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      Progenics Form 8-K Risk Factors January 9, 2006
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      AND EXCHANGE COMMISSION</strong></font></div>
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      D.C. 20549</strong></font></div>
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      8-K</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
      REPORT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of
      1934</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
      of
      Report (Date of earliest event reported) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>January
      9, 2006</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      Pharmaceuticals, Inc.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      name of registrant as specified in its charter)</font></div>
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            </td>
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                or other jurisdiction</font></div>
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                incorporation)</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">File
                Number)</font></div>
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                Employer</font></div>
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                No.)</font></div>
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                Old Saw Mill River Road, Tarrytown, New York</u></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
                of principal executive offices)</font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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                Code)</font></div>
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                telephone number, including area code </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>(914)
                789-2800</u></font></div>
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      appropriate box below if the Form 8-K filing is intended to simultaneously
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
      8.01. Other Events</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      December 23, 2005, Progenics Pharmaceuticals, Inc. and its wholly-owned
      subsidiary, Progenics Pharmaceuticals Nevada, Inc. (&#8220;Progenics&#8221;), entered into
      an exclusive, worldwide License and Co-Development Agreement (the &#8220;Wyeth
      Agreement&#8221;) with Wyeth Pharmaceuticals, a division of Wyeth, and certain
      affiliates of Wyeth (&#8220;Wyeth&#8221;) for the joint development and commercialization of
      methylnaltrexone (&#8220;MNTX&#8221;) for the treatment of opioid-induced side effects,
      including constipation and post-operative bowel dysfunction. See our Current
      Report on Form 8-K dated December 28, 2005. We are updating our risk factor
      disclosure, most recently set forth in our Quarterly Report on Form 10-Q for
      the
      quarter ended September 30, 2005 under the caption "Item 2. Management&#8217;s
      Discussion and Analysis of Financial Condition and Results of Operations
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol">&#190;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Risk
      Factors&#8221;, to reflect, among other things, that collaboration. The updated
      disclosure is set forth below</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RISK
      FACTORS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business and operations entail a variety of risks and uncertainties, including
      those described below.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      product development programs are inherently risky.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      subject to the risks of failure inherent in the development of product
      candidates based on new technologies. Our MNTX product candidate, which is
      designed to reverse certain side effects induced by opioids and to treat
      post-operative bowel dysfunction and is being developed through a collaboration
      with Wyeth, is based on a novel method of action that has not yet been proven
      to
      be safe or effective. No drug with MNTX&#8217;s method of action has ever received
      marketing approval. Additionally, some of our HIV product candidates are
      designed to be effective by blocking viral entry, and our GMK product candidate
      is designed to be a therapeutic cancer vaccine. To our knowledge, no drug
      designed to treat HIV infection by blocking viral entry (with one exception)
      and
      no cancer therapeutic vaccine has been approved for marketing in the U.S. Our
      other research and development programs, and those conducted through our joint
      venture with Cytogen, involve similarly novel approaches to human therapeutics.
      Consequently, there is little precedent for the successful commercialization
      of
      products based on our technologies. There are a number of technological
      challenges that we must overcome to complete most of our development efforts.
      We
      may not be able to develop successfully any of our products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      have granted to Wyeth the exclusive rights to develop and commercialize MNTX,
      our lead product candidate, and our resulting dependence on Wyeth exposes us
      to
      significant risks.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      December 2005, we entered into a license and co-development agreement
      with</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Wyeth.
      Under this agreement, we granted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      Wyeth
      the exclusive worldwide right to develop and commercialize MNTX, our lead
      product candidate</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      As a
      result, we are dependent on Wyeth to perform and fund clinical testing, to
      make
      certain regulatory filings and to manufacture and market products containing
      MNTX. Our collaboration with Wyeth may not be scientifically, clinically or
      commercially successful.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <br>

        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;</font>Any
          revenues from the
          sale of MNTX, if approved for sale by the FDA, will depend almost entirely
          on
          the efforts of Wyeth. Wyeth has significant discretion in determining the
          efforts and resources it applies to sales of our products and may not be
          effective in marketing our products. In addition, Wyeth is a large, diversified
          pharmaceutical company with global operations and its own corporate agenda,
          which may not be consistent with our best interests. For example, Wyeth
          may
          change its strategic focus or pursue alternative technologies in a manner
          that
          results in reduced revenues to us. In addition, we will receive milestone
          payments from Wyeth only if MNTX achieves specified clinical, regulatory
          and
          commercialization milestones, and we will receive royalty payments from
          Wyeth
          only if MNTX receives regulatory approval and is commercialized by Wyeth.
          Many
          of these milestone events will depend on the efforts of Wyeth. We may not
          receive any milestone or royalty payments from Wyeth</font></div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2</font></div>
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        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Wyeth
      may
      terminate the license and co-development agreement:</font></div>
    <ul>
      <li>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 2; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
          any
          or no reason at any time after two years from the first commercial sale
          of the
          first commercial product utilizing MNTX in the United States by providing
          us
          with at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">360
          days prior written notice and complying with certain other
          conditions;</font></div>
      </li>
      <li>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 2; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
          safety or efficacy reasons by providing us with at least 30 days prior
          written
          notice;</font></div>
      </li>
      <li>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 2; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font>upon
          our material breach or
          non-compliance with our representations, warranties and other obligations
          under the license and co-development agreement if the non-compliance is
          not
          cured; or</font></div>
      </li>
      <li>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 2; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">upon
          our bankruptcy or similar insolvency event.</font></div>
      </li>
    </ul>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;If
      our
      relationship </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">with
      Wyeth were to terminate, we would have to either enter into a license and
      co-development agreement with another party or develop and commercialize MNTX
      ourselves. We may not be able to enter into such an agreement with another
      suitable company on acceptable terms or at all. To develop and commercialize
      MNTX on our own, we would&#160;have to develop a sales and marketing
      organization and a distribution infrastructure, neither of which we currently
      have. Developing these resources would be an expensive and lengthy process
      and
      would have a material adverse effect on our revenues and
      profitability.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Moreover,
      a termination of our relationship </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">with
      Wyeth could seriously compromise the development program for MNTX. For example,
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we
      could
      experience significant delays in the development of MNTX and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">would
      have to assume full funding and other responsibility for further development
      and
      eventual commercialization. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      of
      these outcomes would result in delays in our ability to distribute MNTX and
      would increase our expenses, which would have a material adverse effect on
      our
      business, results of operations and financial condition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      collaboration with Wyeth is multi-faceted and involves a complex sharing of
      control over decisions, responsibilities, costs and benefits. There are numerous
      potential sources of disagreement between us </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
      Wyeth, including with respect to product development, marketing strategies,
      manufacturing and supply issues and rights relating to intellectual property.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Wyeth
      has
      significantly greater financial and managerial resources than we do, which
      it
      could draw upon in the event of a dispute. A disagreement between Wyeth and
      us
      could lead to lengthy and expensive litigation or other dispute resolution
      proceedings as well as to extensive financial and operational consequences
      to
      us, and have a material adverse effect on our business, results of operations
      and financial condition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      testing does not yield successful results, our products will not be
      approved.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      will
      need to obtain regulatory approval before we can market our product candidates.
      To obtain marketing approval from regulatory authorities, we or our
      collaborators must demonstrate a product&#8217;s safety and efficacy through extensive
      preclinical and clinical testing. Numerous adverse events may arise during,
      or
      as a result of, the testing process, including the following:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                results of preclinical studies may be inconclusive, or they may not
                be
                indicative of results that will be obtained in human clinical trials;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">potential
                products may not have the desired efficacy or may have undesirable
                side
                effects or other characteristics that preclude marketing approval
                or limit
                their commercial use if approved; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">after
                reviewing test results, we or our collaborators may abandon projects,
                which we previously believed to be promising; and
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we,
                our collaborators or regulators may suspend or terminate clinical
                trials
                if we or they believe that the participating subjects or patients
                are
                being exposed to unacceptable health risks.
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Clinical
      testing is very expensive and can take many years. Results attained in early
      human clinical trials may not be indicative of results that are obtained in
      later clinical trials. In addition, many of our products, such as PRO 140 and
      the PSMA product candidates, are at an early stage of development. The
      successful commercialization of early stage products will require significant
      further research, development, testing, approvals by regulators and additional
      investment. Our products in the research or preclinical development stage may
      not yield results that would permit or justify clinical testing. Our failure
      to
      adequately demonstrate the safety and efficacy of a product under development
      would delay or prevent marketing approval of the product, which could adversely
      affect our operating results and credibility.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>A
      setback in our clinical development programs could adversely affect
      us.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      several ongoing late-stage clinical trials. We have completed enrollment and
      patient treatment in our two pivotal phase 3 clinical trials and in the
      extension study for one of those trials of sub-cutaneous MNTX for the treatment
      of opioid-induced constipation in patients with advanced medical illness.
      Patient enrollment in the extension study of the second pivotal trial has been
      completed and patient treatment is currently ongoing. We will need to
      successfully complete and analyze the data from both of these trials, and their
      extension studies, in order to obtain approval of the FDA to market MNTX. We
      also have completed a phase 2 clinical trial of intravenous MNTX in patients
      at
      risk for post-operative bowel dysfunction and intend, working with our
      collaborator Wyeth, to conduct additional clinical trials of oral MNTX in
      chronic pain patients who experience opioid-induced constipation. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      results of any of these ongoing trials are not satisfactory, or if we encounter
      problems enrolling patients, or if clinical trial supply issues or other
      difficulties arise, our entire MNTX development program could be adversely
      affected, resulting in delays in commencing or completing clinical trials or
      in
      making our regulatory filing for marketing approval. The need to conduct
      additional clinical trials or significant revisions to our clinical development
      plan would lead to delays in filing for the regulatory approvals necessary
      to
      market MNTX. If the clinical trials indicate a serious problem with the safety
      or efficacy of a MNTX product then Wyeth has the right under our license and
      co-development agreement to terminate the agreement or to stop the development
      or commercialization of the affected products. Since MNTX is our most clinically
      advanced product, any setback of these types would have a material adverse
      effect on our stock price and business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      also
      have two ongoing pivotal phase 3 clinical trials for GMK. In May 2000, our
      collaborating research cooperative group in one of these trials, ECOG,
      recommended to clinical investigators participating in the trial that they
      discontinue administering GMK, and as a result that trial did not complete
      patient dosing as contemplated by the initial trial protocol. A second pivotal
      phase 3 trial for GMK was initiated in May 2001 and</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">full
      enrollment of the 1,300 patients called for in the trial has been completed.
      We
      expect to assess the recurrence of cancer and overall survival of the study
      patients over the next several years. If the results of either of the GMK trials
      are not satisfactory, we may need to conduct additional clinical trials or
      abandon our GMK program.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      announced positive phase 1 clinical findings related to PRO 140, and we have
      initiated an additional phase 1b clinical trial. We have also decided to ramp
      down our development efforts on PRO 542, our other HIV product candidate, in
      order to concentrate our resources on PRO 140. If the results of our phase
      1b
      study with PRO 140 or the preclinical and clinical studies involving the PSMA
      vaccine and antibody candidates are not satisfactory, we would need to
      reconfigure our clinical trial programs to conduct additional trials or abandon
      the program involved.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      have a history of operating losses, and we may never be
      profitable.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      incurred substantial losses since our inception. As of September 30, 2005,
      we
      had an accumulated deficit of approximately $156.0 million. We have derived
      no
      significant revenues from product sales or royalties. We do not expect to
      achieve significant product sales or royalty revenue for a number of years,
      if
      ever, other than potential revenues from MNTX. We expect to incur additional
      operating losses in the future, which could increase significantly as we expand
      our clinical trial programs and other product development efforts.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      ability to achieve and sustain profitability is dependent in part on obtaining
      regulatory approval to market our products and then commercializing, either
      alone or with others, our products. We may not be able to develop and
      commercialize products. Moreover, our operations may not be profitable even
      if
      any of our products under development are commercialized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are likely to need additional financing, but our access to capital funding
      is
      uncertain.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of
      September 30, 2005, we had cash, cash equivalents and marketable securities,
      including non-current portion, totaling $128.0 million. In December 2005, we
      received a $60 million upfront payment from Wyeth in connection with the signing
      of the license and co-development agreement relating to MNTX. During the three
      months and nine months ended September 30, 2005, we had a net loss of $10.7
      million and $36.7 million, respectively, and we used cash in operating
      activities of $33.4 million during the nine months ended September 30, 2005.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      our
      agreement with Wyeth, Wyeth is responsible for all future development and
      commercialization costs relating to MNTX starting January 1, 2006. As a result
      we expect that our spending on MNTX in 2006 and beyond will drop significantly
      from the amounts expended in 2005.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
      regard to our other product candidates, however, we expect that we will continue
      to incur significant expenditures for their development and we do not have
      committed external sources of funding for most of these projects. These
      expenditures will be funded from our cash on hand, or we may seek additional
      external funding for these expenditures, most likely through collaborative
      agreements, or other license or sale transactions, with one or more
      pharmaceutical companies, through the issuance and sale of securities or through
      additional government grants or contracts. We cannot predict with any certainty
      when we will need additional funds or how much we will need or if additional
      funds will be available to us. Our need for future funding will depend on
      numerous factors, many of which are outside our control.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      access to capital funding is uncertain. We may not be able to obtain additional
      funding on acceptable terms, or at all. Our inability to raise additional
      capital on terms reasonably acceptable to us would seriously jeopardize the
      future success of our business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      we
      raise funds by issuing and selling securities, it may be on terms that are
      not
      favorable to our existing stockholders. If we raise additional funds by selling
      equity securities, our current stockholders will be diluted, and new investors
      could have rights superior to our existing stockholders. If we raise funds
      by
      selling debt securities, we could be subject to restrictive covenants and
      significant repayment obligations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      clinical trials could take longer than we expect.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although
      for planning purposes we forecast the commencement and completion of clinical
      trials, and have included&#160;many of those forecasts in&#160;reports filed
      with the Securities and Exchange Commission&#160;and in other public
      disclosures, the actual timing of these events can vary dramatically. For
      example, we have experienced delays in our MNTX clinical development program
      in
      the past as a result of slower than anticipated patient enrollment. These delays
      may recur. Delays can be caused by, among other things:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">deaths
                or other adverse medical events involving patients or subjects in
                our
                clinical trials; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">regulatory
                or patent issues; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">interim
                or final results of ongoing clinical trials;
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">failure
                to enroll clinical sites as expected;
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">scheduling
                conflicts with participating clinicians and clinical institutions;
                and
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">manufacturing
                problems. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, we may need to delay or suspend our clinical trials if we are unable
      to obtain additional funding when needed. Also, our clinical programs involving
      our joint venture with Cytogen Corporation&#160; ("Cytogen") could be delayed by
      disagreements between Cytogen and us concerning funding development programs
      or
      other matters. For example, until June 2005, the joint venture had no approved
      2005 budget or work plan because we and Cytogen had not yet reached agreement
      with respect to a number of matters relating to the joint venture. In June
      2005,
      we and Cytogen approved a work plan and budget for 2005. We have not yet agreed
      with Cytogen on a work plan and budget for 2006. Clinical trials involving
      our
      product candidates may not commence or be completed as forecasted.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Moreover,
      we have limited experience in conducting clinical trials, and we rely on others
      to conduct, supervise or monitor some or all aspects of some of our clinical
      trials. In addition, certain clinical trials for our products may be conducted
      by government-sponsored agencies, and consequently will be dependent on
      governmental participation and funding. Under our agreement with Wyeth relating
      to MNTX Wyeth has the responsibility to conduct some of the clinical trials
      for
      that product candidate, including all trials outside of the United States.
      We
      will have less control over the timing and other aspects of these clinical
      trials than if we conducted them entirely on our own.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      a
      result of these and other factors, our clinical trials may not commence or
      be
      completed as we expect or may not be conducted successfully, in which event
      investors&#8217; confidence in our ability to develop products may be impaired and our
      stock price may decline.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are subject to extensive regulation, which can be costly and time consuming
      and
      can subject us to unanticipated fines and delays.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      and
      our products are subject to comprehensive regulation by the FDA in the U.S.
      and
      by comparable authorities in other countries. These national agencies and other
      federal, state and local entities regulate, among other things, the preclinical
      and clinical testing, safety, approval, manufacture, labeling, marketing,
      export, storage, record keeping, advertising and promotion of pharmaceutical
      products. If we violate regulatory requirements at any stage, whether before
      or
      after marketing approval is obtained, we may be subject to forced removal of
      a
      product from the market, product seizure, civil and criminal penalties and
      other
      adverse consequences.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      products do not yet have, and may never obtain, the regulatory approvals needed
      for marketing.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None
      of
      our products has been approved by applicable regulatory authorities for
      marketing. The process of obtaining FDA and foreign regulatory approvals often
      takes many years and can vary substantially based upon the type, complexity
      and
      novelty of the products involved. We have had only limited experience in filing
      and pursuing applications and other submissions necessary to gain marketing
      approvals. Our products under development may never obtain the marketing
      approval from the FDA or any other regulatory authority necessary for
      commercialization.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Even
      if
      our products receive regulatory approval:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">they
                might not obtain labeling claims necessary to make the product
                commercially viable (in general, labeling claims define the medical
                conditions for which a drug product may be marketed, and are therefore
                very important to the commercial success of a product);
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we
                or our collaborators might be required to undertake post-marketing
                trials
                to verify the product&#8217;s efficacy or safety;
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we,
                our collaborators or others might identify side effects after the
                product
                is on the market, or we or our collaborators might experience
                manufacturing problems, either of which could result in subsequent
                withdrawal of marketing approval, reformulation of the product, additional
                preclinical testing or clinical trials, changes in labeling of the
                product
                or the need for additional marketing applications; and
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we
                and our collaborators will be subject to ongoing FDA obligations
                and
                continuous regulatory review. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      our
      products fail to receive marketing approval or lose previously received
      approvals, our financial results would be adversely affected.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Even
      if our products obtain marketing approval, they might not be accepted in the
      marketplace.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      commercial success of our products will depend upon their acceptance by the
      medical community and third party payors as clinically useful, cost effective
      and safe. If healthcare providers believe that patients can be managed
      adequately with alternative, currently available therapies, they may not
      prescribe our products, especially if the alternative therapies are viewed
      as
      more effective, as having a better safety or tolerability profile, as being
      more
      convenient to the patient or healthcare providers or as being less expensive.
      For pharmaceuticals administered in an institutional setting, the ability of
      the
      institution to be adequately reimbursed could also play a significant role
      in
      demand for our products. Even if our products obtain marketing approval, they
      may not achieve market acceptance. If any of our products do not achieve market
      acceptance, we will likely lose our entire investment in that
      product.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Marketplace
      acceptance will depend in part on competition in our industry, which is
      intense.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      extent to which any of our products achieves market acceptance will depend
      on
      competitive factors. Competition in our industry is intense, and it is
      accentuated by the rapid pace of technological development. There are products
      currently in the market that will compete with the products that we are
      developing, including chemotherapy drugs for treating cancer and AIDS drugs.
      As
      described below, Adolor Corporation is developing a drug that would compete
      with
      MNTX. Many of our competitors have substantially greater research and
      development capabilities and experience and greater manufacturing, marketing,
      financial and managerial resources than we do. These competitors may develop
      products that are superior to those we are developing and render our products
      or
      technologies non-competitive or obsolete. If our product candidates receive
      marketing approval but cannot compete effectively in the marketplace, our
      operating results and financial position would suffer.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;One
      or more competitors developing an opioid antagonist may reach the market ahead
      of us and adversely affect the market potential for MNTX.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      aware that Adolor Corporation, in collaboration with Glaxo Group Limited, or
      Glaxo, a subsidiary of GlaxoSmithKline plc, is developing an opioid antagonist,
      Entereg&#8482; (alvimopan), for post-operative ileus, which has completed phase 3
      clinical trials, and for opioid bowel dysfunction and chronic constipation,
      which have completed phase 2 trials. Post-operative ileus is a condition similar
      to post-operative bowel dysfunction, a condition for which we are developing
      MNTX. Entereg is further along in the clinical development process than MNTX,
      and Adolor Corporation has received an approvable letter from the U.S. Food
      and
      Drug Administration for Entereg regarding the treatment of post-operative ileus.
      Additionally, it has been reported that a European specialty pharmaceutical
      company is in clinical development of an oral formulation of methylnaltrexone
      for use in opioid-induced constipation. If either of these products reaches
      the
      market before MNTX, it could achieve a significant competitive advantage
      relative to our product. In any event, the considerable marketing and sales
      capabilities of Glaxo may impair our ability to penetrate the market.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      the
      terms of our collaboration with Wyeth with respect to MNTX, Wyeth will develop
      the oral form of MNTX worldwide. We will lead the U.S. development of the
      subcutaneous and intravenous forms of MNTX, while Wyeth will lead development
      of
      these parenteral products outside the U.S. Wyeth and we will pursue an
      integrated strategy to optimize worldwide development, regulatory approval,
      and
      commercial launch of the three MNTX products, which may impact timelines for
      the
      development of MNTX previously disclosed by us. Decisions regarding the
      timelines for development of the three MNTX products will be made by a Joint
      Development Committee formed under the terms of the license and co-development
      agreement, consisting of members from both Wyeth and Progenics.</font></div><br>
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        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Disputes
      with Cytogen could delay or halt our PSMA programs.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      research and development programs relating to vaccine and antibody
      immunotherapeutics based on PSMA are conducted through a joint venture between
      Cytogen Corporation and us. The JV is a 50/50 joint venture, meaning that our
      ownership rights in the programs, funding obligations and governance rights
      are
      equal. As a result, for the joint venture to operate efficiently, and for the
      research and development programs to be adequately funded and staffed and
      productive, we and Cytogen must be in agreement on strategic and operational
      matters. There is a significant risk that, as a result of differing views and
      priorities, there will be occasions when we do not agree on various
      matters.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cytogen&#8217;s
      and our level of commitment to fund the PSMA joint venture is based upon annual
      budgets and work plans that are developed and approved by the parties. We have
      in the past experienced delays in reaching agreement with Cytogen regarding
      annual budget issues and strategic and operational matters relating to the
      joint
      venture. For example, until June 2005, the joint venture had no approved 2005
      budget or work plan because we and Cytogen had not yet reached agreement with
      respect to a number of matters relating to the joint venture. In June 2005,
      we
      and Cytogen reached agreement on a work plan and budget for 2005</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      not yet agreed with Cytogen on a work plan and budget for 2006. If we do not
      reach an agreement regarding the budget and work plan for 2006 and future years,
      we would likely experience delays in advancing the PSMA programs and may need
      to
      dissolve the joint venture and abandon the PSMA programs being conducted by
      the
      joint venture. We may not reach an agreement with Cytogen on these
      matters.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      we are unable to negotiate collaborative agreements, our cash burn rate could
      increase and our rate of product development could
      decrease.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business strategy includes as an element entering into collaborations with
      pharmaceutical and biotechnology companies to develop and commercialize our
      products and technologies. We recently entered into such a collaboration with
      Wyeth. However, we may not be successful in negotiating additional collaborative
      arrangements. If we do not enter into new collaborative arrangements, we would
      have to devote more of our resources to clinical product development and
      product-launch activities, and our cash burn rate would increase or we would
      need to take steps to reduce our rate of product development.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      we do not remedy our failure to achieve milestones or satisfy conditions
      regarding some of our product candidates, we may not maintain our rights under
      our licenses relating to these product candidates.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      required to make substantial cash payments, achieve specified milestones and
      satisfy other conditions, including filing for and obtaining marketing approvals
      and introducing products, to maintain rights under our intellectual property
      licenses. We may not be able to maintain our rights under these
      licenses.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      our
      license agreements with Sloan Kettering Institute for Cancer Research relating
      to GMK and with Columbia University relating to PRO 542, we are required, among
      other things, to have filed for marketing approval for a drug by 2000 and to
      have commenced commercialization of the drug by 2002 (for GMK) and to have
      filed
      for marketing approval by 2001 (for PRO 542). We have not achieved these and
      other milestones and are unlikely to achieve them soon. We are in a similar
      position with respect to our license agreement with Antigenics Inc. concerning
      QS-21, a component of GMK. If we can establish that our failure to achieve
      these
      milestones resulted from technical issues beyond our control or delays in
      clinical studies that could not have been reasonably avoided, we may be entitled
      to a revision of these milestone dates. Although we believe that we satisfy
      one
      or more of these conditions, we may become involved in disputes with our
      licensors as to our continued right to a license. In addition, at September
      1,
      2004 we became obligated under our license agreement with Columbia to pay
      Columbia $225,000. We have accrued this amount but, pending the outcome of
      discussions with Columbia regarding this payment and other matters relating
      to
      the license, we have not yet paid it. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      we do
      not comply with our obligations under our license agreements, the licensors
      may
      terminate them. Termination of any of our licenses could result in our losing
      our rights to, and therefore being unable to commercialize, any related product.
      We have had discussions with Sloan-Kettering and Columbia to reach agreement
      on
      the revision of applicable milestone dates. We may not, however, reach agreement
      with these licensors in a manner favorable to us.</font></div>
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      have limited manufacturing capabilities, which could adversely impact our
      ability to commercialize products.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      limited manufacturing capabilities, which may result in increased costs of
      production or delay product development or commercialization. In order to
      commercialize our product candidates successfully, we or our collaborators
      must
      be able to manufacture products in commercial quantities, in compliance with
      regulatory requirements, at acceptable costs and in a timely manner. The
      manufacture of our product candidates can be complex, difficult to accomplish
      even in small quantities, difficult to scale-up for large-scale production
      and
      subject to delays, inefficiencies and low yields of quality products. The cost
      of manufacturing some of our products may make them prohibitively expensive.
      If
      adequate supplies of any of our product candidates or related materials are
      not
      available to us on a timely basis or at all, our clinical trials could be
      seriously delayed, since these materials are time-consuming to manufacture
      and
      cannot be readily obtained from third-party sources.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      operate pilot-scale manufacturing facilities for the production of vaccines
      and
      recombinant proteins. We believe that, for these types of product candidates,
      these facilities will be sufficient to meet our initial needs for clinical
      trials. However, these facilities may be insufficient for late-stage clinical
      trials for these types of product candidates, and would be insufficient for
      commercial-scale manufacturing requirements. We may be required to expand
      further our manufacturing staff and facilities, obtain new facilities or
      contract with corporate collaborators or other third parties to assist with
      production.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that we decide to establish a commercial-scale manufacturing facility,
      we
      will require substantial additional funds and will be required to hire and
      train
      significant numbers of employees and comply with applicable regulations, which
      are extensive. We may not be able to build a manufacturing facility that both
      meets regulatory requirements and is sufficient for our clinical trials or
      commercial-scale manufacturing.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      entered into arrangements with third parties for the manufacture of some of
      our
      products. Our third-party sourcing strategy may not result in a cost-effective
      means for manufacturing products. In employing third-party manufacturers, we
      will not control many aspects of the manufacturing process, including compliance
      by these third parties with the FDA&#8217;s current Good Manufacturing Practices and
      other regulatory requirements. We may not be able to obtain adequate supplies
      from third-party manufacturers in a timely fashion for development or
      commercialization purposes, and commercial quantities of products may not be
      available from contract manufacturers at acceptable costs.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are dependent on our patents and other intellectual property rights. The
      validity, enforceability and commercial value of these rights are highly
      uncertain.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      success is dependent in part on obtaining, maintaining and enforcing patent
      and
      other intellectual property rights. The patent position of biotechnology and
      pharmaceutical firms is highly uncertain and involves many complex legal and
      technical issues. There is no clear policy involving the breadth of claims
      allowed, or the degree of protection afforded, under patents in this area.
      Accordingly, the patent applications owned by or licensed to us may not result
      in patents being issued. We are aware of other groups that have patent
      applications or patents containing claims similar to or overlapping those in
      our
      patents and patent applications. We do not expect to know for several years
      the
      relative strength or scope of our patent position as compared to these other
      groups. Furthermore, patents that we own or license may not enable us to
      preclude competitors from commercializing drugs, and consequently may not
      provide us with any meaningful competitive advantage.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      own or
      have licenses to several issued patents. However, the issuance of a patent
      is
      not conclusive as to its validity or enforceability. The validity or
      enforceability of a patent after its issuance by the patent office can be
      challenged in litigation. Our patents may be successfully challenged. Moreover,
      we may incur substantial costs in litigation to uphold the validity of patents
      or to prevent infringement. If the outcome of litigation is adverse to us,
      third
      parties may be able to use our patented invention without payment to us.
      Moreover, third parties may avoid our patents through design
      innovation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Most
      of
      our product candidate, including MNTX, PRO 140, GMK and our PSMA program
      products, incorporate to some degree intellectual property licensed from third
      parties. We can lose the right to patents and other intellectual property
      licensed to us if the related license agreement is terminated due to a breach
      by
      us or otherwise. Our ability, and that of our collaboration partners, to
      commercialize products incorporating licensed intellectual property would be
      impaired if the related license agreements were terminated.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Generally,
      we have the right to defend and enforce patents licensed by us, either in the
      first instance or if the licensor chooses not to do so. In addition, our license
      agreement with the University of Chicago regarding MNTX gives us the right
      to
      prosecute and maintain the licensed patents. We bear the cost of engaging in
      some or all of these activities with respect to our license agreements with
      Sloan-Kettering for GMK, Columbia for PRO 542 and the University of Chicago
      for
      MNTX. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
      most
      of our other license agreements, the licensor bears the cost of engaging in
      all
      of these activities, although we may share in those costs under specified
      circumstances. Historically, our costs of defending patent rights, both our
      own
      and those we license, have not been material.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      also
      rely on unpatented technology, trade secrets and confidential information.
      Third
      parties may independently develop substantially equivalent information and
      techniques or otherwise gain access to our technology or disclose our
      technology, and we may be unable to effectively protect our rights in unpatented
      technology, trade secrets and confidential information. We require each of
      our
      employees, consultants and advisors to execute a confidentiality agreement
      at
      the commencement of an employment or consulting relationship with us. However,
      these agreements may not provide effective protection in the event of
      unauthorized use or disclosure of confidential information.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      we infringe third-party patent or other intellectual property rights, we may
      need to alter or terminate a product development program.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      may
      be patent or other intellectual property rights belonging to others that require
      us to alter our products, pay licensing fees or cease certain activities. If
      our
      products infringe patent or other intellectual property rights of others, the
      owners of those rights could bring legal actions against us claiming damages
      and
      seeking to enjoin manufacturing and marketing of the affected products. If
      these
      legal actions are successful, in addition to any potential liability for
      damages, we could be required to obtain a license in order to continue to
      manufacture or market the affected products. We may not prevail in any action
      brought against us, and any license required under any rights that we infringe
      may not be available on acceptable terms or at all. We are aware of intellectual
      property rights held by third parties that relate to products or technologies
      we
      are developing. For example, we are aware of other groups investigating
      methylnaltrexone and other peripheral opioid antagonists, PSMA or related
      compounds and CCR5 monoclonal antibodies and of patents held, and patent
      applications filed, by these groups in those areas. While the validity of these
      issued patents, patentability of these pending patent applications and
      applicability of any of them to our programs are uncertain, if asserted against
      us, any related patent or other intellectual property rights could adversely
      affect our ability to commercialize our products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      research, development and commercialization of a biopharmaceutical often involve
      alternative development and optimization routes, which are presented at various
      stages in the development process. The preferred routes cannot be predicted
      at
      the outset of a research and development program because they will depend on
      subsequent discoveries and test results. There are numerous third-party patents
      in our field, and we may need to obtain a license to a patent in order to pursue
      the preferred development route of one or more of our products. The need to
      obtain a license would decrease the ultimate profitability of the applicable
      product. If we cannot negotiate a license, we might have to pursue a less
      desirable development route or terminate the program altogether.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are dependent upon third parties for a variety of functions. These arrangements
      may not provide us with the benefits we expect.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      rely
      in part on third parties to perform a variety of functions. We are party to
      numerous agreements which place substantial responsibility on clinical research
      organizations, consultants and other service providers for the development
      of
      our products. We also rely on medical and academic institutions to perform
      aspects of our clinical trials of product candidates. In addition, an element
      of
      our research and development strategy is to in-license technology and product
      candidates from academic and government institutions in order to minimize
      investments in early research. Furthermore, we recently entered into an
      agreement under which we will depend on Wyeth for the commercialization and
      development of MNTX, our lead product candidate. We may not be able to maintain
      any of these relationships or establish new ones on beneficial terms.
      Furthermore, we may not be able to enter new arrangements without undue delays
      or expenditures, and these arrangements may not allow us to compete
      successfully. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      lack sales and marketing experience, which will make us dependent on third
      parties for their expertise in this area.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      no experience in sales, marketing or distribution. If we receive marketing
      approval, we expect to market and sell our products principally through
      distribution, co-marketing, co-promotion or licensing arrangements with third
      parties. We may also consider contracting with a third party professional
      pharmaceutical detailing and sales organization to perform the marketing
      function for our products. Under our license and co-development agreement with
      Wyeth, Wyeth is responsible for commercializing MNTX. To the extent that we
      enter into distribution, co-marketing, co-promotion, detailing or licensing
      arrangements for the marketing and sale of our other products, any revenues
      we
      receive will depend primarily on the efforts of third parties. We will not
      control the amount and timing of marketing resources these third parties devote
      to our products. In addition, if we market products directly, significant
      additional expenditures and management resources would be required to develop
      an
      internal sales force. We may not be able to establish a successful sales force
      should we choose to do so. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      we lose key management and scientific personnel on whom we depend, our business
      could suffer.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      dependent upon our key management and scientific personnel. In particular,
      the
      loss of Dr. Paul J. Maddon, our Chief Executive Officer and Chief Science
      Officer, could cause our management and operations to suffer. We have an
      employment agreement with Dr. Maddon, the initial term of which ran through
      September 30, 2005, subject to an automatic renewal for an additional period
      of
      two years unless either party provides ninety days prior notice of non-renewal.
      See &#8220;Item 11. Executive Compensation - Employment Agreements&#8221; in our Annual
      Report on Form 10-K for the year ended December 31, 2004. Neither we nor Dr.
      Maddon gave notice of non-renewal. We are currently in discussions with Dr.
      Maddon regarding the renewal of his employment agreement and expect that the
      agreement will be renewed. Employment agreements do not, however, assure the
      continued employment of an employee. We maintain key-man life insurance on
      Dr.
      Maddon in the amount of $2.5 million.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      October 2004, our Board of Directors elected Paul F. Jacobson and Kurt W. Briner
      as Co-chairmen of the Board in substitution of Dr. Paul J. Maddon, our Chief
      Executive Officer, Chief Science Officer and a director. Dr. Maddon&#8217;s employment
      agreement contains provisions relating to the Chairmanship position. In
      connection with the renewal of Dr. Maddon&#8217;s employment agreement, we intend to
      clarify that the change in the Chairman position is not inconsistent with Dr.
      Maddon&#8217;s employment agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Competition
      for qualified employees among companies in the biopharmaceutical industry is
      intense. Our future success depends upon our ability to attract, retain and
      motivate highly skilled employees. In order to commercialize our products
      successfully, we may be required to expand substantially our personnel,
      particularly in the areas of manufacturing, clinical trials management,
      regulatory affairs, business development and marketing. We may not be successful
      in hiring or retaining qualified personnel.</font></div>
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    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      we are unable to obtain sufficient quantities of the raw and bulk materials
      needed to make our products, our product development and commercialization
      could
      be slowed or stopped.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      currently obtain supplies of critical raw materials used in production of MNTX,
      GMK and other of our product candidates from single sources. In particular,
      we
      rely on single-source third-party manufacturers for the supply of both bulk
      and
      finished form MNTX. We have a supply agreement with Mallinckrodt Inc., our
      current supplier of bulk-form MNTX, which has an initial term that expires
      on
      January 1, 2008. In accordance with our collaboration agreement with Wyeth,
      we
      will transfer to Wyeth, at a mutually agreeable time,&#160;the responsibility
      for manufacturing MNTX for clinical and commercial use, including our supply
      agreements with third parties. We do not have long-term contracts with any
      of
      our other suppliers. In addition, commercialization of GMK requires an adjuvant,
      QS-21, available only from Antigenics Inc. Our existing arrangements may not
      result in the supply of sufficient quantities of our product candidates needed
      to accomplish our clinical development programs, and we may not have the right
      or capability to manufacture sufficient quantities of these products to meet
      our
      needs if our suppliers are unable or unwilling to do so. Any delay or disruption
      in the availability of raw materials would slow or stop product development
      and
      commercialization of the relevant product.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>A
      substantial portion of our funding comes from federal government grants and
      research contracts. We cannot rely on these grants or contracts as a continuing
      source of funds.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
      substantial portion of our revenues to date has been derived from federal
      government grants and research contracts. In September 2005, we were awarded
      a
      $10.1 million grant from the NIH to partially fund our PRO 140 program. Also,
      in
      2004 we were awarded, in the aggregate, approximately $9.2 million in NIH grants
      and research contracts in addition to previous years&#8217; awards. We cannot rely on
      grants or additional contracts as a continuing source of funds. Moreover, funds
      available under these grants and contracts must be applied by us toward the
      research and development programs specified by the government rather than for
      all our programs generally. For example, the $28.6 million contract awarded
      to
      us by the NIH in September 2003 must be used by us in furtherance of our efforts
      to develop an HIV vaccine. The government&#8217;s obligation to make payments under
      these grants and contracts is subject to appropriation by the U.S. Congress
      for
      funding in each year. Moreover, it is possible that Congress or the government
      agencies that administer these government research programs will decide to
      scale
      back these programs or terminate them due to their own budgetary constraints.
      Additionally, these grants and research contracts are subject to adjustment
      based upon the results of periodic audits performed on behalf of the granting
      authority. Consequently, the government may not award grants or research
      contracts to us in the future, and any amounts that we derive from existing
      grants or contracts may be less than those received to date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      health care reform measures are enacted, our operating results and our ability
      to commercialize products could be adversely affected.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      recent
      years, there have been numerous proposals to change the health care system
      in
      the U.S. and in foreign jurisdictions. Some of these proposals have included
      measures that would limit or eliminate payments for medical procedures and
      treatments or subject the pricing of pharmaceuticals to government control.
      In
      some foreign countries, particularly countries of the European Union, the
      pricing of prescription pharmaceuticals is subject to governmental control.
      In
      addition, as a result of the trend towards managed health care in the U.S.,
      as
      well as legislative proposals to reduce government insurance programs,
      third-party payors are increasingly attempting to contain health care costs
      by
      limiting both coverage and the level of reimbursement of new drug products.
      Consequently, significant uncertainty exists as to the reimbursement status
      of
      newly approved health care products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      we or
      any of our collaborators succeed in bringing one or more of our products to
      market, third-party payors may establish and maintain price levels insufficient
      for us to realize an appropriate return on our investment in product
      development. Significant changes in the health care system in the U.S. or
      elsewhere, including changes resulting from adverse trends in third-party
      reimbursement programs, could have a material adverse effect on our operating
      results and our ability to raise capital and commercialize
      products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
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        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">12</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are exposed to product liability claims, and in the future we may not be able
      to
      obtain insurance against these claims at a reasonable cost or at
      all.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business exposes us to product liability risks, which are inherent in the
      testing, manufacturing, marketing and sale of pharmaceutical products. We may
      not be able to avoid product liability exposure. If a product liability claim
      is
      successfully brought against us, our financial position may be adversely
      affected.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Product
      liability insurance for the biopharmaceutical industry is generally expensive,
      when available at all. We have obtained product liability insurance in the
      amount of $5.0 million per occurrence, subject to a deductible and a $5.0
      million annual aggregate limitation. In addition, where local statutory
      requirements exceed the limits of our existing insurance or where local policies
      of insurance are required, we maintain additional clinical trial liability
      insurance to meet these requirements. Our present insurance coverage may not
      be
      adequate to cover claims brought against us. In addition, some of our license
      and other agreements require us to obtain product liability insurance. Adequate
      insurance coverage may not be available to us at a reasonable cost in the
      future.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      handle hazardous materials and must comply with environmental laws and
      regulations, which can be expensive and restrict how we do business. If we
      are
      involved in a hazardous waste spill or other accident, we could be liable for
      damages, penalties or other forms of censure.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      research and development work and manufacturing processes involve the use of
      hazardous, controlled and radioactive materials. We are subject to federal,
      state and local laws and regulations governing the use, manufacture, storage,
      handling and disposal of these materials. Despite procedures that we implement
      for handling and disposing of these materials, we cannot eliminate the risk
      of
      accidental contamination or injury. In the event of a hazardous waste spill
      or
      other accident, we could be liable for damages, penalties or other forms of
      censure. In addition, we may be required to incur significant costs to comply
      with environmental laws and regulations in the future.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      stock price has a history of volatility. You should consider an investment
      in
      our stock as risky and invest only if you can withstand a significant
      loss.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      stock
      price has a history of significant volatility. Between January 1, 2002 and
      September 30, 2005, our stock price has ranged from $3.82 to $25.07 per share.
      At times, our stock price has been volatile even in the absence of significant
      news or developments relating to us. Moreover, the stocks of biotechnology
      companies and the stock market generally have been subject to dramatic price
      swings in recent years. Factors that may have a significant impact on the market
      price of our common stock include:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                results of clinical trials and preclinical studies involving our
                products
                or those of our competitors; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">changes
                in the status of any of our drug development programs, including
                delays in
                clinical trials or program terminations;
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">developments
                regarding our efforts to achieve marketing approval for our products;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
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                in our relationship with Wyeth regarding the development and
                commercialization of MNTX;</font></div>
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                of technological innovations or new commercial products by us, our
                collaborators or our competitors; </font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">developments
                in our relationships with other collaborative partners;
                </font></div>
            </td>
          </tr>

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</font></div>
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                regulation; </font></div>
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                concern as to the safety and efficacy of products developed by us,
                our
                collaborators or our competitors; </font></div>
            </td>
          </tr>

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    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
                ability to fund on-going operations;
</font></div>
            </td>
          </tr>

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    <div>
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">fluctuations
                in our operating results; and </font></div>
            </td>
          </tr>

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    <div>
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          <tr valign="top" style="line-height: 1.25;">
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">general
                market conditions. </font></div>
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          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      principal stockholders are able to exert significant influence over matters
      submitted to stockholders for approval.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      September 30, 2005, Dr. Maddon and stockholders affiliated with Tudor Investment
      Corporation together beneficially own or control approximately 19% of our
      outstanding shares of common stock. These persons, should they choose to act
      together, could exert significant influence in determining the outcome of
      corporate actions requiring stockholder approval and otherwise control our
      business. This control could have the effect of delaying or preventing a change
      in control of us and, consequently, could adversely affect the market price
      of
      our common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Anti-takeover
      provisions may make the removal of our Board of Directors or management more
      difficult and discourage hostile bids for control of our company that may be
      beneficial to our stockholders.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      Board
      of Directors is authorized, without further stockholder action, to issue from
      time to time shares of preferred stock in one or more designated series or
      classes. The issuance of preferred stock, as well as provisions in certain
      of
      our stock options that provide for acceleration of exercisability upon a change
      of control, and Section 203 and other provisions of the Delaware General
      Corporation Law could:</font></div>
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          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">make
                the takeover of Progenics or the removal of our Board of Directors
                or
                management more difficult; </font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">discourage
                hostile bids for control of Progenics in which stockholders may receive
                a
                premium for their shares of common stock; and
</font></div>
            </td>
          </tr>

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    <div>
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          <tr valign="top" style="line-height: 1.25;">
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                dilute the rights of holders of our common stock and depress the
                market
                price of our common stock. </font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      there are substantial sales of our common stock, the market price of our common
      stock could decline.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sales
      of
      substantial numbers of shares of common stock could cause a decline in the
      market price of our stock. We require substantial external funding to finance
      our research and development programs and may seek such funding through the
      issuance and sale of our common stock. We have announced that we intend to
      file
      shelf registration statements to permit the public reoffer and sale from time
      to
      time of up to 286,000 shares of our common stock by certain stockholders. Sales
      of our common stock pursuant to these registration statements could cause the
      market price or our stock to decline. In addition, some of our other
      stockholders are entitled to require us to register their shares of common
      stock
      for offer or sale to the public. Also, we have filed Form S-8 registration
      statements registering shares issuable pursuant to our equity compensation
      plans. Any sales by existing stockholders or holders of options may have an
      adverse effect on our ability to raise capital and may adversely affect the
      market price of our common stock.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">14</font></div>
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        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><a name="p_"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURES</strong></font></a></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PROGENICS
      PHARMACEUTICALS, INC.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 189pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>&#160;&#160;/s/
      ROBERT A.
      MCKINNEY&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 189pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Robert
      A.
      McKinney</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 189pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
      Financial Officer, Vice President,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 189pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Finance
      and Operations and Treasurer</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      January 9, 2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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Progenics Form 8-K Risk Factors January 9, 2006
SECURITIES
      AND EXCHANGE COMMISSION
Washington,
      D.C. 20549
FORM
      8-K
CURRENT
      REPORT
Pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of
      1934
Date
      of
      Report (Date of earliest event reported)
January
      9, 2006
Progenics
      Pharmaceuticals, Inc.
(Exact
      name of registrant as specified in its charter)
Delaware
000-23143
13-3379479
(State
                or other jurisdiction
of
                incorporation)
(Commission
File
                Number)
(IRS
                Employer
Identification
                No.)
777
                Old Saw Mill River Road, Tarrytown, New York
10591
(Address
                of principal executive offices)
(Zip
                Code)
Registrant's
                telephone number, including area code
(914)
                789-2800
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (
see
General
      Instruction A.2. below):
ð
Written
      communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
ð
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)
ð
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
      Act
      (17 CFR 240.14d-2(b))
ð
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
      Act
      (17 CFR 240.13e-4(c))
Item
      8.01. Other Events
On
      December 23, 2005, Progenics Pharmaceuticals, Inc. and its wholly-owned
      subsidiary, Progenics Pharmaceuticals Nevada, Inc. ("Progenics"), entered into
      an exclusive, worldwide License and Co-Development Agreement (the "Wyeth
      Agreement") with Wyeth Pharmaceuticals, a division of Wyeth, and certain
      affiliates of Wyeth ("Wyeth") for the joint development and commercialization of
      methylnaltrexone ("MNTX") for the treatment of opioid-induced side effects,
      including constipation and post-operative bowel dysfunction. See our Current
      Report on Form 8-K dated December 28, 2005. We are updating our risk factor
      disclosure, most recently set forth in our Quarterly Report on Form 10-Q for
      the
      quarter ended September 30, 2005 under the caption "Item 2. Management's
      Discussion and Analysis of Financial Condition and Results of Operations
¾
Risk
      Factors", to reflect, among other things, that collaboration. The updated
      disclosure is set forth below
.
RISK
      FACTORS
Our
      business and operations entail a variety of risks and uncertainties, including
      those described below.
Our
      product development programs are inherently risky.
We
      are
      subject to the risks of failure inherent in the development of product
      candidates based on new technologies. Our MNTX product candidate, which is
      designed to reverse certain side effects induced by opioids and to treat
      post-operative bowel dysfunction and is being developed through a collaboration
      with Wyeth, is based on a novel method of action that has not yet been proven
      to
      be safe or effective. No drug with MNTX's method of action has ever received
      marketing approval. Additionally, some of our HIV product candidates are
      designed to be effective by blocking viral entry, and our GMK product candidate
      is designed to be a therapeutic cancer vaccine. To our knowledge, no drug
      designed to treat HIV infection by blocking viral entry (with one exception)
      and
      no cancer therapeutic vaccine has been approved for marketing in the U.S. Our
      other research and development programs, and those conducted through our joint
      venture with Cytogen, involve similarly novel approaches to human therapeutics.
      Consequently, there is little precedent for the successful commercialization
      of
      products based on our technologies. There are a number of technological
      challenges that we must overcome to complete most of our development efforts.
      We
      may not be able to develop successfully any of our products.
We
      have granted to Wyeth the exclusive rights to develop and commercialize MNTX,
      our lead product candidate, and our resulting dependence on Wyeth exposes us
      to
      significant risks.
In
      December 2005, we entered into a license and co-development agreement
      with
Wyeth.
      Under this agreement, we granted
to
      Wyeth
      the exclusive worldwide right to develop and commercialize MNTX, our lead
      product candidate
.
      As a
      result, we are dependent on Wyeth to perform and fund clinical testing, to
      make
      certain regulatory filings and to manufacture and market products containing
      MNTX. Our collaboration with Wyeth may not be scientifically, clinically or
      commercially successful.
Any
          revenues from the
          sale of MNTX, if approved for sale by the FDA, will depend almost entirely
          on
          the efforts of Wyeth. Wyeth has significant discretion in determining the
          efforts and resources it applies to sales of our products and may not be
          effective in marketing our products. In addition, Wyeth is a large, diversified
          pharmaceutical company with global operations and its own corporate agenda,
          which may not be consistent with our best interests. For example, Wyeth
          may
          change its strategic focus or pursue alternative technologies in a manner
          that
          results in reduced revenues to us. In addition, we will receive milestone
          payments from Wyeth only if MNTX achieves specified clinical, regulatory
          and
          commercialization milestones, and we will receive royalty payments from
          Wyeth
          only if MNTX receives regulatory approval and is commercialized by Wyeth.
          Many
          of these milestone events will depend on the efforts of Wyeth. We may not
          receive any milestone or royalty payments from Wyeth
2
Wyeth
      may
      terminate the license and co-development agreement:
for
          any
          or no reason at any time after two years from the first commercial sale
          of the
          first commercial product utilizing MNTX in the United States by providing
          us
          with at least
360
          days prior written notice and complying with certain other
          conditions;
for
          safety or efficacy reasons by providing us with at least 30 days prior
          written
          notice;
upon
          our material breach or
          non-compliance with our representations, warranties and other obligations
          under the license and co-development agreement if the non-compliance is
          not
          cured; or
upon
          our bankruptcy or similar insolvency event.
If
      our
      relationship
with
      Wyeth were to terminate, we would have to either enter into a license and
      co-development agreement with another party or develop and commercialize MNTX
      ourselves. We may not be able to enter into such an agreement with another
      suitable company on acceptable terms or at all. To develop and commercialize
      MNTX on our own, we would have to develop a sales and marketing
      organization and a distribution infrastructure, neither of which we currently
      have. Developing these resources would be an expensive and lengthy process
      and
      would have a material adverse effect on our revenues and
      profitability.
Moreover,
      a termination of our relationship
with
      Wyeth could seriously compromise the development program for MNTX. For example,
we
      could
      experience significant delays in the development of MNTX and
would
      have to assume full funding and other responsibility for further development
      and
      eventual commercialization.
Any
      of
      these outcomes would result in delays in our ability to distribute MNTX and
      would increase our expenses, which would have a material adverse effect on
      our
      business, results of operations and financial condition.
Our
      collaboration with Wyeth is multi-faceted and involves a complex sharing of
      control over decisions, responsibilities, costs and benefits. There are numerous
      potential sources of disagreement between us
and
      Wyeth, including with respect to product development, marketing strategies,
      manufacturing and supply issues and rights relating to intellectual property.
Wyeth
      has
      significantly greater financial and managerial resources than we do, which
      it
      could draw upon in the event of a dispute. A disagreement between Wyeth and
      us
      could lead to lengthy and expensive litigation or other dispute resolution
      proceedings as well as to extensive financial and operational consequences
      to
      us, and have a material adverse effect on our business, results of operations
      and financial condition.
If
      testing does not yield successful results, our products will not be
      approved.
We
      will
      need to obtain regulatory approval before we can market our product candidates.
      To obtain marketing approval from regulatory authorities, we or our
      collaborators must demonstrate a product's safety and efficacy through extensive
      preclinical and clinical testing. Numerous adverse events may arise during,
      or
      as a result of, the testing process, including the following:
·
the
                results of preclinical studies may be inconclusive, or they may not
                be
                indicative of results that will be obtained in human clinical trials;
·
potential
                products may not have the desired efficacy or may have undesirable
                side
                effects or other characteristics that preclude marketing approval
                or limit
                their commercial use if approved;
·
after
                reviewing test results, we or our collaborators may abandon projects,
                which we previously believed to be promising; and
·
we,
                our collaborators or regulators may suspend or terminate clinical
                trials
                if we or they believe that the participating subjects or patients
                are
                being exposed to unacceptable health risks.
3
Clinical
      testing is very expensive and can take many years. Results attained in early
      human clinical trials may not be indicative of results that are obtained in
      later clinical trials. In addition, many of our products, such as PRO 140 and
      the PSMA product candidates, are at an early stage of development. The
      successful commercialization of early stage products will require significant
      further research, development, testing, approvals by regulators and additional
      investment. Our products in the research or preclinical development stage may
      not yield results that would permit or justify clinical testing. Our failure
      to
      adequately demonstrate the safety and efficacy of a product under development
      would delay or prevent marketing approval of the product, which could adversely
      affect our operating results and credibility.
A
      setback in our clinical development programs could adversely affect
      us.
We
      have
      several ongoing late-stage clinical trials. We have completed enrollment and
      patient treatment in our two pivotal phase 3 clinical trials and in the
      extension study for one of those trials of sub-cutaneous MNTX for the treatment
      of opioid-induced constipation in patients with advanced medical illness.
      Patient enrollment in the extension study of the second pivotal trial has been
      completed and patient treatment is currently ongoing. We will need to
      successfully complete and analyze the data from both of these trials, and their
      extension studies, in order to obtain approval of the FDA to market MNTX. We
      also have completed a phase 2 clinical trial of intravenous MNTX in patients
      at
      risk for post-operative bowel dysfunction and intend, working with our
      collaborator Wyeth, to conduct additional clinical trials of oral MNTX in
      chronic pain patients who experience opioid-induced constipation.
If
      the
      results of any of these ongoing trials are not satisfactory, or if we encounter
      problems enrolling patients, or if clinical trial supply issues or other
      difficulties arise, our entire MNTX development program could be adversely
      affected, resulting in delays in commencing or completing clinical trials or
      in
      making our regulatory filing for marketing approval. The need to conduct
      additional clinical trials or significant revisions to our clinical development
      plan would lead to delays in filing for the regulatory approvals necessary
      to
      market MNTX. If the clinical trials indicate a serious problem with the safety
      or efficacy of a MNTX product then Wyeth has the right under our license and
      co-development agreement to terminate the agreement or to stop the development
      or commercialization of the affected products. Since MNTX is our most clinically
      advanced product, any setback of these types would have a material adverse
      effect on our stock price and business.
We
      also
      have two ongoing pivotal phase 3 clinical trials for GMK. In May 2000, our
      collaborating research cooperative group in one of these trials, ECOG,
      recommended to clinical investigators participating in the trial that they
      discontinue administering GMK, and as a result that trial did not complete
      patient dosing as contemplated by the initial trial protocol. A second pivotal
      phase 3 trial for GMK was initiated in May 2001 and
full
      enrollment of the 1,300 patients called for in the trial has been completed.
      We
      expect to assess the recurrence of cancer and overall survival of the study
      patients over the next several years. If the results of either of the GMK trials
      are not satisfactory, we may need to conduct additional clinical trials or
      abandon our GMK program.
We
      have
      announced positive phase 1 clinical findings related to PRO 140, and we have
      initiated an additional phase 1b clinical trial. We have also decided to ramp
      down our development efforts on PRO 542, our other HIV product candidate, in
      order to concentrate our resources on PRO 140. If the results of our phase
      1b
      study with PRO 140 or the preclinical and clinical studies involving the PSMA
      vaccine and antibody candidates are not satisfactory, we would need to
      reconfigure our clinical trial programs to conduct additional trials or abandon
      the program involved.
We
      have a history of operating losses, and we may never be
      profitable.
We
      have
      incurred substantial losses since our inception. As of September 30, 2005,
      we
      had an accumulated deficit of approximately $156.0 million. We have derived
      no
      significant revenues from product sales or royalties. We do not expect to
      achieve significant product sales or royalty revenue for a number of years,
      if
      ever, other than potential revenues from MNTX. We expect to incur additional
      operating losses in the future, which could increase significantly as we expand
      our clinical trial programs and other product development efforts.
4
Our
      ability to achieve and sustain profitability is dependent in part on obtaining
      regulatory approval to market our products and then commercializing, either
      alone or with others, our products. We may not be able to develop and
      commercialize products. Moreover, our operations may not be profitable even
      if
      any of our products under development are commercialized.
We
      are likely to need additional financing, but our access to capital funding
      is
      uncertain.
As
      of
      September 30, 2005, we had cash, cash equivalents and marketable securities,
      including non-current portion, totaling $128.0 million. In December 2005, we
      received a $60 million upfront payment from Wyeth in connection with the signing
      of the license and co-development agreement relating to MNTX. During the three
      months and nine months ended September 30, 2005, we had a net loss of $10.7
      million and $36.7 million, respectively, and we used cash in operating
      activities of $33.4 million during the nine months ended September 30, 2005.
Under
      our
      agreement with Wyeth, Wyeth is responsible for all future development and
      commercialization costs relating to MNTX starting January 1, 2006. As a result
      we expect that our spending on MNTX in 2006 and beyond will drop significantly
      from the amounts expended in 2005.
With
      regard to our other product candidates, however, we expect that we will continue
      to incur significant expenditures for their development and we do not have
      committed external sources of funding for most of these projects. These
      expenditures will be funded from our cash on hand, or we may seek additional
      external funding for these expenditures, most likely through collaborative
      agreements, or other license or sale transactions, with one or more
      pharmaceutical companies, through the issuance and sale of securities or through
      additional government grants or contracts. We cannot predict with any certainty
      when we will need additional funds or how much we will need or if additional
      funds will be available to us. Our need for future funding will depend on
      numerous factors, many of which are outside our control.
Our
      access to capital funding is uncertain. We may not be able to obtain additional
      funding on acceptable terms, or at all. Our inability to raise additional
      capital on terms reasonably acceptable to us would seriously jeopardize the
      future success of our business.
If
      we
      raise funds by issuing and selling securities, it may be on terms that are
      not
      favorable to our existing stockholders. If we raise additional funds by selling
      equity securities, our current stockholders will be diluted, and new investors
      could have rights superior to our existing stockholders. If we raise funds
      by
      selling debt securities, we could be subject to restrictive covenants and
      significant repayment obligations.
Our
      clinical trials could take longer than we expect.
Although
      for planning purposes we forecast the commencement and completion of clinical
      trials, and have included many of those forecasts in reports filed
      with the Securities and Exchange Commission and in other public
      disclosures, the actual timing of these events can vary dramatically. For
      example, we have experienced delays in our MNTX clinical development program
      in
      the past as a result of slower than anticipated patient enrollment. These delays
      may recur. Delays can be caused by, among other things:
·
deaths
                or other adverse medical events involving patients or subjects in
                our
                clinical trials;
·
regulatory
                or patent issues;
·
interim
                or final results of ongoing clinical trials;
·
failure
                to enroll clinical sites as expected;
·
scheduling
                conflicts with participating clinicians and clinical institutions;
                and
·
manufacturing
                problems.
5
In
      addition, we may need to delay or suspend our clinical trials if we are unable
      to obtain additional funding when needed. Also, our clinical programs involving
      our joint venture with Cytogen Corporation  ("Cytogen") could be delayed by
      disagreements between Cytogen and us concerning funding development programs
      or
      other matters. For example, until June 2005, the joint venture had no approved
      2005 budget or work plan because we and Cytogen had not yet reached agreement
      with respect to a number of matters relating to the joint venture. In June
      2005,
      we and Cytogen approved a work plan and budget for 2005. We have not yet agreed
      with Cytogen on a work plan and budget for 2006. Clinical trials involving
      our
      product candidates may not commence or be completed as forecasted.
Moreover,
      we have limited experience in conducting clinical trials, and we rely on others
      to conduct, supervise or monitor some or all aspects of some of our clinical
      trials. In addition, certain clinical trials for our products may be conducted
      by government-sponsored agencies, and consequently will be dependent on
      governmental participation and funding. Under our agreement with Wyeth relating
      to MNTX Wyeth has the responsibility to conduct some of the clinical trials
      for
      that product candidate, including all trials outside of the United States.
      We
      will have less control over the timing and other aspects of these clinical
      trials than if we conducted them entirely on our own.
As
      a
      result of these and other factors, our clinical trials may not commence or
      be
      completed as we expect or may not be conducted successfully, in which event
      investors' confidence in our ability to develop products may be impaired and our
      stock price may decline.
We
      are subject to extensive regulation, which can be costly and time consuming
      and
      can subject us to unanticipated fines and delays.
We
      and
      our products are subject to comprehensive regulation by the FDA in the U.S.
      and
      by comparable authorities in other countries. These national agencies and other
      federal, state and local entities regulate, among other things, the preclinical
      and clinical testing, safety, approval, manufacture, labeling, marketing,
      export, storage, record keeping, advertising and promotion of pharmaceutical
      products. If we violate regulatory requirements at any stage, whether before
      or
      after marketing approval is obtained, we may be subject to forced removal of
      a
      product from the market, product seizure, civil and criminal penalties and
      other
      adverse consequences.
Our
      products do not yet have, and may never obtain, the regulatory approvals needed
      for marketing.
None
      of
      our products has been approved by applicable regulatory authorities for
      marketing. The process of obtaining FDA and foreign regulatory approvals often
      takes many years and can vary substantially based upon the type, complexity
      and
      novelty of the products involved. We have had only limited experience in filing
      and pursuing applications and other submissions necessary to gain marketing
      approvals. Our products under development may never obtain the marketing
      approval from the FDA or any other regulatory authority necessary for
      commercialization.
Even
      if
      our products receive regulatory approval:
·
they
                might not obtain labeling claims necessary to make the product
                commercially viable (in general, labeling claims define the medical
                conditions for which a drug product may be marketed, and are therefore
                very important to the commercial success of a product);
·
we
                or our collaborators might be required to undertake post-marketing
                trials
                to verify the product's efficacy or safety;
·
we,
                our collaborators or others might identify side effects after the
                product
                is on the market, or we or our collaborators might experience
                manufacturing problems, either of which could result in subsequent
                withdrawal of marketing approval, reformulation of the product, additional
                preclinical testing or clinical trials, changes in labeling of the
                product
                or the need for additional marketing applications; and
·
we
                and our collaborators will be subject to ongoing FDA obligations
                and
                continuous regulatory review.
6
If
      our
      products fail to receive marketing approval or lose previously received
      approvals, our financial results would be adversely affected.
Even
      if our products obtain marketing approval, they might not be accepted in the
      marketplace.
The
      commercial success of our products will depend upon their acceptance by the
      medical community and third party payors as clinically useful, cost effective
      and safe. If healthcare providers believe that patients can be managed
      adequately with alternative, currently available therapies, they may not
      prescribe our products, especially if the alternative therapies are viewed
      as
      more effective, as having a better safety or tolerability profile, as being
      more
      convenient to the patient or healthcare providers or as being less expensive.
      For pharmaceuticals administered in an institutional setting, the ability of
      the
      institution to be adequately reimbursed could also play a significant role
      in
      demand for our products. Even if our products obtain marketing approval, they
      may not achieve market acceptance. If any of our products do not achieve market
      acceptance, we will likely lose our entire investment in that
      product.
Marketplace
      acceptance will depend in part on competition in our industry, which is
      intense.
The
      extent to which any of our products achieves market acceptance will depend
      on
      competitive factors. Competition in our industry is intense, and it is
      accentuated by the rapid pace of technological development. There are products
      currently in the market that will compete with the products that we are
      developing, including chemotherapy drugs for treating cancer and AIDS drugs.
      As
      described below, Adolor Corporation is developing a drug that would compete
      with
      MNTX. Many of our competitors have substantially greater research and
      development capabilities and experience and greater manufacturing, marketing,
      financial and managerial resources than we do. These competitors may develop
      products that are superior to those we are developing and render our products
      or
      technologies non-competitive or obsolete. If our product candidates receive
      marketing approval but cannot compete effectively in the marketplace, our
      operating results and financial position would suffer.
One
      or more competitors developing an opioid antagonist may reach the market ahead
      of us and adversely affect the market potential for MNTX.
We
      are
      aware that Adolor Corporation, in collaboration with Glaxo Group Limited, or
      Glaxo, a subsidiary of GlaxoSmithKline plc, is developing an opioid antagonist,
      Entereg™ (alvimopan), for post-operative ileus, which has completed phase 3
      clinical trials, and for opioid bowel dysfunction and chronic constipation,
      which have completed phase 2 trials. Post-operative ileus is a condition similar
      to post-operative bowel dysfunction, a condition for which we are developing
      MNTX. Entereg is further along in the clinical development process than MNTX,
      and Adolor Corporation has received an approvable letter from the U.S. Food
      and
      Drug Administration for Entereg regarding the treatment of post-operative ileus.
      Additionally, it has been reported that a European specialty pharmaceutical
      company is in clinical development of an oral formulation of methylnaltrexone
      for use in opioid-induced constipation. If either of these products reaches
      the
      market before MNTX, it could achieve a significant competitive advantage
      relative to our product. In any event, the considerable marketing and sales
      capabilities of Glaxo may impair our ability to penetrate the market.
Under
      the
      terms of our collaboration with Wyeth with respect to MNTX, Wyeth will develop
      the oral form of MNTX worldwide. We will lead the U.S. development of the
      subcutaneous and intravenous forms of MNTX, while Wyeth will lead development
      of
      these parenteral products outside the U.S. Wyeth and we will pursue an
      integrated strategy to optimize worldwide development, regulatory approval,
      and
      commercial launch of the three MNTX products, which may impact timelines for
      the
      development of MNTX previously disclosed by us. Decisions regarding the
      timelines for development of the three MNTX products will be made by a Joint
      Development Committee formed under the terms of the license and co-development
      agreement, consisting of members from both Wyeth and Progenics.
7
Disputes
      with Cytogen could delay or halt our PSMA programs.
Our
      research and development programs relating to vaccine and antibody
      immunotherapeutics based on PSMA are conducted through a joint venture between
      Cytogen Corporation and us. The JV is a 50/50 joint venture, meaning that our
      ownership rights in the programs, funding obligations and governance rights
      are
      equal. As a result, for the joint venture to operate efficiently, and for the
      research and development programs to be adequately funded and staffed and
      productive, we and Cytogen must be in agreement on strategic and operational
      matters. There is a significant risk that, as a result of differing views and
      priorities, there will be occasions when we do not agree on various
      matters.
Cytogen's
      and our level of commitment to fund the PSMA joint venture is based upon annual
      budgets and work plans that are developed and approved by the parties. We have
      in the past experienced delays in reaching agreement with Cytogen regarding
      annual budget issues and strategic and operational matters relating to the
      joint
      venture. For example, until June 2005, the joint venture had no approved 2005
      budget or work plan because we and Cytogen had not yet reached agreement with
      respect to a number of matters relating to the joint venture. In June 2005,
      we
      and Cytogen reached agreement on a work plan and budget for 2005
.
We
      have
      not yet agreed with Cytogen on a work plan and budget for 2006. If we do not
      reach an agreement regarding the budget and work plan for 2006 and future years,
      we would likely experience delays in advancing the PSMA programs and may need
      to
      dissolve the joint venture and abandon the PSMA programs being conducted by
      the
      joint venture. We may not reach an agreement with Cytogen on these
      matters.
If
      we are unable to negotiate collaborative agreements, our cash burn rate could
      increase and our rate of product development could
      decrease.
Our
      business strategy includes as an element entering into collaborations with
      pharmaceutical and biotechnology companies to develop and commercialize our
      products and technologies. We recently entered into such a collaboration with
      Wyeth. However, we may not be successful in negotiating additional collaborative
      arrangements. If we do not enter into new collaborative arrangements, we would
      have to devote more of our resources to clinical product development and
      product-launch activities, and our cash burn rate would increase or we would
      need to take steps to reduce our rate of product development.
If
      we do not remedy our failure to achieve milestones or satisfy conditions
      regarding some of our product candidates, we may not maintain our rights under
      our licenses relating to these product candidates.
We
      are
      required to make substantial cash payments, achieve specified milestones and
      satisfy other conditions, including filing for and obtaining marketing approvals
      and introducing products, to maintain rights under our intellectual property
      licenses. We may not be able to maintain our rights under these
      licenses.
Under
      our
      license agreements with Sloan Kettering Institute for Cancer Research relating
      to GMK and with Columbia University relating to PRO 542, we are required, among
      other things, to have filed for marketing approval for a drug by 2000 and to
      have commenced commercialization of the drug by 2002 (for GMK) and to have
      filed
      for marketing approval by 2001 (for PRO 542). We have not achieved these and
      other milestones and are unlikely to achieve them soon. We are in a similar
      position with respect to our license agreement with Antigenics Inc. concerning
      QS-21, a component of GMK. If we can establish that our failure to achieve
      these
      milestones resulted from technical issues beyond our control or delays in
      clinical studies that could not have been reasonably avoided, we may be entitled
      to a revision of these milestone dates. Although we believe that we satisfy
      one
      or more of these conditions, we may become involved in disputes with our
      licensors as to our continued right to a license. In addition, at September
      1,
      2004 we became obligated under our license agreement with Columbia to pay
      Columbia $225,000. We have accrued this amount but, pending the outcome of
      discussions with Columbia regarding this payment and other matters relating
      to
      the license, we have not yet paid it.
If
      we do
      not comply with our obligations under our license agreements, the licensors
      may
      terminate them. Termination of any of our licenses could result in our losing
      our rights to, and therefore being unable to commercialize, any related product.
      We have had discussions with Sloan-Kettering and Columbia to reach agreement
      on
      the revision of applicable milestone dates. We may not, however, reach agreement
      with these licensors in a manner favorable to us.
8
We
      have limited manufacturing capabilities, which could adversely impact our
      ability to commercialize products.
We
      have
      limited manufacturing capabilities, which may result in increased costs of
      production or delay product development or commercialization. In order to
      commercialize our product candidates successfully, we or our collaborators
      must
      be able to manufacture products in commercial quantities, in compliance with
      regulatory requirements, at acceptable costs and in a timely manner. The
      manufacture of our product candidates can be complex, difficult to accomplish
      even in small quantities, difficult to scale-up for large-scale production
      and
      subject to delays, inefficiencies and low yields of quality products. The cost
      of manufacturing some of our products may make them prohibitively expensive.
      If
      adequate supplies of any of our product candidates or related materials are
      not
      available to us on a timely basis or at all, our clinical trials could be
      seriously delayed, since these materials are time-consuming to manufacture
      and
      cannot be readily obtained from third-party sources.
We
      operate pilot-scale manufacturing facilities for the production of vaccines
      and
      recombinant proteins. We believe that, for these types of product candidates,
      these facilities will be sufficient to meet our initial needs for clinical
      trials. However, these facilities may be insufficient for late-stage clinical
      trials for these types of product candidates, and would be insufficient for
      commercial-scale manufacturing requirements. We may be required to expand
      further our manufacturing staff and facilities, obtain new facilities or
      contract with corporate collaborators or other third parties to assist with
      production.
In
      the
      event that we decide to establish a commercial-scale manufacturing facility,
      we
      will require substantial additional funds and will be required to hire and
      train
      significant numbers of employees and comply with applicable regulations, which
      are extensive. We may not be able to build a manufacturing facility that both
      meets regulatory requirements and is sufficient for our clinical trials or
      commercial-scale manufacturing.
We
      have
      entered into arrangements with third parties for the manufacture of some of
      our
      products. Our third-party sourcing strategy may not result in a cost-effective
      means for manufacturing products. In employing third-party manufacturers, we
      will not control many aspects of the manufacturing process, including compliance
      by these third parties with the FDA's current Good Manufacturing Practices and
      other regulatory requirements. We may not be able to obtain adequate supplies
      from third-party manufacturers in a timely fashion for development or
      commercialization purposes, and commercial quantities of products may not be
      available from contract manufacturers at acceptable costs.
We
      are dependent on our patents and other intellectual property rights. The
      validity, enforceability and commercial value of these rights are highly
      uncertain.
Our
      success is dependent in part on obtaining, maintaining and enforcing patent
      and
      other intellectual property rights. The patent position of biotechnology and
      pharmaceutical firms is highly uncertain and involves many complex legal and
      technical issues. There is no clear policy involving the breadth of claims
      allowed, or the degree of protection afforded, under patents in this area.
      Accordingly, the patent applications owned by or licensed to us may not result
      in patents being issued. We are aware of other groups that have patent
      applications or patents containing claims similar to or overlapping those in
      our
      patents and patent applications. We do not expect to know for several years
      the
      relative strength or scope of our patent position as compared to these other
      groups. Furthermore, patents that we own or license may not enable us to
      preclude competitors from commercializing drugs, and consequently may not
      provide us with any meaningful competitive advantage.
We
      own or
      have licenses to several issued patents. However, the issuance of a patent
      is
      not conclusive as to its validity or enforceability. The validity or
      enforceability of a patent after its issuance by the patent office can be
      challenged in litigation. Our patents may be successfully challenged. Moreover,
      we may incur substantial costs in litigation to uphold the validity of patents
      or to prevent infringement. If the outcome of litigation is adverse to us,
      third
      parties may be able to use our patented invention without payment to us.
      Moreover, third parties may avoid our patents through design
      innovation.
9
Most
      of
      our product candidate, including MNTX, PRO 140, GMK and our PSMA program
      products, incorporate to some degree intellectual property licensed from third
      parties. We can lose the right to patents and other intellectual property
      licensed to us if the related license agreement is terminated due to a breach
      by
      us or otherwise. Our ability, and that of our collaboration partners, to
      commercialize products incorporating licensed intellectual property would be
      impaired if the related license agreements were terminated.
Generally,
      we have the right to defend and enforce patents licensed by us, either in the
      first instance or if the licensor chooses not to do so. In addition, our license
      agreement with the University of Chicago regarding MNTX gives us the right
      to
      prosecute and maintain the licensed patents. We bear the cost of engaging in
      some or all of these activities with respect to our license agreements with
      Sloan-Kettering for GMK, Columbia for PRO 542 and the University of Chicago
      for
      MNTX.
With
      most
      of our other license agreements, the licensor bears the cost of engaging in
      all
      of these activities, although we may share in those costs under specified
      circumstances. Historically, our costs of defending patent rights, both our
      own
      and those we license, have not been material.
We
      also
      rely on unpatented technology, trade secrets and confidential information.
      Third
      parties may independently develop substantially equivalent information and
      techniques or otherwise gain access to our technology or disclose our
      technology, and we may be unable to effectively protect our rights in unpatented
      technology, trade secrets and confidential information. We require each of
      our
      employees, consultants and advisors to execute a confidentiality agreement
      at
      the commencement of an employment or consulting relationship with us. However,
      these agreements may not provide effective protection in the event of
      unauthorized use or disclosure of confidential information.
If
      we infringe third-party patent or other intellectual property rights, we may
      need to alter or terminate a product development program.
There
      may
      be patent or other intellectual property rights belonging to others that require
      us to alter our products, pay licensing fees or cease certain activities. If
      our
      products infringe patent or other intellectual property rights of others, the
      owners of those rights could bring legal actions against us claiming damages
      and
      seeking to enjoin manufacturing and marketing of the affected products. If
      these
      legal actions are successful, in addition to any potential liability for
      damages, we could be required to obtain a license in order to continue to
      manufacture or market the affected products. We may not prevail in any action
      brought against us, and any license required under any rights that we infringe
      may not be available on acceptable terms or at all. We are aware of intellectual
      property rights held by third parties that relate to products or technologies
      we
      are developing. For example, we are aware of other groups investigating
      methylnaltrexone and other peripheral opioid antagonists, PSMA or related
      compounds and CCR5 monoclonal antibodies and of patents held, and patent
      applications filed, by these groups in those areas. While the validity of these
      issued patents, patentability of these pending patent applications and
      applicability of any of them to our programs are uncertain, if asserted against
      us, any related patent or other intellectual property rights could adversely
      affect our ability to commercialize our products.
The
      research, development and commercialization of a biopharmaceutical often involve
      alternative development and optimization routes, which are presented at various
      stages in the development process. The preferred routes cannot be predicted
      at
      the outset of a research and development program because they will depend on
      subsequent discoveries and test results. There are numerous third-party patents
      in our field, and we may need to obtain a license to a patent in order to pursue
      the preferred development route of one or more of our products. The need to
      obtain a license would decrease the ultimate profitability of the applicable
      product. If we cannot negotiate a license, we might have to pursue a less
      desirable development route or terminate the program altogether.
10
We
      are dependent upon third parties for a variety of functions. These arrangements
      may not provide us with the benefits we expect.
We
      rely
      in part on third parties to perform a variety of functions. We are party to
      numerous agreements which place substantial responsibility on clinical research
      organizations, consultants and other service providers for the development
      of
      our products. We also rely on medical and academic institutions to perform
      aspects of our clinical trials of product candidates. In addition, an element
      of
      our research and development strategy is to in-license technology and product
      candidates from academic and government institutions in order to minimize
      investments in early research. Furthermore, we recently entered into an
      agreement under which we will depend on Wyeth for the commercialization and
      development of MNTX, our lead product candidate. We may not be able to maintain
      any of these relationships or establish new ones on beneficial terms.
      Furthermore, we may not be able to enter new arrangements without undue delays
      or expenditures, and these arrangements may not allow us to compete
      successfully.
We
      lack sales and marketing experience, which will make us dependent on third
      parties for their expertise in this area.
We
      have
      no experience in sales, marketing or distribution. If we receive marketing
      approval, we expect to market and sell our products principally through
      distribution, co-marketing, co-promotion or licensing arrangements with third
      parties. We may also consider contracting with a third party professional
      pharmaceutical detailing and sales organization to perform the marketing
      function for our products. Under our license and co-development agreement with
      Wyeth, Wyeth is responsible for commercializing MNTX. To the extent that we
      enter into distribution, co-marketing, co-promotion, detailing or licensing
      arrangements for the marketing and sale of our other products, any revenues
      we
      receive will depend primarily on the efforts of third parties. We will not
      control the amount and timing of marketing resources these third parties devote
      to our products. In addition, if we market products directly, significant
      additional expenditures and management resources would be required to develop
      an
      internal sales force. We may not be able to establish a successful sales force
      should we choose to do so.
If
      we lose key management and scientific personnel on whom we depend, our business
      could suffer.
We
      are
      dependent upon our key management and scientific personnel. In particular,
      the
      loss of Dr. Paul J. Maddon, our Chief Executive Officer and Chief Science
      Officer, could cause our management and operations to suffer. We have an
      employment agreement with Dr. Maddon, the initial term of which ran through
      September 30, 2005, subject to an automatic renewal for an additional period
      of
      two years unless either party provides ninety days prior notice of non-renewal.
      See "Item 11. Executive Compensation - Employment Agreements" in our Annual
      Report on Form 10-K for the year ended December 31, 2004. Neither we nor Dr.
      Maddon gave notice of non-renewal. We are currently in discussions with Dr.
      Maddon regarding the renewal of his employment agreement and expect that the
      agreement will be renewed. Employment agreements do not, however, assure the
      continued employment of an employee. We maintain key-man life insurance on
      Dr.
      Maddon in the amount of $2.5 million.
In
      October 2004, our Board of Directors elected Paul F. Jacobson and Kurt W. Briner
      as Co-chairmen of the Board in substitution of Dr. Paul J. Maddon, our Chief
      Executive Officer, Chief Science Officer and a director. Dr. Maddon's employment
      agreement contains provisions relating to the Chairmanship position. In
      connection with the renewal of Dr. Maddon's employment agreement, we intend to
      clarify that the change in the Chairman position is not inconsistent with Dr.
      Maddon's employment agreement.
Competition
      for qualified employees among companies in the biopharmaceutical industry is
      intense. Our future success depends upon our ability to attract, retain and
      motivate highly skilled employees. In order to commercialize our products
      successfully, we may be required to expand substantially our personnel,
      particularly in the areas of manufacturing, clinical trials management,
      regulatory affairs, business development and marketing. We may not be successful
      in hiring or retaining qualified personnel.
11
If
      we are unable to obtain sufficient quantities of the raw and bulk materials
      needed to make our products, our product development and commercialization
      could
      be slowed or stopped.
We
      currently obtain supplies of critical raw materials used in production of MNTX,
      GMK and other of our product candidates from single sources. In particular,
      we
      rely on single-source third-party manufacturers for the supply of both bulk
      and
      finished form MNTX. We have a supply agreement with Mallinckrodt Inc., our
      current supplier of bulk-form MNTX, which has an initial term that expires
      on
      January 1, 2008. In accordance with our collaboration agreement with Wyeth,
      we
      will transfer to Wyeth, at a mutually agreeable time, the responsibility
      for manufacturing MNTX for clinical and commercial use, including our supply
      agreements with third parties. We do not have long-term contracts with any
      of
      our other suppliers. In addition, commercialization of GMK requires an adjuvant,
      QS-21, available only from Antigenics Inc. Our existing arrangements may not
      result in the supply of sufficient quantities of our product candidates needed
      to accomplish our clinical development programs, and we may not have the right
      or capability to manufacture sufficient quantities of these products to meet
      our
      needs if our suppliers are unable or unwilling to do so. Any delay or disruption
      in the availability of raw materials would slow or stop product development
      and
      commercialization of the relevant product.
A
      substantial portion of our funding comes from federal government grants and
      research contracts. We cannot rely on these grants or contracts as a continuing
      source of funds.
A
      substantial portion of our revenues to date has been derived from federal
      government grants and research contracts. In September 2005, we were awarded
      a
      $10.1 million grant from the NIH to partially fund our PRO 140 program. Also,
      in
      2004 we were awarded, in the aggregate, approximately $9.2 million in NIH grants
      and research contracts in addition to previous years' awards. We cannot rely on
      grants or additional contracts as a continuing source of funds. Moreover, funds
      available under these grants and contracts must be applied by us toward the
      research and development programs specified by the government rather than for
      all our programs generally. For example, the $28.6 million contract awarded
      to
      us by the NIH in September 2003 must be used by us in furtherance of our efforts
      to develop an HIV vaccine. The government's obligation to make payments under
      these grants and contracts is subject to appropriation by the U.S. Congress
      for
      funding in each year. Moreover, it is possible that Congress or the government
      agencies that administer these government research programs will decide to
      scale
      back these programs or terminate them due to their own budgetary constraints.
      Additionally, these grants and research contracts are subject to adjustment
      based upon the results of periodic audits performed on behalf of the granting
      authority. Consequently, the government may not award grants or research
      contracts to us in the future, and any amounts that we derive from existing
      grants or contracts may be less than those received to date.
If
      health care reform measures are enacted, our operating results and our ability
      to commercialize products could be adversely affected.
In
      recent
      years, there have been numerous proposals to change the health care system
      in
      the U.S. and in foreign jurisdictions. Some of these proposals have included
      measures that would limit or eliminate payments for medical procedures and
      treatments or subject the pricing of pharmaceuticals to government control.
      In
      some foreign countries, particularly countries of the European Union, the
      pricing of prescription pharmaceuticals is subject to governmental control.
      In
      addition, as a result of the trend towards managed health care in the U.S.,
      as
      well as legislative proposals to reduce government insurance programs,
      third-party payors are increasingly attempting to contain health care costs
      by
      limiting both coverage and the level of reimbursement of new drug products.
      Consequently, significant uncertainty exists as to the reimbursement status
      of
      newly approved health care products.
If
      we or
      any of our collaborators succeed in bringing one or more of our products to
      market, third-party payors may establish and maintain price levels insufficient
      for us to realize an appropriate return on our investment in product
      development. Significant changes in the health care system in the U.S. or
      elsewhere, including changes resulting from adverse trends in third-party
      reimbursement programs, could have a material adverse effect on our operating
      results and our ability to raise capital and commercialize
      products.
12
We
      are exposed to product liability claims, and in the future we may not be able
      to
      obtain insurance against these claims at a reasonable cost or at
      all.
Our
      business exposes us to product liability risks, which are inherent in the
      testing, manufacturing, marketing and sale of pharmaceutical products. We may
      not be able to avoid product liability exposure. If a product liability claim
      is
      successfully brought against us, our financial position may be adversely
      affected.
Product
      liability insurance for the biopharmaceutical industry is generally expensive,
      when available at all. We have obtained product liability insurance in the
      amount of $5.0 million per occurrence, subject to a deductible and a $5.0
      million annual aggregate limitation. In addition, where local statutory
      requirements exceed the limits of our existing insurance or where local policies
      of insurance are required, we maintain additional clinical trial liability
      insurance to meet these requirements. Our present insurance coverage may not
      be
      adequate to cover claims brought against us. In addition, some of our license
      and other agreements require us to obtain product liability insurance. Adequate
      insurance coverage may not be available to us at a reasonable cost in the
      future.
We
      handle hazardous materials and must comply with environmental laws and
      regulations, which can be expensive and restrict how we do business. If we
      are
      involved in a hazardous waste spill or other accident, we could be liable for
      damages, penalties or other forms of censure.
Our
      research and development work and manufacturing processes involve the use of
      hazardous, controlled and radioactive materials. We are subject to federal,
      state and local laws and regulations governing the use, manufacture, storage,
      handling and disposal of these materials. Despite procedures that we implement
      for handling and disposing of these materials, we cannot eliminate the risk
      of
      accidental contamination or injury. In the event of a hazardous waste spill
      or
      other accident, we could be liable for damages, penalties or other forms of
      censure. In addition, we may be required to incur significant costs to comply
      with environmental laws and regulations in the future.
Our
      stock price has a history of volatility. You should consider an investment
      in
      our stock as risky and invest only if you can withstand a significant
      loss.
Our
      stock
      price has a history of significant volatility. Between January 1, 2002 and
      September 30, 2005, our stock price has ranged from $3.82 to $25.07 per share.
      At times, our stock price has been volatile even in the absence of significant
      news or developments relating to us. Moreover, the stocks of biotechnology
      companies and the stock market generally have been subject to dramatic price
      swings in recent years. Factors that may have a significant impact on the market
      price of our common stock include:
·
the
                results of clinical trials and preclinical studies involving our
                products
                or those of our competitors;
·
changes
                in the status of any of our drug development programs, including
                delays in
                clinical trials or program terminations;
·
developments
                regarding our efforts to achieve marketing approval for our products;
·
developments
                in our relationship with Wyeth regarding the development and
                commercialization of MNTX;
·
announcements
                of technological innovations or new commercial products by us, our
                collaborators or our competitors;
·
developments
                in our relationships with other collaborative partners;
·
developments
                in patent or other proprietary rights;
·
governmental
                regulation;
13
·
changes
                in reimbursement policies or health care legislation;
·
public
                concern as to the safety and efficacy of products developed by us,
                our
                collaborators or our competitors;
·
our
                ability to fund on-going operations;
·
fluctuations
                in our operating results; and
·
general
                market conditions.
Our
      principal stockholders are able to exert significant influence over matters
      submitted to stockholders for approval.
At
      September 30, 2005, Dr. Maddon and stockholders affiliated with Tudor Investment
      Corporation together beneficially own or control approximately 19% of our
      outstanding shares of common stock. These persons, should they choose to act
      together, could exert significant influence in determining the outcome of
      corporate actions requiring stockholder approval and otherwise control our
      business. This control could have the effect of delaying or preventing a change
      in control of us and, consequently, could adversely affect the market price
      of
      our common stock.
Anti-takeover
      provisions may make the removal of our Board of Directors or management more
      difficult and discourage hostile bids for control of our company that may be
      beneficial to our stockholders.
Our
      Board
      of Directors is authorized, without further stockholder action, to issue from
      time to time shares of preferred stock in one or more designated series or
      classes. The issuance of preferred stock, as well as provisions in certain
      of
      our stock options that provide for acceleration of exercisability upon a change
      of control, and Section 203 and other provisions of the Delaware General
      Corporation Law could:
·
make
                the takeover of Progenics or the removal of our Board of Directors
                or
                management more difficult;
·
discourage
                hostile bids for control of Progenics in which stockholders may receive
                a
                premium for their shares of common stock; and
·
otherwise
                dilute the rights of holders of our common stock and depress the
                market
                price of our common stock.
If
      there are substantial sales of our common stock, the market price of our common
      stock could decline.
Sales
      of
      substantial numbers of shares of common stock could cause a decline in the
      market price of our stock. We require substantial external funding to finance
      our research and development programs and may seek such funding through the
      issuance and sale of our common stock. We have announced that we intend to
      file
      shelf registration statements to permit the public reoffer and sale from time
      to
      time of up to 286,000 shares of our common stock by certain stockholders. Sales
      of our common stock pursuant to these registration statements could cause the
      market price or our stock to decline. In addition, some of our other
      stockholders are entitled to require us to register their shares of common
      stock
      for offer or sale to the public. Also, we have filed Form S-8 registration
      statements registering shares issuable pursuant to our equity compensation
      plans. Any sales by existing stockholders or holders of options may have an
      adverse effect on our ability to raise capital and may adversely affect the
      market price of our common stock.
14
SIGNATURES
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.
PROGENICS
      PHARMACEUTICALS, INC.
By:
/s/
      ROBERT A.
      MCKINNEY
Robert
      A.
      McKinney
Chief
      Financial Officer, Vice President,
Finance
      and Operations and Treasurer
Date:
      January 9, 2006