| GENAERA CORP ITEM 1A RISK FACTORS Any investment in shares of our common stock involves a high degree of risk |
| You should carefully consider each of the following risk factors together with the other information presented in this Annual Report on Form 10-K Risks Related to Our Business If we do not raise additional capital, we may not be able to continue our research and development programs |
| We may never commercialize any products |
| We maintained cash, cash equivalents and short-term investments of dlra32dtta2 million at December 31, 2005 |
| We believe these resources are sufficient to sustain operations and meet our research and development goals at least through 2006 |
| However, we will need to raise substantial additional funds in the future to continue our research and development programs and to commercialize our potential products |
| If we are unable to raise additional funds, we may be unable to complete our development activities for any of our proposed products |
| We regularly explore alternative means of financing our operations and seek funding through various sources, including public and private securities offerings, collaborative arrangements with third parties and other strategic alliances and business transactions |
| We currently do not have any commitments from other parties to provide us additional funds and may be unable to obtain sufficient funding in the future on acceptable terms, if at all |
| If we cannot obtain funding, we will need to delay, scale back or eliminate research and development programs or enter into collaborations with third parties to commercialize potential products or technologies that we might otherwise seek to develop or commercialize ourselves, or seek other arrangements |
| If we raise additional capital by issuing equity securities or securities convertible into equity, the issuance may result in ownership dilution to our stockholders and our share price may decline |
| The extent of such dilution will vary based upon the amount of capital raised |
| Capital raising efforts through collaborations may eventually negatively impact our financial interests |
| If we raise additional capital through collaborations and licensing we may give up valuable rights in intellectual property and the value of our interest in the licensed products could be negatively impacted by competing strategic and financial interests of our collaborators or licensees |
| If we engage in collaborations, we may receive lower consideration upon commercialization of such products than if we had not entered into such arrangements, or if we had entered into such arrangements at later stages in the product development process |
| 8 ______________________________________________________________________ [32]Table of Contents We expect to continue to incur substantial losses in the foreseeable future |
| We do not now have, nor have we ever had, products available for commercial sale and we may never generate revenues or become profitable |
| To date, we have engaged primarily in the research and development of drug candidates |
| We have not generated any revenues from product sales and have incurred losses in each year since our inception |
| As of December 31, 2005, we had an accumulated deficit of dlra239dtta5 million |
| Our proposed products are in a relatively early developmental stage and will require significant research, development and testing |
| We must obtain regulatory approvals for any proposed product prior to commercialization of the product |
| Our operations are also subject to various competitive and regulatory risks |
| We expect to experience substantial losses in the foreseeable future as we continue our research, development and testing efforts |
| Risks Related to Our Industry Development and commercial introduction of our products will take several more years and may not be successful |
| We are dedicating substantially all of our resources to research and development, do not have any marketed products and have not generated any product revenue |
| Because substantially all of our potential products currently are in research, preclinical development or the early and middle stages of clinical testing, revenues from sales of any products will not occur for at least the next several years, if at all |
| Our technologies are relatively new fields and may not lead to commercially viable pharmaceutical products |
| Before we can commercially introduce any products, we will likely incur substantial expense for, and devote a significant amount of time to, preclinical testing and clinical trials |
| We cannot apply for regulatory approval of our potential products until we have performed additional research and development testing and demonstrated in preclinical testing and clinical trials that our product candidates are safe and effective for use in humans |
| Some of our product candidates are in the early stages of research and development and we may abandon further development efforts on these product candidates before they reach clinical trials |
| Conducting clinical trials is a lengthy, time-consuming and expensive process |
| Our clinical trials may not demonstrate the safety and efficacy of our potential products and we may encounter unacceptable side effects or other problems in the clinical trials |
| Should this occur, we may have to delay or discontinue development of the potential products |
| Further, even if we believe that a product is safe or effective, we may not obtain the required regulatory approvals, be able to manufacture our products in commercial quantities or be able to market any product successfully |
| Preclinical testing and clinical development are long, expensive and uncertain processes |
| It may take us several years to complete our testing and failure can occur at any stage of testing |
| We may suffer significant setbacks in advanced clinical trials, even after promising results in earlier trials |
| We may not be able to enroll a sufficient number of patients to complete our clinical trials in a timely manner |
| Based on results at any stage of clinical trials, we may decide to discontinue development of our product candidates |
| Failure to recruit patients could delay or prevent clinical trials of our potential products, which could delay or prevent the development of potential products |
| Identifying and qualifying patients to participate in clinical trials of our potential products is critically important to our success |
| The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates |
| We have experienced delays in some of our clinical trials and we may experience similar delays in the future |
| If patients are unwilling to participate in our trials because of competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of potential products will be delayed |
| These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether |
| Compliance with extensive government regulations to which we are subject is expensive and time consuming, and may result in the delay, cessation or cancellation of product sales, introductions or modifications |
| Extensive industry regulation has had, and will continue to have, a significant impact on our business |
| Biopharmaceutical companies, like us, are subject to extensive, complex, costly and evolving regulation by the federal government, principally the FDA, and to a lesser extent by the US Drug Enforcement Administration (“DEA”) and foreign and state government agencies |
| The Federal Food, Drug and Cosmetic Act, the Controlled Substances Act and other domestic and foreign statutes and regulations govern or influence the testing, manufacturing, packing, labeling, storing, record keeping, safety, approval, advertising, promotion, sale and distribution of our products |
| Under certain of these regulations, we and our contract suppliers and manufacturers could be subject to periodic inspection of our or their respective facilities, procedures and operations and/or the testing of our products by the FDA, the DEA and other authorities, which conduct periodic inspections to confirm that we 9 ______________________________________________________________________ [33]Table of Contents and our contract suppliers and manufacturers are in compliance with all applicable regulations |
| The FDA also conducts pre-approval and post-approval reviews and plant inspections to determine whether our systems, or our contract suppliers’ and manufacturers’ processes, are in compliance with current Good Manufacturing Practices (“cGMP”) and other FDA regulations |
| We are dependent on receiving and maintaining FDA and other governmental approvals in order to produce and conduct clinical trials on our products |
| There is always a risk that the FDA or other applicable governmental authorities will not approve our products, or will take post–approval action limiting, modifying or revoking our ability to manufacture or sell our products, or that the rate, timing and cost of such approvals will adversely affect our product introduction plans or results of operations |
| Governmental authorities may delay or deny the approval of any of our drug candidates |
| In addition, governmental authorities may enact new legislation or regulations that could limit or restrict our efforts |
| A delay or denial of regulatory approval for any of our drug candidates will have a material adverse effect on our business |
| Even if we receive approval of a product candidate, approval may be conditioned upon certain limitations and restrictions as to the drugs used and may be subject to continuous review |
| If we fail to comply with any applicable regulatory requirements, we could be subject to penalties, including warning letters, fines, withdrawal of regulatory approval, product recalls, operating restrictions, injunctions and criminal prosecution |
| We expect to rely on third parties to market any products we develop and expect to rely on third parties in connection with the development of our products; if these parties do not perform as expected, we may never successfully commercialize our products |
| We do not have our own sales and marketing staff |
| In order to successfully develop and market our future products, we must develop this infrastructure with inherent risks or enter into marketing and distribution arrangements with third parties |
| We also expect to delegate the responsibility for all, or a significant portion, of the development and regulatory approval for certain products to third parties |
| If these parties do not develop an approvable or marketable product or do not market a product successfully, we may never generate revenue or become profitable |
| Additionally, we may be unable to enter into successful arrangements with other parties for such products |
| We currently have collaborative agreements with three primary collaborators: MedImmune, Inc, Ludwig Institute of Cancer Research (“LICR”) and Laboratorios Bago SA We do not have control over the amount and timing of resources to be devoted to our products by our collaborative partners |
| Our collaborators may not place a high priority on their contractual arrangements with us |
| Collaborators may develop products independently or through third parties that could compete with our proposed products |
| In addition, a collaborator may decide to end a relationship with us |
| We also may decide to establish our own sales force to market and sell certain products |
| Although some members of our management have limited experience in marketing pharmaceutical products, we have no experience with respect to marketing our products |
| If we choose to pursue this alternative, we will need to spend significant additional funds and devote significant management resources and time to establish a successful sales force |
| This effort may not be successful |
| Moreover, because our financial resources are limited, our sales and marketing expenditures in this area would likely be modest compared to that of our competitors |
| We face formidable competition with respect to the products we are seeking to develop |
| The pharmaceutical industry is characterized by intense competition |
| Many companies, research institutions and universities are conducting research and development activities in our fields of interest |
| Most of these competitors have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than we have |
| We may also face competition from companies using different or advanced techniques that could render our future products obsolete |
| Accordingly, we must continue to devote substantial resources and efforts to research and development activities in order to maintain a competitive position in our fields |
| Our efforts may not be successful |
| Many companies are working to develop and market products intended for additional disease areas being targeted by us, including age-related macular degeneration (“AMD”), cancer and respiratory diseases |
| A number of major pharmaceutical companies have significant franchises in these disease areas and can be expected to invest heavily to protect their interests |
| With respect to AMD, anti-angiogenic agents are under development at a number of biopharmaceutical companies, including Alcon, Inc, Bausch & Lomb, Inc, Genentech, Inc, Miravant Medical Technologies, OSI Pharmaceuticals, Inc |
| and QLT, Inc, as well as other large pharmaceutical companies |
| For cancer, anti-angiogenic agents are under development at a number of biopharmaceutical companies, including EntreMed, Inc, Genentech, Inc |
| and Imclone Systems, Inc, as well as other large pharmaceutical companies |
| In the respiratory field, other biopharmaceutical companies also have reported the discovery of genes relating to asthma and other respiratory diseases, including Genentech, Inc, Amgen, Inc |
| and Vertex Pharmaceuticals, Inc, as well as other large pharmaceutical companies |
| Many of the companies developing or marketing competing products 10 ______________________________________________________________________ [34]Table of Contents have significantly more experience than we do in undertaking preclinical testing and human clinical trials of new or improved therapeutic products and obtaining regulatory approvals of such products |
| Some of these companies may be in advanced phases of clinical testing of various drugs that may be competitive with our proposed products |
| We expect technological developments in the biopharmaceutical field to occur at a rapid rate and expect competition to intensify as advances in this field are made |
| Some of these companies are currently involved in research and development activities focused on the pathogenesis of disease and the competition among companies attempting to find genes responsible for disease is intense |
| In addition, we are aware that others are conducting research on compounds derived from animal host-defense systems |
| Colleges, universities, governmental agencies and other public and private research organizations are becoming more active in seeking patent protection and licensing arrangements to collect royalties for use of technology that they have developed, some of which may be directly competitive with our technology |
| If we are unable to recruit and retain skilled employees, we may not be able to achieve our objectives |
| Retaining our current employees and recruiting qualified scientific personnel to perform future research and development work will be critical to our success |
| In addition to pharmaceutical and specialized biotechnology companies, colleges, universities, governmental agencies and other public and private research organizations can be expected to compete with us in recruiting highly qualified scientific personnel |
| Competition is intense for experienced scientists, and we may not be able to retain or recruit sufficient skilled personnel to allow us to pursue collaborations and develop our products and core technologies to the extent otherwise possible |
| If we do not develop and maintain relationships with contract manufacturers, we may not successfully commercialize our products |
| We currently do not have the resources, facilities or technical capabilities to manufacture any of our proposed products in the quantities and quality required for commercial sale |
| We have no plans to establish a manufacturing facility |
| We expect to depend upon contract manufacturers for commercial scale manufacturing of our proposed products in accordance with regulatory standards |
| For example, we are currently working with outside contractors for the chemical production of squalamine |
| This dependence on contract manufacturers may restrict our ability to develop and deliver products on a timely, profitable and competitive basis especially because the number of companies capable of producing our proposed products is limited |
| These contract manufacturers generally have multiple projects and they may give ours a lower priority |
| As a result of contract manufacturing mishaps, our product could be lost or delivered late, delaying our clinical and preclinical programs, or may not be produced in accordance with all current applicable regulatory standards |
| Product not produced in accordance with all current applicable regulatory standards may lead to adverse outcomes for patients and/or product recalls |
| Furthermore, the development of a robust, low-cost manufacturing process for the commercial production of squalamine and other proposed products will require significant time and expenditure by us |
| We may be unable to maintain arrangements with qualified outside contractors to manufacture materials at costs that are affordable to us, if at all |
| Contract manufacturers may utilize their own technology, our technology or technology acquired or licensed from third parties in developing a manufacturing process |
| In order to engage another manufacturer, we may need to obtain a license or other technology transfer from the original contract manufacturer |
| Even if a license is available from the original contract manufacturer on acceptable terms, we may be unable to successfully effect the transfer of the technology to the new contract manufacturer |
| Any such technology transfer may also require the transfer of requisite data for regulatory purposes, including information contained in a proprietary drug master file held by a contract manufacturer |
| If we rely on a contract manufacturer that owns the drug master file, our ability to change contract manufacturers may be more limited |
| We depend on our intellectual property and, if we are unable to protect our intellectual property, our business may be harmed |
| Patents Our success depends, in part, on our ability to develop and maintain a strong patent position for our products and technologies, both in the United States and other countries |
| As with most biotechnology and pharmaceutical companies, our patent position is highly uncertain and involves complex legal and factual questions |
| Without patent and other protections, other companies could offer substantially identical products for sale without incurring the sizeable development and testing costs that we have incurred |
| As a result, our ability to recover these expenditures and realize profits upon commercialization would likely be diminished |
| Even after significant expenditure, a patent may not issue |
| We can never be certain that we were the first to develop the technology or that we were the first to file a patent application for the particular technology |
| US patent applications are maintained in secrecy by the US Patent and Trademark Office until a patent issues and publications in the scientific or patent literature concerning new technologies occur some time after actual discoveries of the technologies are made |
| We cannot be certain that: • patents will issue from any of our patent applications; • our patent rights will be sufficient to protect our technology; • others may not file patents ahead of us in time and prevent the issuing of our patent claims; • others will not design around the patented aspects of our technology; or • our patents will not be successfully challenged or circumvented by our competitors |
| The cost of litigation related to patents can be substantial, regardless of the outcome |
| We own several patents and patent applications for the use of squalamine as an anti-angiogenic, including methods for the treatment of cancer and neovascularization in the eye |
| One of these patents is to the compound’s combination therapy with other anti-cancer agents and will expire in 2017, while another patent covers the treatment of age-related macular degeneration, retinopathy of prematurity and diabetic retinopathy and will expire in 2015 |
| We also own patents covering methods and intermediates in the manufacturing process of squalamine and trodusquemine that expire in 2017, 2018 and 2021 |
| We own a composition of matter patent for the trodusquemine compound, which expires in 2014 |
| We also own a patent for the use of trodusquemine as an anti-obesity agent and other indications that expires in 2015 |
| We own two patents for the use of anti-IL9 or anti-IL9 receptor antibodies for the treatment of asthma and related disorders that expire in 2016 |
| We also have US patents covering the composition of a matter for a mucoregulator target and another patent covering methods for screening for mucoregulator compounds that both expire in 2019 |
| We own a patent on the use of talniflumate and related mucoregulator compounds for treating various conditions where mucous is overproduced, which expires in 2021 |
| The expiration date of each of these patents is subject to extension depending upon the future research and development program timelines |
| We have filed several other applications across our research and development programs and intend to file additional applications, as appropriate, for patents on new compounds, products or processes discovered or developed through the application of our technology |
| We have rights to several patents and patent applications under certain license agreements pursuant to which we expect to owe royalties on sales of products that incorporate issued valid patent claims |
| In particular, we have licensed from the Ludwig Institute of Cancer Research specific technologies related to our IL9 program, the earliest of which expires in 2009 |
| We have licensed from the Children’s Hospital of Philadelphia the composition of matter patent for the squalamine compound, which expires in 2012 |
| These patents are subject to extensions by their owners depending upon the future research and development program timelines |
| Additionally, certain of these agreements also provide that if we elect not to pursue the commercial development of any licensed technology, or do not adhere to an acceptable schedule of commercialization, then our exclusive rights to such technology may terminate |
| Third Party Intellectual Property Rights We cannot be sure that our products do not infringe on the intellectual property rights of others and we may have infringement claims asserted against us |
| These claims may harm our reputation, cost us money and prevent us from offering some products |
| Any claims or litigation in this area may be costly and could result in large awards against us and, whether we ultimately win or lose, could be time-consuming, may injure our reputation, may result in costly delays or may require us to enter into royalty or licensing arrangements |
| If there is a successful claim of infringement against us or if we fail to develop non-infringing technology or license the proprietary rights on a timely basis, our ability to use certain technologies, products, services and brand names may be limited and our business may be harmed |
| Other Intellectual Property We have trademark protection for the product candidate names EVIZON™ and LOMUCIN™ and are currently seeking US registration of these trademarks |
| In order to protect our proprietary technology and processes, we also rely on trade secrets and confidentiality agreements with our employees, consultants, outside scientific collaborators and other advisors |
| We may find that these agreements have been breached or that our trade secrets have otherwise become known or independently developed or discovered by our competitors |
| 12 ______________________________________________________________________ [36]Table of Contents Certain of our exclusive rights to patents and patent applications are governed by contract |
| Generally, these contracts require that we undertake certain obligations including the payment of royalties on sales of any products that are covered by patent claims |
| If we do not meet those obligations, we may lose our rights |
| Additionally, some of these agreements also require that we develop the licensed technology or meet certain milestones within a given timeframe |
| If we do not adhere to an acceptable schedule of commercialization, we may lose our rights |
| Potential Ownership Disputes Disputes may arise as to the ownership of our technology |
| Most of our research and development personnel have previously worked at other biotechnology companies, pharmaceutical companies, universities or research institutions |
| These entities may raise questions as to when technology was developed and assert rights to the technology |
| However, we may not prevail in any such disputes in the future |
| Similar technology ownership disputes may arise in the context of consultants, vendors or third parties, such as contract manufacturers |
| For example, our consultants are employed by or have consulting agreements with third parties |
| There may be disputes as to the capacity in which consultants are operating when they make certain discoveries |
| We may not prevail in any such disputes |
| If we cannot recruit and retain qualified management, we may not be able to successfully develop and commercialize our products |
| We depend to a considerable degree on a limited number of key personnel |
| Most significant responsibilities have been assigned to a relatively small number of individuals |
| In particular, it would be difficult to replace our President and Chief Executive Officer, John L Armstrong, Jr |
| We entered into an evergreen employment agreement with Mr |
| Armstrong, dated October 21, 2003, that is terminable by either party |
| This employment agreement contains non-competition and non-solicitation clauses |
| All of our executive officers have executed individual employment agreements with us |
| We do not maintain “key man” insurance on any of our employees |
| The loss of certain management and technical personnel could adversely affect our ability to develop and commercialize products |
| We are subject to potential product liability claims that could result in significant costs |
| We are subject to significant potential product liability risks inherent in the testing, manufacturing and marketing of human therapeutic products, including the risk that: • our proposed products cause some undesirable side effects or injury during clinical trials; • our products cause undesirable side effects or injury in the market; or • third parties that we have agreed to indemnify incur a related liability |
| We currently maintain primary products and completed operations liability insurance with per occurrence and aggregate coverage limits of dlra8dtta0 million |
| The coverage limits of our insurance policies may be inadequate to fully protect us from liabilities we might incur in connection with clinical trials, manufacturing and marketing of our products |
| Product liability insurance is expensive and in the future may not be available on commercially acceptable terms, or at all |
| A successful claim or claims brought against us in excess of our insurance coverage could materially harm our business and financial condition |
| If we do not receive adequate third-party reimbursement for any of our drug candidates, some patients may be unable to afford our products and sales could suffer |
| In both the United States and elsewhere, the availability of reimbursement from third-party payers, such as government health administration authorities, private health insurers and other organizations, can impact prescription pharmaceutical sales |
| These organizations are increasingly challenging the prices charged for medical products and services, particularly where they believe that there is only an incremental therapeutic benefit that does not justify the additional cost |
| If any of our products ever obtain marketing approval, coverage and reimbursement may not be available for these products, or, if available, may not be adequate |
| Without insurance coverage, many patients may be unable to afford our products, in which case sales of the products would be adversely affected |
| There also has been a trend toward government reforms intended to contain or reduce the cost of health care |
| In certain foreign markets, pricing or profitability of prescription pharmaceuticals is subject to government control |
| In the United States, 13 ______________________________________________________________________ [37]Table of Contents there have been a number of federal and state proposals to implement similar government control |
| We expect this trend to continue, but we cannot predict the nature or extent of any reform that results |
| These reforms could adversely affect our ability to obtain financing for the continued development of our proposed products or market any of our products that are successfully developed |
| Furthermore, reforms could have a broader impact by limiting overall growth of health care spending, such as Medicare and Medicaid spending, which could also adversely affect our business |
| Risks Related to Our Stock Our stock price is extremely volatile and your investment in our stock could decline in value |
| We may become involved in securities class action litigation |
| The market prices and trading volumes for securities of biopharmaceutical and biotechnology companies, including ours, have historically been, and will likely continue to be, highly volatile |
| Future events affecting our business, or that of our competitors, may have a significant impact on our stock price |
| Among these events are the following: • product testing results from us or our competitors; • technological innovations by us or our competitors; • new commercial products from us or our competitors; • whether and when we achieve specified development or commercialization milestones; • regulatory developments in the United States and foreign countries; • developments concerning proprietary rights, including patents; • regulatory actions; • litigation; • economic and other external factors or other disasters or crises; • period-to-period fluctuations in our financial results; and • the general performance of the equity markets and, in particular, the biotechnology sector of the equity markets |
| In the past two years our stock price on the Nasdaq SmallCap Market has fluctuated from a low of dlra1dtta28 per share on December 20, 2005 to a high of dlra5dtta00 per share on January 27, 2004 |
| In 2005, our stock price fluctuated from dlra1dtta28 to dlra3dtta50 per share, with an average price of approximately dlra2dtta09 |
| The volatility in our stock price is due to the volatility of our industry in general and does not appear to be connected to any event specific to us |
| In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company |
| We may become involved in this type of litigation in the future |
| Litigation of this type is often extremely expensive and diverts management’s attention and resources |
| We may be unable to maintain the standards for listing on the Nasdaq SmallCap Market, which could adversely affect the liquidity of our common stock and could subject our common stock to the “penny stock” rules |
| Our common stock is currently listed on the Nasdaq SmallCap Market |
| There are several requirements that we must satisfy in order for our common stock to continue to be listed on the Nasdaq SmallCap Market |
| These requirements include, but are not limited to, maintaining a minimum per share price of our common stock of dlra1dtta00 and a minimum level of stockholders’ equity of dlra2dtta5 million |
| In the future, we may not comply with all of these listing requirements, which might result in the delisting of our common stock |
| Delisting from the Nasdaq SmallCap Market could adversely affect the liquidity and the price of our common stock and could have a long-term adverse impact on our ability to raise future capital through a sale of our common stock |
| If our common stock were delisted, our common stock would be traded on an electronic bulletin board established for securities that are not included on Nasdaq, traded on a national securities exchange or traded in quotations published by the National Quotation Bureau, Inc, commonly referred to as the “pink sheets |
| ” If this occurs, it could be difficult to sell our securities or obtain the same level of market information as to the price of our common stock as is currently available |
| In addition, if our common stock were delisted, it would be subject to the so-called “penny stock” rules |
| The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than dlra5dtta00, subject to certain exceptions, such as any securities listed on a national securities exchange or quoted on Nasdaq |
| For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions |
| 14 ______________________________________________________________________ [38]Table of Contents For transactions covered by the “penny stock” rules, a broker-dealer must make a special suitability determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to the transaction |
| The “penny stock” rules also require broker-dealers to deliver monthly statements to “penny stock” investors disclosing recent price information for the “penny stock” held in the account and information on the limited market in “penny stocks |
| ” Prior to the transaction, a broker-dealer must provide a disclosure schedule relating to the “penny stock” market |
| In addition, the broker-dealer must disclose the following: • commissions payable to the broker-dealer and the registered representative; and • current quotations for the security as mandated by the applicable regulations |
| If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock in the secondary market |
| The exercise of options and warrants and other issuances of shares will likely have a dilutive effect on our stock price |
| As of December 31, 2005, there were outstanding options to purchase an aggregate of 5cmam577cmam250 shares of our common stock at prices ranging from dlra0dtta40 per share to dlra11dtta63 per share, of which options to purchase 2cmam275cmam187 shares were exercisable as of such date |
| As of December 31, 2005, there were outstanding warrants to purchase 4cmam627cmam266 shares of our common stock |
| Of this total, warrants to purchase 167cmam166 shares of our common stock are currently exercisable at dlra3dtta33 per share, subject to adjustment under the anti-dilution provisions of the warrants |
| Warrants to purchase 50cmam000 and 990cmam100 shares are currently exercisable at dlra3dtta79 and dlra5dtta38 per share, respectively |
| In September 2005, in connection with a registered direct offering of our common stock, we issued to institutional investors warrants to purchase 3cmam420cmam000 shares of our common stock at an exercise price of dlra3dtta15 per share, which are exercisable as of March 13, 2006 |
| In connection with an April 2002 private placement of our common stock, we granted to the placement agent warrants to purchase 100cmam000 shares of our common stock at an exercise price of dlra2dtta75 per share |
| As of December 31, 2005, these warrants have not yet been issued |
| The exercise of options and warrants at prices below the market price of our common stock could adversely affect the price of our common stock |
| Additional dilution may result from the issuance of shares of our capital stock in connection with collaborations or manufacturing arrangements or in connection with other financing efforts |
| Our certificate of incorporation and Delaware law contain provisions that could discourage a takeover and entrench management |
| Our certificate of incorporation provides our board of directors the power to issue shares of preferred stock without stockholder approval |
| This preferred stock could have voting rights, including voting rights that could be superior to that of our common stock |
| In addition, Section 203 of the Delaware General Corporation Law contains provisions that impose restrictions on stockholder action to acquire control of us |
| The effect of these provisions of our certificate of incorporation and Delaware law make it more difficult to remove management and could discourage third parties from seeking to obtain control, even though the price at which such third parties seek to acquire our common stock is in excess of the market price for our stock |