Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q 

(Mark One)

Commission File No. 000-23143

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

One World Trade Center, 47^th Floor
New York, NY 10007
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (646) 975-2500

Securities registered pursuant to Section 12(b) of the Act:

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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 4, 2020, a total of 86,596,633 shares of common stock, par value $0.0013 per share, were outstanding.

Note 1. Summary of Significant Accounting Policies

Business

Progenics Pharmaceuticals, Inc. (and its subsidiaries collectively the “Company,” “Progenics”, “we”, or “us”) is an oncology company focused on the development and commercialization of innovative targeted medicines and artificial intelligence to find, fight and follow cancer. Our recent progress includes the enrollment completion of our pivotal phase 3 trial for PyL™ and the positive topline results. Our pipeline includes therapeutic agents designed to precisely target cancer (AZEDRA^®, 1095 and PSMA TTC), as well as prostate-specific membrane antigen (“PSMA”) targeted imaging agents for prostate cancer (PyL and 1404).

Our current principal sources of revenue are AZEDRA sales, royalties, and development and commercial milestones from strategic partnerships. Royalty and further milestone payments from Bausch or Bayer depend on success in development and commercialization of RELISTOR and our PSMA-TTC, respectively, which is dependent on many factors, such as Bausch or Bayer’s efforts, decisions by the FDA and other regulatory bodies, competition from drugs for the same or similar indications, and the outcome of clinical and other testing of the licensed products.

We commenced principal operations in 1988, became publicly traded in 1997, and throughout have been engaged primarily in research and development efforts, establishing corporate collaborations, launching and commercializing AZEDRA and other related business activities. Certain of our intellectual property rights are held by wholly-owned subsidiaries. Our U.S. operations are presently conducted at our headquarters in New York and our manufacturing facility in Somerset, New Jersey. The operations of our wholly-owned foreign subsidiary, EXINI Diagnostics A.B. (“EXINI”), are conducted at our facility in Lund, Sweden. We operate under a single operating segment, which includes development, manufacturing and commercialization of pharmaceutical products and other technologies to target, diagnose and treat cancer. Our operating segment is regularly evaluated for financial performance by our chief operating decision maker, who is our Interim Chief Executive Officer.

Pending Merger with Lantheus Holdings, Inc.

On February 20, 2020, we announced the signing of an amended and restated agreement and plan of merger with Lantheus Holdings, Inc. (“Lantheus Holdings”) (the “Merger Agreement”). The Merger Agreement reflects the renegotiation of certain of the terms of our original agreement for the proposed merger entered into on October 1, 2019. The combined company would be led by Lantheus Holdings’ Chief Executive Officer, Mary Anne Heino. Ms. Heino will be supported by Chief Financial Officer, Robert J. Marshall Jr., and Chief Operations Officer, John Bolla. The Merger Agreement provides that, following the closing, Dr. Gérard Ber and Mr. Heinz Mäusli, currently members of Progenics’ Board of Directors (the “Board”), will be added as members of the Board of Directors of Lantheus Holdings. At the effective time of the merger, each share of Progenics common stock issued and outstanding immediately prior to such time (other than excluded shares and dissenting shares) will be converted into the right to receive (i) 0.31 of a share of Lantheus Holdings common stock (an increase from 0.2502 under the original agreement) and (ii) one non-transferrable contingent value right (a "CVR") per share of Progenics common stock, which will represent the right to receive up to two contingent payments upon the achievement of certain milestones subject to the terms of the Contingent Value Rights Agreement to be entered into between Lantheus Holdings and a rights agent reasonable acceptable to Progenics at or immediately prior to the effective time of the merger. In no event will Lantheus Holdings’ aggregate payments in respect of the CVRs, together with any other non-stock consideration treated as paid in connection with the proposed merger, exceed 19.9% of the total consideration Lantheus Holdings pays in the proposed merger. As a result of the increase in the exchange ratio, following the completion of the proposed merger, former Progenics stockholders’ aggregate ownership stake will increase to approximately 40% of the combined company from approximately 35% under the terms set forth in the original agreement.

On April 2, 2020, Progenics and Lantheus Holdings announced their decision to reschedule their respective special meetings of stockholders to vote on the matters related to the proposed merger of Progenics and Lantheus Holdings from April 28, 2020 to June 16, 2020. The rescheduling of the special meetings is intended to allow both companies the time necessary to respond to the novel coronavirus (COVID-19) global pandemic and its effect on each company’s business and on the combined company. The transaction is expected to close in the second quarter of 2020, subject to approval by Lantheus Holdings and Progenics stockholders and certain other customary closing conditions.

On April 14, 2020, Progenics entered into an agreement with Velan Capital, L.P. (“Velan”), Altiva Management Inc., Balaji Venkataraman and Deepak Sarpangal (collectively, the “Velan Stockholders”), pursuant to which Progenics agreed to pay the Velan Stockholders $1.3 million as partial reimbursement for their expenses incurred in connection with the Velan Stockholders’ involvement with Progenics, including the successful consent solicitation commenced on September 18, 2019 to reconstitute the board of directors of Progenics. The reimbursement will be in full satisfaction of the Velan Stockholders’ claims with respect to such expenses and will be paid promptly following the adoption of the Merger Agreement by the stockholders of Progenics and the approval of the stock issuance pursuant to the Merger Agreement by the stockholders of Lantheus Holdings.

In addition, on April 14, 2020, Progenics and Lantheus Holdings announced the entry by Lantheus Holdings into a Support Agreement (the “Support Agreement”) with Velan in connection with the proposed merger of Progenics and Lantheus Holdings, providing that Velan will vote all of its Progenics common stock and Lantheus Holdings common stock in favor of the proposed merger of Lantheus Holdings and Progenics on the terms set forth in the Merger Agreement, and that Velan will abide by certain customary standstill provisions, in each case, subject to the terms and conditions set forth in the Support Agreement.

AZEDRA

AZEDRA is the first and only approved therapy in the U.S. for the treatment of adult and pediatric patients 12 years and older with iobenguane scan positive, unresectable, locally advanced or metastatic pheochromocytoma or paraganglioma who require systemic anticancer therapy.

First quarter sales of AZEDRA totaled approximately $1.4 million for the quarter ended March 31, 2020. Sales of therapeutic doses of AZEDRA doubled over the preceding quarter. Progenics is continuing to receive and process requests for both dosimetry and therapeutic doses. However, in alignment with government, regulatory and public health recommendations in relation to the COVID-19 pandemic, many of the multidisciplinary treatment centers that serve pheochromocytoma or paraganglioma patients have banned, or have limited access to external visitors, including the field-based sales team for AZEDRA, to ensure the safety of patients and healthcare providers. Consequently, the Company expects corresponding product revenue to reflect the challenging environment associated with the COVID-19 pandemic until restrictions are lifted. As a result, the Company has decided to curtail promotional spending and furlough a portion of the field-based AZEDRA commercial operations and medical employees to support cost-saving measures as the Company continues to navigate through the changing COVID-19 environment. Progenics continues to assess this emerging situation and will make any relevant adjustments in alignment with government mandates when necessary.

PyL

We recently completed two successful pre-New Drug Application (“NDA”) meetings with the U.S. Food and Drug Administration (‘FDA’) and remain on track to complete a submission early in the third quarter of 2020. Based on prior discussions with the FDA, we believe that the data from the CONDOR study and the OSPREY study can serve as a basis for an NDA for PyL.

Several abstracts pertaining to PyL were recently published in the Journal of Urology, including the results of the Phase 3 CONDOR study in patients with biochemical recurrent prostate cancer. The CONDOR trial achieved its primary endpoint, with a correct localization rate (CLR) of 84.8% to 87.0% among the three blinded independent readers (the lower bound of the 95% confidence intervals ranging from 77.8% to 80.4%). The results of additional investigator-sponsored studies of PyL conducted in post-prostatectomy patients and metastatic clear cell renal cell carcinoma were also published in the journal.

1095

Following the removal of the import alert on Centre for Probe Development & Commercialization (CPDC), we have initiated eleven clinical sites in the U.S along with the six active sites in Canada to support enrollment in the Company’s multicenter, randomized, controlled, ARROW Phase 2 study in mCRPC. Progenics’1095 is a small molecule radiotherapeutic designed to selectively bind to the extracellular domain of PSMA, a protein that is highly expressed on prostate cancer cells. As the clinical community is facing challenges in trial conduct due to the COVID-19 pandemic, we are committed to ensuring adequate safety monitoring of ARROW subjects and maintaining the integrity of the trial in alignment with government, regulatory and public health recommendations. As such, Progenics has paused new enrollment for several months in the Phase 2 trial of I-131-1095 (1095) in combination with enzalutamide in chemotherapy-naïve patients with metastatic castration-resistant prostate cancer (mCRPC) to minimize the risk to patients and healthcare providers during the pandemic. For patients who are active and have been randomized for the study, they will continue to receive treatment doses and will be monitored for safety and efficacy in a manner that is permissible by each clinical site. As a result, the Company has decided to furlough a portion of the clinical employees to support cost-saving measures as the Company continues to navigate through the changing COVID-19 environment. Progenics continues to assess this emerging situation and will make any relevant adjustments in alignment with government mandates when necessary.

Liquidity

The Company is not profitable and there is no assurance that we will ever achieve and sustain profitability on a continuing basis. In addition, development activities, clinical testing, and commercialization of the Company’s product candidates will require additional financing. The Company’s accumulated deficit at March 31, 2020 totaled $694.6 million, and management expects to incur substantial losses in future periods. The success of the Company is subject to certain risks and uncertainties, including among others, uncertainties associated with the proposed merger with Lantheus Holdings; uncertainty of the impact of the coronavirus (COVID-19) pandemic; uncertainty of product development and commercialization; uncertainty of capital availability; uncertainty in the Company’s ability to enter into agreements with collaborative partners; dependence on third parties; and dependence on key personnel.

At March 31, 2020, we had $29.5 million of cash and cash equivalents, a decrease of $12.5 million from $42.0 million at December 31, 2019. On February 20, 2020, we announced the signing of the Merger Agreement. Additionally, on March 15, 2020, Progenics as borrower, and Lantheus Medical Imaging, Inc. (“Lantheus Medical Imaging”), a subsidiary of Lantheus Holdings, as lender, entered into a bridge loan agreement, pursuant to which Lantheus Medical Imaging agreed to provide for a secured short-term loan to the Company on or after May 1, 2020 in an aggregate principal amount of up to $10 million (the “Bridge Loan Agreement”). The bridge loan matures on the earlier to occur of (a) September 30, 2020 and (b) the date on which the Company enters into a debt financing or similar arrangements or any amendment to, or replacement of, its existing debt, provided by one or more third parties following the termination date of the Merger Agreement, in either case, having aggregate net cash proceeds that exceed the amount then required to repay all obligations under the Bridge Loan Agreement in full in cash. The bridge loan bears interest at a rate per annum of 9.5% and is secured through the pledge to Lantheus Medical Imaging of all of the issued and outstanding shares of capital stock of Molecular Insight Pharmaceuticals, Inc., a subsidiary of Progenics (“MIP”), and any debt of MIP owed to Progenics. Progenics will use the proceeds of the bridge loan for working capital and other general corporate purposes.

Consistent with regular practice for a growth-stage pharmaceutical or biotechnology company, and as we have done in the past, we anticipate the need, and are exploring options for, additional financing in order to meet our cash requirements if the proposed merger with Lantheus Holdings is not ultimately consummated. However, there can be no assurances that we will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund our current operating expenses or reduced operating expenses reflecting delays or reductions in the scope of our product development programs beyond one year from the date this annual report is issued. As such, we believe there is substantial doubt regarding our ability to continue as a going concern within one year after the date this Quarterly Report on Form 10-Q is filed with the SEC. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Basis of Presentation

Our unaudited condensed consolidated financial statements have been prepared in accordance with applicable presentation requirements, and accordingly, do not include all information and disclosures necessary for a presentation of our financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the U.S. (“GAAP”). In the opinion of management, these financial statements reflect all adjustments, consisting primarily of normal recurring accruals necessary for a fair statement of results for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for the full year.

Our unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2019. The year-end consolidated balance sheet data in these financial statements were derived from audited financial statements but do not include all disclosures required by GAAP.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Progenics as well as its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Revenue Recognition

We recognize revenue when our customers obtain control of the promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To account for our revenue arrangements, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy our performance obligations.

For contracts determined to be within the scope of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09” or the “Topic 606”), we assess the goods or services promised within each contract for the purpose of identifying them as performance obligations. We must apply judgement in assessing whether each promised good or service is distinct. If a promised good or service is not distinct, we will combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their estimated fair value, which requires significant judgment. Variable consideration, which is estimated using the expected value method or the most likely amount method, is included in the transaction price only if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

For arrangements that include development, regulatory or sales milestone payments, we evaluate whether the milestones are probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The following table summarizes our revenue streams from contracts with customers for the three months ended March 31, 2020 and 2019 (in thousands):

Product sales – represent revenue from sales of AZEDRA directly to hospitals. Our performance obligations are to provide AZEDRA based on sales orders from hospitals, which have been verified by our commercial team as properly credentialed to receive, handle, administer and dispose of radioactive materials. We recognize revenue after the customer takes title and has obtained control of the product. Our contracts with hospitals stipulate that product is shipped free on-board destination. We invoice hospitals after the products have been delivered and invoice payments are generally due within 60 days of invoice date. We record sales to hospitals based on AZEDRA’s list price per mCi and the amount prescribed based upon a dosimetric assessment of each patient. We record product sales net of any variable consideration due to rebates and discounts provided under governmental and other programs, and other sales-related deductions, such as product returns and copay assistance programs. Shipping and handling costs associated with finished goods delivered to customers are recorded as a selling expense.

Royalty income – represents revenue from the sales-based royalties under our intellectual property licensing arrangements and is recognized upon net sales of the licensed products.

License and other revenue – represent revenue from upfront payments (fixed consideration) and development and sales milestones, sublicense payments, support and service payments and sales-based bonus payments (variable consideration) under our licensing or software arrangements. The fixed consideration will be recognized as revenue at the time when the transfer of know-how is completed. The variable consideration will be estimated using the most likely amount method and recognized only when we have “a high degree of confidence” that revenue will not be reversed in a subsequent reporting period. The other revenue also includes revenue from product sales of research reagents, that is recognized upon shipment to the end customer (i.e. control of the product is deemed to be transferred).

We had receivable contract balances of $6.2 million and $16.0 million as of March 31, 2020 and December 31, 2019, respectively, primarily related to the royalty revenue stream and milestone payment receivable as of December 31, 2019 under our partnership with Bausch Health Companies, Inc. (“Bausch”) (see Note 5. Accounts Receivable).

Restricted Cash

Restricted cash included in long-term assets of $2.7 million and $3.0 million at March 31, 2020 and December 31, 2019, respectively, represents collateral for a letter of credit securing a lease obligation, collateral for a letter of credit related to equipment purchases and a security deposit with the German District Court related to the PSMA-617 litigation. We believe the carrying value of this asset approximates fair value.

Foreign Currency Translation

Our international subsidiaries generally consider their respective local currency to be their functional currency. Assets and liabilities of these international subsidiaries are translated into U.S. dollars at quarter-end exchange rates and revenues and expenses are translated at average exchange rates during the quarter and year-to-date period. Foreign currency translation adjustments for the reported periods are included in accumulated other comprehensive loss in our condensed consolidated statements of comprehensive loss, and the cumulative effect is included in the stockholders’ equity section of our condensed consolidated balance sheets. Realized gains and losses denominated in foreign currencies are recorded in operating expenses in our condensed consolidated statements of operations and were not material to our consolidated results of operations for the three months ended March 31, 2020 or 2019.

Leases

We determine whether an arrangement is or contains a lease at its inception. We recognize lease liabilities based on the present value of the minimum lease payments not yet paid by using the lease term and discount rate determined at lease commencement. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate to determine the present value of our lease payments. Our leases may include options to extend or terminate a lease when it is reasonably certain that we will exercise that option. We recognize the operating right-of-use (“ROU”) lease assets at amounts equal to the lease liability adjusted for prepaid or accrued rent, remaining balance of any lease incentives and unamortized initial direct costs.

The operating lease liabilities are reported in other current liabilities and other noncurrent liabilities and the related ROU lease assets are reported in other noncurrent assets on our condensed consolidated balance sheets. Lease expense for our operating leases is calculated on a straight-line basis over the lease term and is reported in research and development and selling, general and administrative expenses on our condensed consolidated statements of operations. We do not recognize a lease liability or ROU lease assets for leases whose lease terms, at commencement, are twelve months or less, or for leases which are below the established capitalization threshold.

Property and Equipment

Property and equipment is recorded at historical cost, net of accumulated depreciation and amortization of $4.3 million and $3.8 million as of March 31, 2020 and December 31, 2019, respectively. The following table summarizes our property and equipment (in thousands):

Note 2. New Accounting Pronouncements 

Recently Adopted

In August 2018, the FASB issued ASU 2018-13 (“ASU 2018-13”), Fair Value Measurement - Disclosure Framework (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance improves the disclosure requirements on fair value measurements. We adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

Recently Issued 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses and in April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which amend the scope and transition requirements of ASU 2016-13. The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. In May 2019, the FASB issued ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. This ASU addresses certain stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Date. This ASU extended and simplified how effective dates are staggered between larger public companies (bucket one) and all other entities (bucket two). ASU 2016-13 is effective for SEC filers, excluding entities eligible to be smaller reporting companies, for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and beginning after December 15, 2022 for all other public business entities. As a smaller reporting company, we are currently evaluating the impact this guidance will have on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

Note 3. Net Loss Per Share

Our basic net loss per share amounts have been computed by dividing net loss by the weighted-average number of common shares outstanding during the period. For the three months ended March 31, 2020 and 2019, we reported net losses and, accordingly, potential common shares were not included since such inclusion would have been anti-dilutive.

The calculations of net loss per share, basic and diluted, are as follows (amounts in thousands, except per share data):

The following table summarizes anti-dilutive common shares or common shares where performance conditions have not been met, that were excluded from the calculation of diluted net loss per share (in thousands):

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⁽¹⁾ Calculated as follows: (a) the contingent consideration liability balance divided by (b) the closing stock price of our common stock.

Note 4. Fair Value Measurements

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

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.

We believe the carrying amounts of our cash equivalents, restricted cash, accounts receivable, other current assets, other assets, accounts payable and accrued expenses approximated their fair values as of March 31, 2020 and December 31, 2019.

We record the contingent consideration liability resulting from our acquisition of MIP at fair value in accordance with Accounting Standards Codification (“ASC”) 820 (Topic 820, Fair Value Measurement).

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

The contingent consideration liability of $3.6 million as of March 31, 2020 represents the estimated fair value of the future potential milestone payments to former MIP stockholders (shown in the tables below).

Milestone payments due upon first commercial sale and/or from proceeds received from license revenue (in thousands):

Net sales milestone payments due upon first achievement of specified net sales target in any single calendar year across all MIP-related programs (in thousands):

We consider this liability a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value was determined based on probability adjusted discounted cash flow and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.

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

The following table summarizes quantitative information and assumptions pertaining to the fair value measurement of the Level 3 inputs at March 31, 2020 and December 31, 2019 (in thousands). The decrease in the contingent consideration liability of $0.3 million during the three months ended March 31, 2020 was primarily due to a decrease in the AZEDRA sales forecasts, partially offset by an increase due to shorter discount period and higher volatility used to calculate the present value of the contingent consideration liability.

For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated (in thousands):

Note 5. Accounts Receivable

Our accounts receivable represents amounts due to us from royalties, collaborators, AZEDRA product sales and, to a small extent, sales of research reagents, and consisted of the following at March 31, 2020 and December 31, 2019 (in thousands):

Note 6. Goodwill, In-Process Research and Development and Other Intangible Assets

Goodwill, In-Process Research and Development and Other Intangible Assets

The fair values of in-process research and development (“IPR&D”) and other identified intangible assets acquired in business combinations are capitalized. We utilize the “income method,” which applies a probability weighting that considers the risk of development and commercialization to the estimated future net cash flows that are derived from projected sales revenues and estimated costs or “replacement costs”, whichever is greater. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each IPR&D project and other identified intangible assets, independently. IPR&D assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. Other identified intangible assets, which include the technology asset acquired as part of the EXINI business combination, AZEDRA product rights intangible and Somerset intangible, are amortized over the relevant estimated useful lives. The IPR&D assets are tested for impairment at least annually or when a triggering event occurs that could indicate a potential impairment and any impairment loss is recognized in our condensed consolidated statements of operations.

Goodwill represents excess consideration in a business combination over the fair value of identifiable net assets acquired. Goodwill is not amortized but is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. We determine whether goodwill may be impaired by comparing the fair value of the reporting unit (we have determined that we have only one reporting unit for this purpose), calculated as the product of shares outstanding and the share price as of the end of a period, to its carrying value (for this purpose, our total stockholders’ equity). No goodwill impairment has been recognized as of March 31, 2020 or 2019.

The following tables summarize the activity related to our goodwill and intangible assets (in thousands):

The following table reflects the components of the finite-lived intangible assets as of March 31, 2020 (in thousands):

Note 7. Accrued Expenses

The carrying value of our accrued expenses approximates fair value, as it represents amounts that will be satisfied within one year. Accrued expenses consisted of the following at March 31, 2020 and December 31, 2019 (in thousands):

Note 8. Commitments and Contingencies

Consulting Agreement

On March 4, 2020, we entered into a consulting services agreement with Patrick Fabbio, with a term commencing on March 27, 2020 and continuing until the earlier of the effective date of the proposed merger with Lantheus Holdings or May 15, 2020 unless terminated by either party as set forth therein (the “Consulting Agreement”). Under the Consulting Agreement, Mr. Fabbio will provide consulting services as requested by us. In consideration for Mr. Fabbio’s services, the Consulting Agreement provides that, if the proposed merger is consummated on or before July 1, 2020, Mr. Fabbio will be paid $180,000 upon consummation of the proposed merger. This payment was originally provided for in his retention agreement with Progenics, except that such payment will now be made in a single lump sum upon the closing of the proposed merger with Lantheus Holdings and will not be contingent on Mr. Fabbio’s continued service with Progenics after the closing of the proposed merger.

Legal Proceedings

We are or may be involved in disputes, governmental and/or regulatory inspections, inquiries, investigations, and proceedings that could result in litigation, and other litigation matters that arise from time to time. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect us, our results of operations, financial condition, and cash flows. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our consolidated results of operations, financial position, or cash flows.

Abbreviated New Drug Application Litigations

RELISTOR Subcutaneous Injection

Paragraph IV Certifications - Mylan

On or about October 6, 2015, November 20, 2015, December 22, 2015, and December 23, 2015, Progenics, Salix Pharmaceuticals, Inc. (“Salix”) and Wyeth LLC (“Wyeth”) received four separate notifications of a Paragraph IV certification for RELISTOR (methylnaltrexone bromide) subcutaneous injection, for certain patents that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, also known as “the Orange Book.” The certifications resulted from the filing by Mylan Pharmaceuticals Inc. of an Abbreviated New Drug Application (“ANDA”) with the FDA, challenging such patents for RELISTOR subcutaneous injection and seeking to obtain approval to market a generic version of RELISTOR subcutaneous injection before some or all of these patents expire.

Paragraph IV Certification – Actavis

On or about October 27, 2015, January 5, 2016, and January 8, 2016, Progenics, Salix and Wyeth received three separate notifications of a Paragraph IV certification for certain patents for RELISTOR (methylnaltrexone bromide) subcutaneous injection, for certain patents that are listed in the FDA’s Orange Book. The certifications resulted from the filing by Actavis LLC of an ANDA with the FDA, challenging such patents for RELISTOR subcutaneous injection and seeking to obtain approval to market a generic version of RELISTOR subcutaneous injection before some or all of these patents expire.

District Court Actions

Progenics, Salix, Valeant (now Bausch Health Companies Inc., “Bausch”), and Wyeth filed suit against Mylan Pharmaceuticals, Inc. and Mylan Inc. in the District of New Jersey on November 19, 2015 (2:15-cv-8180-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663, 8,552,025, and 8,822,490 based upon Mylan Pharmaceutical Inc.’s filing of its ANDA seeking to obtain approval to market a generic version of RELISTOR vials before some or all of these patents expire. On February 4, 2016, Progenics, Salix, Bausch, and Wyeth filed an amended complaint, identifying Mylan Laboratories Ltd. as an additional Defendant, and further seeking declaratory judgment of infringement of U.S. Patent No. 9,180,125. Progenics, Salix, Bausch, and Wyeth filed suit against Mylan Pharmaceuticals, Inc., Mylan Laboratories Ltd., and Mylan Inc. in the District of New Jersey on January 4, 2016 (2:16-cv-00035-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663, 8,552,025, and 8,822,490 based upon Mylan Pharmaceutical Inc.’s filing of its ANDA seeking to obtain approval to market a generic version of RELISTOR prefilled syringes before some or all of these patents expire. On January 25, 2016, Progenics, Salix, Bausch, and Wyeth filed an amended complaint, further seeking declaratory judgment of infringement of U.S. Patent No. 9,180,125. Progenics, Salix, Bausch, and Wyeth filed suit against Mylan Pharmaceuticals, Inc., Mylan Laboratories Ltd., and Mylan Inc. in the District of New Jersey on September 1, 2017 (2:17-cv-06714-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent No. 9,669,096 based upon Mylan Pharmaceutical Inc.’s filing of ANDAs seeking to obtain approval to market generic versions of RELISTOR vials and prefilled syringes before the patents expires. On September 18, 2017, Progenics, Salix, Bausch, and Wyeth filed an amended complaint, further seeking declaratory judgment of infringement of U.S. Patent No. 9,492,445.

Progenics, Salix, Bausch, and Wyeth filed suit against Actavis LLC, Actavis, Inc., Actavis Elizabeth LLC, and Allergan PLC fka Actavis PLC in the District of New Jersey on November 30, 2015 (2:15-cv-08353-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663, 8,552,025, and 8,822,490 based upon Actavis LLC’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR prefilled syringes before some or all of these patents expire. On February 18, 2016, Progenics, Salix, Bausch, and Wyeth filed an amended complaint, further seeking declaratory judgment of infringement of U.S. Patent No. 9,180,125. Progenics, Salix, Bausch, and Wyeth filed suit against Actavis LLC, Actavis, Inc., Actavis Elizabeth LLC, and Allergan PLC fka Actavis PLC in the District of New Jersey on February 18, 2016 (2:16-cv-00889-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663, 8,552,025 and 8,822,490 based upon Actavis LLC’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR vials before some or all of these patents expire. Progenics, Salix, Bausch, and Wyeth filed suit against Actavis LLC, Teva Pharmaceuticals USA, Inc., and Teva Pharmaceutical Industries Ltd. in the District of New Jersey on August 18, 2017 (2:17-cv-07206-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 9,669,096 and 9,492,445 based upon Actavis LLC’s filing of ANDAs seeking to obtain approval to market generic versions of RELISTOR vials and prefilled syringes before the patents expires.

The 2:15-cv-8180-SRC-CLW, 2:16-cv-00035-SRC-CLW, 2:15-cv-08353-SRC-CLW, and 2:16-cv-00889-SRC-CLW actions were consolidated into a single action in the District of New Jersey (2:15-cv-08180-SRC-CLW). On May 1, 2018, the Court granted Plaintiffs’ motion for partial summary judgment as to the validity of claim 8 of U.S. Patent No. 8,552,025. On May 23, 2018, the Court entered an order for final judgment under Fed. R. Civ. P. 54(b) in favor of Plaintiffs and against Mylan as to claim 8 of the ’025 patent. On May 16, 2018, trial on the merits was adjourned in the 15-8180 action so that the trial could be consolidated with trial for 17-6714 action.

The 2:17-cv-06714-SRC-CLW and 2:17-cv-07206-SRC-CLW were consolidated into a single action in the District of New Jersey (2:17-cv-06714-SRC-CLW). Litigation in the 2:17-cv-06714-SRC-CLW action is underway. Fact discovery in this action has closed and expert discovery deadlines have not yet been set. This action has been consolidated for purposes of trial only with the 2:15-cv-8180 action.

Settlement Agreement - Actavis

On May 25, 2018, Progenics, Bausch, Salix, Wyeth (Progenics, Bausch and Salix, each “Plaintiff” and collectively “Plaintiffs”) and Actavis LLC (“Actavis”) entered into a Settlement and License Agreement (the “Actavis Agreement”) relating to Civil Action No. 2:15-cv-08180 and Civil Action No. 2:17-cv-06714. The following is a summary of the material terms of the Actavis Agreement. The Actavis Agreement provides for a full settlement and release by both Plaintiffs and Actavis of all claims that were or could have been asserted in the district court cases and all resulting damages or other remedies. Plaintiffs and Actavis have agreed to and, in fact, filed a Stipulated Consent Judgment and Injunction after the execution of the Actavis Agreement. Plaintiffs and Actavis have further acknowledged and agreed that the 30-month stay imposed by the FDA in relation to the approval of Actavis’ ANDAs for the Actavis Products (the “Actavis ANDAs”) should be terminated.

Under the Actavis Agreement, Plaintiffs grant Actavis a non-exclusive, royalty-free, non-transferable, non-sublicensable, limited license under the Patents-In-Suit to make, import, and sell each of the Actavis Products in the U.S. beginning on the earliest of (a) January 1, 2028; (b) for each of the Actavis Products, if Actavis is a “First Applicant” (as defined in 21. U.S.C. § 355(j)(5)(B)(iv)(II)) and has not forfeited, relinquished or otherwise waived its 180-day exclusivity, 180 days prior to the date on which an entity not a First Applicant is permitted to commercially sell such Actavis Product in the U.S. under authorization from Plaintiffs; (c) for each of the Actavis Products, if Actavis either is not a First Applicant or otherwise has forfeited, relinquished or otherwise waived its 180-day exclusivity, the earlier of (i) 181 days after any third party that is a First Applicant markets a corresponding single-dose vial or pre-filled syringe that has been FDA approved or submitted for approval under an ANDA as a generic version of RELISTOR^® Injection for subcutaneous use (the “Generic Products”) in the U.S., or (ii) the date on which a third party that is either not a First Applicant or otherwise has waived its 180-day exclusivity markets, or is first authorized by Plaintiffs to begin marketing, such Generic Product; (d) for each of the Actavis Products, the date on which a third party that has sought or received approval from the FDA under a “New Drug Application” (as defined in the US Federal Drug and Cosmetic Act and regulations promulgated thereunder) (“NDA”) for a corresponding single-dose vial or pre-filled syringe of methylnaltrexone bromide for subcutaneous use for which RELISTOR^® Injection is the listed drug markets or is first authorized by Plaintiffs to begin marketing such corresponding product; (e) for each of the Actavis Products, the date on which a corresponding generic version of the single-dose vial or pre-filled syringe of methylnaltrexone bromide for subcutaneous use approved under NDA No. 021964 for RELISTOR^® Injection that is marketed or intended for marketing in the U.S. without the RELISTOR^® trademark (an “Authorized Generic Product”) is first marketed in the U.S. by a third party; or (f) the earlier of (i) the date on which a final court decision is entered holding that each of the unexpired claims of the Patents-In-Suit are invalid and/or unenforceable, or (ii) the date on which the Patents-In-Suit have expired, been permanently abandoned, or delisted from the Orange Book. The Actavis Agreement also gives Actavis a limited right to grant sublicenses to its affiliates for certain pre-marketing activities.

Federal Circuit Appeal

On May 25, 2018, Mylan filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit (“CAFC”). The matter is currently pending on appeal at the Federal Circuit.

On July 9, 2018, Bausch and Salix filed a motion to disqualify Katten Muchin Rosenman LLP as counsel for Mylan. On July 17, 2018, an order was issued stating the briefing on the merits of Mylan’s appeal pending the disposition of the motion to disqualify. Oral argument was held on September 12, 2018. A decision disqualifying Katten Muchin Rosenman LLP as counsel for Mylan was issued on February 8, 2019, by the Federal Circuit. Merits briefing has concluded. Mylan submitted its opening brief on April 9, 2019. Plaintiffs filed their responsive brief on July 2, 2019. Mylan filed its reply brief on August 6, 2019. Oral argument was held on February 4, 2020. On April 8, 2020, the CAFC issued its decision reversing the district court’s grant of summary judgment and remanding for further proceedings. The current deadline for Plaintiffs to file a petition for rehearing/rehearing en banc is May 8, 2020. On April 22, 2020, Plaintiffs filed a motion to extend the deadline to file a petition for rehearing/rehearing en banc to June 22, 2020.

Paragraph IV Certification - Par

On or about July 15, 2017, Progenics, Salix and Wyeth received notification of a Paragraph IV certification for RELISTOR (methylnaltrexone bromide) subcutaneous injection, for certain patents that are listed in the FDA’s Orange Book. The certification resulted from the filing by Par Sterile Products, LLC (“Par Sterile”) of an ANDA with the FDA, challenging such patents for RELISTOR subcutaneous injection and seeking to obtain approval to market a generic version of RELISTOR subcutaneous injection before some or all of these patents expire.

District Court Actions

Progenics, Salix, Bausch, and Wyeth filed suit against Par Sterile Products, Par Pharmaceutical, Inc. (“Par Pharmaceutical” and, together with Par Sterile, “Par”), and Endo International plc in the District of New Jersey on August 25, 2017 (2:17-cv-06449-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663, 8,552,025, 8,822,490, 9,180,125, and 9,669,096 based upon Par Sterile Product’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR vials before some or all of these patents expire.

Progenics, Salix, Bausch, and Wyeth filed suit against Par Sterile Products, Par Pharmaceutical, and Endo International plc in the Southern District of New York on August 25, 2017 (1:17-cv-06557-PAE) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663, 8,552,025, 8,822,490, 9,180,125, and 9,669,096 based upon Par Sterile Product’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR vials before some or all of these patents expire. This action was voluntarily dismissed on November 30, 2017.

Settlement Agreement - Par

On May 10, 2018, Progenics, Bausch, Salix, Wyeth and Par entered into a Settlement and License Agreement (the “Par Agreement”) relating to Civil Action No. 17-06449-SRC-CLW. The following is a summary of the material terms of the Par Agreement.

The Par Agreement provides for a full settlement and release by both Plaintiffs and Par of all claims that were or could have been asserted in the district court case and all resulting damages or other remedies. Plaintiffs and Par have agreed to and, in fact, filed a Stipulated Consent Judgment and Injunction after the execution of the Par Agreement. Plaintiffs and Par have further acknowledged and agreed that the 30-month stay imposed by the FDA in relation to the approval of Par’s ANDA for the Par Products (the “Par ANDA”) should be terminated.

Under the Par Agreement, Plaintiffs grant Par a non-exclusive, royalty-free, non-transferable, non-sublicensable, limited license under the Patents-In-Suit to make, import, and sell the Par Products in the U.S., or make outside the U.S. solely for importation into the U.S. (the “Par License”) beginning on the earliest of (i) September 30, 2030; (ii) for either of the Par Products, one hundred eighty-one (181) days after any third party who is the “First Applicant” (as defined in 21. U.S.C. § 355(j)(5)(B)(iv)(II)) markets a single-dose vial or pre-filled syringe that has been FDA approved or submitted for approval under an ANDA as a generic version of RELISTOR^® Injection for subcutaneous use (the “Generic Products”); (iii) for either of the Par Products, the date on which a non-First Applicant third party markets an authorized generic (under the RELISTOR^® NDA) but without the RELISTOR^® trademark) single-dose vial or pre-filled syringe of methylnaltrexone bromide for subcutaneous use in the U.S.; (iv) for either of the Par Products, the date on which a third party who is not a First Applicant (or who is a First Applicant who has forfeited or otherwise waived its 180-day exclusivity) markets or is first authorized by Plaintiffs to market the Generic Products in the U.S.; (v) the date on which a final court decision is entered holding that each of the asserted claims against Par in the district court case from the Patents-In-Suit are invalid and/or unenforceable, or not infringed by the single-dose vial Par Product; or (vi) the date on which the Patents-In-Suit have expired, been permanently abandoned or delisted from the FDA’s Orange Book. Plaintiffs have also granted to Par a limited pre-commercialization license to manufacture and/or import the Par Products into the U.S. starting one hundred fifty (150) days prior to the effective date of the Par License solely to the extent reasonably necessary to enable Par to market the Par Products in the U.S. on or after the effective date of the Par License.

RELISTOR Tablets - Actavis

Paragraph IV Certifications

On or about October 24, 2016 and October 24, 2017, Progenics, Salix, Bausch and Wyeth received two separate notifications of a Paragraph IV certification for RELISTOR (methylnaltrexone bromide) tablets, for certain patents that are listed in the FDA’s Orange Book. The certification resulted from the filing by Actavis Laboratories Fl., Inc. (“Actavis”) of an ANDA with the FDA, challenging such patents for RELISTOR tablets and seeking to obtain approval to market a generic version of RELISTOR tablets before some or all of these patents expire.

District Court Actions

Progenics, Salix, Bausch, and Wyeth filed suit against Actavis, Actavis LLC, Teva Pharmaceuticals USA, Inc., and Teva Pharmaceuticals Industries Ltd. in the District of New Jersey on December 6, 2016 (2:16-cv-09038-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,420,663, 8,524,276, 8,956,651, 9,180,125, and 9,314,461 based upon Actavis’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR tablets before some or all of these patents expire.

Progenics, Salix, Bausch, and Wyeth filed suit against Actavis, Actavis LLC, Teva Pharmaceuticals USA, Inc., and Teva Pharmaceuticals Industries Ltd. in the District of New Jersey on December 8, 2017 (2:17-cv-12857-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 9,724,343 and 9,492,445 based upon Actavis’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR tablets before some or all of these patents expire.

The 2:16-cv-09038-SRC-CLW and 2:17-cv-12857-SRC-CLW actions were consolidated into a single action in the District of New Jersey (2:16-cv-09038-SRC-CLW). A four day bench trial was held from May 6, 2019 through May 9, 2019. On July 17, 2019, the Court issued an Order finding the asserted claims of U.S. Patent No. 8,524,276 valid and infringed. The Court additionally ordered that the effective date of any approval of Actavis’s ANDA No. 209615 may not be earlier than the expiration date of U.S. Patent No. 8,524,276.

Progenics, Salix, Bausch, and Wyeth filed suit against Actavis, Actavis LLC, Teva Pharmaceuticals USA, Inc., and Teva Pharmaceuticals Industries Ltd. in the District of New Jersey on June 13, 2019 (2:19-cv-13722-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent No. 10,307,417 based upon Actavis’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR tablets before this patent expires. Litigation in the 2:19-cv-13722-SRC-CLW action is underway. Fact discovery has not yet begun.

Federal Circuit Appeal

Actavis filed an appeal of the District Court decision with the Court of Appeals for the Federal Circuit on August 13, 2019. The matter is currently pending on appeal at the Federal Circuit and merits briefing is underway. Actavis’s opening brief was filed February 6, 2020. The deadline for Plaintiffs to file their responsive brief is currently July 17, 2020.

European Opposition Proceedings

In addition to the above described ANDA notifications, in October 2015, Progenics received notices of opposition to three European patents relating to methylnaltrexone. Notices of opposition against EP1615646 were filed on September 24, 2015 separately by each of Actavis Group PTC ehf and Fresenius Kabi Deutschland GmbH. Notices of opposition against EP2368553 were filed on September 29, 2015 and September 30, 2015 by Fresenius Kabi Deutschland GmbH and Actavis Group PTC ehf, respectively. Notices of opposition against EP2368554 were filed on September 24, 2015 separately by each of Actavis Group PTC ehf and Fresenius Kabi Deutschland GmbH. On May 11, 2017, the opposition division provided notice that EP2368553 will be revoked. On June 28, 2017, the opposition division provided notice that EP1615646 will be revoked. On July 4, 2017, the opposition division provided notice that EP2368554 will be revoked. Each of these matters are on appeal with the European Patent Office. Oral proceedings for EP1615646 are set to occur on September 22, 2020. Oral proceedings for EP2368554 and EP2368553, scheduled for March 9 and March 10, 2020, respectively were cancelled by the Board of Appeals on March 9, 2020, due to health concerns. Oral proceedings have been rescheduled for November 18, 2020 for EP2368554 and for November 17, 2020 for EP2368553.

For each of the above-described proceedings, we and Bausch continue to cooperate closely to vigorously defend and enforce RELISTOR intellectual property rights. Pursuant to the RELISTOR license agreement between Progenics and Bausch, Bausch has the first right to enforce the intellectual property rights at issue and is responsible for the costs of such enforcement.

We are or may be from time to time involved in various other disputes, governmental and/or regulatory inspections, inquires, investigations and proceedings that could result in litigation, and other litigation matters that arise from time to time. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect us, our results of operations, financial condition, and cash flows.

PSMA-617

German District Court Litigation

We announced a lawsuit and associated worldwide patent ownership dispute based on our claims to certain inventions related to PSMA-617, a PSMA-targeted radiopharmaceutical compound under development for the treatment of prostate cancer that is the subject of certain patent applications filed worldwide by the University of Heidelberg (“the University”).

On November 8, 2018, MIP filed a complaint against the University in the District Court of Mannheim in Germany. In this Complaint, the Company claims that the discovery and development of PSMA-617 was related to work performed under a research collaboration sponsored by MIP. MIP alleged that the University breached certain contracts with MIP and that MIP is the co-owner of inventions embodied in certain worldwide patent filings related to PSMA-617 that were filed by the University in its own name. On February 27, 2019, Endocyte, Inc., a wholly owned subsidiary of Novartis AG, filed a motion to intervene in the German litigation. Endocyte is the exclusive licensee of the patent rights that are the subject of the German proceedings.

On November 27, 2018, MIP requested that the European Patent Office (“EPO”) stay the examination of European Patent (EP) 3038996 A1 (EP 14799340.6) and of the Divisional Applications EP 18172716.5, EP 18184296.4, and EP 18203547.7 pending a decision from the German District Court on MIP’s Complaint. On December 10, 2018, the EPO granted MIP’s request and stayed the examination of the patent and patent applications effective November 27, 2018. On December 20, 2018, MIP filed a Confirmation of Ownership with the United States Patent and Trademark Office (“USPTO”) in the corresponding US patent applications (US Serial Nos. 15/131,118; 15/805,900; 16/038,729 and 16/114,988). MIP’s filing with the USPTO takes the position that, in light of the collaboration and contracts between MIP and the University, MIP is the co-owner of these pending U.S. patent applications. On November 12, 2019, the University filed a statement with the USPTO to dispute the Confirmation of Ownership filed by MIP. On February 21, 2020, MIP filed declarations confirming the assignment record as correct based upon MIP’s filings dated December 20, 2018, as well as a Confirmation of Ownership in pending US patent applications 16/551,198 and 16/510,495. On March 6, 2020, MIP filed with the USPTO a notice stating that the Power of Attorney in pending US patent applications 16/551,198 and 16/510,495 was signed by less than all applicants or owners of the applications.

On February 27, 2019, the German District Court set €416,000 as the amount MIP must deposit with the Court as security in the event of an unfavorable final decision on the merits of the dispute. On February 28, 2019, the Court set a hearing date of August 6, 2019 at which time it held the first oral hearing in the case. The Court considered procedural matters and granted the parties the right to make further submissions. MIP’s further submission was timely filed by the October 1, 2019 deadline. The University filed a reply brief on January 31, 2020 and MIP filed a further reply brief on April 8, 2020. The Court is in the process of scheduling a further oral hearing to be held in summer 2020.

Third Party Patents

Post-Grant Review of U.S. Patent No. 10,112,974

On July 29, 2019 we filed a petition for post-grant review (“PGR”) with the United States Patent and Trademark Office (“USPTO”) of U.S. Patent No. 10,112,974 (“the ‘974 patent”), which is jointly owned by Max-Planck-Gesellschaft zur Foerderung der Wissenschaften and Universitat zu Koln (“the Patent Owners”). Certain claims of the ‘974 patent recite precursor compounds for preparing prostate-specific membrane antigen (PSMA) targeting conjugates. In our petition, we allege that such precursor compounds were previously disclosed in other publications, and that claims 1-15 and 31 are therefore invalid.

On August 13, 2019, the USPTO mailed a Notice of Filing Date, setting a three (3)-month deadline for the Patent Owners to file a preliminary response. The Patent Owners did not file a response. On January 29, 2020, the Patent Trial & Appeal Board (PTAB) at the USPTO instituted post-grant review of the ‘974 patent, setting a deadline of April 22, 2020 for the Patent Owners to file a response. On March 13, 2020, the Patent Owners filed a statutory disclaimer, disclaiming claims 1-5, 7, 9, 13-15 and 31. On April 27, 2020, the USPTO issued a final written decision, stating remaining claims 6, 8, and 10-12 were not shown to be unpatentable.

Litigation Related to the Merger

Six lawsuits - four putative class actions and two individual actions - were initially brought against Progenics and the Progenics Board by purported stockholders of Progenics alleging inadequate disclosure by Progenics in the registration statement filed on November 12, 2019 related to the merger. Three of such lawsuits were voluntarily dismissed without prejudice by plaintiffs, with no settlements from, or other agreed obligations by, the respective defendants thereunder. Two additional putative class actions and an individual action were subsequently filed, alleging, among other things, inadequate disclosures in the amended registration statement filed on March 16, 2020 and the proxy statement filed on March 19, 2020.

On November 22, 2019, a purported stockholder filed a putative class action complaint in the United States District Court for the District of Delaware, captioned Johnson v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:19-cv-02183, against Progenics and members of the Progenics Board, which is referred to in this Quarterly Report on Form 10-Q as the Johnson I Action. On March 5, 2020, the Johnson I Action was voluntarily dismissed without prejudice. On November 25, 2019, a second purported stockholder filed a putative class action complaint in the United States District Court for the District of Delaware, captioned Thompson v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:19-cv-02194, against Progenics, certain members of the Progenics Board, Lantheus Holdings, and Plato Merger Sub, Inc. ("Merger Sub"), which is referred to in this Quarterly Report on Form 10-Q as the Thompson Action. On March 10, 2020, the Thompson Action was voluntarily dismissed without prejudice. On November 26, 2019, a third purported stockholder filed a complaint in the United States District Court for the Southern District of New York, captioned Wang v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:19-cv-10936, against Progenics and members of the Progenics Board, which is referred to in this Quarterly Report on Form 10-Q as the Wang Action. On December 9, 2019, a fourth purported stockholder filed a putative class action complaint in the United States District Court for the District of New Jersey, captioned Michael A. Bernstein IRA v. Progenics Pharmaceuticals, Inc. et al., Civil Action No. 2:19-cv-21200, against Progenics, members of the Progenics Board, Lantheus Holdings, and Merger Sub, which is referred to in this Quarterly Report on Form 10-Q as the Bernstein IRA Action. On April 21, 2020 an amended complaint was filed in the Bernstein IRA Action, and on May 6, 2020, the Bernstein IRA action was transferred to the United States District Court for the Southern District of New York under Civil Action No. 1:20-cv-03521. On December 12, 2019, a fifth purported stockholder filed a putative class action complaint in the United States District Court for the District of Delaware, captioned Pill v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:19-cv-02268, against Progenics and members of the Progenics Board. The purported stockholder voluntarily dismissed this action without prejudice and the court closed the case on March 10, 2020. On December 20, 2019, a sixth purported stockholder filed a complaint in the United States District Court for the Southern District of New York, captioned Hess v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:19-cv-11683, against Progenics, Progenics’ Chief Executive Officer and Chief Financial Officer, and members of the Progenics Board, which is referred to in this Quarterly Report on Form 10-Q as the Hess Action. On April 8, 2020, an amended complaint was filed in the Hess Action.

On April 2, 2020, a seventh purported stockholder filed a putative class action in the United States District Court for the Southern District of New York, captioned Goldstone v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:20-cv-02750, against Progenics, members of the Progenics Board, Lantheus Holdings, and Merger Sub, which is referred to in this Quarterly Report on Form 10-Q as the Goldstone Action. On April 6, 2020, the purported stockholder in the Johnson Action filed a putative class action in the United States District Court for the Southern District of New York, captioned Johnson v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:20-cv-02847, against Progenics and members of the Progenics Board, which is referred to in this Quarterly Report on Form 10-Q as the Johnson II Action. On April 8, 2020, an eighth purported stockholder filed a complaint in the United States District Court for the Southern District of New York, captioned Krueger v. Progenics Pharmaceuticals, Inc., et al., Civil Action No. 1:20-cv-02913, against Progenics and members of the Progenics Board, which is referred to in this Quarterly Report on Form 10-Q as the Krueger Action.

The complaints in the Wang, Bernstein IRA, Hess, Goldstone, Johnson II, and Krueger Actions allege, among other things, that Progenics and the members of the Progenics Board violated Sections 14(a) and 20(a) of the Exchange Act, and 17 C.F.R. § 244.100 and Rule 14a-9 promulgated under the Exchange Act, by misstating or omitting certain allegedly material information in the registration statement filed with the SEC on November 12, 2019 related to the merger, the amended registration statement filed on March 16, 2020, or the proxy statement filed on March 19, 2020. The Goldstone complaint further alleges that members of the Board breached their fiduciary duties to the stockholders of Progenics and that Lantheus Holdings and Merger Sub aided and abetted such breaches of fiduciary duties. The complaints seek, among other things, injunctive relief preventing the consummation of the merger, rescission or damages in the event of consummation of the merger, declaratory relief related to disclosures in the registration statement, and certain fees and expenses. Progenics intends to vigorously defend itself against these complaints.

In addition, by letter dated October 14, 2019, Progenics received a shareholder demand from the Fireman’s Retirement System of St. Louis under Section 220 of the DGCL to inspect its books and records concerning, among other things, the opposition to the consent solicitation commenced by Velan and the negotiation and execution of the original merger agreement, and asserting that the Progenics Board may have breached its fiduciary obligations. Progenics and the Fireman’s Retirement System of St. Louis executed a confidentiality agreement and negotiated the scope of the production of books and records in response to the FRS Demand which Progenics has provided.

Whistleblower Complaint

In July 2019, we received notification of a complaint submitted by Dr. Syed Mahmood, the former Vice President of Medical Affairs for Progenics, to the Occupational Safety and Health Administration of the United States Department of Labor (“DOL”), alleging that the termination of his employment by Progenics was in violation of Section 806 of the Sarbanes-Oxley Act of 2002 (“SOX”). Dr. Mahmood is seeking reinstatement as Vice President of Medical Affairs, back pay, front pay in lieu of reinstatement, interest, attorneys’ fees and costs incurred, and special damages. In March 2020, Dr. Mahmood filed a complaint in the U.S. District Court for the Southern District of New York (as permitted by SOX because the DOL had not issued a decision within 180 days). Dr. Mahmood’s federal complaint makes similar allegations as his DOL claim. The DOL action will now be dismissed and the action will proceed in federal district court. Progenics’ response in the federal action is due May 26, 2020. The Company believes that it had ample reason for terminating such employment for good and sufficient legal cause, and the Company believes that the claim is without merit and is vigorously defending this claim.

Note 9. Operating Leases

We lease office and manufacturing space and certain office equipment under noncancelable operating leases. We determine whether an arrangement is or contains a lease at its inception. We recognize lease liabilities based on the present value of the minimum lease payments not yet paid, by using the lease term and discount rate determined at lease commencement. As our leases do not provide an implicit rate, we use our incremental borrowing rate of 9.5% commensurate with the underlying lease terms to determine the present value of our lease payments. Rental payments are recognized as rent expense on a straight-line basis over the term of the lease and for the three months ended March 31, 2020 and 2019, we recognized rent expense in the amount of $0.6 million and $0.5 million, respectively. Our leases have remaining lease terms of one year to 10.5 years, one of which includes an option to extend the lease for five years. For both the three months ended March 31, 2020 and 2019, cash payments against operating lease liabilities totaled $0.5 million.

The information related to our leases is as follows (in thousands):

At March 31, 2020, future lease payments for noncancelable operating leases are as follows (in thousands):

Note 10. Non-Recourse Long-Term Debt, Net

On November 4, 2016, through a wholly-owned subsidiary MNTX Royalties Sub LLC (“MNTX Royalties”), we entered into a $50.0 million loan agreement (the “Royalty-Backed Loan”) with a fund managed by HealthCare Royalty Partners III, L.P. (“HCRP”). Under the terms of the Royalty-Backed Loan, the lenders have no recourse to us or to any of our assets other than the right to receive royalty payments from the commercial sales of RELISTOR products owed under our agreement with Bausch. The RELISTOR royalty payments will be used to repay the principal and interest on the loan. The Royalty-Backed Loan bears interest at a per annum rate of 9.5%.

Under the terms of the loan agreement, payments of interest and principal, if any, are made on the last day of each calendar quarter out of RELISTOR royalty payments received since the immediately-preceding payment date. On each payment date prior to March 31, 2018, RELISTOR royalty payments received since the immediately preceding payment date were applied solely to the payment of interest on the loan, with any royalties in excess of the interest amount retained by us. Beginning on March 31, 2018, 50% of RELISTOR royalty payments received since the immediately-preceding payment date in excess of accrued interest on the loan are used to repay the principal of the loan, with the balance retained by us. Starting on September 30, 2021, all of the RELISTOR royalties received since the immediately-preceding payment date will be used to repay the interest and outstanding principal balance until the balance is fully repaid. The loan has a maturity date of June 30, 2025. Upon the occurrence of certain triggers in the loan agreement and if HCRP so elects, all of the RELISTOR royalty payments received after the immediately-preceding payment date shall be applied to the payment of interest and repayment of principal until the principal of the loan is fully repaid. In the event of such an election by HCRP, we have the right to repay the loan without any prepayment penalty.

In connection with the Royalty-Backed Loan, the debt issuance costs have been recorded as a debt discount in our consolidated balance sheets and are being amortized and recorded as interest expense throughout the life of the loan using the effective interest method.

The following tables summarize the components of the Royalty-Backed Loan in our condensed consolidated financial statements for the periods presented (in thousands):

As of March 31, 2020, we were in compliance with all material covenants under the Royalty-Backed Loan and there was no material adverse change in our business, operations, or financial conditions, as defined in the loan agreement.

Note 11. Stockholders’ Equity

Common Stock and Preferred Stock

We are authorized to issue 160.0 million shares of our common stock, par value $0.0013, and 20.0 million shares of preferred stock, par value $0.001. The Board of Directors (the “Board”) has the authority to issue common and preferred shares, in series, with rights and privileges as determined by the Board.

Shelf Registration 

In October 2018, we filed a new shelf registration statement. The new shelf registration replaced our prior shelf registration statement, pursuant to which no additional securities will be offered or sold. The new shelf registration statement permits: (a) the offering, issuance and sale of up to a maximum aggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and/or units; and (b) as part of the $250.0 million, the offering, issuance and sale by us of up to a maximum aggregate offering price of $75.0 million of our common stock under our sales agreement with Cantor in one or more at-the-market (“ATM”) offerings.

In addition, in October 2018 we entered into a new sales agreement with Cantor Fitzgerald & Co. (“Cantor”), as sales agent, (the “2018 Sales Agreement”). Pursuant to the 2018 Sales Agreement, we may offer and sell through Cantor, from time to time, shares of our common stock up to an aggregate offering price of $75.0 million. The 2018 Sales Agreement may be terminated by Cantor or us at any time upon ten days’ notice, or by Cantor at any time in certain circumstances, including the occurrence of a material adverse change in our business or financial condition.

Note 12. Stock-Based Compensation

Equity Incentive Plans

We adopted the following stockholder-approved equity incentive plans:

●     The 2005 Stock Incentive Plan (the “2005 Plan”), which authorized the issuance of up to 11,450,000 shares of common stock covering several different types of awards, including stock options, restricted shares, stock appreciation rights, performance shares, and phantom stock. The 2005 Plan was terminated in June 2018 at the time the 2018 Stock Incentive Plan was approved. Shares available for new awards under the 2005 Plan at the time of termination became available for awards under the 2018 Stock Incentive Plan. Options granted before termination of the 2005 Plan will continue to remain outstanding until exercised, cancelled or expired.

●     The 2018 Stock Incentive Plan (the “2018 Plan”), pursuant to which we are authorized to issue up to 4,800,000 shares of common stock covering several different types of awards, including stock options, restricted shares, stock appreciation rights, performance shares, and phantom stock. The 2018 Plan will terminate on March 27, 2028.

The stock option plans provide that options may be granted at an exercise price of 100% of fair market value of our common stock on the date of grant, may be exercised in full or in installments, at the discretion of the Board or its Compensation Committee, and must be exercised within ten years from date of grant. Stock options generally vest pro rata over three to five years. We recognize stock-based compensation expense on a straight-line basis over the requisite service (vesting) period based on fair values. We use historical data to estimate expected employee behaviors related to option exercises and forfeitures and included these expected forfeitures as a part of the estimate of stock-based compensation expense as of the grant date. We adjust the total amount of stock-based compensation expense recognized for each award, in the period in which each award vests, to reflect the actual forfeitures related to that award. Changes in our estimated forfeiture rate will result in changes in the rate at which compensation cost for an award is recognized over its vesting period.

Stock Options

The following table summarizes stock options activity for the three months ended March 31, 2020 (in thousands, except per share data or as otherwise noted):

The weighted-average fair value of options granted during the three months ended March 31, 2020 and 2019 was $2.65 and $2.87 per share, respectively.

The total intrinsic value (the excess of the market price over the exercise price) was zero for stock options outstanding, exercisable, vested and expected to vest as of March 31, 2020. The total intrinsic value for stock options exercised during the three months ended March 31, 2020 was approximately $6 thousand. No stock options were exercised during the three months ended March 31, 2019.

Stock-Based Compensation Expense

We account for stock-based awards issued to employees in accordance with the provisions of ASC 718 (Topic 718, Compensation – Stock Compensation). We recognize stock-based compensation expense on a straight-line basis over the service period of the award, which is generally three to five years. Stock-based awards issued to consultants are accounted for in accordance with the provisions of ASC 718 and ASC 505-50 (Subtopic 50 “Equity-Based Payments to Non-Employees” of Topic 505, Equity). Options granted to consultants are periodically revalued as the options vest and are recognized as an expense over the related period of service or the vesting period, whichever is longer. Under the provisions of ASC 718, members of the Board are considered employees for calculation of stock-based compensation expense.

We estimated the fair value of the stock options granted on the date of grant using a Black-Scholes valuation model that used the weighted-average assumptions noted in the following table. The risk-free interest rate assumption we use is based upon United States Treasury interest rates appropriate for the expected life of the awards. The expected life (estimated period of time that we expect employees, directors, and consultants to hold their stock options) was estimated based on historical rates for three group classifications, (i) employees, (ii) outside directors and officers, and (iii) consultants. Expected volatility was based on historical volatility of our stock price for a period equal to the stock option’s expected life and calculated on a daily basis. The expected dividend rate is zero since we do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future.

The following table presents assumptions used in computing the fair value of option grants during the three months ended March 31, 2020 and 2019.

Stock-based compensation expense for the three months ended March 31, 2020 and 2019 was recorded in our condensed consolidated statement of operations as follows (in thousands):

At March 31, 2020, unrecognized stock-based compensation expense related to stock options was approximately $4.8 million and is expected to be recognized over a weighted-average period of approximately 2.8 years.