PROGENICS PHARMACEUTICALS INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-23143

PROGENICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	13-3379479
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

777 Old Saw Mill River Road
Tarrytown, New York 10591
(Address of principal executive offices)
(Zip Code)

(914) 789-2800
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act. Yes No

As of June 30, 2003 there were 12,932,874 shares of common stock, par value $.0013 per share, of the registrant outstanding.

PROGENICS PHARMACEUTICALS, INC.

INDEX

		Page No.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Condensed Balance Sheets at June 30, 2003 and December 31, 2002		3

Condensed Statements of Operations for the Three Months ended June 30, 2003 and 2002 and the Six Months ended June 30, 2003 and 2002		4

Condensed Statement of Stockholders’ Equity and Comprehensive Loss for the Six Months ended June 30, 2003		5

Condensed Statements of Cash Flows for the Six Months ended June 30, 2003 and 2002		6

Notes to Condensed Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14

Item 3. Quantitative and Qualitative Disclosures about Market Risk		29

Item 4. Controls and Procedures		29

PART II – OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders		30

Item 6. Exhibits and Reports on Form 8-K		30

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PROGENICS PHARMACEUTICALS, INC
CONDENSED BALANCE SHEETS
AT JUNE 30, 2003 AND DECEMBER 31, 2002
(Unaudited)

	June 30, 2003			December 31, 2002

ASSETS:
Current assets:
Cash and cash equivalents	$	14,688,556		$	9,446,982
Marketable securities		13,106,023			27,753,984
Certificate of deposit		2,000,000
Accounts receivable		18,162			334,006
Other current assets		637,648			1,573,815

Total current assets		30,450,389			39,108,787

Marketable securities					5,172,808
Fixed assets, at cost, net of accumulated depreciation and amortization		3,778,470			3,705,531
Investment in joint venture		277,273
Deferred stock offering costs		165,000
Restricted cash		170,167			130,795

Total assets	$	34,841,299		$	48,117,921


LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current Liabilities:
Accounts payable and accrued liabilities	$	2,339,437		$	2,892,901
Amount due to joint venture		54,837
Investment deficiency in LLC					7,127

Total current liabilities		2,394,274			2,900,028

Deferred lease liability		57,011			71,264

Total liabilities		2,451,285			2,971,292

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $.001 par value, 20,000,000 authorized; none issued and outstanding

Common stock – $.0013 par value, 40,000,000 shares authorized; issued and outstanding – 12,932,874 in 2003 and 12,681,585 in 2002		16,814			16,486
Additional paid-in capital		92,578,929			91,332,106
Accumulated deficit		(60,253,388	)		(46,307,642	)
Accumulated other comprehensive income		47,659			105,679

Total stockholders’ equity		32,390,014			45,146,629

Total liabilities and stockholders’ equity	$	34,841,299		$	48,117,921

The accompanying notes are an integral part of these financial statements.

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PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

	For the three months ended						For the six months ended
	June 30,						June 30,

	2003			2002			2003			2002

Revenues:
Contract research and development from joint venture	$	849,913		$	1,077,137		$	1,902,613		$	2,084,256
Other contract research and development											193,734
Research grants		1,048,115			1,570,823			2,165,533			2,726,621
Product sales		27,325			5,911			86,891			19,339

Total revenues		1,925,353			2,653,871			4,155,037			5,023,950

Expenses:
Research and development		6,219,784			5,865,977			11,971,930			10,432,526
General and administrative		2,307,307			1,762,019			3,927,449			3,009,189
Loss in joint venture		1,085,959			606,106			1,965,600			1,108,425
Depreciation and amortization		309,544			247,360			613,475			449,298

Total expenses		9,922,594			8,481,462			18,478,454			14,999,438

Operating loss		(7,997,241	)		(5,827,591	)		(14,323,417	)		(9,975,488	)

Other income (expense):
Interest income		158,065			472,465			382,191			1,019,347
Interest expense		(2,825	)					(4,520	)
Payment from insurance settlement											1,600,000

Total other income		155,240			472,465			377,671			2,619,347

Net loss	$	(7,842,001	)	$	(5,355,126	)	$	(13,945,746	)	$	(7,356,141	)

Net loss per share – basic and diluted	$	(0.61	)	$	(0.43	)	$	(1.09	)	$	(0.59	)

The accompanying notes are an integral part of these financial statements.

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PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(Unaudited)

	COMMON STOCK				ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT			ACCUMULATED OTHER COMPREHENSIVE INCOME			TOTAL STOCKHOLDERS’ EQUITY			COMPREHENSIVE LOSS

	Shares		Amount

Balance at December 31, 2002		12,681,585	$	16,486	$	91,332,106		($46,307,642	)	$	105,679		$	45,146,629

Issuance of compensatory stock options						61,570								61,570

Sale of Common Stock under employee stock purchase plans and exercise of stock options		251,289		328		1,185,253								1,185,581

Net loss								(13,945,746	)					(13,945,746	)		(13,945,746	)

Change in unrealized gain on marketable securities											(58,020	)		(58,020	)		(58,020	)

Balance at June 30, 2003		12,932,874	$	16,814	$	92,578,929		($60,253,388	)	$	47,659		$	32,390,014			($14,003,766	)

The accompanying notes are an integral part of these financial statements

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PROGENICS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six months ended June 30,

	2003			2002

Cash flows from operating activities:
Net loss	$	(13,945,746	)	$	(7,356,141	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		613,475			449,298
Amortization of discounts, net of premiums, on marketable securities		391,845			606,380
Loss in joint venture		1,965,600			1,108,425
Noncash expenses incurred in connection with issuance of common stock, stock options and warrants		61,570			209,048
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		315,844			(267,050	)
Decrease in other current assets		936,167			852,306
Decrease in accounts payable and accrued expenses		(509,457	)		(812,142	)
Increase in investment in joint venture		(2,250,000	)		(1,387,730	)
(Decrease) increase in deferred lease liability		(14,253	)		16,234

Total adjustments		1,510,791			774,769

Net cash used in operating activities		(12,434,955	)		(6,581,372	)

Cash flows from investing activities:
Capital expenditures		(675,584	)		(952,719	)
Purchase of certificate of deposit		(2,000,000	)		(1,500,000	)
Increase in restricted cash		(39,372	)		(120,750	)
Sale of marketable securities		21,229,000			14,573,000
Purchase of marketable securities		(1,858,096	)		(6,832,883	)

Net cash provided by investing activities		16,655,948			5,166,648

Cash flows from financing activities:

Proceeds from the sale of common stock under employee stock purchase plans and the exercise of stock options		1,185,581			858,918
Increase in deferred offering costs		(165,000	)

Net cash provided by financing activities		1,020,581			858,918

Net increase (decrease) in cash and cash equivalents		5,241,574			(555,806	)

Cash and cash equivalents at beginning of period		9,446,982			10,759,636

Cash and cash equivalents at end of period	$	14,688,556		$	10,203,830


Supplemental disclosure of noncash investing and financing activities:
Fixed assets included in accounts payable and accrued expenses	$	10,830		$	586,067

The accompanying notes are an integral part of these financial statements.

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PROGENICS PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

1.	Interim Financial Statements

Progenics Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company focusing on the development and commercialization of innovative therapeutic products to treat the unmet medical needs of patients with debilitating conditions and life-threatening diseases. The Company applies its expertise in clinical medicine, 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, as well as to enhance symptom management and supportive care. The Company was incorporated in Delaware on December 1, 1986. All of the Company’s operations are located in New York. The Company operates in a single segment.

The Company believes that its existing capital resources should be sufficient to fund operations beyond one year. There could be changes that would consume the Company’s assets before such time. The Company will require substantial funds to conduct research and development activities, preclinical studies, clinical trials and other activities relating to the commercialization of any potential products. In addition, the Company’s cash requirements may vary materially from those now planned because of results of research and development and product testing, changes in existing relationships with, or new relationships with, licensees, licensors or other collaborators, changes in the focus and direction of the Company’s research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory approval process, manufacturing and marketing and other costs associated with the commercialization of products following receipt of regulatory approvals and other factors. The Company has no committed external sources of capital and, as discussed above, expect no significant product revenues for a number of years as it will take at least that much time, if ever, to bring the Company’s products to the commercial marketing stage. The Company may seek additional financing, such as through future offerings of equity or debt securities or agreements with corporate partners and collaborators with respect to the development of its technology, to fund future operations. There can be no assurance, however, that the Company will be able to obtain additional funds on acceptable terms, if at all.

The interim Condensed Financial Statements of the Company included in this report have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and disclosures necessary for a presentation of the Company’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for such periods. The results of operations for interim periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

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PROGENICS PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (cont.)

2.	Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of June 30, 2003 and December 31, 2002 consist of the following:

		June 30, 2003		December 31, 2002

Accounts payable	$	773,486	$	1,199,998
Accrued consulting and clinical trial costs		548,747		557,113
Accrued payroll and related costs		422,704		568,358
Accrued legal and accounting fees		594,500		567,432

	$	2,339,437	$	2,892,901


3.	Net Loss Per Share

The Company’s basic net loss per share amounts have been computed by dividing net loss by the weighted average number of common shares outstanding during the respective periods. For the three and six months ended June 30, 2003 and 2002, the Company reported net losses and, therefore, no potentially dilutive securities were included in the computation of diluted per share amounts.

		Net Loss (Numerator)			Shares (Denominator)		Per Share Amount

2003:
Three months ended June 30, 2003:
	Basic and Diluted:		($7,842,001	)		12,869,784		($0.61	)


Six months ended June 30, 2003:
	Basic and Diluted:		($13,945,746	)		12,800,228		($1.09	)


2002:
Three months ended June 30, 2002:
	Basic and Diluted:		($5,355,126	)		12,534,936		($0.43	)


Six months ended June 30, 2002:
	Basic and Diluted:		($7,356,141	)		12,494,835		($0.59	)

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PROGENICS PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (cont.)

Options which have been excluded from the diluted per share amounts because their effect would have been antidilutive include the following:

		Three Months Ended June 30,

		2003				2002