. Hoffmann-La Roche Ltd. The multi-step nature of HIV entry into cells-
attachment, co-receptor binding, fusion-may leave the virus susceptible to
inhibition by combinations of drugs that act at different stages of the
process. In laboratory studies, the drug combinations provided a synergistic
activity whereby actions of the first drug (PRO 542 or PRO 140) temporarily
immobilizes the virus and "holds" it in a way that makes it more susceptible
to the second drug (PRO 140 or T-20). Preclinical studies also demonstrated
that HIV failed to develop resistance to PRO 140 despite 40 weeks of continued
exposure to the drug. This period is considerably longer than that required
for HIV to develop resistance to other classes of antiviral agents in similar
laboratory studies.
In December 2001, we reported that multiple doses of PRO 140 reduced and
then maintained viral loads at undetectable levels for the duration of therapy
in an animal model of HIV infection. Sustaining undetectably low levels of
virus in the blood is a primary goal of HIV therapy.
Effective April 1999, we entered into a development and license agreement
with Protein Design Labs, Inc. (PDL), for the development of a humanized
version of PRO 140 that retains the antibody's antiviral activity but which is
more suitable for chronic use in humans. In February 2002, we announced that
we had selected a humanized form of the PRO 140 antibody for clinical testing.
Unlike its mouse-based predecessor, humanized PRO 140 is designed to be
suitable for repeat dosing in humans. Humanization of the PRO 140 monoclonal
antibody was accomplished under a collaborative agreement with PDL. We expect
to file an Investigational New Drug Application with the U.S. FDA for
humanized PRO 140 and enter Phase I/II clinical trials in 2003.
Small-Molecule Drugs
Co-Receptor/Fusion: HIV Therapy
Our HIV co-receptor programs are based on the CCR5 and CXCR4 co-receptors
and the important role these molecules play in virus-to-cell fusion and
subsequent viral replication. CCR5 and CXCR4 belong to a larger family of
cellular receptors, known as 7-transmembrane G-protein-coupled receptors.
These receptors have been successfully exploited as targets by commercialized
therapeutic drugs addressing a wide range of human diseases. Additionally,
studies have indicated that a naturally occurring genetic mutation that
disables the CCR5 co-receptor prevents HIV infection without compromising
immune function. For these reasons, we believe that our co-receptor/fusion
technology offers significant commercial opportunities.
In March 2000, we entered into a research and license agreement with
Pharmacopeia, Inc. to discover small molecule HIV therapeutics that block the
attachment of the virus to its primary cellular receptor, CD4. This agreement
expanded on a collaboration with Pharmacopeia commenced in September 1997.
Under the terms of this agreement, we will provide proprietary CD4 attachment
assays and expertise related to the interaction between HIV and CD4, and
Pharmacopeia will engage in a screening program of its internal compound
library. In August 2000, we expanded our collaboration with Pharmacopeia to
add two additional programs, including one program directed to the HIV
envelope glycoprotein gp41. Under the terms of the Agreement we are entitled
to an exclusive, royalty-bearing license to active compounds identified in
these programs.
In November 2001, we were awarded approximately $600,000 from the National
Institutes of Health (NIH) for the development of novel inhibitors of HIV
entry and infection. Entry inhibitors are a promising new class of HIV drugs
that may offer significant benefits in both safety and efficacy over currently
available HIV therapies. The grant supports an ongoing collaboration between
Progenics and Pharmacopeia, Inc. to develop orally available small-molecule
inhibitors of the HIV envelope glycoprotein gp41, which mediates fusion and
entry of HIV into cells of the human immune system. The project combines
Pharmacopeia's proprietary, high-throughput assays with screening technologies
developed at Progenics for identifying fusion inhibitors. Pharmacopeia has
utilizing these technologies to screen its libraries of several million novel,
drug-like compounds, and screening of other libraries is underway for other
undisclosed targets.
9
We have developed proprietary fusion assays based on our HIV co-receptor
technology. These assays model fusion of HIV with human cells rapidly,
automatically, sensitively and without the use of infectious virus. In
December 1997, we entered into a collaboration with the Roche Group of Basel,
Switzerland to use these assays to discover and develop small-molecule HIV
therapeutics that target the fusion co-receptors, including CCR5 and CXCR4.
Under the terms of the collaboration, we granted to Roche an exclusive
worldwide license to our HIV co-receptor technology. Roche made an up-front
payment and a milestone payment and is obligated to make further milestone
payments, fund research and pay royalties on the sale of any products
commercialized as a result of the collaboration.
In February 2002, we reported the identification of small-molecule CCR5
inhibitors with novel antiviral properties, which were identified in
collaboration with the Roche Group, using our proprietary approach to
identifying CCR5 inhibitors. The compounds potently and specifically blocked
HIV entry in multiple laboratory studies. In addition, these compounds had
little or no effect on the normal function of CCR5.
In March 2002, Roche exercised its right to discontinue funding the research
being conducted under this Agreement and we are in discussions with Roche to
determine the future development program for the compounds identified during
the four years of collaborative effort.
Sulfated Peptides
In collaboration with ADARC, we have identified specific naturally-occurring
chemical modifications to CCR5 that govern its binding to HIV. Synthetic
peptides incorporating these modifications potently blocked the binding of HIV
to CCR5 on the cell surface. The modified CCR5 co-receptor peptides also
inhibited certain HIV strains from entering target cells in vitro. The
modified CCR5 co-receptor peptides may constitute a new class of HIV fusion
inhibitors and also may provide a tool for identifying small-molecule drugs
that target CCR5. Continuing our preclinical work on these modified CCR5
peptides with our academic collaborators at Albert Einstein College of
Medicine, we have identified the specific binding site for HIV on CCR5.
In February 2001, we selected a lead therapeutic sulfated CCR5 peptide for
further drug development. We also announced the publication of a scientific
article describing how sulfated CCR5 peptides mimic the CCR5 receptor, a
structure used by the virus to infect cells. Sulfated CCR5 peptides attach to
HIV in a way that specifically inhibits the binding of the virus to human
immune system cells. Sulfated CCR5 peptides target a region on the virus that
does not appear to vary across different strains of HIV, suggesting that such
molecules might be broadly active against diverse strains of the virus,
including those resistant to conventional therapies. In laboratory studies, a
sulfated CCR5 peptide that was only nine amino acids long represented the
minimum or core structure recognized by HIV in its bid to gain entry into a
cell. The findings were reported by scientists from Progenics and the Albert
Einstein College of Medicine, Bronx, NY, and were reported in the Journal of
Virology.
ProVax: HIV Vaccine
We are conducting research with respect to our ProVax vaccine, a vaccine
candidate which we believe may be useful as a prophylactic for uninfected
individuals and/or as a therapeutic treatment for HIV-positive individuals. We
are currently performing government-funded research and development of the
ProVax vaccine in collaboration with the Cornell University Medical Center.
Cancer Immunotherapy
Cancer is a category of diseases, each of which is characterized by
aberrations in cell growth and differentiation. The establishment and spread
of a tumor is a function of its growth characteristics and its ability to
suppress or evade the body's normal defenses, including surveillance and the
elimination of cancer cells by the immune system. Eradication of malignant
cells that can metastasize, or spread, to vital organs, leading to death, is
central to the effective treatment of cancer.
Despite recent advances in treatment, therapies for many types of cancer
suffer from serious limitations. The principal therapies for cancer have
historically been surgery, radiation and chemotherapy. A significant drawback
to conventional anti-cancer therapy is that both occult, or hidden, and
residual disease is difficult or impossible to eliminate fully, which can lead
to relapse.
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Ganglioside Conjugate Vaccines
Our cancer vaccine programs, GMK and MGV, involve the use of purified
gangliosides as cancer antigens. Gangliosides are chemically defined molecules
composed of carbohydrate and lipid components. Certain gangliosides are
usually found in low amounts in normal human tissue, but are abundant in
certain cancers, such as melanoma, colorectal cancer, lymphoma, small cell
lung cancer, sarcoma, gastric cancer, and neuroblastoma. Therefore, these
gangliosides represent targets for cancer immunotherapy.
Our cancer vaccines use known amounts of chemically defined antigens, not
dead cancer cells or crude extracts from cancer cells. As a result, we are
able to measure specific immune responses to each of the gangliosides used in
our vaccines. We also believe that there is a reduced likelihood of
variability in our products which greatly simplifies the manufacturing
processes.
Because gangliosides alone do not normally trigger an immune response in
humans, we attach gangliosides to large, highly immunogenic carrier proteins
to form "conjugate" vaccines designed to trigger specific immune responses to
ganglioside antigens. To further augment this immune response, we add an
immunological stimulator, known as an "adjuvant," to our ganglioside-carrier
protein conjugate.
Our ganglioside conjugate vaccines stimulate the immune system to produce
specific antibodies to ganglioside antigens. These antibodies have been shown
in vitro to recognize and destroy cancer cells. Based on the in vitro results
and the clinical trial results described below, we believe that vaccination of
cancer patients with ganglioside conjugate vaccines may delay or prevent
recurrence of cancer and prolong overall survival.
GMK: Therapeutic Vaccine for Malignant Melanoma
Our most clinically advanced product under development is GMK, a proprietary
therapeutic vaccine for melanoma that is currently in two pivotal Phase III
clinical trials. GMK, which is the first cancer vaccine based on a defined
cancer antigen to enter Phase III clinical trials, is designed to prevent
recurrence of melanoma in patients who are at risk of relapse after surgery.
GMK is composed of the ganglioside GM2 conjugated to the carrier protein
keyhole limpet hemocyanin, or KLH, and combined with the adjuvant QS-21. QS-21
is a compound in the StimulonTM family of adjuvants developed and owned by
Aquila Biopharmaceuticals, Inc., a wholly owned subsidiary of Antigenics, Inc.
In May 2001, we announced our joint decision with Bristol-Myers Squibb
Company to end our GMK and MGV cancer vaccine collaborative development
agreement originally formed in July 1997. Upon such termination, the licenses
granted to BMS were terminated and we reacquired full control and
responsibility for our development programs for these vaccines, as well as a
one time payment of $9.8 million.
Target Market
Melanoma is a highly lethal cancer of the skin cells that produce the
pigment melanin. In early stages, melanoma is limited to the skin, but in
later stages it can spread to the lungs, liver, brain and other organs. The
National Cancer Institute (NCI) estimated that in 1999 there were 480,000
melanoma patients in the United States. The American Cancer Society estimates
that there will be 53,600 new cases of melanoma diagnosed in the U.S. in 2002.
Melanoma accounts for 4% of skin cancer cases, but 79% of skin cancer deaths.
Melanoma has one of the fastest growing incidence rates of any cancer in the
United States. Increased exposure to the ultraviolet rays of the sun may be an
important factor contributing to the increase in new cases of melanoma.
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Melanoma patients are categorized according to the following staging system:
Melanoma Staging
Stage I Stage II Stage III Stage IV
------- -------- --------- --------
lesion less than 1.5 mm thickness lesion greater than metastasis to regional distant metastasis
1.5 mm thickness draining lymph nodes
no apparent metastasis local spread from regional spread from
primary cancer site primary cancer site
GMK is being developed for the treatment of patients with Stage II or Stage
III melanoma. The American Cancer Society estimates that approximately 50% of
new melanoma patients are diagnosed with Stage II or Stage III melanoma and
that approximately half of all Stage III melanoma patients will experience
recurrence of their cancer and die within five years after surgery.
Current Therapies
Standard treatment for melanoma patients includes surgical removal of the
cancer. Thereafter, therapy varies depending on the stage of the disease. For
Stage I and II melanoma patients, treatment generally consists of close
monitoring for recurrence. The only approved treatment for Stage III melanoma
patients is high-dose alpha-interferon. However, treatment with high-dose
alpha-interferon causes substantial toxicities, requires an intensive
treatment over twelve months (intravenous administration five-days-a-week for
the first month followed by subcutaneous injections three-times-a-week for the
remaining eleven months) and costs approximately $35,000 for the drug alone.
Other approaches for treatment of Stage II or III melanoma patients are
currently under investigation, but none has been approved for marketing in the
U.S. These experimental therapies include chemotherapy, low-dose alpha-
interferon, and other vaccines.
Clinical Trials
GMK entered a pivotal Phase III clinical trial in the United States in
August 1996. A pivotal clinical trial is one that is designed to produce
results sufficient to support regulatory approval. GMK was administered in
this study on an out-patient basis by 12 subcutaneous injections over a two-
year period. In May 2001, we initiated in Europe a large international Phase
III clinical trial of the GMK vaccine. In this study patients recruited from
Europe as well as Australia are randomized after surgery to receive either GMK
or the current standard of care, which is no treatment but close monitoring.
Patients on the vaccine arm of this study will receive 14 doses of GMK over
three years, with an estimated two years of additional follow-up.
The ongoing U.S. Phase III clinical trial compares GMK with high-dose alpha-
interferon in Stage IIb (advanced Stage II) and Stage III melanoma patients
who have undergone surgery but are at high risk for recurrence. This
randomized trial, which exceeded its targeted enrollment of 851 patients by
September 1999, has been conducted nationally by the Eastern Cooperative
Oncology Group (ECOG) in conjunction with the Southwest Oncology Group (SWOG)
and other major cancer centers, cooperative cancer research groups, hospitals
and clinics. ECOG and SWOG are leading cooperative cancer research groups
supported by the NCI and are comprised of several hundred participating
hospitals and clinics, primarily in the United States. The primary endpoint of
the U.S. trial is a comparison of the recurrence of melanoma in patients
receiving GMK versus patients receiving high-dose alpha-interferon.
Additionally, the study is designed to compare quality of life and overall
survival of patients in both groups.
In May 2000, as a result of an unplanned early analysis of a subset of the
880 patients enrolled in the trial, ECOG recommended to clinical investigators
participating in the trial that they discontinue administering GMK. ECOG's
decision was based on its early analysis of data from the subset group which,
according to ECOG, showed that the relapse-free and overall survival rates for
patients receiving the GMK vaccine were lower than for patients receiving
high-dose alpha-interferon.
We believe ECOG's action was premature. At the time of the ECOG action, many
of the patients had not yet completed their full course of therapy with GMK.
Since the onset of biological activity for the GMK vaccine
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appears later than that of alpha-interferon, which is given in high doses over
a shorter time period, we believe that in the longer term the benefits of GMK
to melanoma patients may be demonstrated. In addition, the analysis conducted
by ECOG indicated that GMK was better tolerated and had five times less
frequent and much less severe side effects than high-dose alpha-interferon.
Based on these considerations, we are continuing this trial as an extension
study until the scheduled completion of the trial. ECOG is assisting us in
continued patient follow-up and data compilation, and we anticipate analyzing
the results from this study in 2002.
In May 2001, we initiated of a large international Phase III clinical trial
of the GMK vaccine to prevent the relapse of malignant melanoma, the deadliest
form of skin cancer. The study is being conducted with the EORTC (European
Organization for Research and Treatment of Cancer), Europe's leading cancer
cooperative group. The EORTC Phase III trial expects to enroll 1,300 patients
who are at intermediate risk for recurrence of the disease. The study is
recruiting patients from Europe as well as Australia. EORTC will randomize
patients after surgery to receive either GMK or the current standard of care,
which is no treatment but close monitoring. Patients on the vaccine arm of the
study will receive 14 doses of GMK over three years, with an estimated two
years of additional follow-up. The primary endpoint of this trial is to
compare the recurrence of melanoma in patients receiving GMK versus in
patients receiving observation with no treatment. The study will also compare
overall survival of patients in both groups. Given the size and duration of
this trial, results are not anticipated for several years.
MGV: Therapeutic Vaccine for Certain Cancers
Our second ganglioside conjugate vaccine in development, MGV, is a
proprietary therapeutic vaccine for cancers which express GD2 or GM2
gangliosides. These cancers include colorectal cancer, lymphoma, small cell
lung cancer, sarcoma, gastric cancer and neuroblastoma. MGV has three
components: (i) GM2-KLH, or GM2 ganglioside conjugated to KLH; (ii) GD2-KLH,
or GD2 ganglioside conjugated to KLH; and (iii) QS-21 adjuvant. MGV is
designed to prevent recurrence of cancer and prolong overall survival of
patients after their cancer has been removed by surgery or reduced by
chemotherapy or radiation therapy. In May 2001, we reacquired all rights to
MGV from Bristol Myers Squibb Company.
Target Market
MGV targets cancers that the American Cancer Society estimated had an
aggregate incidence in the United States of over 250,000 new cases during
2000. The American Cancer Society also estimated that more than 135,000
persons died from these targeted cancers, representing nearly 25% of all
deaths from cancer during 2000.
Clinical Trials
MGV completed a Phase I/II clinical trial in 2000 under an institutional IND
at Memorial Sloan-Kettering Cancer Center (MSKCC). The primary objectives of
the study were to establish the safety of MGV and the ability of the vaccine
to induce specific immune responses to both GD2 and GM2 gangliosides in
patients with different cancer types. In addition, a goal of the study was to
find the best ratio of GD2 and GM2 gangliosides in MGV to be used in future
clinical trials.
In this clinical trial, 31 patients with high-risk melanoma and sarcoma were
immunized with MGV over a period of nine months. Patients were randomly
assigned to five groups receiving a fixed dose of GM2-KLH and QS-21 adjuvant
and one of a number of escalating doses of GD2-KLH. In January 2001, we
announced publication of MGV clinical trial results in the journal Clinical
Cancer Research. This study showed that the combination of GM2-KLH/GD2-KLH/QS-
21 could produce antibodies to GM2 and GD2 and was well-tolerated.
Specifically, MGV induced antibodies to the GM2 ganglioside in 97% of
patients. In addition, 91% of patients who received an optimal dose of the
vaccine also developed antibodies to GD2. We previously reported that anti-
ganglioside antibodies taken from vaccinated patients kill tumor cells in
vitro. The study demonstrated that for the first time in cancer patients that
it is possible to induce antibody responses to two gangliosides using a
bivalent vaccine. Additional Phase I/II studies are ongoing at MSKCC
evaluating an optimized GD2 vaccine component.
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PSMA
Prostate cancer is the most common form of cancer affecting U.S. males and
is the second leading cause of cancer deaths in men each year. The American
Cancer Society estimates that 30,200 men will die from prostate cancer, and
189,000 new cases will be diagnosed in 2002. Conventional therapies include
radical prostectomy, in which the prostate gland is surgically removed,
radiation and hormone therapies, chemotherapy and "watchful waiting." Surgery
and radiation therapy are associated with urinary incontinence and impotence.
Hormone therapy and chemotherapy are generally not intended to be curative and
are not actively used to treat localized, early-stage prostate cancer.
Through the PSMA Development Company LLC (the "Joint Venture"), our joint
venture with Cytogen Corporation, we are engaged in a research and development
program relating to vaccine and antibody immunotherapeutics based on Prostate
Specific Membrane Antigen ("PSMA"). PSMA is a protein that is abundantly
expressed on the surface of prostate cancer cells, but not normal cells. We
believe this antigen may have applications in immunotherapeutics for prostate
cancer and potentially for other types of cancer. In December 2001, the Joint
Venture announced that it had identified the molecular structure of PSMA, a
finding which may have fundamental implications for development of prostate
cancer immunotherapies.
In September 2000, we announced the selection for development of a new PSMA
vaccine, comprised of a genetically engineered, or recombinant, form of the
PSMA protein and a potent immunological stimulant, or adjuvant, and designed
to stimulate a patient's immune response system to recognize and destroy
prostate cancer cells. We expect to commence a Phase I/II clinical trial in
2002 on this therapeutic vaccine candidate.
We are also pursuing, in parallel, a vaccine strategy that utilizes novel
and proprietary viral vectors designed to deliver the PSMA gene to the immune
system in order to generate potent and specific immune responses to the
prostate cancer cells. PSMA-based immunotherapy is designed to destroy cancer
cells while sparing healthy tissue. In September 2001, the Joint Venture
entered into a worldwide exclusive licensing agreement with AlphaVax Human
Vaccines, Inc., to use the AlphaVax Replicon Vector (ArV2) system to create a
therapeutic prostate cancer vaccine incorporating the PSMA antigen.
Preclinical studies of this viral-vector prostate cancer vaccine generated a
potent dual-immune response against PSMA, yielding both antibodies and killer
T cells, the two principal mechanisms used by the immune system to eliminate
abnormal cells. We are completing our preclinical development activities on
the PSMA ArV vaccine in anticipation of Phase I/II clinical studies in 2003.
In November 2000, the Joint Venture announced the development of a new
generation of novel murine monoclonal antibodies which identify and bind to
the three-dimensional structure of PSMA as presented on cancer cells. These
antibodies represent potentially excellent candidates for therapy development
since they possess a higher affinity and specificity for PSMA than antibodies
which do not recognize the physical structure of the target antigen.
In March 2001, the Joint Venture entered into a collaboration with Abgenix,
Inc. to use the company's XenoMouse technology for generating fully human
antibodies to PSMA and announced the successful creation of these human
antibodies to PSMA. Clinical trials in prostate cancer patients of a human
monoclonal antibody to PSMA are scheduled to begin in 2003.
Through the Joint Venture, we are in preclinical development of therapies
based on "naked," radiolabelled, and toxin-conjugated forms of these
antibodies designed to selectively target and destroy PSMA-expressing cancer
cells.
Stroke: DHA
In February 1999, we licensed from Memorial Sloan-Kettering Cancer Center
patent rights and technology relating to a derivative of vitamin C called
dehydroascorbic acid, or DHA. We have obtained exclusive worldwide rights to
use DHA for treatment of disease involving oxidative damage to tissue,
including tissues of the central nervous system.
Antioxidants are compounds that act as scavengers of free radicals - highly
unstable molecules that play a role in certain diseases that damage tissue.
Studies have shown that antioxidants can slow the progression of degenerative
neurological diseases, such as Alzheimer's disease. Vitamin C is a potent
antioxidant, but does not
14
easily cross from the circulatory system into the brain. David W. Golde, M.D.
of Memorial Hospital and his colleagues at Sloan-Kettering have shown that DHA
readily crosses the blood-brain barrier and, once in the brain, is converted
into vitamin C. As a result of these properties, we believe that DHA is a
promising drug candidate for a broad range of neurodegenerative diseases
caused by oxidative stress, such as ischemic stroke.
In preclinical studies conducted during 2000 in an animal model of human
stroke, DHA demonstrated significant dose-dependent decreases in brain damage,
neurological deficits, and death caused by stoke. In other preclinical
testing, DHA has shown promise as a topical treatment for oral mucositis, a
disease characterized by inflammation and ulceration of the lining of the
mouth attributable to cancer chemotherapy or radiation therapy.
In May 2001, we announced that DHA significantly decreased brain damage and
neurological deficits when administered as long as three hours after a stroke
in an animal model. We are currently conducting additional proof-of-concept
studies to complete the preclinical development program.
In 2001, we were awarded approximately $300,000 from the National Institutes
of Health (NIH) for the development of DHA as a therapy for ischemic stroke.
The award was a Phase I Small Business Innovation Research (SBIR) grant. The
grant will support continued preclinical efficacy studies, early manufacturing
scale-up, and formulation development.
Corporate Collaborations
Bristol-Myers Squibb Company
In May 2001, we announced our joint decision with Bristol-Myers Squibb
Company to end our GMK and MGV cancer vaccine collaborative development
agreement originally formed in July 1997. Upon such termination, the licenses
granted to BMS were terminated and we reacquired full control and
responsibility for our development programs for these vaccines, as well as a
one time payment of $9.8 million.
Roche Group
In December 1997, we entered into a collaboration agreement with the Roche
Group of Basel, Switzerland to discover and develop novel HIV therapeutics
that target the fusion co-receptors CCR5 and CXCR4. This collaboration, among
other things, provided for Roche to apply its library of small-molecule
compounds to our original screening assays in order to identify inhibitors of
the interaction between HIV co-receptors and HIV. This program is in the early
stage of drug discovery.
Under the terms of the Roche agreement, we have granted to Roche a license
covering products to which we have rights or that are developed as a result of
the collaboration and which have been identified as, or developed for the
purpose of, inhibiting the interaction between chemokine receptors that act as
HIV co-receptors, including CCR5 and CXCR4, and HIV, which interaction results
in fusion of HIV with cells. The license does not extend to certain classes of
molecules, as to which we have retained rights. Pursuant to this license,
Roche has an exclusive worldwide right to develop, make, have made, use, sell,
offer to sell and import any covered products for the therapy of HIV
infection. Subject to specified restrictions, Roche retains the right to grant
sublicenses under the Roche agreement. The term of the license continues until
the expiration of all obligations to pay royalties and then converts to a
fully paid license.
Pursuant to the Roche agreement, Roche made an up-front payment and a
milestone payment and is obligated to make further milestone payments, fund
research and pay royalties on the sale of any products commercialized as a
result of the collaboration. We are also entitled to contingent licensing
rights. This research collaboration had an original term of three years and
was subsequently extended for two additional years by mutual agreement. In
March 2002, Roche exercised its right to discontinue funding the research
being conducted under this Agreement and we are in discussions with Roche to
determine the future development program for the compounds identified during
the four years of collaborative effort.
Cytogen Corporation
We have entered into a joint venture collaboration with Cytogen Corporation
to develop vaccine and antibody-based immunotherapeutic products based on
Prostate Specific Membrane Antigen. This collaboration is
15
a joint venture structured in the form of a mutually owned limited liability
company. All patents and know how currently owned or acquired in the future by
Progenics or Cytogen and useful in the development of PSMA-based antibody or
vaccine immunotherapeutics have been licensed to the joint venture. The
principal intellectual property licensed initially are several patents and
patent applications owned by Sloan-Kettering that cover PSMA. By the terms of
the agreement, we are responsible for preclinical and clinical development,
and Cytogen is principally responsible for product marketing. In addition, we
have certain co-promotion rights. The license agreement terminates on the last
to expire or terminate of any licensable rights to patents or patent
applications licensed by Progenics or Cytogen to the joint venture.
The joint venture aspects of the collaboration are governed by a limited
liability company agreement. This agreement provides generally for joint
management. The agreement also provided for our payment of not more than $3.0
million of the initial research and development funding and $2.0 million in
payments the joint venture is required to pay Cytogen over time. Any other
funding obligations are to be shared 50/50, with voting and ownership dilution
resulting if a party fails to fund its share. We and Cytogen reached a
mutually satisfactory agreement with respect to the resolution of a dispute
related to the timely reacquisition on behalf of the Joint Venture of certain
rights from a third party, which we had reported last year.
Genzyme Transgenics Corporation
We have entered into a collaboration with Genzyme Transgenics to develop a
transgenic source of the PRO 542 molecule. Under this agreement, Genzyme
Transgenics has engaged in a program designed to result in the establishment
of a line of transgenic goats capable of expressing the molecule in lactation
milk. We are obligated to pay Genzyme Transgenics certain fees to conduct the
program as well as additional fees upon the achievement of specified
milestones. If the program is successful, we may elect to enter into a further
agreement for production by Genzyme Transgenics of commercial-scale quantities
of the molecule, the principle terms of which have been agreed upon.
Formatech, Inc.
In June 2001, the Company entered into a collaborative agreement with
Formatech, Inc. to develop improved product formulations for PRO 542. The
Company is obligated to pay Formatech certain fees for the conduct of its
activities under the program, which is subject to expansion based on the
results of the first phase of the work. The Formatech agreement may be
terminated by us upon 30 days prior written notice.
Pharmacopeia, Inc.
In March 2000, we entered into a research and license agreement with
Pharmacopeia, Inc. to discover small molecule HIV therapeutics that block the
attachment of the virus to its primary cellular receptor, CD4. This agreement
expanded a collaboration with Pharmacopeia commenced in September 1997. Under
the terms of the new agreement, we have provided proprietary CD4 attachment
assays and expertise related to the interaction between HIV and CD4 and
Pharmacopeia is engaging in a screening program of its internal compound
library. In August 2000, we expanded our collaboration with Pharmacopeia
further to add two additional programs, including one program directed to the
HIV envelope glycoprotein gp41. Pharmacopeia has utilizing these technologies
to screen its libraries of several million novel, drug-like compounds, and
screening of other libraries is underway for other undisclosed targets. We
will be granted a license to active compounds identified in the program. We
are obligated to pay Pharmacopeia fees for its screening programs as well as
additional amounts upon the achievement of specified milestones and royalties
on any sales of therapeutics marketed as a result of the collaboration.
Licenses
We are a party to license agreements under which we have obtained rights to
use certain technologies in our cancer and HIV programs, as well as certain
other human therapeutics. Set forth below is a summary of these licenses.
Sloan-Kettering. We are party to a license agreement with Sloan-Kettering
under which we obtained the worldwide, exclusive rights to certain technology
relating to ganglioside conjugate vaccines, including GMK and
16
MGV, and their use to treat or prevent cancer. The Sloan-Kettering license
terminates upon the expiration of the last of the licensed patents or 15 years
from the date of the first commercial sale of a licensed product pursuant to
the agreement, whichever is later. In addition to patent applications, the
Sloan-Kettering license includes the exclusive rights to use certain relevant
technical information and know-how. A number of Sloan-Kettering physician-
scientists also serve as consultants to Progenics. We are also a party to a
license agreement with Sloan-Kettering under which we obtained an exclusive,
worldwide license to certain patent rights relating to DHA. The license
continues for 20 years or to the end of the term for which the patent rights
are granted.
Regents of the University of California. We are party to a license
agreement with the Regents of the University of California under which we
obtained the exclusive rights to an issued U.S. patent covering certain
ganglioside conjugate vaccines. The license agreement terminates upon the
expiration of the patent.
Columbia University. We are party to a license agreement with Columbia
University under which we obtained exclusive, worldwide rights to certain
technology and materials relating to CD4 and its use to treat or prevent HIV
infection. The license agreement will terminate upon the expiration of the
last of the licensed patents.
Aquila Biopharmaceuticals. We have entered into a license and supply
agreement with Aquila Biopharmaceuticals, Inc., a wholly owned subsidiary of
Antigenics, Inc., pursuant to which Aquila agreed to supply us with all of our
requirements for the QS-21 adjuvant for use in certain ganglioside-based
cancer vaccines, including GMK and MGV. QS-21 is the lead compound in the
Stimulon family of adjuvants developed and owned by Aquila. The license
terminates upon the expiration of the last of the licensed patents.
Protein Design Labs. We have entered into a development and license
agreement with PDL for the humanization by PDL of PRO 140. Pursuant to the
agreement PDL granted us certain exclusive and nonexclusive worldwide licenses
under relevant patents, patent applications and know how covering or relating
to the humanized PRO 140. The licensing agreement terminates on the later of
ten years from the first commercial sale or the last date on which there is an
unexpired patent or a patent application that has been pending for less than
ten years. Thereafter the license is fully paid up.
UR Labs, Inc. In October 2001, we entered into an agreement with UR Labs,
Inc. (the "URL Agreement") to obtain worldwide exclusive rights to
methylnaltrexone (MNTX), an investigational drug in late-stage clinical
development. UR Labs has exclusively licensed MNTX from the University of
Chicago, where it was discovered. In consideration for the license, we paid a
nonrefundable, noncreditable license fee and are obligated to pay additional
payments upon the occurrence of certain defined milestones associated with the
MNTX product development and commercialization program. In addition, we are
required to pay royalties based upon net sales of the licensed products,
subject to certain set off rights of the Company and the right of the Company
to buy-down the royalty rate under defined circumstances. The URL Agreement
may be terminated under specified circumstances that include the Company's
failure to achieve certain milestones; however the consent of UR Labs to
revisions to the due dates for the milestones shall not be unreasonably
withheld under certain circumstances. If not terminated early, the URL
Agreement continues until the later of the expiration of the UR Labs patents
or the defined period.
Abgenix, Inc. In February 2001, the Joint Venture entered into a worldwide
exclusive licensing agreement with Abgenix, Inc. (the "ABX Agreement"), to use
Abgenix' XenoMouse technology (the "XenoMouse Technology") for generating
fully human antibodies to the Joint Venture's proprietary PSMA antigen. In
consideration for the license, the Joint Venture paid a nonrefundable,
noncreditable license fee and is obligated to pay additional payments upon the
occurrence of certain defined milestones associated with the development and
commercialization program for products incorporating an antibody generated
utilizing the XenoMouse Technology (the "Antibody Products"). In addition, the
Joint Venture is required to pay royalties based upon net sales of the
Antibody Products, subject to certain set off rights of the Company under
defined circumstances. The ABX Agreement may be terminated, after an
opportunity to cure, by Abgenix for cause upon 30 days prior written notice.
If not terminated early, the ABX Agreement continues until the later of the
expiration of the XenoMouse Technology patents or defined period. The Company
has the right to terminate the ABX Agreement upon 30 days prior written
notice.
17
AlphaVax Human Vaccines, Inc. In September 2001, through the Joint Venture
we entered into a worldwide exclusive licensing agreement with AlphaVax Human
Vaccines, Inc. (the "AVX Agreement"), to use the AlphaVax Replicon Vector
(ArV(TM)) system (the "AVRV System") to create a therapeutic prostate cancer
vaccine incorporating the Joint Venture's proprietary PSMA antigen. In
consideration for the license, the Joint Venture paid a nonrefundable,
noncreditable license fee and is obligated to pay additional payments upon the
occurrence of certain defined milestones associated with the development and
commercialization program for products incorporating the AVRV System (the
"Products"). In addition, the Joint Venture is required to pay royalties based
upon net sales of the Products, subject to certain set off rights of the Joint
Venture under defined circumstances. The AVX Agreement may be terminated,
after an opportunity to cure, by AlphaVax under specified circumstances that
include the Joint Venture's failure to achieve certain milestones; however the
consent of AlphaVax to revisions to the due dates for the milestones shall not
be unreasonably withheld. If not terminated early, the AVX Agreement continues
until the later of the expiration of the AVRV System patents or defined
period. The Joint Venture has the right to terminate the AVX Agreement upon 30
days prior written notice.
The licenses to which we are a party impose various milestone,
commercialization, sublicensing, royalty and other payment, insurance,
indemnification and other obligations on us and are subject to certain
reservations of rights. Our or the Joint Venture's failure to comply with
these requirements could result in the termination of the applicable
agreement, which would likely cause us to terminate the related development
program and cause a complete loss of our investment in that program.
Patents and Proprietary Technology
Our policy is to protect our proprietary technology, and we consider the
protection of our rights to be important to our business. In addition to
seeking U.S. patent protection for many of our inventions, we generally file
patent applications in Canada, Japan, Western European countries and
additional foreign countries on a selective basis in order to protect the
inventions deemed to be important to the development of our foreign business.
Currently our patent portfolio protecting our proprietary technologies in the
HIV, cancer and palliative care areas is comprised on a worldwide basis of 62
patents that are issued or allowed and 127 pending patent applications.
Under a license agreement with Sloan-Kettering, we obtained worldwide
exclusive rights to certain technology relating to ganglioside conjugate
vaccines, including GMK and MGV, and their use to treat or prevent cancer.
This technology is the subject of a patent application filed by Sloan-
Kettering in the United States and 25 foreign countries claiming composition
of matter and methods of production and use of certain ganglioside conjugate
vaccines for the treatment or prevention of human cancer.
Under a license agreement with Columbia University, we obtained worldwide,
exclusive rights to certain technology relating to CD4 and its use to treat or
prevent HIV infection. This technology is the subject of issued U.S. and
European patents and several related U.S. and foreign patent applications
filed by Columbia University. The issued patents and the patent applications
claim composition of matter and methods of production and use of certain CD4-
based products for the treatment or prevention of HIV infection. We have also
filed a number of U.S. and foreign patent applications on our HIV attachment
assay technology, our technology directed to PRO 542, our ProVax technology
and clinical uses of these technologies. We have also filed a number of U.S.
and foreign patent applications, one of which is owned jointly with the Aaron
Diamond AIDS Research Center, relating to the discovery of an HIV co-receptor,
CCR5.
Under a license agreement with Sloan-Kettering, we obtained worldwide
exclusive rights to certain technology relating to dehydroascorbic acid and
its use to increase the concentration of vitamin C in tissues, including the
brain, for treating neurodegenerative and neurovascular diseases. This
technology is the subject of a patent application filed by Sloan-Kettering in
the United States and as an international application claiming methods for
increasing the vitamin C concentration in the cells of a subject by
administering to the subject dehydroascorbic acid.
Under a license agreement with UR Labs, Inc., we obtained worldwide
exclusive rights to certain technology relating to methylnaltrexone and its
use to treat and reverse certain debilitating side effects of opioid
18
pain medications. This technology is the subject of issued U.S. and European
patents and several related U.S. and foreign patent applications filed by the
University of Chicago.
The enactment of the legislation implementing the General Agreement on
Tariffs and Trade has resulted in certain changes to U.S. patent laws that
became effective on June 8, 1995. Most notably, the term of patent protection
for patent applications filed on or after June 8, 1995 is no longer a period
of seventeen years from the date of grant. The new term of U.S. patents will
commence on the date of issuance and terminate twenty years from the earliest
effective filing date of the application. Because the time from filing to
issuance of patent applications is often more than three years, a twenty-year
term from the effective date of filing may result in a substantially shortened
term of patent protection, which may adversely impact our patent position.
The research, development and commercialization of a biopharmaceutical often
involves alternative development and optimization routes, which are presented
at various stages in the development process. The preferred routes cannot be
predicted at the outset of a research and development program because they
will depend on subsequent discoveries and test results. There are numerous
third-party patents in our field, and it is possible that to pursue the
preferred development route of one or more of our products we will need to
obtain a license to a patent, which would decrease the ultimate profitability
of the applicable product. If we cannot negotiate a license, we might have to
pursue a less desirable development route or terminate the program altogether.
Government Regulation
Progenics and our products are subject to comprehensive regulation by the
Food and Drug Administration in the United States and by comparable
authorities in other countries. These national agencies and other federal,
state and local entities regulate, among other things, the preclinical and
clinical testing, safety, effectiveness, approval, manufacture, labeling,
marketing, export, storage, record keeping, advertising and promotion of our
products. None of our product candidates has received marketing or other
approval from the FDA or any other similar regulatory authority.
FDA approval of our products, including a review of the manufacturing
processes and facilities used to produce such products, will be required
before such products may be marketed in the United States. The process of
obtaining approvals from the FDA can be costly, time consuming and subject to
unanticipated delays. We cannot assure you that approvals of our proposed
products, processes, or facilities will be granted on a timely basis, or at
all. If we experience delays in obtaining, or do not obtain, approvals for our
products, commercialization of our products would be slowed or stopped.
Moreover, even if we obtain regulatory approval, the approval may include
significant limitations on indicated uses for which the product could be
marketed or other significant marketing restrictions.
The process required by the FDA before our products may be approved for
marketing in the United States generally involves:
o preclinical laboratory and animal tests;
o submission to the FDA of an investigational new drug application, or IND,
which must become effective before clinical trials may begin;
o adequate and well-controlled human clinical trials to establish the
safety and efficacy of the product for its intended indication;
o submission to the FDA of a marketing application; and
o FDA review of the marketing application in order to determine, among
other things, whether the product is safe and effective for its intended
uses.
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to gain preliminary information about a product's pharmacology
and toxicology and to identify any safety problems that would preclude testing
in humans. Products must generally be manufactured according to current Good
Manufacturing Practices, and preclinical safety tests must be conducted by
laboratories that comply with FDA regulations regarding good laboratory
practices. The results of the preclinical tests are submitted to the FDA as
part of an
19
IND. An IND is a submission which the sponsor of a clinical trial of an
investigational new drug must make to the FDA and which must become effective
before clinical trials may commence. The IND submission must include, among
other things:
o a description of the sponsor's investigational plan;
o protocols for each planned study;
o chemistry, manufacturing, and control information;
o pharmacology and toxicology information; and
o a summary of previous human experience with the investigational drug.
Unless the FDA objects to, makes comments or raises questions concerning an
IND, the IND will become effective 30 days following its receipt by the FDA,
and initial clinical studies may begin, although companies often obtain
affirmative FDA approval before beginning such studies. We cannot assure you
that submission of an IND will result in FDA authorization to commence
clinical trials.
A New Drug Application, or NDA, is an application to the FDA to market a new
drug. The NDA must contain, among other things:
o information on chemistry, manufacturing, and controls;
o non-clinical pharmacology and toxicology;
o human pharmacokinetics and bioavailability; and
o clinical data.
The new drug may not be marketed in the United States until the FDA has
approved the NDA.
A Biologic License Application, or BLA, is an application to the FDA to
market a biological product. The BLA must contain, among other things, data
derived from nonclinical laboratory and clinical studies which demonstrate
that the product meets prescribed standards of safety, purity and potency, and
a full description of manufacturing methods. The biological product may not be
marketed in the United States until a biologic license is issued.
Clinical trials involve the administration of the investigational new drug
to healthy volunteers or to patients under the supervision of a qualified
principal investigator. Clinical trials must be conducted in accordance with
the FDA's Good Clinical Practice requirements under protocols that detail,
among other things, the objectives of the study, the parameters to be used to
monitor safety, and the effectiveness criteria to be evaluated. Each protocol
must be submitted to the FDA as part of the IND. Further, each clinical study
must be conducted under the auspices of an Institutional Review Board. The
Institutional Review Board will consider, among other things, ethical factors,
the safety of human subjects, the possible liability of the institution and
the informed consent disclosure which must be made to participants in the
clinical trial.
Clinical trials are typically conducted in three sequential phases, although
the phases may overlap. During Phase I, when the drug is initially
administered to human subjects, the product is tested for safety, dosage
tolerance, absorption, metabolism, distribution and excretion. Phase II
involves studies in a limited patient population to:
o evaluate preliminarily the efficacy of the product for specific, targeted
indications;
o determine dosage tolerance and optimal dosage; and
o identify possible adverse effects and safety risks.
When a new product is found to have an effect and to have an acceptable safety
profile in Phase II evaluation, Phase III trials are undertaken in order to
further evaluate clinical efficacy and to further test for safety within an
expanded patient population. The FDA may suspend clinical trials at any point
in this process if it concludes that clinical subjects are being exposed to an
unacceptable health risk.
The results of the preclinical studies and clinical studies, the chemistry
and manufacturing data, and the proposed labeling, among other things, are
submitted to the FDA in the form of an NDA or BLA, approval of
20
which must be obtained prior to commencement of commercial sales. The FDA may
refuse to accept the application for filing if certain administrative and
content criteria are not satisfied, and even after accepting the application
for review, the FDA may require additional testing or information before
approval of the application. Our analysis of the results of our clinical
studies is subject to review and interpretation by the FDA, which may differ
from our analysis. We cannot assure you that our data or our interpretation of
data will be accepted by the FDA. In any event, the FDA must deny an NDA or
BLA if applicable regulatory requirements are not ultimately satisfied. In
addition, delays or rejections may be encountered based upon changes in
applicable law or FDA policy during the period of product development and FDA
regulatory review. Moreover, if regulatory approval of a product is granted,
such approval may be made subject to various conditions, including post-
marketing testing and surveillance to monitor the safety of the product, or
may entail limitations on the indicated uses for which it may be marketed.
Finally, product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing.
Both before and after approval is obtained, a product, its manufacturer, and
the sponsor of the marketing application for the product are subject to
comprehensive regulatory oversight. Violations of regulatory requirements at
any stage, including the preclinical and clinical testing process, the
approval process, or thereafter, may result in various adverse consequences,
including FDA delay in approving or refusal to approve a product, withdrawal
of an approved product from the market or the imposition of criminal penalties
against the manufacturer or sponsor. In addition, later discovery of
previously unknown problems may result in restrictions on such product,
manufacturer, or sponsor, including withdrawal of the product from the market.
Also, new government requirements may be established that could delay or
prevent regulatory approval of our products under development.
Whether or not FDA approval has been obtained, approval of a pharmaceutical
product by comparable government regulatory authorities in foreign countries
must be obtained prior to marketing such product in such countries. The
approval procedure varies from country to country, and the time required may
be longer or shorter than that required for FDA approval. Although there are
some procedures for unified filing for certain European countries, in general,
each country has its own procedures and requirements. We do not currently have
any facilities or personnel outside of the United States.
In addition to regulations enforced by the FDA, we are also subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation
and Recovery Act and various other present and potential future federal, state
or local regulations. Our research and development involves the controlled use
of hazardous materials, chemicals, viruses and various radioactive compounds.
Although we believe that our safety procedures for storing, handling, using
and disposing of such materials comply with the standards prescribed by
applicable regulations, we cannot completely eliminate the risk of accidental
contaminations or injury from these materials. In the event of such an
accident, we could be held liable for any legal and regulatory violations as
well as damages that result. Any such liability could have a material adverse
effect on Progenics.
Manufacturing
We currently manufacture PRO 542, PRO 140, GMK, MGV and PSMA protein
vaccines in our two pilot production facilities in Tarrytown, New York. One of
these facilities is for the production of vaccines and the other is for the
production of recombinant proteins. We believe that our existing production
facilities will be sufficient to meet our initial needs for clinical trials.
However, these facilities may be insufficient for all of our late-stage
clinical trials and would be insufficient for commercial-scale requirements.
We may be required to expand our manufacturing staff and facilities, obtain
new facilities or contract with third parties or corporate collaborators to
assist with production.
We currently rely on single source third party manufacturers for the supply
of both bulk and finished form methylnaltrexone. While we believe that our
existing arrangements with such single source third party manufacturers are
stable, reliable and adequate for the balance of our clinical trial and
initial commercial supply requirements, we are actively engaged in a program
to further solidify and expand such relationships, as well as to identify
additional manufacturers for bulk and finished form MNTX as supplements and
backup to our current arrangements.
21
In the event we decide to establish a full-scale commercial manufacturing
facility for any or all of our products, we would need to spend substantial
additional funds and will be required to hire and train significant numbers of
employees and comply with the extensive FDA regulations applicable to such a
facility.
Sales and Marketing
We plan to market products for which we obtain regulatory approval through
co-marketing, co-promotion, licensing and distribution arrangements with third
party collaborators. We may also consider contracting with a third party
professional pharmaceutical detailing and sales organization to perform the
marketing function for our products. We believe that our current approach
allows us maximum flexibility of selecting the marketing method that will both
increase market penetration and commercial acceptance of our products and
enable us to avoid expending significant funds to develop a large sales and
marketing organization. Roche and Cytogen have certain marketing rights with
respect to the products covered by their respective license or collaboration
agreements with us.
Competition
Competition in the biopharmaceutical industry is intense and characterized
by ongoing research and development and technological change. We face
competition from many companies and major universities and research
institutions in the United States and abroad. We will face competition from
companies marketing existing products or developing new products for diseases
targeted by our technologies. Many of our competitors have substantially
greater resources, experience in conducting preclinical studies and clinical
trials and obtaining regulatory approvals for their products, operating
experience, research and development and marketing capabilities and production
capabilities than we do. We cannot assure you that our products under
development will compete successfully with existing products or products under
development by other companies, universities and other institutions. Our
competitors may succeed in obtaining FDA approval for products more rapidly
than we do. Drug manufacturers that are first in the market with a therapeutic
for a specific indication generally obtain and maintain a significant
competitive advantage over later entrants. Accordingly, the speed with which
we can develop products, complete the clinical trials and approval processes
and ultimately supply commercial quantities of the products to the market is
expected to be an important competitive factor.
With respect to our products for the treatment of HIV infection, two classes
of products made by our competitors have been approved for marketing by the
FDA for the treatment of HIV infection and AIDS: reverse transcriptase
inhibitors and protease inhibitors. Both types of drugs have shown efficacy in
reducing the concentration of HIV in the blood and prolonging asymptomatic
periods in HIV-positive individuals, especially when administered in
combination. With respect to GMK, the FDA and certain other regulatory
authorities have approved high-dose alpha-interferon for marketing as a
treatment for patients with high-risk melanoma. High-dose alpha interferon has
demonstrated efficacy for this indication.
A significant amount of research in the biopharmaceutical field is also
being carried out at academic and government institutions. Our strategy is to
in-license technology and product candidates from academic and government
institutions. These institutions are becoming increasingly sensitive to the
commercial value of their findings and are becoming more aggressive in
pursuing patent protection and negotiating licensing arrangements to collect
royalties for use of technology that they have developed. These institutions
may also market competitive commercial products on their own or in
collaboration with competitors and will compete with us in recruiting highly
qualified scientific personnel. Any resulting increase in the cost or decrease
in the availability of technology or product candidates from these
institutions may adversely affect our business strategy.
Competition with respect to our technologies and product candidates is and
will be based, among other things, on:
o capabilities of our collaborators;
o efficacy and safety of our products;
o timing and scope of regulatory approval;
o product reliability and availability;
o marketing and sales capabilities;
22
o reimbursement coverage from insurance companies and others;
o degree of clinical benefits of our product candidates relative to their
costs;
o method of administering a product;
o price; and
o patent protection.
Our competitive position will also depend upon our ability to attract and
retain qualified personnel, to obtain patent protection or otherwise develop
proprietary products or processes, and to secure sufficient capital resources
for the often substantial period between technological conception and
commercial sales. Competitive disadvantages in any of these factors could
materially harm our business and financial condition.
Product Liability
The testing, manufacturing and marketing of our products involves an
inherent risk of product liability attributable to unwanted and potentially
serious health effects. To the extent we elect to test, manufacture or market
products independently, we will bear the risk of product liability directly.
We have obtained insurance in the amount of $5.0 million against the risk of
product liability. In addition, where the local statutory requirements exceed
the limits of the Company's existing insurance or local policies of insurance
are required, the Company maintains additional clinical trial liability
insurance to meet such requirements. This insurance is subject to certain
deductibles and coverage limitations. There is no guarantee that insurance
will continue to be available at a reasonable cost, or at all, or that the
amount of such insurance will be adequate.
Human Resources
At December 31, 2001, we had 80 full-time employees, fourteen of whom,
including Dr. Maddon, hold Ph.D. degrees or foreign equivalents and four of
whom, including Dr. Maddon, hold M.D. degrees. At such date, 59 employees were
engaged in research and development, medical and regulatory affairs and
manufacturing activities and 21 were engaged in finance, legal, administration
and business development. We consider our relations with our employees to be
good. None of our employees is covered by a collective bargaining agreement.
Executive Officers and Key Management
Our executive officers and key management are as follows: [Check new ages as
of date of filing]
Name Age Position
- ---- --- --------
Paul J. Maddon, M.D., Ph.D .................... 42 Chairman of the Board, Chief Executive Officer and Chief
Science Officer
Ronald J. Prentki, M.B.A ...................... 44 President and Director
Robert A. McKinney, CPA ....................... 45 Vice President, Finance & Operations and Treasurer
Philip K. Yachmetz, J.D ....................... 45 Vice President, General Counsel and Secretary
Robert J. Israel, M.D ......................... 45 Vice President, Medical Affairs
Richard W. Krawiec, Ph.D. ..................... 54 Vice President, Investor Relations & Corporate Communications
William C. Olson, Ph.D ........................ 39 Vice President, Research & Development
Kenneth G. Surowitz, Ph.D ..................... 43 Vice President, Quality & Regulatory Affairs
Thomas A. Boyd, Ph.D .......................... 50 Vice President, Preclinical Development and Project Management
Paul J. Maddon, M.D., Ph.D. is our founder and has served in various
capacities since our inception, including Chairman of the Board of Directors,
Chief Executive Officer, President and Chief Science Officer. From 1981 to
1988, Dr. Maddon performed research at the Howard Hughes Medical Institute at
Columbia University in the laboratory of Dr. Richard Axel. Dr. Maddon serves
on two NIH scientific review committees, is a member of the editorial board of
the Journal of Virology and is a member of the Board of Directors of the New
York Biotechnology Association. He received a B.A. in biochemistry and
mathematics and a M.D. and a Ph.D. in
23
biochemistry and molecular biophysics from Columbia University. Dr. Maddon has
been an Adjunct Assistant Professor of Medicine at Columbia University since
1989.
Ronald J. Prentki, M.B.A. joined us as our President in July 1998 and became
a director in September 1998. Prior to joining Progenics, Mr. Prentki had been
Vice President of Business Development and Strategic Planning at Hoffmann-La
Roche Inc. from 1996 to 1998. Mr. Prentki spent from 1990 to 1996 at Sterling
Winthrop (subsequently acquired by Sanofi Pharmaceuticals), most recently
serving as Vice President of Business Development. From 1985 to 1990 Mr.
Prentki was with Bristol-Myers Squibb International Division, initially
supporting the marketing of that company's oncology products and later as
Director of Cardiovascular Products. Mr. Prentki started his career in 1979 in
the Ames Diagnostic Division of Miles Laboratories holding a series of sales,
marketing and product development positions before leaving Miles Laboratories
in 1985. Mr. Prentki received a B.S. in Microbiology and Public Health from
Michigan State University and an M.B.A. from the University of Detroit.
Robert A. McKinney, CPA joined us in September 1992. Mr. McKinney served as
Director, Finance and Operations and Treasurer from 1992 to January 1993, when
he was appointed Vice President, Finance and Operations and Treasurer of
Progenics. From 1991 to 1992, he was Corporate Controller at VIMRx
Pharmaceuticals, Inc., a biotechnology research company. From 1990 to 1991,
Mr. McKinney was Manager, General Accounting at Micrognosis, Inc., a software
integration company. From 1985 to 1990, he was an audit supervisor at Coopers
& Lybrand LLP, an international accounting firm. Mr. McKinney studied finance
at the University of Michigan, received a B.B.A. in accounting from Western
Connecticut State University, and is a Certified Public Accountant.
Philip K. Yachmetz, J.D. joined us in September 2000 as General Counsel and
Secretary and was promoted to Vice President in January 2002. Prior to joining
Progenics, Mr. Yachmetz had been Senior Vice President, Business Development,
General Counsel and Secretary of CytoTherapeutics, Inc from 1998 to 1999,
where he also was Acting Chief Financial Officer and Treasurer during 1999.
From 1997 to 1998, Mr. Yachmetz was a Principal and Managing Director of
Millennium Venture Management LLC a business consulting group servicing the
healthcare and high technology industries. Mr. Yachmetz was, from 1996 to
1997, Director, Legal & Corporate Affairs and Secretary of PlayNet
Technologies, Inc. an Internet based entertainment company. From January 1989
to October 1996, Mr. Yachmetz served as Senior Counsel of Hoffmann-La Roche
Inc. Mr. Yachmetz received a B.A. in Political Science from George Washington
University and a J.D. from California Western School of Law and is admitted to
practice law in New York and New Jersey.
Robert J. Israel, M.D. joined us in October 1994 and has been Vice
President, Medical Affairs since that time. From 1991 to 1994, Dr. Israel was
Director, Clinical Research-Oncology and Immunohematology at Sandoz
Pharmaceuticals Corporation. From 1988 to 1991, he was Associate Director,
Oncology Clinical Research at Schering-Plough Corporation. Dr. Israel is a
licensed physician and is board certified in both internal medicine and
medical oncology. He received a B.A. in physics from Rutgers University and a
M.D. from the University of Pennsylvania and completed an oncology fellowship
at Sloan-Kettering. Dr. Israel has been a consultant to the Solid Tumor
Service at Sloan-Kettering since 1987.
Richard W. Krawiec, Ph.D. joined us in February 2001 as Vice President,
Investor Relations and Corporate Communications. Prior to joining Progenics,
Dr. Krawiec served as Vice President of Investor Relations and Corporate
Communications of Cytogen Corporation from 2000 to 2001. Prior to Cytogen, Dr.
Krawiec headed these departments at La Jolla Pharmaceuticals, Inc., Amylin
Pharmaceuticals, Inc. and IDEC Pharmaceuticals, Inc. Previously, Dr. Krawiec
was the founder and Editor-In-Chief of Biotechnology Week magazine and the
Managing Editor and founder of Biotechnology Newswatch. Dr. Krawiec received
B.S. in Biology from Boston University and a Ph.D. in Biological Sciences from
the University of Rhode Island.
William C. Olson, Ph.D. joined us in May 1994. Dr. Olson served as Senior
Director, Research and Development from May 1994 to January 2001, when he was
Vice President, Research and Development. From 1989 to 1992, Dr. Olson served
as a Research Scientist at Johnson & Johnson, and from 1992 until 1994 he was
a Development Scientist at MicroGeneSys, Inc., a biotechnology company. Dr.
Olson received a Ph.D. from the Massachusetts Institute of Technology and a
B.S. from the University of North Dakota. Both degrees were awarded in the
field of chemical engineering.
24
Kenneth G. Surowitz, Ph.D. joined us in January 1999. Dr. Surowitz served as
Senior Director, Quality & Regulatory Affairs from January 1999 to January
2000, when he was appointed Vice President, Quality & Regulatory Affairs of
Progenics. From 1988 to 1999, Dr. Surowitz was employed at the Wyeth-Lederle
Vaccines and Pediatrics unit of American Home Products Corp. in a number of
positions within the organization, most recently as Director of Global
Regulatory Affairs. From 1985 to 1988, he was employed as a Product
Development Microbiologist at Procter and Gamble. Dr. Surowitz received Ph.D.
and M.S. degrees from Ohio State University in the field of microbiology and
an A.B. degree from Lafayette College in biology.
Thomas A. Boyd, Ph.D. joined us in January 2000 as Senior Director, Project
Management and was promoted to Vice President, Preclinical Development and
Project Management in January 2002. Before joining Progenics, Dr. Boyd held
positions with Wyeth-Ayerst Research and Alteon, Inc. Most recently he was
with Boehringer Ingelheim Pharmaceuticals, Inc., as Associate Director, R&D
Project Management. He received his Ph.D. from Brown University in physiology
and biophysics and an A.B. degree from the College of Arts and Sciences,
Cornell University.
Scientific Advisory Boards and Consultants
An important component of our scientific strategy is our collaborative
relationship with leading researchers in cancer and virology. Certain of these
researchers are members of our two Scientific Advisory Boards, one in cancer
and one in virology. The members of each SAB attend periodic meetings and
provide us with specific expertise in both research and clinical development.
In addition, we have collaborative research relationships with certain
individual SAB members. All members of the SABs are employed by employers
other than us and may have commitments to or consulting or advisory agreements
with other entities that may limit their availability to us. These companies
may also compete with us. Several members of the SABs have, from time to time,
devoted significant time and energy to our affairs. However, no member is
regularly expected to devote more than a small portion of time to Progenics.
In general, our scientific advisors are granted stock options in Progenics and
receive financial remuneration for their services.
The following table sets forth information with respect to our Scientific
Advisory Boards.
Cancer Scientific Advisory Board
Name Position/Affiliation
- ---- --------------------
Alan N. Houghton, M.D. (Chairman)....................... Chairman, Immunology Program, Sloan-Kettering and Professor, Cornell
University Medical College ("CUMC")
Angus G. Dalgleish, M.D., Ph.D.......................... Chairman and Professor of Medical Oncology, St. George's Hospital,
London
Samuel J. Danishefsky, Ph.D............................. Kettering Professor and Head, Bioorganic Chemistry, Sloan-Kettering
Institute and Professor of Chemistry, Columbia University
Philip O. Livingston, M.D............................... Member, Sloan-Kettering and Professor, CUMC
John Mendelsohn, M.D.................................... President, The University of Texas M. D. Anderson Cancer Center
David A. Scheinberg, M.D., Ph.D......................... Chief, Leukemia Service, Sloan-Kettering and Professor, CUMC
David B. Agus, M.D. .................................... Research Director, Prostate Cancer Institute, Cedars-Sinai Medical
Center
25
Virology Scientific Advisory Board
Name Position/Affiliation
- ---- --------------------
Stephen P. Goff, Ph.D. (Chairman)....................... Professor of Biochemistry, Columbia University
Mark Alizon, M.D., Ph.D................................. Director of Research, Institute Cochin, Paris
Lawrence A. Chasin, Ph.D. .............................. Professor of Biological Sciences, Columbia University
Leonard Chess, M.D. .................................... Professor of Medicine, Columbia University
Wayne A. Hendrickson, Ph.D. ............................ Professor of Biochemistry, Columbia University
Israel Lowy, M.D., Ph.D................................. Assistant Professor of Medicine, Mount Sinai Medical Center
J. Steven McDougal, M.D. ............................... Chief, Immunology Branch, CDC, Atlanta
Sherie L. Morrison, Ph.D................................ Professor of Microbiology, UCLA
Robin A. Weiss, Ph.D. .................................. Professor and Director of Research, ICR, Royal Cancer Hospital, London
Other Scientific Consultants
Name Position/Affiliation
- ---- --------------------
David W. Golde, M.D. ................................... Member, Sloan-Kettering and Professor, CUMC
26
RISK FACTORS
Our business and operations entail a variety of risks and uncertainties,
including those described below.
If we cannot advance our products beyond the early stages of product
development or demonstrate clinical efficacy, we will never commercialize a
product.
Most of our products are at an early stage of development. The successful
commercialization of our products will require significant further research,
development, testing and regulatory approvals and additional investment. If we
cannot advance our products beyond the early stages of product development or
demonstrate clinical efficacy, we will never commercialize a product. There
are a number of technological challenges that we must successfully address to
complete most of our development efforts. We cannot assure you that any of our
products in the research or preclinical development stage will yield results
that would permit or justify clinical testing or that products that advance to
clinical testing will be commercialized.
Our product development programs are novel and, consequently, inherently
risky.
We are subject to the risks of failure inherent in the development of
product candidates based on new technologies. These risks include, but are not
limited to, the possibility that:
o the technologies we use will not be effective;
o our product candidates will be unsafe or otherwise fail to receive the
necessary regulatory approvals;
o our product candidates will be hard to manufacture on a large scale or
will be uneconomical to market; or
o we do not successfully overcome technological challenges presented by our
products.
To our knowledge, no drug designed to treat HIV infection by blocking viral
entry and no cancer therapeutic vaccine has been approved for marketing in the
U.S. Our other research and development programs involve similarly novel
approaches to human therapeutics. Consequently, there is no precedent for the
successful commercialization of products based on our technologies. We cannot
assure you that any of our products will be successfully developed.
A setback in our methylnaltrexone program could adversely affect us.
We have an ongoing Phase IIb clinical trial for MNTX and expect to commence
pivotal Phase III clinical trials designed to produce results and data
sufficient to support timely regulatory submissions. We are also planning a
series of additional Phase II clinical trials before the end of 2002. We are
dependent on single source third party suppliers for our supplies of bulk and
finished form clinical trial materials. If the results of the any of these
trials are not satisfactory, or if we encounter clinical trial supply issues,
our MNTX development program can be adversely affected resulting in delayed
timelines to the commencement of planned trials and our regulatory filing. The
need to conduct additional clinical trials or significant revisions to our
clinical development plan would lead to delays in our filing for and o