Note Regarding Forward-Looking Statements

This document contains statements that do not relate strictly to historical fact, any of which may be forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. When we use the words "anticipates," "plans," "expects" and similar expressions, we are identifying forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. While it is impossible to identify or predict all such matters, these differences may result from, among other things, the inherent uncertainty of the timing and success of, and expense associated with, research, development, regulatory approval and commercialization of our products and product candidates, including the risks that clinical trials will not commence or proceed as planned; products appearing promising in early trials will not demonstrate efficacy or safety in larger-scale trials; clinical trial data on our products and product candidates will be unfavorable; our products will not receive marketing approval from regulators or, if approved, do not gain sufficient market acceptance to justify development and commercialization costs; we, our collaborators or others might identify side effects after the product is on the market; or efficacy or safety concerns regarding marketed products, whether or not originating from subsequent testing or other activities by us, governmental regulators, other entities or organizations or otherwise, and whether or not scientifically justified, may lead to product recalls, withdrawals of marketing approval, reformulation of the product, additional pre-clinical testing or clinical trials, changes in labeling of the product, the need for additional marketing applications, declining sales or other adverse events.

We are also subject to risks and uncertainties associated with the actions of our corporate, academic and other collaborators and government regulatory agencies, including risks from market forces and trends, such as those relating to the recently-announced acquisition of our RELISTOR® collaborator, Wyeth Pharmaceuticals, by Pfizer Inc.; potential product liability; intellectual property, litigation, environmental and other risks; the risk that licenses to intellectual property may be terminated for our failure to satisfy performance milestones; the risk of difficulties in, and regulatory compliance relating to, manufacturing products; and the uncertainty of our future profitability.

Risks and uncertainties also include general economic conditions, including interest- and currency exchange-rate fluctuations and the availability of capital; changes in generally accepted accounting principles; the impact of legislation and regulatory compliance; the highly regulated nature of our business, including government cost-containment initiatives and restrictions on third-party payments for our products; trade buying patterns; the competitive climate of our industry; and other factors set forth in this document and other reports filed with the U.S. Securities and Exchange Commission (SEC). In particular, we cannot assure you that RELISTOR will be commercially successful or be approved in the future in other formulations, indications or jurisdictions, or that any of our other programs will result in a commercial product.

We do not have a policy of updating or revising forward-looking statements, and we assume no obligation to update any statements as a result of new information or future events or developments. It should not be assumed that our silence over time means that actual events are bearing out as expressed or implied in forward-looking statements.

Overview

General. We are a biopharmaceutical company focusing on the development and commercialization of innovative therapeutic products to treat the unmet medical needs of patients with debilitating conditions and life-threatening diseases. Our principal programs are directed toward supportive care, virology and oncology. Progenics commenced principal operations in 1988, became publicly traded in 1997 and throughout has been engaged primarily in research and development efforts, developing manufacturing capabilities, establishing corporate collaborations and raising capital.

We have only recently begun to derive revenue from a commercial product. In order to commercialize the principal products that we have under development, we continue to address a number of technological and clinical challenges and comply with comprehensive U.S. and non-U.S. regulatory requirements. 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.

With the onset of the global financial crisis in 2008, we began a Company-wide austerity program to streamline operations, increase efficiencies and reduce expenditures. In 2009 to date, we have (i) achieved a planned 10% staffing reduction, bringing headcount to 219 at June 30; (ii) eliminated 2009 salary increases for senior management; (iii) reduced bonuses paid in 2009 for 2008 performance and reduced 401(k) benefit contributions for all employees; and
(iv) reduced expenditures on contractors and consultants.

Supportive Care. Our first commercial product, RELISTOR® (methylnaltrexone bromide) subcutaneous injection, was approved by the U.S. Food and Drug Administration (FDA) in April 2008 for sale in the United States. Our collaboration partner, Wyeth Pharmaceuticals (Wyeth), commenced sales of RELISTOR subcutaneous injection in June, and we have begun earning royalties on world-wide sales. Regulatory approvals have also been obtained in Canada, the European Union, Australia, Venezuela and Chile. Marketing applications have been approved or are pending or scheduled in other countries, and 13 markets are expected to launch in 2009, including Spain, Italy, France, Argentina and Brazil, the largest individual markets after the U.S. In October 2008, we out-licensed to Ono Pharmaceutical Co., Ltd. (Ono), Osaka, Japan, the rights to subcutaneous RELISTOR in Japan where Wyeth elected not to develop the product. In June 2009, Ono began clinical testing in Japan of RELISTOR subcutaneous injection. In August 2009, we and Wyeth announced submission to U.S. and EU regulators of applications for RELISTOR subcutaneous injection for a new pre-filled syringe delivery system, and we continue development and clinical trials with respect to other indications for and presentations of RELISTOR.

In January 2009, Wyeth and Pfizer Inc. announced a definitive agreement under which Pfizer is to acquire Wyeth and in July, Wyeth's shareholders approved the transaction which we understand is currently expected to close in late 2009 and is subject to a variety of conditions. The proposed acquisition does not trigger any change-of-control provisions in our collaboration with Wyeth, and the combined Pfizer/Wyeth organization will continue to have the same rights and responsibilities under the Collaboration following the acquisition as Wyeth had before.

We and Wyeth are also developing subcutaneous RELISTOR for treatment of opioid-induced constipation (OIC) outside the advanced illness setting, in individuals with chronic pain not related to cancer, such as severe back pain that requires treatment with opioids (a phase 3 trial conducted by Wyeth), and in individuals rehabilitating from an orthopedic surgical procedure in whom opioids are used to control post-operative pain (a hypothesis generating phase 2 trial conducted by us). We are no longer enrolling patients in this latter trial and are analyzing data from the treated population. Based on positive results from the phase 3 chronic pain trial, we and Wyeth recently initiated an FDA-required one-year, open-label safety study in chronic, non-cancer pain patients and the study results found RELISTOR to be generally well tolerated. Results from this phase 3 trial and open-label safety study are intended to yield a consolidated safety database to enable filing a supplemental New Drug Application (sNDA), planned for submission by the end of 2010, for treatment of OIC in the chronic, non-cancer pain population.

Wyeth is leading development of an oral formulation of RELISTOR for the treatment of OIC in patients with chronic, non-cancer pain. We and Wyeth are evaluating information from optimization studies of a formulation of this product candidate to determine the next stages of development.

We and Wyeth also have had in development an intravenous formulation of RELISTOR for the management of post-operative ileus (POI), a temporary impairment of the gastrointestinal tract function. Results from two phase 3 clinical trials of this formulation showed that treatment did not achieve primary or secondary end points. Recent results from a third phase 3 trial evaluating an intravenous formulation of RELISTOR in patients following abdominal hernia repair have confirmed these earlier findings.

Development and commercialization of RELISTOR is being conducted under the Wyeth Collaboration Agreement. Under that agreement, we (i) have received an upfront payment from Wyeth, (ii) have received and are entitled to receive further additional payments as certain developmental milestones for RELISTOR are achieved, (iii) have been and are entitled to be reimbursed by Wyeth for expenses we incur in connection with the development of RELISTOR under an agreed-upon development plan and budget, and (iv) have received and are entitled to receive royalties and commercialization milestone payments. These payments will depend on continued success in development and commercialization of RELISTOR, which are in turn dependent on the actions of Wyeth and the FDA and other regulatory bodies, as well as the outcome of clinical and other testing of RELISTOR. Many of these matters are outside our control. Manufacturing and commercialization expenses for RELISTOR are funded by Wyeth.

At inception of the Wyeth collaboration, Wyeth paid to us a $60.0 million non-refundable upfront payment. Wyeth has made $39.0 million in milestone payments since that time and is obligated to make up to $295.0 million in additional payments to us upon the achievement of milestones and contingent events in the development and commercialization of RELISTOR, taking into account the Ono transaction discussed below. Costs for the development of RELISTOR incurred by Wyeth or us starting January 1, 2006 are paid by Wyeth. We are being reimbursed for our out-of-pocket development costs by Wyeth and receive reimbursement for our efforts based on the number of our full-time equivalent employees devoted to the development project, all subject to Wyeth's audit rights and possible reconciliation as provided in the Agreement. During the applicable royalty periods, Wyeth is obligated to pay to us royalties on the net sales, as defined (which includes specified sales deductions), of RELISTOR by Wyeth throughout the world other than Japan, where we have licensed the rights to subcutaneous RELISTOR to Ono.

We recognize revenue from Wyeth for reimbursement of our development expenses for RELISTOR as incurred during each quarter under the development plan agreed to by us and Wyeth. We also recognize revenue for a portion of the $60.0 million upfront payment we received from Wyeth, based on the proportion of the expected total effort for us to complete our development obligations, as reflected in the most recent development plan and budget approved by us and Wyeth, that was actually performed during that quarter. Starting June 2008, we began recognizing royalty income based on the net sales of RELISTOR, as defined, by Wyeth.

Under our License Agreement with Ono, in November 2008 we received from Ono an upfront payment of $15.0 million, and are entitled to receive potential milestones, upon achievement of development responsibilities by Ono, of up to $20.0 million, commercial milestones and royalties on sales by Ono of subcutaneous RELISTOR in Japan. These payments will depend on continued success in development and commercialization of RELISTOR, which are in turn dependent on the actions of Wyeth, Ono, the FDA, Japanese pharmaceutical regulatory authorities and other regulatory bodies, as well as the outcome of clinical and other testing of RELISTOR. Many of these matters are outside our control. Ono also has the option to acquire from us the rights to develop and commercialize in Japan other formulations of RELISTOR, including intravenous and oral forms, on terms to be negotiated separately. Ono may request us to perform activities related to its development and commercialization responsibilities beyond our participation in joint committees and specified technology transfer related tasks which will be at its expense, and payable to us for the services it requests, at the time we perform services for them.

Because Wyeth is not developing RELISTOR in Japan, we will not receive from it Japan-related milestone payments provided in the original Wyeth Collaboration Agreement. These potential future milestone payments would have totaled $22.5 million (of which $7.5 million related to the subcutaneous formulation of RELISTOR and the remainder to the intravenous and oral formulations). As a result, we now have the potential to receive a total of $334.0 million in development and commercialization milestone payments from Wyeth under the Wyeth Collaboration (of which $60.0 million relate to the intravenous formulation of RELISTOR), and of which $39.0 million ($5.0 million relating to the intravenous formulation) have been paid to date.

Virology. In the area of virology, we are developing a viral-entry inhibitor: a humanized monoclonal antibody, PRO 140, for treatment of human immunodeficiency virus (HIV), the virus that causes acquired immunodeficiency syndrome (AIDS). Based on results from previous phase 2 clinical trials, we are developing the subcutaneous form of PRO 140 for treatment of HIV infection, which has the potential for convenient, weekly self-administration. In June 2009, we discontinued development of PRO 206, a drug candidate for treatment of hepatitis C virus infection ("HCV"), as part of a review which indicated that PRO 206 did not satisfy the criteria for further development, and are focusing on second-generation HCV-entry inhibitors in anticipation of selecting a new development candidate. We are also engaged in research regarding a prophylactic vaccine against HIV infection.

Oncology. In the area of prostate cancer, we are conducting a phase 1 clinical trial of a fully human monoclonal antibody-drug conjugate (ADC) directed against prostate specific membrane antigen (PSMA), a protein found at high levels on the surface of prostate cancer cells and also on the neovasculature of a number of other types of solid tumors. We are also developing therapeutic vaccines designed to stimulate an immune response to PSMA. Our PSMA programs are conducted through our wholly owned subsidiary, PSMA Development Company (PSMA LLC).

Our virology and oncology product candidates are not as advanced in development as RELISTOR, and we do not expect any recurring revenues from sales or otherwise with respect to these product candidates in the near term.

Results of Operations (dollars in thousands)

Revenues:

Our sources of revenue during the three and six months ended June 30, 2008 and 2009 included our Collaboration with Wyeth, our License Agreement with Ono, our research grants and contract from the National Institutes of Health (NIH) and, to a small extent, our sale of research reagents. In June 2008, we began recognizing royalty income from net sales by Wyeth of subcutaneous RELISTOR.

                           Three Months Ended June 30,                           Six Months Ended June 30,
                                                               Percent                                              Percent
Sources of Revenue      2008                     2009           Change       2008                2009                Change

Research and
development             $       26,771       $      4,631         (83%)      $      38,881       $      24,775         (36%)
Royalty income                      42                292         595%                  42                 467         1012%
Research grants and
contract                         1,699                510         (70%)              4,312               1,017         (76%)
Other revenues                      72                 36         (50%)                111                 114          3%
Total                   $       28,584       $      5,469         (81%)      $      43,346       $      26,373         (39%)

Research and development revenue:

· Wyeth Collaboration. During the three months ended June 30, 2008 and 2009, we recognized $26,771 and $4,631, respectively, of revenue from Wyeth, consisting of (i) $2,806 and $2,995, respectively, from amortization of the $60,000 upfront payment we received upon entering into our Collaboration in December 2005, (ii) $8,965 and $1,636, respectively, as reimbursement for our development expenses and (iii) $15,000 and $0, respectively, of non-refundable milestone payments.

During the six months ended June 30, 2008 and 2009, we recognized $38,881 and $9,728, respectively, of revenue from Wyeth, consisting of (i) $6,040 and $6,177, respectively, from amortization of the $60,000 upfront payment we received upon entering into our Collaboration in December 2005, (ii) $17,841 and $3,551, respectively, as reimbursement for our development expenses and (iii) $15,000 and $0, respectively, of non-refundable milestone payments.

From the inception of the Wyeth Collaboration through June 30, 2009, we recognized $51,614 of revenue from the $60,000 upfront payment, $102,869 as reimbursement for our development expenses, and a total of $39,000 for non-refundable milestone payments. We expect reimbursement revenue to decline during the remainder of 2009 compared to 2008, as research and development for RELISTOR decreases.

We recognize a portion of the upfront payment in a reporting period in accordance with the proportionate performance method, which is based on the percentage of actual effort performed on our development obligations in that period relative to total effort expected for all of our performance obligations under the arrangement, as reflected in the most recent development plan and budget approved by Wyeth and us. During the third quarter of 2007, a revised budget was approved, which extended our performance period to the end of 2009 and, thereby, decreased the amount of revenue we are recognizing through June 30, 2009. We expect revenue from amortization of the remaining $8.4 million of unamortized upfront premium to increase during the remainder of 2009 compared to 2008, and that the amortization will be completed by the end of 2009.

· Ono License Agreement. In October 2008, we entered into a License Agreement with Ono and in November 2008, received an upfront payment of $15.0 million. We are entitled to receive potential milestones and royalty payments. During the three and six months ended June 30, 2009, we recognized $0 and $15,000 of the upfront payment as revenue, upon satisfaction of our performance obligations and during the three and six months ended June 30, 2009, we recorded $0 and $47, respectively, of reimbursement revenue for activities requested by Ono.

Royalty income. We began earning royalties from net sales by Wyeth of subcutaneous RELISTOR in June 2008. During the three months ended June 30, 2008 and 2009, we earned royalties of $321 and $487, respectively, based on net sales of RELISTOR and recognized $42 and $292, respectively, of royalty income. During the six months ended June 30, 2008 and 2009, we earned royalties of $321 and $767, respectively, and recognized $42 and $467, respectively, of royalty income. As of June 30, 2009, we have recorded a cumulative total of $819 as deferred revenue - current. The $819 of deferred royalty revenue is expected to be recognized as royalty income over the period of our development obligations relating to RELISTOR, which we currently estimate will terminate at the end of 2009. Our royalties from net sales by Wyeth of RELISTOR, as defined, are based on specified royalty rates ranging up to 30% of U.S. and 25% of foreign net sales at the highest sales levels. Royalty rates will increase on incremental sales as net sales in a calendar year exceed specified levels.

Global net sales of RELISTOR, which began last June, were $3.2 million for the second quarter of 2009, compared to (i) $2.1 million in the second quarter of 2008, an increase of 52% and (ii) $1.9 million in the first quarter of 2009, an increase of 74%.

U.S. RELISTOR net sales totaled $2.0 million in the second quarter of 2009, compared to (i) $1.9 million in the second quarter of 2008, an increase of 5% and (ii) $1.2 million in the first quarter of 2009, an increase of 69%. Non-U.S. RELISTOR net sales totaled $1.2 million in the second quarter of 2009, compared to (i) $0.2 million in the second quarter of 2008, an increase of 434% and (ii) $0.7 million in the first quarter of 2009, an increase of 82%.

Research grants and contract. In 2003, we were awarded a contract by the NIH (NIH Contract) to develop a prophylactic vaccine (ProVax) designed to prevent HIV from becoming established in uninfected individuals exposed to the virus. Funding under the NIH Contract provided for pre-clinical research, development and early clinical testing. These funds were used principally in connection with our ProVax HIV vaccine program. Through December 31, 2008, we had recognized revenue of $15,509 from this contract, including $180 for the achievement of two milestones. In June 2009, we were awarded, commencing in the second quarter, annual NIH grants over a five-year period totaling up to $11.4 million to continue this work, subject to annual funding approvals and customary compliance obligations.

Revenues from research grants and contract from the NIH decreased from $1,699 for the three months ended June 30, 2008 to $510 for the three months ended June 30, 2009; $1,083 and $510 from grants and $616 and $0 from the NIH Contract for the three months ended June 30, 2008 and 2009, respectively. The decrease in grant and contract revenue resulted from fewer active grants and reimbursable expenses in 2009 than in 2008, and the expiration of the NIH Contract in December 2008.

Revenues from research grants and contract from the NIH decreased from $4,312 for the six months ended June 30, 2008 to $1,017 for the six months ended June 30, 2009; $3,176 and $1,017 from grants and $1,136 and $0 from the NIH Contract for the six months ended June 30, 2008 and 2009, respectively. The decrease in grant and contract revenue resulted from fewer active grants and reimbursable expenses in 2009 than in 2008, and the expiration of the NIH Contract in December 2008.

Other revenues, primarily from orders for research reagents, decreased from $72 for the three months ended June 30, 2008 to $36 for the three months ended June 30, 2009. Other revenues, primarily from orders for research reagents, increased from $111 for the six months ended June 30, 2008 to $114 for the six months ended June 30, 2009.

Expenses:

Research and Development Expenses include scientific labor, supplies, facility costs, clinical trial costs, product manufacturing costs, royalty payments and license fees. Research and development expenses, including license fees and royalty expense, decreased from $24,261 for the three months ended June 30, 2008 to $13,104 for the for the same period of 2009, and decreased from $48,200 for the six months ended June 30, 2008 to $28,582 for the same period of 2009, as follows:

Three Months Ended June

                             30,                        Six Months Ended June 30,
                                             Percent                                  Percent
                      2008        2009       Change         2008            2009      Change

Salaries and
benefits (cash)    $6,614        $5,781       (13%)      $13,173         $11,896       (10%)

Three Months: Salaries and benefits (cash) decreased due to a decline in average headcount from 198 to 179 for the three months ended June 30, 2008 and 2009, respectively, in the research and development, manufacturing and clinical departments due to our Company-wide austerity program mentioned above, partially offset by expenses related to this program.

Six Months: Salaries and benefits (cash) decreased due to a decline in average headcount from 198 to 183 for the six months ended June 30, 2008 and 2009, respectively, in the research and development, manufacturing and clinical departments due to our Company-wide austerity program, partially offset by expenses related to this program.

Three Months Ended June

                             30,                        Six Months Ended June 30,
                                             Percent                                  Percent
                      2008        2009       Change         2008            2009      Change

Share-based
compensation
(non-cash)         $1,444        $1,738        20%        $3,456          $3,844        11%

Three Months: Share-based compensation (non-cash) increased due to higher restricted stock compensation expenses partially offset by a decrease in employee stock purchase and stock option plans expenses for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. See Critical Accounting Policies - Share-Based Payment Arrangements.

Six Months: Share-based compensation (non-cash) increased due to higher restricted stock compensation expenses partially offset by a decrease in employee stock purchase and stock option plans expenses for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. See Critical Accounting Policies - Share-Based Payment Arrangements.

                          Three Months Ended
                             June 30,                               Six Months Ended June 30,
                                                   Percent                                        Percent

Clinical trial costs $6,039 $555 (91%) $10,902 $1,530 (86%)

Three Months: Clinical trial costs decreased primarily due to lower expenses for
(i) RELISTOR ($4,690), from reduced clinical trial activities, (ii) HIV ($744), due to decreased PRO 140 clinical trial activities, and (iii) Cancer ($49), all for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

Six Months: Clinical trial costs decreased primarily due to lower expenses for
(i) RELISTOR ($8,015), from reduced clinical trial activities, (ii) HIV ($1,238), due to decreased PRO 140 clinical trial activities, and (iii) Cancer ($119), all for the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

                         Three Months Ended
                            June 30,                              Six Months Ended June 30,
                                                  Percent                                       Percent

. . .