Progenics Pharmaceuticals
Annual Report 2018

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 Or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File No. 000-23143 PROGENICS PHARMACEUTICALS, INC.(Exact name of registrant as specified in its charter) Delaware13-3379479(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number) One World Trade Center, 47th FloorNew York, NY 10007(Address of principal executive offices, including zip code) Registrant’s telephone number, including area code: (646) 975-2500 Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $0.0013 per shareThe Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filingrequirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company”in Rule 12b-2 of the Act: Large accelerated filer ☐Accelerated filer ☒Non-accelerated filer ☐Smaller reporting company ☐ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any newor revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant on June 30, 2018, based upon the closing price ofthe Common Stock on The Nasdaq Stock Market LLC on that date of $8.04 per share, was $380,418,164 (1). (1) Calculated by excluding all shares that may be deemed to be beneficially owned by executive officers, directors and five percent stockholdersof the registrant, without conceding that any such person is an “affiliate” of the registrant for purposes of the federal securities laws. As of March 11, 2019, a total of 84,542,514 shares of Common Stock, par value $.0013 per share, were outstanding. DOCUMENTS INCORPORATED BY REFERENCESpecified portions of the registrant’s definitive proxy statement to be filed in connection with solicitation of proxies for its 2019 Annual Meeting ofShareholders are hereby incorporated by reference into Part III of this Form 10-K where such portions are referenced. Table of Contents TABLE OF CONTENTS Page PART I1 Item 1. Business2 Item 1A. Risk Factors15 Item 1B. Unresolved Staff Comments33 Item 2. Properties33 Item 3. Legal Proceedings33 Item 4. Mine Safety Disclosures35PART II36 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities36 Item 6. Selected Financial Data37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk45 Item 8. Financial Statements and Supplementary Data45 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure45 Item 9A. Controls and Procedures45 Item 9B. Other Information47PART III48 Item 10. Directors, Executive Officers and Corporate Governance48 Item 11. Executive Compensation48 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters48 Item 13. Certain Relationships and Related Transactions, and Director Independence48 Item 14. Principal Accounting Fees and Services48PART IV49 Item 15. Exhibits, Financial Statement Schedules49 Item 16. Form 10-K Summary49INDEX TO CONSOLIDATED FINANCIAL STATEMENTSF-1SIGNATURESS-1EXHIBIT INDEXE-1 -i-Table of Contents PART I This document and other public statements we make may contain statements that do not relate strictly to historical fact, any of which may beforward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Statements contained in this communicationthat refer to our estimated or anticipated future results or other non-historical facts are forward-looking statements that reflect our current perceptionof existing trends and information as of the date of this communication. Forward looking statements generally will be accompanied by words such as“anticipate”, “believe”, “plan”, “could”, “should”, “estimate”, “expect”, “forecast”, “outlook”, “guidance”, “intend,” “may”, “might”, “will”,“possible”, “potential”, “predict”, “project”, or other similar words, phrases or expressions. In evaluating such statements, we urge you to specificallyconsider the various risk factors identified under Part I, Item 1A. “Risk Factors”, which could cause actual events or results to differ materially fromthose indicated by forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties which may cause ouractual results, performance or achievements to be materially different from those expressed or implied by such statements. While it is impossible toidentify or predict all such matters, these differences between forward-looking statements and our actual results, performance or achievement may resultfrom, among other things, the inherent uncertainty of the timing and success of, and expense associated with, research, development, regulatoryapproval and commercialization of our products and product candidates, including the risks that clinical trials will not commence or proceed asplanned; products which appear to be promising in early trials will not demonstrate efficacy or safety in larger-scale trials; clinical trial data on ourproducts and product candidates will be unfavorable; our products will not receive marketing approval from regulators or, if approved, do not gainsufficient market acceptance to justify development and commercialization costs; the sales of RELISTOR® and other products by our partners and therevenue and income generated for us thereby may not meet expectations; our commercial launch of AZEDRA® may not meet revenue and incomeexpectations; competing products currently on the market or in development might reduce the commercial potential of our products; we, ourcollaborators or others might identify side effects after the product is on the market; or efficacy or safety concerns regarding marketed products, whetheror not originating from subsequent testing or other activities by us, governmental regulators, other entities or organizations or otherwise, and whetheror not scientifically justified, may lead to product recalls, withdrawals of marketing approval, reformulation of the product, additional pre-clinicaltesting or clinical trials, changes in labeling of the product, the need for additional marketing applications, declining sales, or other adverse events. We are also subject to risks and uncertainties associated with the actions of our corporate, academic and other collaborators and governmentregulatory agencies, including risks from market forces and trends; potential product liability; intellectual property, litigation and other disputeresolution, environmental and other risks; a potential inability to obtain sufficient capital, recruit and retain employees, enter into favorablecollaborations, transactions or other relationships, or the risk that existing or future relationships or transactions may not proceed as planned; thepotential for cybersecurity breaches of our systems and information technology; the risk that current and pending patent protection for our productsmay be invalid, unenforceable or challenged, or fail to provide adequate market exclusivity, or that our rights to in-licensed intellectual property may beterminated for our failure to satisfy performance milestones; the risk of difficulties in, and regulatory compliance relating to, manufacturing products;and the uncertainty of our future profitability. Risks and uncertainties to which we are subject also include general economic conditions, including interest and currency exchange-ratefluctuations and the availability of capital; changes in generally accepted accounting principles; the impact of legislation and regulatory compliance;the highly regulated nature of our business, including government cost-containment initiatives and restrictions on third-party payments for ourproducts; trade buying patterns; the competitive climate of our industry; and other factors set forth in this document and other reports filed with the U.S.Securities and Exchange Commission (“SEC”). In particular, we cannot assure you that AZEDRA® or RELISTOR® will be commercially successful or beapproved in the future in other formulations, indications or jurisdictions, that any of our other programs will result in a commercial product. We do not have a policy of updating or revising forward-looking statements and, except as expressly required by law, we disclaim any intent orobligation to update or revise any statements as a result of new information or future events or developments. It should not be assumed that our silenceover time means that actual events are bearing out as expressed or implied in forward-looking statements. 1Table of Contents Item 1. Business Overview Progenics Pharmaceuticals, Inc. is a Delaware corporation that was incorporated on December 1, 1986. Progenics Pharmaceuticals, Inc. (and itssubsidiaries collectively the “Company,” “Progenics”, “we”, or “us”) is an oncology company focused on the development and commercialization ofinnovative targeted medicines and artificial intelligence to find, fight and follow cancer. Highlights of our recent progress include the approval, launchand manufacturing of AZEDRA®. Our pipeline includes therapeutic agents designed to precisely target cancer (1095 and PSMA TTC), as well as aprostate-specific membrane antigen (“PSMA”) targeted imaging agent for prostate cancer (PyLTM). Recent Progress: ●AZEDRA® Approval. On July 30, 2018, the U.S. Food and Drug Administration (“FDA”) approved the New Drug Application (“NDA”) forAZEDRA (iobenguane I 131) 555 MBq/mL injection for intravenous use. AZEDRA, which is a registered trademark, is a radiotherapeuticthat is indicated for the treatment of adult and pediatric patients 12 years and older with iobenguane scan positive, unresectable, locallyadvanced or metastatic pheochromocytoma or paraganglioma who require systemic anticancer therapy. AZEDRA is the first and only FDA-approved therapy for this indication. AZEDRA’s approved U.S. label and full U.S. prescribing information is available atwww.AZEDRA.com. ●AZEDRA® Launch. AZEDRA was launched on August 1, 2018. Since August, AZEDRA was added to the National Comprehensive CancerNetwork® (“NCCN®”) Clinical Practice Guidelines in Oncology for Neuroendocrine and Adrenal Tumors v 3.2018. NCCN® Guidelines® arewidely recognized and used as the standard for clinical policy in oncology by clinicians and payors. Since AZEDRA’s approval by the FDA,it has also been added to five drug compendia: Clinical Pharmacology©; DRUGDEX®; Lexi-Drugs®; NCCN®; and AHFS-DI. Thesecompendia are recognized by private and public payers, including Centers for Medicare and Medicaid Services (“CMS”) as authoritativesources to be considered in determining drug reimbursement. Recently we presented data to the CMS ICD-10 Coordination andMaintenance Committee to garner a code associated with AZEDRA which supports our efforts to secure New Technology Add-On Payment(NTAP). In addition, our pass-through C code was approved and is in place, and we anticipate that our permanent A code will be awardedsoon. A field-based team of Nuclear Medicine Technologists/Sales Representatives/Medical Science Liaisons and Access Specialists havebeen in the field since approval assisting centers of excellence and payers in the preparation for utilizing and reimbursing AZEDRA. As aresult of this effort, treatment requests have been received and sites are now ready to administer AZEDRA. Patient scheduling is underway;however, no commercial sales have been generated as of the date of this filing. ●AZEDRA® Manufacturing. In February 2019, we acquired the AZEDRA manufacturing assets for $8.0 million cash consideration andentered into a sublease agreement for the radiopharmaceutical manufacturing facility located in Somerset, New Jersey. The Somerset siteserves as the launch facility for AZEDRA and will also provide manufacturing support for our development stage radiopharmaceuticals,including 1095. We also secured the long-term supply of iodine necessary for the production of both AZEDRA and 1095. The production ofAZEDRA uses a proprietary Ultratrace® process which concentrates the MIBG targeted radiolytic activity by eliminating non-therapeutic“cold” MIBG molecules, giving AZEDRA a uniquely high specific activity. Pipeline Advancement: ●We advanced our 1095 program and plan to initiate a Phase 2 trial in the second quarter of 2019. 1095 is a small molecule radiotherapeuticdesigned to selectively bind to the extracellular domain of prostate specific membrane antigen (“PSMA”). The multicenter, randomized,controlled trial will evaluate the efficacy and safety of 1095 in combination with enzalutamide in patients with metastatic castration-resistant prostate cancer (mCRPC) who are PSMA-avid, chemotherapy naïve, and progressed on abiraterone. ●We reported topline results from our recently completed Phase 2/3 trial of PyL which demonstrated its potential high clinical utility. Theseresults were used to design the pivotal Phase 3 trial. ●We commenced a pivotal multi-center, open label Phase 3 trial evaluating the diagnostic performance and clinical impact of PyL in menwith biochemical recurrence of prostate cancer. The primary endpoint is based on positive predictive value and will assess the correctlocalization rate (“CLR”). We expect enrollment to complete by year end 2019. 2Table of Contents ●Using our PSMA-targeted imaging data from previous trials, we completed a prospectively planned retrospective analysis using our deepconvolutional neural network algorithms (“PSMA AI”) to automatically assess the PSMA images. The reads with PSMA AI demonstrated astatistically significant improvement over manual assessment in terms of increased diagnostic accuracy, precision, speed, andreproducibility. The results from this analysis are expected to be presented at upcoming scientific conferences. ●We continue to pursue our life cycle management plans for AZEDRA. In February 2019, an advisory board with KOLS concluded that therewould likely be strong interest in using AZEDRA in multiple MIBG-avid tumors, including gastroenteropancreatic (“GEP-NETS”) and otherneuroendocrine tumors (“NETS”). There was strong interest in advancing a basket trial in these indications since patients often have veryhigh unmet needs for new treatments. PSMA-617: ●Company Asserts Ownership of PSMA-617 Intellectual Property including Composition of MatterWe have commenced a lawsuit disputing the ownership of certain worldwide composition of matter patent filings related to PSMA-617, aPSMA-targeted radiopharmaceutical compound under development by Novartis AG for the treatment of prostate cancer. See Item 3. LegalProceedings Product / Candidate Description StatusMarketRightsUltra-Orphan Theranostic AZEDRA (iobenguane I 131)555 MBq/mL injection Unresectable, locally advanced or metastaticpheochromocytoma or paraganglioma ApprovedU.SProprietaryProstate Cancer Theranostics PyL (18F-DCFPyL) PSMA-targeted PET/CT imaging agent forprostate cancer Phase 3U.S. & CanadaProprietaryPyL (18F-DCFPyL) PSMA-targeted PET/CT imaging agent forprostate cancer Meeting with EMAEuropeCurium1095 (I 131 1095) PSMA-targeted small molecule therapeutic fortreatment of metastatic prostate cancer Phase 2WorldwideProprietaryPSMA-TTC (BAY 2315497) PSMA-targeted antibody conjugate therapeuticfor treatment of metastatic prostate cancer Phase 1WorldwideBayerDigital Technology PSMA AI Imaging analysis technology that uses artificialintelligence and machine learning to quantifyand automate the reading of PSMA targetedimaging Investigational Use OnlyWorldwideProprietaryAutomated Bone Scan Index (aBSI) Automated reading and quantification of bonescans of prostate cancer patients using artificialintelligence and deep learning CE MARK (EU countries)Investigational Use Only(USA)Worldwide (ex.Japan)ProprietaryAutomated Bone Scan Index(BONENAVI) Automated reading and quantification of bonescans of prostate cancer patients using artificialintelligence and deep learning ApprovedJapanFujiOther Programs RELISTOR Subcutaneous Injection(methylnaltrexone bromide) OIC in adults with chronic non-cancer pain oradvanced-illness adult patients ApprovedU.S. & CanadaBauschRELISTOR Tablets(methylnaltrexone bromide) OIC in adults with chronic non-cancer pain ApprovedU.S.BauschLeronlimab (PRO 140) HIV Infection Phase 3U.S.CytoDyn Ultra-Orphan Theranostic: ●AZEDRA is a radiotherapeutic, approved for the treatment of adult and pediatric patients 12 years and older with iobenguane scan positive,unresectable, locally advanced or metastatic pheochromocytoma or paraganglioma who require systemic anticancer therapy. AZEDRA is thefirst and only FDA-approved therapy for this indication. We anticipate opportunities for growth of AZEDRA through the development ofnew indications in 2019. Prostate Cancer Theranostics:  ●PyLTM (also known as 18F-DCFPyL) is a fluorinated PSMA-targeted PET imaging agent that enables visualization of both bone and softtissue metastases to determine the presence or absence of recurrent and/or metastatic prostate cancer. In the US, we are conducting a pivotalPhase 3 trial evaluating the diagnostic performance and clinical impact of PyL in men with biochemical recurrence of prostate cancer.Curium has licensed exclusive rights to develop and commercialize PyL in Europe. Curium plans to meet with the EMA to agree upon theregulatory path forward for PyL in 2019. 3Table of Contents ●1095 (also known as I-131-1095) is a PSMA-targeted Iodine-131 labeled small molecule that is designed to deliver a dose of beta radiationdirectly to prostate cancer cells with minimal impact on the surrounding healthy tissues. In October 2018, we announced plans to advance I-131 1095, its PSMA-targeted therapeutic, into a Phase 2 clinical trial in the second quarter of 2019. ●PSMA TTC is a thorium-227 labeled PSMA-targeted antibody therapeutic. PSMA-TTC is designed to deliver a dose of alpha radiationdirectly to prostate cancer cells with minimal impact on the surrounding healthy tissues. Bayer AG (“Bayer”) has exclusive worldwide rightsto develop and commercialize products using our PSMA antibody technology in combination with Bayer’s alpha-emitting radionuclides.Bayer is developing PSMA TTC, a thorium-227 labeled PSMA-targeted antibody therapeutic. Bayer initiated a Phase 1 trial of PSMA TTCin patients with metastatic castration-resistant prostate cancer. Digital Technology: ●PSMA AI is an imaging analysis technology that uses artificial intelligence and machine learning to quantify and automate the reading ofPSMA-targeted imaging. We recently completed a prospectively planned retrospective analysis using our deep convolutional neuralnetwork algorithms to automatically assess a set of the PSMA images from prior trials. The results from this analysis are expected to bepresented at upcoming scientific conferences. ●Automated Bone Scan Index (aBSI) calculates the disease burden of prostate cancer by quantifying the hotspots on bone scans andautomatically calculating the bone scan index value, representing the disease burden of prostate cancer shown on the bone scan. Thisquantifiable and reproducible calculation of the bone scan index value is intended to aid in the diagnosis and treatment of men with prostatecancer and may have utility in monitoring the course of the disease. aBSI is licensed as a standalone software to FUJIFILM RI Pharma Co.,Ltd. (“Fuji”) in Japan and is sold under the name BONENAVI®. aBSI is also available as a cloud-based software for research only purposeswith the United States. Other Programs: ●RELISTOR is a treatment for opioid-induced constipation (“OIC”) that addresses its underlying mechanism of OIC and decreases theconstipating side effects induced by opioid pain medications such as morphine and codeine without diminishing their ability to relievepain. RELISTOR is approved in two forms a subcutaneous injection (12 mg and 8 mg) and an oral tablet (450 mg once daily). Any referencesherein to RELISTOR do not imply that any other form or possible use of the drug has received approval. RELISTOR subcutaneous injectionis being sold in the U.S., European Union (“E.U.”), and Canada, and RELISTOR tablets are being sold in the U.S. RELISTOR’s approved U.S.label and full U.S. prescribing information is available at www.RELISTOR.com. Other approved labels for RELISTOR apply in ex-U.S.markets. Our recognition of royalty income for financial reporting purposes is explained in Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations and our consolidated financial statements included elsewhere in this document. ●Leronlimab (PRO 140) is a fully humanized monoclonal antibody which is a cellular targeting CCR5 entry antagonist and is currently inPhase 3 development for the treatment of HIV infection. It is owned by CytoDyn and, pursuant to our agreement with CytoDyn, we have theright to receive certain milestone and royalty payments. CytoDyn has announced plans to submit on a rolling basis its biologics licenseapplication (“BLA”) to the FDA during 2019. We may consider opportunities to out-license our development and clinical programs. We may also in-license or acquire additional oncologycompounds and/or programs. Clinical Trial Activities For purposes of this report, in general Phase 1 trials are initial evaluations of safety in humans which study mechanism of action and metabolism;Phase 2 trials evaluate safety, dosing and activity or efficacy, and continue safety evaluation; and Phase 3 trials involve larger scale evaluations of safety,efficacy and dosing. Our practice is and has been to announce commencement and results of all our significant clinical trials in press releases, medical and scientificmeetings, and other venues. The following is a summary of current clinical trial activities involving our principal product candidates. 4Table of Contents PyL. PyL is a clinical-stage fluorinated PSMA-targeted PET imaging agent for prostate cancer. PyL has shown potential for use in identifyingmetastatic prostate cancer. We have an exclusive worldwide license (excluding Australia and New Zealand) to develop and commercialize PyL in PETimaging applications. In October 2018, we announced results of a Phase 2/3 OSPREY trial that assessed the safety and efficacy of PyL in the detection of prostatecancer. In the trial, PyL demonstrated high sensitivity in reliably detecting distant metastatic prostate cancer lesions and high specificity in confirmingthe absence of pelvic lymph node disease. The associated strong positive predictive values and negative predictive value of PyL imaging in these diseasesettings indicate its potential high clinical utility. PyL Phase 2/3 OSPREY Trial - Topline Results Cohort ACohort BObjective Detect prostate cancer in pelvic lymph nodesin patients with high risk locally advancedDetect prostate cancer in distant metastasesin patients with metastatic or recurrentN268117Specificity 96% - 99%Not evaluated; Cohort B suspected to havediseaseNegative Predictive Value81% - 84%Not evaluated; Cohort B suspected to havediseaseSensitivity 31% - 42%93% - 99%Positive Predictive Value78% - 91%81% - 88%Trial achieved co-primary endpoint for specificity in Cohort A; did not meet co-primary endpoint for sensitivity in Cohort A. Secondaryendpoints included: sensitivity in Cohort B; PPV and NPV in Cohort A; and, PPV in Cohort B. Overall, PyL was safe and well-tolerated by all dosed subjects. A total of 81 treatment-emergent adverse events (“TEAEs”) were reported in 51(13.2%) subjects with the most common being fatigue (1.3%), dysgeusia (2.6%), and headache (2.3%). A total of five subjects (1.3%) experiencedTEAE(s) that were ≥ Grade 3 in severity; all were Grade 3 and no subjects experienced Grade 4 or 5 adverse events. A total of seven serious adverse events(“SAEs”) have been reported within the protocol-specified period in subjects who received PyL. All of the SAEs were assessed as unrelated to the studydrug. In December 2018, we announced the start of a pivotal, Phase 3 CONDOR trial evaluating the diagnostic performance and clinical impact of PyLin men with biochemical recurrence of prostate cancer. The Phase 3 CONDOR trial is a multi-center, open label trial and is expected to enrollapproximately 200 patients with biochemical recurrence of prostate cancer in 15 sites in the United States and Canada. The primary endpoint is based onpositive predictive value and will assess the correct localization rate (CLR), defined as a percentage of subjects with a one-to-one correspondence betweenlocalization of at least one lesion identified by PyL and the composite truth standard. Secondary measures include the percentage of subjects with achange in intended prostate cancer treatment plans due to PyL PET/CT imaging. In addition to our sponsored studies and clinical trial collaborations we anticipate that PyL’s potential activity will also be explored ininvestigator sponsored studies at various academic institutions. 1404. We conducted five Phase 1 trials with 1404 in healthy volunteers as well as men with prostate cancer, to establish proof-of-concept anddosimetry, and to assess a simplified kit preparation as compared to multi-step preparation. We then conducted a Phase 2 trial in the U.S. and Europe toassess the safety and ability of 1404 to detect prostate cancer within the prostate gland. Analysis of 1404 SPECT/CT images from this study showed thatuptake of 1404 in the lobes of the prostate gland correlated significantly with Gleason score (p<0.0001). No deaths, serious adverse events, or adverseevents leading to discontinuations occurred during the study. Of the 105 subjects who received a 1404 injection, four subjects reported a total of tenTEAEs with one related to 1404 (infusion site extravasation). No discernible trends in hematology, clinical chemistries, vital signs, or physical findingswere observed during the study. Based on results from these studies, a multi-center, open-label Phase 3 trial was initiated in December 2015 to evaluate the (i) specificity of 1404to detect clinically insignificant prostate cancer and (ii) sensitivity of 1404 to detect clinically significant disease in patients with newly-diagnosed orlow-grade prostate cancer, whose biopsy indicates a histopathologic Gleason grade of ≤3+4 severity and/or were candidates for active surveillance. InDecember 2017, we completed enrollment (N=471) in the Phase 3 trial. Median PSA levels for patients dosed in trial was 5.58 ng/mL (range 0.69 – 16.03).In the study, 1404 detected clinically meaningful prostate cancer with specificity ranging among the three readers from 71-75% (95% confidence intervalCI of 64% to 80%). The co-primary endpoint of sensitivity was not met and ranged amongst the three readers from 47-51% (95% CI of 41% to 56%). Thetrial protocol required the lower limit of the two-sided 95% CI for both specificity and sensitivity to exceed 60%. The most frequent treatment relatedevents included headache (2.3%), dizziness (1.1%) and fatigue (0.8%). In November 2018, based on the 1404 data and an assessment of the PSMA-targeted imaging agent commercial landscape, we decided to focus our efforts on our PyL PSMA-targeted PET/CT imaging agent and not to further investin 1404. 5Table of Contents 1095. In October 2018, we announced plans to initiate a multicenter, randomized, controlled Phase 2 trial that will evaluate the efficacy andsafety of 1095 in combination with enzalutamide in patients with metastatic castration-resistant prostate cancer (mCRPC) who are PSMA-avid,chemotherapy naïve, and progressed on abiraterone. The trial will evaluate the efficacy and safety of 1095 in combination with enzalutamide in patients with metastatic castration-resistant prostatecancer (mCRPC) who are PSMA-avid, chemotherapy naïve, and progressed on abiraterone. 1095 radiotherapy represents a new mechanism of action thatmay overcome resistance developed to novel androgen axis drugs (NAADs), such as abiraterone and enzalutamide. In addition, recent preclinical researchreported that enzalutamide can sensitize cells to radiotherapy induced cell death, suggesting that 1095 in combination with enzalutamide has thepotential to be an effective treatment paradigm for patients with mCRPC who are resistant to NAADs. The study’s primary endpoint will be prostate specific antigen (PSA) response rate according to Prostate Cancer Clinical Trials Working Group 3(PCWG3) criteria defined as a confirmed 50% or greater decline from baseline of 1095 and enzalutamide compared to enzalutamide alone. Secondaryendpoints will evaluate radiographic response based on Response Evaluation Criteria In Solid Tumors (RECIST), Progression Free Survival (PFS) andoverall survival (OS). Tumor avidity will be determined utilizing PyL, the Company’s PET imaging agent designed to visualize prostate cancer. License Agreements and Other Arrangements Molecular Insight Pharmaceuticals, Inc. License Agreements In January 2013, we acquired Molecular Insight Pharmaceuticals, Inc. (“MIP”) by purchasing all of its outstanding capital stock for 4.5 millionshares of our common stock in a private transaction. Under the agreement, we also agreed to pay to the former stockholders potential milestones, in cash orour stock at our option, of up to $23.0 million contingent upon achieving specified commercialization events ($8.0 million for the first commercial sale ofAZEDRA, which has not occurred) and up to $70.0 million contingent upon achieving specified sales targets relating to the acquired company’s products.The timing of any such payments, if any, remains uncertain. In addition to utilizing our own proprietary technology, we have a number of agreements with owners of intellectual property which we use orbelieve may be useful in the research, development and commercialization of product candidates, including: ●A 2012 co-exclusive license agreement with the University of Zurich and the Paul Scherrer Institute for worldwide sublicensable rights tocertain intellectual property related to production methodologies relevant to 1404. Under this agreement, we maintain related patent rightsand are obligated to pay low single-digit royalties on products using the licensed technology, license maintenance fees creditable againstroyalties, an annual fee for an option to expand the license’s field of use, and clinical and regulatory milestone payments aggregating toapproximately $1.8 million. The agreement may be terminated by the licensors upon certain material defaults by, and automaticallyterminates upon certain bankruptcy events relating to MIP and may be terminated by us on prior written notice. ●A 2012 out-license agreement with Fuji for the development and commercialization of 1404 in Japan. Under this agreement, we receivedupfront and milestone payments, of $3.0 million and $1.0 million, respectively, and we have the right to receive additional potential futuremilestone and royalty payments. ●The 2000 and 2003 exclusive license agreements with The University of Western Ontario for worldwide sublicensable rights to certainintellectual property related to production methodologies relevant to AZEDRA. The 2000 agreement terminated in 2018 with the expirationof the patents associated with the agreement. The 2003 agreement for the license of patent families related to alternative approaches forpreparing AZEDRA continues to be in effect. This alternative technology has not been implemented. Under the 2003 agreement, wemaintain related patent rights and are obligated to pay low single-digit royalties on products using the licensed technology, minimumannual royalties creditable against royalties and clinical and regulatory milestone payments aggregating to approximately $0.3 million. 6Table of Contents We have also entered into a number of in-license and out-license agreements, such as: In-License Agreement ●An August 2015 agreement with Johns Hopkins University (“JHU”), granting us exclusive worldwide rights (with the exception of Australiaand New Zealand) for PyL. Under this agreement, we are obligated to pay milestone payments, low single-digit royalties, patent costs andminimum annual royalties which are creditable against royalties, aggregating to approximately $2.9 million. Out-License Agreements ●An April 2016 agreement with a subsidiary of Bayer AG (“Bayer”), granting Bayer exclusive worldwide rights to develop and commercializeproducts using our PSMA antibody technology, in combination with Bayer’s alpha-emitting radionuclides. Bayer is developing PSMA TTC,a thorium-227 labeled PSMA-targeted antibody therapeutic. Bayer initiated a Phase 1 trial of PSMA TTC in patients with metastaticcastration-resistant prostate cancer. Pursuant to the agreement, we received an upfront payment of $4.0 million and milestone paymentstotaling $3.0 million and could receive up to an additional $46.0 million in potential clinical and development milestones. We are alsoentitled to single-digit royalties on net sales, and potential net sales milestone payments up to an aggregate of $130.0 million. ●A December 2018 agreement with Curium, granting Curium exclusive sublicense to develop, manufacture and commercialize PyLTM (18F-DCFPyL) in Europe. Curium will be responsible for the development, regulatory approvals and commercialization of PyL in Europe. Weunderstand from Curium that it plans to meet with the European Medicines Agency to agree upon the regulatory path forward for PyL in2019. Under this agreement, we are entitled to double-digit royalties on net sales of PyL. RELISTOR License Agreement RELISTOR® is a registered trademark and refers to methylnaltrexone – the active ingredient of RELISTOR – as it has been and is beingdeveloped and commercialized by or in collaboration with Salix Pharmaceuticals, Inc., which is a wholly-owned subsidiary of Bausch Health CompaniesInc. (“Bausch”, which is the predecessor of Valeant Pharmaceuticals International, Inc.), under a license agreement (the “RELISTOR License Agreement”).Under the RELISTOR License Agreement, Bausch is responsible for developing and commercializing RELISTOR worldwide, including completingclinical development necessary to support regulatory marketing approvals for potential new indications and formulations, and marketing and selling theproduct. Bausch is marketing RELISTOR directly through its specialty sales force in the U.S., and outside the U.S. directly through distribution andmarketing partners. Under the RELISTOR License Agreement, we recognized a development milestone payment of $40.0 million upon U.S. marketingapproval for subcutaneous RELISTOR in non-cancer pain patients in 2014, and a development milestone payment of $50.0 million for the U.S. marketingapproval of an oral formulation of RELISTOR in July 2016. We are also eligible to receive up to $200.0 million of commercialization milestone paymentsupon achievement of specified U.S. net sales targets, including: U.S. Net Sales Level in any Single Calendar Year Payment (In thousands) In excess of $100 million $10,000 In excess of $150 million 15,000 In excess of $200 million 20,000 In excess of $300 million 30,000 In excess of $750 million 50,000 In excess of $1 billion 75,000 $200,000 Each commercialization milestone payment is payable one time only, regardless of the number of times the condition is satisfied, and all sixpayments could be made within the same calendar year. We are also eligible to receive royalties from Bausch and its affiliates based on the followingroyalty scale: 15% on worldwide net sales up to $100.0 million, 17% on the next $400.0 million in worldwide net sales, and 19% on worldwide net salesover $500.0 million each calendar year, and 60% of any upfront, milestone, reimbursement or other revenue (net of costs of goods sold, as defined, andterritory-specific research and development expense reimbursement) Bausch receives from sublicensees outside the U.S. 7Table of Contents The RELISTOR License Agreement may be terminated by either party upon an uncured material breach or specified bankruptcy events. Inaddition, Bausch may terminate the RELISTOR License Agreement for unresolved safety or efficacy issues or at its discretion upon specified prior noticeat any time, subject to our one-time right to postpone such termination for a specified period of time if we have not successfully transitioned thedevelopment and commercialization of the drug despite good faith and diligent efforts. See Item 1A. Risk Factors. We have licensed to Bausch our exclusive rights to develop and commercialize methylnaltrexone, the active ingredient of RELISTOR, which wein-licensed from the University of Chicago (“UC”). Our agreement with UC provides for an exclusive license to intellectual property in exchange fordevelopment and potential commercialization obligations, low single-digit royalties on commercial sales of resulting products and single-digitpercentages of milestone and sublicensing revenues, and shared patent policing responsibilities. Under the UC agreement, as amended in connection withour RELISTOR collaborations, all of our royalty payment obligations expired at the end of 2017 in the U.S. and expired at the end of 2018 outside theU.S. on the approved indications. Bausch has also entered into license and distribution agreements to expand its sales channels outside of the U.S. for RELISTOR. In January 2016,Bausch entered into a distribution agreement with Swedish Orphan Biovitrum AB, also known as Sobi, for RELISTOR in Western Europe, Russia andGreece. In 2016, we recognized license revenue of $720 thousand for our share of the upfront payment Bausch received from Lupin Limited pursuant to adistribution agreement for RELISTOR in Canada. CytoDyn Agreement We sold Leronlimab (PRO 140) to CytoDyn Inc. (“CytoDyn”) in 2012, which sale included milestone and royalty payment obligations to us.Leronlimab is a fully humanized monoclonal antibody which is a cellular targeting CCR5 entry antagonist and is currently in development for thetreatment of HIV. CytoDyn has announced plans to submit on a rolling basis its BLA to the FDA during 2019. Under our 2012 agreement with CytoDyn, CytoDyn is responsible for all development, manufacturing and commercialization efforts. Pursuant tosuch agreement, we have received $5.0 million in upfront and milestone payments, together with rights to receive an additional $5.0 million upon the firstU.S. or E.U. approval for the sale of the drug, and a 5% royalty on the net sales of approved product(s). Patents and Proprietary Technology Protection of our intellectual property rights is important to our business. We seek U.S. patent protection for many of our inventions, andgenerally file patent applications in Canada, Japan, European countries that are party to the European Patent Convention, and other countries on aselective basis in order to protect inventions we consider to be important to the development of business in those areas. Generally, patents issued in theU.S. are effective for either (i) 20 years from the earliest asserted filing date, if the application was filed on or after June 8, 1995, or (ii) the longer of 17years from the date of issue or 20 years from the earliest asserted filing date, if the application was filed prior to that date. In certain instances, the U.S. patent term can be extended up to a maximum of five years to recapture a portion of the term during which FDAregulatory review was being conducted. The duration of foreign patents varies in accordance with the provisions of applicable local law, although mostcountries provide for patent terms of 20 years from the earliest asserted filing date and allow patent extensions similar to those permitted in the U.S. Patents may not enable us to preclude competitors from commercializing drugs in direct competition with our products, and consequently maynot provide us with any meaningful competitive advantage. See Item 1A. Risk Factors. We also rely on trade secrets, proprietary know-how andcontinuing technological innovation to develop and maintain a competitive position in our product areas. We require our employees, consultants andcorporate partners who have access to our proprietary information to sign confidentiality agreements. Information with respect to our current patent portfolio is set forth below. The original patents surrounding the AZEDRA program were licensed from the University of Western Ontario (“UWO”). The patent familydirected to processes for making polymer precursors, as well as processes for making the final product, expired in 2018 in the U.S. and Canada. The relatedUWO agreement terminated with the expiration of the patents. Other licensed patent families from UWO under a second agreement relate to alternativeapproaches for preparing AZEDRA, which if implemented, would expire in 2024 worldwide. We have pending applications worldwide directed tomanufacturing improvements and the resulting compositions which, if issued, would expire in 2035. 8Table of Contents Owned and in-licensed patents relating to 1404 have expiration ranges of 2020 to 2029; we view as most significant the composition-of-matterpatent on the compound, as well as technetium-99 labeled forms, which expire in 2029 worldwide. The PyL patent family was licensed from Johns Hopkins University. Patent protection for the composition-of-matter patents on the compound,radiolabeled forms of the compound, as well as methods of use, expire in 2030 in the U.S. Corresponding patent family members are pending or issuedworldwide, all expiring in 2029. Process improvement patent applications are pending worldwide which, if issued, would expire in 2037. Company-owned patents relating to 1095 have expiration ranges of 2027 to 2031 in the U.S. We view as most significant the composition-of-matter patent on this compound, as well as radiolabeled forms, which expires in 2027 in the U.S., as well as Europe. Additional U.S. patents are directed tostable compositions and radiolabeling processes which expire in 2030 and 2031, respectively. We own patents relating to automated detection of bone cancer metastases. The patents on this technology expire in 2028. The US patent iscurrently under reexamination. Patent applications are pending relating to automated medical image analysis. The intellectual property directed to PSMA antibody comprises co-owned patents. Composition-of-matter patents have expirations of 2022 inthe U.S. Corresponding foreign counterpart patents will expire 2022. We view all of these patents as significant. With regard to our RELISTOR-related intellectual property, the composition-of-matter patent for the active ingredient of RELISTOR,methylnaltrexone, has expired. University of Chicago, as well as we and our collaborators, have extended the methylnaltrexone patent estate withadditional patents and pending patent applications covering various inventions relating to the product. Bausch has listed in the FDA’s Approved DrugProducts with Therapeutic Equivalence Evaluations (the “Orange Book”) seven U.S. patents relating to subcutaneous RELISTOR, which have expirationdates ranging from 2024 to 2030, and seven U.S. patents relating to RELISTOR tablet, which have expiration dates ranging from 2029 to 2031. FourCanadian patents (expiring in 2024, 2027 and 2029) have been listed with Health Canada relating to subcutaneous RELISTOR. We are aware of intellectual property rights held by third parties that relate to products or technologies we are developing. For example, we areaware of others investigating and developing technologies, imaging agents and drug candidates directed toward PSMA or related compounds as well as inthe case of methylnaltrexone, others are developing peripheral opioid antagonists, and of patents and applications held or filed by others in those areas.The validity of issued patents, patentability of claimed inventions in pending applications and applicability of any of them to our programs are uncertainand subject to change, and patent rights asserted against us could adversely affect our ability to commercialize or collaborate with others on specificproducts. Research, development, and commercialization of a biopharmaceutical product often require choosing between alternative development andoptimization routes at various stages in the development process. Preferred routes depend upon current – and may be affected by subsequent – discoveriesand test results and cannot be identified with certainty at the outset. There are numerous third-party patents in fields in which we work, and we may needto obtain license under patents of others in order to pursue a preferred development route of one or more of our product candidates. The need to obtain alicense would decrease the ultimate value and profitability of an affected product. If we cannot negotiate such a license, we might have to pursue a lessdesirable development route or terminate the entire program altogether. Seasonality As is typical in the pharmaceutical industry, our business may experience modest seasonality due to patient co-pays and co-insurance being resetat the beginning of the calendar year and patients meeting their deductibles over the course of the calendar year. As a result, demand for our products suchas RELISTOR and associated revenue may be lower in the beginning of the year. 9Table of Contents Government Regulation We and our product candidates are subject to comprehensive regulation by the FDA and comparable authorities in other countries.Pharmaceutical regulation currently is a topic of substantial interest in lawmaking and regulatory bodies in the U.S. and internationally, and numerousproposals exist for changes in FDA and non-U.S. regulation of pre-clinical and clinical testing, approval, safety, effectiveness, manufacturing, storage,recordkeeping, labeling, marketing, export, advertising, promotion and other aspects of biologics, small molecule drugs and medical devices, many ofwhich, if adopted, could significantly alter our business and the current regulatory structure described below. See Item 1A. Risk Factors. FDA Regulation FDA approval, which involves review of scientific, clinical and commercial data, manufacturing processes and facilities, is required before aproduct candidate may be marketed in the U.S. This process is costly, time consuming and subject to unanticipated delays, and a drug candidate may failto progress at any point. Other than AZEDRA and RELISTOR, none of our product candidates have received marketing approval from the FDA or any other regulatoryauthority. The process required by the FDA before product candidates may be approved for marketing in the U.S. generally involves: ●pre-clinical laboratory and animal tests; ●submission to and favorable review by the FDA of an investigational new drug application before clinical trials may begin; ●adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for its intended indication (animal andother nonclinical studies also are typically conducted during each phase of human clinical trials); ●submission to the FDA of a marketing application; and ●FDA review of the marketing application in order to determine, among other things, whether the product is safe and effective for its intendeduses. Pre-clinical tests include laboratory evaluation of product chemistry and animal studies to gain preliminary information about a compound’spharmacology and toxicology and to identify safety problems that would preclude testing in humans. Since product candidates must generally bemanufactured according to current Good Manufacturing Practices (“cGMP”), pre-clinical safety tests must be conducted by laboratories that comply withFDA good laboratory practices regulations. Pre-clinical testing is preceded by initial research related to specific molecular targets, synthesis of newchemical entities, assay development and screening for identification and optimization of lead compound(s). Results of pre-clinical tests are submitted to the FDA as part of an IND, which must become effective before clinical trials may commence. TheIND submission must include, among other things, a description of the sponsor’s investigational plan; protocols for each planned study; chemistry,manufacturing and control information; pharmacology and toxicology information and a summary of previous human experience with the investigationaldrug. Unless the FDA objects to, makes comments or raises questions concerning an IND, it becomes effective 30 days following submission, and initialclinical studies may begin. Companies often obtain affirmative FDA approval, however, before beginning such studies. Clinical trials involve the administration of the investigational new drug to healthy volunteers or to individuals under the supervision of aqualified principal investigator. Clinical trials must be conducted in accordance with the FDA’s Good Clinical Practice requirements under protocolssubmitted to the FDA that detail, among other things, the objectives of the trial, parameters used to monitor safety and effectiveness criteria to beevaluated. Each clinical trial must be conducted under the auspices of an Institutional Review Board, which considers, among other things, ethical factors,safety of human subjects, possible liability of the institution and informed consent disclosure which must be made to participants in the trial. Clinical trials are typically conducted in three sequential phases, which may overlap. During Phase 1, when the drug is initially administered tohuman subjects, the product is tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase 2 involves studies in a limitedpopulation to evaluate preliminarily the efficacy of the product for specific, targeted indications, determine dosage tolerance and optimal dosage andidentify possible adverse effects and safety risks. When a product candidate is found in Phase 2 evaluation to have an effect and an acceptable safety profile, Phase 3 trials are undertaken in orderto further evaluate clinical efficacy and test for safety within an expanded population. Safety studies are conducted in accordance with the FDA’sInternational Conference on Harmonization Guidelines. Phase 2 results do not guarantee a similar outcome in Phase 3 trials. The FDA may suspendclinical trials at any point in this process if it concludes that clinical subjects are being exposed to an unacceptable health risk. 10Table of Contents An NDA is an application to the FDA to market a new drug. A BLA is an application to market a biological product. The new drug or biologicalproduct may not be marketed in the U.S. until the FDA has approved the NDA or issued a biologics license. The NDA must contain, among other things,information on chemistry, manufacturing and controls; non-clinical pharmacology and toxicology; human pharmacokinetics and bioavailability; andclinical data. The BLA must contain, among other things, data derived from nonclinical laboratory and clinical studies which demonstrate that theproduct meets prescribed standards of safety, purity and potency, and a full description of manufacturing methods. Supplemental NDAs are submitted toobtain regulatory approval for additional indications for a previously approved drug and are reviewed by the FDA in a similar manner. The results of the pre-clinical studies and clinical studies, the chemistry and manufacturing data, and the proposed labeling, among other things,are submitted to the FDA in the form of an NDA or BLA. The FDA may refuse to accept the application for filing if certain administrative and contentcriteria are not satisfied, and even after accepting the application for review, the FDA may require additional testing or information before approval of theapplication, in either case based upon changes in applicable law or FDA policy during the period of product development and FDA regulatory review.The applicant’s analysis of the results of clinical studies is subject to review and interpretation by the FDA, which may differ from the applicant’s analysis,and in any event, the FDA must deny an NDA or BLA if applicable regulatory requirements are not ultimately satisfied. If regulatory approval of a productis granted, such approval may be made subject to various conditions, including post-marketing testing and surveillance to monitor the safety of theproduct, or may entail limitations on the indicated uses for which it may be marketed. Product approvals may also be withdrawn if compliance withregulatory standards is not maintained or if problems occur following initial marketing. Orphan Drug, Fast Track, Breakthrough Therapy Designations, and Priority Review Other FDA regulations and policies relating to drug approval have implications for certain of our current or future product candidates,particularly AZEDRA. Designation as an Orphan Drug is available under U.S., E.U., and other laws for drug candidates intended to treat rare diseases orconditions, and which if approved are granted a period of market exclusivity, subject to various conditions. Orphan Drug designation does not shorten orotherwise convey any advantage in the regulatory approval process. Under the Orphan Drug Act, the FDA may designate a product as an Orphan Drug if itis intended to treat a rare disease or condition, generally defined as a patient population of fewer than 200,000 in the U.S. AZEDRA is designated as anOrphan Drug. In the U.S., Orphan Drug designation entitles a party to certain financial incentives such as opportunities for grant funding towards clinical trialcosts, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation,the product is entitled to Orphan Drug exclusivity, which means the FDA may not approve any other application to market the same drug for the sameindication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivityor where the manufacturer is unable to assure sufficient product quantity. In cases where the extent and scope of patent protection for a product is limited, the exclusivity period resulting from Orphan Drug designationmay be important in helping products maintain a competitive position. Even if a product obtains Orphan Drug exclusivity, however, that exclusivity maynot effectively protect the product from competition because different drugs with different active moieties may be approved for the same condition. Evenafter an Orphan Drug is approved, the FDA may subsequently approve the same drug with the same active moiety for the same condition if the FDAconcludes that the later drug is safer, more effective or makes a major contribution to patient care. The FDA is also authorized to designate certain products for expedited review if they are intended to address an unmet medical need in thetreatment of a serious or life-threatening disease or condition. These mechanisms for expedited review include fast track designation, breakthroughtherapy designation and priority review designation. AZEDRA has received fast track, breakthrough therapy and priority review designations. The FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, for thetreatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease orcondition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast trackproduct’s NDA before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinicaldata submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for thesubmission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast trackapplication does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDAbelieves that the designation is no longer supported by data emerging in the clinical trial process. 11Table of Contents A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other drugs, to treat aserious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvementover existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. TheFDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process;providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner. Finally, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide asignificant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed drug represents a significantimprovement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in thetreatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance thatmay lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended todirect overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing applicationfrom ten months to six months. Both before and after approval is obtained, a product, its manufacturer and the sponsor of the marketing application for the product are subject tocomprehensive regulatory oversight. Violations of existing or newly-adopted regulatory requirements at any stage, including the pre-clinical and clinicaltesting process, the approval process, or thereafter, may result in various adverse consequences, including FDA delay in approving or refusal to approve aproduct, withdrawal of an approved product from the market or the imposition of criminal penalties against the manufacturer or sponsor. Later discoveryof previously unknown problems may result in restrictions on the product, manufacturer or sponsor, including withdrawal of the product from the market. Regulation Outside the U.S. Whether or not FDA approval has been obtained, approval of a pharmaceutical product by comparable government regulatory authorities abroadmust be obtained prior to marketing the product there. The approval procedure varies from country to country, and the time required may be longer orshorter than that required for FDA approval. The requirements for regulatory approval by governmental agencies in other countries prior tocommercialization of products there can be rigorous, costly and uncertain, and approvals may not be granted on a timely basis or at all. In E.U. countries, Canada, Australia, and Japan, regulatory requirements and approval processes are similar in principle to those in the U.S.Regulatory approval in Japan requires that clinical trials of new drugs be conducted in Japanese patients. Depending on the type of drug for whichapproval is sought, there are currently two potential tracks for marketing approval in E.U. countries: mutual recognition and the centralized procedure.These review mechanisms may ultimately lead to approval in all E.U. countries, but each method grants all participating countries some decision-makingauthority in product approval. The centralized procedure, which is mandatory for biotechnology derived products, results in a recommendation in allmember states, while the E.U. mutual recognition process involves country-by-country approval. In other countries, regulatory requirements may require additional pre-clinical or clinical testing regardless of whether FDA or European approvalhas been obtained. This is the case in Japan, where trials are required to involve patient populations which we and our other collaborators have notexamined in detail. If a product is manufactured in the U.S., it is also subject to FDA and other U.S. export provisions. In most countries outside the U.S.,coverage, pricing and reimbursement approvals are also required, which may affect the profitability of the affected product. Other Regulation In addition to regulations enforced by the FDA, we are also subject to regulation under the U.S. Occupational Safety and Health Act,Environmental Protection Act, Toxic Substances Control Act, Resource Conservation and Recovery Act, and various other current and potential futureU.S. federal, state or local regulations. We believe that our operations comply in all material respects with applicable environmental laws and regulations.Our compliance with these regulations during the past year did not have and is not expected to have a material effect upon our capital expenditures, cashflows, earnings or competitive position. 12Table of Contents In addition, our research is dependent on maintenance of licenses from various authorities permitting the acquisition, use and storage ofquantities of radioactive isotopes that are critical for its manufacture and testing of research products. Biopharmaceutical research and developmentgenerally involves the controlled use of hazardous materials, chemicals, viruses, and various radioactive compounds. Even strict compliance with safetyprocedures for storing, handling, using and disposing of such materials prescribed by applicable regulations cannot completely eliminate the risk ofaccidental contaminations or injury from these materials, which may result in liability for resulting legal and regulatory violations as well as damages. Manufacturing The manufacture of radiopharmaceuticals is complex and requires significant capital expenditures. We have to date engaged third-party contractmanufacturing organizations (“CMOs”) to manufacture active pharmaceutical ingredient (“API”) and finished drug products for clinical trial supplies ofall of our product candidates, including AZEDRA, 1404, PyL and 1095. We recently acquired the AZEDRA manufacturing assets and entered into asublease agreement for the radiopharmaceutical manufacturing facility located in Somerset, New Jersey. The Somerset site serves as the launch facility forAZEDRA and will also provide manufacturing support for our development stage radiopharmaceuticals, including 1095. We continue to dependsignificantly on the availability of high quality CMO services. If we are unable to arrange for satisfactory CMO services, we would need to undertake suchresponsibilities on our own, resulting in our having to incur additional expenses and potentially delaying the development of our product candidates. SeeItem 1A. Risk Factors. Under the RELISTOR License Agreement, Bausch is responsible for the manufacture and supply, at its expense, of all API and finished andpackaged products for its RELISTOR commercialization efforts, including contracting with CMOs for supply of RELISTOR API and subcutaneous andoral finished drug product. Commercial OrganizationWe have built an experienced radiopharmaceutical team of 13 employees to commercialize AZEDRA in the U.S. Competition Competition in the biopharmaceutical industry is intense and characterized by ongoing research and development and technological change. Weface competition from many for-profit companies and major universities and research institutions in the U.S. and abroad. We face competition fromcompanies marketing existing products or developing new products for diseases targeted by our technologies. Many of our competitors have substantiallygreater resources, experience in conducting pre-clinical studies and clinical trials and obtaining regulatory approvals for their products, operatingexperience, research and development and marketing capabilities and production capabilities than we do. Our products and product candidates underdevelopment may not compete successfully with existing products or products under development by other companies, universities and other institutions.Drug manufacturers that are first in the market with a therapeutic for a specific indication generally obtain and maintain a significant competitiveadvantage over later entrants and therefore, the speed with which industry participants move to develop products, complete clinical trials, approveprocesses and commercialize products is an important competitive factor. RELISTOR was the first FDA-approved product for any indication involving OIC. We are, however, aware of other approved and marketedproducts, as well as candidates in pre-clinical or clinical development, that target the side effects of opioid pain therapy. Our principal competitors in thefield of OIC include Nektar Therapeutics, in collaboration with AstraZeneca PLC; Cubist Pharmaceuticals, a subsidiary of Merck & Co., Inc.; andMallinckrodt plc, in collaboration with Takeda Pharmaceutical Company Limited; and Shionogi, Inc. Other prescription, as well as over-the-counter,laxatives are also used as first line for OIC. As to our oncology pipeline, radiation and surgery are two traditional forms of treatment for prostate cancer. If the disease spreads, hormone(androgen) suppression therapy is often used to slow the cancer’s progression, but this form of treatment can eventually become ineffective. We are awareof several competitors who are developing or have received approval for treatments for castration-resistant prostate cancer. Our principal competitors inthe field of mCRPC include Johnson & Johnson subsidiary Janssen Biotech, Inc.; Novartis AG and Pfizer, Inc. in collaboration with Astellas Pharma US,Inc.; and Bayer HealthCare Pharmaceuticals Inc. Our principal competitors in the field of PSMA-targeted imaging agents include Aytu Bioscience Inc.,Blue Earth Diagnostics, Limited and Novartis AG. Other than AZEDRA, there are currently no approved anticancer treatments in the U.S. for malignant, recurrent, and/or unresectablepheochromocytoma and paraganglioma. 13Table of Contents A significant amount of research in the biopharmaceutical field is carried out at academic and government institutions. An element of ourresearch and development strategy has been to in-license technology and product candidates from academic and government institutions. Theseinstitutions are sensitive to the commercial value of their findings and pursue patent protection and negotiate licensing arrangements to collect royaltiesfor use of technology they develop. They may also market competitive commercial products on their own or in collaboration with competitors andcompete with us in recruiting highly qualified scientific personnel, which may result in increased costs or decreased availability of technology or productcandidates from these institutions to other industry participants. Competition with respect to our technologies and products is based on, among other things, product efficacy, safety, reliability, method ofadministration, availability, price and clinical benefit relative to cost; timing and scope of regulatory approval; sales, marketing and manufacturingcapabilities; collaborator capabilities; insurance and other reimbursement coverage; and patent protection. Competitive position in our industry alsodepends on a participant’s ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products orprocesses, and secure sufficient capital resources for the typically substantial period between technological conception and commercial sales. Product Liability The testing, manufacturing and marketing of our product candidates and products involves an inherent risk of product liability attributable tounwanted and potentially serious health effects. To the extent we elect to test, manufacture or market product candidates and products independently, webear the risk of product liability directly. We maintain product liability insurance coverage in amounts and pursuant to terms and conditions customaryfor our industry, scale, and the nature of our activities. Where local statutory requirements exceed the limits of our existing insurance or local policies ofinsurance are required, we maintain additional clinical trial liability insurance to meet these requirements. This insurance is subject to deductibles andcoverage limitations. The availability and cost of maintaining insurance may change over time. See Item 1A. Risk Factors. Human Resources At December 31, 2018, we had 79 full-time employees, 17 of whom hold Ph.D./PharmD degrees and three of whom hold M.D. degrees. At thatdate, 47 employees were engaged in research and development, medical, regulatory affairs, and manufacturing related activities and 32 were engaged infinance, legal, administration, commercial, and business development. We consider our relations with our employees to be good. None of our employeesis covered by a collective bargaining agreement. Available Information We file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934.The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically withthe SEC, including Progenics. The SEC’s website can be found at http://www.sec.gov. We also make available on or through our website, free of charge,copies of these reports on http://www.progenics.com. Additional information concerning our business may be available in press releases or other public announcements and quarterly and currentreports and documents filed with the SEC. Information on or accessed through our website is not included in our SEC filings. 14Table of Contents Item 1A. Risk Factors General Risks Related to our Business Drug development is a long and inherently uncertain process with a high risk of failure at every stage of development. Drug development is a highly uncertain scientific and medical endeavor, and failure can unexpectedly occur at any stage of clinicaldevelopment. Typically, there is a high rate of attrition for product candidates in preclinical and clinical trials due to scientific feasibility, safety, efficacy,changing standards of medical care and other variables. The risk of failure increases for our product candidates that are based on new technologies, as wellas technologies with which we have limited prior experience. Pre-clinical studies and clinical trials are long, expensive and highly uncertain processesthat can take many years. It will take us several years to complete all pre-clinical work and clinical trials and the time required for completing, testing andobtaining approvals is uncertain. The start or end of a clinical trial is often delayed or halted due to changing regulatory requirements, manufacturingchallenges, required clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability or prevalenceof use of a comparator drug or required prior therapy, clinical outcomes, or financial constraints. The FDA and other U.S. and foreign regulatory agencieshave substantial discretion, at any phase of development, to terminate clinical trials, require additional clinical development or other testing, delay,condition or withhold registration and marketing approval and mandate product withdrawals, including recalls. Additionally, we may also amend,suspend or terminate clinical trials at any time if we believe that the participating patients are being exposed to unacceptable health risks. Results attainedin early human clinical trials may not be indicative of results in later clinical trials. In addition, some of our investigational or experimental drugs are at anearly stage of development, and successful commercialization of early stage product candidates requires significant research, development, testing andapprovals by regulators, and additional investment. Our failure to demonstrate adequately the safety and efficacy of a product under development woulddelay or prevent marketing approval, which could adversely affect our operating results and credibility. The failure of one or more of our productcandidates could have a material adverse effect on our business, financial condition and results of operations. The future of our business and operations depends on the success of our development and commercialization programs. Our business and operations entail a variety of serious risks and uncertainties and are inherently risky. The development programs on which wefocus involve novel approaches to human therapeutics and diagnostics. Our product candidates are in clinical development, and in some respects, involvetechnologies with which we have limited prior experience. We are subject to the risks of failure inherent in the development and commercialization ofproduct candidates based on new technologies. There is little precedent for the successful commercialization of products based on our technologies, andthere are a number of technological challenges that we must overcome to complete most of our development efforts. We may not be able to successfullyfurther develop any of our product candidates. We must successfully complete clinical trials and obtain regulatory approvals for potential commercialproducts. Once approved, if at all, commercial product sales are subject to general and industry-specific local and international economic, regulatory,technological and policy developments and trends. Delays, higher costs or other weaknesses in the manufacturing process at our Somerset, New Jerseymanufacturing facility or any of our CMOs could hinder the development and commercialization of our product pipeline. The oncology space in whichwe operate presents numerous significant risks and uncertainties that may be expected to increase to the extent it becomes more competitive or lessfavored in the commercial healthcare marketplace. Failure to realize the anticipated benefits of any strategic acquisition and/or licensing transaction could adversely affect our business,operations and financial condition. A part of our business strategy has been to identify and advance a pipeline of product candidates by identifying product candidates, technologiesand businesses for acquisition and in-licensing that we believe are a strategic fit with our existing business. For example, we recently acquired theAZEDRA manufacturing assets and entered into a sublease agreement for the radiopharmaceutical manufacturing facility, and in 2015 we acquired EXINIDiagnostics A.B. The ultimate success of any strategic transactions entails numerous operational and financial risks, including: ●higher than expected development and integration costs; ●difficulty in combining the technologies, operations and personnel of acquired businesses with our technologies, operations and personnel; ●inherent risks and uncertainties related to our ability to operate newly acquired assets in a manner that achieves our business objectives; ●exposure to unknown liabilities; ●difficulty or inability to form a unified corporate culture across multiple office sites both nationally and internationally; ●inability to retain key employees of acquired businesses; ●disruption of our business and diversion of our management’s time and attention; and ●difficulty or inability to secure financing to fund development activities for such acquired or in-licensed product candidates, technologies orbusinesses. We have limited resources to integrate acquired and in-licensed product candidates, technologies and businesses into our current infrastructure,and we may fail to realize the anticipated benefits of any strategic transactions. Any such failure could have an adverse effect on our business, operationsand financial condition. 15Table of Contents If we do not obtain regulatory approval for our product candidates on a timely basis, or at all, or if the terms of any approval imposesignificant restrictions or limitations on use, our business, results of operations and financial condition will be adversely affected. Setbacks in clinicaldevelopment programs could have a material adverse effect on our business. Regulatory approvals are necessary to market product candidates and require demonstration of a product’s safety and efficacy through extensivepre-clinical and clinical trials. We may not obtain regulatory approval for product candidates on a timely basis, or at all, and the terms of any approval(which in some countries includes pricing and reimbursement approval) may impose significant restrictions, limitations on use or other commerciallyunattractive conditions. The process of obtaining FDA and foreign regulatory approvals often takes many years and can vary substantially based upon thetype, complexity and novelty of the products involved. We have had only limited experience in filing and pursuing applications and other submissionsnecessary to gain marketing approvals. Products under development may never obtain marketing approval from the FDA or other regulatory authoritiesnecessary for commercialization. We or our regulators may also amend, suspend or terminate clinical trials if we or they believe that the participating patients are being exposed tounacceptable health risks, and after reviewing trial results, we may abandon projects which we previously believed to be promising for commercial orother reasons unrelated to patient risks. During this process, we may find, for example, that results of pre-clinical studies are inconclusive or not indicativeof results in human clinical trials, clinical investigators or contract research organizations do not comply with protocols or applicable regulatoryrequirements, or that product candidates do not have the desired efficacy or have undesirable side effects or other characteristics that preclude marketingapproval or limit their potential commercial use if approved. In such circumstances, the entire development program for that product candidate could beadversely affected, resulting in delays in trials or regulatory filings for further marketing approval and a possible need to reconfigure our clinical trialprograms to conduct additional trials or abandon the program involved. Conducting additional clinical trials or making significant revisions to a clinicaldevelopment plan would lead to delays in regulatory filings. If clinical trials indicate, or regulatory bodies are concerned about, actual or possible seriousproblems with the safety or efficacy of a product candidate, we may stop or significantly slow development or commercialization of affected products. Asa result of such concerns, the development programs for our product candidates may be significantly delayed or terminated altogether. If the results of any of our clinical trials are not satisfactory or we encounter problems and/or delays enrolling patients, clinical trial supply issues,setbacks in developing drug formulations, including raw material supply, manufacturing, stability or other difficulties, or issues complying with protocolsor applicable regulatory requirements, the entire development program for our product candidates could be adversely affected in a material manner. We must design and conduct successful clinical trials for our product candidates to obtain regulatory approval. We rely on third parties forconduct of clinical trials, which reduces our control over their timing, conduct and expense and may expose us to conflicts of interest. Clinical trialresults may be unfavorable or inconclusive, and often take longer and cost more than expected. We have limited internal resources with conducting clinical trials, and we rely on or obtain the assistance of others to design, conduct, supervise,or monitor some or all aspects of some of our clinical trials. In relying on these third parties, we have less control over the timing and other aspects ofclinical trials than if we conducted them entirely on our own. Problems with the timeliness or quality of the work of a contract research organization orclinical data management organization may lead us to seek to terminate the relationship and use an alternative service provider. However, making thischange may be costly and may delay our trials and contractual restrictions may make such a change difficult or impossible. These third parties may alsohave relationships with other entities, some of which may be our competitors. In all events, we are responsible for ensuring that each of our clinical trials isconducted in accordance with the general investigational plan and protocols for the trial. The FDA and other foreign regulatory authorities require us tocomply with good clinical practices for conducting and recording and reporting the results of clinical trials to assure that data and reported results arecredible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do notcontrol does not relieve us of these responsibilities and requirements. To obtain regulatory approval of our product candidates, we must demonstrate through preclinical studies and clinical trials that they are safeand effective. Adverse or inconclusive clinical trial results concerning any of our product candidates that regulators find deficient in scope, design or oneor more other material respects, could require additional trials, resulting in increased costs, significant delays in submissions of approval applications,approvals in narrower indications than originally sought, or denials of approval, none of which we can predict. As a result, any projections that wepublicly announce of commencement and duration of clinical trials are not certain. We have experienced clinical trial delays in the past as a result ofslower than anticipated enrollment and such delays may recur. Delays can be caused by, among other things, deaths or other adverse medical events;regulatory or patent issues; interim or final results of ongoing clinical trials; failure to enroll clinical sites as expected; competition for enrollment fromother clinical trials; scheduling conflicts with participating clinicians and institutions; disagreements, disputes or other matters arising fromcollaborations; our inability to obtain necessary funding; or manufacturing problems. 16Table of Contents Risks Related to Our Commercialized Products RELISTOR and AZEDRA We have been and expect to continue to be dependent on Bausch to develop and commercialize RELISTOR, exposing us to significant risks. We rely on Bausch to pursue and complete further development and obtain regulatory approvals for RELISTOR worldwide. At present, ourrevenue is almost exclusively derived from royalty and milestone payments from our RELISTOR collaboration with Bausch, which can result insignificant fluctuation in our revenue from period to period, and our past revenue is therefore not necessarily indicative of our future revenue. We are andwill be dependent upon Bausch and any other business partners with which we may collaborate in the future to perform and fund development, includingclinical testing of RELISTOR, making related regulatory filings and manufacturing and marketing products, including for new indications and in newformulations, in their respective territories. Revenue from the sale of RELISTOR depends entirely upon the efforts of Bausch and its sublicensees, whichhave significant discretion in determining the efforts and resources they apply to sales of RELISTOR. Bausch may not be effective in obtaining approvalsfor new indications or formulations, marketing existing or future products or arranging for necessary sublicense or distribution relationships. Our businessrelationships with Bausch and other partners may not be scientifically, clinically or commercially successful. For example, Bausch has a variety ofmarketed products and its own corporate objectives, which may not be consistent with our best interests, and may change its strategic focus or pursuealternative technologies in a manner that results in reduced or delayed revenue to us. Bausch may also have commercial and financial interests that are notfully aligned with ours in a given territory or territories - which may make it more difficult for us to fully realize the value of RELISTOR. We may havefuture disagreements with Bausch, which has significantly greater financial and managerial resources which it could draw upon in the event of a dispute.Such disagreements could lead to lengthy and expensive litigation or other dispute-resolution proceedings as well as extensive financial and operationalconsequences to us and have a material adverse effect on our business, results of operations and financial condition. In addition, independent actions maybe taken by Bausch concerning product development, marketing strategies, manufacturing and supply issues, and rights relating to intellectual property. Under our agreements with Bausch relating to RELISTOR, we rely on Bausch to, among other things, effectively commercialize the product andmanage pricing, sales and marketing practices and inventory levels in the distribution channel. Assessing and reporting on these and other activities andmetrics in connection with RELISTOR has been difficult as a result of financial reporting and internal control issues that have surfaced both at Bauschand its predecessor licensee, Salix. Our already limited visibility into the internal operations of Bausch and reliance on Bausch to accurately reportinformation concerning the commercialization of RELISTOR has been further obscured by certain recent events at Bausch. As a result of certainincorrectly recognized revenues, both Bausch’s Form 10-K for 2015 and its Form 10-Q for the first quarter of 2016 were filed late, resulting in Bauschreceiving notices of default from certain of its noteholders, in each instance. We remain exposed to Bausch’s credit risk and the possibility of defaultunder the RELISTOR License Agreement in the event that Bausch were to terminate the agreement at its discretion. We are also dependent on Bausch for compliance with regulatory requirements as they apply to RELISTOR. The RELISTOR commercialization program continues to be subject to risk. Future developments in the commercialization of RELISTOR may result in Bausch or any other business partner with which we may collaboratein the future taking independent actions concerning product development, marketing strategies or other matters, including termination of its efforts todevelop and commercialize the drug. Under our license agreement with Bausch, Bausch is responsible for obtaining supplies of RELISTOR, including contracting with contractmanufacturing organizations for supply of RELISTOR active pharmaceutical ingredient and subcutaneous and oral finished drug product. Thesearrangements may not be on terms that are advantageous and, as a result of our royalty and other interests in RELISTOR’s commercial success, will subjectus to risks that the counterparties may not perform optimally in terms of quality or reliability. Bausch’s ability to optimally commercialize either oral or subcutaneous RELISTOR in a given jurisdiction may be impacted by applicablelabeling and other regulatory requirements. If clinical trials indicate, or regulatory bodies are concerned about, actual or possible serious problems withthe safety or efficacy of RELISTOR, Bausch may stop or significantly slow further development or commercialization of RELISTOR. In such an event, wecould be faced with either further developing and commercializing the drug on our own or with one or more substitute collaborators, either of which pathswould subject us to the development, commercialization, collaboration and/or financing risks discussed in these risk factors. 17Table of Contents We are also aware of other approved and marketed products, as well as product candidates in pre-clinical or clinical development that areintended to target the side effects of opioid pain therapy and are direct competitors to RELISTOR. For instance, there are three approved products thattarget opioid-induced constipation: MOVANTIK® (naloxegol), AMITIZA® (lubiprostone), and Symproic® (naldemedine) which could compete withRELISTOR. The competitors who have developed these products and product candidates may have superior resources that allow them to implement moreeffective approaches to sales and marketing. There is no guarantee that RELISTOR will be able to compete commercially with these products.Additionally, there has been growing public concern regarding the use of opioid drugs. Any efforts by the FDA or other governmental authorities torestrict or limit the use of opioids may negatively impact the market for RELISTOR. Any such significant action adverse to the further development and commercialization of RELISTOR could have a material adverse impact onour business and on the price of our stock. Our patents are subject to generic challenge, and the validity, enforceability and commercial value of these patents are highly uncertain. Our ability to obtain and defend our patents impacts the commercial value of our products and product candidates. Third parties have challengedand are likely to continue challenging the patents that have been issued or licensed to us. Patent protection involves complex legal and factual questionsand, therefore, enforceability is uncertain. Our patents may be challenged, invalidated, held to be unenforceable, or circumvented, which could negativelyimpact their commercial value. For example, we (along with Bausch and Wyeth LLC) have received notifications of a Paragraph IV certification forRELISTOR (methylnaltrexone bromide) subcutaneous injection and for RELISTOR (methylnaltrexone bromide) Tablets, for certain patents that are listedin the FDA Orange Book. The certifications resulted from filings by entities such as Mylan Pharmaceuticals Inc., Actavis LLC and Par Sterile Products,LLC of Abbreviated New Drug Applications (“ANDAs”) with the FDA, challenging such patents for RELISTOR subcutaneous injection and seeking toobtain approval to market a generic version of RELISTOR subcutaneous injection and filings by Actavis Laboratories FL, Inc. seeking to obtain approvalto market a generic version of RELISTOR Tablets before some or all of these patents expire. Furthermore, patent applications filed outside the UnitedStates may be challenged by other parties, for example, by filing third-party observations that argue against patentability or an opposition. Suchopposition proceedings are increasingly common in the EU and are costly to defend. For example, we received notices of opposition to three Europeanpatents relating to methylnaltrexone. Although we and Bausch are cooperating to defend against both the ANDA challenges and the European oppositions and intend to continue tovigorously enforce RELISTOR intellectual property rights, such litigation is inherently subject to significant risks and uncertainties, and there can be noassurance that the outcome of these litigations will be favorable to us or Bausch. An unfavorable outcome in these cases could result in the rapidgenericization of RELISTOR products or could result in the shortening of available patent life. Any such outcome could have a material impact on ourfinancial performance and stock price. Pursuant to the RELISTOR license agreement between us and Bausch, Bausch has the first right to enforce the intellectual property rights at issueand is responsible for the costs of such enforcement. At the same time, we may incur substantial further costs in supporting the effort to uphold the validityof patents or to prevent infringement. Patent disputes are frequent, costly and can preclude, delay or increase the cost of commercialization of products.We have previously been and are currently involved in patent litigation, and we expect to be subject to patent litigation in the future. For moreinformation related to our patent litigation and legal proceedings, see Item 3. Legal Proceedings. Our AZEDRA commercialization program is subject to significant risk. It is very difficult to estimate the commercial potential of recently approved products, due to factors such as safety and efficacy compared toother available treatments (including potential generic drug alternatives with similar efficacy profiles), changing standards of care, third party payerreimbursement, patient and physician preferences and the availability of competitive alternatives that may emerge either during the approval process orafter commercial introduction. Frequently, products that have shown promising results in clinical trials suffer significant setbacks even after they areapproved for commercial sale. On July 30, 2018, we received FDA approval of our NDA for AZEDRA. There is no guarantee that AZEDRA will be a commercial success and wehave not generated any sales as of the date of this filing. Further, future uses of AZEDRA commercially may reveal that AZEDRA is ineffective,unacceptably toxic, has other undesirable side effects, is difficult to manufacture on a commercial scale, is not cost-effective or economically viable,infringes on proprietary rights of another party or is otherwise not fit for further use. 18Table of Contents AZEDRA, designated as an Orphan Drug is intended to treat a rare disease with a small patient population. While we have received FDAapproval, we are still in discussions with payors regarding pricing for AZEDRA. If pricing for AZEDRA is not accepted in the market at an appropriatelevel it may not generate enough revenue to make it economically viable. There have been recent examples of the market reacting poorly to the high costof certain drugs. If the market reacts similarly to AZEDRA, it could result in negative publicity and reputational harm to us. Further, the Trumpadministration has indicated support for possible new measures related to drug pricing, which could increase the pricing pressures related to AZEDRA andfurther limit its economic viability. We have little experience as a company in commercializing products and, prior to the FDA approval and launch of AZEDRA, had no existingcommercial infrastructure. Given this lack of experience, there is a heightened risk as to whether we will be able to successfully commercialize AZEDRA.If AZEDRA is determined to be unsafe or ineffective in humans, not economically viable or we are unable to successfully commercialize it, our businesswill be materially adversely affected. We may not be able to maintain Orphan Drug exclusivity for AZEDRA and, even if we do, that exclusivity may not prevent the FDA, fromapproving competing products. Under the Orphan Drug Act, the FDA may designate a product as an Orphan Drug if it is a drug intended to treat a rare disease or condition, whichis generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.AZEDRA currently has the Orphan Drug designation in the United States. In the United States, Orphan Drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trialcosts, tax advantages and user-fee waivers. In addition, if a product that has Orphan Drug designation subsequently receives the first FDA approval for thedisease for which it has such designation, the product is entitled to Orphan Drug exclusivity, which means the FDA may not approve any otherapplication to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinicalsuperiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. We may not be able to maintain Orphan Drug exclusivity for AZEDRA. In addition, exclusive marketing rights in the United States may belimited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request fordesignation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease orcondition. Even after an Orphan Drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition ifthe FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. A loss of the Orphan Drug exclusivity forAZEDRA may have an adverse impact on our ability to adequately commercialize AZEDRA. Failure to obtain marketing approval in foreign jurisdictions would prevent AZEDRA from being marketed abroad. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatoryauthority outside of the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. In order tomarket and sell AZEDRA in the European Union and many other foreign jurisdictions, we or our potential third-party collaborators must obtain separatemarketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involveadditional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approvalprocess outside of the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside ofthe United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or ourpotential third-party collaborators may not obtain approvals from regulatory authorities outside of the United States on a timely basis, if at all. However, afailure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in other countries. We may not beable to file for marketing approvals and may not receive necessary approvals to commercialize AZEDRA in any market outside of the United States. 19Table of Contents Risks Related to Our Product Candidates Even if our product candidates obtain marketing approval, our ability to generate revenue will be diminished if our products are notaccepted in the marketplace, or if we select pricing strategies for our products that are less competitive than those of our competitors, or fail toobtain acceptable prices or an adequate level of reimbursement for products from third-party payers or government agencies. The commercial success of our products will depend upon their acceptance by the medical community and third-party payers as clinically useful,cost effective and safe. Market acceptance of approved products, is affected by a wide range of factors, including the timing of regulatory approvals,product launches and the presence of generic, over-the-counter or other competitors; the pricing of the product and relative prices of competing products;product development efforts for new indications; the availability of reimbursement for the product; our ability to obtain sufficient commercial quantitiesof the product; success in arranging for necessary sublicense or distribution relationships; and general and industry-specific local and internationaleconomic pressures. If health care providers believe that patients can be managed adequately with alternative, currently available therapies, they may notprescribe our products, especially if the alternative therapies are viewed as more effective, as having a better safety or tolerability profile, as being moreconvenient to the patient or health care providers or as being less expensive. Third-party insurance coverage may not be available to patients for anyproducts we develop. For pharmaceuticals administered in an institutional setting, the ability of the institution to be adequately reimbursed fromgovernment and health administration authorities, private health insurers and other third-party payers could also play a significant role in demand for ourproducts. Significant uncertainty exists as to the reimbursement status of newly-approved pharmaceuticals. Government and other third-party payersincreasingly are attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for new drugs and by refusing, in somecases, to provide coverage for uses of approved products for indications for which the FDA has not granted labeling approval. In most foreign markets,pricing and profitability of prescription pharmaceuticals are subject to government control. In the U.S., we expect that there will continue to be a numberof federal and state proposals to implement similar government control and that the emphasis on managed care in the U.S. will continue to put pressure onthe pricing of pharmaceutical products. Cost control initiatives could decrease the price that we can receive for any products in the future and adverselyaffect our ability to successfully commercialize our products. If any of our product candidates do not achieve market acceptance, we will likely lose ourentire investment in that product candidate. We are subject to extensive and ongoing regulation, which can be costly and time consuming, may interfere with marketing approval forour product candidates, and can subject us to unanticipated limitations, restrictions, delays and fines. Our business, products and product candidates are subject to comprehensive regulation by the FDA and comparable authorities in othercountries, and include the Sunshine Act under the Patient Protection and Affordable Care Act (“PPACA”). These agencies and other entities regulate thepre-clinical and clinical testing, safety, effectiveness, approval, manufacture, labeling, marketing, export, storage, recordkeeping, advertising, promotionand other aspects of our products and product candidates. We cannot guarantee that approvals of product candidates, processes or facilities will be grantedon a timely basis, or at all. If we experience delays or failures in obtaining approvals, commercialization of our product candidates will be slowed orstopped. In addition to these uncertainties, the U.S. House of Representatives made several attempts in 2017 to repeal the PPACA and replace it with acurtailed system of tax credits and dissolve an expansion of the Medicaid program. Although such attempts were ultimately unsuccessful, there isconsiderable uncertainty regarding the future of the current PPACA framework, and any changes will likely take time to unfold. As such, we cannotpredict what effect the PPACA or other healthcare reform initiatives that may be adopted in the future will have on our business. Even if we obtain regulatory approval for a product candidate, the approval may include significant limitations on indicated uses for which theproduct could be marketed or other significant marketing restrictions. If we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may be subject to forced removal ofa product from the market, product seizure, civil and criminal penalties and other adverse consequences. Our products may face regulatory, legal or commercial challenges even after approval. Even if a product receives regulatory approval: It might not obtain labeling claims necessary to make the product commercially viable (in general, labeling claims define the medical conditionsfor which a drug product may be marketed, and are therefore very important to the commercial success of a product), or may be required to carry Boxed orother warnings that adversely affect its commercial success. 20Table of Contents Approval may be limited to uses of the product for treatment or prevention of diseases or conditions that are relatively less financiallyadvantageous to us than approval of greater or different scope or subject to an FDA imposed Risk Evaluation and Mitigation Strategy (“REMS”) thatimposes limits on the distribution or use of the product. While we may develop a product candidate with the intention of addressing a large, unmetmedical need, the FDA or other foreign regulatory authorities may only approve the use of the drug for indications affecting a relatively small number ofpatients, thus greatly reducing the market size and our potential revenues. Side effects identified after the product is on the market might hurt sales or result in mandatory safety labeling changes, additional pre-clinicaltesting or clinical trials, imposition of a REMS, product recalls or withdrawals from the market, reputational harm to us, and lawsuits (including class-action suits). Efficacy or safety concerns regarding a marketed product, or manufacturing or other problems, may lead to a recall, withdrawal of marketingapproval, marketing restrictions, reformulation of the product, additional pre-clinical testing or clinical trials, changes in labeling, imposition of a REMS,warnings and contraindications, the need for additional marketing applications, declining sales or other adverse events. These potential consequencesmay occur whether or not the concerns originate from subsequent testing or other activities by us, governmental regulators, other entities or organizationsor otherwise, and whether or not they are scientifically justified. If products lose previously received marketing and other approvals, our business, resultsof operations and financial condition would be materially adversely affected. In certain foreign jurisdictions, it cannot be marketed until pricing and reimbursement for the product is also approved. We will be subject to ongoing FDA obligations and continuous regulatory review, and might be required to undertake post-marketing trials toverify the product’s efficacy or safety or other regulatory obligations. Our relationships with customers and third-party payers are or may become subject to applicable anti-kickback, fraud and abuse and otherhealthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, program exclusion, contractual damages, reputationalharm and diminished profits and future earnings. Health care providers, physicians and third-party payers play a primary role in the recommendation and prescription of any product candidatesfor which we obtain marketing approval. Our future arrangements with third-party payers and customers will or already do require us and them to complywith broadly applicable fraud and abuse and other health care laws and regulations, including both federal and state anti-kickback and false claims laws,that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products that obtainmarketing approval. Efforts to ensure that business arrangements comply with applicable health care laws and regulations involve substantial costs. It ispossible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case lawinvolving applicable fraud and abuse or other healthcare laws and regulations. If such operations are found to be in violation of any of these laws or otherapplicable governmental regulations, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion fromgovernment funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of related operations. If physicians or otherproviders or entities involved with our products are found to be not in compliance with applicable laws, they may be subject to criminal, civil oradministrative sanctions, including exclusions from government funded healthcare programs, which may adversely affect us. If we or our partners are unable to obtain sufficient quantities of the raw and bulk materials needed to make our products or productcandidates, development of our products or product candidates or commercialization of our approved products could be slowed or stopped. We or our partners may not be able to obtain the materials necessary to make a particular product or product candidate in adequate volume andquality. If any materials needed to make a product or product candidate is insufficient in quantity or quality, if a supplier fails to deliver in a timelyfashion or at all or if these relationships terminate, we or our partners may not be able to fulfill manufacturing obligations for our products or productcandidates, either on our own or through third-party suppliers. A delay or disruption of supplies of our products or product candidates would have amaterial adverse effect on our business as a whole. Our existing arrangements with suppliers may result in the supply of insufficient quantities of ourproduct candidates needed to accomplish our clinical development programs or commercialization, and we may not have the right and in any event, donot currently have the capability to manufacture these products if our suppliers are unable or unwilling to do so. We currently arrange for supplies ofcritical raw materials used in production of our product candidates from single sources. We do not have long-term contracts with any of these suppliers.Any delay or disruption in the availability of raw materials would slow or stop product development and commercialization of the relevant product. 21Table of Contents Manufacturing resources could limit or adversely affect our ability to commercialize products. We or our partners may engage third parties to manufacture our product candidates. We or our partners may not be able to obtain adequatesupplies from third-party manufacturers in a timely fashion for development or commercialization purposes, and commercial quantities of products maynot be available from CMOs at acceptable costs. In order to commercialize our product candidates successfully, we need to be able to manufacture or arrange for the manufacture of products incommercial quantities, in compliance with regulatory requirements, at acceptable costs and in a timely manner. Manufacture of our product candidates,can be complex, difficult to accomplish even in small quantities, difficult to scale-up for large-scale production and subject to delays, inefficiencies andlow yields of quality products. The manufacture of radiopharmaceuticals is relatively complex and requires significant capital expenditures. Although werecently acquired the assets comprising the AZEDRA radiopharmaceutical manufacturing facility, we continue to rely on CMOs for our productcandidates. The cost of manufacturing our product candidates may make them prohibitively expensive. If adequate supplies of any of our productcandidates or related materials are not available on a timely basis or at all, our clinical trials or commercialization of our product candidates could beseriously delayed, since these materials are time consuming to manufacture and cannot be readily obtained from third-party sources. We continue to bedependent on a limited number of highly specialized manufacturing and development partners, including single source manufacturers for certain of ourproduct candidates. If we were to lose one or more of these key relationships, it could materially adversely affect our business. Establishing newmanufacturing relationships, or creating our own manufacturing capability, would require significant time, capital and management effort, and the transferof product-related technology and know-how from one manufacturer to another is an inherently complex and uncertain process. Failure of any manufacturer of our various product candidates to comply with applicable regulatory requirements could subject us topenalties and have a material adverse effect on supplies of our product candidates. Third-party manufacturers are required to comply with cGMP or similar regulatory requirements outside of the U.S. If manufacturers of ourproduct candidates cannot successfully manufacture material that conforms to the strict regulatory requirements of the FDA and any applicable foreignregulatory authority, they may not be able to supply us with our product candidates. If these facilities are not approved for commercial manufacture, wemay need to find alternative manufacturing facilities, which could result in delays of several years in obtaining approval for a product candidate. We donot control the manufacturing operations and are completely dependent on our third-party manufacturing partners or contractors for compliance with theapplicable regulatory requirements for the manufacture of some of our product candidates. Manufacturers are subject to ongoing periodic unannouncedinspections by the FDA and corresponding state and foreign agencies for compliance with cGMP and similar regulatory requirements. Failure of anymanufacturer of any of our product candidates to comply with applicable cGMP or other regulatory requirements could result in sanctions being imposedon our collaborators or us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions,interruptions in supply and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and have amaterial adverse impact on our business, financial condition and results of operations. The validity, enforceability and commercial value of our patents and other intellectual property rights are highly uncertain. We own or license a number of issued patents. We must obtain, maintain and enforce patent and other rights to protect our intellectual property.The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves many complex legal and technical issues. There aremany laws, regulations and judicial decisions that dictate and otherwise influence the manner in which patent applications are filed and prosecuted and inwhich patents are granted and enforced, all of which are subject to change from time to time. There is no clear policy involving the breadth of claimsallowed, or the degree of protection afforded, under patents in this area. In addition, we are aware of others who have patent applications or patentscontaining claims similar to or overlapping those in our patents and patent applications. Accordingly, patent applications owned by or licensed to us maynot result in patents being issued. Even if we own or license a relevant issued patent, we may not be able to preclude competitors from commercializingdrugs that may compete directly with one or more of our products or product candidates, in which event such rights may not provide us with anymeaningful competitive advantage. In the absence or upon successful challenge of patent protection, drugs may be subject to generic competition, whichcould adversely affect pricing and sales volumes of the affected products. It is generally difficult to determine the relative strength or scope of a biotechnology or pharmaceutical patent position in absolute terms at anygiven time. The issuance of a patent is not conclusive as to its validity or enforceability, which can be challenged in litigation or via administrativeproceedings. The license agreements from which we derive or out-license intellectual property provide for various royalty, milestone and other payment,commercialization, sublicensing, patent prosecution and enforcement, insurance, indemnification and other obligations and rights, and are subject tocertain reservations of rights. While we generally have the right to defend and enforce patents licensed to or by us, either in the first instance or if thelicensor or licensee chooses not to do so, we must usually bear the cost of doing so. 22Table of Contents Patents have a limited life and expire by law. In addition to uncertainties as to scope, validity, enforceability and changes in law, patents by law have limited lives. Upon expiration of patentprotection, our drug candidates and/or products may be subject to generic competition, which could adversely affect pricing and sales volumes of theaffected products. The original patents surrounding the AZEDRA program were licensed from the University of Western Ontario (“UWO”). The patent familydirected to processes for making polymer precursors, as well as processes for making the final product, expired in 2018 in the U.S. and Canada. Otherlicensed patent families from UWO relate to alternative approaches for preparing AZEDRA, which if implemented would expire in 2024, worldwide.Progenics has pending applications worldwide directed to manufacturing improvements and the resulting compositions which, if issued, would expire in2035. Owned and in-licensed patents relating to the 1404 product candidate have expiration ranges of 2020 to 2029; we view as most significant thecomposition-of-matter patent on the compound, as well as technetium-99 labeled forms, which expires in 2029 worldwide. Patent protection for the composition-of-matter patent on PyL compound, radiolabeled form of the compound, as well as methods of use expire in2030 in the United States. Corresponding patent family members are pending or issued worldwide, all with expirations of 2029. Process improvementpatent applications are pending worldwide which, if issued, would expire in 2037. Company-owned patents relating to MIP-1095 have expiration ranges of 2027 to 2031 in the U.S. We view as most significant the composition-of-matter patent on this compound, as well as radiolabeled forms, which expires in 2027 in the U.S., as well as Europe. Additional U.S. patents are directedto stable compositions and radiolabeling processes which expire in 2030 and 2031, respectively. We own patents relating to automated detection of bone cancer metastases through. The patents on this technology expire in 2028. The USpatent is currently under reexamination. Applications are pending relating to automated medical image analysis. With respect to PSMA antibody, currently issued composition-of-matter patents comprising co-owned patents have expirations of 2022 in theU.S. Corresponding foreign counterpart patents will expire 2022. We view all of these patents as significant. We depend on intellectual property licensed from third parties and unpatented technology, trade secrets and confidential information. If welose any of these rights, including by failing to achieve milestone requirements or to satisfy other conditions, our business, results of operations andfinancial condition could be harmed. Many of our product candidates incorporate intellectual property licensed from third parties. For example, PyL utilizes technology licensed to usfrom Johns Hopkins University. We could lose the right to patents and other intellectual property licensed to us if the related license agreement isterminated due to a breach by us or otherwise. Our ability to commercialize products incorporating licensed intellectual property would be impaired if therelated license agreements were terminated. In addition, we are required to make substantial cash payments, achieve milestones and satisfy otherconditions, including filing for and obtaining marketing approvals and introducing products, to maintain rights under our intellectual property licenses.Due to the nature of these agreements and the uncertainties of development, we may not be able to achieve milestones or satisfy conditions to which wehave contractually committed, and as a result may be unable to maintain our rights under these licenses. If we do not comply with our license agreements,the licensors may terminate them, which could result in our losing our rights to, and therefore being unable to commercialize, related products. We also rely on unpatented technology, trade secrets and confidential information. Third parties may independently develop substantiallyequivalent information and techniques or otherwise gain access to our technology or disclose our technology, and we may be unable to effectively protectour rights in unpatented technology, trade secrets and confidential information. We require each of our employees, consultants and advisors to execute aconfidentiality agreement at the commencement of an employment or consulting relationship with us. These agreements may, however, not provideeffective protection in the event of unauthorized use or disclosure of confidential information. Any loss of trade secret protection or other unpatentedtechnology rights could harm our business, results of operations and financial condition. 23Table of Contents If we do not achieve milestones or satisfy conditions regarding some of our product candidates, we may not maintain our rights underrelated licenses. We are required to make substantial cash payments, achieve milestones and satisfy other conditions, including filing for and obtaining marketingapprovals and introducing products, to maintain rights under certain intellectual property licenses. Due to the nature of these agreements and theuncertainties of research and development, we may not be able to achieve milestones or satisfy conditions to which we have contractually committed, andas a result may be unable to maintain our rights under these licenses. If we do not comply with our license agreements, the licensors may terminate them,which could result in our losing our rights to, and therefore being unable to commercialize, related products. If we infringe third-party patent or other intellectual property rights, we may need to alter or terminate a product development program. There may be patent or other intellectual property rights belonging to others that require us to alter our products, pay licensing fees or ceasecertain activities. If our products infringe patent or other intellectual property rights of others, the owners of those rights could bring legal actions againstus claiming damages and seeking to enjoin manufacturing and marketing of the affected products. If these legal actions are successful, in addition to anypotential liability for damages, we could be required to obtain a license in order to continue to manufacture or market the affected products. We may notprevail in any action brought against us, and any license required under any rights that we infringe may not be available on acceptable terms or at all. Weare aware of intellectual property rights held by third parties that relate to products or technologies we are developing. For example, we are aware of othergroups investigating PSMA or related compounds and monoclonal antibodies directed at PSMA, PSMA-targeted imaging agents and therapeutics, andmethylnaltrexone and other peripheral opioid antagonists, and of patents held, and patent applications filed, by these groups in those areas. While thevalidity of these issued patents, the patentability of these pending patent applications and the applicability of any of them to our products and programsare uncertain, if asserted against us, any related patent or other intellectual property rights could adversely affect our ability to commercialize ourproducts. Research, development and commercialization of a biopharmaceutical product often require choosing between alternative development andoptimization routes at various stages in the development process. Preferred routes may depend on subsequent discoveries and test results and cannot bepredicted with certainty at the outset. There are numerous third-party patents in our field, and we may need to obtain a license under a patent in order topursue the preferred development route of one or more of our products or product candidates. The need to obtain a license would decrease the ultimateprofitability of the applicable product. If we cannot negotiate a license, we might have to pursue a less desirable development route or terminate theprogram altogether. We have been and expect to continue to be dependent on collaborators for the development, manufacturing and sales of certain productsand product candidates, which expose us to the risk of reliance on these collaborators. In conducting our operations, we currently depend, and expect to continue to depend, on numerous collaborators. Key among these newcollaborations, are those with Bayer to develop and commercialize products using our PSMA antibody technology and with Fuji for the development andcommercialization of 1404 and bone BSI in Japan. In addition, certain clinical trials for our product candidates may be conducted by government-sponsored agencies, and consequently will be dependent on governmental participation and funding. These arrangements expose us to the sameconsiderations we face when contracting with third parties for our own trials. If any of our collaborators breach or terminate its agreement with us or otherwise fail to conduct successfully and in a timely manner thecollaborative activities for which they are responsible, the preclinical or clinical development or commercialization of the affected product candidate orresearch program could be delayed or terminated. We generally do not control the amount and timing of resources that our collaborators devote to ourprograms or product candidates. We also do not know whether current or future collaboration partners, if any, might pursue alternative technologies ordevelop alternative products either on their own or in collaboration with others, including our competitors, as a means for developing treatments for thediseases or conditions targeted by our collaborative arrangements. Our collaborators are also subject to similar development, regulatory, manufacturing,cyber-security and competitive risks as us, which may further impede their ability to successfully perform the collaborative activities for which they areresponsible. Setbacks of these types to our collaborators could have a material adverse effect on our business, results of operations and financialcondition. 24Table of Contents We are dependent upon third parties for a variety of functions. These arrangements may not provide us with the benefits we expect. We rely on third parties to perform a variety of functions. We are party to numerous agreements which place substantial responsibility on clinicalresearch organizations, consultants and other service providers for the development of our product candidates. We also rely on medical and academicinstitutions to perform aspects of our clinical trials of product candidates. In addition, an element of our research and development strategy has been to in-license technology and product candidates from academic and government institutions in order to minimize or eliminate investments in early research.We may not be able to enter new arrangements without undue delays or expenditures, and these arrangements may not allow us to compete successfully.Moreover, if third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct clinical trials in accordance withregulatory requirements or applicable protocols, our product candidates may not be approved for marketing and commercialization or such approval maybe delayed. If that occurs, we or our collaborators will not be able, or may be delayed in our efforts, to commercialize our product candidates. Business and Operational Risks We lack sales and marketing experience. We have not historically had established sales, marketing or distribution infrastructure but have begun to build out this capability in connectionwith the launch of AZEDRA in the U.S. We may not be successful in developing an effective commercial infrastructure or in achieving sufficient marketacceptance for AZEDRA or other products. We do plan to market and sell products through distribution, co-marketing, co-promotion or licensingarrangements with third parties for territories outside the U.S. We may consider contracting with a third-party professional pharmaceutical detailing andsales organization to perform marketing functions for one or more products. To the extent that we enter into distribution, co-marketing, co-promotion,detailing or licensing arrangements for the marketing and sale of product candidates, any revenues we receive will depend primarily on the efforts of thirdparties. We will not control the amount and timing of marketing resources these third parties devote to our products. We are involved in various legal proceedings that are uncertain, costly and time-consuming and could have a material adverse impact onour business, financial condition and results of operations and could cause the market value of our common stock to decline. From time to time we are involved in legal proceedings and disputes and may be involved in litigation in the future. These proceedings arecomplex and extended and occupy the resources of our management and employees. These proceedings are also costly to prosecute and defend and mayinvolve substantial awards or damages payable by us if not found in our favor. We may also be required to pay substantial amounts or grant certain rightson unfavorable terms in order to settle such proceedings. Defending against or settling such claims and any unfavorable legal decisions, settlements ororders could have a material adverse effect on our business, financial condition and results of operations and could cause the market value of our commonstock to decline. For more information regarding legal proceedings, see Item 3 of Part I, and Note 8 in the notes to the consolidated financial statements inPart IV of this Form 10-K. In particular, the pharmaceutical and medical device industries historically have generated substantial litigation concerning the manufacture, useand sale of products and we expect this litigation activity to continue. As a result, we expect that patents related to our products will be routinelychallenged, and our patents may not be upheld. In order to protect or enforce patent rights, we may initiate litigation against third parties. If we are notsuccessful in defending an attack on our patents and maintaining exclusive rights to market one or more of our products still under patent protection, wecould lose a significant portion of sales in a very short period. We may also become subject to infringement claims by third parties and may have todefend against charges that we violated patents or the proprietary rights of third parties. If we infringe the intellectual property rights of others, we couldlose our right to develop, manufacture or sell products, or could be required to pay monetary damages or royalties to license proprietary rights from thirdparties. In addition, in the U.S., it has become increasingly common for patent infringement actions to prompt claims that antitrust laws have beenviolated during the prosecution of the patent or during litigation involving the defense of that patent. Such claims by direct and indirect purchasers andother payers are typically filed as class actions. The relief sought may include treble damages and restitution claims. Similarly, antitrust claims may bebrought by government entities or private parties following settlement of patent litigation, alleging that such settlements are anti-competitive and inviolation of antitrust laws. In the U.S. and Europe, regulatory authorities have continued to challenge as anti-competitive so-called “reverse payment”settlements between branded and generic drug manufacturers. We may also be subject to other antitrust litigation involving competition claims unrelatedto patent infringement and prosecution. A successful antitrust claim by a private party or government entity against us could have a material adverseeffect on our business, financial condition and results of operations and could cause the market value of our common stock to decline. 25Table of Contents We are exposed to product liability claims, and in the future may not be able to obtain insurance against claims at a reasonable cost or atall. Our business exposes us to product liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceuticalproducts. We may not be able to avoid product liability exposure. If a product liability claim is successfully brought against us, our financial positionmay be adversely affected. Product liability insurance for the biopharmaceutical industry is generally expensive, when available at all, and may not beavailable to us at a reasonable cost in the future. Our current insurance coverage and indemnification arrangements may not be adequate to cover claimsbrought against us, and are in any event subject to the insuring or indemnifying entity discharging its obligations to us. We, our CMOs and our distributors handle hazardous materials and must comply with environmental laws and regulations, which can beexpensive and restrict how we our CMOs or our distributors do business. If we our CMOs or our distributors are involved in a hazardous waste spillor other accident, we our CMOs or our distributors could be liable for damages, penalties or other forms of censure. Research and development work and manufacturing processes with our pipeline products involve the use of hazardous, controlled and/orradioactive materials. We, our CMOs and our distributors are subject to federal, state and local laws and regulations governing the use, manufacture,storage, handling and disposal of these materials. In particular we, our CMOs and our distributors are subject to regulation by the U.S. EnvironmentalProtection Agency, U.S. Department of Transportation, Occupational Safety and Health Administration and comparable state regulatory agencies. Despiteprocedures that we, our CMOs and our distributors implement for handling and disposing of these materials, the risk of accidental contamination or injurycannot be eliminated. In the event of a hazardous waste spill or other accident, we, our CMOs and our distributors could be liable for damages, penalties orother forms of censure. There may be significant costs to comply with applicable environmental laws and regulations in the future, and such costs may beincurred by us directly or passed through to us by our CMOs and our distributors. In the event of the damages, penalties, censures or higher costs outlinedabove, the efficiency and cost of our research, development and commercialization pipeline may be adversely impacted. If we lose key personnel on whom we depend, our business could suffer. We are dependent upon our key management, commercial and scientific personnel, the loss of whom could require us to identify and engagequalified replacements, and could cause our management and operations to suffer in the interim. Competition for qualified employees among companiesin the biopharmaceutical industry is intense. Future success in our industry depends in significant part on the ability to attract, retain and motivate highlyskilled employees, which we may not be successful in doing. Health care reform measures could adversely affect our operating results and our ability to obtain marketing approval of and tocommercialize our product candidates. In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding thehealth care system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect ourability to profitably sell any product candidates for which we obtain marketing approval. For example, the Trump administration has indicated support forpossible new measures related to drug pricing. New government legislation or regulations related to pricing or government or third-party payer decisionsnot to approve pricing for, or provide adequate coverage and reimbursements of, our products, hold the potential to severely limit market opportunities ofsuch products. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activitiesfor pharmaceutical products. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or preventmarketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. In the U.S., federallegislation has changed the way Medicare covers and pays for pharmaceutical products. Cost reduction initiatives and other provisions of legislation havedecreased coverage and reimbursement. Though such legislation applies only to drug benefits for Medicare beneficiaries, private payers often followMedicare coverage policy and payment limitations in setting their own reimbursement rates. More recent legislation is intended to broaden access tohealth insurance, further reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparencyrequirements for health care and health insurance industries, and impose new taxes and fees on the health industry and additional health policy reforms.New laws impose significant annual fees on companies that manufacture or import branded prescription drug products, and contain substantial newcompliance provisions, which in each case may affect our business practices with health care practitioners. Subject to federal and state agencies issuingregulations or guidance, it appears likely that new laws will continue to pressure pharmaceutical pricing, especially under the Medicare program, and mayalso increase regulatory burdens and operating costs. We cannot be sure whether additional legislative changes will be enacted, whether the FDAregulations, guidance or interpretations will be changed or what the impact of such changes on the marketing approvals of our product candidates, if any,may be. 26Table of Contents Our future depends on the proper management of our current and future business operations, including the associated expenses. Our business strategy requires us to manage our business to provide for the continued development and potential commercialization of ourproprietary and partnered product candidates. Our strategy also calls for us to undertake increased research and development activities and to manage anincreasing number of relationships with partners and other third parties, while simultaneously managing the capital necessary to support this strategy. Ifwe are unable to manage effectively our current operations and any growth we may experience, our business, financial condition and results of operationsmay be adversely affected. If we are unable to effectively manage our expenses, we may find it necessary to reduce our personnel-related costs throughreductions in our workforce, which could harm our operations, employee morale and impair our ability to retain and recruit talent. Furthermore, ifadequate funds are not available, we may be required to obtain funds through arrangements with partners or other sources that may require us to relinquishrights to certain of our technologies, products or future economic rights that we would not otherwise relinquish or require us to enter into other financingarrangements on unfavorable terms. Risks associated with our operations outside of the United States could adversely affect our business. Although we currently conduct most of our business in the U.S., we also conduct business internationally, which exposes us to additional risks,including risks associated with foreign legal requirements, economic and political conditions and fluctuations in foreign currency exchange rates. Weexpect that we will continue to conduct business internationally. These business operations subject us to a number of risks and uncertainties, includingbut not limited to: ●changes in international regulatory and compliance requirements that could restrict our ability to develop, market and sell our products; ●political and economic instability; ●the impact of any trade or international regulatory policy changes brought about by the new U.S. federal administration; ●diminished protection of intellectual property in some countries outside of the U.S.; ●trade protection measures and import or export licensing requirements; ●difficulty in staffing and managing international operations; ●differing labor regulations and business practices; ●heightened risk of a failure of our overseas employees to comply with U.S. and foreign laws, including export regulations, the FCPA andtrade regulations; ●potentially negative consequences from changes in or interpretations of tax laws; ●changes in international medical reimbursement policies and programs; ●financial risks such as longer payment cycles, difficulty collecting accounts receivable and exposure to fluctuations in foreign currencyexchange rates; ●regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ and serviceproviders’ activities that may fall within the purview of the FCPA or similar foreign laws such as the U.K. Bribery Act; and ●regulatory and compliance risks that relate to data practices and privacy, including those resulting from the EU adopted General DataProtection Regulation, which became effective on May 25, 2018 and imposes monetary penalties for non-compliance. Any of these factors may, individually or as a group, have a material adverse effect on our business and results of operations. These or othersimilar risks could adversely affect our revenue and profitability. Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance of our future products. Ifthere is not sufficient reimbursement for our future products, it is less likely that such products will be widely used. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on payments allowed forlower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetaryconstraints and/or imperfections in Medicare or Medicaid data used to calculate these rates. Net prices for drugs may be reduced by mandatory discountsor rebates required by government health care programs. Such legislation, or similar regulatory changes or relaxation of laws that restrict imports of drugsfrom other countries, could reduce the net price we receive for any future marketed drugs. As a result, our future drugs might not ultimately be consideredcost-effective. 27Table of Contents We cannot be certain that reimbursement will be available for AZEDRA or any other drug candidates that we develop. Also, we cannot be certainthat reimbursement policies will not reduce the demand for, or the price paid for, any future drugs. If reimbursement is not available or is available on alimited basis, we may not be able to successfully commercialize AZEDRA or any other drug candidates that we develop. In general, other factors that could affect the demand for, and sales and profitability of our future products include, but are not limited to: ●the timing of regulatory approval, if any, of competitive drugs; ●our or any other of our partners' pricing decisions, as applicable, including a decision to increase or decrease the price of a drug, and thepricing decisions of our competitors; ●the seasonality of patient demand due to health insurance programs; ●government and third-party payor reimbursement and coverage decisions that affect the utilization of our future drugs and competing drugs; ●negative safety or efficacy data from new clinical studies conducted either in the U.S. or internationally by any party could cause the sales ofour future drugs to decrease or a future drug to be recalled; ●the degree of patent protection afforded our future drugs by patents granted to or licensed by us and by the outcome of litigation involvingour or any of our licensor's patents; ●the outcome of litigation involving patents of other companies concerning our future drugs or processes related to production andformulation of those drugs or uses of those drugs; the increasing use and development of alternate therapies; ●the rate of market penetration by competing drugs; and ●the termination of, or change in, existing arrangements with our partners. Any of these factors could have a material adverse effect on the sales of any drug candidates that we may commercialize in the future. A significant disruption in our information technology systems or a cyber-security breach could compromise our clinical/patient data orother data, trade secrets and confidential information and adversely affect our business, results of operations and/or financial condition. We, our current and future contract research organizations, CMOs, licensees and partners are increasingly dependent on critical, complex andinterdependent information technology systems to operate our businesses. Like other companies in our industry, we rely on such systems for many aspectsof our business. Our systems process, transmit and store information related to research and development, the regulatory approval process, manufacturing,as well as the sale and distribution of our products and product candidates. Our information technology systems, and those of our partners, also managedata such as our financials, intellectual property rights, regulatory information, and other sensitive data relating to our business. Our systems additionallycontain confidential personal data and sensitive health information relating to our patients and consumers. Given that we rely on third parties for businesspurposes such as conducting clinical trials, we are exposed to third-party risk that such sensitive information will be compromised. Although weimplement data privacy and safety measures to secure the confidential information that is exchanged between us and third parties, the size and complexityof our information technology systems make them potentially vulnerable to breakdown, malicious cyber-attacks, intrusion, viruses and data securitybreaches by computer hackers, foreign governments, foreign companies or competitors, or by employee error or malfeasance. Such events may permitunauthorized persons to access, misappropriate and/or destroy sensitive data and result in the impairment or disruption of important business processes,loss or misuse of trade secrets, confidential information or other proprietary intellectual property or public exposure of personal information (includingsensitive personal information) of employees, business partners, clinical trial patients, customers and others. Any compromise of our data security couldalso result in a violation of applicable privacy and other laws and a loss of confidence in our data security measures. If such an event were to occur, ourbusiness, results of operations, financial condition and reputation could be adversely affected. Although we have not experienced a material security breach or cyber-attack, our information technology systems are subject to frequent attacks.While we have implemented protective measures, a significant breakdown, disruption, security breach or cyber-attack may nonetheless occur within ourinformation technology systems. Any of the foregoing could have a material adverse effect on our business, prospects, reputation, operating results andfinancial condition, including as a result of our being required to make significant investments to fix, fortify or replace our technology systems and/orbeing subject to lawsuits, fines, penalties or other government action. There can be no assurance that our efforts to protect our data and informationtechnology systems will prevent breakdowns or breaches in our systems, or those of third parties with which we do business. 28Table of Contents If our facility or those of our vendors incur damage or power is lost for a significant length of time, our business will suffer. We store some of our preclinical and clinical data at our facilities as well as those of our vendors. Any significant degradation or failure of our orour vendors’ computer systems could cause us to inaccurately calculate or lose our data. In addition, our stability samples are stored at our vendors’ facilities. If their facilities incur physical damage or have an extended power failure, itcould result in a loss of these samples. Loss of our clinical data or stability samples could result in significant delays in our drug development process andcould harm our business and operations. Competitive Risks Competing products in development may adversely affect acceptance of our future products. We are aware of a number of products and product candidates which compete or may potentially compete with our future products. Any of theseapproved products or product candidates, or others which may be developed in the future, may achieve a significant competitive advantage relative to ourfuture products and, in any event, the existing or future marketing and sales capabilities of these competitors may impair our or our collaborators’ abilityto compete effectively in the market. We are also aware of competitors, who are developing alternative treatments for disease targets to which our research and development programsare directed, any of which – or others which may be developed in the future – may achieve a significant competitive advantage relative to any futureproduct we may develop. Marketplace acceptance depends in part on competition in our industry, which is intense, and competing products in development mayadversely affect acceptance of our products. The extent to which any of our future products achieves market acceptance will depend on competitive factors. Competition in thebiopharmaceutical industry is intense and characterized by ongoing research and development and technological change. We face competition frommany for-profit companies and major universities and research institutions in the U.S. and abroad. We face competition from companies marketingexisting products or developing new products for diseases and conditions targeted by our technologies. We are aware of a number of products and productcandidates which compete or may potentially compete with PSMA-targeted imaging agents and therapeutics, or our other product candidates. We areaware of several competitors, such as Johnson & Johnson subsidiary Janssen Biotech, Inc.; Novartis AG and Pfizer, Inc. in collaboration with AstellasPharma US, Inc.; Aytu Bioscience, Inc.; Blue Earth Diagnostics, Limited and Bayer HealthCare Pharmaceuticals Inc., which have received approval for orare developing treatments or diagnostics for prostate cancer. Any of these competing approved products or product candidates, or others which may bedeveloped in the future, may achieve a significant competitive advantage relative to 1404, AZEDRA, PyL, 1095, or other product candidates. Competition with respect to our technologies and product candidates is based on, among other things, product efficacy, safety, reliability,method of administration, availability, price and clinical benefit relative to cost; timing and scope of regulatory approval; sales, marketing andmanufacturing capabilities; collaborator capabilities; insurance and other reimbursement coverage; and patent protection. Competitive disadvantages inany of these factors could materially harm our business and financial condition. Many of our competitors have substantially greater research anddevelopment capabilities and experience and greater manufacturing, marketing, financial and managerial resources than we do. These competitors maydevelop products that are superior to those we are developing and render our products or technologies non-competitive or obsolete. Our productcandidates under development may not compete successfully with existing products or product candidates under development by other companies,universities and other institutions. Drug manufacturers that are first in the market with a therapeutic for a specific indication generally obtain and maintaina significant competitive advantage over later entrants and therefore, the speed with which industry participants move to develop products, completeclinical trials, approve processes and commercialize products is an important competitive factor. If our product candidates receive marketing approval butcannot compete effectively in the marketplace, our operating results and financial position would suffer. 29Table of Contents Financial Risks We have outstanding debt - and failure by us or our royalty subsidiary to fulfill our obligations under the applicable loan agreements maycause the repayment obligations to accelerate. In November 2016, our subsidiary, MNTX Royalties, entered into a loan agreement (the “Royalty-Backed Loan”) with HealthCare RoyaltyPartners III, L.P. (“HCRP”) pursuant to which MNTX Royalties borrowed $50 million and had the ability, subject to mutual agreement with HCRP, toborrow an additional $50 million up to twelve months after the initial closing date of the loan. The loan will be repaid from the royalty payments from thecommercial sales of RELISTOR products owed under our agreement with Bausch. The obligations of MNTX Royalties under the loan agreement to repay the Royalty-Backed Loan may be accelerated upon the occurrence ofcertain events of default, including but not limited to, if: ●MNTX Royalties fails to pay any principal or interest (except as permitted) within three Business days of when such payment is due andpayable or otherwise made in accordance with the terms of the Royalty-Backed Loan; ●MNTX Royalties fails to pay when due any indebtedness of $15 thousand or more; ●any representation or warranty made by MNTX Royalties in the loan agreement or any other transaction document proves to be incorrect ormisleading in any material respect when made, and such failure is uncured on or before the 30th day following notice thereof; ●MNTX Royalties fails to perform or observe any covenant or agreement contained in the loan agreement or any other transaction document; ●any uninsured judgment, decree, or order in an amount in excess of $25 thousand is rendered against MNTX Royalties and enforcementproceedings have commenced upon such judgment, decree, or order or such judgment, decree, or order has not been stayed or bondedpending appeal, vacated, or discharged, within 30 days from entry; ●any of a set of defined insolvency events occurs; ●we default under the agreement pursuant to which we contributed the royalty and related rights under the RELISTOR license to MNTXRoyalties, and such default is continuing; ●any of the loan transaction documents cease to be in full force and effect or valid and enforceable; ●MNTX Royalties fails to perform or observe any covenant or agreement contained in any material contract and such failure is not cured orwaived within any applicable grace period; ●the agreement with Bausch is terminated or cancelled and is not replaced within 270 days after such termination or cancellation; and ●any security interest purported to be created by the loan agreement or the related agreement ceases to be in full force and effect, or any rights,powers, and privileges purported to be created and granted under the loan agreement or such security agreement ceases to be in full force andeffect. In connection with the Royalty-Backed Loan, MNTX Royalties granted a first priority lien and security interest (subject only to certain definedpermitted liens) in all of its assets and all real, intangible and personal property, including all of its right, title, and interest in and to the royalty paymentsunder our agreement with Bausch. Under the terms of the loan agreement, HCRP has no recourse for non-payment of the Royalty-Backed Loan to us, or toany of our assets other than the RELISTOR royalty rights held by MNTX Royalties. However, we do have certain obligations that run to the benefit ofHCRP with respect to the representations, warranties and covenants it makes under the agreement pursuant to which we contributed the royalty andrelated rights under the RELISTOR License to MNTX Royalties. A breach of these obligations could lead to recourse against us with respect to any lossessuffered by HCRP as a result of such breach. Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, and limit our ability to reactto changes in the economy or our industry. As of December 31, 2018, our outstanding non-recourse long term debt amounted to $44.6 million. This level could have adverse consequencesfor us, including: ●heightening our vulnerability to downturns in our business or our industry or the general economy and restricting us from makingimprovements or acquisitions, or exploring business opportunities; and ●limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors whohave greater capital resources. 30Table of Contents Developing product candidates and launching approved products requires us to obtain additional financing from time to time. Our access tocapital funding is uncertain. We incur significant costs to develop our product candidates and launch approved products such as AZEDRA. We do not have committedexternal sources of funding for these projects. We fund our operations, to a significant extent, with the proceeds from capital-raising. We may do so viaequity securities issuances in public offerings, through our three-year facility with an investment bank pursuant to which we have sold our stock in at-the-market (“ATM”) transactions for net proceeds of approximately $34.7 million and may sell from time to time up to an additional $75.0 million of ourstock, or through debt financing. We may also fund operations through collaboration, license, further royalty financings, private placement or otheragreements with one or more pharmaceutical or other companies, or the receipt of milestone and other payments for out-licensed products. To the extentwe raise additional capital by issuing equity securities, existing stockholders could experience substantial dilution, and if we issue securities other thancommon stock, new investors could have rights superior to existing stockholders. Any further debt financing that we may obtain may involve operatingcovenants that restrict our business and significant repayment obligations. To the extent we raise additional funds through new collaboration andlicensing arrangements, we may be required to relinquish some rights to technologies or product candidates, or grant licenses on terms that are notfavorable to us. We cannot predict with certainty when we will need additional funds, how much we will need, the form a financing may take or whetheradditional funds will be available at all. The variability of conditions in global financial and credit markets may exacerbate the difficulty of timingcapital raising or other financing, as a result of which we may seek to consummate such transactions substantially in advance of immediate need. Our needfor future funding will depend on numerous factors, including the advancement of existing product development projects, the launch of AZEDRA and theavailability of new projects; the achievement of events, most of which are out of our control and depend entirely on the efforts of others, triggeringmilestone payments to us; the progress and success of clinical trials and pre-clinical activities (including studies and manufacturing) involving productcandidates, whether conducted by collaborators or us; the progress of research programs carried out by us; changes in the breadth of our research anddevelopment programs; the progress of research and development efforts of collaborators; our ability to acquire or license necessary, useful or otherwiseattractive technologies; competing technological and market developments; the costs and timing of obtaining, enforcing and defending patent and otherintellectual property rights; the costs and timing of regulatory filings and approvals; our ability to manage our growth or contraction; and unforeseenlitigation. These factors may be more important with respect to product candidates and programs that involve technologies with which we have limitedprior experience. Insufficient funds may require us to delay, scale back or eliminate some or all of our research and development or commercializationprograms, cause us to lose rights under existing licenses or to relinquish greater or all rights to product candidates at an earlier stage of development or onless favorable terms than we would otherwise choose and may adversely affect our ability to operate as a going concern. We may not be able at a givennecessary time to obtain additional funding on acceptable terms, or at all. Our inability to raise additional capital on terms reasonably acceptable to uswould seriously jeopardize our business. We have a history of operating losses. We have incurred substantial losses throughout its history. A large portion of our revenue has historically consisted of upfront and milestonepayments from licensing transactions. We reported operating losses for 2018 and 2017, while we reported operating income for 2016, as a result of amilestone payment from Bausch. The timing and amount of any similar transactions in the future is highly unpredictable and uncertain. Without upfrontor other such payments, we operate at a loss, due in large part to the significant research and development expenditures required to identify and validatenew product candidates and pursue our development efforts. Moreover, we have derived no significant revenue from product sales and have only in thelast several years derived revenue from royalties. We may not achieve significant product sales or royalty revenue for a number of years, if ever. We expectto incur net operating losses and negative cash flow from operations in the future, which could increase significantly if we expand our clinical trialprograms and other product development efforts. Our ability to achieve and sustain profitability is dependent in part on obtaining regulatory approval forand then commercializing AZEDRA and other product candidates, either alone or with others. Our operations may not be profitable even if AZEDRA andany of our other product candidates under development are commercialized. Failure to become and remain profitable may adversely affect the marketprice of our common stock and our ability to raise capital and continue operations. Our ability to use net operating losses to offset future taxable income is subject to certain limitations. We currently have significant net operating losses (“NOLs”) that may be used to offset future taxable income. The U.S. Internal Revenue Codelimits the amount of taxable income that may be offset annually by NOL carryforwards after a change in control (generally greater than 50% change inownership) of a loss corporation, and our use of NOL carryforwards may be further limited as a result of any future equity transactions that result in anadditional change of control. 31Table of Contents Our stock price has a history of volatility and may be affected by selling pressure. You should consider an investment in our stock as riskyand invest only if you can withstand a significant loss. Our stock price has a history of significant volatility. It has varied between a high of $9.42 and a low of $3.62 in 2018, between a high of $11.72and a low of $4.60 in 2017, and between a high of $9.78 and a low of $3.61 in 2016. Factors that may have a significant impact on the market price of ourcommon stock include the results of clinical trials and pre-clinical studies undertaken by us or our collaboration partners; delays, terminations or otherchanges in development programs; developments in marketing approval efforts; developments in collaborator or other business relationships, particularlyregarding RELISTOR, AZEDRA or other significant products or programs; technological innovation or product announcements by us, our collaboratorsor our competitors; patent or other proprietary rights developments; governmental regulation; changes in reimbursement policies or health carelegislation; safety and efficacy concerns about products developed by us, our collaborators or our competitors; our ability to fund ongoing operations;fluctuations in our operating results; general market conditions; and the reporting of or commentary on such matters by the press and others. At times, ourstock price has been volatile even in the absence of significant news or developments. The stock prices of biotechnology companies and securitiesmarkets generally have been subject to dramatic price swings in recent years, and financial and market conditions during that period have resulted inwidespread pressures on securities of issuers throughout the world economy. Our stockholders may be diluted, and the price of our common stock may decrease, as a result of future issuances of securities, exercises ofoutstanding stock options, or sales of outstanding securities. We expect to issue additional common stock in public offerings, private placements and/or through our October 2018 sales agreement with aninvestment bank, pursuant to which we may sell from time to time up to $75.0 million of our stock, and to issue options to purchase common stock forcompensation purposes. We may issue preferred stock, restricted stock units or securities convertible into or exercisable or exchangeable for our commonstock. All such issuances would dilute existing investors and could lower the price of our common stock. Sales of substantial numbers of outstandingshares of common stock could also cause a decline in the market price of our stock. We require substantial external funding to finance our research anddevelopment programs and may seek such funding through the issuance and sale of our common stock, which we have done in follow-on primaryofferings in 2012, 2013, 2014 and 2018, and ATM transactions in 2017 and 2018. We have a shelf registration statement which may be used to issue up to$250.0 million of common stock and other securities before any underwriter discounts, commissions, and offering expenses. We also have in placeregistration statements covering shares issuable pursuant to our equity compensation plans, and sales of our securities under them could cause the marketprice of our stock to decline. Sales by existing stockholders or holders of options or other rights may adversely affect the market price of our commonstock. We are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act. The Sarbanes-Oxley Act requires that we maintain effective internal controls over financial reporting and disclosure controls and procedures.Among other things, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management toreport on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 ofthe Sarbanes-Oxley Act and related regulations (“Section 404”). Compliance with Section 404 requires substantial accounting expense and significantmanagement efforts. Our testing, or the subsequent review by our independent registered public accounting firm, may reveal deficiencies in our internalcontrols that would require us to remediate in a timely manner so as to be able to comply with the requirements of Section 404 each year. Because of itsinherent limitations, internal control over financial reporting may not prevent or detect all deficiencies or weaknesses in our financial reporting. If we arenot able to comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, theNasdaq Stock Market or other regulatory authorities that would require additional financial and management resources and could adversely affect themarket price of our common stock. No assurance is given that our procedures and processes for detecting weaknesses in our internal control over financialreporting will be effective. We do not intend to pay dividends on our common stock. Until such time as we pay cash dividends, our stockholders must rely on increasesin our stock price for appreciation. We have never declared or paid dividends on our common stock. We intend to retain future earnings to develop and commercialize our productcandidates. Therefore, we do not intend to pay cash dividends in the foreseeable future. Until such time as we determine to pay cash dividends on ourcommon stock, our stockholders must rely on increases in the market price of our common stock for appreciation of their respective investments. 32Table of Contents Other Risks Our principal stockholders are able to exert significant influence over matters submitted to stockholders for approval. At December 31, 2018, our directors and executive officers together beneficially owned or controlled approximately 4.2% of our outstandingcommon shares, including shares currently issuable upon option exercises, and our five largest other stockholders held approximately 39.8%. Shouldthese parties choose to act alone or together, they could exert significant influence in determining the outcome of corporate actions requiring stockholderapproval and otherwise control our business. This control could, among other things, have the effect of delaying or preventing a change in control of theCompany, adversely affecting our stock price. Anti-takeover provisions may make removal of our Board and/or management more difficult, discouraging hostile bids for control thatmay be beneficial to our stockholders. Our Board is authorized, without further stockholder action, to issue from time to time shares of preferred stock in one or more designated seriesor classes. The issuance of preferred stock, as well as provisions in some outstanding stock options that provide for acceleration of vesting upon a changeof control, and Section 203 and other provisions of the Delaware General Corporation Law could make a takeover or the removal of our Board ormanagement more difficult; discourage hostile bids for control in which stockholders may receive a premium for their shares; and otherwise dilute therights of common stockholders and depress the market price of our stock. Item 1B. Unresolved Staff Comments There were no unresolved SEC staff comments regarding our periodic or current reports under the Exchange Act as of December 31, 2018. Item 2. Properties At December 31, 2018, we occupied approximately 26,000 square feet of corporate office space located in New York City, pursuant to leaseagreements expiring in September 2030 (subject to an early termination right) under which we pay rent and facilities charges including utilities, taxes,and operating expenses. We also lease approximately 4,000 square feet of office space in Lund, Sweden. The lease term expired on December 31, 2018 and was renewedfor an additional three years. In connection with the February 2019 acquisition of the AZEDRA manufacturing assets, we entered into a sublease agreement for theradiopharmaceutical manufacturing facility located in Somerset, New Jersey. We now occupy approximately 11,400 square feet of space under a subleaseagreement expiring in November 2028, under which we pay rent and facilities charges including utilities, taxes and operating expenses. Item 3. Legal Proceedings Abbreviated New Drug Application Litigations RELISTOR Subcutaneous Injection - Mylan Paragraph IV Certifications On or about October 6, 2015, November 20, 2015, December 22, 2015, and December 23, 2015, Progenics, Salix Pharmaceuticals, Inc. (“Salix”)and Wyeth LLC (“Wyeth”) received four separate notifications of a Paragraph IV certification for RELISTOR (methylnaltrexone bromide) subcutaneousinjection, for certain patents that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, also known as “the OrangeBook.” The certifications resulted from the filing by Mylan Pharmaceuticals Inc. of an Abbreviated New Drug Application (“ANDA”) with the FDA,challenging such patents for RELISTOR subcutaneous injection and seeking to obtain approval to market a generic version of RELISTOR subcutaneousinjection before some or all of these patents expire. 33Table of Contents District Court Actions Progenics, Salix, Valeant (now Bausch Health Companies Inc., “Bausch”), and Wyeth filed suit against Mylan Pharmaceuticals, Inc. and MylanInc. in the District of New Jersey on November 19, 2015 (2:15-cv-8180-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos.8,247,425, 8,420,663, 8,552,025, and 8,822,490 based upon Mylan Pharmaceutical Inc.’s filing of its ANDA seeking to obtain approval to market ageneric version of RELISTOR vials before some or all of these patents expire. On February 4, 2016, Progenics, Salix, Bausch, and Wyeth filed an amendedcomplaint, identifying Mylan Laboratories Ltd. as an additional Defendant, and further seeking declaratory judgment of infringement of U.S. Patent No.9,180,125. Progenics, Salix, Bausch, and Wyeth filed suit against Mylan Pharmaceuticals, Inc., Mylan Laboratories Ltd., and Mylan Inc. in the District ofNew Jersey on January 4, 2016 (2:16-cv-00035-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663,8,552,025, and 8,822,490 based upon Mylan Pharmaceutical Inc.’s filing of its ANDA seeking to obtain approval to market a generic version ofRELISTOR prefilled syringes before some or all of these patents expire. On January 25, 2016, Progenics, Salix, Bausch, and Wyeth filed an amendedcomplaint, further seeking declaratory judgment of infringement of U.S. Patent No. 9,180,125. Progenics, Salix, Bausch, and Wyeth filed suit againstMylan Pharmaceuticals, Inc., Mylan Laboratories Ltd., and Mylan Inc. in the District of New Jersey on September 1, 2017 (2:17-cv-06714-SRC-CLW)seeking declaratory judgment of infringement of U.S. Patent No. 9,669,096 based upon Mylan Pharmaceutical Inc.’s filing of ANDAs seeking to obtainapproval to market generic versions of RELISTOR vials and prefilled syringes before the patents expires. On September 18, 2017, Progenics, Salix,Bausch, and Wyeth filed an amended complaint, further seeking declaratory judgment of infringement of U.S. Patent No. 9,492,445. The 2:15-cv-8180-SRC-CLW, 2:16-cv-00035-SRC-CLW, 2:15-cv-08353-SRC-CLW, and 2:16-cv-00889-SRC-CLW actions were consolidatedinto a single action in the District of New Jersey (2:15-cv-08180-SRC-CLW). On May 1, 2018, the Court granted Plaintiffs’ motion for partial summaryjudgment as to the validity of claim 8 of U.S. Patent No. 8,552,025. On May 23, 2018, the Court entered an order for final judgment under Fed. R. Civ. P.54(b) in favor of Plaintiffs and against Mylan as to claim 8 of the ’025 patent. Litigation in the 2:17-cv-06714-SRC-CLW action is underway. Fact discovery in this action has closed and expert discovery deadlines have notyet been set. This action has been consolidated for purposes of trial only with the 2:15-cv-8180 action. Federal Circuit Appeal On May 25, 2018, Mylan filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit. The matter is currently pendingon appeal at the Federal Circuit. On July 9, 2018, Bausch and Salix filed a motion to disqualify Katten Muchin Rosenman LLP as counsel for Mylan. On July 17, 2018, an orderwas issued stating the briefing on the merits of Mylan’s appeal pending the disposition of the motion to disqualify. Oral argument was held on September12, 2018. A decision disqualifying Katten Muchin Rosenman LLP as counsel for Mylan was issued on February 8, 2019, by the Federal Circuit. Meritsbriefing is currently underway. The deadline for submission of Mylan’s opening brief is April 9, 2019. RELISTOR Tablets - Actavis Paragraph IV Certifications On or about October 24, 2016 and October 24, 2017, Progenics, Salix, Bausch and Wyeth received two separate notifications of a Paragraph IVcertification for RELISTOR (methylnaltrexone bromide) tablets, for certain patents that are listed in the FDA’s Orange Book. The certification resultedfrom the filing by Actavis Laboratories Fl., Inc. (“Actavis”) of an ANDA with the FDA, challenging such patents for RELISTOR tablets and seeking toobtain approval to market a generic version of RELISTOR tablets before some or all of these patents expire. District Court Actions Progenics, Salix, Bausch, and Wyeth filed suit against Actavis Laboratories FL, Inc., Actavis LLC, Teva Pharmaceuticals USA, Inc., and TevaPharmaceuticals Industries Ltd. in the District of New Jersey on December 6, 2016 (2:16-cv-09038-SRC-CLW) seeking declaratory judgment ofinfringement of U.S. Patent Nos. 8,420,663, 8,524,276, 8,956,651, 9,180,125, and 9,314,461 based upon Actavis’s filing of an ANDA seeking to obtainapproval to market a generic version of RELISTOR tablets before some or all of these patents expire. Progenics, Salix, Bausch, and Wyeth filed suit against Actavis Laboratories FL, Inc., Actavis LLC, Teva Pharmaceuticals USA, Inc., and TevaPharmaceuticals Industries Ltd. in the District of New Jersey on December 8, 2017 (2:17-cv-12857-SRC-CLW) seeking declaratory judgment ofinfringement of U.S. Patent Nos. 9,724,343 and 9,492,445 based upon Actavis’s filing of an ANDA seeking to obtain approval to market a generic versionof RELISTOR tablets before some or all of these patents expire. 34Table of Contents The 2:16-cv-09038-SRC-CLW and 2:17-cv-12857-SRC-CLW actions were consolidated into a single action in the District of New Jersey (2:16-cv-09038-SRC-CLW). Litigation is underway and is currently in the expert discovery phase. European Opposition Proceedings In addition to the above described ANDA notifications, in October 2015, Progenics received notices of opposition to three European patentsrelating to methylnaltrexone. Notices of opposition against EP1615646 were filed on September 24, 2015 separately by each of Actavis Group PTC ehfand Fresenius Kabi Deutschland GmbH. Notices of opposition against EP2368553 were filed on September 29, 2015 and September 30, 2015 byFresenius Kabi Deutschland GmbH and Actavis Group PTC ehf, respectively. Notices of opposition against EP2368554 were filed on September 24, 2015separately by each of Actavis Group PTC ehf and Fresenius Kabi Deutschland GmbH. On May 11, 2017, the opposition division provided notice thatEP2368553 will be revoked. On June 28, 2017, the opposition division provided notice that EP1615646 will be revoked. On July 4, 2017, the oppositiondivision provided notice that EP2368554 will be revoked. Each of these matters are on appeal with the European Patent Office. For each of the above-described proceedings, we and Bausch continue to cooperate closely to vigorously defend and enforce RELISTORintellectual property rights. Pursuant to the RELISTOR License Agreement between us and Bausch, Bausch has the first right to enforce the intellectualproperty rights at issue and is responsible for the costs of such enforcement. We are or may be from time to time involved in various other disputes, governmental and/or regulatory inspections, inquires, investigations andproceedings that could result in litigation, and other litigation matters that arise from time to time. The process of resolving matters through litigation orother means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect us, our results of operations,financial condition, and cash flows. PSMA-617 German District Court Litigation We announced a lawsuit and associated worldwide patent ownership dispute based on our claims to certain inventions related to PSMA-617, aPSMA-targeted radiopharmaceutical compound under development for the treatment of prostate cancer that is the subject of certain European PatentApplications filed by the University of Heidelberg (“the University”). On November 8, 2018, MIP filed a complaint against the University in the District Court of Mannheim in Germany. In this Complaint, theCompany claims that the discovery and development of PSMA-617 was related to work performed under a research collaboration sponsored by MIP. MIPalleged that the University breached certain contracts with MIP and that MIP is the co-owner of inventions embodied in certain worldwide patent filingsrelated to PSMA-617, currently pending in the Europe and the United States that were filed by the University in its own name. On February 27, 2019,Endocyte, Inc., a wholly owned subsidiary of Novartis AG, filed a motion to intervene in the German litigation. Endocyte is the exclusive licensee of thepatent rights that are the subject of the German proceedings. On November 27, 2018, MIP requested that the European Patent Office (“EPO”) stay the examination of European Patent (EP) 3 038 996 A1 (EP14 799 340.6) and of the Divisional Applications EP 18 172 716.5, EP18 184 296.4, and EP 18 203 547.7 pending a decision from the German Districtcourt on MIP’s Complaint. On December 10, 2018, the EPO granted MIP’s request and stayed the examination of the patent and patent applicationseffective November 27, 2018. Likewise, on December 20, 2018, MIP filed a Confirmation of Ownership with the United States Patent and TrademarkOffice (“USPTO”) in the corresponding US patent applications (US Serial Nos. 15/131,118; 16/038,729 and 16/114988). MIP’s filing with the USPTOtakes the position that, in light of the collaboration and contracts between MIP and the University, MIP is the co-owner of these pending U.S. patentapplications. Item 4. Mine Safety Disclosures Not Applicable 35Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our common stock is quoted on The Nasdaq Stock Market LLC under the symbol PGNX. On March 11, 2019, there were approximately 63holders of record of our common stock. Comparative Stock Performance Graph The graph below compares, for the past five years, the cumulative stockholder returns on our common stock with the cumulative stockholderreturns of (i) the Nasdaq U.S. Benchmark (TR) Index and (ii) the Nasdaq Biotechnology Index, assuming an investment in each of $100 on December 31,2013. We changed our comparison peer group from the ICB: 4577 Pharmaceuticals (Subsector) Index to the Nasdaq Biotechnology Index. The reasonfor this change is that we believe the Nasdaq Biotechnology Index is more reflective of the biotechnology markets that we serve and therefore provides ameaningful comparison of our stock performance to investors. The stock performance graph below includes a comparison of our cumulative total return toboth of the selected indices that will be used going forward ((i) Nasdaq U.S. Benchmark (TR) Index and (ii) Nasdaq Biotechnology Index), and thediscontinued index (ICB: 4577 Pharmaceuticals (Subsector) Index). 36Table of Contents Dividends We have never paid any dividends, and we currently anticipate that all earnings, if any, will be retained for development of our business and nodividends will be declared in the foreseeable future. Item 6. Selected Financial Data The selected historical consolidated statement of operations data presented below for the years ended December 31, 2018, 2017, and 2016 andthe historical consolidated balance sheet data as of December 31, 2018 and 2017 have been derived from our audited consolidated financial statements,which are included elsewhere in this Annual Report on Form 10-K. The historical consolidated statement of operations data presented below for the yearsended December 31, 2015 and 2014 and the historical consolidated balance sheet data as of December 31, 2016, 2015, and 2014 have been derived fromour audited consolidated financial statements that do not appear in this report. The data set forth below should be read in conjunction with Management’sDiscussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes includedelsewhere herein. The selected historical financial information in this section is not intended to replace our financial statements and the related notesthereto. Years Ended December 31, 2018 2017 2016 2015 2014 (In thousands, except per share data) Consolidated Statements of Operations Data: Revenue: Royalty income $14,908 $10,965 $10,295 $6,608 $3,101 Other revenue 714 733 59,134 2,068 41,276 Total revenue 15,622 11,698 69,429 8,676 44,377 Expenses: Research and development 35,147 42,589 37,569 28,196 28,592 Selling, general and administrative 29,431 24,909 23,356 18,184 15,489 Intangible impairment charges 23,200 - - - 2,676 Change in contingent consideration liability (5,800) 2,600 (4,600) 1,600 1,500 Total operating expenses 81,978 70,098 56,325 47,980 48,257 Other operating income - - - - 7,250 Operating (loss) income (66,356) (58,400) 13,104 (39,304) 3,370 Other (expense) income: Interest (expense) income and other income, net (2,933) (4,285) (527) 52 51 Total other (expense) income (2,933) (4,285) (527) 52 51 (Loss) income before income tax benefit (expense) (69,289) (62,685) 12,577 (39,252) 3,421 Income tax benefit (expense) 1,632 11,672 (1,844) 133 989 Net (loss) income (67,657) (51,013) 10,733 (39,119) 4,410 Net loss attributable to noncontrolling interests - - (73) (7) - Net (loss) income attributable to Progenics $(67,657) $(51,013) $10,806 $(39,112) $4,410 Per share amount on net (loss) income attributable to Progenics: Basic $(0.87) $(0.73) $0.15 $(0.56) $0.06 Diluted $(0.87) $(0.73) $0.15 $(0.56) $0.06 December 31, 2018 2017 2016 2015 2014 (In thousands) Consolidated Balance Sheets Data: Cash and cash equivalents $137,686 $90,642 $138,909 $74,103 $119,302 Working capital 120,683 81,511 131,744 73,556 115,241 Total assets 169,497 145,957 198,986 131,251 161,037 Other liabilities - long term 44,976 67,145 77,867 30,861 29,443 Total stockholders' equity 101,075 63,453 104,762 90,661 124,909 37Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are an oncology company focused on the development and commercialization of innovative targeted medicines and artificial intelligence tofind, fight and follow cancer. Highlights of our recent progress include the approval, launch and manufacturing of AZEDRA®. Our pipeline includestherapeutic agents designed to precisely target cancer (1095 and PSMA TTC), as well as a prostate-specific membrane antigen (“PSMA”) targeted imagingagent for prostate cancer (PyLTM). Our business strategy requires us to manage our business to provide for the continued development, manufacturing and potentialcommercialization of our proprietary and partnered product candidates. This includes identifying and advancing a pipeline of product candidates byidentifying product candidates, technologies and businesses for acquisition and in-licensing that we believe are a strategic fit with our existing business. Our strategy also calls for us to undertake increased research and development activities and to manage an increasing number of relationshipswith partners and other third parties, while simultaneously managing the capital necessary to support this strategy. An element of our research anddevelopment strategy has been to in-license technology and product candidates. For additional discussion of our product candidates, license agreements and other arrangements, see Item 1. Business. Recent Developments In February 2019, we acquired the AZEDRA manufacturing assets for $8.0 million cash consideration and entered into a sublease agreement forthe radiopharmaceutical manufacturing facility located in Somerset, New Jersey. The Somerset site serves as the launch facility for AZEDRA and will alsoprovide manufacturing support for our development stage radiopharmaceuticals, including 1095. Results of Operations The following table is an overview of our results of operations (in thousands, except percentages): 2018 2017 2016 2018 vs. 2017 2017 vs. 2016 Total revenue $15,622 $11,698 $69,429 34% (83%) Operating expenses $81,978 $70,098 $56,325 17% 24% Operating (loss) income $(66,356) $(58,400) $13,104 (14%) (546%) Net (loss) income $(67,657) $(51,013) $10,733 (33%) (575%) Net (loss) income attributable to Progenics $(67,657) $(51,013) $10,806 (33%) (572%) Revenue Our sources of revenue during the years indicated below primarily include royalties and license fees from Bausch and other collaborators and, toa small extent, sale of research reagents. The following table is a summary of our worldwide revenue (in thousands, except percentages): Source 2018 2017 2016 2018 vs. 2017 2017 vs. 2016 Royalty income $14,908 $10,965 $10,295 36% 7% Other revenue 714 733 59,134 (3%) (99%) Total revenue $15,622 $11,698 $69,429 34% (83%) Royalty income. We recognized royalty income primarily based on the below net sales of RELISTOR as reported to us by Bausch (in thousands).Bausch’s reported net sales for the year ended December 31, 2018 were impacted by a non-recurring favorable sales return adjustment, as well as areduction in channel inventory in the fourth quarter of 2018. 2018 2017 2016 2018 vs. 2017 2017 vs. 2016 U.S. $96,800 $71,100 $66,900 36% 6% Outside U.S. 2,600 2,000 3,700 30% (46%) Worldwide net sales of RELISTOR $99,400 $73,100 $70,600 36% 4% 38Table of Contents Royalty income increased by $3.9 million, or 36%, in 2018 compared to 2017 and increased by $0.7 million, or 7%, in 2017 compared to 2016,due primarily to higher net sales of RELISTOR. Bausch launched RELISTOR tablets in the U.S. in September 2016 following receipt of FDA approval inJuly 2016. Other revenue. The other revenue remained flat at $0.7 million in 2018 and 2017. The decrease in other revenue of $58.4 million, or 99%, in2017 compared to 2016 was primarily attributable to the $50.0 million milestone payment under the Bausch license agreement and $7.0 million upfrontand milestone payments under the Bayer license agreement, all of which were received in 2016. Operating Expenses The following table is a summary of our operating expenses (in thousands, except percentages): Operating Expenses 2018 2017 2016 2018 vs. 2017 2017 vs. 2016 Research and development $35,147 $42,589 $37,569 (17%) 13% Selling, general and administrative 29,431 24,909 23,356 18% 7% Intangible impairment charge 23,200 - - 100% N/A Change in contingent consideration liability (5,800) 2,600 (4,600) (323%) (157%) Total operating expenses $81,978 $70,098 $56,325 17% 24% Research and Development (“R&D”) We do not track fully burdened research and development costs separately for each of our product candidates. We review our research anddevelopment expenses by focusing on external and internal development costs. External development costs consist of costs associated with our clinicaltrials, including pharmaceutical development and manufacturing of clinical trial materials. Included in other costs are external corporate overhead coststhat are not specific or allocated to any one program. Internal costs consist of salaries and wages, share-based compensation and benefits, which are nottracked by program as several of our departments support multiple development programs. The following table summarizes the external costs attributableto each program and internal costs (in thousands): Years Ended December 31, 2018 2017 2016 External Costs PyL $9,053 $8,633 $3,525 AZEDRA 5,982 11,394 10,301 1404 2,645 7,428 8,060 1095 988 671 1,816 Relistor 48 1,126 1,257 Other 3,926 3,263 3,460 Total External Costs $22,642 $32,515 $28,419 Internal Costs 12,505 10,074 9,150 Total R&D Costs $35,147 $42,589 $37,569 R&D expenses decreased by $7.4 million, or 17%, in 2018 compared to 2017, primarily attributable to lower external costs associated with thecompletion of the Phase 2 trial for AZEDRA and the Phase 3 trial for 1404. R&D expenses increased by $5.0 million, or 13%, in 2017 compared to 2016,primarily attributable to higher clinical trial and contract manufacturing costs for PyL and higher consulting fees to support the NDA filing and pre-approval inspection readiness for AZEDRA. Partially offsetting the increase were lower clinical drug supply costs for AZEDRA (as the Phase 2registrational trial was completed) and lower manufacturing scale-up costs for 1095. Selling, General and Administrative (“SG&A”) SG&A expenses increased by $4.5 million, or 18%, in 2018 compared to 2017, primarily attributable to higher costs associated with thecommercial launch of AZEDRA. SG&A expenses increased by $1.6 million, or 7%, in 2017 compared to 2016, primarily attributable to higher costsassociated with building our commercial capabilities in preparation for a potential AZEDRA launch if approved by the FDA, partially offset bydepreciation expense. In addition, the 2016 period included an accrual for compensation related to litigation with a former employee, which was notrepeated in 2017. 39Table of Contents Intangible Impairment Charge The completion of the 1404 Phase 3 trial, whereby only one of the co-primary endpoints was met, negatively impacted our 2018 assumptions ofpotential future sales projections, resulting in a $23.2 million impairment of the 1404 indefinite-lived asset fair value. The corresponding non-cashimpairment charge was recorded as part of operating expenses in the consolidated statements of operations. Change in Contingent Consideration Liability The decrease in the contingent consideration liability of $5.8 million in 2018 was primarily attributable to a decrease in sales projections andprobability of success for 1404, following results from the recently completed Phase 3 trial, whereby only one of the co-primary endpoints was met and wedecided not to further invest in 1404, partially offset by higher estimated probability of success of AZEDRA, which was approved on July 30, 2018, and adecrease in the discount period used to calculate the potential milestone payments to former MIP stockholders. The increase in the contingentconsideration liability of $2.6 million in 2017 was primarily attributable to a higher estimated probability of success of AZEDRA, as our registrationalPhase 2b trial of AZEDRA achieved the primary endpoint under a SPA agreement with the FDA and the reduction in the discount period used to calculatethe present value of the contingent consideration liability. The decrease in the contingent consideration liability of $4.6 million in 2016 resultedprimarily from a change in the discount rate and sales projections used in calculating the contingent consideration liability. Other (Expense) Income The following table is a summary of our other (expense) income (in thousands, except percentages): Other (Expense) Income 2018 2017 2016 2018 vs. 2017 2017 vs. 2016 Interest (expense) income, net (2,912) (4,038) (493) (28%) 719% Other (expense) income, net (21) (247) (34) (91%) 626% Other (expense) income $(2,933) $(4,285) $(527) (32%) 713% Total other (expense) income, net decreased by $1.4 million, or 32% in 2018 compared to 2017, primarily attributable to increased interestincome due to higher average cash balances and higher interest rates during the current year. The other (expense) income, net increased $3.8 million, or713%, in 2017 compared to 2016, primarily attributable to interest expense for the Royalty-Backed Loan, which was executed in November 2016. Income Tax Benefit (Expense) The following table is a summary of our income tax benefit (expense) and effective tax rate (in thousands, except percentages): 2018 2017 2016 Income tax benefit (expense) $1,632 $11,672 $(1,844)Effective tax rate 2.4% 18.6% 14.7% We account for income taxes using the liability method in accordance with the Accounting Standards Codification (“ASC”) Topic740, IncomeTaxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for income tax purposes. During 2018, we recorded an income tax benefit of approximately $1.6 million. The primary driver of this tax benefit is related to the impairmentand reclassification of indefinite-lived intangibles for in process research and development assets. Our effective tax rate for 2018 was 2.4%. On December 22, 2017, the U.S. government enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (“TaxAct”). As a result of federal tax rate change, we recorded a provisional income tax benefit of approximately $3.7 million in 2017. In accordance with StaffAccounting Bulletin No. 118, we completed the analysis of the impact of the 2017 Tax Act with no change to the provisional amount recorded in 2017. In2017, we recorded an income tax benefit of approximately $11.7 million in 2017, of which $6.6 million related to the reduction in the federal and statetax rates, $4.8 million related to the use of our naked credit as a source of income to release a portion of our valuation allowance and the remaining $0.2million related to a refundable AMT credit. Our effective tax rate for 2017 was 18.6%. In 2016, we recorded an income tax expense of approximately $1.8million in 2016 as a result of an increase in our effective tax rate to 14.7%. Our effective tax rate in 2016 was impacted by our relocation to New YorkCity, which has its own local tax rate and adds to the overall tax rate used for calculating the income tax provision. 40Table of Contents Liquidity and Capital Resources The following table is a summary of selected financial data (in thousands): 2018 2017 2016 Cash and cash equivalents $137,686 $90,642 $138,909 Accounts receivable, net $3,803 $3,972 $4,864 Total assets $169,497 $145,957 $198,986 Working capital $120,683 $81,511 $131,744 Our current principal sources of revenue from operations are royalties and development and commercial milestones. Our principal sources ofliquidity are our existing cash and cash equivalents. As of December 31, 2018, we had cash and cash equivalents of approximately $137.7 million, anincrease of $47.1 million from $90.6 million at December 31, 2017, reflecting proceeds received from the sale of common stock, partially offset byoperating expenses. We expect to continue to have significant cash requirements to support product development activities and the commercial launch ofAZEDRA. The amount and timing of cash requirements will depend on the progress and success of our clinical development programs, regulatory andmarket acceptance, and the resources we devote to research and commercialization activities. The amount of cash on-hand will depend on the progress ofvarious clinical programs, potential sales from the launch of AZEDRA, and the achievement of various milestones and royalties under our existing licenseagreements. We believe that our current cash and cash equivalents, which includes $104.7 million of net proceeds received through December 31, 2018 froman underwritten public offering and the sale of our stock in at-the-market (“ATM”) transactions under a controlled equity offering sales agreement (seeShelf Registration section below for additional details), will be sufficient to fund our operations for at least the next twelve months. We expect to fund ouroperations going forward with existing cash resources, anticipated revenues from our existing license agreements, sales of AZEDRA, and cash that we mayraise through future capital raising and other financing transactions. If we do not realize sufficient royalty or milestone revenue from our license agreements, sales of AZEDRA, or are unable to enter into favorablecollaboration, license, asset sale, additional capital raising, or other financing transactions, we will have to reduce, delay, or eliminate spending on certainprograms, and/or take other economic measures. Shelf Registration During the first quarter of 2017, we filed a shelf registration statement that permitted: (a) the offering, issuance and sale of up to a maximumaggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and/or units; and (b) as part of the $250.0million, the offering, issuance and sale by us of up to a maximum aggregate offering price of $75.0 million of our common stock under our salesagreement with Cantor Fitzgerald & Co. (“Cantor”) in one or more ATM offerings (the “2017 Sales Agreement”). During the third quarter of 2018, we raised $70.0 million, net of underwriting discounts and commissions and offering expenses, in anunderwritten public offering of 9.1 million shares of common stock at a public offering price of $8.25 per share. Through December 31, 2018, we sold atotal of approximately 5.1 million shares of our common stock in ATM offerings under the sales agreement, for net proceeds, after deducting commissionsand other transaction costs, of approximately $34.7 million. In October 2018, we filed a new shelf registration statement. The new shelf registration replaced our prior shelf registration statement, pursuant towhich no additional securities will be offered or sold. The new shelf registration statement permits: (a) the offering, issuance and sale of up to a maximumaggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and/or units; and (b) as part of the $250.0million, the offering, issuance and sale by us of up to a maximum aggregate offering price of $75.0 million of our common stock under our salesagreement with Cantor in one or more ATM offerings. In addition, in October 2018, we entered into a new sales agreement with Cantor, as sales agent, which replaced the 2017 Sales Agreement (the“2018 Sales Agreement”). Pursuant to the 2018 Sales Agreement, we may offer and sell through Cantor, from time to time, shares of our common stock upto an aggregate offering price of $75.0 million. The 2018 Sales Agreement may be terminated by Cantor or us at any time upon ten days’ notice, or byCantor at any time in certain circumstances, including the occurrence of a material adverse change in our business or financial condition. 41Table of Contents Cash Flows The following table is a summary of our cash flow activities (in thousands): 2018 2017 2016 Net cash (used in) provided by operating activities $(46,752) $(54,107) $19,518 Net cash used in investing activities $(817) $(232) $(3,939)Net cash provided by financing activities $94,717 $5,510 $49,622 Operating Activities Net cash used in operating activities during 2018 and 2017 was primarily attributable to funding operating expenses, net of non-cash items,including the intangible impairment charge in 2018 and change in fair value of contingent consideration liability. Net cash provided by operatingactivities during 2016 was primarily attributable to the milestone payment received from Bausch for the approval of RELISTOR tablets ($50.0 million),partially offset by operating expenses, net of non-cash items. Investing Activities Net cash used in investing activities was primarily related to capital expenditures, partially offset by proceeds from the sale of fixed assets. Financing Activities Net cash provided by financing activities was primarily attributable to net proceeds from the sale of our common stock in an underwritten publicoffering in 2018, ATM transactions in 2018 and 2017, net proceeds from the royalty monetization in 2016, and proceeds from the exercise of stockoptions. Contractual Obligations Our funding requirements for the next 12 months and beyond will include required payments under operating leases and fixed payments underlicense agreements. The following table summarizes our contractual obligations as of December 31, 2018 for future payments under these agreements (inmillions): Payments Due by Period (1) Total Less than oneyear 1 to 3 years 3 to 5 years Greater than5 years Operating leases $26.6 $1.9 $4.0 $4.3 $16.4 Fixed payments under license agreements 1.5 0.2 0.4 0.5 0.4 Total $28.1 $2.1 $4.4 $4.8 $16.8 (1) Does not include milestone or contractual payment obligations contingent upon the achievement of certain milestones or events if the amount and timing of suchobligations are unknown or uncertain. We may be required to pay additional amounts up to approximately: (i) $90.6 million in contingent milestone payments under our licenseagreements; (ii) $93.0 million in payments to the former stockholders of MIP, contingent upon achieving specified commercialization events or sales targets; and (iii) $57.1 millionin future principal and interest, based upon estimated sales projections, under the Royalty-Backed Loan. We periodically assess the scientific progress and merits of each of our programs to determine if continued research and development iscommercially and economically viable. Certain of our programs have been terminated due to the lack of scientific progress and prospects for ultimatecommercialization. Because of the uncertainties associated with research and development in these programs, the duration and completion costs of ourresearch and development projects are difficult to estimate and are subject to considerable variation. Our inability to complete research and developmentprojects in a timely manner or failure to enter into collaborative agreements could significantly increase capital requirements and adversely affect ourliquidity. 42Table of Contents Our cash requirements may vary materially from those now planned because of results of research and development and product testing, changesin existing relationships or new relationships with licensees, licensors or other collaborators, changes in the focus and direction of our research anddevelopment programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatoryapproval process, manufacturing and marketing and other costs associated with the commercialization of products following receipt of regulatoryapprovals and other factors. The above discussion contains forward-looking statements based on our current operating plan and the assumptions on which it relies. Therecould 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 consolidated financial statements in conformity with accounting principles generally accepted in the U.S. Our significantaccounting policies are disclosed in Note 2 to our consolidated financial statements included in this report. The selection and application of theseaccounting principles and methods requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues andexpenses, as well as certain financial statement disclosures. We evaluate these estimates on an ongoing basis. We base these estimates on historicalexperience and on various other assumptions that we believe reasonable under the circumstances. The results of these evaluations form the basis formaking judgments about the carrying values of assets and liabilities that are not otherwise readily apparent. While we believe that the estimates andassumptions we use in preparing the financial statements are appropriate, they are subject to a number of factors and uncertainties regarding their ultimateoutcome and, therefore, actual results could differ from these estimates. The critical accounting policies we use and the estimates we make are described below. These are policies and estimates that we believe are themost important in portraying our financial condition and results of operations, and that require our most difficult, subjective or complex judgments, oftenas a result of the need to make estimates about the effect of matters that are inherently uncertain. We have discussed the development, selection, anddisclosure of these critical accounting policies and estimates with the Audit Committee of our Board of Directors. Revenue Recognition. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The standard provides a single model for revenue arising from contracts with customers andsupersedes current revenue recognition guidance. We adopted ASU 2014-09 on January 1, 2018, using the modified retrospective method, for allcontracts not completed as of the date of adoption. There were no significant changes to our internal control over financial reporting due to the adoptionof the new standard. Based on the evaluation of our current contracts, revenue recognition is consistent under ASC 605 Revenue Recognition and ASC 606, Revenuefrom Contracts with Customers, except for revenue from variable consideration bonus payments under our software licensing arrangements. Thecumulative effect of applying ASU 2014-09 to all contracts that were not completed as of January 1, 2018 was recorded as a post-adoption adjustment ofapproximately $35 thousand to the opening balance of accumulated deficit on January 1, 2018, with a corresponding increase to accounts receivable.Subsequent to the adoption of the new standard, variable consideration related to the bonus payments are estimated and recognized when it is probablethat a significant reversal of revenue will not occur. Under this new guidance, we recognize revenue when our customers obtain control of the promised goods or services, in an amount that reflectsthe consideration which we expect to receive in exchange for those goods or services. To account for arrangements that are within the scope of this newguidance, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii)determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract;and (v) recognize revenue when (or as) we satisfy our performance obligations. For contracts determined to be within the scope of ASU 2014-09, we assess the goods or services promised within each contract for the purpose ofidentifying them as performance obligations. We must apply judgement in assessing whether each promised good or service is distinct. If a promised goodor service is not distinct, we will combine that good or service with other promised goods or services until it identifies a bundle of goods or services that isdistinct. 43Table of Contents The transaction price is then determined and allocated to the identified performance obligations in proportion to their estimated fair value, whichrequires significant judgment. Variable consideration, which is estimated using the expected value method or the most likely amount method, is includedin the transaction price only if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. For arrangements that include development, regulatory or sales milestone payments, we evaluate whether the milestones are probable of beingreached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenuereversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or thelicensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. Share-Based Payment Arrangements. Our share-based compensation of employees includes non-qualified stock options and restricted stock,which are compensatory under ASC 718, Compensation – Stock Compensation. We account for share-based compensation to non-employees, includingnon-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. Themodel requires input assumptions with respect to (i) expected volatility of our common stock, which is based upon the daily quoted market prices on TheNasdaq Stock Market LLC over a period equal to the expected term, (ii) the period of time over which employees, officers, directors and non-employeeconsultants are expected to hold their options prior to exercise, (iii) expected dividend yield (zero in our case due to never having paid dividends and notexpecting to pay dividends in the 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 tothe expected term of the related equity instruments. We rely only on historical volatility since we believe it is generally viewed as providing the mostreliable indication of future volatility. In estimating expected future volatility, we assume it will be consistent with historical; we calculate historicalvolatility using a simple average calculation; we use available historical data for the length of the option’s expected term, and we consistently use asufficient number of price 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 datarelated to exercise and post-termination cancellation activity. The expected term of stock options granted to our Chief Executive Officer (“CEO”) andnon-employee directors, consultants and officers are calculated separately from stock options granted to other 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 expectedto vest. Estimated forfeiture rates are based upon historical data on vesting behavior of employees. We adjust the total amount of compensation costrecognized for each award, in the period in which each award vests, to reflect the actual forfeitures related to that award. Changes in our estimatedforfeiture 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 their fair value and the amount ofcompensation expense recognized in future periods. A higher volatility, longer expected term and higher risk-free rate increases the resultingcompensation expense recognized in future periods. Conversely, a lower volatility, shorter expected term and lower risk-free rate decreases such expenserecognized in future periods. Clinical Trial and Other Research and Development Expenses. Clinical trial expenses, which are included in research and developmentexpenses, represent obligations resulting from contracts with various clinical investigators and clinical research organizations in connection withconducting clinical trials for our product candidates. Such costs are expensed as incurred, and are generally based on the total number of patients in thetrial, the rate at which the patients enter the trial and the period over which the clinical investigators and clinical research organizations provide services.We believe that this method best aligns the efforts expended on a clinical trial with the expenses we record. We adjust our rate of clinical expenserecognition if actual results differ from our estimates. In addition to clinical trial expenses, we estimate the amounts of other research and developmentexpenses, for which invoices have not been received at the end of a period, based upon communication with third parties that have provided services orgoods during the period. Such estimates are subject to change as additional information becomes available. 44Table of Contents In–Process Research and Development, Intangible Assets-Technology, and Goodwill. We have a policy for accounting for intangible assets,under which in-process research and development (“IPR&D”), intangible assets-technology, and goodwill are initially measured at fair value andcapitalized as intangible assets. Impairment tests for goodwill and IPR&D, which are indefinite-lived intangibles, are performed annually in the fourthquarter, unless impairment indicators require an earlier evaluation. Finite-lived intangible assets, including intangible assets-technology, are evaluatedonly when impairment indicators are present. IPR&D will be amortized upon and subject to commercialization of the underlying candidates andintangible assets-technology is amortized over the relevant estimated useful life. Contingent Consideration Liability. The estimated fair value of the contingent consideration liability, initially measured and recorded on theacquisition date, is considered to be a Level 3 instrument and is reviewed quarterly, or whenever events or circumstances occur that indicate a change infair value. The contingent consideration liability is recorded at fair value at the end of each reporting period. The estimated fair value is determined based on probability adjusted discounted cash flow and Monte Carlo simulation models that includessignificant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are theprobabilities 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 valuemeasurement, respectively. We record the contingent consideration liability at fair value with changes in estimated fair values recorded in change incontingent consideration liability in our consolidated statements of operations. Legal Proceedings. From time to time, we may be a party to legal proceedings in the course of our business. The outcome of any suchproceedings, regardless of the merits, is inherently uncertain. The assessment of whether a loss is probable or reasonably possible, and whether the loss or arange of loss is estimable, often involves a series of complex judgments about future events. We record accruals for contingencies to the extent that theoccurrence of the contingency is probable, and the amount of liability is reasonably estimable. If the reasonable estimate of liability is within a range ofamounts and some amount within the range appears to be a better estimate than any other, then we record that amount as an accrual. If no amount withinthe range is a reasonable estimate, then we record the lowest amount as an accrual. Loss contingencies that are assessed as remote are not reported in thefinancial statements, or in the notes to the consolidated financial statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our primary investment objective is to preserve principal. Our money market funds have interest rates that are variable and totaled $136.1million at December 31, 2018. As a result, we do not believe that these investment balances have a material exposure to interest-rate risk. The majority of our business is conducted in U.S. dollars. However, we do conduct certain transactions in other currencies, including Euros,British Pounds, Swiss Francs, and Swedish Krona. Historically, fluctuations in foreign currency exchange rates have not materially affected ourconsolidated results of operations and during the years ended December 31, 2018, 2017, and 2016, our consolidated results of operations were notmaterially affected by fluctuations in foreign currency exchange rates. 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 reportsis recorded, processed, summarized and reported within the timelines specified in the SEC’s rules and forms, and that such information is accumulated andcommunicated to our management, including our CEO and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter howwell designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level ofassurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Wehave a Disclosure Committee consisting of members of our senior management which monitors and implements our policy of disclosing materialinformation 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, includingour CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by thisreport. Based on the foregoing, our CEO and CFO concluded that our current disclosure controls and procedures, as designed and implemented, wereeffective at the reasonable assurance level. 45Table of Contents 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) and15d-15(f) during our fiscal quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internalcontrol 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 CEO and CFO and effected by our Board,management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles. Our management is responsible for establishing andmaintaining adequate internal control over financial reporting which includes policies and procedures that: ●Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets; ●Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization ofmanagement and directors; and ●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have amaterial effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree 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 ofSponsoring Organizations of the Treadway Commission (2013 framework), known as COSO, to evaluate the effectiveness of our internal control overfinancial reporting. Management has concluded that our internal control over financial reporting was effective as of December 31, 2018. Attestation Report of the Registered Public Accounting Firm The effectiveness of our internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered publicaccounting firm, as of December 31, 2018 as stated in their report which is provided below. Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Progenics Pharmaceuticals, Inc. Opinion on Internal Control Over Financial ReportingWe have audited Progenics Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (theCOSO criteria). In our opinion, Progenics Pharmaceuticals, Inc. (the “Company”) maintained, in all material respects, effective internal control overfinancial reporting as of December 31, 2018, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive (loss) income,stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statementschedule listed in the Index at Item 15(a) and our report dated March 14, 2019 expressed an unqualified opinion thereon. 46Table of Contents Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internalcontrol over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accuratelyand fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Stamford, ConnecticutMarch 14, 2019 Item 9B. Other Information None. 47Table of Contents 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 suchItems in our definitive proxy statement for our 2019 Annual Meeting of Stockholders to be filed with the SEC no later than 120 days after December 31,2018, which proxy statement is incorporated herein by reference: Item of Form 10-KLocation in 2019 Proxy Statement Item 10. Directors, Executive Officers and Corporate GovernanceElection of Directors.Executive and Other Officers.Corporate Governance.Code of Business Ethics and Conduct.*Section 16(a) Beneficial Ownership Reporting and Compliance.*The full text of our Code of Business Ethics and Conduct is available on ourwebsite (www.progenics.com). Item 11. Executive CompensationExecutive Compensation.Compensation Committee Report.Pay Ratio Disclosure.Compensation Committee Interlocks and Insider Participation. Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder MattersEquity Compensation Plan Information.Security Ownership of Certain Beneficial Owners and Management. Item 13. Certain Relationships and Related Transactions, and DirectorIndependenceCertain Relationships and Related Transactions.Affirmative Determinations Regarding Director Independence and OtherMatters. Item 14. Principal Accounting Fees and ServicesFees Billed for Services Rendered by our Independent Registered PublicAccounting Firm.Pre-approval of Audit and Non-Audit Services by the Audit Committee. 48Table of Contents 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: (1) Consolidated Financial Statements of Progenics Pharmaceuticals, Inc.: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at December 31, 2018 and 2017 Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016 Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2018, 2017 and 2016 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 Notes to Consolidated Financial Statements (2) Financial Statement Schedules Schedule 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 beenomitted. (3) Item 601 Exhibits Exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately following the signature page ofthis Report and incorporated herein by reference. Item 16. Form 10-K Summary None 49Table of Contents PROGENICS PHARMACEUTICALS, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting FirmF-2Financial Statements: Consolidated Balance SheetsF-3Consolidated Statements of OperationsF-4Consolidated Statements of Comprehensive (Loss) IncomeF-5Consolidated Statements of Stockholders’ EquityF-6Consolidated Statements of Cash FlowsF-7Notes to Consolidated Financial StatementsF-8 F-1Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Progenics Pharmaceuticals, Inc. Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Progenics Pharmaceuticals, Inc. (the Company) as of December 31, 2018 and 2017, therelated consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the three years in the periodended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position ofthe Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December31, 2018, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 14, 2019 expressed an unqualifiedopinion thereon. Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to theCompany in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and thePCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performingprocedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond tothose risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditsalso included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation ofthe financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2012. Stamford, ConnecticutMarch 14, 2019 F-2Table of Contents PROGENICS PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS(In thousands, except per share data) December 31, 2018 2017 ASSETS Current assets: Cash and cash equivalents $137,686 $90,642 Accounts receivable, net 3,803 3,972 Other current assets 2,640 2,256 Total current assets 144,129 96,870 Property and equipment, net 3,944 4,122 Intangible assets, net 6,666 30,369 Goodwill 13,074 13,074 Other assets 1,684 1,522 Total assets $169,497 $145,957 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $444 $3,359 Accrued expenses 10,533 9,555 Contingent consideration liability 7,050 - Current portion of debt, net 5,419 2,445 Total current liabilities 23,446 15,359 Long-term debt, net 39,180 47,242 Contingent consideration liability 3,950 16,800 Deferred tax liability 28 1,575 Other liabilities 1,818 1,528 Total liabilities 68,422 82,504 Commitments and Contingencies Stockholders’ equity: Preferred stock, $0.001 par value Authorized - 20,000 shares; issued and outstanding - none - - Common stock, $0.0013 par value Authorized - 160,000 shares; issued - 84,742 shares in 2018 and71,645 shares in 2017 110 93 Additional paid-in capital 713,019 609,829 Treasury stock at cost, 200 shares of common stock (2,741) (2,741)Subscription receivable - (2,109)Accumulated other comprehensive loss (105) (33)Accumulated deficit (609,208) (541,586)Total stockholders’ equity 101,075 63,453 Total liabilities and stockholders’ equity $169,497 $145,957 The accompanying notes are an integral part of the financial statements. F-3Table of Contents PROGENICS PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data) Years Ended December 31, 2018 2017 2016 Revenue: Royalty income $14,908 $10,965 $10,295 Other revenue 714 733 59,134 Total revenue 15,622 11,698 69,429 Operating expenses: Research and development 35,147 42,589 37,569 Selling, general and administrative 29,431 24,909 23,356 Intangible impairment charge 23,200 - - Change in contingent consideration liability (5,800) 2,600 (4,600)Total operating expenses 81,978 70,098 56,325 Operating (loss) income (66,356) (58,400) 13,104 Other (expense) income: Interest (expense) income and other income, net (2,933) (4,285) (527)Total other (expense) income (2,933) (4,285) (527) (Loss) income before income tax (expense) benefit (69,289) (62,685) 12,577 Income tax benefit (expense) 1,632 11,672 (1,844) Net (loss) income (67,657) (51,013) 10,733 Net loss attributable to noncontrolling interests - - (73)Net (loss) income attributable to Progenics $(67,657) $(51,013) $10,806 Net (loss) income per share attributable to Progenics - basic $(0.87) $(0.73) $0.15 Weighted-average shares - basic 77,890 70,284 70,003 Net (loss) income per share attributable to Progenics - diluted $(0.87) $(0.73) $0.15 Weighted-average shares - diluted 77,890 70,284 70,155 The accompanying notes are an integral part of the financial statements. F-4Table of Contents PROGENICS PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME(In thousands) Years Ended December 31, 2018 2017 2016 Net (loss) income $(67,657) $(51,013) $10,733 Other comprehensive loss: Foreign currency translation adjustments (72) 52 (62)Comprehensive (loss) income (67,729) (50,961) 10,671 Comprehensive loss attributable to noncontrolling interests - - (73)Comprehensive (loss) income attributable to Progenics $(67,729) $(50,961) $10,744 The accompanying notes are an integral part of the financial statements. F-5Table of Contents PROGENICS PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(In thousands) Accumulated Common Stock Common StockSubscribed Additional Other Treasury Stock Total Number Par Number Par Paid-in Accumulated Comprehensive Subscription Number Noncontrolling Stockholders’ of Shares Value of Shares Value Capital Deficit Loss Receivable of Shares Cost Interests Equity Balance atDecember 31,2015 70,146 $91 - $- $594,511 $(501,379) $(26) $- (200) $(2,741) $205 $90,661 Net income - - - - - 10,806 - - - - (73) 10,733 Purchase ofnoncontrollinginterests - - - - (239) - - - - - (129) (368)Foreigncurrencytranslationadjustment - - - - - - (59) - - - (3) (62)Stock-basedcompensationexpense - - - - 2,457 - - - - - - 2,457 Exercise of stockoptions 244 1 - - 1,340 - - - - - - 1,341 Balance atDecember 31,2016 70,390 $92 - $- $598,069 $(490,573) $(85) $- (200) $(2,741) $- $104,762 Net loss - - - - - (51,013) - - - - - (51,013)Foreigncurrencytranslationadjustment - - - - - - 52 - - - - 52 Return ofpurchasepremium fornoncontrollinginterests - - - - 15 - - - - - - 15 Stock-basedcompensationexpense - - - - 4,142 - - - - - - 4,142 Exercise of stockoptions 80 - - - 469 - - - - - - 469 Issuance ofcommon stockin connectionwith at-the-market offering,net ofcommissions andissuance costs 855 1 - - 5,025 - - - - - - 5,026 Subscription ofcommon stockin connectionwith at-the-market offering,net ofcommissions - - 320 - 2,109 - - (2,109) - - - - Balance atDecember 31,2017 71,325 $93 320 $- $609,829 $(541,586) $(33) $(2,109) (200) $(2,741) $- $63,453 Net loss - - - - - (67,657) - - - - - (67,657)Foreigncurrencytranslationadjustment - - - - - - (72) - - - - (72)Stock-basedcompensationexpense - - - - 5,209 - - - - - - 5,209 Cumulativeeffect of ASU2014-09adoption - - - - - 35 - - - - - 35 Exercise of stockoptions 96 - - - 467 - - - - - - 467 Issuance ofcommon stockin connectionwith at-the-market offering,net ofcommissions andissuance costs 4,230 5 (320) - 27,539 - - 2,109 - - - 29,653 Sale of commonstock in publicoffering, net ofunderwritingdiscounts andcommissions($4,500) andofferingexpenses ($513) 9,091 12 - - 69,975 - - - - - - 69,987 Balance atDecember 31,2018 84,742 $110 - $- $713,019 $(609,208) $(105) $- (200) $(2,741) $- $101,075 The accompanying notes are an integral part of the financial statements. F-6Table of Contents PROGENICS PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Years Ended December 31, 2018 2017 2016 Cash flows from operating activities: Net (loss) income $(67,657) $(51,013) $10,733 Adjustments to reconcile net (loss) income to net cash (used in) provided byoperating activities: Stock-based compensation expense 5,209 4,142 2,457 Depreciation and amortization 1,497 1,121 2,078 Paid in-kind interest - (13) 765 Non-cash interest expense 302 247 38 Deferred income tax (1,548) (11,435) 1,811 Intangible impairment charge 23,200 - - Change in fair value of contingent consideration liability (5,800) 2,600 (4,600)Other - 10 (296)Changes in assets and liabilities: Accounts receivable 204 892 (1,322)Other current assets (403) 2,046 1,314 Other assets (150) 468 (469)Accounts payable (2,906) 2,779 243 Accrued expenses 1,009 (6,274) 6,581 Other current liabilities - - (158)Other liabilities 291 323 343 Net cash (used in) provided by operating activities (46,752) (54,107) 19,518 Cash flows from investing activities: Purchases of property and equipment (817) (269) (4,286)Proceeds from sale of fixed assets - 37 347 Net cash used in investing activities (817) (232) (3,939)Cash flows from financing activities: Net proceeds from public offering of common stock 69,987 - - Net proceeds from issuance of long-term debt - - 48,650 Net proceeds from issuance of common stock in connection with at-the-marketoffering 29,653 5,026 - Proceeds from exercise of stock options 467 469 1,340 Repayment of debt (5,390) - - Return of estimated interest payment for noncontrolling interest - 15 (368)Net cash provided by financing activities 94,717 5,510 49,622 Effect of currency rate changes on cash, cash equivalents and restricted cash (92) 83 (86)Net (decrease) increase in cash, cash equivalents and restricted cash 47,056 (48,746) 65,115 Cash, cash equivalents and restricted cash at beginning of period 92,164 140,910 75,795 Cash, cash equivalents and restricted cash at end of period $139,220 $92,164 $140,910 Supplemental disclosure of cash flow information Cash paid for interest $4,660 $4,821 $- Noncash financing activity Subscription receivable $(2,109) $2,109 $- The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total ofthe same such amounts shown above for the year ended December 31, 2018: Cash, cash equivalents and restricted cash information Cash and cash equivalents at beginning of period 90,642 Restricted cash included in long-term assets at the beginning of period 1,522 Cash, cash equivalents and restricted cash at beginning of period $92,164 Cash and cash equivalents at end of period 137,686 Restricted cash included in long-term assets at the end of period 1,534 Cash, cash equivalents, and restricted cash at end of period $139,220 The accompanying notes are an integral part of the financial statements. F-7Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(amounts in thousands, except per share amounts or as otherwise noted) 1. Organization and Business Business Progenics Pharmaceuticals, Inc. (and its subsidiaries collectively the “Company,” “Progenics”, “we”, or “us”) is an oncology company focusedon the development and commercialization of innovative targeted medicines and artificial intelligence to find, fight and follow cancer. Highlights of ourrecent progress include the approval, launch and manufacturing of AZEDRA®. Our pipeline includes therapeutic agents designed to precisely targetcancer (1095 and PSMA TTC), as well as a prostate-specific membrane antigen (“PSMA”) targeted imaging agent for prostate cancer (PyLTM). We commenced principal operations in 1988, became publicly traded in 1997, and throughout have been engaged primarily in research anddevelopment efforts, establishing corporate collaborations, launching AZEDRA and other related business activities. Certain of our intellectual propertyrights are held by wholly-owned subsidiaries. Our U.S. operations are presently conducted at our headquarters in New York and our manufacturing facilityin Somerset, New Jersey. The operations of our wholly-owned foreign subsidiary, EXINI Diagnostics A.B. (“EXINI”), are conducted at our facility in Lund,Sweden. We operate under a single operating segment, which includes development, manufacturing and commercialization of pharmaceutical productsand other technologies to target, diagnose and treat cancer. Our operating segment is regularly evaluated for financial performance by our chief operatingdecision maker, who is our Chief Executive Officer. Revenue Our current principal sources of revenue from operations are royalty, development and commercial milestones from Bausch and Bayer. Royaltyand further milestone payments from Bausch or Bayer depend on success in development and commercialization of RELISTOR and our PSMA antibodytechnology, respectively, which is dependent on many factors, such as Bausch or Bayer’s respective efforts, decisions by the FDA and other regulatorybodies, competition from drugs for the same or similar indications, and the outcome of clinical and other testing of the licensed products. Liquidity At December 31, 2018, we had $137.7 million in cash and cash equivalents, an increase of $47.1 million from $90.6 million at December 31,2017. We expect that this amount will be sufficient to fund operations as currently anticipated beyond one year from the filing date of this Annual Reporton Form 10-K. We have historically funded our operations to a significant extent from capital-raising and we expect to require additional funding in thefuture, the availability of which is never guaranteed and may be uncertain. We expect that we may continue to incur operating losses. During 2018, we raised net proceeds of $70.0 million in an underwritten public offering of 9.1 million shares of common stock at a publicoffering price of $8.25 per share. During 2018 and 2017 we raised an additional $29.7 million and $5.0 million, respectively, in at-the-market (“ATM”)transactions under a controlled equity offering sales agreement (“Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”). (See Note 10. Stockholders’Equity for additional information). During 2016, we raised net proceeds of $48.7 million through a royalty monetization transaction (See Note 9. Long-Term Debt, Net for additional information). 2. 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”). Thepreparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported inthe financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates, including but not limited to those related tocollectability of receivables, intangible assets, contingent consideration and legal contingencies. As additional information becomes available or actualamounts become determinable, the recorded estimates are revised and reflected in the operating results. Actual results could differ from thoseestimates. License and other revenue amounts have been combined in prior periods’ financial statements to conform to the current year presentation. Inaddition, certain amounts in the income tax rate reconciliation have been reclassified within the notes to the consolidated financial statements to conformto current year presentation. F-8Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Principles of Consolidation The consolidated financial statements include the accounts of Progenics as well as its wholly-owned subsidiaries. All material intercompanytransactions and balances have been eliminated in consolidation. Foreign Currency Translation Our international subsidiaries generally consider their respective local currency to be their functional currency. Assets and liabilities of theseinternational subsidiaries are translated into U.S. dollars at quarter-end exchange rates and revenues and expenses are translated at average exchange ratesduring the quarter and year-to-date period. Foreign currency translation adjustments for the reported periods are included in accumulated othercomprehensive loss in our consolidated statements of comprehensive loss, and the cumulative effect is included in the stockholders’ equity section of ourconsolidated balance sheets. Realized gains and losses denominated in foreign currencies are recorded in operating expenses in our consolidatedstatements of operations and were not material to our consolidated results of operations for the years ended December 31, 2018, 2017, and 2016. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions thataffect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates. Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue fromContracts with Customers (Topic 606). The standard provides a single model for revenue arising from contracts with customers and supersedes currentrevenue recognition guidance. We adopted ASU 2014-09 on January 1, 2018, using the modified retrospective method, for all contracts not completed asof the date of adoption. The adoption of ASU 2014-09 represents a change in accounting principle that will more closely align revenue recognition withthe transfer of promised goods or services to the customer. We implemented internal controls in 2017 to ensure we adequately evaluated our contracts andproperly assessed the impact of the new accounting standard related to revenue recognition on our financial statements to facilitate adoption on January1, 2018. There were no significant changes to our internal control over financial reporting due to the adoption of the new standard. Based on the evaluation of our current contracts, revenue recognition is consistent under Accounting Standards Codification (“ASC”) Topic 605,Revenue Recognition and ASC 606, Revenue from Contracts with Customers, except for revenue from variable consideration bonus payments under oursoftware licensing arrangements. The cumulative effect of applying ASU 2014-09 to all contracts that were not completed as of January 1, 2018 wasrecorded as a post-adoption adjustment of approximately $35 thousand to the opening balance of accumulated deficit on January 1, 2018, with acorresponding increase to accounts receivable. Subsequent to the adoption of the new standard, variable consideration related to the bonus payments areestimated and recognized when it is probable that a significant reversal of revenue will not occur. Under this new guidance, we recognize revenue when our customers obtain control of the promised goods or services, in an amount that reflectsthe consideration which we expect to receive in exchange for those goods or services. To account for arrangements that are within the scope of this newguidance, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii)determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract;and (v) recognize revenue when (or as) we satisfy our performance obligations. For contracts determined to be within the scope of ASU 2014-09, we assess the goods or services promised within each contract for the purpose ofidentifying them as performance obligations. We must apply judgement in assessing whether each promised good or service is distinct. If a promised goodor service is not distinct, we will combine that good or service with other promised goods or services until it identifies a bundle of goods or services that isdistinct. The transaction price is then determined and allocated to the identified performance obligations in proportion to their estimated fair value, whichrequires significant judgment. Variable consideration, which is estimated using the expected value method or the most likely amount method, is includedin the transaction price only if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. F-9Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) For arrangements that include development, regulatory or sales milestone payments, we evaluate whether the milestones are probable of beingreached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenuereversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or thelicensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) theperformance obligation is satisfied. The following are our revenue streams from contracts with customers: Source 2018 2017 2016 Royalty income $14,908 $10,965 $10,295 Other revenue 714 733 59,134 Total revenue $15,622 $11,698 $69,429 Royalty income - represents revenue from the sales-based royalties under our intellectual property licensing arrangements and is recognized uponnet sales of the licensed products. Other revenue – represents revenue from upfront payments (fixed consideration) and development and sales milestones, sublicense payments,support and service payments and sales-based bonus payments (variable consideration) under our licensing or software arrangements. The fixedconsideration will be recognized as revenue at the time when the transfer of know-how is completed. The variable consideration will be estimatedusing the most likely amount method and recognized only when we have “a high degree of confidence” that revenue will not be reversed in asubsequent reporting period. The other revenue also includes revenue from product sales of research reagents, that is recognized upon shipmentto the end customer (i.e. control of the product is deemed to be transferred). Included in the $59.1 million other revenue for the year ended December 31, 2016, is $50.7 million we recognized under the RELISTOR LicenseAgreement, of which $50.0 million related to the achievement of a development milestone (FDA approval of RELISTOR tablets) and $0.7 million relatedto our share of the upfront payment Bausch received from a Canadian-based distributor of RELISTOR. In addition, during 2016, we recognized licenserevenue of $7.0 million under the license agreement with Bayer, of which $4.0 million related to the upfront payment and $3.0 million related to theachievement of a preclinical development milestones. We are eligible for future milestone and royalty payments under both license agreements withBausch and Bayer. We had receivable contract balances of $3.8 million and $4.0 million as of December 31, 2018 and 2017, respectively, primarily related to theroyalty revenue stream (see Note 5. Accounts Receivable). Research and Development Expenses Research and development expenses consist of costs for clinical development and manufacturing of clinical trial materials associated with ourresearch and development activities. Our research and development expenses include: ●External research and development expenses incurred under arrangements with third-parties, such as Contract Research Organizations, orCROs, consultants and Contract Manufacturing Organizations, or CMOs; ●Employee-related expenses, including salaries, benefits, travel and stock-based compensation; ●Facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities,depreciation of leasehold improvements and equipment, and laboratory supplies; and ●License and sub-license fees. F-10Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) We expense research and development costs as incurred. We account for nonrefundable advance payments for goods and services that will beused in future research and development activities as expense when the service has been performed or when the goods have been received. At each period end, we evaluate the accrued expense balance related to these activities based upon information received from the suppliers andestimated progress towards completion of the research or development objectives to ensure that the balance is reasonably stated. Such estimates aresubject to change as additional information becomes available. 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 proprietaryinventions. 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 (Topic 260, Earnings Per Share). Basic net (loss) income per shareamounts have been computed by dividing net (loss) income attributable to us by the weighted-average number of common shares outstanding during theperiod. For 2018 and 2017, we reported net losses and, accordingly, potential common shares were not included since such inclusion would have beenanti-dilutive. For 2016, we reported net income, and the computation of diluted earnings per share is based upon the weighted-average number of ourcommon shares and dilutive effect, determined using the treasury stock method, of potential common shares outstanding including amounts ofunrecognized compensation expense. Shares to be issued upon the assumed conversion of the contingent consideration liability are excluded from thediluted earnings per share calculation, if performance conditions have not been met. Comprehensive (Loss) Income Comprehensive (loss) income represents the change in net assets of a business enterprise during a period from transactions and other events andcircumstances from non-owner sources. Our comprehensive (loss) income includes net (loss) income adjusted for the changes in foreign currencytranslation adjustment. The disclosures required by ASC 220 (Topic 220, Comprehensive Income) for 2018, 2017, and 2016 have been included in theconsolidated statements of comprehensive (loss) income. There was no income tax expense/benefit allocated to any component of other comprehensive(loss) income (see Note 10. Stockholders’ Equity for additional information). Concentrations of Credit Risk Financial instruments which potentially subject us to concentrations of risk consist principally of cash, cash equivalents, and receivables. Weinvest our excess cash in money market funds, which are classified as cash and cash equivalents. We have established guidelines that relate to creditquality, 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 carryingamount reported in the balance sheet for cash and cash equivalents approximates its fair value. Cash and cash equivalents subject us to concentrations ofcredit risk. At December 31, 2018 and 2017, we had invested approximately $136.1 million and $87.2 million, respectively, in cash equivalents in theform of money market funds with two investment companies and held approximately $1.6 million and $3.4 million, respectively, in three commercialbanks. Restricted Cash Restricted cash included in long-term assets of $1.5 million at December 31, 2018 and 2017, represents collateral for a letter of credit securing alease obligation. We believe the carrying value of this asset approximates fair value. F-11Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Accounts Receivable We estimate the level of accounts receivable which ultimately will be uncollectable based on a review of specific receivable balances, industryexperience and the current economic environment. We reserve for affected accounts receivable an allowance for doubtful accounts. At December 31,2018, we had no allowance for doubtful accounts. In-Process Research and Development, Other Identified Intangible Assets and Goodwill The fair values of in-process research and development (“IPR&D”) and other identified intangible assets acquired in business combinations arecapitalized. The Company utilizes the “income method”, which applies a probability weighting that considers the risk of development andcommercialization to the estimated future net cash flows that are derived from projected sales revenues and estimated costs or “replacement costs”,whichever is greater. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products andexpected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis isperformed for each IPR&D project and other identified intangible assets independently. IPR&D assets are treated as indefinite-lived intangible assets untilcompletion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. Otheridentified intangible assets are amortized over the relevant estimated useful life. The IPR&D assets are tested at least annually or when a triggering eventoccurs that could indicate a potential impairment and any impairment loss is recognized in our consolidated statements of operations. Goodwill represents excess consideration in a business combination over the fair value of identifiable net assets acquired. Goodwill is notamortized but is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. TheCompany determines whether goodwill may be impaired by comparing the fair value of the reporting unit (the Company has determined that it has onlyone reporting unit for this purpose), calculated as the product of shares outstanding and the share price as of the end of a period, to its carrying value (forthis purpose, the Company’s total stockholders’ equity). No goodwill impairment has been recognized as of December 31, 2018 or 2017. Fair Value Measurements In accordance with ASC 820 (Topic 820, Fair Value Measurements and Disclosures), we use a three-level hierarchy for fair value measurementsof certain assets and liabilities for financial reporting purposes that distinguishes between market participant assumptions developed from market dataobtained from outside sources (observable inputs) and our own assumptions about market participant assumptions developed from the best informationavailable to us in the circumstances (unobservable inputs). We assign hierarchy levels to our contingent consideration liability arising from the MolecularInsight Pharmaceuticals, Inc. (“MIP”) acquisition based on our assessment of the transparency and reliability of the inputs used in the valuation. The fairvalue hierarchy is divided into three levels based on the source of inputs as follows: ●Level 1 - Valuations based on unadjusted quoted market prices in active markets for identical assets or liabilities that we have the ability toaccess ●Level 2 - Valuations for which all significant inputs are observable, either directly or indirectly, other than Level 1 inputs ●Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement To estimate the fair values of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximizes the use ofobservable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputsthat market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. Unobservable inputs areinputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the bestinformation available in the circumstances.The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is basedon models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, theinputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, thelevel in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to theoverall fair value measurement.F-12Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Recurring Fair Value Measurements We believe the carrying amounts of our cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accruedexpenses approximated their fair values as of December 31, 2018 and 2017. The fair value of the contingent consideration liability represents future potential milestone payments related to the MIP acquisition. The fairvalue of the contingent consideration liability is categorized as a Level 3 instrument, as displayed in Note 4. We record the contingent considerationliability at fair value with changes in estimated fair values recorded in the consolidated statements of operations. We reassess the fair value of thecontingent consideration at each reporting period. The contingent consideration liability results from probability adjusted discounted cash flows andMonte Carlo simulation models which include estimates of milestone payments to former MIP stockholders under the acquisition agreement. Nonrecurring Fair Value Measurements Our 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 toits then-current estimated fair value (for intangible assets) or to market prices for similar assets (for property and equipment). If the carrying value is notrecoverable we record an impairment charge in our consolidated statements of operations. No impairments for property and equipment occurred for theyears ended December 31, 2018 and 2017. Based on the results from the 1404 Phase 3 trial completed in 2018, whereby only one of the co-primary endpoints was met, we changed ourLevel 3 assumptions of potential future sales projections, resulting in a $23.2 million impairment of the 1404 indefinite-lived assets fair value. Thecorresponding non-cash impairment charge was recorded as part of operating expenses in the consolidated statements of operations.Other current assets are comprised of prepaid expenses, interest, and other receivables, all of which are expected to be settled within one year.Restricted cash, included in other assets, represents collateral for letters of credit securing a lease obligation. We believe the carrying value of these assetsapproximates fair value and are considered Level 1 assets. 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. Thecost and accumulated depreciation of assets retired or sold are removed from the respective accounts and any gain or loss is recognized in operations. Theestimated useful lives of fixed assets are as follows: Computer equipment (in years) 3 Machinery and equipment (in years) 5-7 Furniture and fixtures (in years) 5 Leasehold improvements Earlier of life of improvement orlease 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 overthe lease terms and record the difference between rent expense and current rental payments as deferred lease liability. Deferred lease incentive includes aconstruction allowance from our landlord which is amortized as a reduction to rental expense on a straight-line basis over the lease term. As of December31, 2018, and 2017, our consolidated balance sheets include the following: 2018 2017 Other current liabilities: Deferred lease incentive $26 $26 Other liabilities: Deferred lease liability $1,541 $1,225 Deferred lease incentive $277 $303 F-13Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Income Taxes We account for income taxes in accordance with the provisions of ASC 740 (Topic 740, Income Taxes), which requires that we recognize deferredtax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under thismethod, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respectivefinancial reporting amounts (temporary differences) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. Avaluation allowance is established for deferred tax assets for which realization is uncertain. In accordance with ASC 718 (Topic 718, Compensation – Stock Compensation) and ASC 505 (Topic 505, Equity), we have made a policydecision related to intra-period tax allocation, to account for utilization of windfall tax benefits based on provisions in the tax law that identify thesequence in which amounts of tax benefits are used for tax purposes (i.e., tax law ordering). We adopted Accounting Standards Update (“ASU”) No. 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”) on January 1, 2017, which requires that all excess tax benefits and taxdeficiencies during the period be recognized in income (rather than in equity) on a prospective basis. Uncertain tax positions are accounted for in accordance with ASC 740, which prescribes a comprehensive model for the manner in which acompany should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that we have taken or expect totake 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, orproperty 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 statusof 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. Thosepositions, for which management's assessment is that there is more than a 50% probability of sustaining the position upon challenge by a taxing authoritybased 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%likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. Any ASC 740 liabilities forwhich 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 tointerest and/or penalties arising from uncertain tax positions, we will record interest and penalties as a component of income taxes (see Note 13. IncomeTaxes for additional information). The U.S. Tax Cuts and Jobs Act (“Tax Act”) subjects a U.S. shareholder to current tax on global intangible low-taxed income earned by certainforeign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that we are permitted to makean accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-taxed incomein future years or provide for the tax expense related to such income in the year the tax is incurred. We have elected to provide for the tax expense in theyear the tax is incurred. Risks and Uncertainties To date, we have relied principally on external funding, license fees and milestone payments under agreements with Bausch, Bayer and others,out-licensing and asset sale arrangements, and royalties to finance our operations. There can be no assurance that our research and development will besuccessfully completed, that any products developed will obtain necessary marketing approval by regulatory authorities or that any approved productswill be commercially viable. In addition, we operate in an environment of rapid change in technology, and we are dependent upon satisfactoryrelationships with our partners and the continued services of our current employees, consultants and subcontractors. We are also dependent upon Bauschfulfilling their manufacturing obligations, either on their own or through third-party suppliers. For 2018, 2017, and 2016, the primary sources of ourrevenues were royalty and milestone payments. There can be no assurance that such revenues will continue. Substantially all of our accounts receivable atDecember 31, 2018 and 2017 were from the above-named sources. F-14Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Legal Proceedings From time to time, we may be a party to legal proceedings in the course of our business. The outcome of any such proceedings, regardless of themerits, is inherently uncertain. The assessment of whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable,often involves a series of complex judgments about future events. We record accruals for contingencies to the extent that the occurrence of thecontingency is probable, and the amount of liability is reasonably estimable. If the reasonable estimate of liability is within a range of amounts and someamount within the range appears to be a better estimate than any other, then we record that amount as an accrual. If no amount within the range is areasonable estimate, then we record the lowest amount within the range as an accrual. Loss contingencies that are assessed as remote are not reported inthe financial statements, or in the notes to the consolidated financial statements. Impact of Recently Issued and Adopted Accounting Standards Recently Adopted In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The standard provides a single model forrevenue arising from contracts with customers and supersedes current revenue recognition guidance. We adopted ASU 2014-09 on January 1, 2018, usingthe modified retrospective method, for all contracts not completed as of the date of adoption. (See Revenue Recognition section above for additionalinformation) In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities (“ASU 2016-01”). The standard requires equity investments (except those accounted for under the equity method ofaccounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, andseparate presentation of financial assets and financial liabilities by measurement category and type of financial asset. Additionally, ASU 2016-01eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financialinstruments on the balance sheet. We adopted this standard on January 1, 2018. The adoption of this standard did not have a material impact on ourconsolidated financial statements, as we do not have any equity investments. In November 2016, the FASB issued ASU 2016-18 (“ASU 2016-18”), Statement of Cash Flows (Topic 230): Restricted Cash. For entities thathave restricted cash and are required to present a statement of cash flows, ASU 2016-18 changes the cash flow presentation for restricted cash. We adoptedthis standard on January 1, 2018. Accordingly, the consolidated statement of cash flow for the years ended December 31, 2017 and 2016 have been re-casted to conform with the current year presentation under this new guidance. In January 2017, the FASB issued ASU 2017-01 (“ASU 2017-01”), Business Combinations (Topic 805): Clarifying the Definition of a Business.The standard narrows the application of when an integrated set of assets and activities is considered a business and provides a framework to assist entitiesin evaluating whether both an input and a substantive process are present to be considered a business. We adopted this standard on January 1, 2018. Theadoption of this standard did not have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 (“ASU 2017-04”), Intangibles - Goodwill and Other (Topic 350): Simplifying the Test forGoodwill Impairment. The standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwillimpairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount.We adopted this standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements. Recently Issued In February 2016, the FASB issued ASU 2016-02 (“ASU 2016-02”), Leases (Topic 842). This standard established a right-of-use model thatrequires all lessees to recognize right-of-use assets and liabilities on their balance sheet that arise from leases with terms longer than 12 months as well asprovide disclosures with respect to certain qualitative and quantitative information related to their leasing arrangements. This standard became effectivefor us on January 1, 2019. F-15Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) The FASB has subsequently issued the following amendments to ASU 2016-02, which have the same effective date and transition date of January1, 2019, and which we collectively refer to as the new leasing standards: ●ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which permits an entity to electan optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired prior to adoption ofTopic 842 and that were not previously accounted for as leases under the prior standard, ASC 840, Leases. ●ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amends certain narrow aspects of the guidance issued in ASU2016-02. ●ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for a transition approach to initially apply ASU 2016-02 atthe adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption aswell as an additional practical expedient for lessors to not separate non-lease components from the associated lease component. ●ASU No. 2018-20, Narrow-Scope Improvements for Lessors, which contains certain narrow scope improvements to the guidance issuedin ASU 2016-02. We will adopt the new leasing standards on January 1, 2019, using a modified retrospective transition approach to be applied to leases existingas of, or entered into after, January 1, 2019. We have reviewed our existing lease contracts and the impact of the new leasing standards on ourconsolidated financial statements. Upon adoption of the new leasing standards, we expect to recognize a lease liability of approximately $15.3 millionand related right-of-use asset of approximately $13.5 million on our consolidated balance sheet. The impact of adoption of the new leasing standards willhave no impact to our consolidated statements of operations. In August 2018, the FASB issued ASU 2018-13 (“ASU 2018-13”), Fair Value Measurement - Disclosure Framework (Topic 820): DisclosureFramework – Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance improves the disclosure requirements on fairvalue measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Earlyadoption is permitted for any removed or modified disclosures. We are currently assessing the timing of adopting the updated provisions and the impactof the updated provisions on our consolidated financial statements. 3. Goodwill and Acquired Intangible Assets Intangible assets and goodwill were initially measured at the acquisition date at estimated fair value and capitalized for the acquisitions of ourwholly-owned subsidiaries EXINI and MIP. The following table summarizes the activity related to goodwill and intangible assets: Other Intangible Goodwill IPR&D Assets Balance at January 1, 2017 $13,074 $28,700 $1,881 Amortization expense - - (212)Balance at December 31, 2017 13,074 28,700 1,669 Reclassification - (4,900) 4,900 Amortization expense - - (503)Impairment - (23,200) - Balance at December 31, 2018 $13,074 $600 $6,066 The following table reflects the components of the finite-lived intangible assets as of December 31, 2018: Gross Amount AccumulatedAmortization Net CarryingValue Intangible assets - AZEDRA product rights $4,900 $291 $4,609 Intangible assets - EXINI technology 2,120 663 1,457 Total $7,020 $954 $6,066 F-16Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) The weighted-average remaining life of the finite-lived intangible assets was approximately seven years at December 31, 2018. Amortization expense was calculated on a straight-line basis over the estimated useful life of the asset and was $503 thousand, $212 thousandand $212 thousand per year for the years ended December 31, 2018, 2017 and 2016, respectively. Assuming no changes in the gross carrying amount offinite lived intangible assets, the future annual amortization expense related to finite lived intangible assets is expected to be $912 thousand in each ofthe next five years (2019 through 2023). 4. Fair Value Measurements We record the contingent consideration liability resulting from our acquisition of MIP at fair value in accordance with ASC 820, Fair ValueMeasurement. The following tables summarize each major class of our financial assets and liabilities measured at fair value on a recurring basis as of the datesindicated, classified by valuation hierarchy (in thousands): Fair Value Measurements at December 31, 2018 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 31, 2018 (Level 1) (Level 2) (Level 3) Assets: Money market funds $136,052 $136,052 $- $- Total assets $136,052 $136,052 $- $- Liabilities: Contingent consideration liability $11,000 $- $- $11,000 Total liabilities $11,000 $- $- $11,000 Fair Value Measurements at December 31, 2017 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 31, 2017 (Level 1) (Level 2) (Level 3) Assets: Money market funds $87,231 $87,231 $- $- Total assets $87,231 $87,231 $- $- Liabilities: Contingent consideration liability $16,800 $- $- $16,800 Total liabilities $16,800 $- $- $16,800 The contingent consideration liability of $11.0 million and $16.8 million at December 31, 2018 and 2017, respectively, represents the estimatedfair value of the future potential milestone payments to former MIP stockholders (shown in the tables below). Milestone payments due upon first commercial sale (in thousands): Program Consideration Form of Payment at Progenics'OptionAZEDRA $8,000 Cash or Progenics common stock1404 10,000 Cash or Progenics common stock1095 5,000 Cash or Progenics common stock $23,000 F-17Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Net sales milestone payments due upon first achievement of specified net sales target in any single calendar year across all MIP-related programs(in thousands): Calendar Year Net Sales Level Consideration Form of Payment at Progenics'Option$30 million $5,000 Cash or Progenics common stock$60 million 5,000 Cash or Progenics common stock$100 million 10,000 Cash or Progenics common stock$250 million 20,000 Cash or Progenics common stock$500 million 30,000 Cash or Progenics common stock $70,000 We consider this liability a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value wasdetermined based on probability adjusted discounted cash flow and Monte Carlo simulation models that included significant estimates and assumptionspertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving regulatory approvalof the development projects and subsequent commercial success and discount rates. The estimated fair value was determined based on probability adjusted discounted cash flow and Monte Carlo simulation models that includedsignificant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs were theprobabilities 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 valuemeasurement, respectively. We record the contingent consideration liability at fair value with changes in estimated fair values recorded in change incontingent consideration liability in our consolidated statements of operations. The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of the Level 3 inputs atDecember 31, 2018 and 2017 (in thousands). The 2018 decrease in the contingent consideration liability of $5.8 million was primarily attributable to adecrease in the sales projections and probability of success for 1404, following results from the Phase 3 trial, whereby only one of the co-primaryendpoints was met, partially offset by higher estimated probability of success of AZEDRA and a decrease in the discount period used to calculate thepresent value of the contingent consideration liability. The 2017 increase in the contingent consideration liability of $2.6 million was primarilyattributable to the higher probability of success of AZEDRA used to calculate the potential milestone payments to former MIP stockholders and areduction in the discount period. Fair Value at December 31, Range 2018 Valuation Technique Unobservable Input (Weighted-Average) Contingent Consideration Liability: AZEDRA commercialization $7,050 Probability adjusted Probability of success 90% discounted cash flowmodel Period of expected milestoneachievement 2019 Discount rate 10% 1095 commercialization 450 Probability adjusted Probability of success 18% discounted cash flowmodel Period of expected milestoneachievement 2026 Discount rate 10% Net sales targets 3,500 Monte-Carlo simulation Probability of success 18%-90% Discount rate 10% Total $11,000 F-18Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Fair Value at December 31, Range 2017 Valuation Technique Unobservable Input (Weighted-Average) Contingent Consideration Liability: AZEDRA commercialization $5,500 Probability adjusted Probability of success 72% discounted cash flowmodel Period of expected milestoneachievement 2018 Discount rate 10% 1404 commercialization 4,500 Probability adjusted Probability of success 59% discounted cash flowmodel Period of expected milestoneachievement 2020 Discount rate 10% 1095 commercialization 400 Probability adjusted Probability of success 16% discounted cash flowmodel Period of expected milestoneachievement 2025 Discount rate 10% Net sales targets 6,400 Monte-Carlo simulation Probability of success 16%-72% Discount rate 10% Total $16,800 For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated: Liability - Contingent Consideration Fair Value Measurements Using Significant Unobservable Inputs (Level 3) 2018 2017 Balance at beginning of period $16,800 $14,200 Fair value change included in net loss (5,800) 2,600 Balance at end of period $11,000 $16,800 Changes in unrealized gains or losses for the period included in earnings (orchanges in net assets) for liabilities held at the end of the reporting period $(5,800) $2,600 5. Accounts Receivable Our accounts receivable represent amounts due to us from royalties, collaborators, and, to a small extent, sales of research reagents, and consistedof the following at December 31, 2018 and 2017: 2018 2017 Royalties $3,151 $3,683 Other 652 289 Accounts receivable, net $3,803 $3,972 6. Fixed Assets Fixed assets as of December 31, 2018 and 2017 consisted of the following: 2018 2017 Machinery and equipment $2,992 $2,516 Leasehold improvements 1,734 1,734 Computer equipment 721 714 Furniture and fixtures 878 874 Construction in progress 317 - Property and equipment, gross 6,642 5,838 Less - accumulated depreciation (2,698) (1,716)Property and equipment, net $3,944 $4,122 F-19Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) At December 31, 2018 and 2017, $1.5 million and $1.6 million, respectively, of net leasehold improvements were being amortized over periodsof 11.8 years and 12.8 years, under leases with terms through September 30, 2030. We recorded depreciation expense of $1.0 million, $0.9 million, and$1.9 million during 2018, 2017, and 2016, respectively. 7. Accrued Expenses The carrying value of our accrued expenses approximates fair value as it represents amounts that will be satisfied within one year. Accruedexpenses consisted of the following at December 31, 2018 and 2017: 2018 2017 Accrued payroll and related costs $2,871 $2,400 Accrued contract manufacturing costs 2,516 666 Accrued clinical trial costs 2,318 2,570 Accrued consulting and service fee expenses 1,229 1,860 Accrued legal and professional fees 1,191 1,022 Other 408 1,037 Accrued expenses $10,533 $9,555 8. Commitments and Contingencies Operating Leases At December 31, 2018, we leased corporate office space in New York City, pursuant to a lease agreement expiring in September 2030 (subject toan early termination right), and additional office space in Lund, Sweden, pursuant to a lease agreement expiring in December 2021. Rental payments are recognized as rent expense on a straight-line basis over the term of the lease. In addition to rents due under theseagreements, we are obligated to pay additional facilities charges, including utilities, taxes and operating expenses. As of December 31, 2018, future minimum annual payments under all operating lease agreements are as follows: Years ending Minimum Annual December 31, Payments 2019 $1,935 2020 1,969 2021 2,003 2022 2,134 2023 2,173 Thereafter 16,375 Total $26,589 Rental expense totaled approximately $1.9 million, $1.9 million, and $1.2 million for 2018, 2017, and 2016, respectively. For 2018, 2017 and2016, rent expense exceeded amounts paid by $0.3 million, $0.3 million and $0.2 million, respectively. Additional facility charges, including utilities,taxes, and operating expenses, for 2018, 2017, and 2016 were approximately $0.1 million, $0.1 million, and $1.1 million, respectively. F-20Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Licensing, Service, and Supply Agreements We have entered into intellectual property-based license and service agreements in connection with product development programs, and haveincurred milestone, license and sublicense fees and supply costs, included in research and development expenses, totaling approximately $471 thousand,$343 thousand, and $324 thousand during 2018, 2017, and 2016, respectively. Paid frominception/acquisition toDecember 31, 2018 FutureCommitments(1) Terms Amgen Fremont, Inc. (formerly Abgenix) $1,350 $5,750 Milestones and royalties to use XenoMouse®technology for generating fully human antibodies toPSMA LLC’s PSMA antigen. Former member of PSMA LLC $466 $52,188 Annual minimum royalty payments and milestonesto use technology related to PSMA. Selexis Commercial License Agreement $125 $1,799 Milestones and royalties to use Selexis technologyrelated to PSMA Antibodies. University of Zurich and the Paul ScherrerInstitute $565 $1,125 Annual maintenance and license fee payments,milestones and royalties in respect of licensedtechnology related to 1404. University of Western Ontario 2003 Agreement $39 $145 Annual minimum royalty, administration andmilestone payments in respect of licensedtechnology related to AZEDRA. Johns Hopkins University Technology $250 $2,685 Annual minimum royalty payments and milestonesto use technology related to PyL.(1) Amounts based on known contractual obligations as specified in the respective license agreements, which are dependent on the achievement or occurrence of futuremilestones or events and exclude amounts for royalties which are dependent on future sales and are unknown. In addition, we are planning to out-license or terminate non-germane licenses and service agreements, as to which we have paid $5.0 millionthrough December 31, 2018, and have future commitments of $28.5 million, subject to occurrence of future milestones or events. 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 us, and some have purchased our common stock or receivedstock options which are subject to vesting provisions. We have recognized expenses with regard to the consulting agreements of $300 thousand, $326thousand, and $164 thousand for 2018, 2017, and 2016, respectively. Legal Proceedings On January 4, 2017, we settled all claims against us under a federal action brought in 2010 by a former employee, where such former employeehad complained that we had violated the anti-retaliation provisions of the federal Sarbanes-Oxley law by terminating him. In connection with thissettlement, we and the former employee exchanged mutual releases and we paid an aggregate sum of $4.0 million to the former employee and hisattorneys. F-21Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) Abbreviated New Drug Application Litigations RELISTOR Subcutaneous Injection - Mylan Paragraph IV Certifications On or about October 6, 2015, November 20, 2015, December 22, 2015, and December 23, 2015, Progenics, Salix Pharmaceuticals, Inc. (“Salix”)and Wyeth LLC (“Wyeth”) received four separate notifications of a Paragraph IV certification for RELISTOR (methylnaltrexone bromide) subcutaneousinjection, for certain patents that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, also known as “the OrangeBook.” The certifications resulted from the filing by Mylan Pharmaceuticals Inc. of an Abbreviated New Drug Application (“ANDA”) with the FDA,challenging such patents for RELISTOR subcutaneous injection and seeking to obtain approval to market a generic version of RELISTOR subcutaneousinjection before some or all of these patents expire. District Court Actions Progenics, Salix, Valeant (now Bausch Health Companies Inc., “Bausch”), and Wyeth filed suit against Mylan Pharmaceuticals, Inc. and MylanInc. in the District of New Jersey on November 19, 2015 (2:15-cv-8180-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos.8,247,425, 8,420,663, 8,552,025, and 8,822,490 based upon Mylan Pharmaceutical Inc.’s filing of its ANDA seeking to obtain approval to market ageneric version of RELISTOR vials before some or all of these patents expire. On February 4, 2016, Progenics, Salix, Bausch, and Wyeth filed an amendedcomplaint, identifying Mylan Laboratories Ltd. as an additional Defendant, and further seeking declaratory judgment of infringement of U.S. Patent No.9,180,125. Progenics, Salix, Bausch, and Wyeth filed suit against Mylan Pharmaceuticals, Inc., Mylan Laboratories Ltd., and Mylan Inc. in the District ofNew Jersey on January 4, 2016 (2:16-cv-00035-SRC-CLW) seeking declaratory judgment of infringement of U.S. Patent Nos. 8,247,425, 8,420,663,8,552,025, and 8,822,490 based upon Mylan Pharmaceutical Inc.’s filing of its ANDA seeking to obtain approval to market a generic version ofRELISTOR prefilled syringes before some or all of these patents expire. On January 25, 2016, Progenics, Salix, Bausch, and Wyeth filed an amendedcomplaint, further seeking declaratory judgment of infringement of U.S. Patent No. 9,180,125. Progenics, Salix, Bausch, and Wyeth filed suit againstMylan Pharmaceuticals, Inc., Mylan Laboratories Ltd., and Mylan Inc. in the District of New Jersey on September 1, 2017 (2:17-cv-06714-SRC-CLW)seeking declaratory judgment of infringement of U.S. Patent No. 9,669,096 based upon Mylan Pharmaceutical Inc.’s filing of ANDAs seeking to obtainapproval to market generic versions of RELISTOR vials and prefilled syringes before the patents expires. On September 18, 2017, Progenics, Salix,Bausch, and Wyeth filed an amended complaint, further seeking declaratory judgment of infringement of U.S. Patent No. 9,492,445. The 2:15-cv-8180-SRC-CLW, 2:16-cv-00035-SRC-CLW, 2:15-cv-08353-SRC-CLW, and 2:16-cv-00889-SRC-CLW actions were consolidatedinto a single action in the District of New Jersey (2:15-cv-08180-SRC-CLW). On May 1, 2018, the Court granted Plaintiffs’ motion for partial summaryjudgment as to the validity of claim 8 of U.S. Patent No. 8,552,025. On May 23, 2018, the Court entered an order for final judgment under Fed. R. Civ. P.54(b) in favor of Plaintiffs and against Mylan as to claim 8 of the ’025 patent. Litigation in the 2:17-cv-06714-SRC-CLW action is underway. Fact discovery in this action has closed and expert discovery deadlines have notyet been set. This action has been consolidated for purposes of trial only with the 2:15-cv-8180 action. Federal Circuit Appeal On May 25, 2018, Mylan filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit. The matter is currently pendingon appeal at the Federal Circuit. On July 9, 2018, Bausch and Salix filed a motion to disqualify Katten Muchin Rosenman LLP as counsel for Mylan. On July 17, 2018, an orderwas issued stating the briefing on the merits of Mylan’s appeal pending the disposition of the motion to disqualify. Oral argument was held on September12, 2018. A decision disqualifying Katten Muchin Rosenman LLP as counsel for Mylan was issued on February 8, 2019, by the Federal Circuit. Meritsbriefing is currently underway. The deadline for submission of Mylan’s opening brief is April 9, 2019. RELISTOR Tablets - Actavis Paragraph IV Certifications On or about October 24, 2016 and October 24, 2017, Progenics, Salix, Bausch and Wyeth received two separate notifications of a Paragraph IVcertification for RELISTOR (methylnaltrexone bromide) tablets, for certain patents that are listed in the FDA’s Orange Book. The certification resultedfrom the filing by Actavis Laboratories Fl., Inc. (“Actavis”) of an ANDA with the FDA, challenging such patents for RELISTOR tablets and seeking toobtain approval to market a generic version of RELISTOR tablets before some or all of these patents expire. F-22Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) District Court Actions Progenics, Salix, Bausch, and Wyeth filed suit against Actavis Laboratories FL, Inc., Actavis LLC, Teva Pharmaceuticals USA, Inc., and TevaPharmaceuticals Industries Ltd. in the District of New Jersey on December 6, 2016 (2:16-cv-09038-SRC-CLW) seeking declaratory judgment ofinfringement of U.S. Patent Nos. 8,420,663, 8,524,276, 8,956,651, 9,180,125, and 9,314,461 based upon Actavis’s filing of an ANDA seeking to obtainapproval to market a generic version of RELISTOR tablets before some or all of these patents expire. Progenics, Salix, Bausch, and Wyeth filed suit against Actavis Laboratories FL, Inc., Actavis LLC, Teva Pharmaceuticals USA, Inc., and TevaPharmaceuticals Industries Ltd. in the District of New Jersey on December 8, 2017 (2:17-cv-12857-SRC-CLW) seeking declaratory judgment ofinfringement of U.S. Patent Nos. 9,724,343 and 9,492,445 based upon Actavis’s filing of an ANDA seeking to obtain approval to market a generic versionof RELISTOR tablets before some or all of these patents expire. The 2:16-cv-09038-SRC-CLW and 2:17-cv-12857-SRC-CLW actions were consolidated into a single action in the District of New Jersey (2:16-cv-09038-SRC-CLW). Litigation is underway and is currently in the expert discovery phase. European Opposition Proceedings In addition to the above described ANDA notifications, in October 2015, Progenics received notices of opposition to three European patentsrelating to methylnaltrexone. Notices of opposition against EP1615646 were filed on September 24, 2015 separately by each of Actavis Group PTC ehfand Fresenius Kabi Deutschland GmbH. Notices of opposition against EP2368553 were filed on September 29, 2015 and September 30, 2015 byFresenius Kabi Deutschland GmbH and Actavis Group PTC ehf, respectively. Notices of opposition against EP2368554 were filed on September 24, 2015separately by each of Actavis Group PTC ehf and Fresenius Kabi Deutschland GmbH. On May 11, 2017, the opposition division provided notice thatEP2368553 will be revoked. On June 28, 2017, the opposition division provided notice that EP1615646 will be revoked. On July 4, 2017, the oppositiondivision provided notice that EP2368554 will be revoked. Each of these matters are on appeal with the European Patent Office. For each of the above-described proceedings, we and Bausch continue to cooperate closely to vigorously defend and enforce RELISTORintellectual property rights. Pursuant to the RELISTOR license agreement between Progenics and Bausch, Bausch has the first right to enforce theintellectual property rights at issue and is responsible for the costs of such enforcement. We are or may be from time to time involved in various other disputes, governmental and/or regulatory inspections, inquires, investigations andproceedings that could result in litigation, and other litigation matters that arise from time to time. The process of resolving matters through litigation orother means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect us, our results of operations,financial condition, and cash flows. PSMA-617 German District Court Litigation We announced a lawsuit and associated worldwide patent ownership dispute based on our claims to certain inventions related to PSMA-617, aPSMA-targeted radiopharmaceutical compound under development for the treatment of prostate cancer that is the subject of certain European PatentApplications filed by the University of Heidelberg (“the University”). On November 8, 2018, MIP filed a complaint against the University in the District Court of Mannheim in Germany. In this Complaint, theCompany claims that the discovery and development of PSMA-617 was related to work performed under a research collaboration sponsored by MIP. MIPalleged that the University breached certain contracts with MIP and that MIP is the co-owner of inventions embodied in certain worldwide patent filingsrelated to PSMA-617, currently pending in the Europe and the United States that were filed by the University in its own name. On February 27, 2019,Endocyte, Inc., a wholly owned subsidiary of Novartis AG, filed a motion to intervene in the German litigation. Endocyte is the exclusive licensee of thepatent rights that are the subject of the German proceedings. F-23Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) On November 27, 2018, MIP requested that the European Patent Office (“EPO”) stay the examination of European Patent (EP) 3 038 996 A1 (EP14 799 340.6) and of the Divisional Applications EP 18 172 716.5, EP18 184 296.4, and EP 18 203 547.7 pending a decision from the German Districtcourt on MIP’s Complaint. On December 10, 2018, the EPO granted MIP’s request and stayed the examination of the patent and patent applicationseffective November 27, 2018. Likewise, on December 20, 2018, MIP filed a Confirmation of Ownership with the United States Patent and TrademarkOffice (“USPTO”) in the corresponding US patent applications (US Serial Nos. 15/131,118; 16/038,729 and 16/114988). MIP’s filing with the USPTOtakes the position that, in light of the collaboration and contracts between MIP and the University, MIP is the co-owner of these pending U.S. patentapplications. 9. Non-Recourse Long-Term Debt, Net On November 4, 2016, through a new wholly-owned subsidiary MNTX Royalties Sub LLC (“MNTX Royalties”), we entered into a $50.0 millionloan agreement (the “Royalty-Backed Loan”) with a fund managed by HealthCare Royalty Partners III, L.P. (“HCRP”). Under the terms of the Royalty-Backed Loan, the lenders have no recourse to us or to any of our assets other than the right to receive royalty payments from the commercial sales ofRELISTOR products owed under our agreement with Bausch. The RELISTOR royalty payments will be used to repay the principal and interest on theloan. The Royalty-Backed Loan bears interest at a per annum rate of 9.5%. Under the terms of the loan agreement, payments of interest and principal, if any, are made on the last day of each calendar quarter out ofRELISTOR royalty payments received since the immediately preceding payment date. On each payment date prior to March 31, 2018, RELISTOR royaltypayments received since the immediately preceding payment date will be applied solely to the payment of interest on the loan, with any royalties inexcess of the interest amount retained by us. Beginning on March 31, 2018, 50% of RELISTOR royalty payments received since the immediatelypreceding payment date in excess of accrued interest on the loan will be used to repay the principal of the loan, with the balance retained by us. Startingon September 30, 2021, all of the RELISTOR royalties received since the immediately preceding payment date will be used to repay the interest andoutstanding principal balance until the balance is fully repaid. The loan has a maturity date of June 30, 2025. Upon the occurrence of certain triggers inthe loan agreement, or if HCRP so elects on or after January 1, 2018, all of the RELISTOR royalty payments received after the immediately precedingpayment date shall be applied to the payment of interest and repayment of principal until the principal of the loan is fully repaid. In the event of such anelection by HCRP, we have the right to repay the loan without any prepayment penalty. In connection with the Royalty-Backed Loan, the debt issuance costs have been recorded as a debt discount in our consolidated balance sheetsand are being amortized and recorded as interest expense throughout the life of the loan using the effective interest method. As of December 31, 2018, we were in compliance with all material covenants under the Royalty-Backed Loan and there was no material adversechange in our business, operations, or financial conditions, as defined in the loan agreement. Future principal payments, based upon estimated sales projections, under the Royalty-Backed Loan as of December 31, 2018, are as follows: 2019 $5,688 2020 6,989 2021 13,125 2022 19,560 Total payments $45,362 Interest expense, including amortization of debt discount, related to the Royalty-Backed Loan for the year ended December 31, 2018 and 2017was approximately $5.0 million and $5.1 million, respectively. F-24Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) 10. Stockholders’ Equity Common Stock and Preferred Stock We are authorized to issue 160.0 million shares of our common stock, par value $.0013, and 20.0 million shares of preferred stock, par value$.001. The Board of Directors (the “Board”) has the authority to issue common and preferred shares, in series, with rights and privileges as determined bythe Board. Shelf Registration During the first quarter of 2017, we filed a shelf registration statement that permitted: (a) the offering, issuance and sale of up to a maximumaggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and/or units; and (b) as part of the $250.0million, the offering, issuance and sale by us of up to a maximum aggregate offering price of $75.0 million of our common stock under our salesagreement with Cantor Fitzgerald & Co. (“Cantor”) in one or more at-the-market (“ATM”) offerings (the “2017 Sales Agreement”). During 2018, we raised $70.0 million, net of underwriting discounts and commissions and offering expenses, in an underwritten public offeringof 9.1 million shares of common stock at a public offering price of $8.25 per share, and we sold a total of 3.9 million shares of our common stock in ATMtransactions under the sales agreement for net proceeds, after deducting commissions and other transaction costs, of approximately $27.5 million at anaverage selling price of $7.45 per share. During the fourth quarter of 2017, we sold 0.9 million shares of our common stock in ATM transactions under the sales agreement for netproceeds, after deducting commissions and other transaction costs, of approximately $5.0 million at an average selling price of $6.06 per share. AtDecember 31, 2017, we had 0.3 million shares of our common stock subscribed in ATM transactions under the sales agreement for net proceeds, afterdeducting commissions and other transaction costs, of approximately $2.1 million at an average selling price of $6.79 per share. Accordingly, we haverecorded a subscription receivable of $2.1 million as a reduction of stockholders’ equity in our consolidated balance sheet at December 31, 2017. In October 2018, we filed a new shelf registration statement. The new shelf registration replaced our prior shelf registration statement, pursuant towhich no additional securities will be offered or sold. The new shelf registration statement permits: (a) the offering, issuance and sale of up to a maximumaggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and/or units; and (b) as part of the $250.0million, the offering, issuance and sale by us of up to a maximum aggregate offering price of $75.0 million of our common stock under our salesagreement with Cantor in one or more ATM offerings. In addition, in October 2018 we entered into a new sales agreement with Cantor, as sales agent, which replaced the 2017 Sales Agreement (the“2018 Sales Agreement”). Pursuant to the 2018 Sales Agreement, we may offer and sell through Cantor, from time to time, shares of our common stock upto an aggregate offering price of $75.0 million. The 2018 Sales Agreement may be terminated by Cantor or us at any time upon ten days’ notice, or byCantor at any time in certain circumstances, including the occurrence of a material adverse change in our business or financial condition. 11. Stock-Based Compensation Equity Incentive Plans We adopted the following stockholder-approved equity incentive plans: ● The 1996 Amended Stock Incentive Plan (the “1996 Plan”) authorized the issuance of up to 5.0 million shares of our common stockcovering several different types of awards, including stock options, restricted shares, stock appreciation rights, performance shares, and phantom stock.The 1996 Plan was terminated in 2006. Options granted before termination of the 1996 Plan will continue to remain outstanding until exercised,cancelled, or expired. F-25Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) ● The 2005 Stock Incentive Plan (the “2005 Plan”), which authorized the issuance of up to 11.45 million shares of common stock coveringseveral different types of awards, including stock options, restricted shares, stock appreciation rights, performance shares, and phantom stock. The 2005Plan was terminated in June 2018 at the time the 2018 Stock Incentive Plan was approved. Shares available for new awards under the 2005 Plan at thetime of termination became available for awards under the 2018 Stock Incentive Plan. Options granted before termination of the 2005 Plan will continueto remain outstanding until exercised, cancelled or expired. ● The 2018 Performance Incentive Plan (the “2018 Plan”), pursuant to which we are authorized to issue up to 4.8 million shares of commonstock covering several different types of awards, including stock options, restricted shares, stock appreciation rights, performance shares, and phantomstock. The 2018 Plan will terminate on March 27, 2028. The stock option plans provide that options may be granted at an exercise price of 100% of fair market value of our common stock on the date ofgrant, may be exercised in full or in installments, at the discretion of the Board or its Compensation Committee, and must be exercised within ten yearsfrom date of grant. Stock options generally vest pro rata over three to five years. We recognize stock-based compensation expense on a straight-line basisover the requisite service (vesting) period based on fair values. We use historical data to estimate expected employee behaviors related to option exercisesand forfeitures and included these expected forfeitures as a part of the estimate of stock-based compensation expense as of the grant date. We adjust thetotal amount of stock-based compensation expense recognized for each award, in the period in which each award vests, to reflect the actual forfeituresrelated 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 overits vesting period. Stock Options The following table summarizes stock options activity for the year ended December 31, 2018: Weighted Weighted Average Number Average Remaining of Shares Exercise Price Contractual Life Outstanding at January 1, 2018 5,535 $7.25 6.04 Granted 1,566 $6.93 Exercised (96) $4.85 Cancelled (483) $7.97 Expired (258) $16.05 Outstanding at December 31, 2018 6,264 $6.79 6.02 Exercisable at December 31, 2018 4,242 $6.42 4.78 Vested and expected to vest at December 31, 2018 5,887 $6.75 5.84 The weighted average fair value of options granted during 2018, 2017, and 2016 was $4.56, $6.96, and $3.24 per share, respectively. The total intrinsic value (the excess of the market price over the exercise price) for stock options outstanding, exercisable, and vested andexpected to vest, was zero as of December 31, 2018. The total intrinsic value for stock options exercised during 2018, 2017, and 2016 was $173 thousand,$233 thousand, and $476 thousand, respectively. Stock-Based Compensation Expense We account for stock-based awards issued to employees in accordance with the provisions of ASC 718 (Topic 718, Compensation – StockCompensation). We recognize stock-based compensation expense on a straight-line basis over the service period of the award, which is generally three tofive years. Stock-based awards issued to consultants are accounted for in accordance with the provisions of ASC 718 and ASC 505-50 (Subtopic 50"Equity-Based Payments to Non-Employees" of Topic 505, Equity). Options granted to consultants are periodically revalued as the options vest, and arerecognized as an expense over the related period of service or the vesting period, whichever is longer. Under the provisions of ASC 718, members of theBoard are considered employees for calculation of stock-based compensation expense. F-26Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) We estimated the fair value of the stock options granted on the date of grant using a Black-Scholes valuation model that used the weightedaverage assumptions noted in the following table. The risk-free interest rate assumption we use is based upon U.S. Treasury interest rates appropriate forthe expected life of the awards. The expected life (estimated period of time that we expect employees, directors, and consultants to hold their stockoptions) was estimated based on historical rates for three group classifications, (i) employees, (ii) outside directors and officers, and (iii) consultants.Expected volatility was based on historical volatility of our stock price for a period equal to the stock option's expected life and calculated on a dailybasis. The expected dividend rate is zero since we do not currently pay cash dividends on our common stock and do not anticipate doing so in theforeseeable future. The following table presents assumptions used in computing the fair value of option grants during 2018, 2017, and 2016: 2018 2017 2016 Risk-free interest rate 2.72% 2.17% 1.53% Expected life (in years) 6.67 6.76 6.77 Expected volatility 69% 72% 74% Expected dividend yield -- -- -- Stock-based compensation expense for the years ended December 31, 2018, 2017, and 2016 was recorded in our consolidated statement ofoperations as follows: 2018 2017 2016 Research and development expenses $1,760 $1,371 $843 General and administrative expenses 3,449 2,771 1,614 Total stock-based compensation expense $5,209 $4,142 $2,457 At December 31, 2018, unrecognized stock-based compensation expense related to stock options was approximately $5.2 million and isexpected to be recognized over a weighted average period of approximately 2.1 years. 12. Employee Savings Plan The terms of the amended and restated Progenics Pharmaceuticals 401(k) Plan (the “401(k) Plan”), among other things, allow eligible employeesto participate in the Amended Plan by electing to contribute to the 401(k) Plan a percentage of their compensation to be set aside to pay their futureretirement benefits. We matched 50% of employee contributions equal to 1% - 10% of compensation during the three years ended December 31, 2018,made by eligible employees to the 401(k) Plan (the “Matching Contribution”). In addition, we may also make a discretionary contribution each year onbehalf of all participants who are non-highly compensated employees. We made Matching Contributions of approximately $381 thousand, $302thousand, and $281 thousand to the 401(k) Plan for the years ended December 31, 2018, 2017, and 2016, respectively. No discretionary contributionswere made during those years. 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 taxeffects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for incometax purposes. On December 22, 2017, the U.S. government enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (“TaxAct”). As a result of the federal tax rate change, we recorded a provisional income tax benefit of approximately $3.7 million in 2017. In accordance withStaff Accounting Bulletin No. 118, we completed the analysis of the impact of the 2017 Tax Act, with no change to the provisional amount recorded in2017. F-27Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) In 2018, we recorded an income tax benefit of approximately $1.6 million. The primary driver of this tax benefit is related to the impairment andreclassification of indefinite-lived intangibles for in process research and development assets. Our effective tax rate for 2018 was 2.4%. In 2017, werecorded an income tax benefit of approximately $11.7 million, of which $6.6 million related to the reduction in the federal and state tax rates, $4.8million related to the use of our naked credit as a source of income to release a portion of our valuation allowance and the remaining $0.2 million relatedto a refundable AMT credit. Our effective tax rate for 2017 was 18.6%. In 2016, we recorded an income tax expense of approximately $1.8 million as aresult of an increase in our effective tax rate to 14.7%. Our effective tax rate in 2016 was impacted by our relocation to New York City, which has its ownlocal tax rate and adds to the overall tax rate used for calculating the income tax provision. We have completed calculations through June 30, 2016, under Internal Revenue Code Section 382, the results of which indicate that pastownership changes will limit annual utilization of net operating losses (“NOLs”) in the future. Ownership changes subsequent to June 30, 2016, mayfurther limit the future utilization of net operating loss and tax credit carry-forwards as defined by the federal and state tax codes. The components of the (benefit from) provision for income taxes from continuing operations during the three years ending December 31, 2018consisted of the following: 2018 2017 2016 Current taxes: United States $(2) $3 $11 Foreign - - - State (82) (16) 22 Total current taxes $(84) $(13) $33 Deferred taxes: United States $(1,188) $(8,777) $- Foreign - - - State (360) (2,882) 1,811 Total deferred taxes $(1,548) $(11,659) $1,811 (Benefit from) provision for income taxes $(1,632) $(11,672) $1,844 Deferred tax assets and liabilities as of December 31, 2018 and 2017 consisted of the following: 2018 2017 Deferred tax assets: Depreciation $- $100 Research & Experimental and Orphan Drug tax credit carry-forwards 35,435 33,496 NYS investment tax credit carry-forwards 1,282 1,284 Net operation loss carry-forwards 188,588 177,313 Capitalized research and development expenditures 1,066 3,066 Stock compensation 5,236 5,666 Other items 819 1,279 Total gross deferred tax assets 232,426 222,204 Less valuation allowance (232,174) (217,382)Deferred tax assets 252 4,822 Deferred tax liabilities: Indefinite-lived intangibles (136) (6,397)Depreciation and amortization (144) - Deferred tax liabilities (280) (6,397)Net deferred tax liability $(28) $(1,575) We maintain a tax valuation allowance on deferred tax assets considering our history of taxable losses and the uncertainty regarding our abilityto generate sufficient taxable income in the future to utilize these deferred tax assets. For 2018 and 2017, we incurred net losses for tax purposes. Werecognized a full tax valuation against deferred tax assets at December 31, 2018 and 2017. In 2018 and 2017, we recognized deferred tax liabilities of$0.03 million and $1.6 million, respectively, to reflect the net tax effects related to the impairment and reclassification of indefinite-lived intangibles forin process research and development assets. F-28Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) The following is a reconciliation of the U.S. statutory income tax rate to our effective tax rate for the years ended December 31, 2018, 2017, and2016: 2018 2017 2016 U.S. Federal statutory rate 21.0% 34.0% 34.0%State income taxes, net of Federal benefit 0.9% 1.5% 10.8%Foreign rate differential 0.0% (0.6%) 2.6%Research and experimental and Orphan Drug tax credit 2.3% 6.4% (50.6%)Effect of federal and state tax rate changes 0.3% (6.1%) (43.0%)Tax Reform Impact 0.0% 13.9% 0.0%Change in fair value of contingent consideration liability 1.8% (1.4%) (12.4%)Stock option shortfalls (2.2%) (3.1%) 22.3%Other (0.5%) (0.1%) 0.1%Change in valuation allowance (21.2%) (25.9%) 50.9%Effective tax rate 2.4% 18.6% 14.7% As of December 31, 2018, we had available, for tax return purposes, unused federal NOLs of approximately $712.7 million, of which $664.1million of NOLs generated prior to 2018 will expire in various years from 2019 to 2037 and $48.6 million of NOLs generated in 2018 can be carriedforward indefinitely. Also, we had available, for tax return purposes, unused state NOLs of approximately $577.3 million, which will expire in variousyears from 2030 to 2038 and unused foreign NOLs of approximately $10.3 million, which can be carried forward indefinitely. 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 statusof our ASC 740 Income Taxes liability, if any, or require an additional liability to be recorded. We have not, as of yet, conducted a study of our researchand experimental (“R&E”) credit carry-forwards. Such a study might result in an adjustment to our R&E credit carry-forwards, but until a study iscompleted and any adjustment is known, no amounts are being presented as an uncertain tax position under ASC 740-10 except for uncertain taxpositions acquired in connection with the MIP acquisition. A full valuation allowance has been provided against our R&E credits and, if an adjustment isrequired, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the statements of operations andcomprehensive loss if an adjustment was required. As of December 31, 2018, we are subject to federal, foreign, and state income tax. Open tax years relate to years in which unused net operatinglosses were generated or, if used, for which the statute of limitation for examination by taxing authorities has not expired. Our open tax years extend backto 1997. No amounts of interest or penalties were recognized in our consolidated statements of operations or consolidated balance sheets as of and for theyears ended December 31, 2018, 2017, and 2016. Our R&E and Orphan Drug tax credit carry-forwards of approximately $36.1 million at December 31, 2018 expire in various years from 2019 to2038. As of December 31, 2018 and 2017, we have not recognized any liability for uncertain tax positions, because of our full valuation allowance. Wewill recognize interest and penalties related to these positions, should such costs be assessed. The recognition of unrecognized tax benefits would notaffect 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 years ended December 31, 2018 and 2017. 2018 2017 Beginning uncertain tax benefits $1,951 $2,661 Prior year - increases (decreases) - (710)Current year - increases (decreases) - - Settlements - - Expired statuses (7) - Ending uncertain tax benefits $1,944 $1,951 F-29Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) 14. Net (Loss) Income Per Share Our basic net (loss) income per share attributable to Progenics amounts have been computed by dividing net (loss) income attributable toProgenics by the weighted-average number of common shares outstanding during the period. For 2018 and 2017 we reported net losses and, accordingly,potential common shares were not included since such inclusion would have been anti-dilutive. As a result, basic and diluted EPS are the same for 2018and 2017. For 2016, we reported net income, and the computation of diluted earnings per share is based upon the weighted-average number of ourcommon shares and dilutive effect of stock options (determined using the treasury stock method). In applying the treasury stock method for the calculation of diluted EPS, amounts of unrecognized compensation expense are required to beincluded in the assumed proceeds in the denominator of the diluted EPS calculation unless they are anti-dilutive. We have made an accounting policydecision to calculate windfall tax benefits/shortfalls, for purposes of diluted EPS calculation, excluding the impact of deferred tax assets. This policydecision will apply when we have net income and windfall tax benefits/shortfalls are realizable. The calculations of net (loss) income per share, basic and diluted, are as follows: Net (loss) income Weighted-average attributable shares to Progenics outstanding Per share (Numerator) (Denominator) amount 2018 Basic and diluted $(67,657) 77,890 $(0.87)2017 Basic and diluted $(51,013) 70,284 $(0.73) 2016 Basic $10,806 70,003 $0.15 Dilutive effect of stock options - 152 Diluted $10,806 70,155 $0.15 The following table summarizes anti-dilutive common shares or common shares where performance conditions have not been met, that wereexcluded from the calculation of the diluted net (loss) income per share: 2018 2017 2016 Stock options 3,794 2,395 3,577 Contingent consideration liability(1) 2,619 2,824 1,644 Total securities excluded 6,413 5,219 5,221 ___________________________________(1) Calculated as follows: (a) the contingent consideration liability balance at December 31 divided by (b) the closing stock price of ourcommon stock on the last day of trading of the fiscal year. F-30Table of Contents PROGENICS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued(amounts in thousands, except per share amounts or as otherwise noted) 15. Unaudited Quarterly Results (unaudited) Summarized quarterly financial data during 2018 and 2017 are as follows: 2018 Quarter Ended March 31 June 30 September 30 December 31 Revenues $3,189 $3,878 $5,317 $3,238 Operating expenses $15,607 $18,216 $30,365 $17,790 Operating loss $(12,418) $(14,338) $(25,048) $(14,552)Net loss $(13,424) $(15,172) $(24,357) $(14,704)Net loss per share - basic and diluted $(0.19) $(0.20) $(0.30) $(0.17) 2017 Quarter Ended March 31 June 30 September 30 December 31 Revenues $2,347 $2,765 $2,697 $3,889 Operating expenses $17,600 $18,325 $17,002 $17,171 Operating loss $(15,253) $(15,560) $(14,305) $(13,282)Net loss $(16,360) $(16,636) $(15,352) $(2,665)Net loss per share - basic and diluted $(0.23) $(0.24) $(0.22) $(0.04) 16. Subsequent Event In February 2019, we acquired the AZEDRA manufacturing assets for $8.0 million cash consideration and entered into a sublease agreement forthe radiopharmaceutical manufacturing facility located in Somerset, New Jersey. The Somerset site serves as the launch facility for AZEDRA and will alsoprovide manufacturing support for the Company’s development stage radiopharmaceuticals, including 1095. We also secured the long-term supply ofiodine necessary for the production of both AZEDRA and 1095. The production of AZEDRA uses a proprietary Ultratrace® process which concentratesthe MIBG targeted radiolytic activity by eliminating non-therapeutic “cold” MIBG molecules, giving AZEDRA a uniquely high specific activity. We arestill evaluating the accounting implications of this transaction. F-31Table of Contents SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS Allowance for Doubtful Accounts Year endedDecember 31, BeginningBalance Additions Chargedto General andAdministrativeExpenses DeductionsAccounts WrittenOffDuring Period EndingBalance (in thousands) 2018 $- $- $- $- 2017 $- $- $- $- 2016 $10 $- $(10) $- F-32Table of Contents EXHIBIT INDEX Exhibit Number * Description3.1(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(23) Progenics Pharmaceuticals, Inc. 2018 Performance Incentive Plan.10.2(24) Settlement and License Agreement by and among the Registrant, Valeant Pharmaceuticals International, Inc., Salix Pharmaceuticals,Inc., Wyeth LLC, and Actavis LLC., entered into as of May 25, 2018.10.3(25) Settlement and License Agreement by and among the Registrant, Valeant Pharmaceuticals International, Inc., Salix Pharmaceuticals,Inc., Wyeth LLC, and Par Sterile Products, LLC and Par Pharmaceutical, Inc., dated May 10, 2018.10.5(4) ‡ Amended and Restated 1996 Stock Incentive Plan10.6.3(5) ‡ Amended 2005 Stock Incentive Plan10.6.4(6) ‡ Form of Non-Qualified Stock Option Award Agreement10.6.5(6) ‡ Form of Restricted Stock Award Agreement 10.7(7) ‡ Form of Indemnification Agreement10.21.1(9) Amended and Restated Agreement of Lease, dated October 28, 2009, between BMR-Landmark at Eastview LLC and the Registrant.10.25(10) † 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.and (ii) Second Amendment to Option and License Agreement, dated March 3, 1989, by and among the University of Chicago, ARCHDevelopment Corporation and UR Labs, Inc.10.26(11) Membership Interest Purchase Agreement, dated April 20, 2006, between the Registrant and Cytogen Corporation.10.27(11) † Amended and Restated PSMA/PSMP License Agreement, dated April 20, 2006, by and among the Registrant, Cytogen Corporation andPSMA Development Company LLC.10.34(12) † Collaboration Agreement, effective June 14, 2005, by and between Seattle Genetics, Inc. and PSMA Development Company LLC.10.37(13) † License Agreement, dated February 3, 2011, by and between Salix Pharmaceuticals, Inc., the Registrant, Progenics PharmaceuticalsNevada, Inc. and Excelsior Life Sciences Ireland Limited. 10.37.1(13) † 2010 Agreement Related to Progenics’ MNTX In-License, dated February 3, 2011, by and among the University of Chicago, acting onbehalf of itself and ARCH Development Corporation, the Registrant, Progenics Pharmaceuticals Nevada, Inc. and SalixPharmaceuticals, Inc.10.38(14) † 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(14) † License Agreement, dated September 1, 2012, by and between FUJIFILM RI Pharma Co., Ltd. and Molecular Insight Pharmaceuticals,Inc.10.40(15) † License Agreement, dated May 4, 2012, between Molecular Insight Pharmaceuticals, Inc., the University of Zurich and the PaulScherrer Institute.10.41(16) License Agreement, dated December 15, 2000, between Molecular Insight Pharmaceuticals, Inc. and The Board of Governors of theUniversity of Western Ontario.10.43(17) Controlled Equity OfferingSM Sales Agreement, dated October 12, 2018, by and between the Registrant and Cantor Fitzgerald & Co.10.45(12) † Collaboration Agreement, effective February 21, 2001, by and between Abgenix, Inc. and PSMA Development Company LLC.10.46 (18) † Lease, dated December 31, 2015, between the Registrant and WTC TOWER 1 LLC.10.47(19) † License Agreement, effective July 30, 2015 between the Registrant and The Johns Hopkins University.10.49(19) Employment Offer Letter Agreement between the Registrant and Patrick Fabbio.10.50(20) License Agreement, dated April 28, 2016, between PSMA Development Company LLC and Bayer AS.10.51(21) Assignment and Assumption Agreement, dated May 6, 2016, between the Registrant and Regeneron Pharmaceuticals, Inc.10.52(22) Loan Agreement, dated November 4, 2016, between the Registrant through its wholly-owned subsidiary MNTX Royalties Sub LLC andHealthcare Royalty Partners III, L.P.21.1 Subsidiaries of the Registrant.23.1 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 SecuritiesExchange Act of 1934, as amended.31.2 Certification of Patrick Fabbio, Senior Vice President and Chief Financial Officer of the Registrant pursuant to 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. E-1Table of Contents 32.1 Certification of Mark R. Baker, Chief Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.32.2 Certification of Patrick Fabbio, Senior Vice President and Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101 Interactive Data File101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema101.CAL XBRL Taxonomy Extension Calculation Linkbase101.LAB XBRL Taxonomy Extension Label Linkbase101.PRE XBRL Taxonomy Extension Presentation Linkbase101.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 thefootnote below, and are incorporated by reference herein. (1) Previously filed in Current Report on Form 8-K filed on June 13, 2013.(2) Previously filed in Current Report on Form 8-K filed on January 30, 2017.(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 June 18, 2014.(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 quarter ended March 31, 2007.(9) Previously filed in Current Report on Form 8-K filed on November 28, 2012.(10) Previously filed in Annual Report on Form 10-K for the year ended December 31, 2005.(11) Previously filed in Quarterly Report on Form 10-Q for the quarter ended June 30, 2006(12) Previously filed in Amendment No. 2 to Annual Report on Form 10-K/A for the year ended December 31, 2009.(13) Previously filed in Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.(14) Previously filed in Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.(15) Previously filed in Annual Report on Form 10-K for the year ended December 31, 2013.(16) Previously filed in Registration Statement on Form S-1, Commission File No. 333-129570 filed by Molecular Insight Pharmaceuticals, Inc.(17) Previously filed in Registration Statement on Form S-3, Commission File No. 333-227805.(18) Previously filed in Current Report on Form 8-K filed on January 5, 2016.(19) Previously filed in Annual Report on Form 10-K for the year ended December 31, 2015.(20) Previously filed in Current Report on Form 8-K filed on May 4, 2016.(21) Previously filed in Current Report on Form 8-K filed on May 10, 2016.(22) Previously filed in Current Report on Form 8-K filed on November 7, 2016.(23) Previously filed in Current Report on Form 8-K filed on June 14, 2018.(24) Previously filed in Current Report on Form 8-K filed on May 31, 2018.(25) Previously filed in Current Report on Form 8-K filed on May 11, 2018. † Confidential treatment granted as to certain portions omitted and filed separately with the Commission.‡ Management contract or compensatory plan or arrangement. E-2Table of Contents SIGNATURES 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 signedon its behalf by the undersigned, thereunto duly authorized. PROGENICS PHARMACEUTICALS, INC. By:/s/ MARK R. BAKER Mark R. BakerChief Executive Officer and Director(Principal Executive Officer) Date: March 14, 2019 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant in the capacities and on the dates indicated. Signature CapacityDate /s/ PETER J. CROWLEY ChairmanMarch 14, 2019Peter J. Crowley /s/ MARK R. BAKER Chief Executive Officer and Director(Principal Executive Officer)March 14, 2019Mark R. Baker /s/ BRADLEY CAMPBELL DirectorMarch 14, 2019Bradley Campbell /s/ KAREN J. FERRANTE DirectorMarch 14, 2019Karen J. Ferrante, M.D. /s/ MICHAEL D. KISHBAUCH DirectorMarch 14, 2019Michael D. Kishbauch /s/ DAVID A. SCHEINBERG DirectorMarch 14, 2019David A. Scheinberg, M.D., Ph.D. /s/ NICOLE S. WILLIAMS DirectorMarch 14, 2019Nicole S. Williams /s/ PATRICK FABBIO Senior Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)March 14, 2019Patrick Fabbio S-1Exhibit 21.1 Progenics Pharmaceuticals, Inc.Subsidiaries Name Jurisdiction of Incorporation Excelsior Life Sciences Ireland Limited IrelandMolecular Insight Pharmaceuticals, Inc. DelawareMolecular Insight Limited* England and WalesProgenics Life Sciences Limited England and WalesProgenics Pharmaceuticals Nevada, Inc. NevadaPSMA Development Company LLC DelawareEXINI Diagnostics AB SwedenMNTX Royalties Sub LLC Delaware * Subsidiary of Molecular Insight Pharmaceuticals, Inc.  Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-3 Nos. 333-227805 and 333-215454) of Progenics Pharmaceuticals, Inc., (2)Registration Statements (Form S-8 No. 333-225951) pertaining to the 2018 Performance Incentive Plan of Progenics Pharmaceuticals, Inc., and (3)Registration Statements (Form S-8 Nos. 333-197071, 333-183511, 333-176204, 333-160389, 333-143670, and 333-124910) pertaining to the2005 Stock Incentive Plan of Progenics Pharmaceuticals, Inc. of our reports dated March 14, 2019, with respect to the consolidated financial statements and schedules of Progenics Pharmaceuticals, Inc. and theeffectiveness of internal control over financial reporting of Progenics Pharmaceuticals, Inc. included in this Annual Report (Form 10-K) of ProgenicsPharmaceuticals, Inc. for the year ended December 31, 2018. /s/ Ernst & Young LLP Stamford, ConnecticutMarch 14, 2019 Exhibit 31.1 CERTIFICATIONPURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a) UNDER THESECURITIES EXCHANGE ACT OF 1934, AS AMENDED I, Mark R. Baker, certify that: 1.I have reviewed this annual report on Form 10-K of Progenics Pharmaceuticals, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during theperiod in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s independent registered public accounting firm and the audit committee of the registrant’s board of directors (or persons performingthe equivalent function): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ Mark R. BakerDate: March 14, 2019Mark R. Baker Chief Executive Officer(Principal Executive Officer) Exhibit 31.2 CERTIFICATIONPURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a) UNDER THESECURITIES EXCHANGE ACT OF 1934, AS AMENDED I, Patrick Fabbio, certify that: 1.I have reviewed this annual report on Form 10-K of Progenics Pharmaceuticals, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during theperiod in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s independent registered public accounting firm and the audit committee of the registrant’s board of directors (or persons performingthe equivalent function): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ Patrick FabbioDate: March 14, 2019Patrick Fabbio Chief Financial Officer (Principal Financial and Accounting Officer) Exhibit 32.1 CERTIFICATION PURSUANTTO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned Chief Executive Officer of Progenics Pharmaceuticals, Inc. (the “Company”) does hereby certify as follows: This annual report on Form 10-K of the Company for the period ended December 31, 2018 and filed with the Securities and ExchangeCommission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 andthe information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Mark R. BakerDate: March 14, 2019Mark R. BakerChief Executive Officer(Principal Executive Officer) A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting thesignature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ProgenicsPharmaceuticals, Inc. and will be retained by Progenics Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff uponrequest. Exhibit 32.2 CERTIFICATION PURSUANTTO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned Chief Financial Officer of Progenics Pharmaceuticals, Inc. (the “Company”) does hereby certify as follows: This annual report on Form 10-K of the Company for the period ended December 31, 2018 and filed with the Securities and ExchangeCommission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 andthe information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Patrick FabbioDate: March 14, 2019Patrick Fabbio Chief Financial Officer (Principal Financial and Accounting Officer) A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting thesignature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ProgenicsPharmaceuticals, Inc. and will be retained by Progenics Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff uponrequest

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