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☒ 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☒ 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 August 5, 2019,May 4, 2020, a total of 86,421,63486,596,633 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. HighlightsOur recent progress includes the enrollment completion of our recent progress include the first commercial revenue for AZEDRA^®, completion of enrollment of the PyL^TMpivotal Phasephase 3 trial for PyL™ and dosing of the first patient in the 1095 open label Phase 2 trial.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).

Recent and Continued Progress:

Corporate:

Strategic partnerships:

Our current principal sources of revenue from operations are royaltyAZEDRA sales, royalties, and development and commercial milestones from Bausch and Bayer.strategic partnerships. Royalty and further milestone payments from Bausch or Bayer depend on success in development and commercialization of RELISTOR and our PSMA antibody technology,PSMA-TTC, respectively, which is dependent on many factors, such as Bausch or Bayer’s respective 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 June 30, 2019,March 31, 2020, we had $84.8$29.5 million of cash and cash equivalents, a decrease of $52.9$12.5 million from $137.7$42.0 million at December 31, 2018. We expect2019. 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 thisexceed 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 sufficientable to obtain additional capital on acceptable terms and in the amounts necessary to fully fund operations as currently anticipatedour current operating expenses or reduced operating expenses reflecting delays or reductions in the scope of our product development programs beyond one year from the filing date ofthis 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. We have historically funded our operations10-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 significant extent from capital-raising and we expect to require additional funding in the future, the availability of which is never guaranteed and may be uncertain. We expect that we may continue to incur operating losses.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, 2018.2019. 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 and six months ended June 30,March 31, 2020 and 2019 and 2018 (in thousands):

Note 2. New Accounting Pronouncements 

Recently Adopted

In February 2016, the FASB issued ASU 2016-02 (“ASU 2016-02”), Leases (Topic 842). This standard established a right-of-use model that requires all lessees to recognize right-of-use assets and liabilities on their balance sheet that arise from leases with terms longer than 12 months as well as provide disclosures with respect to certain qualitative and quantitative information related to their leasing arrangements.

The FASB has subsequently issued the following amendments to ASU 2016-02, which have the same effective date and transition date of January 1, 2019, and which we collectively refer to as the new leasing standards:

We adopted the new leasing standards on January 1, 2019, using a modified retrospective transition approach to be applied to leases existing as of, or entered into after, January 1, 2019 and did not adjust comparative periods. We also elected the package of practical expedients permitted under this standard, which among other things, allowed us to carry forward the lease classification for our existing leases. In preparation for the adoption of this standard and to enable preparation of the required financial information, we implemented new internal controls and processes.

The adoption of this standard impacted our 2019 opening consolidated balance sheet as we recorded operating lease liabilities of $15.3 million and ROU lease assets of $13.5 million, which equals the lease liabilities net of deferred rent and lease incentives previously recorded on our balance sheet under the old guidance. The adoption of this standard did not have an impact on our consolidated statements of operations or cash flows.

Recently Issued

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. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. EarlyWe adopted this standard on January 1, 2020. The adoption is permitted for any removed or modified disclosures. We are currently assessing the timing of adopting the updated provisions and thethis standard did not have a material impact of the updated provisions 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, andTopic 825, FinancialInstruments, 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) (Topic 326): Targeted Transition Relief.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 standard isamendments 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, 2019.2020. 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 and six months ended June 30,March 31, 2020 and 2019, and 2018, 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):

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 June 30, 2019March 31, 2020 and December 31, 2018.2019.

We record the contingent consideration liability resulting from our acquisition of Molecular Insight Pharmaceuticals, Inc. (“MIP”)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):