Progenics Form 8-K Risk Factors January 9, 2006
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of
Report (Date of earliest event reported) January
9, 2006
Progenics
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
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000-23143
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13-3379479
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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|
|
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777
Old Saw Mill River Road, Tarrytown, New York
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10591
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code (914)
789-2800
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
ð
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
ð
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
ð
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
ð
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
8.01. Other Events
On
December 23, 2005, Progenics Pharmaceuticals, Inc. and its wholly-owned
subsidiary, Progenics Pharmaceuticals Nevada, Inc. (“Progenics”), entered into
an exclusive, worldwide License and Co-Development Agreement (the “Wyeth
Agreement”) with Wyeth Pharmaceuticals, a division of Wyeth, and certain
affiliates of Wyeth (“Wyeth”) for the joint development and commercialization of
methylnaltrexone (“MNTX”) for the treatment of opioid-induced side effects,
including constipation and post-operative bowel dysfunction. See our Current
Report on Form 8-K dated December 28, 2005. We are updating our risk factor
disclosure, most recently set forth in our Quarterly Report on Form 10-Q for
the
quarter ended September 30, 2005 under the caption "Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
¾Risk
Factors”, to reflect, among other things, that collaboration. The updated
disclosure is set forth below.
RISK
FACTORS
Our
business and operations entail a variety of risks and uncertainties, including
those described below.
Our
product development programs are inherently risky.
We
are
subject to the risks of failure inherent in the development of product
candidates based on new technologies. Our MNTX product candidate, which is
designed to reverse certain side effects induced by opioids and to treat
post-operative bowel dysfunction and is being developed through a collaboration
with Wyeth, is based on a novel method of action that has not yet been proven
to
be safe or effective. No drug with MNTX’s method of action has ever received
marketing approval. Additionally, some of our HIV product candidates are
designed to be effective by blocking viral entry, and our GMK product candidate
is designed to be a therapeutic cancer vaccine. To our knowledge, no drug
designed to treat HIV infection by blocking viral entry (with one exception)
and
no cancer therapeutic vaccine has been approved for marketing in the U.S. Our
other research and development programs, and those conducted through our joint
venture with Cytogen, involve similarly novel approaches to human therapeutics.
Consequently, there is little precedent for the successful commercialization
of
products based on our technologies. There are a number of technological
challenges that we must overcome to complete most of our development efforts.
We
may not be able to develop successfully any of our products.
We
have granted to Wyeth the exclusive rights to develop and commercialize MNTX,
our lead product candidate, and our resulting dependence on Wyeth exposes us
to
significant risks.
In
December 2005, we entered into a license and co-development agreement
with
Wyeth.
Under this agreement, we granted to
Wyeth
the exclusive worldwide right to develop and commercialize MNTX, our lead
product candidate.
As a
result, we are dependent on Wyeth to perform and fund clinical testing, to
make
certain regulatory filings and to manufacture and market products containing
MNTX. Our collaboration with Wyeth may not be scientifically, clinically or
commercially successful.
Any
revenues from the
sale of MNTX, if approved for sale by the FDA, will depend almost entirely
on
the efforts of Wyeth. Wyeth has significant discretion in determining the
efforts and resources it applies to sales of our products and may not be
effective in marketing our products. In addition, Wyeth is a large, diversified
pharmaceutical company with global operations and its own corporate agenda,
which may not be consistent with our best interests. For example, Wyeth
may
change its strategic focus or pursue alternative technologies in a manner
that
results in reduced revenues to us. In addition, we will receive milestone
payments from Wyeth only if MNTX achieves specified clinical, regulatory
and
commercialization milestones, and we will receive royalty payments from
Wyeth
only if MNTX receives regulatory approval and is commercialized by Wyeth.
Many
of these milestone events will depend on the efforts of Wyeth. We may not
receive any milestone or royalty payments from Wyeth
Wyeth
may
terminate the license and co-development agreement:
-
for
any
or no reason at any time after two years from the first commercial sale
of the
first commercial product utilizing MNTX in the United States by providing
us
with at least 360
days prior written notice and complying with certain other
conditions;
-
for
safety or efficacy reasons by providing us with at least 30 days prior
written
notice;
-
upon
our material breach or
non-compliance with our representations, warranties and other obligations
under the license and co-development agreement if the non-compliance is
not
cured; or
-
upon
our bankruptcy or similar insolvency event.
If
our
relationship with
Wyeth were to terminate, we would have to either enter into a license and
co-development agreement with another party or develop and commercialize MNTX
ourselves. We may not be able to enter into such an agreement with another
suitable company on acceptable terms or at all. To develop and commercialize
MNTX on our own, we would have to develop a sales and marketing
organization and a distribution infrastructure, neither of which we currently
have. Developing these resources would be an expensive and lengthy process
and
would have a material adverse effect on our revenues and
profitability.
Moreover,
a termination of our relationship with
Wyeth could seriously compromise the development program for MNTX. For example,
we
could
experience significant delays in the development of MNTX and would
have to assume full funding and other responsibility for further development
and
eventual commercialization.
Any
of
these outcomes would result in delays in our ability to distribute MNTX and
would increase our expenses, which would have a material adverse effect on
our
business, results of operations and financial condition.
Our
collaboration with Wyeth is multi-faceted and involves a complex sharing of
control over decisions, responsibilities, costs and benefits. There are numerous
potential sources of disagreement between us and
Wyeth, including with respect to product development, marketing strategies,
manufacturing and supply issues and rights relating to intellectual property.
Wyeth
has
significantly greater financial and managerial resources than we do, which
it
could draw upon in the event of a dispute. A disagreement between Wyeth and
us
could lead to lengthy and expensive litigation or other dispute resolution
proceedings as well as to extensive financial and operational consequences
to
us, and have a material adverse effect on our business, results of operations
and financial condition.
If
testing does not yield successful results, our products will not be
approved.
We
will
need to obtain regulatory approval before we can market our product candidates.
To obtain marketing approval from regulatory authorities, we or our
collaborators must demonstrate a product’s safety and efficacy through extensive
preclinical and clinical testing. Numerous adverse events may arise during,
or
as a result of, the testing process, including the following:
· |
the
results of preclinical studies may be inconclusive, or they may not
be
indicative of results that will be obtained in human clinical trials;
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· |
potential
products may not have the desired efficacy or may have undesirable
side
effects or other characteristics that preclude marketing approval
or limit
their commercial use if approved;
|
· |
after
reviewing test results, we or our collaborators may abandon projects,
which we previously believed to be promising; and
|
· |
we,
our collaborators or regulators may suspend or terminate clinical
trials
if we or they believe that the participating subjects or patients
are
being exposed to unacceptable health risks.
|
Clinical
testing is very expensive and can take many years. Results attained in early
human clinical trials may not be indicative of results that are obtained in
later clinical trials. In addition, many of our products, such as PRO 140 and
the PSMA product candidates, are at an early stage of development. The
successful commercialization of early stage products will require significant
further research, development, testing, approvals by regulators and additional
investment. Our products in the research or preclinical development stage may
not yield results that would permit or justify clinical testing. Our failure
to
adequately demonstrate the safety and efficacy of a product under development
would delay or prevent marketing approval of the product, which could adversely
affect our operating results and credibility.
A
setback in our clinical development programs could adversely affect
us.
We
have
several ongoing late-stage clinical trials. We have completed enrollment and
patient treatment in our two pivotal phase 3 clinical trials and in the
extension study for one of those trials of sub-cutaneous MNTX for the treatment
of opioid-induced constipation in patients with advanced medical illness.
Patient enrollment in the extension study of the second pivotal trial has been
completed and patient treatment is currently ongoing. We will need to
successfully complete and analyze the data from both of these trials, and their
extension studies, in order to obtain approval of the FDA to market MNTX. We
also have completed a phase 2 clinical trial of intravenous MNTX in patients
at
risk for post-operative bowel dysfunction and intend, working with our
collaborator Wyeth, to conduct additional clinical trials of oral MNTX in
chronic pain patients who experience opioid-induced constipation.
If
the
results of any of these ongoing trials are not satisfactory, or if we encounter
problems enrolling patients, or if clinical trial supply issues or other
difficulties arise, our entire MNTX development program could be adversely
affected, resulting in delays in commencing or completing clinical trials or
in
making our regulatory filing for marketing approval. The need to conduct
additional clinical trials or significant revisions to our clinical development
plan would lead to delays in filing for the regulatory approvals necessary
to
market MNTX. If the clinical trials indicate a serious problem with the safety
or efficacy of a MNTX product then Wyeth has the right under our license and
co-development agreement to terminate the agreement or to stop the development
or commercialization of the affected products. Since MNTX is our most clinically
advanced product, any setback of these types would have a material adverse
effect on our stock price and business.
We
also
have two ongoing pivotal phase 3 clinical trials for GMK. In May 2000, our
collaborating research cooperative group in one of these trials, ECOG,
recommended to clinical investigators participating in the trial that they
discontinue administering GMK, and as a result that trial did not complete
patient dosing as contemplated by the initial trial protocol. A second pivotal
phase 3 trial for GMK was initiated in May 2001 and full
enrollment of the 1,300 patients called for in the trial has been completed.
We
expect to assess the recurrence of cancer and overall survival of the study
patients over the next several years. If the results of either of the GMK trials
are not satisfactory, we may need to conduct additional clinical trials or
abandon our GMK program.
We
have
announced positive phase 1 clinical findings related to PRO 140, and we have
initiated an additional phase 1b clinical trial. We have also decided to ramp
down our development efforts on PRO 542, our other HIV product candidate, in
order to concentrate our resources on PRO 140. If the results of our phase
1b
study with PRO 140 or the preclinical and clinical studies involving the PSMA
vaccine and antibody candidates are not satisfactory, we would need to
reconfigure our clinical trial programs to conduct additional trials or abandon
the program involved.
We
have a history of operating losses, and we may never be
profitable.
We
have
incurred substantial losses since our inception. As of September 30, 2005,
we
had an accumulated deficit of approximately $156.0 million. We have derived
no
significant revenues from product sales or royalties. We do not expect to
achieve significant product sales or royalty revenue for a number of years,
if
ever, other than potential revenues from MNTX. We expect to incur additional
operating losses in the future, which could increase significantly as we expand
our clinical trial programs and other product development efforts.
Our
ability to achieve and sustain profitability is dependent in part on obtaining
regulatory approval to market our products and then commercializing, either
alone or with others, our products. We may not be able to develop and
commercialize products. Moreover, our operations may not be profitable even
if
any of our products under development are commercialized.
We
are likely to need additional financing, but our access to capital funding
is
uncertain.
As
of
September 30, 2005, we had cash, cash equivalents and marketable securities,
including non-current portion, totaling $128.0 million. In December 2005, we
received a $60 million upfront payment from Wyeth in connection with the signing
of the license and co-development agreement relating to MNTX. During the three
months and nine months ended September 30, 2005, we had a net loss of $10.7
million and $36.7 million, respectively, and we used cash in operating
activities of $33.4 million during the nine months ended September 30, 2005.
Under
our
agreement with Wyeth, Wyeth is responsible for all future development and
commercialization costs relating to MNTX starting January 1, 2006. As a result
we expect that our spending on MNTX in 2006 and beyond will drop significantly
from the amounts expended in 2005.
With
regard to our other product candidates, however, we expect that we will continue
to incur significant expenditures for their development and we do not have
committed external sources of funding for most of these projects. These
expenditures will be funded from our cash on hand, or we may seek additional
external funding for these expenditures, most likely through collaborative
agreements, or other license or sale transactions, with one or more
pharmaceutical companies, through the issuance and sale of securities or through
additional government grants or contracts. We cannot predict with any certainty
when we will need additional funds or how much we will need or if additional
funds will be available to us. Our need for future funding will depend on
numerous factors, many of which are outside our control.
Our
access to capital funding is uncertain. We may not be able to obtain additional
funding on acceptable terms, or at all. Our inability to raise additional
capital on terms reasonably acceptable to us would seriously jeopardize the
future success of our business.
If
we
raise funds by issuing and selling securities, it may be on terms that are
not
favorable to our existing stockholders. If we raise additional funds by selling
equity securities, our current stockholders will be diluted, and new investors
could have rights superior to our existing stockholders. If we raise funds
by
selling debt securities, we could be subject to restrictive covenants and
significant repayment obligations.
Our
clinical trials could take longer than we expect.
Although
for planning purposes we forecast the commencement and completion of clinical
trials, and have included many of those forecasts in reports filed
with the Securities and Exchange Commission and in other public
disclosures, the actual timing of these events can vary dramatically. For
example, we have experienced delays in our MNTX clinical development program
in
the past as a result of slower than anticipated patient enrollment. These delays
may recur. Delays can be caused by, among other things:
· |
deaths
or other adverse medical events involving patients or subjects in
our
clinical trials;
|
· |
regulatory
or patent issues;
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· |
interim
or final results of ongoing clinical trials;
|
· |
failure
to enroll clinical sites as expected;
|
· |
scheduling
conflicts with participating clinicians and clinical institutions;
and
|
· |
manufacturing
problems.
|
In
addition, we may need to delay or suspend our clinical trials if we are unable
to obtain additional funding when needed. Also, our clinical programs involving
our joint venture with Cytogen Corporation ("Cytogen") could be delayed by
disagreements between Cytogen and us concerning funding development programs
or
other matters. For example, until June 2005, the joint venture had no approved
2005 budget or work plan because we and Cytogen had not yet reached agreement
with respect to a number of matters relating to the joint venture. In June
2005,
we and Cytogen approved a work plan and budget for 2005. We have not yet agreed
with Cytogen on a work plan and budget for 2006. Clinical trials involving
our
product candidates may not commence or be completed as forecasted.
Moreover,
we have limited experience in conducting clinical trials, and we rely on others
to conduct, supervise or monitor some or all aspects of some of our clinical
trials. In addition, certain clinical trials for our products may be conducted
by government-sponsored agencies, and consequently will be dependent on
governmental participation and funding. Under our agreement with Wyeth relating
to MNTX Wyeth has the responsibility to conduct some of the clinical trials
for
that product candidate, including all trials outside of the United States.
We
will have less control over the timing and other aspects of these clinical
trials than if we conducted them entirely on our own.
As
a
result of these and other factors, our clinical trials may not commence or
be
completed as we expect or may not be conducted successfully, in which event
investors’ confidence in our ability to develop products may be impaired and our
stock price may decline.
We
are subject to extensive regulation, which can be costly and time consuming
and
can subject us to unanticipated fines and delays.
We
and
our products are subject to comprehensive regulation by the FDA in the U.S.
and
by comparable authorities in other countries. These national agencies and other
federal, state and local entities regulate, among other things, the preclinical
and clinical testing, safety, approval, manufacture, labeling, marketing,
export, storage, record keeping, advertising and promotion of pharmaceutical
products. If we violate regulatory requirements at any stage, whether before
or
after marketing approval is obtained, we may be subject to forced removal of
a
product from the market, product seizure, civil and criminal penalties and
other
adverse consequences.
Our
products do not yet have, and may never obtain, the regulatory approvals needed
for marketing.
None
of
our products has been approved by applicable regulatory authorities for
marketing. The process of obtaining FDA and foreign regulatory approvals often
takes many years and can vary substantially based upon the type, complexity
and
novelty of the products involved. We have had only limited experience in filing
and pursuing applications and other submissions necessary to gain marketing
approvals. Our products under development may never obtain the marketing
approval from the FDA or any other regulatory authority necessary for
commercialization.
Even
if
our products receive regulatory approval:
· |
they
might not obtain labeling claims necessary to make the product
commercially viable (in general, labeling claims define the medical
conditions for which a drug product may be marketed, and are therefore
very important to the commercial success of a product);
|
· |
we
or our collaborators might be required to undertake post-marketing
trials
to verify the product’s efficacy or safety;
|
· |
we,
our collaborators or others might identify side effects after the
product
is on the market, or we or our collaborators might experience
manufacturing problems, either of which could result in subsequent
withdrawal of marketing approval, reformulation of the product, additional
preclinical testing or clinical trials, changes in labeling of the
product
or the need for additional marketing applications; and
|
· |
we
and our collaborators will be subject to ongoing FDA obligations
and
continuous regulatory review.
|
If
our
products fail to receive marketing approval or lose previously received
approvals, our financial results would be adversely affected.
Even
if our products obtain marketing approval, they might not be accepted in the
marketplace.
The
commercial success of our products will depend upon their acceptance by the
medical community and third party payors as clinically useful, cost effective
and safe. If healthcare providers believe that patients can be managed
adequately with alternative, currently available therapies, they may not
prescribe our products, especially if the alternative therapies are viewed
as
more effective, as having a better safety or tolerability profile, as being
more
convenient to the patient or healthcare providers or as being less expensive.
For pharmaceuticals administered in an institutional setting, the ability of
the
institution to be adequately reimbursed could also play a significant role
in
demand for our products. Even if our products obtain marketing approval, they
may not achieve market acceptance. If any of our products do not achieve market
acceptance, we will likely lose our entire investment in that
product.
Marketplace
acceptance will depend in part on competition in our industry, which is
intense.
The
extent to which any of our products achieves market acceptance will depend
on
competitive factors. Competition in our industry is intense, and it is
accentuated by the rapid pace of technological development. There are products
currently in the market that will compete with the products that we are
developing, including chemotherapy drugs for treating cancer and AIDS drugs.
As
described below, Adolor Corporation is developing a drug that would compete
with
MNTX. Many of our competitors have substantially greater research and
development capabilities and experience and greater manufacturing, marketing,
financial and managerial resources than we do. These competitors may develop
products that are superior to those we are developing and render our products
or
technologies non-competitive or obsolete. If our product candidates receive
marketing approval but cannot compete effectively in the marketplace, our
operating results and financial position would suffer.
One
or more competitors developing an opioid antagonist may reach the market ahead
of us and adversely affect the market potential for MNTX.
We
are
aware that Adolor Corporation, in collaboration with Glaxo Group Limited, or
Glaxo, a subsidiary of GlaxoSmithKline plc, is developing an opioid antagonist,
Entereg™ (alvimopan), for post-operative ileus, which has completed phase 3
clinical trials, and for opioid bowel dysfunction and chronic constipation,
which have completed phase 2 trials. Post-operative ileus is a condition similar
to post-operative bowel dysfunction, a condition for which we are developing
MNTX. Entereg is further along in the clinical development process than MNTX,
and Adolor Corporation has received an approvable letter from the U.S. Food
and
Drug Administration for Entereg regarding the treatment of post-operative ileus.
Additionally, it has been reported that a European specialty pharmaceutical
company is in clinical development of an oral formulation of methylnaltrexone
for use in opioid-induced constipation. If either of these products reaches
the
market before MNTX, it could achieve a significant competitive advantage
relative to our product. In any event, the considerable marketing and sales
capabilities of Glaxo may impair our ability to penetrate the market.
Under
the
terms of our collaboration with Wyeth with respect to MNTX, Wyeth will develop
the oral form of MNTX worldwide. We will lead the U.S. development of the
subcutaneous and intravenous forms of MNTX, while Wyeth will lead development
of
these parenteral products outside the U.S. Wyeth and we will pursue an
integrated strategy to optimize worldwide development, regulatory approval,
and
commercial launch of the three MNTX products, which may impact timelines for
the
development of MNTX previously disclosed by us. Decisions regarding the
timelines for development of the three MNTX products will be made by a Joint
Development Committee formed under the terms of the license and co-development
agreement, consisting of members from both Wyeth and Progenics.
Disputes
with Cytogen could delay or halt our PSMA programs.
Our
research and development programs relating to vaccine and antibody
immunotherapeutics based on PSMA are conducted through a joint venture between
Cytogen Corporation and us. The JV is a 50/50 joint venture, meaning that our
ownership rights in the programs, funding obligations and governance rights
are
equal. As a result, for the joint venture to operate efficiently, and for the
research and development programs to be adequately funded and staffed and
productive, we and Cytogen must be in agreement on strategic and operational
matters. There is a significant risk that, as a result of differing views and
priorities, there will be occasions when we do not agree on various
matters.
Cytogen’s
and our level of commitment to fund the PSMA joint venture is based upon annual
budgets and work plans that are developed and approved by the parties. We have
in the past experienced delays in reaching agreement with Cytogen regarding
annual budget issues and strategic and operational matters relating to the
joint
venture. For example, until June 2005, the joint venture had no approved 2005
budget or work plan because we and Cytogen had not yet reached agreement with
respect to a number of matters relating to the joint venture. In June 2005,
we
and Cytogen reached agreement on a work plan and budget for 2005.
We
have
not yet agreed with Cytogen on a work plan and budget for 2006. If we do not
reach an agreement regarding the budget and work plan for 2006 and future years,
we would likely experience delays in advancing the PSMA programs and may need
to
dissolve the joint venture and abandon the PSMA programs being conducted by
the
joint venture. We may not reach an agreement with Cytogen on these
matters.
If
we are unable to negotiate collaborative agreements, our cash burn rate could
increase and our rate of product development could
decrease.
Our
business strategy includes as an element entering into collaborations with
pharmaceutical and biotechnology companies to develop and commercialize our
products and technologies. We recently entered into such a collaboration with
Wyeth. However, we may not be successful in negotiating additional collaborative
arrangements. If we do not enter into new collaborative arrangements, we would
have to devote more of our resources to clinical product development and
product-launch activities, and our cash burn rate would increase or we would
need to take steps to reduce our rate of product development.
If
we do not remedy our failure to achieve milestones or satisfy conditions
regarding some of our product candidates, we may not maintain our rights under
our licenses relating to these product candidates.
We
are
required to make substantial cash payments, achieve specified milestones and
satisfy other conditions, including filing for and obtaining marketing approvals
and introducing products, to maintain rights under our intellectual property
licenses. We may not be able to maintain our rights under these
licenses.
Under
our
license agreements with Sloan Kettering Institute for Cancer Research relating
to GMK and with Columbia University relating to PRO 542, we are required, among
other things, to have filed for marketing approval for a drug by 2000 and to
have commenced commercialization of the drug by 2002 (for GMK) and to have
filed
for marketing approval by 2001 (for PRO 542). We have not achieved these and
other milestones and are unlikely to achieve them soon. We are in a similar
position with respect to our license agreement with Antigenics Inc. concerning
QS-21, a component of GMK. If we can establish that our failure to achieve
these
milestones resulted from technical issues beyond our control or delays in
clinical studies that could not have been reasonably avoided, we may be entitled
to a revision of these milestone dates. Although we believe that we satisfy
one
or more of these conditions, we may become involved in disputes with our
licensors as to our continued right to a license. In addition, at September
1,
2004 we became obligated under our license agreement with Columbia to pay
Columbia $225,000. We have accrued this amount but, pending the outcome of
discussions with Columbia regarding this payment and other matters relating
to
the license, we have not yet paid it.
If
we do
not comply with our obligations under our license agreements, the licensors
may
terminate them. Termination of any of our licenses could result in our losing
our rights to, and therefore being unable to commercialize, any related product.
We have had discussions with Sloan-Kettering and Columbia to reach agreement
on
the revision of applicable milestone dates. We may not, however, reach agreement
with these licensors in a manner favorable to us.
We
have limited manufacturing capabilities, which could adversely impact our
ability to commercialize products.
We
have
limited manufacturing capabilities, which may result in increased costs of
production or delay product development or commercialization. In order to
commercialize our product candidates successfully, we or our collaborators
must
be able to manufacture products in commercial quantities, in compliance with
regulatory requirements, at acceptable costs and in a timely manner. The
manufacture of our product candidates can be complex, difficult to accomplish
even in small quantities, difficult to scale-up for large-scale production
and
subject to delays, inefficiencies and low yields of quality products. The cost
of manufacturing some of our products may make them prohibitively expensive.
If
adequate supplies of any of our product candidates or related materials are
not
available to us on a timely basis or at all, our clinical trials could be
seriously delayed, since these materials are time-consuming to manufacture
and
cannot be readily obtained from third-party sources.
We
operate pilot-scale manufacturing facilities for the production of vaccines
and
recombinant proteins. We believe that, for these types of product candidates,
these facilities will be sufficient to meet our initial needs for clinical
trials. However, these facilities may be insufficient for late-stage clinical
trials for these types of product candidates, and would be insufficient for
commercial-scale manufacturing requirements. We may be required to expand
further our manufacturing staff and facilities, obtain new facilities or
contract with corporate collaborators or other third parties to assist with
production.
In
the
event that we decide to establish a commercial-scale manufacturing facility,
we
will require substantial additional funds and will be required to hire and
train
significant numbers of employees and comply with applicable regulations, which
are extensive. We may not be able to build a manufacturing facility that both
meets regulatory requirements and is sufficient for our clinical trials or
commercial-scale manufacturing.
We
have
entered into arrangements with third parties for the manufacture of some of
our
products. Our third-party sourcing strategy may not result in a cost-effective
means for manufacturing products. In employing third-party manufacturers, we
will not control many aspects of the manufacturing process, including compliance
by these third parties with the FDA’s current Good Manufacturing Practices and
other regulatory requirements. We may not be able to obtain adequate supplies
from third-party manufacturers in a timely fashion for development or
commercialization purposes, and commercial quantities of products may not be
available from contract manufacturers at acceptable costs.
We
are dependent on our patents and other intellectual property rights. The
validity, enforceability and commercial value of these rights are highly
uncertain.
Our
success is dependent in part on obtaining, maintaining and enforcing patent
and
other intellectual property rights. The patent position of biotechnology and
pharmaceutical firms is highly uncertain and involves many complex legal and
technical issues. There is no clear policy involving the breadth of claims
allowed, or the degree of protection afforded, under patents in this area.
Accordingly, the patent applications owned by or licensed to us may not result
in patents being issued. We are aware of other groups that have patent
applications or patents containing claims similar to or overlapping those in
our
patents and patent applications. We do not expect to know for several years
the
relative strength or scope of our patent position as compared to these other
groups. Furthermore, patents that we own or license may not enable us to
preclude competitors from commercializing drugs, and consequently may not
provide us with any meaningful competitive advantage.
We
own or
have licenses to several issued patents. However, the issuance of a patent
is
not conclusive as to its validity or enforceability. The validity or
enforceability of a patent after its issuance by the patent office can be
challenged in litigation. Our patents may be successfully challenged. Moreover,
we may incur substantial costs in litigation to uphold the validity of patents
or to prevent infringement. If the outcome of litigation is adverse to us,
third
parties may be able to use our patented invention without payment to us.
Moreover, third parties may avoid our patents through design
innovation.
Most
of
our product candidate, including MNTX, PRO 140, GMK and our PSMA program
products, incorporate to some degree intellectual property licensed from third
parties. We can lose the right to patents and other intellectual property
licensed to us if the related license agreement is terminated due to a breach
by
us or otherwise. Our ability, and that of our collaboration partners, to
commercialize products incorporating licensed intellectual property would be
impaired if the related license agreements were terminated.
Generally,
we have the right to defend and enforce patents licensed by us, either in the
first instance or if the licensor chooses not to do so. In addition, our license
agreement with the University of Chicago regarding MNTX gives us the right
to
prosecute and maintain the licensed patents. We bear the cost of engaging in
some or all of these activities with respect to our license agreements with
Sloan-Kettering for GMK, Columbia for PRO 542 and the University of Chicago
for
MNTX. With
most
of our other license agreements, the licensor bears the cost of engaging in
all
of these activities, although we may share in those costs under specified
circumstances. Historically, our costs of defending patent rights, both our
own
and those we license, have not been material.
We
also
rely on unpatented technology, trade secrets and confidential information.
Third
parties may independently develop substantially equivalent information and
techniques or otherwise gain access to our technology or disclose our
technology, and we may be unable to effectively protect our rights in unpatented
technology, trade secrets and confidential information. We require each of
our
employees, consultants and advisors to execute a confidentiality agreement
at
the commencement of an employment or consulting relationship with us. However,
these agreements may not provide effective protection in the event of
unauthorized use or disclosure of confidential information.
If
we infringe third-party patent or other intellectual property rights, we may
need to alter or terminate a product development program.
There
may
be patent or other intellectual property rights belonging to others that require
us to alter our products, pay licensing fees or cease certain activities. If
our
products infringe patent or other intellectual property rights of others, the
owners of those rights could bring legal actions against us claiming damages
and
seeking to enjoin manufacturing and marketing of the affected products. If
these
legal actions are successful, in addition to any potential liability for
damages, we could be required to obtain a license in order to continue to
manufacture or market the affected products. We may not prevail in any action
brought against us, and any license required under any rights that we infringe
may not be available on acceptable terms or at all. We are aware of intellectual
property rights held by third parties that relate to products or technologies
we
are developing. For example, we are aware of other groups investigating
methylnaltrexone and other peripheral opioid antagonists, PSMA or related
compounds and CCR5 monoclonal antibodies and of patents held, and patent
applications filed, by these groups in those areas. While the validity of these
issued patents, patentability of these pending patent applications and
applicability of any of them to our programs are uncertain, if asserted against
us, any related patent or other intellectual property rights could adversely
affect our ability to commercialize our products.
The
research, development and commercialization of a biopharmaceutical often involve
alternative development and optimization routes, which are presented at various
stages in the development process. The preferred routes cannot be predicted
at
the outset of a research and development program because they will depend on
subsequent discoveries and test results. There are numerous third-party patents
in our field, and we may need to obtain a license to a patent in order to pursue
the preferred development route of one or more of our products. The need to
obtain a license would decrease the ultimate profitability of the applicable
product. If we cannot negotiate a license, we might have to pursue a less
desirable development route or terminate the program altogether.
We
are dependent upon third parties for a variety of functions. These arrangements
may not provide us with the benefits we expect.
We
rely
in part on third parties to perform a variety of functions. We are party to
numerous agreements which place substantial responsibility on clinical research
organizations, consultants and other service providers for the development
of
our products. We also rely on medical and academic institutions to perform
aspects of our clinical trials of product candidates. In addition, an element
of
our research and development strategy is to in-license technology and product
candidates from academic and government institutions in order to minimize
investments in early research. Furthermore, we recently entered into an
agreement under which we will depend on Wyeth for the commercialization and
development of MNTX, our lead product candidate. We may not be able to maintain
any of these relationships or establish new ones on beneficial terms.
Furthermore, we may not be able to enter new arrangements without undue delays
or expenditures, and these arrangements may not allow us to compete
successfully.
We
lack sales and marketing experience, which will make us dependent on third
parties for their expertise in this area.
We
have
no experience in sales, marketing or distribution. If we receive marketing
approval, we expect to market and sell our products principally through
distribution, co-marketing, co-promotion or licensing arrangements with third
parties. We may also consider contracting with a third party professional
pharmaceutical detailing and sales organization to perform the marketing
function for our products. Under our license and co-development agreement with
Wyeth, Wyeth is responsible for commercializing MNTX. To the extent that we
enter into distribution, co-marketing, co-promotion, detailing or licensing
arrangements for the marketing and sale of our other products, any revenues
we
receive will depend primarily on the efforts of third parties. We will not
control the amount and timing of marketing resources these third parties devote
to our products. In addition, if we market products directly, significant
additional expenditures and management resources would be required to develop
an
internal sales force. We may not be able to establish a successful sales force
should we choose to do so.
If
we lose key management and scientific personnel on whom we depend, our business
could suffer.
We
are
dependent upon our key management and scientific personnel. In particular,
the
loss of Dr. Paul J. Maddon, our Chief Executive Officer and Chief Science
Officer, could cause our management and operations to suffer. We have an
employment agreement with Dr. Maddon, the initial term of which ran through
September 30, 2005, subject to an automatic renewal for an additional period
of
two years unless either party provides ninety days prior notice of non-renewal.
See “Item 11. Executive Compensation - Employment Agreements” in our Annual
Report on Form 10-K for the year ended December 31, 2004. Neither we nor Dr.
Maddon gave notice of non-renewal. We are currently in discussions with Dr.
Maddon regarding the renewal of his employment agreement and expect that the
agreement will be renewed. Employment agreements do not, however, assure the
continued employment of an employee. We maintain key-man life insurance on
Dr.
Maddon in the amount of $2.5 million.
In
October 2004, our Board of Directors elected Paul F. Jacobson and Kurt W. Briner
as Co-chairmen of the Board in substitution of Dr. Paul J. Maddon, our Chief
Executive Officer, Chief Science Officer and a director. Dr. Maddon’s employment
agreement contains provisions relating to the Chairmanship position. In
connection with the renewal of Dr. Maddon’s employment agreement, we intend to
clarify that the change in the Chairman position is not inconsistent with Dr.
Maddon’s employment agreement.
Competition
for qualified employees among companies in the biopharmaceutical industry is
intense. Our future success depends upon our ability to attract, retain and
motivate highly skilled employees. In order to commercialize our products
successfully, we may be required to expand substantially our personnel,
particularly in the areas of manufacturing, clinical trials management,
regulatory affairs, business development and marketing. We may not be successful
in hiring or retaining qualified personnel.
If
we are unable to obtain sufficient quantities of the raw and bulk materials
needed to make our products, our product development and commercialization
could
be slowed or stopped.
We
currently obtain supplies of critical raw materials used in production of MNTX,
GMK and other of our product candidates from single sources. In particular,
we
rely on single-source third-party manufacturers for the supply of both bulk
and
finished form MNTX. We have a supply agreement with Mallinckrodt Inc., our
current supplier of bulk-form MNTX, which has an initial term that expires
on
January 1, 2008. In accordance with our collaboration agreement with Wyeth,
we
will transfer to Wyeth, at a mutually agreeable time, the responsibility
for manufacturing MNTX for clinical and commercial use, including our supply
agreements with third parties. We do not have long-term contracts with any
of
our other suppliers. In addition, commercialization of GMK requires an adjuvant,
QS-21, available only from Antigenics Inc. Our existing arrangements may not
result in the supply of sufficient quantities of our product candidates needed
to accomplish our clinical development programs, and we may not have the right
or capability to manufacture sufficient quantities of these products to meet
our
needs if our suppliers are unable or unwilling to do so. Any delay or disruption
in the availability of raw materials would slow or stop product development
and
commercialization of the relevant product.
A
substantial portion of our funding comes from federal government grants and
research contracts. We cannot rely on these grants or contracts as a continuing
source of funds.
A
substantial portion of our revenues to date has been derived from federal
government grants and research contracts. In September 2005, we were awarded
a
$10.1 million grant from the NIH to partially fund our PRO 140 program. Also,
in
2004 we were awarded, in the aggregate, approximately $9.2 million in NIH grants
and research contracts in addition to previous years’ awards. We cannot rely on
grants or additional contracts as a continuing source of funds. Moreover, funds
available under these grants and contracts must be applied by us toward the
research and development programs specified by the government rather than for
all our programs generally. For example, the $28.6 million contract awarded
to
us by the NIH in September 2003 must be used by us in furtherance of our efforts
to develop an HIV vaccine. The government’s obligation to make payments under
these grants and contracts is subject to appropriation by the U.S. Congress
for
funding in each year. Moreover, it is possible that Congress or the government
agencies that administer these government research programs will decide to
scale
back these programs or terminate them due to their own budgetary constraints.
Additionally, these grants and research contracts are subject to adjustment
based upon the results of periodic audits performed on behalf of the granting
authority. Consequently, the government may not award grants or research
contracts to us in the future, and any amounts that we derive from existing
grants or contracts may be less than those received to date.
If
health care reform measures are enacted, our operating results and our ability
to commercialize products could be adversely affected.
In
recent
years, there have been numerous proposals to change the health care system
in
the U.S. and in foreign jurisdictions. Some of these proposals have included
measures that would limit or eliminate payments for medical procedures and
treatments or subject the pricing of pharmaceuticals to government control.
In
some foreign countries, particularly countries of the European Union, the
pricing of prescription pharmaceuticals is subject to governmental control.
In
addition, as a result of the trend towards managed health care in the U.S.,
as
well as legislative proposals to reduce government insurance programs,
third-party payors are increasingly attempting to contain health care costs
by
limiting both coverage and the level of reimbursement of new drug products.
Consequently, significant uncertainty exists as to the reimbursement status
of
newly approved health care products.
If
we or
any of our collaborators succeed in bringing one or more of our products to
market, third-party payors may establish and maintain price levels insufficient
for us to realize an appropriate return on our investment in product
development. Significant changes in the health care system in the U.S. or
elsewhere, including changes resulting from adverse trends in third-party
reimbursement programs, could have a material adverse effect on our operating
results and our ability to raise capital and commercialize
products.
We
are exposed to product liability claims, and in the future we may not be able
to
obtain insurance against these claims at a reasonable cost or at
all.
Our
business exposes us to product liability risks, which are inherent in the
testing, manufacturing, marketing and sale of pharmaceutical products. We may
not be able to avoid product liability exposure. If a product liability claim
is
successfully brought against us, our financial position may be adversely
affected.
Product
liability insurance for the biopharmaceutical industry is generally expensive,
when available at all. We have obtained product liability insurance in the
amount of $5.0 million per occurrence, subject to a deductible and a $5.0
million annual aggregate limitation. In addition, where local statutory
requirements exceed the limits of our existing insurance or where local policies
of insurance are required, we maintain additional clinical trial liability
insurance to meet these requirements. Our present insurance coverage may not
be
adequate to cover claims brought against us. In addition, some of our license
and other agreements require us to obtain product liability insurance. Adequate
insurance coverage may not be available to us at a reasonable cost in the
future.
We
handle hazardous materials and must comply with environmental laws and
regulations, which can be expensive and restrict how we do business. If we
are
involved in a hazardous waste spill or other accident, we could be liable for
damages, penalties or other forms of censure.
Our
research and development work and manufacturing processes involve the use of
hazardous, controlled and radioactive materials. We are subject to federal,
state and local laws and regulations governing the use, manufacture, storage,
handling and disposal of these materials. Despite procedures that we implement
for handling and disposing of these materials, we cannot eliminate the risk
of
accidental contamination or injury. In the event of a hazardous waste spill
or
other accident, we could be liable for damages, penalties or other forms of
censure. In addition, we may be required to incur significant costs to comply
with environmental laws and regulations in the future.
Our
stock price has a history of volatility. You should consider an investment
in
our stock as risky and invest only if you can withstand a significant
loss.
Our
stock
price has a history of significant volatility. Between January 1, 2002 and
September 30, 2005, our stock price has ranged from $3.82 to $25.07 per share.
At times, our stock price has been volatile even in the absence of significant
news or developments relating to us. Moreover, the stocks of biotechnology
companies and the stock market generally have been subject to dramatic price
swings in recent years. Factors that may have a significant impact on the market
price of our common stock include:
· |
the
results of clinical trials and preclinical studies involving our
products
or those of our competitors;
|
· |
changes
in the status of any of our drug development programs, including
delays in
clinical trials or program terminations;
|
· |
developments
regarding our efforts to achieve marketing approval for our products;
|
· |
developments
in our relationship with Wyeth regarding the development and
commercialization of MNTX;
|
· |
announcements
of technological innovations or new commercial products by us, our
collaborators or our competitors;
|
· |
developments
in our relationships with other collaborative partners;
|
· |
developments
in patent or other proprietary rights;
|
· |
governmental
regulation;
|
· |
changes
in reimbursement policies or health care legislation;
|
· |
public
concern as to the safety and efficacy of products developed by us,
our
collaborators or our competitors;
|
· |
our
ability to fund on-going operations;
|
· |
fluctuations
in our operating results; and
|
· |
general
market conditions.
|
Our
principal stockholders are able to exert significant influence over matters
submitted to stockholders for approval.
At
September 30, 2005, Dr. Maddon and stockholders affiliated with Tudor Investment
Corporation together beneficially own or control approximately 19% of our
outstanding shares of common stock. These persons, should they choose to act
together, could exert significant influence in determining the outcome of
corporate actions requiring stockholder approval and otherwise control our
business. This control could have the effect of delaying or preventing a change
in control of us and, consequently, could adversely affect the market price
of
our common stock.
Anti-takeover
provisions may make the removal of our Board of Directors or management more
difficult and discourage hostile bids for control of our company that may be
beneficial to our stockholders.
Our
Board
of Directors is authorized, without further stockholder action, to issue from
time to time shares of preferred stock in one or more designated series or
classes. The issuance of preferred stock, as well as provisions in certain
of
our stock options that provide for acceleration of exercisability upon a change
of control, and Section 203 and other provisions of the Delaware General
Corporation Law could:
· |
make
the takeover of Progenics or the removal of our Board of Directors
or
management more difficult;
|
· |
discourage
hostile bids for control of Progenics in which stockholders may receive
a
premium for their shares of common stock; and
|
· |
otherwise
dilute the rights of holders of our common stock and depress the
market
price of our common stock.
|
If
there are substantial sales of our common stock, the market price of our common
stock could decline.
Sales
of
substantial numbers of shares of common stock could cause a decline in the
market price of our stock. We require substantial external funding to finance
our research and development programs and may seek such funding through the
issuance and sale of our common stock. We have announced that we intend to
file
shelf registration statements to permit the public reoffer and sale from time
to
time of up to 286,000 shares of our common stock by certain stockholders. Sales
of our common stock pursuant to these registration statements could cause the
market price or our stock to decline. In addition, some of our other
stockholders are entitled to require us to register their shares of common
stock
for offer or sale to the public. Also, we have filed Form S-8 registration
statements registering shares issuable pursuant to our equity compensation
plans. Any sales by existing stockholders or holders of options may have an
adverse effect on our ability to raise capital and may adversely affect the
market price of our common stock.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
PROGENICS
PHARMACEUTICALS, INC.
By: /s/
ROBERT A.
MCKINNEY
Robert
A.
McKinney
Chief
Financial Officer, Vice President,
Finance
and Operations and Treasurer
Date:
January 9, 2006