| BIOGEN IDEC INC Item 1A Risk Factors The SEC encourages public companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions |
| In addition to historical information, this report contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements |
| Reference is made in particular to forward-looking statements regarding the anticipated level of future product sales, royalty revenues, expenses and profits, regulatory approvals, our long-term growth, our ability to continue development of TYSABRI and reintroduce TYSABRI into the market, the re-initiation of manufacturing of TYSABRI, the development and marketing of additional products, including RITUXAN in RA, the impact of competitive products, the anticipated outcome of pending or anticipated litigation and patent-related proceedings, the plans for our Denmark large-scale manufacturing facility, the substantial completion and licensing of our Denmark packaging and labeling facility, our ability to meet our manufacturing needs, the value of investments in certain marketable securities, and our plans to spend additional capital on external business development and research opportunities |
| These and all other forward-looking statements are made based on our current belief as to the outcome and timing of such future events |
| Risk factors which could cause actual results to differ from our expectations and which could negatively impact our financial condition and results of operations are discussed below and elsewhere in this report |
| Although we believe that the risks described below represent all material risks currently applicable to our business, additional risks and uncertainties not presently known to us or that are currently not believed to be significant to our business may also affect our actual results and could harm our business, financial condition and results of operations |
| Unless required by law, we do not undertake any obligation to publicly update any forward-looking statements |
| Our Revenues Rely Significantly on a Limited Number of Products |
| Our current and future revenues depend substantially upon continued sales of our commercial products |
| Revenues related to sales of two of our products, AVONEX and RITUXAN, represented approximately 93prca of our total revenues in 2005 |
| We cannot assure you that AVONEX or RITUXAN will continue to be accepted in the US or in any foreign markets or that sales of either of these products will not decline in the future |
| A number of factors may affect market acceptance of AVONEX, RITUXAN and our other products, including: • the perception of physicians and other members of the health care community of their safety and efficacy relative to that of competing products; • patient and physician satisfaction with these products; • the effectiveness of our sales and marketing efforts and those of our marketing partners and licensees in the US, the EU and other foreign markets; • the size of the markets for these products; • unfavorable publicity concerning these products or similar drugs; • the introduction, availability and acceptance of competing treatments; • the availability and level of third party reimbursement; • adverse event information relating to any of these products; • changes to product labels to add significant warnings or restrictions on use; • the success of ongoing development work on RITUXAN and new anti-CD20 product candidates; • the continued accessibility of third parties to vial, label, and distribute these products on acceptable terms; • the unfavorable outcome of patent litigation related to any of these products; • the ability to manufacture commercial lots of these products successfully and on a timely basis; and • regulatory developments related to the manufacture or continued use of these products |
| 27 _________________________________________________________________ [97]Table of Contents Any material adverse developments with respect to the commercialization of these products may cause our revenue to grow at a slower than expected rate, or even decrease, in the future |
| In addition, the successful development and commercialization of new anti-CD20 product candidates in our collaboration with Genentech (which also includes RITUXAN) will adversely affect our participation in the operating profits from such collaboration (including as to RITUXAN) in such a manner that, although overall collaboration revenue might ultimately increase as the result of the successful development and commercialization of any such product candidate, our share of the operating profits will decrease |
| Safety Issues with TYSABRI Could Significantly Affect our Growth |
| TYSABRI was approved by the FDA in November 2004 to treat relapsing forms of MS to reduce the frequency of clinical relapses |
| In February 2005, in consultation with the FDA, we and Elan voluntarily suspended the marketing and commercial distribution of TYSABRI We also suspended dosing in all clinical trials of TYSABRI These decisions were based on reports of cases of PML, a rare and frequently fatal, demyelinating disease of the central nervous system in patients treated with TYSABRI in clinical studies |
| We and Elan conducted a safety evaluation of patients treated with TYSABRI in MS, Crohn’s disease and RA clinical studies |
| The safety evaluation included the review of any reports of potential PML in MS patients receiving TYSABRI in the commercial setting |
| In October 2005, we completed the safety evaluation and found no new confirmed cases of PML Three confirmed cases of PML were previously reported, two of which were fatal |
| On September 26, 2005, we and Elan submitted an sBLA for TYSABRI to the FDA for the treatment of MS We and Elan have also recently submitted a data package to the EMEA This information was supplied as part of the ongoing EMEA review process, which was initiated in the summer of 2004 with the filing for approval of TYSABRI as a treatment for MS In November 2005, we were granted Priority Review status for the sBLA, which will result in action by the FDA approximately six months from the submission date, which is in March 2006 |
| In January 2006, we and Elan announced that we had received notification from the FDA that the Peripheral and Central Nervous System Drugs Advisory Committee would review TYSABRI for the treatment of MS on March 7, 2006 |
| In February 2006, we and Elan announced that the FDA informed the companies that it removed the hold on clinical trial dosing of TYSABRI We plan to work with regulatory authorities to determine the path forward and future commercial availability of the product |
| The path forward in the US could range from the permanent withdrawal of TYSABRI from the market and terminating clinical studies of TYSABRI, the need for additional testing prior to approval, or the re-introduction of TYSABRI to the market in the US If we are allowed to re-introduce TYSABRI to the market in the US, it could be for a significantly restricted use |
| The outcome of our work with the EMEA could result in the withdrawal of our applications for approval of TYSABRI as a treatment for MS and Crohn’s disease in the EU, or, if in consultation with the EMEA, we receive marketing approval for TYSABRI in one or both indications, a product label with similar restrictions on use as those that may be required by the FDA If we are able to re-introduce TYSABRI into the US market or get approval in the EU, we expect that there will be an ongoing extensive patient risk management program and that the label will include “black box” and other significant safety warnings |
| A “black box” warning is the most serious warning placed in the labeling of a prescription medication |
| The success of any reintroduction into the US market and launch in the EU will depend upon its acceptance by the medical community and patients, which cannot be certain given questions regarding the safety of TYSABRI raised by these adverse events, the possibility of significant restrictions on use and the significant safety warnings that we expect to be in the label |
| Our inability to return TYSABRI to the market in the US or to get TYSABRI approved in the EU or any significant restrictions on use or lack of acceptance of TYSABRI by the medical community or patients would materially affect our growth and impact various aspects of our business and our plans for the future |
| This could result in, among other things, material write-offs of inventory, intangible assets or goodwill, impairment of capital assets, and additional reductions in our workforce |
| Our long-term viability and growth will depend upon the successful development and commercialization of other products from our research and development activities and external growth opportunities |
| We, along with Genentech, continue to expand our development efforts related to RITUXAN and we are independently expanding 28 _________________________________________________________________ [98]Table of Contents development efforts around other potential products in our pipeline |
| The expansion of our pipeline may include increases in spending on internal projects, and is expected to include an increase in spending on external growth opportunities, such as the acquisition and license of third party technologies or products, collaborations with other companies and universities, the acquisitions of companies with commercial products and/or products in their pipelines, and other types of investments |
| Product development and commercialization involve a high degree of risk |
| Only a small number of research and development programs result in the commercialization of a product |
| In addition, competition for collaborations and the acquisition and in-license of third party technologies and products in the biopharmaceutical industry is intense |
| We cannot be certain that we will be able to enter into collaborations or agreements for desirable and compatible technologies or products on acceptable terms or at all |
| Many important factors affect our ability to successfully develop and commercialize other products, including the ability to: • obtain and maintain necessary patents and licenses; • demonstrate safety and efficacy of drug candidates at each stage of the clinical trial process; • enroll patients in our clinical trials and complete clinical trials; • overcome technical hurdles that may arise; • manufacture successfully products in sufficient quantities to meet demand; • meet applicable regulatory standards; • obtain reimbursement coverage for the products; • receive required regulatory approvals; • produce drug candidates in commercial quantities at reasonable costs; • compete successfully against other products and market products successfully; • enter into agreements for desirable and compatible technologies or products on acceptable terms; • anticipate accurately the costs associated with any acquisition; • prevent the potential loss of key employees of any acquired business; • acquire a supplier base for the materials associated with any new product opportunity; • hire additional employees to operate effectively any acquired business, including employees with specialized knowledge; • mitigate risks associated with entering into new markets in which we have no or limited prior experience; and • manage successfully any significant collaborations and/or integrate any significant acquisitions |
| Even if later stage clinical trials are successful, the risk exists that unexpected concerns may arise from additional data or analysis or that obstacles may arise or issues may be identified in connection with review of clinical data with regulatory authorities or that regulatory authorities may disagree with our view of the data or require additional data or information or additional studies |
| Competition in Our Industry and in the Markets for Our Products is Intense |
| The biotechnology industry is intensely competitive |
| We compete in the marketing and sale of our products, the development of new products and processes, the acquisition of rights to new products with commercial potential and the hiring of personnel |
| We compete with biotechnology and pharmaceutical companies that have a greater number of products on the market, greater financial and other resources and other technological or competitive advantages |
| We cannot be certain that one or more of our competitors will not receive patent protection that dominates, blocks or adversely affects our product development or business; will not benefit from significantly greater sales and marketing capabilities; or will not develop products that are accepted more widely than ours |
| 29 _________________________________________________________________ [99]Table of Contents AVONEX competes with three other products: • REBIF, which is co-promoted by Serono, Inc |
| in the US and sold by Serono AG in the EU; • BETASERON, sold by Berlex in the US and sold under the name BETAFERON by Schering AG in the EU; and • COPAXONE, sold by Teva in the US and co-promoted by Teva and Aventis Pharma in the EU In addition, a number of companies, including us, are working to develop products to treat MS that may in the future compete with AVONEX If we are able to reintroduce TYSABRI to the market, it would compete with the products listed above, including AVONEX AVONEX also faces competition from off-label uses of drugs approved for other indications |
| Some of our current competitors are also working to develop alternative formulations for delivery of their products, which may in the future compete with AVONEX RITUXAN is typically used after patients fail to respond or relapse after treatment with traditional radiation therapy or standard chemotherapy regimes, such as CVP and CHOP ZEVALIN is typically used after patients fail to respond or relapse following treatment with RITUXAN ZEVALIN received designation as an Orphan Drug from the FDA for the treatment of relapsed or refractory low grade, follicular, or transformed B-cell non-Hodgkin’s lymphoma, including patients with RITUXAN refractory follicular NHL Marketing exclusivity resulting from this Orphan Drug designation expires in February 2009 |
| ZEVALIN competes with BEXXAR, a radiolabeled molecule developed by Corixa Corporation, which is now being developed and commercialized by GlaxoSmithKline |
| BEXXAR received FDA approval in June 2003 to treat patients with CD20, follicular, NHL, with and without transformation, whose disease is refractory to RITUXAN and has relapsed following chemotherapy |
| A number of other companies, including us, are working to develop products to treat B-cell NHLs and other forms of non-Hodgkin’s lymphoma that may ultimately compete with RITUXAN and ZEVALIN In February 2006, the FDA approved the sBLA for use of RITUXAN, in combination with methotrexate, for reducing signs and symptoms in adult patients with moderately-to-severely active RA who have had an inadequate response to one or more TNF antagonist therapies |
| RITUXAN will compete with several different types of therapies in the RA market, including: • traditional therapies for RA, including disease-modifying anti-rheumatic drugs, such as steroids, methotrexate and cyclosporine, and pain relievers such as acetaminophen; • anti-TNF therapies, such as REMICADE, a drug sold worldwide by Centocor, Inc, a subsidiary of Johnson & Johnson, HUMIRA, a drug sold by Abbott Laboratories, and ENBREL, a drug sold by Amgen,Inc |
| ; • ORENCIA, a drug developed by Bristol-Myers Squibb Company, which was approved by the FDA to treat moderate-to-severe RA in December 2005; • drugs in late-stage development for RA; and • drugs approved for other indications that are used to treat RA In addition, a number of other companies, including us, are working to develop products to treat RA that may ultimately compete with RITUXAN in the RA marketplace |
| We are Subject to Risks Related to the Products that We Manufacture |
| We manufacture and expect to continue to manufacture our own commercial requirements of bulk AVONEX, and TYSABRI and the ZEVALIN bulk antibody |
| Our inability to manufacture successfully bulk product and to maintain regulatory approvals of our manufacturing facilities would harm our ability to produce timely sufficient quantities of commercial supplies of AVONEX, ZEVALIN and TYSABRI, if we are able to re-launch this product, to meet demand |
| Problems with manufacturing processes could result in product defects or manufacturing failures, which could require us to delay shipment of products, recall, or withdraw products previously shipped, or impair our ability to expand into new markets or supply products in existing markets |
| Any such problem would be exacerbated by unexpected demand for our products |
| In June 2005, we sold our large-scale manufacturing facility in Oceanside, 30 _________________________________________________________________ [100]Table of Contents California to Genentech |
| We previously had planned to use the Oceanside facility to manufacture TYSABRI and other commercial products |
| We currently manufacture TYSABRI at our manufacturing facility in Research Triangle Park, North Carolina, or RTP We are proceeding with construction of the bulk manufacturing component of our large-scale biologic manufacturing facility in Hillerod, Denmark and have added a labeling and packaging component to the project |
| ” Our plans with respect to the Hillerod large-scale manufacturing facility are, in part, dependent upon the commercial availability and potential market acceptance of TYSABRI See “Item 1A — Risk Factors — Safety Issues with TYSABRI Could Significantly Affect our Growth |
| ” If we are able to re-introduce TYSABRI to the market, we expect that we will be able to meet foreseeable manufacturing needs for TYSABRI from our large-scale manufacturing facility in RTP We would, however, need to evaluate our requirements for additional manufacturing capacity in light of the approved label and our judgment of the potential US market acceptance of TYSABRI in MS, the probability of obtaining marketing approval of TYSABRI in MS in the EU and other jurisdictions, and the probability of obtaining marketing approval of TYSABRI in additional indications in the US, EU and other jurisdictions |
| If we cannot produce sufficient commercial requirements of bulk product to meet demand, we would need to rely on third party manufacturers, of which there are only a limited number capable of manufacturing bulk products of the type we require as contract suppliers |
| We cannot be certain that we could reach agreement on reasonable terms, if at all, with those manufacturers |
| Even if we were to reach agreement, the transition of the manufacturing process to a third party to enable commercial supplies could take a significant amount of time |
| Our ability to supply products in sufficient capacity to meet demand is also dependent upon third party contractors to fill-finish, package and store such products |
| For a discussion of the risks associated with using third parties to perform manufacturing-related services for our products, see “Item 1A — Risk Factors — We Rely to a Large Extent on Third Parties in the Manufacturing of Our Products |
| ” In the past, we have had to write down and incur other charges and expenses for products that failed to meet specifications |
| Similar charges may occur in the future |
| Any prolonged interruption in the operations of our existing manufacturing facilities could result in cancellations of shipments or loss of product in the process of being manufactured |
| Because our manufacturing processes are highly complex and are subject to a lengthy FDA approval process, alternative qualified production capacity may not be available on a timely basis or at all |
| We Rely to a Large Extent on Third Parties in the Manufacturing of Our Products |
| We rely on Genentech for all RITUXAN manufacturing |
| Genentech relies on a third party to manufacture certain bulk RITUXAN requirements |
| If Genentech or any third party upon which it relies does not manufacture or fill/finish RITUXAN in sufficient quantities and on a timely and cost-effective basis, or if Genentech or any third party does not obtain and maintain all required manufacturing approvals, our business could be harmed |
| We also rely heavily upon third party manufacturers and suppliers to manufacture and supply significant portions of the product components of ZEVALIN other than the bulk antibody |
| We also source all of our fill-finish and the majority of our final product storage operations, along with a substantial portion of our packaging operations of the components used with our products, to a concentrated group of third party contractors |
| The manufacture of products and product components, fill-finish, packaging and storage of our products require successful coordination among ourselves and multiple third party providers |
| Our inability to coordinate these efforts, the lack of capacity available at the third party contractor or any other problems with the operations of these third party contractors could require us to delay shipment of saleable products, recall products previously shipped or impair our ability to supply products at all |
| This could increase our costs, cause us to lose revenue or market share, and damage our reputation |
| Any third party we use to fill-finish, package or store our products to be sold in the US must be licensed by the FDA As a result, alternative third party providers may not be readily available on a timely basis |
| Due to the unique nature of the production of our products, there are several single source providers of raw materials |
| We make every effort to qualify new vendors and to develop contingency plans so that production is not impacted by short-term issues associated with single source providers |
| Nonetheless, our business could be materially impacted by long term or chronic issues associated with single source providers |
| 31 _________________________________________________________________ [101]Table of Contents The Manufacture of Our Products is Subject to Government Regulation |
| We and our third party providers are generally required to maintain compliance with current Good Manufacturing Practice, or cGMP, and are subject to inspections by the FDA or comparable agencies in other jurisdictions to confirm such compliance |
| Any changes of suppliers or modifications of methods of manufacturing require amending our application to the FDA and ultimate amendment acceptance by the FDA prior to release of product to the market place |
| Our inability or the inability of our third party service providers to demonstrate ongoing cGMP compliance could require us to withdraw or recall product and interrupt commercial supply of our products |
| Any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our products as a result of a failure of our facilities or the facilities or operations of third parties to pass any regulatory agency inspection could significantly impair our ability to develop and commercialize our products |
| This could increase our costs, cause us to lose revenue or market share and damage our reputation |
| Royalty revenues contribute to our overall profitability |
| Royalty revenues may fluctuate as a result of disputes with licensees, collaborators and partners, future patent expirations and other factors such as pricing reforms, health care reform initiatives, other legal and regulatory developments and the introduction of competitive products that may have an impact on product sales by our licensees and partners |
| In addition, sales levels of products sold by our licensees, collaborators and partners may fluctuate from quarter to quarter due to the timing and extent of major events such as new indication approvals or government-sponsored programs |
| Since we are not involved in the development or sale of products by our licensees, collaborators and partners, we cannot be certain of the timing or potential impact of factors which may affect their sales |
| In addition, the obligation of licensees to pay us royalties generally terminates upon expiration of the related patents |
| Our quarterly revenues, expenses and net income have fluctuated in the past and are likely to fluctuate significantly in the future |
| Fluctuation may result from a variety of factors, including: • demand and pricing for our products; • physician and patient acceptance of our products; • amount and timing of sales orders for our products; • our achievement of product development objectives and milestones; • research and development and manufacturing expenses; • clinical trial enrollment and expenses; • our manufacturing performance and capacity and that of our partners; • percentage of time that our manufacturing facilities are utilized for commercial versus clinical manufacturing; • rate and success of product approvals; • costs related to obtain product approvals, launching new products and maintaining market acceptance for existing products; • timing of regulatory approval, if any, of competitive products and the rate of market penetration of competing products; • new data or information, positive or negative, on the benefits and risks of our products or products under development; • expenses related to protecting our intellectual property; • expenses related to litigation and settlement of litigation; 32 _________________________________________________________________ [102]Table of Contents • payments made to acquire new products or technology; • write downs and write offs of inventories, intangible assets, goodwill or investments; • impairment of assets, such as buildings and manufacturing facilities; • government or private healthcare reimbursement policies; • collaboration obligations and copromotion payments we make or receive; • timing and nature of contract manufacturing and contract research and development payments and receipts; • interest rate fluctuations; • changes in our effective tax rate; • foreign currency exchange rates; and • overall economic conditions |
| Our operating results during any one quarter do not necessarily suggest the anticipated results of future quarters |
| Our Sales Depend on Payment and Reimbursement from Third Party Payors, and a Reduction in Payment Rate or Reimbursement Could Result in Decreased Use or Sales of Our Products |
| In both domestic and foreign markets, sales of our products are dependent, in part, on the availability of reimbursement from third party payers such as state and federal governments under programs such as Medicare and Medicaid in the US, and private insurance plans |
| In certain foreign markets, the pricing and profitability of our products generally are subject to government controls |
| In the US, there have been, there are, and we expect there will continue to be, a number of state and federal proposals that could limit the amount that state or federal governments will pay to reimburse the cost of pharmaceutical and biologic products |
| Recent Medicare reforms have lowered the reimbursement rate for many of our products |
| We are not able to predict the full impact of these reforms and their regulatory requirements on our business |
| However, we believe that legislation or regulatory action that reduces reimbursement for our products could adversely impact our business |
| In addition, we believe that private insurers, such as managed care organizations, may adopt their own reimbursement reductions unilaterally, or in response to such action |
| Reduction in reimbursement for our products could have a material adverse effect on our results of operations |
| Also, we believe the increasing emphasis on management of the utilization and cost of health care in the US has and will continue to put pressure on the price and usage of our products, which may adversely impact product sales |
| Further, when a new therapeutic product is approved, the availability of governmental and/or private reimbursement for that product is uncertain, as is the amount for which that product will be reimbursed |
| We cannot predict the availability or amount of reimbursement for our approved products or product candidates, including those at any stage of development, and current reimbursement policies for marketed products may change at any time |
| In addition, benefit designs by government and private payers that provide coverage but require more cash outlay from the patient may have the affect of reducing utilization of our products |
| Recent Medicare reforms also added an expanded prescription drug benefit beginning in 2006 for all Medicare beneficiaries that choose to enroll |
| The temporary drug discount card program that was established for the purpose of providing interim opportunities for discounts to Medicare beneficiaries is being phased out in 2006 |
| Meanwhile, the new Part D pharmacy benefit for Medicare beneficiaries is undergoing enrollment for implementation in 2006 |
| The federal government, through the manner in which it has shaped this program, is encouraging the commercial plans and managed care entities that administer the new benefit to demand discounts from pharmaceutical and biotechnology companies |
| In addition, certain states have proposed and certain other states have adopted various programs for seniors and low-income individuals where a condition of coverage is that the manufacturer provide a discounted price, as well as programs involving importation from other countries, such as Canada, and bulk purchasing of drugs |
| If reimbursement for our marketed products changes adversely or if we fail to obtain adequate reimbursement for our other current or future products, health care providers may limit how much or under what circumstances they 33 _________________________________________________________________ [103]Table of Contents will prescribe or administer them, which could reduce the use of our products or cause us to reduce the price of our products |
| In 2003, Congress revised the statutory provisions governing Medicare payment for drugs, biologics and radiopharmaceuticals furnished by physicians, suppliers, and hospital outpatient departments |
| For physicians and suppliers, beginning in 2005, Medicare began to set payment rates for drugs and biologicals they furnish at ASP plus 6 percent, which lowered payment rates for our products |
| The revisions for payments to hospital outpatient departments included a transitional change to the payment methodology in 2004 and 2005, which lowered payment rates for our products in those years |
| The methodology has changed again in 2006, with payment rates being set at the same ASP plus 6 percent methodology used to reimburse physicians and suppliers since 2005 |
| While physicians and suppliers adjusted to the change to the ASP payment methodology in 2005, that is not true for products dispensed in the hospital outpatient setting |
| Some of our products, such as RITUXAN, are not frequently provided in hospital outpatient departments so a majority of patients receiving the products should not be affected by these rate changes |
| Other products, such as ZEVALIN, are used primarily in the hospital outpatient setting and we are uncertain as to whether hospitals will view the 2006 rates favorably and therefore choose to provide ZEVALIN to their patients |
| We encounter similar regulatory and legislative issues in most other countries |
| In the EU and some other international markets, the government provides health care at low direct cost to consumers and regulates pharmaceutical prices or patient reimbursement levels to control costs for the government-sponsored health care system |
| This international patchwork of price regulation may lead to inconsistent prices and some third party trade in our products from markets with lower prices |
| Such trade exploiting price differences between countries could undermine our sales in markets with higher prices |
| We have filed numerous patent applications in the US and various other countries seeking protection of inventions originating from our research and development, including a number of our processes and products |
| Patents have been issued on many of these applications |
| We have also obtained rights to various patents and patent applications under licenses with third parties, which provide for the payment of royalties by us |
| The ultimate degree of patent protection that will be afforded to biotechnology products and processes, including ours, in the US and in other important markets remains uncertain and is dependent upon the scope of protection decided upon by the patent offices, courts and lawmakers in these countries |
| There is no certainty that our existing patents or others, if obtained, will afford us substantial protection or commercial benefit |
| Similarly, there is no assurance that our pending patent applications or patent applications licensed from third parties will ultimately be granted as patents or that those patents that have been issued or are issued in the future will prevail if they are challenged in court |
| A substantial number of patents have already been issued to other biotechnology and biopharmaceutical companies |
| Competitors may have filed applications for, or have been issued patents and may obtain additional patents and proprietary rights that may relate to products or processes competitive with or similar to our products and processes |
| Moreover, the patent laws of the US and foreign countries are distinct and decisions as to patenting, validity of patents and infringement of patents may be resolved differently in different countries |
| In general, we obtain licenses to third party patents, which we deem necessary or desirable for the manufacture, use and sale of our products |
| We are currently unable to assess the extent to which we may wish or be required to acquire rights under such patents and the availability and cost of acquiring such rights, or whether a license to such patents will be available on acceptable terms or at all |
| There may be patents in the US or in foreign countries or patents issued in the future that are unavailable to license on acceptable terms |
| Our inability to obtain such licenses may hinder our ability to market our products |
| We are aware that others, including various universities and companies working in the biotechnology field, have filed patent applications and have been granted patents in the US and in other countries claiming subject matter potentially useful to our business |
| Some of those patents and patent applications claim only specific products or methods of making such products, while others claim more general processes or techniques useful or now used in the biotechnology industry |
| There is considerable uncertainty within the biotechnology industry about the validity, 34 _________________________________________________________________ [104]Table of Contents scope and enforceability of many issued patents in the US and elsewhere in the world, and, to date, there is no consistent policy regarding the breadth of claims allowed in biotechnology patents |
| We cannot currently determine the ultimate scope and validity of patents which may be granted to third parties in the future or which patents might be asserted to be infringed by the manufacture, use and sale of our products |
| There has been, and we expect that there may continue to be significant litigation in the industry regarding patents and other intellectual property rights |
| Litigation, including our current patent litigation with Classen Immunotherapies, and other proceedings concerning patents and other intellectual property rights may be protracted, expensive and distracting to management |
| Competitors may sue us as a way of delaying the introduction of our products |
| Any litigation, including any interference proceedings to determine priority of inventions, oppositions to patents in foreign countries or litigation against our partners, may be costly and time consuming and could harm our business |
| We expect that litigation may be necessary in some instances to determine the validity and scope of certain of our proprietary rights |
| Litigation may be necessary in other instances to determine the validity, scope and/or noninfringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our products |
| Ultimately, the outcome of such litigation could adversely affect the validity and scope of our patent or other proprietary rights, or, conversely, hinder our ability to market our products |
| Our business is subject to extensive government regulation and oversight |
| As a result, we may become subject to governmental actions which could adversely affect our business, operations or financial condition, including: • new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to health care availability, method of delivery and payment for health care products and services; • changes in the FDA and foreign regulatory approval processes that may delay or prevent the approval of new products and result in lost market opportunity; • new laws, regulations and judicial decisions affecting pricing or marketing; and • changes in the tax laws relating to our operations |
| Failure to Comply with Government Regulations Regarding Our Products Could Harm Our Business |
| Our activities, including the sale and marketing of our products, are subject to extensive government regulation and oversight, including regulation under the federal Food, Drug and Cosmetic Act and other federal and state statutes |
| Pharmaceutical and biotechnology companies have been the target of lawsuits and investigations alleging violations of government regulation, including claims asserting antitrust violations and violations of the Prescription Drug Marketing Act, or other violations related to environmental matters |
| Violations of governmental regulation may be punishable by criminal and civil sanctions, including fines and civil monetary penalties |
| We cannot predict with certainty the eventual outcome of any litigation in this area |
| If we were to be convicted of violating laws regulating the sale and marketing of our products, our business could be materially harmed |
| Some of Our Activities may Subject Us to Risks under Federal and State Laws Prohibiting “Kickbacks” and False or Fraudulent Claims |
| We are subject to the provisions of a federal law commonly known as the Medicare/Medicaid anti-kickback law, and several similar state laws, which prohibit payments intended to induce physicians or others either to purchase or arrange for or recommend the purchase of healthcare products or services |
| While the federal law applies only to products or services for which payment may be made by a federal healthcare program, state laws may apply regardless of whether federal funds may be involved |
| These laws constrain the sales, marketing and other promotional activities of manufacturers of drugs and biologicals, such as us, by limiting the kinds of financial arrangements, including sales programs, with hospitals, physicians, and other potential purchasers of drugs and biologicals |
| Other federal and state laws generally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third party payors that are false or fraudulent, or are for items or services that were not provided as claimed |
| Anti-kickback and false claims laws 35 _________________________________________________________________ [105]Table of Contents prescribe civil and criminal penalties for noncompliance that can be substantial, including the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid) |
| Pharmaceutical and biotechnology companies have been the target of lawsuits and investigations alleging violations of government regulation, including claims asserting violations of the federal False Claim Act, the federal anti-kickback statute, and other violations in connection with off-label promotion of products and Medicare and/or Medicaid reimbursement, or related to claims under state laws, including state anti-kickback and fraud laws |
| For example, we and a number of other major pharmaceutical and biotechnology companies are named defendants in certain Average Wholesale Price litigation pending in the US District Court for the District of Massachusetts alleging, among other things, violations in connection with Medicaid |