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, 2004 or |
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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, 2004, based upon the closing price of the Common Stock on the Nasdaq National Market of $16.85 per share, was approximately $227,942,000 (1). As of March 15, 2005, 17,489,911 shares of Common Stock, par value $.0013 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
| (1) | Calculated by excluding all shares that may be deemed to be beneficially owned by executive officers, directors and five percent stockholders of the Registrant, without conceding that any such person is an “affiliate” of the Registrant for purposes of the Federal securities laws. |
TABLE OF CONTENTS
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| PART I |
Certain statements in this Annual Report on Form 10-K constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Included in these forward-looking statements are statements regarding our expectations for beginning or completing clinical trails, submitting to regulatory authorities applications for marketing approvals for our product candidates, raising additional capital and reducing our operating costs if we cannot raise additional funds. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any expected future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the risk that we will not be able to obtain funding necessary to conduct our operations, the uncertainties associated with product development, the risk that clinical trials will not commence, proceed or be completed as planned, the risk that our products will not receive marketing approval from regulators, the risks and uncertainties associated with the dependence upon the actions of our corporate, academic and other collaborators and of government regulatory agencies, the risk that our licenses to intellectual property may be terminated because of our failure to have satisfied performance milestones, the risk that products that appear promising in early clinical trials do not demonstrate efficacy in larger scale clinical trials, the risk that we may not be able to manufacture commercial quantities of our products, the uncertainty of future profitability and other factors set forth more fully in this Form 10-K, including those described under the caption “Item 1. Business—Risk Factors,” and other periodic filings with the Securities and Exchange Commission, to which investors are referred for further information.
We do not have a policy of updating or revising forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this Form 10-K as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.
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 issuers, 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 |
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 and the treatment of HIV infection and cancer. We have five 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 marketing approval. MNTX is designed to reverse the side effects of opioid pain medications while maintaining pain relief, an important need not currently met by any approved drugs. We are also developing MNTX for the management of post-operative bowel dysfunction caused by endogenous, or naturally occurring, opioids. We are conducting a broad clinical development program for MNTX in three different settings, using a different dosage form in each setting: a subcutaneous dosage form for patients with advanced medical illness; an intravenous dosage form for patients with post-operative bowel dysfunction; and an oral dosage form for patients with chronic pain. The status of our MNTX program in each of these settings is summarized below.
| • | We are studying MNTX in two pivotal, phase 3 clinical trials for the treatment of opioid-induced constipation in patients with advanced medical illness (“AMI”). Constipation is a serious medical problem for patients with terminal illnesses who are being treated with opioid pain-relief medications. In a pivotal phase 3 clinical trial in this indication completed in late 2004, MNTX induced laxation (a bowel movement) within four hours at more than four times the rate of placebo. Preliminary safety data from this trial showed that MNTX was generally well tolerated. We expect to complete enrollment of our second phase 3 trial in mid-2005. If the results of these two clinical studies are sufficiently compelling, we could submit to the U.S. Food and Drug Administration (“FDA”) a New Drug Application (“NDA”) seeking marketing approval for MNTX in AMI as early as the end of 2005. |
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| • | We have completed a phase 2 clinical trial of MNTX in the management of post-operative bowel dysfunction, an impairment of the gastrointestinal tract that frequently occurs in patients after abdominal and other major surgeries. We plan to meet with the FDA in 2005 to discuss designing a phase 3 clinical program. |
| • | We have conducted phase 1 clinical studies of oral MNTX in healthy volunteers. We are preparing to begin a phase 2 clinical trial of MNTX for the relief of opioid-induced constipation in chronic pain patients, including those suffering from headaches, joint pain, lower-back pain, sickle-cell disease, muscle pain and other disorders. |
We are seeking to establish a strategic collaboration with one or more pharmaceutical companies to support our development and commercialization efforts for MNTX. While we are engaged in discussions with several potential collaborators, these discussions might not 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. HIV is the virus that causes AIDS. We are conducting a multi-dose phase 2 clinical trial with PRO 542, a genetically engineered molecule designed to selectively target and neutralize HIV. We are also conducting a phase 1 study in healthy volunteers of 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 expect to complete phase 1 clinical testing of PRO 140 in mid-2005.
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 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 have an active business development function to seek out promising new products and technologies around which to build new development programs or enhance existing 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:
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| Program/Product Candidates | Indication/Use | Status (1) | ||
| Symptom Management and Supportive Care |
||||
| MNTX | Treatment of opioid-induced constipation in patients with advanced medical illness |
Phase 3 | ||
Management
of post-operative bowel dysfunction |
Phase 2 | |||
Treatment of opioid-induced constipation in patients with chronic pain |
Phase 1 | |||
| HIV | ||||
| PRO 542 | HIV therapy | Phase 2 | ||
| PRO 140 | HIV therapy | Phase 1 | ||
| ProVax | HIV vaccine | Research | ||
| Prostate Cancer | ||||
| PSMA (2): | ||||
Recombinant protein vaccine |
Immunotherapy for prostate cancer | Phase 1 | ||
Viral-vector vaccine |
Immunotherapy for prostate cancer | Preclinical | ||
Monoclonal antibody |
Immunotherapy for prostate cancer | Preclinical | ||
| Other | ||||
| GMK vaccine | Immunotherapy for melanoma | Phase 3 | ||
| Hepatitis C therapeutic | Therapy for hepatitis C virus infection | Research |
| (1) | “Research” means initial
research related to specific molecular targets, synthesis of new chemical
entities, assay development or screening for the identification of lead
compounds. “Preclinical” means that a lead compound is undergoing toxicology, formulation and other testing in preparation for clinical trials. 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. Our timing expectations regarding the PSMA programs assume we are able to agree expeditiously with Cytogen on a budget and work plan for 2005, which we have not yet accomplished. See “— Risk Factors — Disputes with Cytogen could delay or halt our PSMA programs.” |
| 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 than we expect.” | |
None of our product candidates has received marketing approval from the FDA or any other regulatory authority, and we have not yet received any revenue from the sale of any of our product candidates. We must receive marketing approval before we can commercialize any of our product candidates.
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| 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 180 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. At the same time, opioids 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, many 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 we are developing to reverse certain side effects induced by treatment with opioids. MNTX is a 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, including in the gastrointestinal tract, but since it does not interfere with opioid activity within the central nervous system, it does not block pain relief. To date, patients treated with MNTX in addition to opioid pain medications have reported 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. See “—Licenses—UR Labs.” MNTX has been studied in more than 650 patients and volunteers in numerous clinical trials. To date, MNTX has been generally 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 the treatment of opioid-induced constipation in patients with advanced medical illness, including cancer, AIDS and heart disease. Approximately 1.0 million deaths occur each year in the U.S. from AMI. Most of these patients receive opioids for pain prior to their death and suffer debilitating constipation.
We have completed a pivotal phase 3 clinical study of MNTX for the treatment of opioid-induced constipation in patients with AMI. This trial was a double-blind, randomized and placebo-controlled study that enrolled 154 patients at 16 hospice centers in the U.S. Patients were randomized to receive one of three blinded doses of study medication: a placebo, an MNTX dose of 0.15 mg/kg or an MNTX dose of 0.30 mg/kg. All patients had a life expectancy of less than six months, no laxation for 48 hours despite the use of laxatives and stool softeners and stable opioid therapy. The primary endpoint of the study was whether a single subcutaneous dose of MNTX induced laxation within four hours. Secondary endpoints were laxation within 24 hours without rescue medication and median time to laxation. The patients were approximately evenly divided among treatment groups. All enrolled patients were eligible to receive MNTX in an open-label phase of the study for up to four additional weeks.
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The top-line statistical analysis was performed on data from the blinded portion of the study. All statistical analyses were performed on an intent-to-treat basis using two-sided tests. Highly statistically significant results were achieved for all of the study endpoints at both dose levels of MNTX tested. Top-line results are set forth in the table below.
| Laxation within four hours (1) | |||||||
| Dose | Percentage of Patients |
p Value | |||||
| MNTX 0.15 mg/kg | 62% | p<0.0001 | |||||
| MNTX 0.30 mg/kg | 58% | p<0.0001 | |||||
| Placebo | 13% | — | |||||
| (1) Cochran-Mantel-Haenszel test of each MNTX dose versus placebo; significance testing at the 0.0249 level to account for multiple comparisons against placebo and an interim analysis. | |||||||
| Laxation within 24 hours without rescue medication (2) | |||||||
| Dose | Percentage of Patients |
p Value | |||||
| MNTX 0.15 mg/kg | 68% | p=0.0004 | |||||
| MNTX 0.30 mg/kg | 64% | p=0.001 | |||||
| Placebo | 33% | — | |||||
| (2) Chi-square test of each MNTX dose versus placebo; significance testing at the 0.05 level. | |||||||
| Median time to laxation (3) | |||||||
| Dose | Percentage of Patients |
p Value | |||||
| MNTX 0.15 mg/kg | 70 minutes | p<0.0001 | |||||
| MNTX 0.30 mg/kg | 45 minutes | p<0.0001 | |||||
| Placebo | over 24 hours | — | |||||
| (3) Log-rank test of each MNTX dose versus placebo; significance testing at the 0.05 level. | |||||||
Preliminary safety data from this study showed that MNTX was generally well tolerated. The most frequent adverse events reported included transient abdominal cramping and flatulence, both of which are necessary physiological prerequisites to a bowel movement in patients with significant constipation. These adverse events are consistent with phase 2 results and with the drug’s mechanism of action on the gastrointestinal tract. Serious adverse events attributed to study medication occurred rarely and were evenly distributed across the three groups. There were no reports of systemic opioid withdrawal due to study medication.
In January 2004, we initiated a second pivotal phase 3 clinical trial of MNTX. This randomized, double-blind, placebo-controlled study is designed to measure the ability of subcutaneous 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 in the U.S. and Canada. Thereafter, enrolled patients will be eligible to enter an open-label extension study for up to an additional three months. We expect to complete enrollment of this second pivotal phase 3 trial in mid-2005.
We had previously completed a multi-center, 33-patient phase 2 clinical trial of MNTX for the treatment of opioid-induced constipation in patients with AMI. In this study, patients were randomized to receive one of four
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subcutaneous doses of MNTX, three of which were intended to be active doses. 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, and laxation within four hours of dosing was reported in approximately 60% of patient doses for the active MNTX dose range. 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.
There were no serious adverse events reported related to MNTX in the phase 2 clinical trial. The most common side effects were transient flatulence and mild abdominal cramping. No evidence of opioid withdrawal was observed in the phase 2 trial, and there was no decline in pain relief.
If the results of our phase 3 clinical trial program of MNTX to treat opioid-induced constipation in patients with AMI are sufficiently compelling, we could submit to the FDA an NDA for MNTX in this indication as early as the end of 2005. We expect that the FDA would take at least six months to act on our application and that we could therefore receive marketing approval as early as 2006.
Post-operative Bowel Dysfunction. We are also developing MNTX for the management of post-operative bowel dysfunction. Of the patients who undergo surgery in the U.S. each year, more than four million patients are at high risk for developing bowel dysfunction, a serious impairment of the gastrointestinal tract. Post-operative bowel dysfunction is caused in part by the release by the body of endogenous opioids in response to the trauma of surgery. Bowel dysfunction is a major factor in increasing hospital stay, as patients are typically not discharged until bowel function is restored.
We have completed a multi-center, double-blind, randomized, placebo-controlled phase 2 clinical trial of intravenous MNTX in patients at risk for post-operative bowel dysfunction. The study was conducted in 65 individuals who had undergone segmental colectomies, which is the removal of a portion of the colon. Patients who received MNTX exhibited an acceleration of gastrointestinal recovery by approximately one day on average compared to placebo. Significant improvements were seen in both time to first bowel movement and time to discharge eligibility from the hospital, both of which we believe are clinically important measures of gastrointestinal recovery. MNTX was generally well tolerated in this study, with no reports of serious adverse events related to the drug. We plan to complete a more in-depth analysis of the data and meet with the FDA in 2005 to discuss designing a phase 3 clinical program.
Chronic Pain. We are developing MNTX for the treatment of constipation in patients receiving opioids for chronic pain. More than 25 million patients in the U.S. suffer from chronic pain. Opioid pain relievers are widely prescribed for these patients, many of whom suffer debilitating constipation as a result.
We have conducted two phase 1 clinical studies of oral MNTX at three dose levels in a total of 61 healthy volunteers. Analysis of data from these two studies, which were double-blind and randomized, indicated that MNTX was well tolerated and exhibited predictable pharmacokinetics. In four clinical studies conducted previously by independent researchers, an orally administered capsule form of MNTX demonstrated activity, including relief of opioid-induced constipation. We plan to initiate phase 2 studies of oral MNTX in 2005 in chronic pain patients who experience opioid-induced constipation.
| HIV |
Infection by the human immunodeficiency virus, or HIV, 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.
The Joint United Nations Program on HIV/AIDS (“UNAIDS”) and the World Health Organization (“WHO”) estimate that, as of December 2004, 39 million people worldwide were living with HIV. In high-income countries, 1.6 million people are infected, which includes an estimated 64,000 newly infected individuals. Of these
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1.6 million individuals, 1.0 million reside in North America. UNAIDS and WHO estimate that there were over three million deaths attributed to AIDS during 2004, of which 22,500 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 combination therapy, patients begin to develop resistance to these drugs. The potential for resistance is increased 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. 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. Further work by other scientists has established the existence of a second co-receptor, CXCR4. 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.
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 is based on the CD4 receptor, and our PRO 140 program is 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. 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. The goal of the study is to determine if repeat dosing can induce viral load reductions in this setting. Viral load is the concentration of virus nucleic acid, or genetic material, in the blood and is a widely used indicator of infection levels. Reduction in viral load is a primary goal of HIV therapy. We are also investigating the safety, pharmacokinetics and immunogenicity of PRO 542 treatment. Immunogenicity is the extent to which a patient’s immune system mounts a defense response against a drug, which could impair the drug’s ability to exert a therapeutic effect and could, in some cases, have serious health consequences to the patient. To date, PRO 542 has been well tolerated and non-immunogenic.
We expect to obtain results from our ongoing phase 2 clinical trial of PRO 542 in the second half of 2005. We plan to review these results with the intent of making a decision regarding the ongoing feasibility of this program.
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| 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 CCR5 without interfering with the normal function of CCR5. We began phase 1 clinical trials in May 2004. The goal of these studies is to determine the tolerability, safety, pharmacology and immunogenicity of PRO 140 in healthy volunteers. We expect to complete these studies in mid-2005.
PRO 140 has shown promising activity in preclinical studies. In in vitro studies, PRO 140 demonstrated potent, broad-spectrum antiviral activity against more than 40 genetically diverse “primary” HIV viruses isolated directly from infected individuals. Single doses of a murine-based PRO 140 reduced viral burdens to undetectable levels in an 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. Additionally, 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.
The “humanized” version of PRO 140 was developed for us by Protein Design Labs, Inc. See “— Licenses — Protein Design Labs.”
In May 2002, we entered into a fee-for-service agreement with ViroLogic, Inc. under which ViroLogic agreed to perform clinical laboratory tests using ViroLogic’s HIV resistance-testing technology on samples we provide. We use these services in connection with our clinical development of PRO 140 and PRO 542. 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, 2004, we had paid to ViroLogic $71,000 under this agreement.
| ProVax |
ProVax is our vaccine product candidate under development for the prevention of 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 Medical College of Cornell University.
ProVax contains critical surface proteins whose form closely mimics the structures found on HIV. In animal testing, ProVax stimulated the production of specific anti-HIV antibodies. When tested in the laboratory, these antibodies inactivated certain strains of HIV isolated from infected patients. The vaccine-elicited antibodies were observed to bind to the surface of the virus, rendering it non-infectious. Such neutralizing antibodies against HIV have been difficult to induce with vaccines currently in development.
In September 2003, we were awarded a contract by the National Institutes of Health (the “NIH”) to develop an HIV vaccine. We anticipate that these funds will be used principally in connection with our ProVax HIV vaccine program. 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 are the principal investigators under the contract and 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 are collaborating with us and head the vaccine design and animal testing core groups, respectively, under a subcontract. A total of approximately $3.7 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. Through December 31, 2004, we had recognized revenue of $3.1 million from this contract, including $90,000 for the achievement of a milestone.
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| Prostate Cancer |
Prostate cancer is the most common form of cancer affecting U.S. and is the second leading cause of cancer deaths in men each year. The American Cancer Society estimated that 230,100 new cases of prostate cancer would be diagnosed and that 29,500 men would die from the disease in 2004 in the U.S.
Conventional therapies for prostate cancer include radical prostatectomy, 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.
| PSMA |
Through PSMA Development Company LLC, our joint venture with Cytogen Corporation, we are engaged in research and development programs relating to vaccine and antibody immunotherapeutics based on PSMA. See “— Joint Venture Relating to PSMA.” 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 system to recognize and destroy prostate cancer cells. This trial is being conducted pursuant to a physician IND by the Memorial Sloan-Kettering Cancer Center. The vaccine combines the PSMA cancer antigen (recombinant soluble PSMA, or “rsPSMA”) 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 ongoing clinical trial is designed to evaluate the safety, immunogenicity and immune-stimulating properties of the vaccine in patients with either newly diagnosed or recurrent prostate cancer. Enrollment in this clinical trial is complete, and preliminary findings showed that certain prostate cancer patients produced anti-PSMA antibodies in response to the vaccine. Additional research will be needed to optimize the production, immune response and anti-tumor activity of the vaccine before this product candidate will advance to Phase II.
The joint venture is also pursuing 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. In preclinical studies, this 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. We anticipate initiating phase 1 clinical trials in the second half of 2005.
The joint venture has also developed human monoclonal antibodies which bind to PSMA. These antibodies, which were developed under license from Abgenix, Inc., are designed to recognize the three-dimensional physical structure of the protein and possess a high affinity and specificity for PSMA. In November 2002, the joint venture reported that its PSMA monoclonal antibody substantially reduced tumor growth in an animal model of human prostate cancer. This antibody, which was conjugated, or attached, to a radioisotope, selectively delivered this lethal payload to cells that expressed PSMA on their surface. The joint venture is investigating a PSMA monoclonal antibody-toxin conjugate. We expect the joint venture to commence human clinical trials in 2006.
In 2004, the NIH awarded us two grants totaling $7.4 million to be paid over four years and a third grant for $600,000 to be paid over two years. The awards were made under the National Cancer Institute’s FLAIR program, or Flexible System to Advance Innovative Research for Cancer Drug Discovery by Small Business. One grant for $3.8 million was awarded to fund the development and clinical testing of a PSMA human monoclonal antibody for the treatment of metastatic prostate cancer. An additional grant for $3.6 million was awarded to fund
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the continued development of a rsPSMA vaccine. The grant for $600,000 was awarded to fund continued development of PSMA-targeted immunotoxins.
The joint venture currently has no approved 2005 budget or work plan because we and Cytogen have not yet reached agreement with respect to a number of matters relating to the joint venture. If we do not reach an agreement regarding the 2005 budget and work plan, the programs conducted by the joint venture would likely be delayed or halted. Our timing expectations set forth above regarding the PSMA programs assume we are able to agree expeditiously with Cytogen on a budget and work plan for 2005. See “— Risk Factors — Disputes with Cytogen could delay or halt our PSMA programs.”
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 are currently conducting two phase 3 clinical trials of GMK.
Melanoma is a 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 estimated that in 2000 there were 550,860 melanoma patients in the U.S. The American Cancer Society estimates that there will be 55,100 new cases of melanoma diagnosed in the U.S. during 2004. 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.
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 for these melanoma patients ranges from 44% to 85%, depending on the stage of the disease and other physiological factors.
GMK entered a pivotal phase 3 clinical trial in the U.S. in August 1996. GMK was administered in this study by 12 subcutaneous injections over a two-year period on an out-patient basis. 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 other major cancer centers, cooperative cancer research groups, hospitals and clinics. The primary endpoint of this 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. No safety issues were identified. 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 actions, 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. We refer to “extending” the trial in this manner as an “extension study.” 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 is good, the data could be used with data from one or more other trials in support of a filing with the FDA for marketing approval; if the data is not good or inconclusive, it would not be useful in support of an application for marketing approval, and further studies would be required. In any event, positive data from our second phase 3 clinical trial of GMK, described below, would likely be required to obtain marketing approval for this product candidate.
In May 2001, we initiated an 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
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Treatment of Cancer, or EORTC, Europe’s leading cancer cooperative group. The EORTC phase 3 trial protocol 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. At present, we expect to enroll all 1,300 patients by the second half of 2005.
Hepatitis C Therapeutic
We are engaged in a research program to discover treatments for hepatitis C based on our discovery of a liver-specific receptor for the hepatitis C virus. Hepatitis C is a major cause of chronic liver disease. This receptor may provide a new target for hepatitis C therapy.
Joint Venture Relating to PSMA
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. With certain limited exceptions, 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. To date, we have been principally responsible for preclinical and clinical development. By the terms of the joint venture, Cytogen is principally responsible for product marketing, and we have co-promotion rights.
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.
Under our agreement with Cytogen, we were required to pay to the joint venture $2.0 million in supplemental capital contributions, which were used by the joint venture to pay a $2.0 million non-refundable licensing fee to Cytogen.
In general, the amount of funds that we and Cytogen must contribute to fund the operations of the joint venture is based on a budget and a related work plan that are 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 (currently 50%). 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, 2004, our portion of this joint funding obligation that we have paid was $12.3 million. According to the joint venture agreement, we may directly pursue and obtain government grants in support of the PSMA programs and retain related amounts not to exceed $3.0 million. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Joint Venture with Cytogen Corporation.”
The joint venture currently has no approved 2005 budget or work plan because we and Cytogen have not yet reached agreement with respect to a number of matters relating to the joint venture. If we do not reach an agreement regarding the 2005 budget and work plan, the programs conducted by the joint venture would likely be delayed or halted and the joint venture could be dissolved.
We and Cytogen 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
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our research and development services to the joint venture are required to be assigned to the joint venture for its use and benefit.
The principal 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.
| Licenses |
We are a party to license agreements under which we have obtained rights to use certain technologies in our product development programs. Our joint venture with Cytogen has also entered into license agreements with third parties. Set forth below is a summary of the more significant of these licenses.
| 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. 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, 2004 we had paid to UR Labs $550,000 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 U.S., if any). Upon prior written notice and an opportunity to cure, UR Labs may terminate the agreement under specified default circumstances that include our failure to achieve specified development milestones; however, the consent of UR Labs to appropriate revisions to the development milestones shall not be unreasonably withheld under specified circumstances. If not earlier terminated, the agreement continues so long as we are obligated to pay royalties on the sale of a licensed product (including MNTX) 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 term extensions may extend the period of our license rights, when and if such patent term extensions are granted.
| 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 developed the humanized PRO 140 monoclonal antibody and granted to us related exclusive and nonexclusive worldwide licenses under patents, patent applications and know-how. 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 U.S. 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, 2004, we have paid to PDL approximately $2.9 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 December 31, 2006. In the event of a default by one party, the agreement may be terminated, after an opportunity to cure, by the non-defaulting party upon prior written notice.
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| 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. While we have had discussions with Sloan-Kettering to obtain its consent to a revision of the milestone dates, Sloan-Kettering has not consented to a revision as of this time. The agreement may be terminated, after an opportunity to cure, by Sloan-Kettering for cause upon prior written notice.
As of December 31, 2004, 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 2021; 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 to be manufacturing a drug for commercial distribution by June 2004. We have not achieved either of these milestones 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. While we have had discussions with Columbia to obtain its consent to a revision of the milestone dates, Columbia has not consented to a revision as of this time. The agreement may be terminated, after an opportunity to cure, by Columbia for cause upon prior written notice.
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As of December 31, 2004, we have paid to Columbia $850,000 under this agreement. In addition, we are obligated to pay Columbia a milestone fee of $225,000. 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 Inc., pursuant to which Aquila agreed to supply us with all of our requirements for the QS-21 adjuvant used in 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 U.S., 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. In the event of a default by one party, the agreement may be terminated, after an opportunity to cure, by the non-defaulting party upon prior written notice.
As of December 31, 2004, 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.
| 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 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, 2004, the joint venture has paid to Abgenix $850,000 under this agreement. If the joint venture achieves certain milestones specified under the agreement, it will be obligated to pay Abgenix an additional approximately $6.2 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, 2004, the joint venture has paid to AlphaVax $600,000 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
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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 expires in 2015; however, patent applications filed in the U.S. 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.
| ADARC |
We have a letter agreement with The Aaron Diamond AIDS Research Center 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.
| 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.
| 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, European countries that are party to the European Patent Convention 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 U.S. are effective for:
| • | the longer of 17 years from the date of issue or 20 years from the earliest asserted filing date of the corresponding patent application, if the patent application was filed prior to June 8, 1995; and |
| • | 20 years from the earliest asserted filing date of the corresponding patent application, if the application was filed on or after June 8, 1995. |
In addition, in certain instances, the patent term can be extended up to a maximum of five years to recapture a portion of the term during which the FDA regulatory review was being conducted. The duration of foreign patents varies in accordance with the provisions of applicable local law, although most countries provide for patent terms of 20 years from the earliest asserted filing date and allow patent extensions similar to those permitted in the U.S.
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 generally require our employees, consultants and corporate partners who have access to our proprietary information to sign confidentiality agreements.
Currently our patent portfolio relating to our proprietary technologies in the symptom management and supportive care, HIV and cancer areas is comprised, on a worldwide basis, of 125 patents that have been issued or allowed and 154 pending patent applications, which we either own directly or of which we are the exclusive licensee. Our issued patents expire on dates ranging from 2006 through 2021. In addition, our joint venture with
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Cytogen owns directly or is the exclusive licensee of five patents that have been issued or allowed and 31 pending patent applications. The joint venture’s issued patents expire on dates ranging from 2014 to 2016. Patent term extensions and pending patent applications may extend the period of patent protection afforded our products in development.
We are aware of intellectual property rights held by third parties that relate to products or technologies we are developing. For example, we are aware of other groups investigating methylnaltrexone and other peripheral opioid antagonists, PSMA or related compounds and CCR5 monoclonal antibodies and of patents held, and patent applications filed, by these groups in those areas. While the validity of issued patents, patentability of pending patent applications and applicability of any of them to our programs are uncertain, if asserted against us, any related patent rights could adversely affect our ability to commercialize our products.
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 U.S. 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, recordkeeping, 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 U.S. The process of obtaining approvals from the FDA can be costly, time consuming and subject to unanticipated delays. We cannot assure you that approvals of our proposed products, processes, or facilities will be granted on a timely basis, or at all. If we experience delays in obtaining, or do not obtain, approvals for our products, commercialization of our products would be slowed or stopped. Moreover, even if we obtain regulatory approval, the approval may include significant limitations on indicated uses for which the product could be marketed or other significant marketing restrictions.
The process required by the FDA before our products may be approved for marketing in the U.S. generally involves:
| • | preclinical laboratory and animal tests; |
| • | submission to the FDA of an investigational new drug application, or IND, which must become effective before clinical trials may begin; |
| • | adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for its intended indication; |
| • | submission to the FDA of a marketing application; and |
FDA review of the marketing application in order to determine, among other things, whether the product is safe and effective for its intended uses. Preclinical tests include laboratory evaluation of product chemistry and animal studies to gain preliminary information about a product’s pharmacology and toxicology and to identify any safety problems that would preclude testing in humans. Products must generally be manufactured according to current Good Manufacturing Practices, and preclinical safety tests must be conducted by laboratories that comply with FDA regulations regarding good laboratory practices. The results of the preclinical tests are submitted to the FDA as part of an IND (Investigational New Drug) application. An IND is a submission which the sponsor of a
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clinical trial of an investigational new drug must make to the FDA and which must become effective before clinical trials may commence. The IND submission must include, among other things:
| • | a description of the sponsor’s investigational plan; |
| • | protocols for each planned study; |
| • | chemistry, manufacturing, and control information; |
| • | pharmacology and toxicology information; and |
| • | a summary of previous human experience with the investigational drug. |
Unless the FDA objects to, makes comments to or raises questions concerning an IND, the IND will become effective 30 days following its receipt by the FDA, and initial clinical studies may begin, although companies often obtain affirmative FDA approval before beginning such studies. We cannot assure you that submission of an IND by us will result in FDA authorization to commence clinical trials.
A New Drug Application, or NDA, is an application to the FDA to market a new drug. The NDA must contain, among other things, information on:
| • | chemistry, manufacturing, and controls; |
| • | non-clinical pharmacology and toxicology; |
| • | human pharmacokinetics and bioavailability; and |
| • | clinical data. |
The new drug may not be marketed in the U.S. until the FDA has approved the NDA.
A Biologic License Application, or BLA, is an application to the FDA to market a biological product. The BLA must contain, among other things, data derived from nonclinical laboratory and clinical studies which demonstrate that the product meets prescribed standards of safety, purity and potency, and a full description of manufacturing methods. The biological product may not be marketed in the U.S. until a biologic license is issued.
Clinical trials involve the administration of the investigational new drug to healthy volunteers or to patients under the supervision of a qualified principal investigator. Clinical trials must be conducted in accordance with the FDA’s Good Clinical Practice requirements under protocols that detail, among other things, the objectives of the study, the parameters to be used to monitor safety, and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, each clinical study must be conducted under the auspices of an Institutional Review Board. The Institutional Review Board will consider, among other things, ethical factors, the safety of human subjects, the possible liability of the institution and the informed consent disclosure which must be made to participants in the clinical trial.
Clinical trials are typically conducted in three sequential phases, although the phases may overlap. During phase 1, when the drug is initially administered to human subjects, the product is tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase 2 involves studies in a limited patient population to:
| • | evaluate preliminarily the efficacy of the product for specific, targeted indications; |
| • | determine dosage tolerance and optimal dosage; and |
| • | identify possible adverse effects and safety risks. |
When a new product is found to have an effect and to have an acceptable safety profile in phase 2 evaluation, phase 3 trials are undertaken in order to further evaluate clinical efficacy and to further test for safety within an expanded patient population. The FDA may suspend clinical trials at any point in this process if it concludes that clinical subjects are being exposed to an unacceptable health risk.
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The results of the preclinical studies and clinical studies, the chemistry and manufacturing data, and the proposed labeling, among other things, are submitted to the FDA in the form of an NDA or BLA, approval of which must be obtained prior to commencement of commercial sales. The FDA may refuse to accept the application for filing if certain administrative and content criteria are not satisfied, and even after accepting the application for review, the FDA may require additional testing or information before approval of the application. Our analysis of the results of our clinical studies is subject to review and interpretation by the FDA, which may differ from our analysis. We cannot assure you that our data or our interpretation of data will be accepted by the FDA. In any event, the FDA must deny an NDA or BLA if applicable regulatory requirements are not ultimately satisfied. In addition, we may encounter delays or rejections based upon changes in applicable law or FDA policy during the period of product development and FDA regulatory review. Moreover, if regulatory approval of a product is granted, such approval may be made subject to various conditions, including post-marketing testing and surveillance to monitor the safety of the product, or may entail limitations on the indicated uses for which it may be marketed. Finally, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing.
Both before and after approval is obtained, a product, its manufacturer, and the sponsor of the marketing application for the product are subject to comprehensive regulatory oversight. Violations of regulatory requirements at any stage, including the preclinical and clinical testing process, the approval process, or thereafter, may result in various adverse consequences, including FDA delay in approving or refusal to approve a product, withdrawal of an approved product from the market or the imposition of criminal penalties against the manufacturer or sponsor. In addition, later discovery of previously unknown problems may result in restrictions on such product, manufacturer, or sponsor, including withdrawal of the product from the market. Also, new government requirements may be established that could delay or prevent regulatory approval of our products under development.
Whether or not FDA approval has been obtained, approval of a pharmaceutical product by comparable government regulatory authorities in foreign countries must be obtained prior to marketing such product in such countries. The approval procedure varies from country to country, and the time required may be longer or shorter than that required for FDA approval. Although there are some procedures for unified filing for certain European countries, in general, each country has its own procedures and requirements. We do not currently have any facilities or personnel outside of the U.S.
In addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and various other present and potential future federal, state or local regulations. Our research and development involves the controlled use of hazardous materials, chemicals, viruses and various radioactive compounds. Although we believe that our safety procedures for storing, handling, using and disposing of such materials comply with the standards prescribed by applicable regulations, we cannot completely eliminate the risk of accidental contaminations or injury from these materials. In the event of such an accident, we could be held liable for any legal and regulatory violations as well as damages that result. Any such liability could have a material adverse effect on Progenics.
| Manufacturing |
We currently rely on single-source third party manufacturers for the supply of both bulk and finished form MNTX. We believe that our existing arrangements with such single-source third party manufacturers are reliable and adequate for the balance of our clinical trial and initial commercial supply requirements. However, we may in the future seek additional manufacturers for bulk and finished form MNTX as supplements and backup to our current arrangements.
In March 2005, we entered into an agreement with Mallinckrodt Inc. for the supply of the bulk form of MNTX. The contract provides for Mallinckrodt to