During 2012, we recognized $7,949 of revenue from upfront and reimbursement payments from partnering our PRO 140 and C. difficile programs.partnering. As of December 31, 2012, $676 is recorded in deferred revenue – current.
For 2011, share-based compensation included restricted stock and option plan expenses from (i) accelerated vesting of outstanding awards to non-management employees in connection with a change in program eligibility and termination of the Company's employee stock purchase plans (the latter of which resulted in a decline in share-based compensation), and (ii) a shift in headcount from general and administrative departments to research and development. See Critical Accounting Policies − Share-Based Payment Arrangements.
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Clinical trial costs | | $ | 8,862 | | | $ | 2,692 | | | $ | 10,099 | | | | 229 | % | | | (73 | %) |
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Clinical trial costs | | $ | 2,692 | | | $ | 10,099 | | | $ | 7,056 | | | | (73 | %) | | | 43 | % |
2013 vs. 2012 Clinical trial costs increased primarily due to higher expenses for Oncology ($6,214), partially offset by decreased expenses in Other programs ($27) and Relistor ($17).
2012 vs. 2011 Clinical trial costs decreased primarily due to (i) Relistor ($9,132), resulting from lower clinical trial activities related to oral methylnaltrexone study,Relistor ($9,132), partially offset by increased expenses in Oncology ($1,700), primarily related to PSMA ADC and Other ($25).
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
Laboratory and manufacturing | | | | | | | | | | | Percent change | |
supplies and equipment | | $ | 632 | | | $ | 592 | | | $ | 4,203 | | | | 7 | % | | | (86 | %) |
20112013 vs. 20102012 Clinical trial costsLaboratory and manufacturing supplies and equipment increased primarily dueby $511 for Other programs, including second quarter impairment losses from the write-off of laboratory equipment in connection with an amendment to higher expenses for (i) Relistor ($3,385), from increased clinical trial expenses including activities related to oral methylnaltrexone phase 3 study and regulatory filing fees for the submission of the sNDA for subcutaneous Relistor and (ii) Oncology ($316),Company's Tarrytown lease, partially offset by decreasedlower Oncology expenses ($471), primarily from a decline in lab supplies for Other programs ($658).PSMA ADC.
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
Laboratory and manufacturing | | | | | | | | | | | Percent change | |
supplies | | $ | 592 | | | $ | 4,203 | | | $ | 2,388 | | | | (86 | %) | | | 76 | % |
2012 vs. 2011 Laboratory and manufacturing supplies and equipment decreased due to lower expenses in (i) Relistor ($2,197), (ii) Oncology ($388), resulting fromreflecting a decline in manufacturing supplies for PSMA ADC, and (iii) Other ($1,026).
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
Contract manufacturing and | | | | | | | | | | | Percent change | |
subcontractors | | $ | 2,042 | | | $ | 3,111 | | | $ | 6,713 | | | | (34 | %) | | | (54 | %) |
20112013 vs. 20102012 LaboratoryContract manufacturing and manufacturing supplies increasedsubcontractors decreased due to higher expenses for (i) Relistor ($1,562), primarily due to purchases of manufacturing supplies on behalf of Salix, and (ii) Oncology ($375), resulting from increase in expenses for PSMA ADC, partially offset by lower expenses for Oncology ($571), Other programs ($122)353), and Relistor ($145).
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
Contract manufacturing and | | | | | | | | | | | Percent change | |
subcontractors | | $ | 3,111 | | | $ | 6,713 | | | $ | 6,853 | | | | (54 | %) | | | (2 | %) |
2012 vs. 2011 Contract manufacturing and subcontractors decreased due to lower expenses for Relistor ($2,399), resulting fromreflecting a decrease in purchases of subcutaneous Relistor related products, and Other ($1,596), partially offset by an increase in Oncology ($393).
2011 vs. 2010 Contract manufacturing and subcontractors decreased due to lower expenses for (i) Oncology ($83), resulting from a decline in manufacturing expenses for PSMA ADC, (ii) Relistor ($2), due to lower contract manufacturing expenses for the multi-dose pen, and (iii) Other ($55).
Expenses in this category relate to the conduct of clinical trials, including manufacture by third parties of drug materials, testing, analysis, formulation and toxicology services, and vary as the timing and level of such services are required.
31
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Consultants | | $ | 330 | | | $ | 1,270 | | | $ | 3,310 | | | | (74 | %) | | | (62 | %) |
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Consultants | | $ | 905 | | | $ | 330 | | | $ | 1,270 | | | | 174 | % | | | (74 | %) |
2013 vs. 2012 Consultants expense increased primarily due to higher expenses for Oncology ($613), partially offset by lower expenses for Other programs ($27) and Relistor ($11).
2012 vs. 2011 Consultants expense decreased due to lower expenses in 2012 for Relistor regulatory and other activities ($816)816), primarily related to the sNDA submission for subcutaneous Relistor in non-cancer pain patients, Oncology ($18) and Other programs ($106).
2011 vs. 2010 Consultants expenses decreased due to lower expenses for Relistor ($2,082) and Other programs ($41), partially offset by an increase in Oncology ($83).
Expenses in this category relate to monitoring ongoing clinical trials and reviewing data from completed trials including the preparation of filings and vary as the timing and level of such services are required.
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
License fees | | $ | 1,170 | | | $ | 578 | | | $ | 1,270 | | | | 102 | % | | | (54 | %) |
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
License fees | | $ | 567 | | | $ | 1,170 | | | $ | 578 | | | | (52 | %) | | | 102 | % |
2013 vs. 2012 License fees decreased due to lower expenses for Oncology ($573) and Other programs ($30).
2012 vs. 2011 License fees increased due to higher expenses for clinical trial initiation in Oncology ($902)902), due to the initiation of a phase 2 trial, partially offset by lower expenses for Relistor ($156) and Other programs ($154).
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Royalty expense | | $ | 624 | | | $ | 499 | | | $ | 405 | | | | 25 | % | | | 23 | % |
20112013 vs. 20102012 License fees decreased primarilyThe increase in royalty expense was due to lower expenses for Other programs ($663),higher net sales of Relistor ($27) and Oncology ($2).in 2013.
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Royalty expense | | $ | 499 | | | $ | 405 | | | $ | 241 | | | | 23 | % | | | 68 | % |
2012 vs. 2011 The increase in royalty expense iswas due to higher net sales of Relistor in 2012.
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Other operating expenses | | $ | 6,457 | | | $ | 5,175 | | | $ | 7,741 | | | | 25 | % | | | (33 | %) |
20112013 vs. 20102012 The increase in royalty expense isOther operating expenses increased from 2012 primarily due to higher net salesincreases in rent ($1,131), as a result of Relistorlease amendment and termination expenses, travel ($106), other operating expenses ($140) and insurance ($57), partially offset by a decrease in 2011.facilities ($152).
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Other operating expenses | | $ | 5,175 | | | $ | 7,741 | | | $ | 7,473 | | | | (33 | %) | | | 4 | % |
2012 vs. 2011 Other operating expenses decreased primarily due to decreases in rent ($1,943), travel ($111), insurance ($55) and other operating expenses ($489), partially offset by increases in expenses for facilities ($32).
2011 vs. 2010 Other operating expenses increased primarily due to higher expenses for rent ($237), insurance ($89) and travel ($20), partially offset by a decrease in expenses for facilities ($78).
General and Administrative Expenses decreasedincreased to $14,809 for 2013 from $14,706 for 2012 and decreased from $18,248 for 2011, and from $22,832 for 2010, as follows:
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Salaries and benefits | | $ | 6,493 | | | $ | 7,228 | | | $ | 8,086 | | | | (10 | %) | | | (11 | %) |
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Salaries and benefits | | $ | 4,821 | | | $ | 6,493 | | | $ | 7,228 | | | | (26 | %) | | | (10 | %) |
2013 vs. 2012 Salaries and benefits decreased primarily due to 2012 accrued severance expense resulting from headcount reductions, while the average headcount remained unchanged.
2012 vs. 2011 Salaries and benefits decreased due to a decline in average headcount to 24 from 32, in the general and administrative departments and lower accrued bonus expense in 2012, partially offset by an increase in accrued severance expense related to additional headcount reductions in the third quarter.
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Share-based compensation | | $ | 1,022 | | | $ | 1,968 | | | $ | 1,863 | | | | (48 | %) | | | 6 | % |
20112013 vs. 20102012 Salaries and benefitsShare-based compensation decreased due to a declinelower equity incentives expenses, which included restructuring expenses in average headcount to 32 from 39, in the general and administrative departments (see above for decline in average research and development headcount), and lower accrued bonus expense, partially offset by accrued severance expenses related to headcount reduction.2012.
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Share-based compensation | | $ | 1,968 | | | $ | 1,863 | | | $ | 4,424 | | | | 6 | % | | | (58 | %) |
2012 vs. 2011 Share-based compensation increased due to higher stock option expenses in connection with the third quarter 2012 restructuring, partially offset by lower restricted stock and elimination of employee stock purchase plans expenses as a resultresulting from the 2011 termination of their termination in 2011.
2011 vs. 2010 Share-based compensation decreased due to lower restricted stock, stock option and employee stock purchase plans expenses.those plans.
For 2011, share-based compensation reflected accelerated vesting in connection with termination of our employee stock purchase plans, as described under research and development expenses, above.plans.
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Consulting and professional fees | | $ | 2,362 | | | $ | 4,389 | | | $ | 5,843 | | | | (46 | %) | | | (25 | %) |
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Consulting and professional fees | | $ | 3,922 | | | $ | 2,362 | | | $ | 4,389 | | | | 66 | % | | | (46 | %) |
2013 vs. 2012 Consulting and professional fees increased due to higher consulting ($697), patent ($457), legal ($256), audit ($101) and other fees ($49).
2012 vs. 2011 Consulting and professional fees decreased due to lower consulting ($1,246), audit ($297), patent ($294), accounting ($91), legal ($63) and other fees ($36).
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Other operating expenses | | $ | 4,325 | | | $ | 3,883 | | | $ | 4,768 | | | | 11 | % | | | (19 | %) |
20112013 vs. 20102012 Consulting and professional fees decreasedOther operating expenses increased due to lower patenthigher expenses for market research ($1,203)158), legalrecruiting ($497)112), investor relations ($109) and taxes ($108) and other feesoperating expenses ($13)127), which were partially offset by an increasea decreases in consultingrent ($137), tax accounting ($63) and audit fees ($59)172).
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Other operating expenses | | $ | 3,883 | | | $ | 4,768 | | | $ | 4,479 | | | | (19 | %) | | | 6 | % |
2012 vs. 2011 Other operating expenses decreased due to lower expenses for rent ($646), investor relations ($63), taxes ($30), and other operating expenses ($359), partially offset by an increases in recruiting ($137), computer software ($66) and travel ($10).
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Depreciation and amortization | | $ | 939 | | | $ | 1,324 | | | $ | 2,066 | | | | (29 | %) | | | (36 | %) |
20112013 vs. 20102012 Other operating expenses increasedDepreciation and amortization expense decreased primarily due to higher expenses for rent ($82), taxes ($59), computer software ($87)lower leasehold improvements and other operating expenses ($122), partially offset by decreases in recruiting ($51)machinery and travel ($10).equipment fixed asset balances.
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Depreciation and amortization | | $ | 1,324 | | | $ | 2,066 | | | $ | 2,853 | | | | (36 | %) | | | (28 | %) |
2012 vs. 2011 Depreciation and amortization expense decreased to $1,324 for 2012 from $2,066 for 2011, primarily due to lower machinery and equipment fixed asset balances.
2011 vs. 2010 DepreciationIntangible impairment charges and amortizationchange in contingent consideration liability
2013 As of December 31, 2013 indefinite-lived intangible assets decreased by $919, from $32.3 million to $31.4 million, resulting from our annual impairment testing, with the corresponding expense decreasedrecorded in the general and administrative expenses in the Consolidated Statements of Operations. This impairment was the result of change in the estimated timing of beginning cash inflows from 2014 to $2,0662018 and an increase in discount rate from 15% to 18% for 2011the Onalta intangible asset. In addition, the fourth quarter review of the contingent consideration liability fair value resulted in a $200 decrease, from $2,853 for 2010, primarily$15.9 million to $15.7 million, which has also been recorded in the general and administrative expenses in the Consolidated Statements of Operations. The decrease in contingent consideration liability was due to lower leasehold improvement amortization expenses.an increase in the discount period.
Other income:
| | 2012 | | | 2011 | | | 2010 | | | 2012 vs. 2011 | | | 2011 vs. 2010 | |
| | | | | | | | | | | Percent change | |
Interest income | | $ | 60 | | | $ | 65 | | | $ | 64 | | | | (8 | %) | | | 2 | % |
| | 2013 | | | 2012 | | | 2011 | | | 2013 vs. 2012 | | | 2012 vs. 2011 | |
| | | | | | | | | | | Percent change | |
Interest income | | $ | 46 | | | $ | 60 | | | $ | 65 | | | | (23 | %) | | | (8 | %) |
2013 vs. 2012 Interest income decreased due to lower average interest rates in 2013 than in 2012, partially offset by increases resulting from higher average balances of cash equivalents.
2012 vs. 2011 Interest income decreased to $60 for 2012 from $65 for 2011.
2011 vs. 2010 Interest income increased to $65 for 2011 from $64 for 2010. For 2011 and 2010, investment income remained unchanged at $65, while amortization of premiums, net of discounts, was $0 and ($1) for years ended December 31, 2011 and 2010, respectively.over the period.
Interest income, as reported, is primarily the result of investment income from our auction rate securities decreasedheld by the amortization of premiums we paid or increased by the amortization of discounts we received for those securities.us.
Income Taxes:
For 2013, income tax benefit of $362 resulted from the change in the difference between carrying amounts of in-process research and development assets for financial reporting purposes and the amounts used for income tax purposes. For 2012 and 2010, our2011, there was no provision for income taxes due to a pre-tax loss was $35,431for 2012 and $69,820. Forthe 2011 we recognized $10,381 in pre-tax income primarily as a result of the $60,000 Salix upfront cash payment, which has beenamount was completely offset fully withby our available net operating loss carry-forwards.We received a federal tax refund of $95 in 2010 from new legislation permitting the carryback of NOLs to 2005 as well as permitting the suspension of limitations on alternative minimum tax NOL utilization.
Net Income (Loss): Income:
20122013 net loss was $35,431,$42,572, compared to net loss of $35,431 for 2012, and net income of $10,381 for 2011 and net loss of $69,725 for 2010.2011.
Liquidity and Capital Resources
We have to date funded operations principally through payments received from private placements of equity securities, public offerings of common stock, collaborations, grants and contracts, royalties, interest on investments and proceeds from the exercise of outstanding options and warrants,warrants.
We received in 2013 a $5,000 upfront payment from partnering of the C. difficile program and through September 30, 2011, salesare eligible to receive future milestone and royalty payments. This receipt resulted in the reversal in 2013 of our common stock under our two employee stock purchase plans (Purchase Plans) which were terminated during 2011.deferred tax assets and liabilities established in 2012 to reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
We received in 2012 a $3,500 payment upon sale of our PRO 140 program and are eligible to receive future milestone and royalty payments in respect of this asset.
Under the Salix License Agreement, we received in 2011 a $60,000 upfront cash payment and $225 in respect of Salix ex-U.S. sublicensee revenue and are eligible to receive development and commercialization milestone payments plus royalties on net sales and 60% of any upfront, milestone, reimbursement or other revenue (net of costs of goods sold, as defined, and territory-specific research and development expense reimbursement) Salix receives from ex-U.S. sublicensees.
Our expenses and reimbursement revenue related to Relistor have declined substantially since Salix assumed direct responsibility for expenses under third-party contracts we have assigned to it. Under the Salix License Agreement, we are reimbursed for Salix approved full-time equivalents (FTE) and third-party development expenses incurred and paid by us after February 3, 2011.
At December 31, 2012,2013, we held $58,838$65,860 in cash and cash equivalents, a decreasean increase of $11,267$7,022 from $70,105$58,838 at December 31, 2011.2012. We expect that this amount will be sufficient to fund operations as currently anticipated beyond one year. In addition, at December 31, 20122013 and 2011,2012, our investment in auction rate securities classified as long-term assets on the Consolidated Balance Sheets amounted to $3,240$2,208 and $3,332,$3,240, respectively.
If we do not realize sufficient royalty or other revenue from Relistor or are unable to enter into favorableother collaboration, license, asset sale, capital raising or other financing transactions, we will have to reduce, delay or eliminate spending on certain programs, and/or reduce headcount andtake other overhead expenses.economic measures.
Cash used in operating activities for 2013 and 2012 was $36,107 and 2010 was $34,644, and $46,410, respectively, due to excess of expenditures on our research and development programs and general and administrative costs over cash received from collaborators and government grants. Our cash flow from operating activities was positive for 2011, due to the receipt of a $60,000 Salix upfront payment, $225 in respect of Salix ex-U.S. sublicensee revenue and $16,289 in reimbursement payments from Salix and Wyeth, partially offset by expenditures on our research and development programs and general and administrative costs. See Risk Factors.
During the third quarter ofIn 2013, we completed an underwritten public offering under our 2011 we put in place a shelf registration statement with the SEC which may be used for the issuance of up to $100.09.8 million shares of common stock preferred stock, debt securities, warrants, other rights and units.at a public offering price of $4.40 per share (including the underwriters' overallotment option), resulting in net proceeds of approximately $40.1 million. In December 2012, we completed a public offering of 12.7 million shares of common stock and receivedfor net proceeds of approximately $23.3 million. During the first quarter of 2014, we established a $150 million replacement shelf registration statement which we used for our recent underwritten public offering of 8.75 million shares of common stock at a public offering price of $4.60 per share, resulting in net proceeds of approximately $37.5 million. We may utilize this shelf registration for the issuance of up to approximately $110 million of additional common stock and other securities.
Sources of Cash
Operating Activities. During 2013 we received $9,686 under our collaborations, primarily consisting of (i) $5,125 in upfront and reimbursement payments from partnering of the C. difficile program, (ii) $3,952 in royalties and reimbursements from Salix, (iii) payments totaling $224 from out-licenses of other assets, and (iv) $385 in reimbursement payments relating to 1404. During 2012 we received $9,393 under collaborations, out-licenses and sale of assets, consisting of (i) $404 in reimbursement payments under the Salix License Agreement, (ii) $5,461 in royalties from Salix, (iii) $3,500 from the sale of our PRO 140 program and (iv) $28 under the License Agreement with Ono.another out-license. During 2011 we received $79,998 under our collaborations, consisting of (i) $60,000 Salix upfront cash payment and $225 in respect of Salix ex-U.S. sublicensee revenue, (ii) $14,659 in reimbursement payments under the Salix License Agreement, (iii) $1,767 in royalties from Salix, (iv) $3,317 under the Transition Agreementpursuant to our former collaboration with Wyeth Pharmaceuticals and (v) $30 under the License Agreement with Ono. During 2010 we received $10,351 from Wyeth, consisting of (i) $0 as reimbursements payments under the 2005 Wyeth collaboration, (ii) $7,906 under the Transition Agreement, (iii) $2,415 in royalties and (iv) $30 under the License Agreement with Ono.another out-license.
We have in the past partially funded research programs through awards from the NIH.NIH, which we do not expect to receive in the foreseeable future. For 2013, 2012 2011 and 2010,2011, we received $287, $576 $5,178 and $4,315,$5,178, respectively, of revenue from all of our NIH awards. We expect a further decline in NIH reimbursable expenses.
Changes in Accounts receivable and Accounts payable for 2013, 2012 2011 and 20102011 resulted from the timing of receipts from Salix, Wyeth, Ono, Fuji, other partnering transactions, and NIH, and payments made to trade vendors in the normal course of business.
Other than potential amounts we may receive from partnering transactions, weWe have no othercommitted external sources of capital.funding or capital other than agreements under which collaborators and licensees have contractual obligations to make payments to us. Other than revenues from Relistor, we expect no significant product revenues for a number of years,in the immediate or near-term future, as it will take at least that muchsignificant time if ever, to bring any of our current product candidates to the commercial marketing stage.
Investing Activities. Of $58,838Approximately 92% of our $65,860 in cash and cash equivalents primarilyat December 31, 2013 was invested in money market funds of which, at December 31, 2012, $51,127 is guaranteed by the U.S. Treasury or Federal Deposit Insurance Corporation's guarantee program. Our auctionfunds. Auction rate securities of $3,240 include $2,300$2,208 consist of securities collateralized by student loan obligations subsidized by the U.S. government, $100$1,100 of which was redeemed at par during the first quarterand second quarters of 2012.2013. These investments, whileauction rate securities are rated investment grade by the Standard & Poor's and Moody's rating agencies and predominantly havinghave scheduled maturities greater than ten years, are heavily concentrated in the U.S. financial sector.years. During 2012,2013, we realized $174 of proceeds from sales of fixed assets were $390.assets.
Financing Activities. During 2012,2013, net cash provided by financing activities includes $23,348included $40,078 in net proceeds that we received forfrom the issuance of approximately 12.79.775 million shares of our common stock. In addition, during 2013, 2012 2011 and 2010,2011, we received cash of $71, $306 $3,726 and $3,896,$3,726, respectively, from exercise of stock options, sales of common stock in satisfaction of severance obligations (in 2012) and under the now-discontinued employee stock purchase plans (in 2011) and exercise of stock options.. The amount of cash we receive from these sources fluctuates commensurate with headcount levels and changes in the price of our common stock price on the grant date for options exercised, and on the sale date for shares sold under the now-terminated employee stock purchase plans.
Unless we obtain regulatory approval from the FDA for additional product candidates and/or enter into agreements with corporate collaborators with respect to our additional technologies,other proprietary assets, we will be required to fund our operations in the future through sales of common stock or other securities or royalty or other financing agreements and/or grants and government contracts.agreements. Adequate additional funding may not be available to us on acceptable terms or at all. Our inability to raise additional capital on terms reasonably acceptable to us may seriously jeopardize the future success of our business.
Uses of Cash
Operating Activities. The majority of our cash has been used to advance our research and development programs,, including conducting pre-clinical studies and clinical trials, pursuing regulatory approvals for product candidates, filing and prosecuting patent applications and defending patent claims. Our expenses for research and development for 2012, 2011 and 2010, were $33,509, $54,166 and $52,151, respectively.claims. Included in the 2012 period presented below is $2,073 of cash disbursements incurred in connection with a former senior executive first quarter retirement. For various reasons, including the early stage of certain of our programs, the timing and results of our clinical trials, our dependence in certain instances on third parties, many of which are outside of our control, we cannot estimate the total remaining costs to be incurred and timing to complete all our research and development programs.
For 2012, 2011 and 2010, researchResearch and development costs incurred by project over the past three years were as follows:
| | 2012 | | | 2011 | | | 2010 | | 2013 | | | 2012 | | | 2011 | |
| | | | | |
Oncology | | $ | 29.1 | | | $ | 22.2 | | | $ | 17.4 | | $ | 33.4 | | | $ | 29.1 | | | $ | 22.2 | |
Relistor | | | 1.7 | | | | 23.2 | | | | 23.4 | | | 0.9 | | | | 1.7 | | | | 23.2 | |
Other programs | | | 2.7 | | | | 8.8 | | | | 11.4 | | | 0.8 | | | | 2.7 | | | | 8.8 | |
Total | | $ | 33.5 | | | $ | 54.2 | | | $ | 52.2 | | $ | 35.1 | | | $ | 33.5 | | | $ | 54.2 | |
We maywill require additional funding to continue our research and product development programs, conduct pre-clinical studies and clinical trials, fund operating expenses, pursue regulatory approvals for our product candidates, file and prosecute patent applications and enforce or defend patent claims, if any, fund other operating expenses, and fund product in-licensing and any possible acquisitions.
Investing Activities. During 2012, 2011 and 2010,the past three years, we have spent $137, $767 $226 and $2,171,$226, respectively, on capital expenditures.
Contractual Obligations
Our funding requirements, both for the next 12 months and beyond, will include required payments under operating leases and fixed and contingent payments under licensing, collaboration and collaborationother agreements, including those to which our Molecular Insight subsidiary is a party. The following table summarizes our contractual obligations as of December 31, 20122013 for future payments under ourthese agreements, and does not include MIPincluding Molecular obligations:
| | | | | Payments due by Year-end | | | | | Payments due by Year-end | |
| | Total | | | 2013 | | | | 2014-2015 | | | | 2016-2017 | | | Thereafter | | Total | | | 2014 | | | | 2015-2016 | | | | 2017-2018 | | | Thereafter | |
| | (in millions) | | (in millions) | |
Operating leases | | $ | 20.6 | | | $ | 2.4 | | | $ | 4.9 | | | $ | 5.1 | | | $ | 8.2 | | $ | 13.9 | | | $ | 1.9 | | | $ | 3.8 | | | $ | 4.0 | | | $ | 4.2 | |
License, collaboration and other agreements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed payments | | | 0.5 | | | | - | | | | 0.2 | | | | 0.3 | | | | - | | | 1.3 | | | | 0.3 | | | | 0.4 | | | | 0.6 | | | | - | |
Contingent payments (1) | | | 72.1 | | | | - | | | | 2.3 | | | | 3.0 | | | | 66.8 | | | 105.7 | | | | - | | | | 2.3 | | | | 7.7 | | | | 95.7 | |
Total | | $ | 93.2 | | | $ | 2.4 | | | $ | 7.4 | | | $ | 8.4 | | | $ | 75.0 | | $ | 120.9 | | | $ | 2.2 | | | $ | 6.5 | | | $ | 12.3 | | | $ | 99.9 | |
_______________
(1) | Based on assumed achievement of milestones covered under each agreement, the timing and payment of which is highly uncertain. |
We periodically assess the scientific progress and merits of each of our programs to determine if continued research and development is commercially and economically viable. Certain of our programs have been terminated due to the lack of scientific progress and prospects for ultimate commercialization. Because of the uncertainties associated with research and development in these programs, the duration and completion costs of our research and development projects are difficult to estimate and are subject to considerable variation. Our inability to complete research and development projects in a timely manner or failure to enter into collaborative agreements could significantly increase capital requirements and adversely affect our liquidity.
Our cash requirements may vary materially from those now planned because of results of research and development and product testing, changes in existing relationships or new relationships with licensees, licensors or other collaborators, changes in the focus and direction of our research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory approval process, manufacturing and marketing and other costs associated with the commercialization of products following receipt of regulatory approvals and other factors.
The above discussion contains forward-looking statements based on our current operating plan and the assumptions on which it relies. There could be deviations from that plan that would consume our assets earlier than planned.
Off-Balance Sheet Arrangements and Guarantees
We have no obligations under off-balance sheet arrangements and do not guarantee the obligations of any other unconsolidated entity.
Critical Accounting Policies
We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. Our significant accounting policies are disclosed in Note 23 to our financial statements included in this Annual Report on Form 10-K for 2012.Report. The selection and application of these accounting principles and methods requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. OnWe evaluate these estimates on an ongoing basis, we evaluate our estimates.basis. We base ourthese estimates on historical experience and on various other assumptions that are believed to bewe believe reasonable under the circumstances. The results of our evaluationthese evaluations form the basis for making judgments about the carrying values of assets and liabilities that are not otherwise readily apparent. While we believe that the estimates and assumptions we use in preparing the financial statements are appropriate, these estimates and assumptionsthey are subject to a number of factors and uncertainties regarding their ultimate outcome and, therefore, actual results could differ from these estimates.
We have identified ourThe critical accounting policies we use and the estimates we make are described below. These are policies and estimates that we believe are the most important in portraying our financial condition and results of operations, and that require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We have discussed the development, selection and disclosure of these critical accounting policies and estimates with the Audit Committee of our Board of Directors.
Revenue Recognition. We recognize revenue from all sources based on the provisions of the SEC's Staff Accounting Bulletin (SAB) No. 104 (SAB 104) and ASC 605 Revenue Recognition.
In October 2009, the FASB updatedThe FASB's ASC 605 Revenue Recognition by specifyingspecifies how to separate deliverables in multiple-deliverable arrangements, and how to measure and allocate arrangement consideration to one or more units of accounting. Under ASC 605,accounting, and provides that the delivered item(s) are separate units of accounting, providedif (i) the delivered item(s) have value to a collaborator on a stand-alone basis, and (ii), if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We adopted this update on January 1, 2011.
Royalty revenue is recognized based upon net sales of related licensed products. Royalty revenueproducts, and is recognized in the period the sales occur, provided that the royalty amounts are fixed or determinable, collection of the related receivable is reasonably assured and we have no remaining performance obligations under the arrangement providing for the royalty.
Amounts not expected to be recognized within one year of the balance sheet date are classified as long-term deferred revenue. The estimate of the classification of deferred revenue as short-term or long-term is based upon the periods in which we expect to perform joint committee services and/orour collaboration arrangement obligations including non-reimbursable technical assistance.
Share-Based Payment Arrangements. Our share-based compensation toof employees includes non-qualified stock options and restricted stock, and shares issued under our Purchase Plans, which are compensatory under ASC 718 Compensation – Stock Compensation. We account for share-based compensation to non-employees, including non-qualified stock options and restricted stock, in accordance with ASC 505 Equity.
The fair value of each non-qualified stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The model requires input assumptions with respect to (i) expected volatility of our common stock, which is based upon the daily quoted market prices on The NASDAQ Stock Market LLC over a period equal to the expected term, (ii) the period of time over which employees, officers, directors and non-employee consultants are expected to hold their options prior to exercise, (iii) zero expected dividend yield (zero in our case due to never having paid dividends and not expecting to pay dividends in the future,future), and (iv) risk-free interest rates for periods within the expected term of the options, which are based on the U.S. Treasury yield curve in effect at the time of grant.
Historical volatilities are based upon daily quoted market prices of our common stock on The NASDAQ Stock Market LLC over a period equal to the expected term of the related equity instruments. We rely only on historical volatility since we believe it providesis generally viewed as providing the most reliable indication of future volatility. FutureIn estimating expected future volatility, is expected towe assume it will be consistent with historical; we calculate historical volatility is calculated using a simple average calculation; we use available historical data is available for the length of the option's expected term, and we consistently use a sufficient number of price observations are used consistently.observations. Since our stock options are not traded on a public market, we do not use implied volatility.
The expected term of options granted represents the period of time that options granted are expected to be outstanding based upon historical data related to exercise and post-termination cancellation activity. The expected term of stock options granted to our Chief Executive Officer (CEO) and non-employee directors, consultants and consultantsofficers are calculated separately from stock options granted to employees and other officers.employees.
We apply a forfeiture rate to the number of unvested awards in each reporting period in order to estimate the number of awards that are expected to vest. Estimated forfeiture rates are based upon historical data on vesting behavior of employees. We adjust the total amount of compensation cost 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.
Changes in the assumptions used to compute the fair value of the option awards are likely to affect thetheir fair value of the non-qualified stock option awards and the amount of compensation expense recognized in future periods. A higher volatility, longer expected term and higher risk-free rate increases the resulting compensation expense recognized in future periods as compared to prior periods. Conversely, a lower volatility, shorter expected term and lower risk-free rate decreases the resulting compensationsuch expense recognized in future periods as compared to prior periods.
For performance-based stock option awards vesting of a defined portion of each award will occur earlier if a defined performance condition is achieved; more than one condition may be achieved in any period. We estimate the probability of achievement of each performance condition and use those probabilities to determine the requisite service period of each award. The requisite service period for the award is the shortest of the explicit or implied service periods. For performance and market-based stock option awards to our CEO (consisting of options(awarded in 2010)2012 and 2011 only), vesting occurs on the basis of the achievement of specified performance or market-based milestones. The options have an exercise price equal to the closing price on our common stock on the date of grant. The awards are valued using a Monte Carlo simulation model and the expense related to these grants will be recognized over the shortest estimated time for the achievement of the performance or market conditions. On July 1, 2011, we granted an option to our CEO which vests on the basis of theupon achievement of specified performance-based milestones. The option hasawards, which have an exercise price equal to the closing price of our common stock on the date of grant. The award isgrant, are valued using the Black-Scholes option pricing model andmodel: the expense related to this grant will bethese grants is recognized during the period, if any, in which one of theeach performance milestonesmilestone is achieved. The awards will not vest unless one of the performance milestones is achieved or the market condition is met. Changes in the estimate of probability of achievement of any performance or market condition will be reflected in compensation expense of the period of change and future periods affected by the change.
Clinical Trial and Other Research and Development Expenses Including Clinical Trial Expenses. Clinical trial expenses, which are included in research and development expenses, represent obligations resulting from our contracts with various clinical investigators and clinical research organizations in connection with conducting clinical trials for our product candidates. Such costs are expensed as incurred, and are generally based on the total number of patients in the trial, the rate at which the patients enter the trial and the period over which the clinical investigators and clinical research organizations to provide services. We believe that this method best approximatesaligns the efforts expended on a clinical trial with the expenses we record. We adjust our rate of clinical expense recognition if actual results differ from our estimates. In addition to clinical trial expenses, we estimate the amounts of other research and development expenses, for which invoices have not been received at the end of a period, based upon communication with third parties that have provided services or goods during the period. Such estimates are subject to change as additional information becomes available.
Fair Value Measurements. Our available-for-sale investment portfolio consists of money market funds and $2.4 million face amount of auction rate securities (ARS), and is recorded at fair value in the accompanying Consolidated Balance Sheets in accordance with ASC 320 Investments – Debt and Equity Securities. The change in the fair value of these investments is recorded as a component of other comprehensive income (loss).
We continue to monitor markets for our investments and consider the impact, if any, of market conditions on the fair market value of our investments.
We expect to recover the amortized cost of all of our investments at maturity. Currently, weWe currently do not anticipate having to sell these securities in order to operate our business and we believe that it is not more likely than not that we will be required to sell these securities before recovery of principal. We do not believe the carrying values of our ARS investments are other than temporarily impaired and therefore expect the positions will eventually be liquidated without significant loss. We monitor markets for our investments and consider the impact, if any, of market conditions on the fair market value of our investments.
Valuation of securities is subject to uncertainties that are difficult to predict, such as changes to credit ratings of the securities and/or the underlying assets supporting them, default rates applicable to the underlying assets, underlying collateral value, discount rates, counterparty risk, ongoing strength and quality of market credit and liquidity and general economic and market conditions. The valuation of the auction rate securities we holdARS in our portfolio is based on an internal analysis of timing of expected future successful auctions, collateralization of underlying assets of the security and credit quality of the security.
35In –Process Research and Development and Goodwill. In connection with the acquisition of Molecular Insight, we have established a policy for accounting for intangible assets, under which in process research and development (IPR&D) and goodwill are initially measured at fair value and capitalized as an intangible asset and an impairment test for these intangibles is performed annually in the fourth quarter, unless impairment indicators require an earlier evaluation. Upon and subject to commercialization of these candidates, the IPR&D will be amortized over the relevant estimated useful life.
Contingent Consideration Liability. The estimated fair value of the contingent consideration liability, initially measured and recorded on the acquisition date, is considered to be a Level 3 instrument and is reviewed quarterly, or whenever events or circumstances occur that indicate a change in fair value. The contingent consideration liability is recorded at fair value at the end of each period.
Impact of Recently Issued Accounting Standards
In June 2011, the FASB issued ASU No. 2011-05, which requires that comprehensive income and the related components be presented in a single continuous statement or in two separate but consecutive statements. The ASU was effective beginning January 1, 2012. We adopted this new standard, presenting comprehensive income in two separate but consecutive statements, and applied it retrospectively on January 1, 2012. As this guidance relates to presentation only, the adoption of this standard had no material impact on our consolidated financial statements.
In May 2011, the FASB issued ASU No. 2011-04, which is the result of joint efforts by the FASB and International Accounting Standards Board to develop a single, converged fair value framework. The converged guidance specifies how to measure fair value and what disclosures to provide about fair value measurements. The ASU is effective for interim and annual periods beginning after December 15, 2011. We adopted this new standard on January 1, 2012 and it had no material impact on our consolidated financial statements.
In February 2013, The FASB issued ASU No. 2013-02, which requires presentation of amounts reclassified out of accumulated other comprehensive income by component. The ASU is effective for reporting periods beginning after December 15, 2012. We are currently evaluating the effect this ASU will have on our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Our primary investment objective is to preserve principal. Our money market funds and auction rate securitiesARS have interest rates that were variable and totaled $59,464$62,572 at December 31, 2012.2013. As a result, we do not believe that these investment balances have a material exposure to interest-rate risk.
At December 31, 2012,that date, we continue to holdheld approximately $3,240 (5.4%$2,208 (3.53% of assets measured at fair value) carrying amount of auction rate securities,ARS, in respect of which we have received all scheduled interest payments. The principal amount of these remaining auction rate securitiesARS will not be accessible until the issuer calls or restructures the underlying security, the underlying security matures and is paid or a buyer outside the auction process emerges.
We continue to monitor the market for auction rate securitiesARS and consider the impact, if any, of market conditions on the fair market value of ourthese investments. We believe that the failed auctions experienced to date are not a result of the deterioration of the underlying credit quality of these securities, although valuation of them is subject to uncertainties that are difficult to predict, such as changes to credit ratings of the securities and/or the underlying assets supporting them, default rates applicable to the underlying assets, underlying collateral value, discount rates, counterparty risk, ongoing strength and quality of market credit and liquidity, and general economic and market conditions. We do not believe the carrying values of these auction rate securitiesthe ARS that we hold are other than temporarily impaired and therefore expect the positions will eventually be liquidated without significant loss.
The valuation of the auction rate securitiesARS we hold is based on an internal analysis of timing of expected future successful auctions, collateralization of underlying assets of the security and credit quality of the security. We re-evaluatedAs a result of re-evaluating the valuation of these securities as of December 31, 2012 and2013, we reduced the temporary impairment amount decreased $8to $192 from $268$260 at December 31, 2011 to $260.2012. A 100 basis point increase to our internal analysis would result in a $35$24 increase in the temporary impairment of these securities as of December 31, 2012.2013.
Item 8. Financial Statements and Supplementary Data
See page F-1, Index to Consolidated Financial Statements.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Treasurer,Principal Financial Officer (PFO), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have a Disclosure Committee consisting of members of our senior management which monitors and implements our policy of disclosing material information concerning the Company in accordance with applicable law.
As required by SEC Rule 13a-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and Treasurer,PFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our CEO and TreasurerPFO concluded that our current disclosure controls and procedures, as designed and implemented, were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f) and 15d-15(f) during our fiscal quarter ended December 31, 20122013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management's Report on Internal Control Over Financial Reporting
Internal control over financial reporting is a process designed by, or under the supervision of, our principal executiveCEO and principal financial officersPFO and effected by our Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management is responsible for establishing and maintaining adequate internal control over financial reporting and itwhich includes policies and procedures that:
· | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| |
· | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and |
| |
· | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has used the framework set forth in the report entitled Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework), known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Management has concluded that our internal control over financial reporting was effective as of December 31, 2012.2013. The effectiveness of our internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm, as of December 31, 20122013 as stated in their report which is provided below.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Progenics Pharmaceuticals, Inc.
We have audited Progenics Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2012,2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Progenics Pharmaceuticals, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Progenics Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012,2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsheets of Progenics Pharmaceuticals, Inc. as of December 31, 2013 and 2012, and the related consolidated statementstatements of income andoperations, comprehensive (loss) income, stockholders' equity, and cash flows for the yearyears then ended December 31, 2012 of Progenics Pharmaceuticals, Inc. and our report dated March 15, 201313, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Hartford, Connecticut
March 15, 201313, 2014
Item 9B. Other Information
None.
PART III
The information required by the Form 10-K Items listed in the following table will be included under the respective headings specified for such Items in our definitive proxy statement for our 20132014 Annual Meeting of Stockholders to be filed with the SEC:
Item of Form 10-K | Location in 20132014 Proxy Statement |
| | |
| Directors, Executive Officers and Corporate Governance | Election of Directors. BoardExecutive and Committee Meetings.Other Officers.
Executive OfficersCorporate Governance.
Code of the Company.Business Ethics and Conduct.* Section 16(a) Beneficial Ownership Reporting and Compliance. Code of Business Ethics and Conduct.*
*The full text of our codeCode of business ethicsBusiness Ethics and conductConduct is available on our website (http://www.progenics.com/documents.cfmwww).progenics.com). |
| | |
| Executive Compensation | Executive Compensation. Compensation Committee Report. Compensation Committee Interlocks and Insider Participation. |
| | |
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | Equity Compensation Plan Information. Security Ownership of Certain Beneficial Owners and Management. |
| | |
| Certain Relationships and Related Transactions, and Director Independence | Certain Relationships and Related Transactions. Affirmative Determinations Regarding Director Independence and Other Matters. |
| | |
| Principal Accounting Fees and Services | Fees Billed for Services Rendered by our Independent Registered Public Accounting Firm. Pre-approval of Audit and Non-Audit Services by the Audit Committee. |
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents or the portions thereof indicated are filed as a part of this Annual Report.
| (a) | Documents filed as part of this Annual Report: |
Consolidated Financial Statements of Progenics Pharmaceuticals, Inc.:
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets at December 31, 20122013 and 20112012
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 2011 and 20102011
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2013, 2012 2011 and 20102011
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2013, 2012 2011 and 20102011
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 2011 and 20102011
Notes to Consolidated Financial Statements
| (b) | Financial Statement Schedules |
All financialSchedule II – Valuation and Qualifying Accounts
Financial statement schedules referred to in Item 12-01 of Regulation S-X and not listed above are inapplicable and therefore have been omitted.
Exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately following the signature page of this Report and incorporated herein by reference.
PROGENICS PHARMACEUTICALS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page |
| F-2 |
Financial Statements: | |
| F-3 |
| F-4 |
| F-5 |
| F-6 |
| F-7 |
| F-8 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Progenics Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheetsheets of Progenics Pharmaceuticals, Inc. as of December 31, 2013 and 2012, and the related consolidated statementstatements of operations, and comprehensive loss,(loss) income, stockholders' equity, and cash flows for the year ended December 31, 2012.years then ended. Our audits also included the financial statement schedule listed in the Index at Item 15(b). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.audits.
We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit providesaudits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Progenics Pharmaceuticals, Inc. at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for the yearyears then ended, December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Progenics Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2012,2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 15, 201313, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Hartford, Connecticut
March 15, 201313, 2014
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Progenics Pharmaceuticals, Inc.
In our opinion, the consolidated balance sheet as of December 31, 2011 and the related consolidated statements of operations, and comprehensive income (loss), of stockholders' equity and of cash flows for each of the two years in the periodyear ended December 31, 2011 present fairly, in all material respects, the financial positionresults of operations and cash flows of Progenics Pharmaceuticals, Inc. and its subsidiaries at December 31, 2011, andfor the results of their operations and their cash flows for each of the two years in the periodyear ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.audit. We conducted our auditsaudit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provideaudit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 15, 2012
PROGENICS PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for par value and share amounts)
| | December 31, | | | December 31, | |
| | 2012 | | | 2011 | | | 2012 | | | 2012 | |
Assets | | | | | | | |
Assets | | | | | | | |
Current assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 58,838 | | | $ | 70,105 | | | $ | 65,860 | | | $ | 58,838 | |
Accounts receivable | | | 6,937 | | | | 1,516 | | |
Accounts receivable, net | | | | 2,879 | | | | 6,937 | |
Other current assets | | | 1,692 | | | | 919 | | | | 1,943 | | | | 1,692 | |
Total current assets | | | 67,467 | | | | 72,540 | | | | 70,682 | | | | 67,467 | |
Auction rate securities | | | 3,240 | | | | 3,332 | | | | 2,208 | | | | 3,240 | |
Fixed assets, at cost, net of accumulated depreciation and amortization | | | 3,399 | | | | 4,038 | | | | 2,413 | | | | 3,399 | |
Intangible assets, net (Note 3) | | | | 31,379 | | | | - | |
Goodwill | | | | 7,702 | | | | - | |
Deferred tax assets – long term | | | 2,052 | | | | - | | | | - | | | | 2,052 | |
Other assets | | | 150 | | | | 200 | | | | 157 | | | | 150 | |
Total assets | | $ | 76,308 | | | $ | 80,110 | | | $ | 114,541 | | | $ | 76,308 | |
| | | | | | | | | | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | |
Accounts payable and accrued expenses | | $ | 5,640 | | | $ | 6,331 | | | $ | 6,512 | | | $ | 5,640 | |
Deferred tax liability - current | | | 2,069 | | | | - | | | | - | | | | 2,069 | |
Deferred revenue - current | | | 838 | | | | 204 | | | | - | | | | 838 | |
Other current liabilities | | | 115 | | | | 115 | | | | 115 | | | | 115 | |
Total current liabilities | | | 8,662 | | | | 6,650 | | | | 6,627 | | | | 8,662 | |
Deferred revenue - long term | | | - | | | | 162 | | |
Contingent consideration liability | | | | 15,700 | | | | - | |
Deferred tax liability - long term | | | | 12,321 | | | | - | |
Other liabilities | | | 1,078 | | | | 1,497 | | | | 914 | | | | 1,078 | |
Total liabilities | | | 9,740 | | | | 8,309 | | | | 35,562 | | | | 9,740 | |
Commitments and contingencies (Note 9) | | | | | | | | | |
Commitments and contingencies (Note 10) | | | | | | | | | |
Stockholders' equity: | | | | | | | | | | | | | | | | |
Preferred stock, $.001 par value; 20,000,000 shares authorized; issued and outstanding – none | | | - | | | | - | | | | - | | | | - | |
Common stock, $.0013 par value; 80,000,000 shares authorized; issued – 46,765,472 in 2012 and 34,046,409 in 2011 | | | 61 | | | | 44 | | |
Common stock, $.0013 par value; shares authorized - 160,000,000 in 2013 and 80,000,000 in 2012; issued – 61,025,404 in 2013 and 46,765,472 in 2012 | | | | 79 | | | | 61 | |
Additional paid-in capital | | | 493,613 | | | | 463,440 | | | | 548,510 | | | | 493,613 | |
Accumulated deficit | | | (424,105 | ) | | | (388,674 | ) | | | (466,677 | ) | | | (424,105 | ) |
Accumulated other comprehensive loss | | | (260 | ) | | | (268 | ) | | | (192 | ) | | | (260 | ) |
Treasury stock, at cost (200,000 shares in 2012 and 2011) | | | (2,741 | ) | | | (2,741 | ) | |
Treasury stock, at cost (200,000 shares in 2013 and 2012) | | | | (2,741 | ) | | | (2,741 | ) |
Total stockholders' equity | | | 66,568 | | | | 71,801 | | | | 78,979 | | | | 66,568 | |
Total liabilities and stockholders' equity | | $ | 76,308 | | | $ | 80,110 | | | $ | 114,541 | | | $ | 76,308 | |
The accompanying notes are an integral part of the financial statements.
PROGENICS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except net (loss) income per share)
| | Years Ended December 31, | | | Years Ended December 31, | |
| | 2012 | | | 2011 | | | 2010 | | | 2013 | | | 2012 | | | 2011 | |
Revenues: | | | | | | | | | | | | | | | | | | |
Royalty income | | $ | 4,963 | | | $ | 3,046 | | | $ | 1,826 | | | $ | 5,923 | | | $ | 4,963 | | | $ | 3,046 | |
Collaboration revenue | | | 8,525 | | | | 76,764 | | | | 1,413 | | | | 1,595 | | | | 8,525 | | | | 76,764 | |
Research grants | | | 488 | | | | 4,810 | | | | 4,573 | | | | 275 | | | | 488 | | | | 4,810 | |
Other revenues | | | 72 | | | | 176 | | | | 140 | | | | 69 | | | | 72 | | | | 176 | |
Total revenues | | | 14,048 | | | | 84,796 | | | | 7,952 | | | | 7,862 | | | | 14,048 | | | | 84,796 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
Research and development | | | 31,840 | | | | 53,183 | | | | 50,640 | | | | 33,903 | | | | 31,840 | | | | 53,183 | |
License fees – research and development | | | 1,170 | | | | 578 | | | | 1,270 | | | | 567 | | | | 1,170 | | | | 578 | |
Royalty expense | | | 499 | | | | 405 | | | | 241 | | | | 624 | | | | 499 | | | | 405 | |
General and administrative | | | 14,706 | | | | 18,248 | | | | 22,832 | | | | 14,809 | | | | 14,706 | | | | 18,248 | |
Depreciation and amortization | | | 1,324 | | | | 2,066 | | | | 2,853 | | | | 939 | | | | 1,324 | | | | 2,066 | |
Total expenses | | | 49,539 | | | | 74,480 | | | | 77,836 | | | | 50,842 | | | | 49,539 | | | | 74,480 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating (loss) income | | | (35,491 | ) | | | 10,316 | | | | (69,884 | ) | | | (42,980 | ) | | | (35,491 | ) | | | 10,316 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other income: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | 60 | | | | 65 | | | | 64 | | | | 46 | | | | 60 | | | | 65 | |
Total other income | | | 60 | | | | 65 | | | | 64 | | | | 46 | | | | 60 | | | | 65 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net (loss) income before income taxes | | | (35,431 | ) | | | 10,381 | | | | (69,820 | ) | |
Net (loss) income before provision for income taxes | | | | (42,934 | ) | | | (35,431 | ) | | | 10,381 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income tax benefit | | | - | | | | - | | | | 95 | | | | 362 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (35,431 | ) | | $ | 10,381 | | | $ | (69,725 | ) | | $ | (42,572 | ) | | $ | (35,431 | ) | | $ | 10,381 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net (loss) income per share - basic | | $ | (1.02 | ) | | $ | 0.31 | | | $ | (2.14 | ) | | $ | (0.76 | ) | | $ | (1.02 | ) | | $ | 0.31 | |
Weighted-average shares - basic | | | 34,754 | | | | 33,375 | | | | 32,590 | | | | 55,798 | | | | 34,754 | | | | 33,375 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net (loss) income per share - diluted | | $ | (1.02 | ) | | $ | 0.31 | | | $ | (2.14 | ) | | $ | (0.76 | ) | | $ | (1.02 | ) | | $ | 0.31 | |
Weighted-average shares - diluted | | | 34,754 | | | | 33,494 | | | | 32,590 | | | | 55,798 | | | | 34,754 | | | | 33,494 | |
The accompanying notes are an integral part of the financial statements.
PROGENICS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(amounts in thousands)
| | Years Ended December 31, | | |
| | 2012 | | | 2011 | | | 2010 | | | Years Ended December 31, | |
| | | | | | | | | | | 2013 | | | 2012 | | | 2011 | |
Net (loss) income | | $ | (35,431 | ) | | $ | 10,381 | | | $ | (69,725 | ) | | $ | (42,572 | ) | | $ | (35,431 | ) | | $ | 10,381 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | |
Net change in unrealized loss on auction rate securities | | | 8 | | | | 24 | | | | 15 | | | | 68 | | | | 8 | | | | 24 | |
Total other comprehensive income | | | 8 | | | | 24 | | | | 15 | | | | 68 | | | | 8 | | | | 24 | |
Comprehensive (loss) income | | $ | (35,423 | ) | | $ | 10,405 | | | $ | (69,710 | ) | | $ | (42,504 | ) | | $ | (35,423 | ) | | $ | 10,405 | |
The accompanying notes are an integral part of the financial statements.
PROGENICS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2013, 2012 2011 and 2010
2011
(amounts in thousands)
| | Common Stock | | | Additional | | | | | | Accumulated Other | | | Treasury Stock | | | | | | Common Stock | | | Additional | | | | | | Accumulated Other | | | Treasury Stock | | | | |
| | Shares | | | Amount | | | Paid-In Capital | | | Accumulated Deficit | | | Comprehensive Income (Loss) | | | Shares | | | Amount | | | Total | | | Shares | | | Amount | | | Paid-In Capital | | | Accumulated Deficit | | | Comprehensive Income (Loss) | | | Shares | | | Amount | | | Total | |
Balance at December 31, 2009 | | | 32,142 | | | $ | 42 | | | $ | 439,943 | | | $ | (329,330 | ) | | $ | (307 | ) | | | (200 | ) | | $ | (2,741 | ) | | $ | 107,607 | | |
Balance at December 31, 2010 | | | | 33,326 | | | $ | 43 | | | $ | 453,353 | | | $ | (399,055 | ) | | $ | (292 | ) | | | (200 | ) | | $ | (2,741 | ) | | $ | 51,308 | |
Net loss | | | - | | | | - | | | | - | | | | (69,725 | ) | | | - | | | | - | | | | - | | | | (69,725 | ) | | | - | | | | - | | | | - | | | | 10,381 | | | | - | | | | - | | | | - | | | | 10,381 | |
Other comprehensive income | | | - | | | | - | | | | - | | | | - | | | | 15 | | | | - | | | | - | | | | 15 | | |
Compensation expenses for share-based payment arrangements | | | - | | | | - | | | | 9,515 | | | | - | | | | - | | | | - | | | | - | | | | 9,515 | | |
Issuance of restricted stock, net of forfeitures | | | 173 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
Sale of common stock under employee stock purchase plans and exercise of stock options | | | 1,011 | | | | 1 | | | | 3,895 | | | | - | | | | - | | | | - | | | | - | | | | 3,896 | | |
Balance at December 31, 2010 | | | 33,326 | | | | 43 | | | | 453,353 | | | | (399,055 | ) | | | (292 | ) | | | (200 | ) | | | (2,741 | ) | | | 51,308 | | |
Net income | | | - | | | | - | | | | - | | | | 10,381 | | | | - | | | | - | | | | - | | | | 10,381 | | |
Other comprehensive income | | | - | | | | - | | | | - | | | | - | | | | 24 | | | | - | | | | - | | | | 24 | | | | - | | | | - | | | | - | | | | - | | | | 24 | | | | - | | | | - | | | | 24 | |
Compensation expenses for share-based payment arrangements | | | - | | | | - | | | | 6,362 | | | | - | | | | - | | | | - | | | | - | | | | 6,362 | | | | - | | | | - | | | | 6,362 | | | | - | | | | - | | | | - | | | | - | | | | 6,362 | |
Forfeitures of restricted stock | | | (38 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (38 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Sale of common stock under employee stock purchase plans and exercise of stock options | | | 758 | | | | 1 | | | | 3,725 | | | | - | | | | - | | | | - | | | | - | | | | 3,726 | | | | 758 | | | | 1 | | | | 3,725 | | | | - | | | | - | | | | - | | | | - | | | | 3,726 | |
Balance at December 31, 2011 | | | 34,046 | | | | 44 | | | | 463,440 | | | | (388,674 | ) | | | (268 | ) | | | (200 | ) | | | (2,741 | ) | | | 71,801 | | | | 34,046 | | | | 44 | | | | 463,440 | | | | (388,674 | ) | | | (268 | ) | | | (200 | ) | | | (2,741 | ) | | | 71,801 | |
Net loss | | | - | | | | - | | | | - | | | | (35,431 | ) | | | - | | | | - | | | | - | | | | (35,431 | ) | |
Net income | | | | - | | | | - | | | | - | | | | (35,431 | ) | | | - | | | | - | | | | - | | | | (35,431 | ) |
Other comprehensive income | | | - | | | | - | | | | - | | | | - | | | | 8 | | | | - | | | | - | | | | 8 | | | | - | | | | - | | | | - | | | | - | | | | 8 | | | | - | | | | - | | | | 8 | |
Compensation expenses for share-based payment arrangements | | | - | | | | - | | | | 6,536 | | | | - | | | | - | | | | - | | | | - | | | | 6,536 | | | | - | | | | - | | | | 6,536 | | | | - | | | | - | | | | - | | | | - | | | | 6,536 | |
Sale of common stock in public offering, net of underwriting discounts and commissions ($1,518) and offering expenses ($434) | | | 12,650 | | | | 17 | | | | 23,331 | | | | - | | | | - | | | | - | | | | - | | | | 23,348 | | | | 12,650 | | | | 17 | | | | 23,331 | | | | - | | | | - | | | | - | | | | - | | | | 23,348 | |
Forfeitures of restricted stock | | | (6 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (6 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Sale of common stock under stock incentive plan and exercise of stock options | | | 75 | | | | - | | | | 306 | | | | - | | | | - | | | | - | | | | - | | | | 306 | | |
Sale of common stock under employee stock purchase plans and exercise of stock options | | | | 75 | | | | - | | | | 306 | | | | - | | | | - | | | | - | | | | - | | | | 306 | |
Balance at December 31, 2012 | | | 46,765 | | | $ | 61 | | | $ | 493,613 | | | $ | (424,105 | ) | | $ | (260 | ) | | | (200 | ) | | $ | (2,741 | ) | | $ | 66,568 | | | | 46,765 | | | | 61 | | | | 493,613 | | | | (424,105 | ) | | | (260 | ) | | | (200 | ) | | | (2,741 | ) | | | 66,568 | |
Net loss | | | | - | | | | - | | | | - | | | | (42,572 | ) | | | - | | | | - | | | | - | | | | (42,572 | ) |
Other comprehensive income | | | | - | | | | - | | | | - | | | | - | | | | 68 | | | | - | | | | - | | | | 68 | |
Compensation expenses for share-based payment arrangements | | | | - | | | | - | | | | 3,546 | | | | - | | | | - | | | | - | | | | - | | | | 3,546 | |
Acquisition of subsidiary, net of issuance costs | | | | 4,472 | | | | 6 | | | | 11,214 | | | | - | | | | - | | | | - | | | | - | | | | 11,220 | |
Sale of common stock in public offering, net of underwriting discounts and commissions ($2,581) and offering expenses ($351) | | | | 9,775 | | | | 12 | | | | 40,066 | | | | - | | | | - | | | | - | | | | - | | | | 40,078 | |
Forfeitures of restricted stock | | | | (1 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Exercise of stock options | | | | 14 | | | | - | | | | 71 | | | | - | | | | - | | | | - | | | | - | | | | 71 | |
Balance at December 31, 2013 | | | | 61,025 | | | $ | 79 | | | $ | 548,510 | | | $ | (466,677 | ) | | $ | (192 | ) | | | (200 | ) | | $ | (2,741 | ) | | $ | 78,979 | |
The accompanying notes are an integral part of the financial statements.
PROGENICS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
| | Years Ended December 31, | | | Years Ended December 31, | |
| | 2012 | | | 2011 | | | 2010 | | | 2013 | | | 2012 | | | 2011 | |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (35,431 | ) | | $ | 10,381 | | | $ | (69,725 | ) | | $ | (42,572 | ) | | $ | (35,431 | ) | | $ | 10,381 | |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | 1,324 | | | | 2,066 | | | | 2,853 | | | | 939 | | | | 1,324 | | | | 2,066 | |
Gains on sales of fixed assets | | | (327 | ) | | | - | | | | - | | |
Losses (gains) on sales of fixed assets | | | | 204 | | | | (327 | ) | | | - | |
Intangible impairment charge | | | | 919 | | | | - | | | | - | |
Deferred income tax | | | | (362 | ) | | | - | | | | - | |
Change in contingent consideration liability | | | | (200 | ) | | | - | | | | - | |
Expenses for share-based compensation awards | | | 6,536 | | | | 6,362 | | | | 9,515 | | | | 3,546 | | | | 6,536 | | | | 6,362 | |
Changes in assets and liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
(Increase) decrease in accounts receivable | | | (5,421 | ) | | | 767 | | | | 5,239 | | |
(Increase) decrease in other current assets | | | (754 | ) | | | 882 | | | | (333 | ) | |
(Increase) decrease in deferred tax and other assets | | | (2,002 | ) | | | 1,050 | | | | 617 | | |
(Decrease) increase in accounts payable and accrued expenses | | | (691 | ) | | | (3,352 | ) | | | 3,847 | | |
Increase in deferred revenue – current | | | 634 | | | | 204 | | | | - | | |
Increase (decrease) in deferred tax and other current liabilities | | | 2,069 | | | | 3 | | | | (58 | ) | |
Decrease (increase) in accounts receivable | | | | 4,114 | | | | (5,421 | ) | | | 767 | |
Decrease (increase) in other current assets | | | | 336 | | | | (754 | ) | | | 882 | |
Decrease (increase) in deferred tax and other assets | | | | 2,044 | | | | (2,002 | ) | | | 1,050 | |
(Decrease) in accounts payable and accrued expenses | | | | (1,956 | ) | | | (691 | ) | | | (3,352 | ) |
(Decrease) increase in deferred revenue – current | | | | (886 | ) | | | 634 | | | | 204 | |
(Decrease) increase in deferred tax and other current liabilities | | | | (2,069 | ) | | | 2,069 | | | | 3 | |
(Decrease) increase in deferred revenue - long term | | | (162 | ) | | | 162 | | | | - | | | | - | | | | (162 | ) | | | 162 | |
(Decrease) increase in other liabilities | | | (419 | ) | | | (138 | ) | | | 1,635 | | |
(Decrease) in other liabilities | | | | (164 | ) | | | (419 | ) | | | (138 | ) |
Net cash (used in) provided by operating activities | | | (34,644 | ) | | | 18,387 | | | | (46,410 | ) | | | (36,107 | ) | | | (34,644 | ) | | | 18,387 | |
Cash flows from investing activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Cash acquired in acquisition of subsidiary | | | | 1,888 | | | | - | | | | - | |
Capital expenditures | | | (767 | ) | | | (226 | ) | | | (2,171 | ) | | | (137 | ) | | | (767 | ) | | | (226 | ) |
Proceeds from sales of fixed assets | | | 390 | | | | - | | | | - | | | | 174 | | | | 390 | | | | - | |
Proceeds from redemption of auction rate securities | | | 100 | | | | 300 | | | | 1,700 | | | | 1,100 | | | | 100 | | | | 300 | |
Net cash (used in) provided by investing activities | | | (277 | ) | | | 74 | | | | (471 | ) | |
Net cash provided by (used in) investing activities | | | | 3,025 | | | | (277 | ) | | | 74 | |
Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Equity issuance costs in connection with acquisition of subsidiary | | | | (45 | ) | | | - | | | | - | |
Proceeds from public offering of common stock, net of underwriting discounts and commissions and offering expenses | | | 23,348 | | | | - | | | | - | | | | 40,078 | | | | 23,348 | | | | - | |
Proceeds from the exercise of stock options and sale of common stock under the employee stock purchase plans | | | 306 | | | | 3,726 | | | | 3,896 | | | | 71 | | | | 306 | | | | 3,726 | |
Net cash provided by financing activities | | | 23,654 | | | | 3,726 | | | | 3,896 | | | | 40,104 | | | | 23,654 | | | | 3,726 | |
Net (decrease) increase in cash and cash equivalents | | | (11,267 | ) | | | 22,187 | | | | (42,985 | ) | |
Net increase (decrease) in cash and cash equivalents | | | | 7,022 | | | | (11,267 | ) | | | 22,187 | |
Cash and cash equivalents at beginning of period | | | 70,105 | | | | 47,918 | | | | 90,903 | | | | 58,838 | | | | 70,105 | | | | 47,918 | |
Cash and cash equivalents at end of period | | $ | 58,838 | | | $ | 70,105 | | | $ | 47,918 | | | $ | 65,860 | | | $ | 58,838 | | | $ | 70,105 | |
| | | | | | | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | | | | |
Contingent consideration liability | | | $ | 15,700 | | | $ | - | | | $ | - | |
Stock acquisition consideration | | | $ | 11,265 | | | $ | - | | | $ | - | |
The accompanying notes are an integral part of the financial statements.
1. Organization and Business
Progenics Pharmaceuticals, Inc. ("Progenics," "we" or "us") develops innovative medicines for oncology. A significant part of our research andoncology. Our clinical development efforts centerscenter on prostate specific membrane antigen (PSMA), a protein found at high levels on the surface of prostate cancer cells and also on the neovasculature of a number of other types of solid tumors.late-stage oncology assets. We are conducting phase 2 clinical trials of two product candidates for prostate cancer: our therapeutic candidate, PSMA ADC, a fully human monoclonal antibody-drug conjugate (ADC) directed toward PSMA,, and MIP-1404,1404 (trofolastat), an imaging agent candidate, in developmentand resuming a pivotal phase 2 clinical trial of Azedra™, our ultra-orphan radiotherapy candidate for pheochromocytoma. We have also decided to move forward MIP-1095, a compound originally developed by Molecular Insight, Pharmaceuticals, a clinical-stage biotechnology company we acquiredinto clinical development, and expect to file an IND application in January 2013 (see Note 15). Among other assets in our pipeline of targeted radiotherapy and molecular imaging compounds from the acquisition are a group of small molecule therapeutics, MIP-1095, -1555 and -1558, in preclinical study for metastatic prostate cancer and other PSMA-expressing cancers, and Azedra™, an ultra-orphan radiotherapy candidate in phase 2 study for pheochromocytoma and potential additional indications.U.S. later this year.
Progenics has developed internally and acquired from research institutions, pharmaceutical and biotechnology companies compounds and technologies which we determine to advance with other parties, includingWe have licensed our first commercial drug, Relistor® (methylnaltrexone bromide) subcutaneous injection for the treatment of opioid induced constipation which we have licensed(OIC), to Salix Pharmaceuticals, Inc. worldwide, and have partnered other than Japan, where we have licensed the subcutaneous formulation of the drug to Ono Pharmaceutical Co., Ltd. In 2012, we out-licensed to MedImmune, LLC our proprietary C. difficile research program for a $5.0 million upfront payment (received in 2013)internally-developed or acquired compounds and the right to receive potential future milestone and royalty payments, and transferred our PRO 140 HIV viral-entry inhibitor to CytoDyn Inc. for $3.5 million cash and the right to receive potential future payments as well. We have recently suspended investment in our proprietary phosphoinositide 3-kinase (PI3K) inhibitor research and are evaluating alternative paths forward for this program.technologies with third parties. We continue to consider opportunities for strategic collaborations, out-licenses and other arrangements with biopharmaceutical companies involving our proprietary research, development and clinical programs, and may in the future also in-license or acquire additional oncology compounds and/or programs.
Our current principal sources of revenue from operations are upfront,royalty, commercialization milestone royalty and revenue-sharing payments from Salix's Relistor operations. Royalty and milestone payments from Relistor depend on success in development and commercialization, which is dependent on many factors, such as the actions of Salix and Ono,Salix's efforts, decisions by the FDA and other regulatory bodies such as the July 2012 Complete Response Letter mentioned below,in respect of the Relistor chronic pain sNDA, competition from drugs for the same or similar indications, and the outcome of clinical and other testing of Relistor, and, to the extent requested by our collaboration partners, our own efforts. We and Salix have sought to expand the availability of subcutaneous Relistor to patients taking opioids for non-cancer pain and who suffer from OIC as a result, and to develop an oral formulation of methylnaltrexone for use by such patients. As previously announced, the FDA in July 2012 issued a Complete Response Letter for the supplemental New Drug Application for Relistor injection for subcutaneous use for the treatment of OIC in adult patients with chronic, non-cancer pain. Salix and Progenics are continuing to work together with the FDA to generate a reasonable path forward for the further development and regulatory review of Relistor, and while is not possible to determine definitively the duration of discussions with the FDA regarding this matter, at this time Salix and Progenics anticipate a path forward could be reached with the FDA during 2013.Relistor.
In 2012,We fund our operations to a significant extent from capital-raising. During 2013, we completed an underwritten public offering of 12,6509.8 million shares of common stock at a public offering price of $2.00$4.40 per share, resulting in net proceeds of approximately $23.3$40.1 million, and in early 2014 sold an additional 8.75 million shares at $4.60 per share for net proceeds of approximately $37.5 million.
Progenics commenced principal operations in 1988, became publicly traded in 1997 and throughout has been engaged primarily in research and development efforts, establishing corporate collaborations and related activities. Certain of our intellectual property rights are held by wholly owned subsidiaries. None of our subsidiaries other than PSMA Development Company LLC (PSMA LLC) had operations during 2012, 2011 or 2010. All of our operations are conducted at our facilities in Tarrytown, New York. We operate under a single research and development segment.
Funding and Financial Matters. At December 31, 2012,2013, we held $58.8$65.9 million in cash and cash equivalents, a decreasean increase of $11.3$7.1 million from $70.1$58.8 million at December 31, 2011.2012. We expect that this amount, together with the additional 2014 public offering proceeds, will be sufficient to fund operations as currently anticipated beyond one year. We may require additional funding in the future, and ifif we are unable to conclude favorable collaboration, license, asset sale, capital raising or other financing transactions, we will have to reduce, delay or eliminate spending on some current operations, and/or reduce salary and other overhead expenses, to extend our remaining operations. We expect to incur operating losses during the near term. At December 31, 2012,2013, cash, cash equivalents and auction rate securities decreased $11.3increased $6.0 million to $62.1$68.1 million from $73.4$62.1 million at December 31, 2011.2012.
2. Acquisition of Molecular Insight Pharmaceuticals, Inc.
Molecular Insight's operations from January 18, 2013, the date we acquired this subsidiary which significantly expanded the Company's focus on PSMA as an oncology target while broadening the oncology pipeline, are included in the Consolidated Financial Statements. The acquisition consideration included 4,566,210 shares (500,000 of which were placed in an escrow expiring in April 2014) of Progenics common stock in a private transaction not taxable to Progenics. (The closing NASDAQ market price of Progenics' freely transferable common shares on January 18, 2013 was $2.83 per share.) Under the acquisition agreement, Progenics also agreed to pay to the stockholders potential milestones, in cash or Progenics stock at Progenics' option, of up to $23 million contingent upon achieving specified commercialization events and up to $70 million contingent upon achieving specified sales targets relating to all MIP products. Of the 500,000 placed in escrow, shares have been returned to Progenics to date pursuant to financial adjustment provisions of the agreement.
In April 2008, our BoardThe acquisition was accounted for using the acquisition method of Directors approved a share repurchase program to acquire up to $15.0 million of our outstanding common shares,accounting, under which we have $12.3 million remaining available. Purchases may be discontinuedassets and liabilities of the acquired entity are recorded at any time. We did not repurchase any common shares during 2012, 2011their respective fair values as of the acquisition date (estimated as described below) and 2010. This program was terminatedadded to those of the acquiring entity. The difference between the estimated fair value of the acquisition consideration paid and fair value of the identifiable net assets represents potential future economic benefits arising from combining Progenics and MIP, taking into account a deferred tax liability related to in March 2013.process research and development (IPR&D) intangible assets, and has been recorded as goodwill. The results of operations of MIP's business, the estimated fair market values of the assets acquired and liabilities assumed, and goodwill are included in our consolidated financial statements since the date of the acquisition.
2.During the year ended December 31, 2013, the Company incurred $790 in transaction costs related to the acquisition, which primarily consisted of legal, accounting and valuation-related expenses and reduced additional paid-in capital in the first quarter of 2013 by $45 for acquisition-related equity issuance costs. The transaction costs were recorded in general and administrative expenses in the accompanying consolidated statements of operations. During the year ended December 31, 2013, MIP's business contributed $884 of revenues and $11,379 of net loss.
Purchase Price Allocation: We have accounted for the Molecular Insight acquisition by allocating our estimate of the fair market value of the consideration we paid to the fair values of the assets acquired and liabilities assumed at the effective date of the acquisition, estimated using the valuation models summarized below. Given the uniqueness of and uncertainties attendant to the assets and liabilities, the derived values do not reflect actual transactions or quoted prices. Acquired intangible assets, including goodwill, are not deductible for tax purposes.
| | Amount | |
Consideration: | | | |
Progenics common stock consideration paid | | $ | 11,265 | |
Contingent consideration (pursuant to future milestone obligations) | | | 15,900 | |
Total consideration | | | 27,165 | |
| | | | |
Tangible assets acquired and liabilities assumed: | | | | |
Cash and cash equivalents | | | 1,888 | |
Accounts receivable | | | 56 | |
Other current assets | | | 529 | |
Fixed assets | | | 249 | |
Accounts payable, accrued expenses and deferred revenue - current | | | (2,876 | ) |
Deferred tax liability – long term | | | (12,683 | ) |
Total tangible assets acquired and liabilities assumed | | | (12,837 | ) |
| | | | |
Intangible assets – in process research and development | | | 32,300 | |
Total tangible and intangible assets acquired and liabilities assumed | | | 19,463 | |
| | | | |
Goodwill | | $ | 7,702 | |
Intangible assets and goodwill: In connection with the acquisition of Molecular Insight, in process research and development and goodwill are initially measured at estimated fair value and capitalized as an intangible asset. We perform an impairment test for these intangibles annually in the fourth quarter, unless impairment indicators require an earlier evaluation. Upon and subject to commercialization of the Company's product candidates, the IPR&D will be amortized over its estimated useful life.
We valued as intangible assets the in process research and development projects acquired as follows:
(i) 1404, an imaging agent in phase 2 development, at an estimated fair value of $23.2 million resulting from a probability adjusted discounted cash flow model which includes estimates of significant cash inflows beginning in 2017 and a 18% discount rate;
(ii) Azedra, a small molecule candidate for the treatment of pheochromocytoma and paraganglioma in phase 2b development, and for neuroblastoma in phase 2a development, at an estimated fair value of $4.9 million resulting from a probability adjusted discounted cash flow model which includes estimates of significant cash inflows beginning in 2017 and a 15% discount rate;
(iii) small molecule candidate MIP-1095, in preclinical development for the treatment of prostate cancer, at an estimated fair value of $2.7 million resulting from a probability adjusted discounted cash flow model which includes estimates of significant cash inflows beginning in 2021 and a 20% discount rate; and
(iv) Onalta, a drug candidate in phase 2 development for the treatment of metastatic carcinoid and pancreatic neuroendocrine tumors, at an estimated fair value of $1.5 million resulting from a probability adjusted discounted cash flow model which includes estimates of significant cash inflows beginning in 2014 and a 15% discount rate.
On the acquisition date, we recorded a contingent consideration liability at an estimated fair value of $15.9 million resulting from probability adjusted discounted cash flow and Monte Carlo simulation models which include estimates of significant milestone payments to former MIP stockholders under the acquisition agreement ranging from 2016 to 2022 and risk adjusted discount rates ranging from 10% to 12.5%.
Pro forma financial information (unaudited): The following unaudited pro forma information presents the results of operations of the combined companies for the periods indicated as if the acquisition had been consummated on January 1, 2012, combining the respective historical results of Progenics and MIP for each period. Non-recurring transaction expenses of $790, incurred in the year ended December 31, 2013, are reflected in the pro forma information as if these were incurred in the corresponding 2012 period, due to the pro forma assumption of January 1, 2012 as the date of the acquisition consummation.
| | Three Months Ended December 31, | | | Year Ended December 31, | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Revenues | | $ | 2,968 | | | $ | 12,801 | | | $ | 7,867 | | | $ | 18,235 | |
Net loss | | | (8,551 | ) | | | (3,458 | ) | | | (43,736 | ) | | | (57,877 | ) |
Basic and diluted loss per share | | | (0.14 | ) | | | (0.08 | ) | | | (0.78 | ) | | | (1.48 | ) |
3. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the U.S. (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. On an ongoing basis, the Company evaluates its estimates, including but not limited to those related to collectability of receivables, intangible assets and contingencies. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in the operating results. Actual results could differ from those estimates.
Consolidation
The consolidated financial statements include the accounts of Progenics and PSMA LLC, as of and for the years ended December 31, 2013, 2012 and 2011 and 2010.Molecular from January 18, 2013, the date we acquired this subsidiary. Inter-company transactions have been eliminated in consolidation.
Revenue Recognition
We recognize revenue from all sources based on the provisions of the SEC's Staff Accounting Bulletin (SAB) No. 104 (SAB 104) and ASC 605 Revenue Recognition. Under ASC 605, delivered items are separate units of accounting, provided (i) the delivered items have value to a collaborator on a stand-alone basis, and (ii) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in our control. A separate update to ASC 605 provides guidance on the criteria that should be met when determining whether the milestone method of revenue recognition is appropriate.
If we are involved in a steering or other committee as part of a multiple-deliverable arrangement, we assess whether our involvement constitutes a performance obligation or a right to participate. For those committees that are deemed obligations, we will evaluate our participation along with other obligations in the arrangement and will attribute revenue to our participation through the period of our committee responsibilities. We recognize revenue for payments that are contingent upon performance solely by our collaborator immediately upon the achievement of the defined event if we have no related performance obligations. Reimbursement of costs is recognized as revenue provided the provisions of ASC 605 are met, the amounts are determinable and collection of the related receivable is reasonably assured.
Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue. Amounts not expected to be recognized within one year of the balance sheet date are classified as long-term. The estimate of the classification of deferred revenue as short- or long-term is based upon the period in which we expect to perform joint committee services.
Royalty revenue is recognized in the period the sales occur, provided the royalty amounts are fixed or determinable, collection of the related receivable is reasonably assured and we have no remaining performance obligations under the arrangement providing for the royalty.
During 2012, 2011 and 2010,the past three years, we also recognized revenue from sales of research reagents and from government research grants, awarded to us by the National Institutes of Health (NIH), which we used in proprietary research programs. NIH grant revenue is recognized as efforts are expended and as related program costs are incurred. We performperformed work under the NIH grants on a best-effort basis.
Under Molecular's 2013 license of certain research, development and commercialization rights to Onalta™, we received a $0.2 million in upfront payment and are eligible for future milestone and royalty payments. In consideration for the upfront payment, we have delivered relevant know-how (including patent rights), inventory and non-reimbursable services.
In the fourth quarter of 2012, we out-licensed our C. difficile program to MedImmune, LLC for a $5.0 million upfront payment, which has been included in Accounts Receivable at December 31, 2012, and the right to receive potential future milestone and royalty payments.payments. In consideration for the upfront payment, we are responsible for deliveringhave delivered relevant know-how (including patent rights) and non-reimbursable services. As of December 31, 2012, we have delivered the know-how and portion of the non-reimbursable services and as a result $4,997 has been recognized as revenue, with the remaining $3 related to the remaining portion of non- reimbursable services recorded in deferred revenue – current.
Under our 2012 agreement with CytoDyn Inc. for our PRO 140 program, we received in 2012 a $3.5 million payment and are eligible for future milestone and royalty payments. In consideration for the upfront payment, we are responsible for deliveringhave delivered relevant know-how (including patent rights), inventory and non-reimbursable services. Of these deliverables, which have a stand-alone value and represent separate units of accounting, we determined that the know-how and patent rights were delivered for revenue recognition purposes as of December 31, 2012, and we recognized $2,827 as revenue from the $3.5 million upfront payment received. As of December 31, 2012, $673 is recorded in deferred revenue – current, which relates to the transfer of the inventory and the non-reimbursable services.
Under our license agreement, Salix is responsible for further developing and commercializing Relistor worldwide other than Japan, including completing clinical development necessary to support regulatory marketing approvals for potential new indications and formulations. WeJapan. In consideration of the $60.0 million upfront payment from Salix, we have granted Salix an exclusive license of relevant know-how, patent rights and technology, assigned relevant third-party contracts, and performed substantially all of our other transition-related activities as of June 30, 2011. During the second quarter of 2011, we and Salix completed a number of tasks involved in enabling Salix to distribute Relistor in the U.S. and Europe, as well as clinical and regulatory development related activities, and have agreed with Salix on research and development services we are to perform at Salix's direction. We have not performed any significant research and development activities during 2012 or the third and fourth quarters of 2011.
In consideration of the $60.0 million upfront payment from Salix, we are responsible for delivering to Salix an exclusive license of relevant know-how, patent rights and technology and servingserved on joint committees provided for in the License Agreement. Agreement through end of 2013.
These deliverables, which have stand-alone value and represent separate units of accounting, include (i) the exclusive license which was delivered for revenue recognition purposes during the 2011 second quarter, (ii) performing reimbursable development services at Salix's direction during the 2011 second quarter, the period in which we and Salix finalized the development plan, and (iii) joint committee services, which we expect to performhave been performed through 2013. We determined that the license has stand-alone value as the license was delivered to Salix for revenue recognition purposes in the second quarter of 2011 and Salix is responsible for continuing research and development.
We developed a best estimate of selling price for each deliverable as vendor-specific objective evidence and third-party evidence was not available. We allocated the best estimate of selling price, on a relative basis, to each of the three units of accounting as the $60.0 million upfront payment was the only payment from Salix which was fixed and determinable at the inception of the arrangement. As a result, $58.4 million, $1.1 million and $0.5 million was allocated to the license, reimbursable development services and our participation in the joint committees as provided in the License Agreement, respectively. We recognized $58.4 million for the license and relevant know-how, patent rights and technology and $1.1 million for the reimbursable development services, respectively, during the second quarter of 2011, the period in which we delivered these items and performed the development services. We recognized $0.2 million, $0.2 million and $59.6 million during 2013, 2012 and 2011, respectively. At December 31, 2012, and 2011, the remaining deferred revenue of $0.2 million, and $0.4 million, respectively, pertaining to joint committee services, iswas recognized inas collaboration revenue in 2013, as such activities are performedwere performed.
F-11
Ono is responsible for developing and commercializing subcutaneous Relistor in Japan, including conducting the clinical development necessary to support regulatory marketing approval. Ono will own the filings and approvals related to subcutaneous Relistor in Japan. In addition to the $15.0 million upfront payment from Ono, we are entitled to receive up to an additional $20.0 million, payable upon achievement by Ono of its development milestones. Ono is also obligated to pay to us royalties and commercialization milestones on sales by Ono of subcutaneous Relistor in Japan. Ono has the option to acquire from us the rights to develop and commercialize in Japan other formulations of Relistor, including intravenous and oral forms, on terms to be negotiated separately. Ono may request us to perform activities related to its development and commercialization responsibilities, beyond our participation in joint committees and specified technology transfer-related tasks, at its expense payable at the time we perform such services. Revenue earned from activities we perform for Ono is recorded in collaboration revenue. See Note 10.
We recognized the upfront payment of $15.0 million, which we received from Ono in November 2008, as collaboration revenue during the first quarter of 2009, upon satisfaction of our performance obligations.
Research and Development Expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, materials, supplies, maintenance of research equipment, costs related to research collaboration and licensing agreements, the purchase of in-process research and development, the cost of services provided by outside contractors, including services related to our clinical trials, the full cost of manufacturing drug for use in research, pre-clinical development and clinical trials. All costs associated with research and development are expensed as incurred.
At each period end, we evaluate the accrued expense balance related to these activities based upon information received from the suppliers and estimated progress towards completion of the research or development objectives to ensure that the balance is reasonably stated. Such estimates are subject to change as additional information becomes available.
Use of Estimates
Significant estimates include useful lives of fixed assets, the periods over which certain revenues and expenses will be recognized, including collaboration revenue recognized from non-refundable up-front licensing payments and expense recognition of certain clinical trial costs which are included in research and development expenses, the amount of non-cash compensation costs related to share-based payments to employees and non-employees and the periods over which those costs are expensed, and the likelihood of realization of deferred tax assets.assets and the assumptions used in the valuations of in-process research and development and contingent consideration liability.
Patents
As a result of research and development efforts conducted by us, we have applied, or are applying, for a number of patents to protect proprietary inventions. All costs associated with patents are expensed as incurred.
Net (Loss) Income Per Share
We prepare earnings per share (EPS) data in accordance with ASC 260 Earnings Per Share. Basic net (loss) income per share amounts have been computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the period. For 20122013 and 2010,2012, we reported net losses and, therefore, potential common shares, amounts of unrecognized compensation expense and windfall tax benefits have been excluded from diluted net loss per share since they would be anti-dilutive. For 2011, we reported net income, and the computation of diluted earnings per share is based upon the weighted-average number of our common shares and dilutive effect, determined using the treasury stock method, of potential common shares outstanding including amounts of unrecognized compensation expense. As of December 31, 2012 and 2011, 28 and 2010, our 28, 98, and 341, respectively, shares of unvested restricted stock outstanding have non-forfeitable rights to dividends.dividends; all such shares were vested at the end of December 31, 2013. The allocation of 20122013 and 20102012 net losses and the 2011 net income to these participating securities pursuant to the two-class method is not material to both basic and diluted earnings per share.
Concentrations of Credit Risk
Financial instruments thatwhich potentially subject Progenics to concentrations of credit risk consist principally of cash, cash equivalents, auction rate securities and receivables from out-licensing and disposition of assets, Salix, Ono or the NIH.receivables. We invest our excess cash in money market funds. We have established guidelines that relate to credit quality, diversification and maturity and that limit exposure to any one issue of securities. We hold no collateral for these financial instruments.
Cash and Cash Equivalents
We consider all highly liquid investments which have maturities of three months or less, when acquired, to be cash equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Cash and cash equivalents subject us to concentrations of credit risk. At December 31, 20122013 and 2011,2012, we have invested approximately $56,224$60,364 and $64,068,$56,224, respectively, in cash equivalents in the form of money market funds with one major investment company and held approximately $2,614$4,898 and $6,037,$2,614, respectively, in a single commercial bank.
Auction Rate Securities
In accordance with ASC 320 Investments – Debt and Equity Securities, investments are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in comprehensive (loss) income. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income or expense. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income or expense. In computing realized gains and losses, we compute the cost of its investments on a specific identification basis. Such cost includes the direct costs to acquire the securities, adjusted for the amortization of any discount or premium. The fair value of auction rate securities has been estimated based on a three-level hierarchy for fair value measurements. Interest and dividends on securities classified as available-for-sale are included in interest income (see Note 3)4).
At December 31, 20122013 and 2011,2012, our investment in auction rate securities in the(recorded as long-term assets section ofin the Consolidated Balance SheetsSheets) amounted to $3,240$2,208 and $3,332,$3,240, respectively. Valuation of securities is subject to uncertainties that are difficult to predict, such as changes to credit ratings of the securities and/or the underlying assets supporting them, default rates applicable to the underlying assets, underlying collateral value, discount rates, counterparty risk, ongoing strength and quality of market credit and liquidity and general economic and market conditions. The valuation of the auction rate securities we hold is based on an internal analysis of timing of expected future successful auctions, collateralization of underlying assets of the security and credit quality of the security. We re-evaluated the valuation of these securities as of December 31, 20122013 and the temporary impairment amount decreased $8$68 from $268$260 at December 31, 20112012 to $260.$192. All income generated from these investments was recorded as interest income (see Note 3)4).
In-Process Research and Development and Goodwill
The fair values of in-process research and development (IPR&D) acquired in business combinations are capitalized. The Company utilizes 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. 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 project independently. These 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. IPR&D intangible assets which are determined to have a decline in their fair value are adjusted downward and an expense is recognized as part of the general and administrative expenses in the Consolidated Statements of Operations. These are tested at least annually or when a triggering event occurs that could indicate a potential impairment.
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. The Company determines whether goodwill may be impaired by comparing the fair value of the reporting unit, calculated as the product of shares outstanding and the share price as of the end of a period, to its carrying value. No goodwill impairment has been recognized as of December 31, 2013. The Company has determined that it has only one reporting unit, which includes the acquired Molecular Insight.
The following table reflects the components of the finite lived intangible assets as of December 31, 2013:
| | Gross Amount | | | Accumulated Amortization | | | Net Carrying Value | |
Finite lived intangible assets | | $ | 21 | | | $ | 2 | | | $ | 19 | |
Total | | $ | 21 | | | $ | 2 | | | $ | 19 | |
The weighted-average remaining life of the finite lived intangible assets is five years at December 31, 2013.
Amortization expense is calculated on a straight-line basis over the estimated useful life of the asset. Amortization expense for the period from January 18, 2013 to December 31, 2013 was $2. Estimated amortization expense related to intangible assets existing as of December 31, 2013 is approximately $4 annually for each of the succeeding five years.
The following table summarizes the activity related to the Company's goodwill and indefinite lived IPR&D:
| | Goodwill | | | IPR&D | |
Balance at January 1, 2013 | | $ | - | | | $ | - | |
Increase related to MIP acquisition | | | 7,702 | | | | 32,300 | |
Reclassification to finite lived IPR&D | | | - | | | | (21 | ) |
Impairment | | | - | | | | (919 | ) |
Balance at December 31, 2013 | | $ | 7,702 | | | $ | 31,360 | |
Fair Value Measurements
In accordance with ASC 820 Fair Value Measurements and Disclosures, we use a three-level hierarchy for fair value measurements of certain assets and liabilities for financial reporting purposes that distinguishes between market participant assumptions developed from market data obtained from outside sources independent of the reporting entity (observable inputs) and the reporting entity'sour own assumptions about market participant assumptions developed from the best information available to us in the circumstances (unobservable inputs). TheWe assign hierarchy level assignedlevels to each security inassets constituting our available-for-sale portfolio isand to our contingent consideration liability arising from the MIP acquisition based on our assessment of the transparency and reliability of the inputs used in the valuation of such instrument atvaluation. ASC 820 defines the measurement date. The three hierarchy levels are defined as follows:as:
· | Level 1 - Valuations based on unadjusted quoted market prices in active markets for identical securities. |
| |
· | Level 2 - Valuations based on observable inputs other than Level 1 prices, such as quoted prices for similar assets at the measurement date, quoted prices in markets that are not active or other inputs that are observable, either directly or indirectly. |
| |
· | Level 3 - Valuations based on unobservable inputs that are unobservable and significant to the overall fair value measurement, andwhich as noted above involve management judgment. |
Recurring Fair Value Measurements
We believe the carrying amounts of the Company's cash equivalents, accounts receivable, other current assets, other assets (restricted cash providing collateral for a letter of credit securing lease obligations) and accounts payable and accrued expenses approximated their fair values as of December 31, 2013 and 2012, due to their short-term nature; we consider them Level 1 instruments.
The fair value of the contingent consideration liability, consisting of future potential milestone payments related to the MIP acquisition was $15.7 million as of December 31, 2013 and $15.9 million as January 18, 2013, the acquisition date (see Note 2). The fair value of the contingent consideration liability is categorized as a Level 3 instrument, as displayed in Note 4. The Company records the contingent consideration liability at fair value with changes in estimated fair values recorded in general and administrative expenses in the Consolidated Statements of Operations. As of December 31, 2013, we reassessed the fair value of the contingent consideration and recorded a $0.2 million decrease, due to an increase in the discount period, and a corresponding credit in the general and administrative expenses in the fourth quarter of 2013. The December 31, 2013 contingent consideration of $15.7 million results from probability adjusted discounted cash flow and Monte Carlo simulation models which include estimates of significant milestone payments to former MIP stockholders under the acquisition agreement ranging from 2017 to 2022 and risk adjusted discount rates ranging from 10% to 12.5%.
Nonrecurring Fair Value Measurements
The Company's non-financial assets, such as intangible assets and property and equipment, are measured and recorded at fair value on the acquisition date, and if indicators of impairment exist, we assess recoverability by measuring the amount of any impairment by comparing the carrying value of the asset to its then-current estimated fair value (for intangible assets) or to market prices for similar assets (for property and equipment). If the carrying value is not recoverable we record an impairment charge as a general and administrative expense in the Consolidated Statements of Operations. The company reassessed the value of the indefinite lived intangible assets and recorded a non-cash charge to earnings of $919 in the fourth quarter of 2013. This impairment was the result of change in the Level 3 assumptions: (i) the timing of the estimated beginning of cash inflows from 2014 to 2018 and (ii) an increase in discount rate from 15% to 18% for the Onalta intangible asset. In connection with the second quarter amendment of the Company's Tarrytown lease, we recognized impairment losses of $347 on leasehold improvements and machinery and equipment removed from service which are included in Research and development expenses in our accompanying Consolidated Statements of Operations for the year ended December 31, 2013. As a result of closing our biologics pilot facilities in 2011, an impairment loss of $22 was included in Research and development expenses in our accompanying Consolidated Statement of Operations during 2011. No impairments occurred for the year ended December 31, 2012.
Other current assets are comprised of prepaid expenses, interest, deferred tax asset and other receivables of $1,692$1,943 and $919$1,692 at December 31, 20122013 and 2011,2012, respectively, which are expected to be settled within one year. Restricted cash of $157 and $150 at December 31, 2013 and 2012, and $200 at December 31, 2011,respectively, consists of collateral for a letter of credit securing lease obligations. We believe thatthe carrying value of thosethese assets approximates fair value.
Fixed Assets
Leasehold improvements, furniture and fixtures, and equipment are stated at cost. Furniture, fixtures and equipment are depreciated on a straight-line basis over their estimated useful lives. Leasehold improvements are amortized on a straight-line basis over the life of the lease or of the improvement, whichever is shorter. Costs of construction of long-lived assets are capitalized but are not depreciated until the assets are placed in service.
Expenditures for maintenance and repairs which do not materially extend the useful lives of the assets are charged to expense as incurred. The cost and accumulated depreciation of assets retired or sold are removed from the respective accounts and any gain or loss is recognized in operations. The estimated useful lives of fixed assets are as follows:
Computer equipment | 3 years |
Machinery and equipment | 5-7 years |
Furniture and fixtures | 5 years |
Leasehold improvements | Earlier of life of improvement or lease |
Deferred Lease Liability and Incentive
Our lease agreements include fixed escalations of minimum annual lease payments and we recognize rental expense on a straight-line basis over the lease terms and record the difference between rent expense and current rental payments as deferred rent. Deferred lease incentive includes a construction allowance from our landlord which is amortized as a reduction to rental expense on a straight-line basis over the lease term. As of December 31, 20122013 and 2011,2012, the Consolidated Balance Sheets include the following:
F-15
| | 2012 | | | 2011 |
Other current liabilities: | | | | | |
Deferred lease incentive | | $ | 115 | | | $ | 115 |
Total other current liabilities | | $ | 115 | | | $ | 115 |
Other liabilities: | | | | | | | |
Deferred lease liability | | $ | 273 | | | $ | 577 |
Deferred lease incentive | | | 805 | | | | 920 |
Total other liabilities | | $ | 1,078 | | | $ | 1,497 |
| | 2013 | | | 2012 | |
Other current liabilities: | | | | | | |
Deferred lease incentive | | $ | 115 | | | $ | 115 | |
Total other current liabilities | | $ | 115 | | | $ | 115 | |
Other liabilities: | | | | | | | | |
Deferred lease liability | | $ | 224 | | | $ | 273 | |
Deferred lease incentive | | | 690 | | | | 805 | |
Total other liabilities | | $ | 914 | | | $ | 1,078 | |
Income Taxes
We account for income taxes in accordance with the provisions of ASC 740 Income Taxes, which requires that we recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (temporary differences) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. A valuation allowance is established for deferred tax assets for which realization is uncertain.
In accordance with ASC 718 Compensation – Stock Compensation and ASC 505 Equity, we have made a policy decision related to intra-period tax allocation, to account for utilization of windfall tax benefits based on provisions in the tax law that identify the sequence in which amounts of tax benefits are used for tax purposes (i.e., tax law ordering).
Uncertain tax positions are accounted for in accordance with ASC 740 Income Taxes, which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that we have taken or expect to take on a tax return. ASC 740 applies to income taxes and is not intended to be applied by analogy to other taxes, such as sales taxes, value-add taxes, or property taxes. We review our nexus in various tax jurisdictions and our tax positions related to all open tax years for events that could change the status of our ASC 740 liability, if any, or require an additional liability to be recorded. Such events may be the resolution of issues raised by a taxing authority, expiration of the statute of limitations for a prior open tax year or new transactions for which a tax position may be deemed to be uncertain. Those positions, for which management's assessment is that there is more than a 50 percent probability of sustaining the position upon challenge by a taxing authority based upon its technical merits, are subjected to the measurement criteria of ASC 740. We record the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. Any ASC 740 liabilities for which we expect to make cash payments within the next twelve months are classified as "short term." In the event that we conclude that we are subject to interest and/or penalties arising from uncertain tax positions, we will record interest and penalties as a component of income taxes (see Note 12).
Risks and Uncertainties
We have to date relied principally on external funding, collaborations with Salix, WyethFuji and others, out-licensing and asset sale arrangements, royalty and product revenue to finance our operations. There can be no assurance that our research and development will be successfully completed, that any products developed will obtain necessary marketing approval by regulatory authorities or that any approved products will be commercially viable. In addition, we operate in an environment of rapid change in technology, and we are dependent upon satisfactory relationships with our partners and the continued services of our current employees, consultants and subcontractors. We are also dependent upon Salix, Fuji and Ono fulfilling their manufacturing obligations, either on their own or through third-party suppliers. For 2013, 2012 2011 and 2010,2011, the primary sources of our revenues were Salix, Wyeth, Ono, Fuji, asset out-licensing and disposition, and research grant revenues from the NIH. There can be no assurance that revenues from asset out-licensing and disposition, Salix, Ono and OnoFuji or from research awards will continue. Substantially all of our accounts receivable at December 31, 20122013 and 20112012 were from the above-named sources.
Comprehensive (Loss) Income
Comprehensive (loss) income represents the change in net assets of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive (loss) income includes net (loss) income adjusted for the change in net unrealized gain or loss on auction rate securities. The disclosures required by ASC 220 Comprehensive Income for 2013, 2012 2011 and 20102011 have been included in the Consolidated Statements of Comprehensive (Loss) Income. There was no income tax expense/benefit allocated to any component of Other Comprehensive (Loss) Income (see Note 12)13).
Impact of Recently Adopted Accounting Standards
In June 2011, the FASB issued ASU No. 2011-05, which requires that comprehensive income and the related components be presented in a single continuous statement or in two separate but consecutive statements. The ASU was effective beginning January 1, 2012. We adopted this new standard, presenting comprehensive income in two separate but consecutive statements, and applied it retrospectively on January 1, 2012. As this guidance relates to presentation only, the adoption of this standard had no material impact on our consolidated financial statements.
In May 2011, the FASB issued ASU No. 2011-04, which is the result of joint efforts by the FASB and International Accounting Standards Board to develop a single, converged fair value framework. The converged guidance specifies how to measure fair value and what disclosures to provide about fair value measurements. The ASU is effective for interim and annual periods beginning after December 15, 2011. We adopted this new standard on January 1, 2012 and it had no material impact on our consolidated financial statements.
In February 2013, Thethe FASB issued ASU No. 2013-02, which requires presentation of amounts reclassified out of accumulated other comprehensive income by component. The ASU is effective for reporting periods beginning after December 15, 2012. We are currently evaluating the effectadopted this ASU will havenew standard on January 1, 2013 and it had no material impact on our consolidated financial statements.
3.4. Fair Value Measurements
OurWe record auction rate securities are recorded at fair value in the accompanying Consolidated Balance Sheets in accordance with ASC 320 Investments – Debt and Equity Securities. The change in the fair value of these securities is recorded as a component of other comprehensive (loss) income. We also record the contingent consideration liability resulting from the MIP acquisition at fair value in accordance with ASC 820-10-50.
The following tables present our money market funds, included in cash and cash equivalents, and auction rate securities assets and contingent consideration liability measured at fair value on a recurring basis as of December 31, 2012 and 2011,the dates indicated, classified by valuation hierarchy:
| | | | | Fair Value Measurements at December 31, 2013 | |
| | Balance at December 31, 2013 | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | |
Assets: | | | | | | | | | | | | |
Money market funds | | $ | 60,364 | | | $ | 60,364 | | | $ | - | | | $ | - | |
Auction rate securities | | | 2,208 | | | | - | | | | - | | | | 2,208 | |
Total Assets | | $ | 62,572 | | | $ | 60,364 | | | $ | - | | | $ | 2,208 | |
| | | | | | | | | | | | | | | | |
Liability: | | | | | | | | | | | | | | | | |
Contingent consideration | | $ | 15,700 | | | $ | - | | | $ | - | | | $ | 15,700 | |
Total Liability | | $ | 15,700 | | | $ | - | | | $ | - | | | $ | 15,700 | |
| | | | | Fair Value Measurements at December 31, 2012 | |
| | Balance at December 31, 2012 | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | |
| | | | | | | | | | | | |
Money market funds | | $ | 56,224 | | | $ | 56,224 | | | $ | - | | | $ | - | |
Auction rate securities | | | 3,240 | | | | - | | | | - | | | | 3,240 | |
Total | | $ | 59,464 | | | $ | 56,224 | | | $ | - | | | $ | 3,240 | |
| | | | | Fair Value Measurements at December 31, 2011 |
| | Balance at December 31, 2011 | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) |
| | | | | | | | | | | |
Money market funds | | $ | 64,068 | | | $ | 64,068 | | | $ | - | | | $ | - |
Auction rate securities | | | 3,332 | | | | - | | | | - | | | | 3,332 |
Total | | $ | 67,400 | | | $ | 64,068 | | | $ | - | | | $ | 3,332 |
At December 31, 2012,2013, we hold $3,240$2,208 in auction rate securities which are classified as Level 3. The fair value of these securities includes $2,300$2,208 of U.S. government subsidized securities collateralized by student loan obligations, with maturities greater than 10 years, and $940 of investment company perpetual preferred stock, without a stated maturity. Auction rate securities are collateralized long-term instruments that were intended to provide liquidity through an auction process that resets interest rates at pre-determined intervals.years. We will not realize cash in respect of the principal amount of these securities until the issuer calls or restructures the security, the security reaches any scheduled maturity and is paid, or a buyer outside the auction process emerges. As of December 31, 2012,2013, we have received all scheduled interest payments on these securities, which, in the event of auction failure, are reset according to the contractual terms in the governing instruments.
The valuation of auction rate securities we hold is based on Level 3 unobservable inputs which consist of our internal analysis of (i) timing of expected future successful auctions or issuer calls of the securities, (ii) collateralization of underlying assets of the security and (iii) credit quality of the security. We use a discounted cash flow model to estimate the value of these auction rate securities and the unobservable inputs consist of a redemption period ranging from four to 15 years (weighted-average: 5.9 years) and discount rates ranging from 0.125% to 2.102% (weighted-average: 0.71%). Significant increases (decreases) in the redemption period or discount rates would result in a significantly lower (higher) fair value measurement. In re-evaluating the valuation of these securities as of December 31, 2012,2013, the temporary impairment amount, the duration of which is greater than 12 months, decreased $8 from $268$260 at December 31, 2011,2012, to $260,$192, which is reflected as a part of accumulated other comprehensive loss on our accompanying Consolidated Balance Sheets and based on such re-evaluation, we believe that we have the ability to hold these securities until recovery of fair value. Due to the uncertainty related to the liquidity in the auction rate security market and therefore when individual positions may be liquidated, we have classified these auction rate securities as long-term assets on our accompanying Consolidated Balance Sheets. We continue to monitor markets for our investments and consider the impact, if any, of market conditions on the fair market value of our investments. We do not believe the carrying values of our investments are other than temporarily impaired and therefore expect the positions will eventually be liquidated without significant loss.
The estimated fair value of the contingent consideration liability of $15.7 million represents future potential milestone payments to former MIP stockholders. The Company considers 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 were the probabilities of achieving regulatory approval of the development projects and subsequent commercial success, and discount rates. Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement, respectively. The Company records the contingent consideration liability at fair value with changes in estimated fair values recorded in general and administrative expenses in the Consolidated Statements of Operations.
F-15
The following table presents quantitative information pertaining to the fair value measurement of the Level 3 inputs:
| | Fair Value as of December 31, 2013 | | Valuation Technique | | Unobservable Input | | Range (Weighted Average) | |
| | | | | | | | | |
Asset: | | | | | | | | | |
Auction Rate Securities | | $ | 2,208 | | Discounted cash flow model | | Redemption period | | 5 to 15 years (6 years) | |
| | | | | | | Discount rate | | | 0.25% - 3.00% (1.55%) | |
Contingent consideration liability: | | | | | | | | | | | |
| | | | | | | | | | | |
Azedra commercialization | | $ | 2,300 | | Probability adjusted discounted cash flow model | | Probability of success | | | 40% | |
| | | | | | | Period of milestone expected achievement | | | 2017 | |
| | | | | | | Discount rate | | | 10% | |
| | | | | | | | | | | |
1404 commercialization | | $ | 2,000 | | Probability adjusted discounted cash flow model | | Probability of success | | | 31% | |
| | | | | | | Period of milestone expected achievement | | | 2018 | |
| | | | | | | Discount rate | | | 10% | |
| | | | | | | | | | | |
MIP-1095 commercialization | | $ | 500 | | Probability adjusted discounted cash flow model | | Probability of success | | | 19% | |
| | | | | | | Period of milestone expected achievement | | | 2021 | |
| | | | | | | Discount rate | | | 10% | |
| | | | | | | | | | | |
Net sales targets | | $ | 10,900 | | Monte-Carlo simulation | | Probability of success | | | 19% - 40% (32.8%) | |
| | | | | | | Period of milestone expected achievement | | | 2018 - 2022 | |
| | | | | | | Discount rate | | | 12.5% | |
| | Fair Value as of December 31, 2012 | | Valuation Technique | | Unobservable Input | | Range (Weighted Average) | |
| | | | | | | | | |
Asset: | | | | | | | | | |
Auction Rate Securities | | $ | 3,240 | | Discounted cash flow model | | Redemption period | | 4 to 15 years (5.9 years) | |
| | | | | | | Discount rate | | | 0.125% - 2.102% (0.71%) | |
For ourthose financial instruments with significant Level 3 inputs, (all of which are auction rate securities), the following table summarizes the activities for 2012 and 2011:the periods indicated:
| | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | | | Asset – Auction Rate Securities Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | |
Description | | 2012 | | | 2011 | | | 2013 | | | 2012 | |
Balance at beginning of period | | $ | 3,332 | | | $ | 3,608 | | | $ | 3,240 | | | $ | 3,332 | |
Transfers into Level 3 | | | - | | | | - | | | | - | | | | - | |
Total realized/unrealized gains (losses) | | | | | | | | | | | | | | | | |
Included in net income (loss) | | | - | | | | - | | | | - | | | | - | |
Included in comprehensive income (loss) | | | 8 | | | | 24 | | | | 68 | | | | 8 | |
Settlements | | | (100 | ) | | | (300 | ) | | | (1,100 | ) | | | (100 | ) |
Balance at end of period | | $ | 3,240 | | | $ | 3,332 | | | $ | 2,208 | | | $ | 3,240 | |
Total amount of unrealized gains (losses) for the period included in other comprehensive loss attributable to the change in fair market value of related assets still held at the reporting date | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | Liability – Contingent Consideration Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | |
Description | | 2013 | | | 2012 | |
Balance at beginning of period | | $ | - | | | $ | - | |
Fair value of contingent consideration – acquisition of Molecular Insight | | | 15,900 | | | | - | |
Fair value adjustment to contingent consideration included in net loss | | | (200 | ) | | | - | |
Balance at end of period | | $ | 15,700 | | | $ | - | |
Changes in unrealized gains or losses for the period included in earnings (or changes in net assets) for liabilities held at the end of the reporting period | | $ | (200 | ) | | $ | - | |
The following tables summarize the amortized cost basis, the aggregate fair value and gross unrealized holding gains and losses at December 31, 20122013 and 2011:2012:
| | Amortized | | | Fair | | | Unrealized Holding | |
2013: | | Cost Basis | | | Value | | | Gains | | | (Losses) | | | Net | |
Maturities greater than ten years: | | | | | | | | | | | | | | | |
Auction rate securities | | $ | 2,400 | | | $ | 2,208 | | | $ | - | | | $ | (192 | ) | | $ | (192 | ) |
| | $ | 2,400 | | | $ | 2,208 | | | $ | - | | | $ | (192 | ) | | $ | (192 | ) |
| | Amortized | | | Fair | | | Unrealized Holding | |
2012: | | Cost Basis | | | Value | | | Gains | | | (Losses) | | | Net | |
Maturities greater than ten years: | | | | | | | | | | | | | | | |
Auction rate securities | | $ | 2,500 | | | $ | 2,300 | | | $ | - | | | $ | (200 | ) | | $ | (200 | ) |
Investments without stated maturity dates: | | | | | | | | | | | | | | | | | | | | |
Auction rate securities | | | 1,000 | | | | 940 | | | | - | | | | (60 | ) | | | (60 | ) |
| | $ | 3,500 | | | $ | 3,240 | | | $ | - | | | $ | (260 | ) | | $ | (260 | ) |
| | Amortized | | | Fair | | | Unrealized Holding | |
2011: | | Cost Basis | | | Value | | | Gains | | | (Losses) | | | Net | |
Maturities greater than ten years: | | | | | | | | | | | | | | | |
Auction rate securities | | $ | 2,600 | | | $ | 2,392 | | | $ | - | | | $ | (208 | ) | | $ | (208 | ) |
Investments without stated maturity dates: | | | | | | | | | | | | | | | | | | | | |
Auction rate securities | | | 1,000 | | | | 940 | | | | - | | | | (60 | ) | | | (60 | ) |
| | $ | 3,600 | | | $ | 3,332 | | | $ | - | | | $ | (268 | ) | | $ | (268 | ) |
We compute the cost of its investments on a specific identification basis. Such cost includes the direct costs to acquire the securities, adjusted for the amortization of any discount or premium.
The following table shows the gross unrealized losses and fair value of our auction rate securities with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 20122013 and 2011.
2012: | | Less than 12 Months | | | 12 Months or Greater | | | Total | | |
2013: | | | Less than 12 Months | | | 12 Months or Greater | | | Total | |
Description of Securities | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auction rate securities | | $ | - | | | $ | - | | | $ | 3,240 | | | $ | (260 | ) | | $ | 3,240 | | | $ | (260 | ) | | $ | - | | | $ | - | | | $ | 2,208 | | | $ | (192 | ) | | $ | 2,208 | | | $ | (192 | ) |
Total | | $ | - | | | $ | - | | | $ | 3,240 | | | $ | (260 | ) | | $ | 3,240 | | | $ | (260 | ) | | $ | - | | | $ | - | | | $ | 2,208 | | | $ | (192 | ) | | $ | 2,208 | | | $ | (192 | ) |
2011: | | Less than 12 Months | | | 12 Months or Greater | | | Total | | |
2012: | | | Less than 12 Months | | | 12 Months or Greater | | | Total | |
Description of Securities | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auction rate securities | | $ | - | | | $ | - | | | $ | 3,332 | | | $ | (268 | ) | | $ | 3,332 | | | $ | (268 | ) | | $ | - | | | $ | - | | | $ | 3,240 | | | $ | (260 | ) | | $ | 3,240 | | | $ | (260 | ) |
Total | | $ | - | | | $ | - | | | $ | 3,332 | | | $ | (268 | ) | | $ | 3,332 | | | $ | (268 | ) | | $ | - | | | $ | - | | | $ | 3,240 | | | $ | (260 | ) | | $ | 3,240 | | | $ | (260 | ) |
Other-than-temporary impairment analysis on auction rate securities. The unrealized losses on our auction rate securities resulted from an internal analysis of timing of expected future successful auctions, collateralization of underlying assets of the security and credit quality of the security. At December 31, 20122013 there was one and 2011,at December 31, 2012, there were two securities with a gross unrealized loss position of $192 and $260 ($2,208 and $268 ($3,240 and $3,332$3,240 of the total fair value), respectively.
The severity of the unrealized losses for auction rate securities at December 31, 2013 and 2012 and 2011 ranged from 6 percent towas 8 percent below amortized cost, and the weighted average duration of the unrealized losses for these securities was 5870 and 4658 months, respectively.
We have evaluated our individual auction rate securities holdings for other-than-temporary impairment and determined that the unrealized losses as of December 31, 20122013 and 20112012 are attributable to uncertainty in the liquidity of the auction rate security market.market. Because we do not intend to sell these securities, and believe it is not more likely than not that we would be required to sell these securities before recovery of principal, we do not consider these securities to be other-than-temporarily impaired at December 31, 20122013 and 2011.2012.
4.5. Accounts Receivable
Our accounts receivable represent amounts due to Progenics from collaborators, royalties, research grants and the sales of research reagents. These amounts are considered to be short-term as they are expected to be collected within one yearreagents and we believe carrying value approximates fair value. Accounts receivable as of December 31, 20122013 and 2011,2012, consisted of the following:
| | 2012 | | | 2011 | | 2013 | | | 2012 | |
Collaborators | | $ | 6,125 | | | $ | 77 | | $ | 12 | | | $ | 6,125 | |
Royalties | | | 781 | | | | 1,279 | | | 2,862 | | | | 781 | |
Research grants | | | 12 | | | | 100 | | | - | | | | 12 | |
Other | | | 19 | | | | 60 | | | 12 | | | | 19 | |
| | | | 2,886 | | | | 6,937 | |
Less, allowance for doubtful accounts | | | | (7 | ) | | | - | |
Total | | $ | 6,937 | | | $ | 1,516 | | $ | 2,879 | | | $ | 6,937 | |
5.6. Fixed Assets
Fixed assets as of December 31, 20122013 and 20112012 consisted of the following:
| | 2012 | | | 2011 | | | 2013 | | | 2012 | |
Computer equipment | | $ | 2,166 | | | $ | 2,133 | | | $ | 2,234 | | | $ | 2,166 | |
Machinery and equipment | | | 8,031 | | | | 12,035 | | | | 7,091 | | | | 8,031 | |
Furniture and fixtures | | | 133 | | | | 230 | | | | 170 | | | | 133 | |
Leasehold improvements | | | 5,327 | | | | 11,526 | | | | 5,020 | | | | 5,327 | |
Construction in progress and other | | | 12 | | | | 175 | | |
Other | | | | 16 | | | | 12 | |
| | | 15,669 | | | | 26,099 | | | | 14,531 | | | | 15,669 | |
Less, accumulated depreciation and amortization | | | (12,270 | ) | | | (22,061 | ) | | | (12,118 | ) | | | (12,270 | ) |
Total | | $ | 3,399 | | | $ | 4,038 | | | $ | 2,413 | | | $ | 3,399 | |
At December 31, 2013 and 2012, $2.0 million and $2.6 million, respectively, of leasehold improvements, net were being amortized over periods of 8.5-10.8 years, under leases with terms through December 31, 2020. At December 31, 2011, $2.3 million of leasehold improvements, net were being amortized over periods of 1.3-10.8 years, under leases with terms through December 31, 2020.
6.7. Accounts Payable and Accrued Expenses
The carrying value of our accounts payable and accrued expenses approximates fair value, as it represents amounts due to vendors and employees, which will be satisfied within one year. Accounts payable and accrued expenses as of December 31, 20122013 and 2011,2012, consisted of the following:
| | 2012 | | | 2011 | | 2013 | | | 2012 | |
Accrued consulting and clinical trial costs | | $ | 2,193 | | | $ | 1,637 | | $ | 2,672 | | | $ | 2,193 | |
Accrued payroll and related costs | | | 1,552 | | | | 3,149 | | | 2,123 | | | | 1,552 | |
Restructuring accrual | | | 813 | | | | 731 | | | - | | | | 813 | |
Legal and professional fees | | | 774 | | | | 371 | | | 608 | | | | 774 | |
Accounts payable | | | 229 | | | | 309 | | | 793 | | | | 229 | |
Other | | | 79 | | | | 134 | | | 316 | | | | 79 | |
Total | | $ | 5,640 | | | $ | 6,331 | | $ | 6,512 | | | $ | 5,640 | |
7.8. Restructuring
We reduced headcount in the third and fourth quarters of 2011, resulting in a restructuring accrual of $1.3 million for severance and related benefits which were paid through August 2012. We incurred other exit and contract termination costs, including expenses related to a lease amendment and consolidation of employees within reduced facility space.
We completed an additionalalso reduced headcount reduction in the third quarter of 2012, resulting in a restructuring accrual of $1.9 million which is beingwas paid through August 2013, and the first quarter of 2013, resulting in an approximately $1.5 million restructuring accrual which we intend to pay up to $1.2 million in shareswas paid through the end of common stock issued pursuant to the Company's 2005 Stock Incentive Plan.2013. During the fourthsecond quarter of 2012,2013, we issued $0.1 million of common stockincurred other exit and at the closing market price of the Company's common stock on December 31, 2012, up to 174 shares may be issued in satisfaction of the remaining obligation.contract termination costs, including lease termination and amendment and consolidation expenses ($1,359).
Activity in the restructuring accrual, which is included in accounts payable and accrued expenses in our Consolidated Balance Sheets, and in research and development and general and administrative expenses in the Consolidated Statements of Operations, is specified below.
| | Severance and Related Benefits | | | Other Exit Costs | | | Contract Termination Costs | | | Total Restructuring Accrual | |
Balance at December 31, 2010 | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Additions, net | | | 1,341 | | | | 8 | | | | 292 | | | | 1,641 | |
Payments | | | (770 | ) | | | (2 | ) | | | (138 | ) | | | (910 | ) |
Balance at December 31, 2011 | | | 571 | | | | 6 | | | | 154 | | | | 731 | |
Additions, net | | | 1,905 | | | | 184 | | | | 3 | | | | 2,092 | |
Payments | | | (1,663 | ) | | | (190 | ) | | | (157 | ) | | | (2,010 | ) |
Balance at December 31, 2012 | | | 813 | | | | - | | | | - | | | | 813 | |
Additions, net | | | 1,492 | | | | 15 | | | | 1,359 | | | | 2,866 | |
Payments | | | (2,305 | ) | | | (15 | ) | | | (1,359 | ) | | | (3,679 | ) |
Balance at December 31, 2013 | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | Severance and Related Benefits | | | Other Exit Costs | | | Contract Termination Costs | | | Total Restructuring Accrual | |
Balance at December 31, 2011 | | $ | 571 | | | $ | 6 | | | $ | 154 | | | $ | 731 | |
Additions, net | | | 1,905 | | | | 184 | | | | 3 | | | | 2,092 | |
Payments | | | (1,663 | ) | | | (190 | ) | | | (157 | ) | | | (2,010 | ) |
Balance at December 31, 2012 | | $ | 813 | | | $ | - | | | $ | - | | | $ | 813 | |
8.9. Stockholders' Equity
We are authorized to issue 80.0160.0 million shares of Common Stock, par value $.0013, and 20.0 million shares of preferred stock, par value $.001. The Board of Directors has the authority to issue common and preferred shares, in series, with rights and privileges as determined by the Board of Directors. In December 2012,July 2013, we completed a public offering of 12,6509,775 shares of common stock, with net proceeds of approximately $23.3$40.1 million.
In 2008, our Board of Directors approved a share repurchase program to acquire up to $15.0 million of our outstanding common shares. Purchases may be discontinued at any time. We did not repurchase any common shares during 2012, 2011 and 2010. At December 31, 2012, we had $12.3 million remaining available for purchases under the program. This program was terminated in March 2013.
9.10. Commitments and Contingencies
a. Operating Leases
As of December 31, 2012,2013, we leased office, manufacturing and laboratory space, under lease agreements expiring in December 2020.
Rental payments are recognized as rent expense on a straight-line basis over the term of the lease. In addition to rents due under these agreements, we are obligated to pay additional facilities charges, including utilities, taxes and operating expenses. We also lease certain office equipment under non-cancelable operating leases, which expire at various times through April 2013.
As of December 31, 2012,2013, future minimum annual payments under all operating lease agreements are as follows:
Years ending December 31, | | Minimum Annual Payments | | Minimum Annual Payments | |
2013 | | $ | 2,410 | |
2014 | | | 2,410 | | $ | 1,841 | |
2015 | | | 2,470 | | | 1,887 | |
2016 | | | 2,532 | | | 1,934 | |
2017 | | | 2,595 | | | 1,983 | |
2018 | | | | 2,032 | |
Thereafter | | | 8,182 | | | 4,218 | |
Total | | $ | 20,599 | | $ | 13,895 | |
Rental expense totaled approximately $3,548, $2,074 and $3,475 for 2013, 2012 and $3,544 for 2012, 2011, and 2010, respectively. For 2013 and 2012, amounts paid exceeded rent expense by $164 and $419, respectively, due to the recognition of lease incentives. For 2011, and 2010, we recognized rent expense in excess of amounts paid of $63, and $181, respectively, due to the recognition of escalation clauses and lease incentives. Additional facility charges, including utilities, taxes and operating expenses, for 2013, 2012 2011 and 20102011 were approximately $2,330, $2,845 $4,033 and $3,645,$4,033, respectively.
b. Licensing, Service Supply and Related PartySupply Agreements
Progenics hasand its subsidiaries have entered into intellectual property-based license and service agreements in connection with its product development programs. Progenics hasprograms, and have recognized milestone, license and sublicense fees and supply costs, which are included in research and development expenses, totaling approximately $567, $1,170 and $578 and $1,266 for 2012, 2011 and 2010,during the last three years, respectively.
Agreement | | Paid from inception to December 31, 2012 | | | | | Terms | |
| | | Paid from inception to December 31, 2013 | | | Future (1) Commitments | | Terms |
Progenics agreements with: | | | | | | | | | |
Lonza Sales AG | | $ | 909 | | | $ | 808 | | Annual license fee payments, milestones and royalties, as applicable, in respect of oncology and other products. | | $ | 909 | | | $ | 824 | | Annual license fee payments, milestones and royalties, as applicable, in respect of oncology and other products. |
| | | | | | | | | | | | | | | | | | |
PSMA LLC agreements with: | Seattle Genetics, Inc. | | | 4,400 | | | | 13,800 | | Milestone and periodic maintenance payments to use ADC technology to link chemotherapeutic agents to monoclonal antibodies that target prostate specific membrane antigen. ADC technology is based in part on technology licensed by SGI from third parties. | | | 4,400 | | | | 13,900 | | Milestone and periodic maintenance payments to use ADC technology to link chemotherapeutic agents to monoclonal antibodies that target prostate specific membrane antigen. ADC technology is based in part on technology licensed by SGI from third parties. |
Amgen Fremont, Inc. (formerly Abgenix) | | | | 1,350 | | | | 5,750 | | Milestones and royalties to use XenoMouse® technology for generating fully human antibodies to PSMA LLC's PSMA antigen. |
Former member of PSMA LLC | | | | 278 | | | | 52,188 | | Annual minimum royalty payments and milestones to use technology related to PSMA. |
| | | | | | | | | | | | | | | | | | |
Amgen Fremont, Inc. (formerly Abgenix) | | | 1,350 | | | | 5,750 | | Milestones and royalties to use XenoMouse® technology for generating fully human antibodies to PSMA LLC's PSMA antigen. | |
| | | | | | | | | | | Paid from acquisition date to December 31, 2013 | | | Future (1) Commitments | | Terms |
Former member of PSMA LLC | | | 241 | | | | 52,216 | | Annual minimum royalty payments and milestones to use technology related to PSMA. | |
MIP agreements with: | | | | | | | | | | |
| | | | | | | | | | |
University of Zurich and the Paul Scherrer Institute | | | | 65 | | | | 1,225 | | Annual maintenance and license fee payments, milestones and royalties in respect of licensed technology related to 1404. |
University of Western Ontario | | | | 4 | | | | 374 | | Annual minimum royalty, administration and milestone payments in respect of licensed technology related to Azedra. |
Novartis Pharma AG and other interests | | | | - | | | | 4,600 | | Milestone and royalty payments in respect of licensed technology related to Onalta. |
Bayer Schering Pharma AG | | | | - | | | | 9,000 | | Milestone and royalty payments in respect of licensed technology related to a MIP asset. |
| | | | | | | | | | |
(1) Amounts based on known contractual obligations as specified in the respective license agreements, which are dependent on the achievement or occurrence of future milestones or events and exclude amounts for royalties which are dependent on future sales and are unknown.
We are seeking to out-license or terminate non-germane Molecular Insight licenses and service agreements, as to which we have paid $216 through December 31, 2013, and have future commitments of $3,453, subject to occurrence of future milestones or events.
c. Consulting Agreements
As part of our research and development efforts, we have from time to time entered into consulting agreements with external scientific specialists. These agreements contain various terms and provisions, including fees to be paid by us and royalties, in the event of future sales, and milestone payments, upon achievement of defined events, payable by us. Certain of these scientists are advisors to Progenics, and some have purchased our Common Stock or received stock options which are subject to vesting provisions. Two members of our Board formerly had consulting agreements; no payments in respect of these agreements have been made since 2010. We have recognized expenses with regard to the consulting agreements of $39, $8 and $27 for 2013, 2012 and $179 for 2012, 2011, and 2010, respectively. Those expenses include the fair value of stock options granted during 20112013 and 2010,2011, which were fully vested at grant date, of approximately $11$7 and $42,$11, respectively. Such amounts of fair value are included in research and development expense for each year presented (see Note 10)11).
d. Retirement Agreement
On March 14, 2012, Progenics and company founder Paul J. Maddon entered into an agreement providing for his retirement as Chief Science Officer. In connection with Dr. Maddon's retirement and termination of his employment agreement, Progenics agreed to pay him an amount equal to $1,789 and provide other benefits under the agreement.
e. Related Party Agreement
In December 2012, Progenics entered into a financial advisory agreement with MTS Health Partners, L.P., of which the Company's Board Chair is a Senior Managing Director and partner, on customary terms and conditions, whereby, in 2013, MTS will receive ahas received monthly retainer of $10retainers totaling $55 during the term of the agreement (which may be terminated by either party on 30 days notice),and $300 for MTS' services in connection with the Molecular Insight acquisition described in Note 15,2. This agreement was terminated in June 2013.
f. Legal Proceedings
Progenics is a party to a proceeding brought by a former employee complaining that the Company violated the anti-retaliation provisions of the federal Sarbanes-Oxley law by terminating the former employee. The Company believes the former employee's claims are without merit and is contesting the matter vigorously. The federal District Court hearing the case issued in connection with other transactions, if any, asJuly 2013 an order denying our motion for summary judgment dismissing the former employee's complaint, making it likely that the proceeding will continue to which MTS provides servicestrial. Given the inherent uncertainty attendant to the Company, such other amounts asproceeding, it is not possible at this time to estimate the parties may mutually agree.
October 2013 commenced an arbitration with Ono under the provisions of the parties' License Agreement, following a communication from Ono that it has determined to discontinue development of subcutaneous Relistor in Japan because of "commercial concerns" that Ono contends would permit it to cease development and terminate the Agreement. Under our Agreement with Ono, Ono may cease development of subcutaneous Relistor only if it terminates the License Agreement, which it may do unilaterally only if Progenics is in material default. Progenics is not in default under the Agreement, and Ono has neither asserted that Progenics is, nor terminated the Agreement.
10.11. Share-Based Payment Arrangements
Our share-based compensation to employees includes non-qualified stock options, restricted stock and shares issued under our Purchase Plans, which are compensatory under ASC 718 Compensation – Stock Compensation. During the second quarter of 2011, we accelerated the vesting of outstanding awards to non-management employees in connection with a change in program eligibility and termination of the Company's employee stock purchase plans. We account for share-based compensation to non-employees, including non-qualified stock options and restricted stock, in accordance with ASC 505 Equity.
Compensation cost for share-based awards will be recognized in our financial statements over the related requisite service periods; usually the vesting periods for awards with a service condition. We have made an accounting policy decision to use the straight-line method of attribution of compensation expense, under which the grant date fair value of share-based awards will be recognized on a straight-line basis over the total requisite service period for the total award.
We have adopted two stock incentive plans, the 1996 Amended Stock Incentive Plan (terminated in 2006) and the 2005 Stock Incentive Plan. Under these Plans as amended, up to 5,000 and 8,450 shares of common stock, respectively, have been reserved for the issuance of awards to employees, consultants, directors and other individuals who render services to Progenics (collectively, Awardees). The Plans contain anti-dilution provisions in the event of a stock split, stock dividend or other capital adjustment as defined. Each Plan provides for the Board or Committee to grant to Awardees stock options, stock appreciation rights, restricted stock, performance awards or phantom stock, as defined (collectively, Awards). The Committee is also authorized to determine the term and vesting of each Award and the Committee may in its discretion accelerate the vesting of an Award at any time. Stock options granted under the Plans generally vest pro rata over three to five years and have terms of ten years. Restricted stock issued under either Plan usually vestsgenerally vested annually over three to five years, unless specified otherwise by the Committee. The exercise price of outstanding non-qualified stock options is usually equal to the fair value of our common stock on the date of grant. The exercise price of non-qualified stock options granted from the 2005 Plan and incentive stock options (ISO) granted from the Plans may not be lower than the fair value of our common stock on the dates of grant. At December 31, 2013, 2012 2011 and 2010,2011, all outstanding stock options were non-qualified options. The 2005 Plan will terminate in April 2015; options granted before termination of the Plans will continue under the respective Plans until exercised, cancelled or expired.
We apply a forfeiture rate to the number of unvested awards in each reporting period in order to estimate the number of awards that are expected to vest. Estimated forfeiture rates are based upon historical data on vesting behavior of employees. We adjust the total amount of compensation cost 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.
Under ASC 718 Compensation – Stock Compensation,, the fair value of each non-qualified stock option award is estimated on the date of grant using the Black-Scholes option pricing model, which requires input assumptions noted in the following table. Ranges of assumptions for inputs are disclosed where the value of such assumptions varied during the related period. Historical volatilities are based upon daily quoted market prices of our common stock on The NASDAQ Stock Market LLC over a period equal to the expected term of the related equity instruments. We rely only on historical volatility since it provides the most reliable indication of future volatility. Future volatility is expected to be consistent with historical; historical volatility is calculated using a simple average calculation; historical data is available for the length of the option's expected term and a sufficient number of price observations are used consistently. Since our stock options are not traded on a public market, we do not use implied volatility. For 2013, 2012 2011 and 20102011 our expected term was calculated based upon historical data related to exercise and post-termination cancellation activity. Accordingly,activity; accordingly, for grants issued to employees and directors and officers (excluding our former CEO in 2011 and 2010)2011), we are using expected terms of 5.45.3 and 7.4 years, 5.35.4 and 7.4 years and 5.3 and 7.37.4 years, respectively. The expected term of stock options granted to our former CEO in 2011 and 2010 was calculated separately from stock options granted to employees and directors and officers, and was 8 years for 2011 and 2010.2011. The expected term for options granted to non-employees was also calculated separately from stock options granted to employees and directors and officers and was ten years, which is the contractual term of those options. We have never paid dividends and do not expect to pay dividends in the future. Therefore, our dividend rate is zero. The risk-free rate for periods within the expected term of the options is based on the U.S. Treasury yield curve in effect at the time of grant. The following table presents assumptions used in computing the fair value of option grants during 2013, 2012 2011 and 2010:2011:
| | 2013 | | | 2012 | | | 2011 | |
| | | | | | | | | |
Expected volatility | | | 73% – 90 | % | | | 70% – 85 | % | | | 68% – 78 | % |
Expected dividends | | Zero | | | Zero | | | Zero | |
Expected term (years) | | | 5.3 – 10 | | | | 5.3 – 10 | | | | 5.3 – 10 | |
Weighted average expected term (years) | | | 5.96 | | | | 6.11 | | | | 6.17 | |
Risk-free rate | | | 0.76% – 2.83 | % | | | 0.57% – 1.71 | % | | | 0.77% – 2.97 | % |
A summary of option activity under the Plans as of December 31, 2013 and changes during the year then ended is presented below:
Options | | Shares | | | Weighted Average Exercise Price | | | Weighted Average Remaining Contractual Term (Yr.) | | | Aggregate Intrinsic Value | |
| | | | | | | | | | | | |
Outstanding at January 1, 2013 | | | 5,366 | | | $ | 12.27 | | | | | | | |
Granted | | | 1,018 | | | | 5.13 | | | | | | | |
Exercised | | | (14 | ) | | | 5.08 | | | | | | | |
Forfeited | | | (608 | ) | | | 10.63 | | | | | | | |
Expired | | | (463 | ) | | | 14.70 | | | | | | | |
Outstanding at December 31, 2013 | | | 5,299 | | | | 10.89 | | | | 5.82 | | | $ | 304 | |
Exercisable at December 31, 2013 | | | 3,875 | | | $ | 12.45 | | | | 4.86 | | | $ | 118 | |
| | 2012 | | 2011 | | 2010 |
| | | | | | |
Expected volatility | | 70% – 85% | | 68% – 78% | | 68% – 87% |
Expected dividends | | Zero | | zero | | zero |
Expected term (years) | | 5.3 – 10 | | 5.3 – 10 | | 5.3 – 10 |
Weighted average expected term (years) | | 6.11 | | 6.17 | | 6.92 |
Risk-free rate | | 0.57% – 1.71% | | 0.77% – 2.97% | | 1.21% – 3.09% |
A summary of option activity under the Plans as of December 31, 2012 and changes during the year then ended is presented below:
Options | | Shares | | | Weighted Average Exercise Price | | | Weighted Average Remaining Contractual Term (Yr.) | | | Aggregate Intrinsic Value |
| | | | | | | | | | | |
Outstanding at January 1, 2012 | | | 5,597 | | | $ | 12.60 | | | | | | |
Granted | | | 814 | | | | 9.54 | | | | | | |
Exercised | | | (38 | ) | | | 5.28 | | | | | | |
Forfeited or expired | | | (1,007 | ) | | | 12.16 | | | | | | |
Outstanding at December 31, 2012 | | | 5,366 | | | $ | 12.27 | | | | 5.61 | | | $ | 1 |
Exercisable at December 31, 2012 | | | 3,970 | | | $ | 13.72 | | | | 4.77 | | | $ | 1 |
The weighted average grant-date fair value of options granted under the Plans during 2013, 2012 and 2011 was $3.74, $6.38 and 2010 was $6.38, $5.51, and $3.10, respectively. The total intrinsic value of options exercised during 2013, 2012 and 2011 was $11, $174 and 2010 was $174, $345, and $0, respectively.
The options granted under the Plans, described above, include 33, 113, 38, 75, 145 and 113 non-qualified stock options granted to our former CEO on July 1, 2002, 2003, 2004 and 2005, on July 3, 2006 and on July 2, 2007, respectively, which cliff vest after nine years and 11 months from the respective grant date. All but the 2006 awards are fully vested. Vesting of a defined portion of each award will occur earlier if a defined performance condition is achieved; more than one condition may be achieved in any period. In accordance with ASC 718 Compensation – Stock Compensation, at the end of each reporting period, we will estimate the probability of achievement of each performance condition and will use those probabilities to determine the requisite service period of each award.2006. For the 2006 award, the requisite service period is the shortest of the explicit or implied service periods and the explicit service period for this award is nine years and 11 months from the grant date. The implied service periods related to the performance conditions were the estimated times for each performance condition to be achieved. Thus, compensation expense was recognized over the shortest estimated time for the achievement of performance conditions for that award (assuming that the performance conditions were to be achieved before the cliff vesting occurred). On July 1, 2008, 2009 and 2010, we granted awards to our former CEO (consisting of options in 2010 and 2009 and options and restricted stock in 2008) and on July 1, 2010 to our CEO (consisting of options) which vest on the basis of the achievement of specified performance or market-based milestones. In connection with our former CEO's retirement in 2012 the 2004, 2007, 2008, 2009 and 2010 performance or market-based awards have been fully vested as a result of accelerated vesting during 2012. The options have an exercise price equal to the closing price of our common stock on the date of grant. The awards are valued using a Monte Carlo simulation model. On July 1, 2011 and March 1, 2012, we granted option awards to our CEO which vests on the basis of the achievement of specified performance-based milestones. The options have exercise prices equal to the closing price of our common stock on the dates of grant. The awards are valued using the Black-Scholes option pricing model. The expense related to the grants with performance and market-based milestones will be recognized over the shortest estimated time for the achievement of the performance or market conditions. The awards will not vest unless one of the milestones is achieved or the market condition is met. Changes in the estimate of probability of achievement of any performance or market condition will be reflected in compensation expense of the period of change and future periods affected by the change.
At December 31, 2012,2013, the estimated requisite service periods for the 2006, 2010, 2011 and 2012 awards, described above, were 3.5,2.5, 1.0 2.0 and 2.01.0 years, respectively. For 2013, 2012 2011 and 2010,2011, the total compensation expense recognized for the performance-based options was $0.1 million, $2.0 million $0.4 million and $1.1$0.4 million, respectively.
A summary of the status of our outstanding restricted stock awarded under the Plans which has not yet vested as of December 31, 20122013 and changes during the year then ended is presented below:
Restricted Stock Awards | | Shares | | | Weighted Average Grant-Date Fair Value |
| | | | | |
Nonvested at January 1, 2012 | | | 98 | | | $ | 7.40 |
Granted | | | - | | | | - |
Vested | | | (64 | ) | | | 8.50 |
Forfeited | | | (6 | ) | | | 5.35 |
Nonvested at December 31, 2012 | | | 28 | | | $ | 5.35 |
Two employee stock purchase plans (the Purchase Plans), the 1998 Employee Stock Purchase Plan (the Qualified Plan) and the 1998 Non-Qualified Employee Purchase Plan (the Non-Qualified Plan), as amended, provided for the issuance of up to 4,400 and 1,100 shares of common stock, respectively. Issuances of common stock under the Purchase Plans, terminated by the Company during the second quarter of 2011, provided for the grant to all employees of options to use an amount equal to 25% of their quarterly compensation, as such percentage was determined by the Board of Directors prior to the date of grant, to purchase shares of our common stock at a price per share equal to the lesser of the fair market value of the common stock on the date of grant or 85% of the fair market value on the date of exercise. Options were granted automatically on the first day of each fiscal quarter and expired six months after the date of grant. The Qualified Plan was not available to employees owning more than five percent of the common stock and imposed certain other quarterly limitations on option grants. Options under the Non-Qualified Plan were granted to the extent that option grants were restricted under the Qualified Plan.
The fair value of shares purchased under the Purchase Plans was estimated on the date of grant in accordance with ASC 718 Compensation – Stock Compensation, via the same option valuation model used for options granted under the Plans, but with the following assumptions during 2011 and 2010:2011:
| | 2011 | | 2010 |
| | | | |
Expected volatility | | 43% – 51% | | 45% – 72% |
Expected dividends | | zero | | zero |
Expected term | | 6 months | | 6 months |
Risk-free rate | | 0.06% – 0.22% | | 0.11% – 0.18% |
| | 2011 | |
| | | |
Expected volatility | | | 43% – 51 | % |
Expected dividends | | zero | |
Expected term | | 6 months | |
Risk-free rate | | | 0.06% – 0.22 | % |
Purchases of common stock under the Purchase Plans during 2011 and 2010 are summarized as follows:
| | Qualified Plan | | | Non-Qualified Plan |
| | Shares Purchased | | | Price Range | | | Weighted Average Grant-Date Fair Value | | | Shares Purchased | | | Price Range | | | Weighted Average Grant-Date Fair Value |
| | | | | | | | | | | | | | | | | |
2011 | | | 428 | | | $ | 4.62 – $5.65 | | | $ | 0.88 | | | | 162 | | | $ | 4.62 – $5.65 | | | $ | 0.84 |
2010 | | | 802 | | | $ | 3.50 – $4.56 | | | $ | 0.94 | | | | 208 | | | $ | 3.75 – $4.56 | | | $ | 0.96 |
| | Qualified Plan | | | Non-Qualified Plan | |
| | Shares Purchased | | | Price Range | | | Weighted Average Grant-Date Fair Value | | | Shares Purchased | | | Price Range | | | Weighted Average Grant-Date Fair Value | |
| | | | | | | | | | | | | | | | | | |
2011 | | | 428 | | | $ | 4.62 – $5.65 | | | $ | 0.88 | | | | 162 | | | $ | 4.62 – $5.65 | | | $ | 0.84 | |
The total compensation expense of shares, granted to both employees and non-employees, under all of our share-based payment arrangements that was recognized in operations during 2013, 2012 2011 and 20102011 was:
| | 2012 | | | 2011 | | | 2010 | | 2013 | | | 2012 | | | 2011 | |
Recognized as: | | | | | | | | | | | | | | | | | |
Research and Development | | $ | 4,568 | | | $ | 4,499 | | | $ | 5,091 | | $ | 2,524 | | | $ | 4,568 | | | $ | 4,499 | |
General and Administrative | | | 1,968 | | | | 1,863 | | | | 4,424 | | | 1,022 | | | | 1,968 | | | | 1,863 | |
Total | | $ | 6,536 | | | $ | 6,362 | | | $ | 9,515 | | $ | 3,546 | | | $ | 6,536 | | | $ | 6,362 | |
No tax benefit was recognized related to such compensation cost because of the Company's net operating losses and the related deferred tax assets were fully offset by valuation allowance. Accordingly, no amounts related to windfall tax benefits have been reported in cash flows from operations or cash flows from financing activities for the periods presented.
As of December 31, 2012,2013, there was $5.1 million and $0.1$4.4 million of total unrecognized compensation cost related to non-vested stock options under the 1996 and 2005 Plans and non-vested restricted shares, respectively.Plans. Those costs are expected to be recognized over a weighted average periodsperiod of 1.8 years and 0.5 years, respectively.2.1 years. Cash received from exercises under all share-based payment arrangements for 20122013 was $0.3$0.1 million. We issue new shares of our common stock upon share option exercise and share purchase.exercises.
In applying the treasury stock method for the calculation of diluted EPS, amounts of unrecognized compensation expense and windfall tax benefits are required to be included in the assumed proceeds in the denominator of the diluted EPS calculation unless they are anti-dilutive. We incurred net losses for 20122013 and 20102012 and, therefore, such amounts have not been included in the calculations for those periods since they would be anti-dilutive. As a result, basic and diluted EPS are the same for the 20122013 and 20102012 periods. We reported net income for 2011 and included the dilutive effect of unrecognized compensation expense in the assumed proceeds in the denominator of the diluted EPS calculation. We have made an accounting policy decision to calculate windfall tax benefits/shortfalls, for purposes of diluted EPS calculation, excluding the impact of deferred tax assets. This policy decision will apply when we have net income and windfall tax benefits/shortfalls are realizable.
11.12. Employee Savings Plan
The terms of the amended and restated Progenics Pharmaceuticals 401(k) Plan (the Amended Plan), among other things, allow eligible employees to participate in the Amended Plan by electing to contribute to the Amended Plan a percentage of their compensation to be set aside to pay their future retirement benefits. During the three years ended December 31, 2012,2013, we matched 50% of those employee contributions that are equal to 5%-8% of compensation and are made by eligible employees to the Amended Plan (the Matching Contribution). In addition, we may also make a discretionary contribution each year on behalf of all participants who are non-highly compensated employees. We made Matching Contributions of approximately $330, $535 $597 and $594$597 to the Amended Plan for 2013, 2012 2011 and 2010,2011, respectively. No discretionary contributions were made during those years.
12.13. Income Taxes
We account for income taxes using the liability method in accordance with ASC 740 Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
There is no provision or benefit for federal or state income taxes for 2013, 2012 and 2011, or 2010 other than a federal$0.4 million income tax refundbenefit in 2013, resulting from the change in the temporary difference between carrying amounts of $95 we received in 2010 from new legislation permittingin-process research and development assets for financial reporting purposes and the carryback of net operating losses (NOLs) to 2005 as well as permitting the suspension of limitations on alternative minimumamounts used for income tax NOL utilization.purposes. We have completed a calculation through March 31, 2011, under Internal Revenue Code Section 382, the results of which indicate that past ownership changes will limit utilization of NOLs in the future. Ownership changes subsequent to March 31, 2011, may further limit the future utilization of net operating loss and tax credit carry-forwards as defined by the federal and state tax codes.
Deferred tax assets and liabilities as of December 31, 20122013 and 2011,2012, consisted of the following:
| | 2012 | | | 2011 | | | 2013 | | | 2012 | |
Deferred tax assets: | | | | | | | | | | | | |
Depreciation and amortization | | $ | 6,497 | | | $ | 6,865 | | | $ | 6,165 | | | $ | 6,497 | |
R&E tax credit carry-forwards | | | 11,843 | | | | 11,966 | | | | 5,129 | | | | 11,843 | |
NYS investment tax credit carry-forwards | | | 1,084 | | | | 1,088 | | | | 1,095 | | | | 1,084 | |
AMT credit carry-forwards | | | 211 | | | | 211 | | | | 211 | | | | 211 | |
Net operating loss carry-forwards | | | 112,966 | | | | 85,110 | | | | 190,263 | | | | 112,966 | |
Capitalized research and development expenditures | | | 30,884 | | | | 43,113 | | | | 25,231 | | | | 30,884 | |
Stock compensation | | | 14,436 | | | | 13,789 | | | | 13,826 | | | | 14,436 | |
Other items | | | 2,193 | | | | 3,600 | | | | 1,097 | | | | 2,193 | |
Total gross deferred tax assets | | | 180,114 | | | | 165,742 | | | | 243,017 | | | | 180,114 | |
Less: Valuation allowance | | | (178,045 | ) | | | (165,742 | ) | | | (243,017 | ) | | | (178,045 | ) |
Deferred tax assets | | | 2,069 | | | | - | | | | - | | | | 2,069 | |
Deferred tax liability - current | | | (2,069 | ) | | | - | | | | - | | | | (2,069 | ) |
Net deferred tax asset (liability) | | $ | - | | | $ | - | | |
Deferred tax liability – long term | | | | (12,321 | ) | | | - | |
Net deferred tax liability | | | $ | (12,321 | ) | | $ | - | |
We do not recognize deferred tax assets considering our history of taxable losses and the uncertainty regarding our ability to generate sufficient taxable income in the future to utilize these deferred tax assets. For 2013 and 2012, we incurred net losses for tax purposes. For 2011, we had income for tax purposes and such amount was offset completely by our available net operating loss carry-forwards. We recognized a full tax valuation against deferred taxes at December 31, 2012 and 2011.2013. In 2012, we recognized deferred income tax assets, net of a valuation allowance, of $2,069 ($17 in current assets and $2,052 in non-current assets) and in 2013 and 2012 we recognized deferred income tax liabilities of $12,321 and $2,069, respectively to reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The recognition of these deferred income tax assets and liabilities had no effect on our net loss for 2012.2012, however, it resulted in $362 income tax benefit for 2013.
The following is a reconciliation of income taxes computed at the Federal statutory income tax rate to the actual effective income tax provision during 2013, 2012 2011 and 2010:2011:
| | 2012 | | 2011 | | 2010 | | 2013 | | | 2012 | | | 2011 | |
| | | | | | | | | | | | | | | |
U.S. Federal statutory rate | | (35.0)% | | 35.0% | | (34.0)% | | | (34.0 | )% | | | (35.0 | )% | | | 35.0 | % |
State income taxes, net of Federal benefit | | (5.4) | | 8.0 | | (5.1) | | | (4.9 | ) | | | (5.4 | ) | | | 8.0 | |
Research and experimental tax credit | | - | | (4.1) | | (1.7) | | | (3.6 | ) | | | - | | | | (4.1 | ) |
Change in valuation allowance | | 34.7 | | (22.6) | | 38.2 | | | 11.4 | | | | 34.7 | | | | (22.6 | ) |
Effect of federal tax rate bracket change on valuation allowance | | - | | (34.8) | | - | | | 8.7 | | | | - | | | | (34.8 | ) |
Equity compensation | | 4.2 | | 17.0 | | 2.3 | | | 3.1 | | | | 4.2 | | | | 17.0 | |
Investment tax credit | | - | | (0.1) | | 0.1 | | | (0.1 | ) | | | - | | | | (0.1 | ) |
NOL expiration – Section 382 | | | | 18.6 | | | | - | | | | - | |
Other | | 1.5 | | 1.6 | | 0.1 | | | - | | | | 1.5 | | | | 1.6 | |
Income tax provision (benefit) | | 0.0% | | 0.0% | | (0.1)% | | | (0.8 | )% | | | 0.0 | % | | | 0.0 | % |
As of December 31, 2012,2013, we had available, for tax return purposes, unused federal NOLs of approximately $298.0$513.8 million, which will expire in various years from 20212018 to 2032,2033, $18.2 million of which were generated from deductions post January 1, 2006 that, when realized, will reduce taxes payable and will increase paid-in-capital and are not reflected in our deferred tax assets above. Additionally, $11.4$11.2 million of the valuation allowance relates to NOLs attributable to excess tax deductions for equity compensation pre January 1, 2006. When realized this will also be reflected as an increase to paid-in-capital. Also, we had available, for tax return purposes, unused state NOLs of approximately $453.1 million, which will expire in various years from 2019 to 2033.
We have reviewed our nexus in various tax jurisdictions and our tax positions related to all open tax years for events that could change the status of our ASC 740 Income Taxes liability, if any, or require an additional liability to be recorded. During 2013, 2012 2011 and 2010,2011, we had no unrecognized tax benefits resulting from tax positions during a prior or current period, settlements with taxing authorities or the expiration of the applicable statute of limitations.limitations, except for the $0.4 million income tax benefit recognized in 2013, resulting from the change in the difference between carrying amounts of in-process research and development assets for financial reporting purposes and the amounts used for income tax purposes. We have not, as of yet, conducted a study of our research and development credit carry-forwards. Such a study might result in an adjustment to our research and development credit carry-forwards, but until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position under ASC 740-10. A full valuation allowance has been provided against the Company's research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the statements of operations and comprehensive loss if an adjustment was required.
As of December 31, 2012,2013, we are subject to federal and state income tax in the U.S. Open tax years relate to years in which unused net operating losses were generated or, if used, for which the statute of limitation for examination by taxing authorities has not expired. Our open tax years extend back to 1995, with the exception of 1997 and 2011, during which we reported net income.1996. No amounts of interest or penalties were recognized in our Consolidated Statements of Operations or Consolidated Balance Sheets as of and for 2013, 2012 2011 and 2010.2011.
Our research and experimental (R&E) tax credit carry-forwards of approximately $11.8$5.1 million at December 31, 20122013 expire in various years from 2018 to 2032.2033. During 2012,2013, research and experimental tax credit carry-forwards of approximately $125$20 expired. The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, retroactively reinstated the federal research and development credit for 2012 and extended these credits through 2013.
As of December 31, 2013, we have not recognized any liability for uncertain tax positions, because of our full valuation allowance. We will recognize interest and penalties related to these positions, should such costs be assessed. As of December 31, 2013, we have not recognized interest and penalties. The recognition of unrecognized tax benefits would not affect our effective tax rate because the tax benefit would be offset by an increase in our valuation allowance.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year ended December 31, 2013.
| | 2013 |
| | |
Beginning uncertain tax benefits | | $ | 2,661 |
Current year - increases | | | - |
Current year - decreases | | | - |
Settlements | | | - |
Expired statuses | | | - |
Ending uncertain tax benefits | | $ | 2,661 |
14. Net Income (Loss) Per Share
Our basic net (loss) income per share amounts have been computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the period. For 20122013 and 2010,2012, we reported net losses and, therefore, potential common shares were not included since such inclusion would have been anti-dilutive. For 2011, we reported net income, and the computation of diluted earnings per share is based upon the weighted-average number of our common shares and dilutive effect, determined using the treasury stock method, of potential common shares outstanding. As of December 31, 2012 2011 and 2010,2011, our 28 98 and 341,98, respectively, shares of unvested restricted stock outstanding havewith non-forfeitable rights to dividends.dividends were outstanding; all such shares were vested at the end of December 31, 2013. The allocation of 2012 and 2010 net losses and the 2011 net income to these participating securities pursuant to the two-class method is not material to both basic and diluted earnings per share. The calculations of net loss per share, basic and diluted, are as follows:
| | Net (Loss) Income (Numerator) | | | Weighted Average Common Shares (Denominator) | | | Per Share Amount | | | Net (Loss) Income (Numerator) | | | Weighted Average Common Shares (Denominator) | | | Per Share Amount | |
2013: | | | | | | | | | | |
Basic and diluted | | | $ | (42,572 | ) | | | 55,798 | | | $ | (0.76 | ) |
2012: | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted | | $ | (35,431 | ) | | | 34,754 | | | $ | (1.02 | ) | | $ | (35,431 | ) | | | 34,754 | | | $ | (1.02 | ) |
2011: | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 10,381 | | | | 33,375 | | | $ | 0.31 | | | $ | 10,381 | | | | 33,375 | | | $ | 0.31 | |
Dilutive effect of stock options | | | - | | | | 66 | | | | | | | | - | | | | 66 | | | | | |
Dilutive effect of restricted stock | | | - | | | | 53 | | | | | | | | - | | | | 53 | | | | | |
Diluted | | $ | 10,381 | | | | 33,494 | | | $ | 0.31 | | | $ | 10,381 | | | | 33,494 | | | $ | 0.31 | |
2010: | | | | | | | | | | | | | |
Basic and diluted | | $ | (69,725 | ) | | | 32,590 | | | $ | (2.14 | ) | |
During 2013, 2012 2011 and 2010,2011, anti-dilutive common shares excluded from diluted per share amounts consist of the following:
| | 2012 | | | 2011 | | | 2010 |
| | Weighted Average Number | | | Weighted Average Exercise Price | | | Weighted Average Number | | | Weighted Average Exercise Price | | | Weighted Average Number | | | Weighted Average Exercise Price |
Options | | | 5,947 | | | $ | 12.32 | | | | 4,543 | | | $ | 14.92 | | | | 5,037 | | | $ | 15.17 |
Restricted stock | | | 60 | | | | | | | | 45 | | | | | | | | 45 | | | | |
Total | | | 6,007 | | | | | | | | 4,588 | | | | | | | | 5,082 | | | | |
| | 2013 | | | 2012 | | | 2011 |
| | Weighted Average Number | | | Weighted Average Exercise Price | | | Weighted Average Number | | | Weighted Average Exercise Price | | | Weighted Average Number | | | Weighted Average Exercise Price |
Options | | | 5,969 | | | $ | 11.54 | | | | 5,947 | | | $ | 12.32 | | | | 4,543 | | | $ | 14.92 |
Restricted stock | | | - | | | | | | | | 60 | | | | | | | | 45 | | | | |
Total | | | 5,969 | | | | | | | | 6,007 | | | | | | | | 4,588 | | | | |
14.15. Unaudited Quarterly Results (unaudited)
Summarized quarterly financial data during 20122013 and 20112012 are as follows:
| | 2012 Quarter Ended | | | 2013 Quarter Ended | |
| | March 31 | | | June 30 | | | September 30 | | | December 31 | | | March 31 | | | June 30 | | | September 30 | | | December 31 | |
Revenues (1) | | $ | 2,226 | | | $ | 1,820 | | | $ | 1,117 | | | $ | 8,885 | | | $ | 2,226 | | | $ | 1,801 | | | $ | 867 | | | $ | 2,968 | |
Net loss | | | (13,086 | ) | | | (10,720 | ) | | | (11,301 | ) | | | (324 | ) | | | (11,258 | ) | | | (12,263 | ) | | | (10,500 | ) | | | (8,551 | ) |
Net loss per share - basic and diluted | | | (0.39 | ) | | | (0.32 | ) | | | (0.33 | ) | | | (0.01 | ) | | | (0.22 | ) | | | (0.24 | ) | | | (0.17 | ) | | | (0.14 | ) |
| | 2011 Quarter Ended | |
| | March 31 | | | June 30 | | | September 30 | | | December 31 | |
Revenues (2) | | $ | 2,388 | | | $ | 74,407 | | | $ | 5,804 | | | $ | 2,197 | |
Net income (loss) | | | (22,927 | ) | | | 55,486 | | | | (11,432 | ) | | | (10,746 | ) |
Net income (loss) per share - basic | | | (0.69 | ) | | | 1.66 | | | | (0.34 | ) | | | (0.32 | ) |
Net income (loss) per share - diluted | | | (0.69 | ) | | | 1.64 | | | | (0.34 | ) | | | (0.32 | ) |
| | 2012 Quarter Ended | |
| | March 31 | | | June 30 | | | September 30 | | | December 31 | |
Revenues (1) | | $ | 2,226 | | | $ | 1,820 | | | $ | 1,117 | | | $ | 8,885 | |
Net loss | | | (13,086 | ) | | | (10,720 | ) | | | (11,301 | ) | | | (324 | ) |
Net loss per share - basic and diluted | | | (0.39 | ) | | | (0.32 | ) | | | (0.33 | ) | | | (0.01 | ) |
_______________
(1) | Revenues in the fourth quarter of 2012 include $5.0 million and $2.8 million from the MedImmune and CytoDyn Agreements, respectively. |
(2)
| Revenues in the second quarter of 2011 include $59.5 million from the Salix Agreement |
15.16. Subsequent Event
We acquired MIP in January 2013 pursuant toDuring the first quarter of 2014, we established a Stock Purchase and Sale Agreement with its stockholders and their representative,$150 million shelf registration statement (inclusive of approximately $31.7 million of availability under a superseded registration) which we purchased allused for our recent underwritten public offering of MIP's outstanding capital stock in consideration8.75 million shares of the issuance by Progenics to the stockholders of 4,566 shares (500 of which is in escrow) of Progenics common stock inat a private transaction exempt from the registration requirements of the U.S. Securities Act of 1933 and therefore subject to transfer restrictions at the time of issuance. (The closing NASDAQ marketpublic offering price of Progenics' freely transferable common shares on January 18, 2013, the date this acquisition was consummated, was $2.83$4.60 per share.) Under the Agreement, Progenics also agreed to pay to the stockholders potential milestones,share, resulting in cash or Progenics stock at Progenics' option,net proceeds of up to $23 million contingent upon achieving specified commercialization events and up to $70 million contingent upon achieving specified sales targets relating to all MIP products. The Agreement contains customary representations and warranties regarding MIP, the stockholders, their representative, and Progenics, as well as covenants, indemnification and other provisions. This acquisition is to be accounted for using the acquisition method of accounting. As of the completion of the acquisition, MIP's assets and liabilities will be recorded at their respective fair values and added to those of Progenics. The final determination of acquisition consideration results from the completion of the analysis of the fair value of MIP's assets and liabilities and any difference between the acquisition consideration and the fair value of the identifiable net assets is to be recorded as goodwill.approximately $37.5 million.
Allowance for Doubtful Accounts
Year ended December 31, | | Beginning Balance | | | Additions Charged to General and administrative expenses | | | Deductions Accounts Written Off During Period | | | Ending Balance | |
(in thousands) | | | | | | | | | | | | |
2013 | | $ | - | | | $ | 7 | | | $ | - | | | $ | 7 | |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PROGENICS PHARMACEUTICALS, INC. |
| By: | /s/ MARK R. BAKER |
| | Mark R. Baker Chief Executive Officer and Director (Principal Executive Officer) |
Date: March 14, 201313, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature | | Capacity | Date |
/s/ PETER J. CROWLEY | | Chairman | March 14, 201313, 2014 |
Peter J. Crowley | | | |
| | | |
/s/ PAUL J. MADDON | | Vice Chairman | March 14, 201313, 2014 |
Paul J. Maddon, M.D., Ph.D. | | | |
| | | |
/s/ MARK R. BAKER | | Chief Executive Officer and Director (Principal Executive Officer)
| March 14, 201313, 2014 |
Mark R. Baker | | (Principal Executive Officer) | |
| | | |
/s/ CHARLES A. BAKERKAREN J. FERRANTE | | Director | March 14, 201313, 2014 |
Charles A. BakerKaren J. Ferrante, M.D. | | | |
| | | |
/s/ KURT W. BRINERMICHAEL D. KISHBAUCH | | Director | March 14, 201313, 2014 |
Kurt W. BrinerMichael D. Kishbauch | | | |
/s/ STEPHEN P. GOFF | | Director | March 14, 2013 |
Stephen P. Goff, Ph.D. | | | |
/s/ DAVID A. SCHEINBERG | | Director | March 14, 201313, 2014 |
David A. Scheinberg, M.D., Ph.D. | | | |
| | | |
/s/ NICOLE S. WILLIAMS | | Director | March 14, 201313, 2014 |
Nicole S. Williams | | | |
| | | |
/s/ ANGELO W. LOVALLO, JR. | | Senior Executive Director, Financial ReportingVice President, Finance and Treasurer
(Principal Financial and Accounting Officer)
| March 14, 201313, 2014 |
Angelo W. Lovallo, Jr. | | (Principal Financial and Accounting Officer) | |
| | | |
| | |
Exhibit | | |
Number * | | Description |
3.1(1) | | Amended and Restated Certificate of Incorporation of the Registrant. |
3.2(2) | | Amended and Restated By-laws of the Registrant. |
4.1(3) | | Specimen Certificate for Common Stock, $0.0013 par value per share, of the Registrant. |
10.1(3) | | Form of Registration Rights Agreement. |
10.2(3) | | 1989 Non-Qualified Stock Option Plan‡ |
10.3(3) | | 1993 Stock Option Plan, as amended‡ |
10.4(3) | | 1993 Executive Stock Option Plan‡ |
10.5(4) | | Amended and Restated 1996 Stock Incentive Plan‡ |
10.6.3(5) | | Amended 2005 Stock Incentive Plan ‡ |
10.6.4(6) | | Form of Non-Qualified Stock Option Award Agreement ‡ |
10.6.5(6) | | Form of Restricted Stock Award Agreement ‡ |
10.7(7) | | Form of Indemnification Agreement‡ |
10.8(8) | | Employment Agreement, dated December 31, 2007, between the Registrant and Dr. Paul J. Maddon‡ |
10.8.1(9) | | First Amendment to Employment Agreement, dated March 31, 2011, between the Registrant and Dr. Paul J. Maddon‡ |
10.8.2(10)10.8.2(8) | | Retirement Agreement, dated as of March 14, 2012, between the Registrant and Dr. Paul J. Maddon‡ |
10.9(3) | | Letter dated August 25, 1994 between the Registrant and Dr. Robert J. Israel‡ |
10.16(11)10.16(9)† | | Development and License Agreement, dated April 30, 1999, between Protein Design Labs, Inc. and the Registrant. |
10.16.1(12)10.16.1(10) | | Letter Agreement, dated November 24, 2003, relating to the Development and License Agreement between Protein Design Labs, Inc. and the Registrant. |
10.18(13) | | Director Stock Option Plan‡ |
10.19(14)10.19(11)† | | Exclusive Sublicense Agreement, dated September 21, 2001, between the Registrant and UR Labs, Inc. |
10.19.1(15)10.19.1(12) | | Amendment to Exclusive Sublicense Agreement, dated September 21, 2001, between the Registrant and UR Labs, Inc. |
10.21.1(16)10.21.1(13) | | Amended and Restated Agreement of Lease, dated October 28, 2009, between BMR-Landmark at Eastview LLC and the Registrant. |
10.23 | | Information concerning compensation of the Registrant's non-employee directors is included in the Registrant's proxy material for its 20122013 Annual Meeting of Stockholders and its Current Report on Form 8-K filed on September 12, 2013 and is incorporated herein by reference.‡ |
10.25(17)10.25(14) † | | Option and License Agreement, dated May 8, 1985, by and between the University of Chicago and UR Labs, Inc., as amended by (i) Amendment to Option and License Agreement, dated September 17, 1987, by and between the University of Chicago and UR Labs, Inc., (ii) Second Amendment to Option and License Agreement, dated March 3, 1989, by and among the University of Chicago, ARCH Development Corporation and UR Labs, Inc., and (iii) Letter Agreement Related to Progenics' Relistor In-License dated, December 22, 2005, by and among the University of Chicago, acting on behalf of itself and ARCH Development Corporation, the Registrant, Progenics Pharmaceuticals Nevada, Inc. and Wyeth, acting through its Wyeth Pharmaceuticals Division. |
10.26(18)10.26(15) | | Membership Interest Purchase Agreement, dated April 20, 2006, between the Registrant Inc. and Cytogen Corporation. |
10.27(18)10.27(15) † | | Amended and Restated PSMA/PSMP License Agreement, dated April 20, 2006, by and among the Registrant, Cytogen Corporation and PSMA Development Company LLC. |
10.28(19) | | Consulting Agreement, dated May 1, 1995, between Active Biotherapies, Inc. and Dr. David A. Scheinberg, M.D., Ph.D., as amended on June 13, 1995, as assigned to the Registrant, and as amended on January 1, 2001‡ |
10.29(20)10.29(16) † | | License Agreement, dated as of October 16, 2008, by and among Ono Pharmaceutical Co., Ltd. and the Registrant. |
10.30(20)10.30(16) † | | Partial Termination and License Agreement, dated October 16, 2008, by and among Wyeth, acting through Wyeth Pharmaceuticals Division, Wyeth-Whitehall Pharmaceuticals, Inc. and Wyeth-Ayerst Lederle, Inc. and the Registrant and Progenics Pharmaceuticals Nevada, Inc. |
10.31(20)10.31(16) † | | Consent, Acknowledgment and Agreement, dated as of October 16, 2008, by and among Wyeth, acting through Wyeth Pharmaceuticals Division, Wyeth-Whitehall Pharmaceuticals, Inc. and Wyeth-Ayerst Lederle, Inc., the Registrant and Ono Pharmaceutical Co., Ltd. |
10.32(20)10.32(16) † | | 2008 Agreement Related to Progenics' MNTX In-License, dated October 16, 2008, by and among the University of Chicago, acting on behalf of itself and ARCH Development Corporation, the Registrant, Progenics Pharmaceuticals Nevada, Inc. and Ono Pharmaceutical Co., Ltd. |
10.33(21) † | | Termination and Transition Agreement, effective as of October 1, 2009, by and among Wyeth, acting through Wyeth Pharmaceuticals Division, Wyeth-Whitehall Pharmaceuticals, Inc., Wyeth-Ayerst Lederle, Inc., and AHP Manufacturing B.V., and the Registrant, Progenics Pharmaceuticals Nevada, Inc. and Excelsior Life Sciences Ireland Limited. |
10.33.1(22) † | | First Amendment to Termination and Transition Agreement, effective as of October 1, 2010, by and among Wyeth LLC, acting through Wyeth Pharmaceuticals Division, Wyeth-Whitehall Pharmaceuticals LLC, Wyeth-Ayerst Lederle LLC, and AHP Manufacturing B.V., and the Registrant, Progenics Pharmaceuticals Nevada, Inc. and Excelsior Life Sciences Ireland Limited. |
10.34(23)10.34(17) † | | Collaboration Agreement, effective June 14, 2005, by and between Seattle Genetics, Inc. and PSMA Development Company, LLC. |
10.37(9) † | | License Agreement dated as of February 3, 2011, by and between Salix Pharmaceuticals, Inc., the Registrant, Progenics Pharmaceuticals Nevada, Inc. and Excelsior Life Sciences Ireland Limited. |
10.37.1(9) † | | 2010 Agreement Related to Progenics' MNTX In-License, dated February 3, 2011, by and among the University of Chicago, acting on behalf of itself and ARCH Development Corporation, the Registrant, Progenics Pharmaceuticals Nevada, Inc. and Salix Pharmaceuticals, Inc. |
10.38(18) † | | Stock Purchase and Sale Agreement, dated January 16, 2013, by and between Molecular Insight Pharmaceuticals, Inc., its Stockholders, the Registrant, and Highland Capital Management, L.P., as Stockholders Representative. |
10.39(18) † | | License Agreement, dated September 1, 2012, by and between FUJIFILM RI Pharma Co., Ltd. and Molecular Insight Pharmaceuticals, Inc. |
10.40 †† | | License Agreement, dated May 2, 2012, between Molecular Insight Pharmaceuticals, Inc., the University of Zurich and the Paul Scherrer Institute. |
10.41(19) | | License Agreement, dated as of December 15, 2000, between Molecular Insight Pharmaceuticals, Inc. and The Board of Governors of the University of Western Ontario. |
10.42(19) | | License Agreement, dated as of November 3, 2006, between Molecular Insight Pharmaceuticals, Inc. and Novartis Pharma AG, together with First Amendment, dated January 4, 2007, thereto. |
10.43(20) | | Controlled Equity OfferingSM Sales Agreement dated as of January 23, 2014, by and between the Registrant and Cantor Fitzgerald & Co. (filed as Exhibit 1.1 to Registration Statement on Form S-3, Commission File No. 333-193521. |
12.1 | | Statement re computation of ratio of earnings (loss) to combined fixed charges and preferred stock dividends. |
21.1 | | Subsidiaries of the Registrant. |
23.1 | | Consent of PricewaterhouseCoopers LLP. |
23.2 | | Consent of Ernst & Young LLP. |
31.1 | | Certification of Mark R. Baker, Chief Executive Officer of the Registrant pursuant to 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
31.2 | | Certification of Angelo W. Lovallo, Jr., Senior Executive Director, Financial ReportingVice President, Finance & Treasurer of the Registrant pursuant to 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
32.1 | | Certification of Mark R. Baker, Chief Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | | Certification of Angelo W. Lovallo, Jr., Senior Executive Director, Financial ReportingVice President, Finance & Treasurer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 | | Interactive Data File |
101.INS | | XBRL Instance Document |
101.SCH | | XBRL Taxonomy Extension Schema |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase |
101.LAB | | XBRL Taxonomy Extension Label Linkbase |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase |
101.DEF | | XBRL Taxonomy Extension Definition Document |
| | |
* | | Exhibits footnoted as previously filed have been filed as an exhibit to the document of the Registrant or other registrant referenced in the footnote below, and are incorporated by reference herein. |
| | |
(1) | | Previously filed in QuarterlyCurrent Report on Form 10-Q for the quarter ended8-K filed on June 30, 2011.13, 2013. |
(2) | | Previously filed in Current Report on Form 8-K filed on March 16, 2012. |
(3) | | Previously filed in Registration Statement on Form S-1, Commission File No. 333-13627. |
(4) | | Previously filed in Registration Statement on Form S-8, Commission File No. 333-120508. |
(5) | | Previously filed in Current Report on Form 8-K filed on November 28, 2012.June 17, 2013. |
(6) | | Previously filed in Current Report on Form 8-K filed on July 8, 2008. |
(7) | | Previously filed in Quarterly Report on Form 10-Q for the quarterly period endingquarter ended March 31, 2007 |
(8) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 2007. |
(9) | | Previously filed in Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. |
(10)(8) | | Previously filed in Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. |
(11)(9) | | Previously filed in Quarterly Report on Form 10-Q for the quarterly periodquarter ended June 30, 1999. |
(12)(10) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 2004. |
(13) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 1999. |
(14)(11) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 2002. |
(15)(12) | | Previously filed in Current Report on Form 8-K filed on September 20, 2004. |
(16)(13) | | Previously filed in Current Report on Form 8-K filed on November 28, 2012. |
(17)(14) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 2005. |
(18)(15) | | Previously filed in Quarterly Report on Form 10-Q for the quarterly period endingquarter ended June 30, 2006.2006 |
(19) | | Previously filed in Annual Report on Form 10-K/A for the year ended December 31, 2006. |
(20)(16) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 2008. |
(21) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 2009. |
(22) | | Previously filed in Annual Report on Form 10-K for the year ended December 31, 2010. |
(23)(17) | | Previously filed in Amendment No. 2 to Annual Report on Form 10-K/A for the year ended December 31, 2009. |
(18) | | Previously filed in Quarterly Report on Form 10-Q for the quarter ended March 31, 2013. |
(19) | | Previously filed in Registration Statement on Form S-1, Commission File No. 333-129570 filed by Molecular Insight Pharmaceuticals, Inc. |
(20) | | Previously incorporated in Current Report on Form 8-K filed on January 24, 2014 by reference to Exhibit 1.1 to Registration Statement on Form S-3, Commission File No. 333-193521. |
| | |
| | |
† | | Confidential treatment granted as to certain portions omitted and filed separately with the Commission. |
†† | | Confidential treatment requested as to certain portions omitted and filed separately with the Commission. |
‡ | | Management contract or compensatory plan or arrangement. |
| | |
E-2E-3