By Mary Welch

Progenics Pharmaceuticals Inc. intends to raise $38.5 million by selling 2 million shares of its common stock, mainly in order to in-license and develop new programs.

¿The majority of products in our pipeline were acquired from academia, other biotechnology companies and even some pharmaceutical companies,¿ said Paul Maddon, chairman and CEO of the Tarrytown, N.Y., company. ¿We might enter into some favorable licensing arrangements, but we¿d prefer to in-license and then do clinical development. And that costs money.¿

The company¿s five underwriters have an option to purchase another 300,000 shares of common stock. After the offering, the company would have 11.5 million shares outstanding. The company is hoping to close the financing before Thanksgiving. The underwriters are CIBC World Markets Corp., Punk, Ziegel & Co., Prudential Vector Healthcare, BancBoston Robertson Stephens Inc., and Gerald Klauer Mattison & Co. Inc., all of New York.

The company ¿has never been a high-burn company,¿ Maddon said. ¿We¿ve always been in a favorable cash position. Currently, we have $23 million to $25 million cash on hand. We were EPS [earnings per share]-positive in 1997, the first year we put out an IPO [initial public offering], and in 1998 as well. This year we may break even or have a small loss. We wanted to do this offering, not only to continue developing our current projects, but to have the funds to acquire other programs and ensure that we can initiate them and take them through development for a number of years.¿

For the second quarter of 1999, the company posted revenues of $2.8 million; for the first six months of the year, that figure was $5.9 million. The company reported a net loss of $3.3 million for the quarter, and $3.5 million for the six months.

Progenics mainly focuses on two disease areas: cancer and viral diseases, particularly HIV. The one exception is a novel anti-oxygent aimed at a neurological indication.

Its lead product, GMK, reached full enrollment in its Phase III trial this month. Progenics is developing GMK along with Bristol-Myers Squibb Co., of Whitehouse Station, N.J., for the treatment of malignant melanoma.

The study, the largest ever performed in melanoma, has enrolled more than 850 persons at 300 medical centers. The GMK vaccine is designed to stimulate a patient¿s immune system to control or eradicate residual cancer cells after the tumor has been removed.

GGV, a second vaccine being developed in the collaboration, is in Phase II trials for colon cancer, although several indications may be sought.

The company¿s lead HIV product, PRO 542, which it is developing independently, is in Phase II trials, and a second product, PRO 367, should start Phase I/II trials before the end of the year. PRO 542 is a novel fusion protein that incorporates the HIV-binding region of the human cell surface receptor into a human antibody molecule. It neutralizes HIV by binding to the gp 120 glycoprotein on the HIV envelope, which prevents the virus from binding to the cell surface, and also by binding to and detaching the gp 120 glycoprotein from the HIV envelope, thereby inactivating the virus.

Progenics also is in a collaboration with F. Hoffmann-La Roche Ltd., of Basel, Switzerland, in the area of HIV fusion co-receptors.

¿The focus of our viral target is to mediate the point of viral entry ¿ the first step in the life cycle,¿ said Maddon. ¿We¿re developing small-molecule, orally active compounds that target the virus¿s fusion co-receptors. These co-receptors are required for viral fusion and subsequent infection of the human immune system cells.¿

The company has several additional programs about to enter Phase I next year.

¿There are lots of programs already in the company and there are other programs that we want to work on,¿ Maddon said. ¿We¿ve been fortunate that many of them have been sponsored by pharmaceutical companies or by government grants. But this round of financing will allow us to go out, get some interesting programs, fund and develop them.¿

Progenics¿ stock (NASDAQ:PGNX) closed Thursday at $18.688, down 43.75 cents a share.