UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| (Mark One) |
 |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 or |
 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to __________ |
Commission File No. 000-23143
PROGENICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
13-3379479 (I.R.S. Employer Identification Number) |
|||
777 Old Saw Mill River Road
Tarrytown, NY 10591
(Address of principal executive offices, including 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)
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
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 June 30, 2003, based upon the last reported sale price of the Common Stock on the Nasdaq National Market of $15.06 per share, was approximately $121,201,000.(1) As of March 10, 2004, 16,760,348 shares of Common Stock, par value $.0013 per share, were outstanding.
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.
| (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 |
TABLE OF CONTENTS
| 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 or be completed when planned, the risks and uncertainties associated with dependence upon the actions of 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 “Item 1. Business—Risk Factors.”
Available Information
We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934, or the Exchange Act. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding registrants, including Progenics, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.
We also make available, free of charge, on or through our Internet website (http://www.Progenics.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
| Item 1. | Business |
GENERAL
Overview
Progenics Pharmaceuticals, Inc. 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. Our principal programs are directed toward symptom management and supportive care, HIV infection and cancer. We have four product candidates in clinical development and several others in preclinical development.
Our product candidate in the area of symptom management and supportive care is methylnaltrexone (MNTX), a compound in pivotal phase 3 clinical testing. A pivotal clinical trial is one that is designed to produce results sufficient to support regulatory approval. MNTX is designed to treat the debilitating side effects of narcotic-based pain relievers, which are referred to as opioid analgesics, without interfering with pain relief. We are conducting a broad clinical development program for MNTX in several settings. The first three indications that we are pursuing are:
| • | treatment of constipation in patients with advanced medical illness who are receiving opioids; | |
| • | treatment of post-operative ileus, a paralysis of the gastrointestinal tract that frequently occurs in patients after abdominal and other major surgeries; and | |
| • | treatment of gastrointestinal dysfunction and other opioid-induced side effects in patients with chronic pain, including those suffering from headaches, joint pain, lower-back pain, sickle-cell disease, muscle pain and other disorders. |
Each of these indications represents a large potential market. We are developing a different dosage form for each indication: subcutaneous for patients with advanced medical illness; intravenous for patients with post-operative ileus; and oral for patients with chronic pain.
In our phase 2b clinical trial, MNTX induced a more regular laxation schedule in opioid-treated patients with advanced medical illness. In addition, we observed a significant dose-dependent laxation response and no evidence of breakthrough pain.
1
In December 2002, we began a pivotal phase 3 clinical trial of MNTX for the treatment of opioid-induced constipation in patients with advanced medical illness (AMI). In January 2004, we initiated a second pivotal phase 3 clinical trial of MNTX for the same indication. Constipation is a serious medical problem for patients with terminal illnesses who are being treated with narcotics to relieve pain. MNTX is designed to reverse the side effects of opioid therapy while maintaining pain relief, an important need not currently met by any approved drugs. Pending successful completion of these two clinical trials and receipt of regulatory approval, we believe MNTX may be our first product candidate to be approved for marketing, which may occur as early as 2005. We are seeking to establish a strategic collaboration with a large pharmaceutical company to support our development and commercialization efforts for MNTX. While we are engaged in discussions with several potential collaborators, these can be no assurance that any of these discussions will be concluded successfully.
In the area of HIV infection, we are developing viral-entry inhibitors, which are molecules designed to inhibit the virus’ ability to enter certain types of immune system cells. We are conducting a multi-dose phase 2 clinical trial with our lead HIV product candidate, PRO 542, a genetically engineered molecule designed to selectively target and neutralize HIV. We are also in preclinical development with PRO 140, a monoclonal antibody designed to target the HIV co-receptor CCR5. Receptors and co-receptors are structures on the surface of a cell to which a virus must bind in order to infect the cell. We plan to file an Investigational New Drug Application with the FDA and begin clinical testing of PRO 140 in the first half of 2004.
In addition, we are developing immunotherapies for prostate cancer, including monoclonal antibodies directed against prostate specific membrane antigen (PSMA), a protein found on the surface of prostate cancer cells. We are also developing vaccines designed to stimulate an immune response to PSMA. Our PSMA programs are being conducted through PSMA Development Company LLC, our joint venture with Cytogen Corporation. We are also studying a cancer vaccine, GMK, in phase 3 clinical trials for the treatment of malignant melanoma.
We are actively seeking out other promising products and technologies around which to build development programs. Our in-licensing strategy has been the basis for our clinical development programs for MNTX, novel HIV therapeutics and cancer immunotherapies. Except with respect to our development programs targeting PSMA, which are being conducted through our joint venture with Cytogen, we own the worldwide commercialization rights to each of our product candidates.
The following table summarizes the current status of our principal development programs and product candidates:
| Program/Product Candidates | Indication/Use | Status (1) | ||
| Symptom Management and Supportive Care |
||||
| MNTX | Treatment
of constipation in patients with advanced medical illness who are receiving
opioids |
Phase 3 | ||
Treatment
of patients with post-operative ileus |
Phase 2 | |||
Treatment
of opioid side effects in patients with chronic pain |
Phase 1 | |||
| HIV | ||||
| PRO 542 | HIV therapy | Phase 2 | ||
| PRO 140 | HIV therapy | Phase 1 expected to begin in first half of 2004 | ||
| CD4 attachment and gp41 fusion inhibitors | HIV therapy | Research | ||
| ProVax | HIV vaccine | Research | ||
| Prostate Cancer | ||||
| PSMA(2): | ||||
| Recombinant protein vaccine | Immunotherapy
for prostate cancer |
Phase 1 | ||
| Viral-vector vaccine | Immunotherapy
for prostate cancer |
Phase 1 expected to begin in 2004 | ||
| Monoclonal antibody | Immunotherapy
for prostate cancer |
Phase 1 expected to begin in first half of 2005 | ||
| Other | ||||
| GMK vaccine | Immunotherapy
for melanoma |
Phase 3 | ||
| Hepatitis C therapeutic | Therapy
for hepatitis C virus infection |
Research |
2
| (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. |
| Phase 1-3 clinical trials are safety and efficacy tests in humans as follows: | |
| “Phase 1”: Evaluation of safety. | |
| “Phase 2”: Evaluation of safety, dosing and activity or efficacy. | |
| “Phase 3”: Larger scale evaluation of safety and efficacy. | |
| (2) | Programs conducted through PSMA Development Company LLC, our joint venture with Cytogen Corporation. |
See “—Government Regulation.” The actual timing of events can vary dramatically relative to the expected timing described in the table above due to a variety of factors. See “—Risk Factors—Our clinical trials could take longer to initiate or complete than we expect.”
None of our product candidates have received FDA approval, and we have not yet received any revenue from the sale of any of our product candidates. We must receive marketing approval from the FDA before we can commercialize any of our product candidates.
Symptom Management and Supportive Care
Narcotic medications such as morphine and codeine, which are referred to as opioids, are the mainstay in controlling severe pain. We estimate that approximately 190 million prescriptions for opioids are written annually in the U.S. Physicians prescribe opioids for patients with advanced medical illness, patients undergoing surgery and patients who experience chronic pain, as well as for other indications.
Opioids relieve pain by interacting with receptors that are located in the brain and spinal cord, which comprise the central nervous system. 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, itching and urinary retention. Current treatment options for opioid-induced constipation include laxatives and stool softeners, which are only minimally effective. As a result, patients may have to stop opioid therapy and endure pain in order to obtain relief from opioid-induced constipation and other side effects.
| MNTX |
MNTX is a selective, peripheral, opioid-receptor antagonist that is designed to reverse certain side effects induced by treatment with opioids. MNTX is a novel derivative of naltrexone, a drug that is prescribed for narcotic and alcohol dependence. MNTX competes with opioid analgesics for binding sites on opioid receptors, but is unable to cross the blood-brain barrier. As a result, MNTX “turns off” the effects of opioid analgesics outside the central nervous system. MNTX binds to local opioid receptors in the gastrointestinal tract and is also absorbed into the bloodstream, potentially relieving opioid-related side effects elsewhere in the body, including skin itch and urinary retention. To date, patients treated with MNTX in addition to opioid pain medications have experienced no decline in pain relief and have experienced a reversal of many of the side effects related to opioids.
We licensed worldwide exclusive rights to MNTX from UR Labs, Inc. in October 2001. UR Labs had licensed MNTX from the University of Chicago, where it was discovered (See “—Licenses—UR Labs”). MNTX has been studied in more than 400 patients and volunteers in numerous clinical trials. The compound has been shown in clinical trials, to date, to be well tolerated and highly active in blocking opioid-related side effects without interfering with pain relief.
Advanced Medical Illness. The first indication we are pursuing for MNTX is relief of opioid-induced bowel dysfunction in patients with AMI, including cancer, AIDS and heart disease. Approximately 1.2 million deaths occur each year in the U.S. from AMI. The vast majority of these patients receive opioids for pain prior to their death and suffer debilitating constipation.
3
At the June 2003 meeting of the American Society of Clinical Oncology, we presented data from a multi-center, 33-patient phase 2b clinical trial of MNTX for the reversal of opioid-induced constipation in patients with advanced medical illness. Patients were randomized to receive one of four doses of MNTX: 20 mg, 12.5 mg, 5 mg and a 1 mg dose, which was intended to function as a placebo dose. Patients received a subcutaneous injection and were treated every-other-day for one week. After the one-week blinded dosing period, patients were eligible to receive open-label doses of MNTX for up to three additional weeks. An analysis of the data showed that MNTX had significant activity at various doses. Median time to laxation was approximately one hour after receiving active doses of MNTX. In contrast, with the 1 mg dose, time to laxation exceeded 48 hours. Laxation within four hours of dosing was reported in approximately 60% of patient doses for the active MNTX dose range and was approximately 10% of the 1 mg dose. Furthermore, the 24-hour laxation response rate for patients receiving active doses averaged 66% on treatment days as opposed to an average of only 4% on non-treatment days. Results from the entire study (double-blinded and open-label portions) showed that 58% of patients receiving active doses of MNTX laxated within four hours, and that patients who were treated in the open label portion of the study experienced drug activity for up to one month. In addition, the median frequency of laxations increased from two per week pre-treatment to four to six bowel movements per week while on treatment at the active doses of MNTX.
There were no serious adverse events reported related to MNTX in the phase 2b clinical trial. The most common side effects were transient flatulence and mild abdominal cramping, which are necessary physiological prerequisites to a bowel movement in patients with significant constipation. As in previous trials, no evidence of opioid withdrawal was observed in the phase 2b trial, and there was no increase in analgesic requirements.
Based upon the preliminary results of the open-label portion of the phase 2b study and the findings of prior clinical trials, we began enrolling patients in a randomized, double-blind, placebo-controlled pivotal phase 3 clinical study in December 2002 to evaluate the ability of single subcutaneous doses of MNTX to induce laxation within four hours. We expect to complete enrollment of a total of approximately 150 patients for this study by mid-year 2004. This clinical trial also includes a three-week open-label phase in which patients receive MNTX as required.
In January 2004, we initiated a second pivotal phase 3 clinical trial of MNTX. The trial is a randomized, double-blind, placebo-controlled study that is designed to measure the ability of MNTX to induce laxation within four hours in patients with AMI and opioid-induced constipation. In addition, the study will evaluate the ability of MNTX to restore patients to a normal bowel schedule of three or more laxations per week. Approximately 130 patients will receive study medication every-other day for two weeks at hospice centers across the United States and Canada. Thereafter, they will be eligible to enter an MNTX open-label extension study for an additional three months. We expect to complete enrollment of this second pivotal phase 3 trial of MNTX by the end of 2004. It is likely that we will need to successfully complete both of our phase 3 clinical trials of MNTX in order to obtain FDA approval to market MNTX.
Post-operative Ileus. We are also developing MNTX for the treatment of post-operative ileus. Of the 40-million surgeries that occur in the U.S. each year, more than four million patients are at high risk for developing ileus, a serious paralysis of the gastrointestinal tract. Ileus is a major factor in increasing hospital stay, as patients are typically not discharged until bowel and urinary functions are restored. In May 2003, we initiated a multi-center, randomized, double-blind, placebo-controlled phase 2 clinical study of intravenous MNTX in post-operative ileus in 60 individuals who have undergone colectomies, which is the removal of all or part of the colon. The goal of the study is to determine whether MNTX treatment can restore bowel function and reduce the severity or duration of ileus compared to placebo. We expect results from this trial by mid-year 2004 and, assuming successful completion of the phase 2 clinical trial, to initiate a phase 3 clinical trial for this indication thereafter.
Chronic Pain. We are developing MNTX for the treatment of constipation in patients receiving opioids for chronic pain. Of the 25 million Americans with chronic pain, approximately four million patients must take opioids on a daily basis, and many suffer intractable constipation. Four published clinical studies have investigated the use of oral MNTX in capsule form and have demonstrated its activity, including relief of opioid-induced constipation. Many people suffering from chronic pain are ambulatory and are not under constant doctor’s supervision. We therefore believe an oral formulation of MNTX would be well suited for this population. In November 2003, we initiated a double-blind, randomized, placebo-controlled phase 1 study in 35 healthy volunteers, which is designed to further characterize tolerability and pharmacokinetics of a tablet formulation of MNTX at three dosage levels. We expect results from this phase 1 study by mid-year and plan to initiate phase 2 studies of oral MNTX later in 2004 in chronic pain patients who experience opioid-induced constipation.
HIV
HIV infection causes a slowly progressing deterioration of the immune system resulting in Acquired Immune Deficiency Syndrome, or AIDS. 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.
4
UNAIDS, the Joint United Nations program on HIV/AIDS, and WHO, the World Health Organization, estimated that, as of December 2003, 40 million people worldwide were living with HIV. In high-income countries, 1.6 million people are infected, which includes an estimated 80,000 individuals newly infected in 2003. Of these 1.6 million individuals, 1.2 million reside in North America. Additionally, there were nearly three million deaths attributed to AIDS during 2003, of these 18,000 were from high-income countries.
At present, three classes of products have received marketing approval from the FDA for the treatment of HIV infection and AIDS: reverse transcriptase inhibitors, protease inhibitors and entry inhibitors. Reverse transcriptase and protease inhibitors inhibit two of the viral enzymes required for HIV to replicate once it has entered the cell.
Since the late 1990s, many HIV patients have benefited from combination therapy of protease and reverse transcriptase inhibitors. 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. Increasingly, after years of this combination therapy, patients begin to develop resistance to these drugs. The potential for resistance is exacerbated by interruptions in dosing, which lead to lower drug levels and permit increased viral replication. Interruption in dosing is common in patients on combination therapies, because these drug regimens often require more than a dozen tablets to be taken at specific times each day. An additional problem is that many 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. Our viral-entry inhibitors represent a potential new class of drugs for these patients.
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 founders 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, or ADARC, described in an article in Nature the discovery of a co-receptor for HIV on the surface of human 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.
We have a letter agreement with ADARC pursuant to which we have the exclusive right to pursue the commercial development, directly or with a partner, of products related to HIV based on patents jointly owned by ADARC and us. In addition, we previously had an arrangement with ADARC, not subject to a written agreement, pursuant to which ADARC provided services to us, including assistance with tests and studies of some of our leading HIV product candidates.
Based on our pioneering research, we believe we are a leader in the discovery of viral-entry inhibitors, a promising new class of HIV therapeutics. For the large number of patients who are failing conventional anti-retroviral or combination therapy, we believe viral-entry inhibitors could become the next generation of therapy. Fuzeon™, formerly referred to as T-20, is an entry inhibitor developed by Trimeris, Inc. in collaboration with F. Hoffmann-La Roche Ltd that was approved for marketing by the FDA in March 2003. PRO 542, PRO 140 and Fuzeon inhibit different steps in the sequence of events leading to the entry of HIV into target cells, and therefore may act synergistically in their ability to block HIV infection of healthy cells.
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 co-receptor.
| PRO 542 |
PRO 542 is our proprietary antibody-like product candidate that is designed to neutralize HIV by preventing it from attaching to the CD4 receptor on the surface of immune system cells. In a phase 2 clinical trial of 12 HIV-infected individuals, a single dose of PRO 542 significantly reduced viral loads by 60% to 80% for up to six weeks. We are presently conducting a multi-dose open-label phase 2 clinical study of PRO 542 in patients with advanced disease who are no longer responding to currently available anti-retroviral medications. Patients are receiving three intravenous doses of PRO 542 per week for three weeks. The goal of the study is to determine if repeat dosing can induce robust and sustained viral load reductions in this setting. We are also investigating the safety, pharmacokinetics and immunogenicity of PRO 542 treatment. Sustained reduction in viral load is a primary goal of HIV therapy. We expect to receive the results from this study in mid-2004.
5
Our first clinical studies of PRO 542 were two dose-escalation phase 1/2 clinical trials which 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 the extent to which 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.
The 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. Results 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.
The second dose-escalation phase 1/2 clinical trial was conducted in 18 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. By 28 days after therapy, peak viral load was reduced in all six children treated with multiple doses. Additionally, the drug was well tolerated by all patients tested. In addition, we initiated, in cooperation with the Pediatric AIDS Clinical Trial Group of the National Institutes of Health, a new phase 2 trial to define the dose and frequency of administration of PRO 542 for HIV-infected children, including those resistant to available antiviral therapies.
We also determined in preclinical in vitro testing that the combination of PRO 542 and Fuzeon demonstrated significantly enhanced anti-HIV activity in blocking the entry of HIV into healthy cells. In further preclinical in vitro studies, a “triple cocktail” of PRO 542, PRO 140 and Fuzeon, 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 2002, we achieved two major milestones in our PRO 542 clinical program. We identified a target population of patients who are most likely to benefit from PRO 542, those with advanced disease, and established clinical proof-of-concept that infrequent dosing with PRO 542 yielded prolonged viral-load reduction. In September 2002, we reported final results from a phase 2 clinical trial of PRO 542, which showed that PRO 542 reduced plasma concentrations of HIV in infected individuals who were no longer responding to currently available antiretroviral medications. In these 12 treatment-experienced patients, a single dose of PRO 542 reduced viral concentrations in the blood by 60% to 80% on average. The viral-load reductions were sustained throughout the six-week follow-up period, and no serious side effects were observed. Additional findings from this phase 2 clinical trial of PRO 542, announced in February 2003, indicate that the magnitude of viral load reductions were correlated strongly with viral susceptibility to PRO 542 prior to drug treatment, as measured by the PhenoSense™ HIV Entry assay from ViroLogic, Inc. We believe that viral-resistance testing may identify patients who will derive the greatest benefit from therapy with HIV entry inhibitors. In addition, patient viruses collected six weeks after treatment initiation showed no evidence of having developed resistance to PRO 542.
During the course of 2003, we continued to devote concentrated efforts both internally and with third-party collaborators to enhance our ability to supply adequate quantities of PRO 542 for our clinical program through the creation of a high-producing genetically engineered PRO 542 cell line and the expansion of our internal manufacturing capabilities. In March 2003, we entered into an agreement with Gala Design, Inc. to create a high-producing genetically engineered cell line that expresses PRO 542. Additionally, we are preparing to install in 2004 a 1,000-liter bioreactor that will utilize the new cell line to increase productivity. This facility, which we expect will be operational early in 2005, is designed to provide us with an additional source of PRO 542 in support of our clinical program. We believe that the investment in cell-line development provides us with a viable strategic alternative to our reliance on transgenic goats as a source of PRO 542.
Our phase 2 clinical program also includes studies that employ repeated subcutaneous dosing of PRO 542. In these studies, we are using the PhenoSense™ HIV Entry assay to select for those patients harboring the most sensitive viruses to PRO 542 neutralization. In July 2002, we announced an agreement with ViroLogic to use its proprietary HIV resistance-testing technology, the PhenoSense™ HIV Entry assay, in the development of PRO 542 and PRO 140, our second experimental viral entry inhibitor.
6
Additional clinical trials may include treating patients with PRO 542 in combination with Fuzeon. In preclinical studies, PRO 542 and Fuzeon were shown to be synergistic in inhibiting HIV, as each drug was designed to block the virus in a different manner before it enters the human immune cells.
| PRO 140 |
PRO 140 is a humanized monoclonal antibody designed to block the ability of HIV to infect cells by inhibiting virus-cell binding. We have designed PRO 140 to target a distinct site on the HIV co-receptor CCR5 without interfering with the normal function of CCR5. We expect to begin phase 1 clinical trials in 2004. The goal of the phase 1 studies will be to determine the safety, pharmacokinetics, immunogenicity and anti-viral activity of PRO 140 in healthy volunteers and HIV-infected individuals.
In May 1999, we announced the development of a panel of proprietary anti-CCR5 monoclonal antibodies created at Progenics and evaluated in collaboration with ADARC. These antibodies are designed to block the ability of HIV to infect cells isolated from healthy individuals by inhibiting virus-cell binding, 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. Effective April 1999, we entered into a development and license agreement with Protein Design Labs, Inc., for the development of a humanized version of PRO 140 that retains the antibody’s antiviral activity but is more suitable for chronic use in humans (See “—Licenses—Protein Design Labs”).
We subsequently announced in 2000 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 Fuzeon™, 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.
In January 2001, a scientific article in the Journal of Virology described how PRO 140 demonstrated potent, broad-spectrum antiviral activity against more than 40 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 model of HIV infection. In mice treated with PRO 140, initially high HIV concentrations became undetectable for up to nine days after a single dose.
Later in 2001, we also reported that we had identified the molecular basis for the synergistic antiviral activity observed for HIV entry inhibitors PRO 542, PRO 140 and the fusion inhibitor Fuzeon™. The multi-step nature of HIV entry into cells—attachment, co-receptor binding and 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 Fuzeon). 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.
Additionally, in December 2001, we further 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.
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 our collaborative agreement with Protein Design Labs entered in April 1999. We expect to file an Investigational New Drug Application with the FDA for humanized PRO 140 in the first half of 2004. We plan to use ViroLogic’s PhenoSense HIV Entry assay to select for patients harboring the most sensitive viruses to PRO 140 inhibition.
7
CD4 attachment inhibitors and gp41 fusion inhibitors
In March 2000, we entered into a research and license agreement with Pharmacopeia, Inc., to develop 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 that commenced in September 1997. Under the terms of this agreement, we have provided proprietary CD4 attachment assays and expertise related to the interaction between HIV and CD4, and Pharmacopeia engaged 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.
To further advance this program, in November 2001 we were awarded approximately $600,000 from the National Institutes of Health for the development of novel inhibitors of HIV entry and infection. Entry inhibitors are a new class of HIV drugs that may offer benefits in both safety and efficacy over currently available HIV therapies. The grant supports the above described 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 first phase of the project combined Pharmacopeia’s proprietary, high-throughput assays with screening technologies developed at Progenics for identifying fusion inhibitors. Pharmacopeia utilized these technologies to screen its libraries of several million novel, drug-like compounds, and also screened other libraries to which Progenics has rights for other undisclosed targets. The second phase of the project has been directed towards optimizing active compounds identified during the screening. We continue to assess the results of this collaboration as they become available.
ProVax
We are conducting research on our ProVax vaccine candidate, which we believe may be useful in preventing HIV infection 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 Weill/Cornell Medical College.
In 2002, we announced the development of vaccine candidates that contain critical surface proteins whose form closely mimics the structures found on the virus. The findings were described in articles in the Journal of Virology.
In September 2003, we were awarded a contract by the NIH to develop an HIV vaccine. The contract provides for up to $28.6 million in funding to us over five years for preclinical research, development and early clinical testing of a prophylactic vaccine designed to prevent HIV from becoming established in uninfected individuals exposed to the virus. Our scientists will be the principal investigators under the contract and will head the vaccine development effort. John P. Moore, Ph.D. of Weill Medical College of Cornell University and Preston A. Marx, Ph.D. of Tulane National Primate Research Center will continue their collaboration with us and will head the vaccine design and animal testing core groups, respectively, under a subcontract. A total of approximately $3.8 million is earmarked under the contract to fund such subcontracts. Funding under this contract is subject to compliance with its terms, and the payment of an aggregate of $1.6 million in fees under the contract is subject to achievement of specified milestones. We anticipate that these funds will be used principally in connection with our ProVax HIV vaccine program.
Prostate Cancer
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 are difficult or impossible to eliminate fully, which can lead to relapse.
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 estimated that 28,900 men would die from prostate cancer and 220,900 new cases would be diagnosed in 2003 in the U.S.
Conventional therapies for prostate cancer include radical prostectomy, in which the prostate gland is surgically removed, radiation and hormone therapies and chemotherapy. Surgery and radiation therapy may result in 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.
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PSMA
Through PSMA Development Company LLC (PDC), our joint venture with Cytogen Corporation, we are engaged in a research and development program relating to vaccine and antibody immunotherapeutics based on PSMA. PDC is funded annually by the members and advancement of its programs is dependent on the agreement by the members on, among other things, a work plan and budget and other operations and financial matters on a year to year basis (See “—Corporate Collaborations—PSMA Development Company LLC”). PSMA is a protein that is abundantly expressed on the surface of prostate cancer cells as well as cells in the newly formed blood vessels of most other solid tumors. We believe that PSMA has applications in immunotherapeutics for prostate cancer and potentially for other types of cancer.
In December 2002, the joint venture initiated a phase 1 clinical trial with its therapeutic recombinant protein vaccine, which is designed to stimulate a patient’s immune response system to recognize and destroy prostate cancer cells. The vaccine combines the PSMA cancer antigen with an immune stimulant to induce an immune response against prostate cancer cells. The genetically engineered PSMA vaccine generated potent immune responses in preclinical animal testing. The clinical trial is designed to evaluate the safety and immune-stimulating properties of the vaccine in patients with either newly diagnosed or recurrent prostate cancer. We anticipate results from this trial during the first half of 2004.
The joint venture is also pursuing, in collaboration with AlphaVax Human Vaccines, Inc., a vaccine program that utilizes viral vectors designed to deliver the PSMA gene to immune system cells in order to generate potent and specific immune responses to prostate cancer cells (See “—Licenses—AlphaVax Human Vaccines”). In preclinical studies, this viral-vector prostate cancer vaccine generated a potent dual response against PSMA, yielding a response by both antibodies and killer T cells, the two principal mechanisms used by the immune system to eliminate abnormal cells. The joint venture is completing preclinical development activities on the PSMA viral-vector vaccine in anticipation of initiating phase 1 clinical trials in 2004.
The joint venture has also developed novel human monoclonal antibodies which bind to PSMA. These antibodies, produced in collaboration with Abgenix, Inc., were developed to recognize the three-dimensional physical structure of the protein and possess a high affinity and specificity for PSMA (See “—Licenses—Abgenix”). We expect that the joint venture will begin phase 1 clinical trials with one of these antibodies by the first half of 2005.
In November 2002, the joint venture reported that fully human monoclonal antibodies directed against PSMA and conjugated to a toxin substantially reduced tumor growth in an animal model of human prostate cancer. These antibodies demonstrated the ability to selectively deliver a lethal payload to cells that expressed PSMA on their surface. The joint venture is in the process of selecting the optimal toxin and radioactive payloads in parallel with producing clinical-grade antibodies.
In November 2003, PDC announced publication of new findings on antibody and vaccine therapies that target PSMA. The results were published in the Proceedings of the National Academy of Sciences USA. PDC researchers reported that PSMA exists on human cancer cells as a homodimer, a protein complex consisting of two identical PSMA chains. Importantly, researchers also found that when recombinant soluble PSMA (rsPSMA) was used as a cancer vaccine in an animal model, the dimeric form of the protein efficiently elicited antibodies that recognized PSMA-expressing tumor cells while the monomeric form did not. In addition, PDC researchers reported the discovery of fully human monoclonal antibodies that specifically recognize dimeric but not monomeric rsPSMA. We believe that such antibodies represent candidates for therapy by virtue of their specificity for dimeric PSMA. PDC is currently conducting a phase 1 clinical study of a therapeutic prostate cancer vaccine based on a novel proprietary form of dimeric rsPSMA.
Other Product Candidates and Research Programs
GMK Vaccine
GMK is a proprietary therapeutic vaccine that is designed to prevent recurrence of melanoma in patients who are at risk of relapse after surgery. We hold a worldwide exclusive license to GMK from Sloan-Kettering Institute for Cancer Research (See “—Licenses—Sloan-Kettering”). We are currently conducting two phase 3 clinical trials of GMK. GMK is composed of the ganglioside GM2 joined to the carrier protein keyhole limpet hemocyanin, or KLH, and combined with the adjuvant QS-21. QS-21 is a compound in the Stimulon™ family of adjuvants developed and owned by Aquila Biopharmaceuticals, Inc., a wholly owned subsidiary of Antigenics, Inc. (See “—Licenses—Aquila Biopharmaceuticals”). GMK is designed to stimulate the immune system to produce specific antibodies to the 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.
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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, or NCI, estimated that in 2000 there were 550,860 melanoma patients in the U.S. The American Cancer Society estimated that there would be 54,200 new cases of melanoma diagnosed in the U.S. during 2003. 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 U.S. Increased exposure to the ultraviolet rays of the sun may be an important factor contributing to the increase in new cases of melanoma.
GMK is being developed for the treatment of patients with Stage II or Stage III melanoma. The American Cancer Society estimates that the five-year relative survival rate of Stage II melanoma patients is between 65% and 70% and that the five-year survival rate for Stage III melanoma patients is approximately 45%.
GMK entered a pivotal phase 3 clinical trial in the United States in August 1996. GMK was administered in this study on an out-patient basis by 12 subcutaneous injections over a two-year period. This 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 has been conducted nationally by the Eastern Cooperative Oncology Group, or ECOG, in conjunction with the Southwest Oncology Group, or 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, the conventional treatment for high-risk melanoma patients. 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.
As a result of the actions of ECOG, the trial did not complete patient dosing as contemplated by the initial trial protocol. Despite ECOG’s action, we extended our clinical trial to allow those patients who so elected, with the advice of their treating physicians, to complete the full dosing protocol. We continue to monitor all patients in the trial until its scheduled completion as contemplated by the initial protocol. This action has been taken with the knowledge of the FDA and the various institutional review boards at the clinical sites affected. We refer to “extending” the trial in this manner as an “extension study.” ECOG is assisting us in continued patient follow-up and data compilation. We are planning to meet with the FDA in 2004 to finalize the method of analysis for this study. Given recent FDA actions on similar product candidates, we are considering amending our statistical plan for this study to compare median 5.5-year survival between the two treatment groups. We reached the median 5.5-year survival in late 2003 and plan to perform the final analysis of the study in 2004 after meeting with the FDA.
While all patients received at least a portion of the planned dosing, only about one-half of the patients received the full number of doses of GMK. We believe that the likely potential outcomes of the ECOG trial as supplemented by the extension study are as follows: if the data are good, the data could support a filing with the FDA for marketing approval; if the data are not good or are inconclusive, they would not support a marketing approval and further studies would be required.
In May 2001, we initiated a large international phase 3 clinical trial of the GMK vaccine to prevent the relapse of malignant melanoma. The study is being conducted with the European Organization for Research and Treatment of Cancer, or EORTC, Europe’s leading cancer cooperative group. The EORTC phase 3 trial design contemplates enrolling 1,300 patients who are at intermediate risk for recurrence of the disease. The study is recruiting patients from Europe and 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. We do not expect final data from this trial until 2009. The primary endpoint of this trial is to compare the recurrence of melanoma in patients receiving GMK with patients receiving observation and no treatment. The study will also compare overall survival of patients in both groups. Patient accrual for this study has proceeded more slowly than anticipated due to regulatory delays. At present we expect to enroll all 1,300 patients by mid-2005.
Hepatitis C Therapeutic
We recently reported our discovery of the first liver-specific receptor for the hepatitis C virus, which is a major cause of liver disease. This receptor may provide a new target for hepatitis C therapy. We are performing additional research based on this discovery.
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Research and Development
A major portion of our operating expenses to date is related to research and development. Research and development expenses consist of independent research and development costs and costs associated with collaborative research and development and in-licensing arrangements. Research and development expenses were $27.2 million in 2003, $23.8 million in 2002, and $14.5 million in 2001.
Corporate Collaborations
| PSMA Development Company LLC |
In June 1999, we and Cytogen Corporation formed a joint venture in the form of a limited liability company for the purposes of conducting research, development, manufacturing and marketing of products related to PSMA. All patents and know-how owned by us or Cytogen and used or 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 relate to PSMA. We and Cytogen must also offer to license to the joint venture patents, patent applications and technical information used or useful in the joint venture’s field to which we or Cytogen acquire licensable rights. By the terms of the joint venture, Cytogen is principally responsible for product marketing, and we have co-promotion rights. To date, we have been principally responsible for preclinical and clinical development.
Each member of the joint venture currently owns 50% of the joint venture. In general, each member has equal representation on the joint venture’s management committee, equal voting rights, equal rights to profits and losses of the joint venture and equal rights upon liquidation, provided there is no dilution of either member’s ownership interest as discussed below. Pursuant to the joint venture agreement, a member’s voting and ownership interest will be diluted if it fails to make required capital contributions. Under specified circumstances, a change in control of one of the members will result in that member’s loss of voting, management and marketing rights.
In general, the amount of funds that we and Cytogen must pay to fund the operations of the joint venture is based on a budget that is required to be approved by both parties and updated annually. We are required to fund that portion of the budget equal to our percentage interest in the joint venture. We were required to fund and recognize the initial cost of research up to $3.0 million. During the fourth quarter of 2001, we had surpassed the $3.0 million in funding for research costs, and funding obligations were thereafter shared equally by Cytogen and us. As of December 31, 2003, our portion of this joint funding obligation that we have paid was $7.2 million. According to the joint venture agreement, we are entitled to receive a rebate, not to exceed $3.0 million, related to government grants received for work we perform for the joint venture in support of the PSMA programs. As of December 31, 2003, the amount of such rebate received and recognized by us as revenue was approximately $927,000 (See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Revenues”).
Under the joint venture agreement, we were also required to pay to the joint venture $2.0 million in supplemental capital contributions, which was used by the joint venture to pay a $2.0 million non-refundable licensing fee to Cytogen.
We provide research and development services to the joint venture and are compensated for our services based on agreed upon terms which approximate our cost. All inventions made by us in connection with our research and development services to the joint venture are required to be assigned to the joint venture for its use and benefit.
The joint venture agreements generally terminate upon the last to expire of the patents licensed by the members to the joint venture or upon a breach by either member that is not cured within 60 days of written notice. Of the patents and patent applications that are the subject of the joint venture, the issued patents expire on dates ranging from 2014 and 2016. Patent term extensions and pending patent applications may extend the period of patent protection and thus the term of the joint venture agreements, when and if such patent applications are allowed and issued.
In January 2004, we and Cytogen agreed to an updated work plan governing the activities of the joint venture for the 2004 calendar year; agreed to a budget for the joint venture’s operations for 2004 and related capital contributions of the parties; and agreed to research, development and related services which the members will provide to the joint venture for the remainder of 2004. The joint venture work plan, budget and other operational and financial matters relating to periods after 2004 will require the further agreement of us and Cytogen.
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| ViroLogic, Inc. |
In May 2002, we entered into a fee-for-service agreement with ViroLogic, Inc. under which ViroLogic has agreed to perform clinical laboratory tests using ViroLogic’s HIV resistance-testing technology on samples we provide. Services under the contract are performed upon our submission of a work order setting forth an agreed-upon scope of clinical laboratory tests and services to be performed by ViroLogic, as well as a fee schedule. We are not obligated to submit any work orders and can terminate any work order with or without cause upon 30 days written notice, with the obligation to pay for work performed under the work order. As of December 31, 2003, we have paid to ViroLogic $53,000 under this agreement.
Licenses
We are a party to license agreements under which we have obtained rights to use specified technologies. Set forth below is a summary of each of these licenses.
| Sloan-Kettering |
We are party to a license agreement with Sloan-Kettering under which we obtained the worldwide, exclusive rights to specified technology relating to ganglioside conjugate vaccines, including GMK, and its use to treat or prevent cancer. In general, the Sloan-Kettering license agreement terminates upon the later to occur of the expiration of the last to expire of the licensed patents or 15 years from the date of the first commercial sale of a licensed product pursuant to the agreement, unless sooner terminated. Patents that are presently issued expire in 2014; however, pending patent applications that we have also licensed and patent term extensions may extend the license period, when and if the patent applications are allowed and issued or patent term extensions are granted. In addition to the patents and patent applications, we have also licensed from Sloan-Kettering the exclusive rights to use relevant technical information and know-how. A number of Sloan-Kettering physician-scientists also serve as consultants to Progenics.
Our license agreement requires us to achieve development milestones. The agreement states that we are required to have filed for marketing approval of a drug by 2000 and to commence manufacturing and distribution of a drug by 2002. We have not achieved these milestones due to delays that we believe could not have been reasonably avoided. The agreement provides that Sloan-Kettering shall not unreasonably withhold consent to a revision of the milestone dates under specified circumstances, and we believe that the delays referred to above satisfy the criteria for a revision of the milestone dates. Sloan-Kettering has not consented to a revision of the milestone dates as of this time; however, our discussions with them in this regard have resulted in an agreement in principal which we are in the process of documenting at this time.
We have the right to terminate the agreement without cause upon 90 days prior written notice, with the obligation to pay only those liabilities that have accrued prior to such termination. The agreement may also be terminated, after an opportunity to cure, by Sloan-Kettering for cause upon 60 days prior written notice.
As of December 31, 2003, we have paid to Sloan-Kettering $1.0 million under this agreement. In addition, we are obligated to pay royalties based on the sales of products under the license. We have a $200,000 minimum royalty payment obligation in any given calendar year, which is fully creditable against currently earned royalties payable by us to Sloan-Kettering in such year based on sales of licensed products.
| Columbia University |
We are party to a license agreement with Columbia University under which we obtained exclusive, worldwide rights to specified technology and materials relating to CD4. In general, the license agreement terminates (unless sooner terminated) upon the expiration of the last to expire of the licensed patents, which is presently 2020; however, patent applications that we have also licensed and patent term extensions may extend the period of our license rights, when and if the patent applications are allowed and issued or patent term extensions are granted.
Our license agreement requires us to achieve development milestones. Among others, the agreement states that we are required to have filed for marketing approval of a drug by June 2001 and be manufacturing a drug for commercial distribution by June 2004. We have not achieved the June 2001 milestone and will be unable to achieve the June 2004 milestone due to delays that we believe could not have been reasonably avoided and are reasonably beyond our control. The agreement provides that Columbia shall not unreasonably withhold consent to a revision of the milestone dates under specified circumstances, and we believe that the delays referred to above satisfy the criteria for a revision of the milestone dates. Columbia has not consented to a revision of the milestone dates; however, we are in discussions with them in this regard.
We have the right to terminate the agreement without cause upon 90 days prior written notice, with the obligation to pay only those liabilities that have accrued prior to such termination. The agreement may also be terminated, after an opportunity to cure, by Columbia for cause upon 60 days prior written notice.
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As of December 31, 2003, we have paid to Columbia $850,000 under this agreement. In addition, we are obligated to pay Columbia $225,000 upon the earlier to occur of June 1, 2004 or our achievement of our final milestone under the agreement. We are also required to pay annual maintenance fees of $50,000 and royalties based on the sale of products we develop under the license, if any.
| Aquila Biopharmaceuticals |
We have entered into a license and supply agreement with Aquila Biopharmaceuticals, Inc., a wholly owned subsidiary of Antigenics, pursuant to which Aquila agreed to supply us with all of our requirements for the QS-21 adjuvant for use in ganglioside-based cancer vaccines, including GMK. QS-21 is the lead compound in the Stimulon family of adjuvants developed and owned by Aquila. In general, the license agreement terminates upon the expiration of the last to expire of the licensed patents, unless sooner terminated. In the United States the licensed patent will expire in 2008.
Our license agreement requires us to achieve development milestones. The agreement states that we are required to have filed for marketing approval of a drug by 2001 and to commence the manufacture and distribution of a drug by 2003. We have not achieved these milestones due to delays that we believe could not have been reasonably avoided. The agreement provides that Aquila shall not unreasonably withhold consent to a reasonable revision of the milestone dates under specified circumstances, and we believe that the delays referred to above satisfy the criteria for a revision of the milestone dates. Aquila has not consented to a revision of the milestone dates.
We have the right to terminate the agreement without cause upon 90 days prior written notice, with the obligation to pay only those liabilities that have accrued prior to such termination. In the event of a default by one party, the agreement may also be terminated, after an opportunity to cure, by the non-defaulting party upon 60 days prior written notice.
As of December 31, 2003, we have paid to Aquila $758,000 under this agreement. We have no future cash payment obligations relating to milestones under the agreement, although we are required to pay Aquila royalties on the sale of products we develop under the license.
| Protein Design Labs |
We have entered into a development and license agreement with Protein Design Labs, or PDL, for the humanization by PDL of PRO 140. Pursuant to the agreement, PDL granted us exclusive and nonexclusive worldwide licenses under patents, patent applications and know-how relating to the humanized PRO 140. In general, the license agreement terminates on the later of 10 years from the first commercial sale of a product developed under the agreement or the last date on which there is an unexpired patent or a patent application that has been pending for less than ten years, unless sooner terminated. Thereafter the license is fully paid. The last of the presently issued patents expires in 2014; however, patent applications filed in the United States and internationally that we have also licensed and patent term extensions may extend the period of our license rights, when and if such patent applications are allowed and issued or patent term extensions are granted. As of December 31, 2003, we have paid or accrued to PDL approximately $2.4 million under this agreement. If all milestones specified under the agreement are achieved, we will be obligated to pay PDL an additional approximately $4.0 million. We are also required to pay annual maintenance fees of $150,000 and royalties based on the sale of products we develop under the license, although our obligation to pay the annual maintenance fee has been suspended until the earlier of a specified milestone or April 2007. We have the right to terminate the agreement without cause upon 60 days prior written notice, with the obligation to pay only those liabilities that have accrued prior to such termination. In the event of a default by one party, the agreement may also be terminated, after an opportunity to cure, by non-defaulting party upon 30 days prior written notice.
| UR Labs |
We have entered into an agreement with UR Labs to obtain worldwide exclusive rights to intellectual property rights related to MNTX. 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 defined milestones associated with the MNTX product development and commercialization program. As of December 31, 2003, we have paid to UR Labs $500,000 under this agreement. If we satisfy all future development milestones specified in the agreement, we will be obligated to pay UR Labs an additional $1.2 million. Furthermore, we are required to pay royalties based upon net sales of the licensed products (but at a rate of not less than $100,000 per year after product approval in the United States, if any). Upon 90 days prior written notice including the opportunity to cure, UR Labs may terminate the agreement under specified default circumstances that include our failure to achieve specified development milestones (including the filing of an NDA for MNTX by December 31, 2004); however, the consent of UR Labs to appropriate revisions to the development milestones shall not be unreasonably withheld under specified circumstances. We have the right to terminate the agreement without cause upon 60 days prior written notice, with the obligation to pay only those liabilities that have accrued prior to such termination. In the event of a default by UR Labs, we may terminate the agreement, after an opportunity to cure, upon 60 days prior written notice.
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If not terminated early, the agreement continues so long as we are obligated to pay royalties on the sale of a licensed product that includes MNTX. If there is a valid patent relating to a licensed product in a particular country on the date of the first commercial sale in that country, we are obligated to pay royalties until the later of the expiration of the last to expire licensed patent or five years from the date of that sale. If a valid licensed patent does not exist in a particular country on the date of the first commercial sale of a licensed product in that country, we are obligated to pay royalties until seven years from the date of that sale. The last of the presently issued patents expire in 2017; however, patent applications filed in the United States and internationally that we have also licensed and patent term extensions may extend the period of our license rights, when and if such patent applications are allowed and issued or patent term extensions are granted.
| Abgenix |
In February 2001, our joint venture with Cytogen entered into a worldwide exclusive licensing agreement with Abgenix to use Abgenix’ 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, non-creditable license fee and is obligated to pay additional payments upon the occurrence of defined milestones associated with the development and commercialization program for products incorporating an antibody generated utilizing the XenoMouse technology. As of December 31, 2003, the joint venture has paid to Abgenix $400,000 under this agreement. If the joint venture achieves certain milestones specified under the agreement, it will be obligated to pay Abgenix an additional approximately $6.7 million. Furthermore, the joint venture is required to pay royalties based upon net sales of any antibody products. This agreement may be terminated, after an opportunity to cure, by Abgenix for cause upon 30 days prior written notice. The joint venture has the right to terminate this agreement upon 30 days prior written notice. If not terminated early, this agreement continues until the later of the expiration of the XenoMouse technology patents that may result from pending patent applications or seven years from the first commercial sale of the products.
| AlphaVax Human Vaccines |
In September 2001, the joint venture entered into a worldwide exclusive license agreement with AlphaVax Human Vaccines to use the AlphaVax Replicon Vector 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 AlphaVax’ system. As of December 31, 2003, the joint venture has paid to AlphaVax $500,000 under this agreement. If the joint venture achieves certain milestones specified under the agreement, it will be obligated to pay AlphaVax an additional approximately $5.4 million. Furthermore, the joint venture is required to pay annual maintenance fees until the first commercial sale and royalties based upon net sales of any products developed using AlphaVax’ system. This agreement may be terminated, after an opportunity to cure, by AlphaVax under specified circumstances that include the joint venture’s failure to achieve milestones; however, the consent of AlphaVax to revisions to the due dates for the milestones shall not be unreasonably withheld. The joint venture has the right to terminate the agreement upon 30 days prior written notice. If not terminated early, this agreement continues until the later of the expiration of the patents relating to AlphaVax’ system or seven years from the first commercial sale of the products developed using AlphaVax’ system. The last of the presently issued patents expire in 2015; however, patent applications filed in the United States and internationally that we have also licensed and patent term extensions may extend the period of our license rights, when and if such patent applications are allowed and issued or patent term extensions are granted.
| Rights and Obligations |
We have the right generally to defend and enforce patents licensed by us, either in the first instance or if the licensor chooses not to do so. In addition, our license agreement with UR Labs regarding MNTX gives us the right to prosecute and maintain the licensed patents. We bear the cost of engaging in all of these activities with respect to our license agreements with Sloan-Kettering for GMK, Columbia for our HIV product candidates subject to the Columbia license and UR Labs for MNTX. With most of our other license agreements, the licensor bears the cost of engaging in all of these activities, although we may share in those costs under certain circumstances. Historically, our costs of defending patent rights, both our own and those we license, have not been material.
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. 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.
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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 that we consider to be important to the development of our foreign business. Generally, patents issued in the United States are effective for:
| • | the longer of 17 years from the date of issue or 20 years from the earliest effective filing date of the corresponding patent application, if the patent application was filed prior to June 8, 1995; and | |
| • | 20 years from the earliest filing date for patent applications filed on or after June 8, 1995. |
In addition, in certain instances, the patent term can be extended to recapture a portion of the term lost during the FDA regulatory review period. The duration of foreign patents varies in accordance with the provisions of applicable local law.
We also rely on trade secrets, proprietary know-how and continuing technological innovation to develop and maintain a competitive position in our product areas. We require our employees, consultants and corporate partners who have access to our proprietary information to sign confidentiality agreements.
As of March 10, 2004, our patent portfolio relating to our proprietary technologies in the HIV, cancer and symptom management areas is comprised, on a worldwide basis, of 104 patents that are issued or allowed and 184 pending patent applications, which we either own directly or of which we are the exclusive licensee. The issued patents that we own expire on dates ranging from 2012 through 2021. However, we have filed a number of United States and foreign patent applications related to MNTX, our HIV attachment technology, our technology directed to PRO 542 and PRO 140, our ProVax technology and clinical uses of these technologies. We have also filed a number of United States 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. Patent term extensions and these pending patent applications may extend the period of patent protection afforded our products in development, when and if such patent term extensions and patent applications are allowed and issued or patent term extensions are granted.
Our patent portfolio includes United States and foreign patents and pending patent applications that relate to our products in development in the HIV, cancer, symptom management and supportive care areas and of which we are the exclusive licensee. This portion of our patent portfolio is described in more detail below.
Under a license agreement with UR Labs, Inc. (See “—Licenses—UR Labs”), we obtained worldwide exclusive rights to specified technology relating to MNTX. 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 relating to certain compositions, formulations and uses of MNTX. The last of the presently issued patents expire in 2017; however, patent applications that we have also licensed and patent term extensions may extend the period of patent protection, when and if such patent applications are allowed and issued or patent term extensions are granted. Furthermore, we have continued to expand the patent coverage relating to MNTX with the filing of new patent applications that may extend the patent protection period for MNTX when and if such patent applications are allowed and issued.
Under a license agreement with Sloan-Kettering (See “—Licenses—Sloan-Kettering”), we obtained worldwide exclusive rights to specified technology relating to ganglioside conjugate vaccines, including GMK, and its use to treat or prevent cancer. This technology is the subject of a patent filed by Sloan-Kettering in the United States and 25 foreign countries claiming composition of matter and methods of production and use of specified ganglioside conjugate vaccines for the treatment or prevention of human cancer. The currently issued patents expire in 2014. However, pending patent applications that we have also licensed and patent term extensions may extend the period of patent protection, when and if such patent applications are allowed and issued or patent term extensions are granted.
Under a license agreement with Columbia University (See “—Licenses—Columbia University”), we obtained worldwide, exclusive rights to specified technology relating to CD4. 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 specified CD4-based products for the treatment or prevention of HIV infection. The issued patents covered by this license agreement expire on dates ranging from 2007 to 2020; however, patent applications that we have also licensed and patent term extensions may extend the period of patent protection, when and if such patent applications are allowed and issued or patent term extensions are granted.
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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 upon 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 th