| IMMUNOGEN INC Item 1A Risk Factors THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THOSE THAT WE CURRENTLY BELIEVE MAY MATERIALLY AFFECT OUR COMPANY ADDITIONAL RISKS AND UNCERTAINTIES THAT WE ARE UNAWARE OF OR THAT WE CURRENTLY DEEM IMMATERIAL ALSO MAY BECOME IMPORTANT FACTORS THAT AFFECT OUR COMPANY If our TAP technology does not produce safe, effective and commercially viable products, our business will be severely harmed |
| Our TAP technology yields novel anticancer product candidates for the treatment of cancer |
| No TAP product candidate has obtained regulatory approval and all of them are in early stages of development |
| The most advanced TAP product candidates are only in the Phase I or Phase I/II stage of clinical trials |
| Our TAP product candidates or our collaborators’ TAP product candidates may not prove to be safe, effective or commercially viable treatments for cancer and our TAP technology may not result in any future meaningful benefits to us or for our current or potential collaborative partners |
| Furthermore, we are aware of only one antibody-drug conjugate that has obtained FDA approval and is based on technology similar to our TAP technology |
| If our TAP technology fails to generate product candidates that are safe, effective and commercially viable treatments for cancer, or fails to obtain FDA approval, our business will be severely harmed |
| Clinical trials for our product candidates will be lengthy and expensive and their outcome is uncertain |
| Before obtaining regulatory approval for the commercial sale of any product candidates, we and our collaborative partners must demonstrate through clinical testing that our product candidates are safe and effective for use in humans |
| Conducting clinical trials is a time-consuming, expensive and uncertain process and typically requires years to complete |
| Our most advanced product candidates are only in the Phase I or Phase I/II stage of clinical trials |
| In our industry, the results from preclinical testing and early clinical trials often are not predictive of results obtained in later clinical trials |
| Some compounds that have shown promising results in preclinical or early clinical trials subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory approval |
| At any time during the clinical trials, we, our collaborative partners, or the FDA might delay or halt any clinical trials for our product candidates for various reasons, including: § occurrence of unacceptable toxicities or side effects; § ineffectiveness of the product candidate; § insufficient drug supply; § negative or inconclusive results from the clinical trials, or results that necessitate additional clinical studies; § delays in obtaining or maintaining required approvals from institutions, review boards or other reviewing entities at clinical sites; § delays in patient enrollment; or § other reasons that are internal to the businesses of our collaborative partners, which they may not share with us |
| The results of clinical trials may fail to demonstrate the safety or effectiveness of our product candidates or our collaborators’ product candidates to the extent necessary to obtain regulatory approval or to make the commercialization of the product worthwhile |
| Any failure or substantial delay in successfully completing clinical trials and obtaining regulatory approval for our product candidates or our collaborators’ product candidates could severely harm our business |
| 15 _________________________________________________________________ If our collaborative partners fail to perform their obligations under our agreements, or determine not to continue with clinical trials for particular product candidates, our business could be severely impacted |
| Our strategy for the development and commercialization of our product candidates depends, in large part, upon the formation and maintenance of collaborative arrangements |
| Collaborations provide an opportunity for us to: § generate cash flow and revenue; § offset some of the costs associated with our internal research and development, preclinical testing, clinical trials and manufacturing; § seek and obtain regulatory approvals faster than we could on our own; § successfully commercialize existing and future product candidates; § gain use of our technology with antibodies that are proprietary to other companies; § secure access to targets which, due to intellectual property restrictions, would otherwise be unavailable to our technology |
| If we fail to secure or maintain successful collaborative arrangements, the development and marketing of compounds that use our technology may be delayed, scaled back, or otherwise may not occur |
| In addition, we may be unable to negotiate other collaborative arrangements or, if necessary, modify our existing arrangements on acceptable terms |
| We cannot control the amount and timing of resources our partners may devote to our products |
| Our partners may separately pursue competing products, therapeutic approaches or technologies to develop treatments for the diseases targeted by us or our collaborative efforts, or may decide for reasons not known to us to discontinue development of products under our agreements with them |
| Any of our partners may slow or discontinue the development of a product covered by a collaborative arrangement for reasons that can include: § a change in the partner’s strategic focus as a result of merger, management changes, adverse business events, or other causes; § a change in the priority of the product relative to other programs in the collaborator’s pipeline; § a reassessment of the patent situation related to the compound or its target; § a change in the anticipated competition for the product; § clinical study results; § a reduction in the financial resources the collaborator can or is willing to apply to the development of new compounds and § other factors |
| Even if our partners continue the collaborative arrangements, they may nevertheless determine not to actively pursue the development or commercialization of any resulting products |
| Also, our partners may fail to perform their obligations under the collaborative agreements or may be slow in performing their obligations |
| Our partners can terminate our collaborative agreements under certain conditions |
| The decision to advance a product that is covered by a collaborative agreement through clinical trials and ultimately to commercialization is in the discretion of our collaborative partners |
| If any collaborative partner were to terminate or breach our agreements, or fail to complete its obligations to us in a timely manner, our anticipated revenue from the agreement and from the development and commercialization of our products would be severely limited |
| If we are not able to establish additional collaborations or any or all of our existing collaborations are terminated and we are not able to enter into alternative collaborations on acceptable terms, our continued development, manufacture and commercialization of our product candidates could be delayed or scaled back as we may not have the funds or capability to continue these activities |
| If our collaborators fail to successfully develop and commercialize TAP compounds, our business would be severely harmed |
| We depend on a small number of collaborators for a substantial portion of our revenue |
| The loss of, or a material reduction in activity by, any one of these collaborators could result in a substantial decline in our revenue |
| We have and will continue to have collaborations with a limited number of companies |
| Also, the failure of any one of our collaborative partners to perform its obligations under its agreement with us, including making any royalty, milestone or other payments to us, could have a material adverse effect on our financial condition |
| Further, any material reduction by any one of our collaborative partners in its level of commitment of resources, funding, personnel, and interest in continued development under its agreement with us could have a material adverse effect on our financial condition |
| If consolidation trends in the healthcare industry continue, the number of our potential collaborators could decrease, which could have an adverse impact on our development efforts |
| If a present or future collaborator of ours were to be involved in a business combination, its continued pursuit and emphasis on our product development program could be delayed, diminished or terminated |
| 16 _________________________________________________________________ If our collaborators’ requirements for clinical materials to be manufactured by us are significantly lower than we have estimated, our financial results and condition could be adversely affected |
| We procure certain components of finished conjugate, including ansamitocin P3, DM1, DM4, and linker, on behalf of our collaborators |
| In order to meet our commitments to our collaborators, we are required to enter into agreements with third parties to produce these components well in advance of our production of clinical materials on behalf of our collaborators |
| If our collaborators do not require as much clinical material as we have contracted to produce, we may not be able to recover our investment in these components and we may suffer significant losses |
| For example, in February 2005, Boehringer Ingelheim discontinued development of bivatuzumab mertansine and in January 2006, Millennium discontinued development of MLN2704 |
| In the periods subsequent to discontinuation of development, we can have significantly reduced demand for conjugated material |
| Specifically, the discontinuation of bivatuzumab mertansine has contributed to the decrease in clinical materials reimbursement in the year ended June 30, 2006 |
| In addition, we operate a conjugate manufacturing facility |
| A significant portion of the cost of operating this facility, including the cost of manufacturing personnel, is charged to the cost of producing clinical materials on behalf of our collaborators |
| If we produce fewer batches of clinical materials for our collaborators, less of the cost of operating the conjugate manufacturing facility will be charged to our collaborators and our financial condition could be adversely affected |
| We have a history of operating losses and expect to incur significant additional operating losses |
| We have generated operating losses since our inception |
| As of June 30, 2006, we had an accumulated deficit of dlra238dtta6 million |
| For the years ended June 30, 2006, 2005, and 2004, we generated losses of dlra17dtta8 million, dlra11dtta0 million and dlra5dtta9 million, respectively |
| We expect to incur substantial additional operating expenses over the next several years as our research, development, preclinical testing, clinical studies and collaborator support activities increase |
| We intend to continue to invest significantly in our product candidates |
| Further, we expect to invest significant resources supporting our existing collaborators as they work to develop, test and commercialize TAP and other antibody compounds, and we or our collaborators may encounter technological or regulatory difficulties as part of this development and commercialization process that we cannot overcome or remedy |
| We may also incur substantial marketing and other costs in the future if we decide to establish marketing and sales capabilities to commercialize our product candidates |
| None of our product candidates has generated any commercial revenue and our only revenues to date have been primarily from upfront and milestone payments, research and development support and clinical materials reimbursement from our collaborative partners |
| We do not expect to generate revenues from the commercial sale of our product candidates for several years, and we may never generate revenues from the commercial sale of products |
| Even if we do successfully develop products that can be marketed and sold commercially, we will need to generate significant revenues from those products to achieve and maintain profitability |
| Even if we do become profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis |
| We and our collaborative partners are subject to extensive government regulations and we and our collaborative partners may not be able to obtain necessary regulatory approvals |
| We and our collaborative partners may not receive the regulatory approvals necessary to commercialize our product candidates, which would cause our business to be severely harmed |
| Pharmaceutical product candidates, including those in development by us and our collaborative partners, are subject to extensive and rigorous government regulation |
| The FDA regulates, among other things, the development, testing, manufacture, safety, record-keeping, labeling, storage, approval, advertising, promotion, sale and distribution of pharmaceutical products |
| If our potential products or our collaborators’ potential products are marketed abroad, they will also be subject to extensive regulation by foreign governments |
| None of our product candidates has been approved for sale in the United States or any foreign market |
| The regulatory review and approval process, which includes preclinical studies and clinical trials of each product candidate, is lengthy, complex, expensive and uncertain |
| Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish the product candidate’s safety and efficacy |
| Data obtained from preclinical and clinical trials are susceptible to varying interpretation, which may delay, limit or prevent regulatory approval |
| The approval process may take many years to complete and may involve ongoing requirements for post-marketing studies |
| In light of the limited regulatory history of monoclonal antibody-based therapeutics, regulatory approvals for our products may not be obtained without lengthy delays, if at all |
| Any FDA or other regulatory approvals of our product candidates, once obtained, may be withdrawn |
| The effect of government regulation may be to: 17 _________________________________________________________________ § delay marketing of potential products for a considerable period of time; § limit the indicated uses for which potential products may be marketed; § impose costly requirements on our activities; and § place us at a competitive disadvantage to other pharmaceutical and biotechnology companies |
| We may encounter delays or rejections in the regulatory approval process because of additional government regulation from future legislation or administrative action or changes in FDA policy during the period of product development, clinical trials and FDA regulatory review |
| Failure to comply with FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production or injunction, as well as other regulatory action against our product candidates or us |
| Outside the United States, our ability to market a product is contingent upon receiving clearances from the appropriate regulatory authorities |
| The foreign regulatory approval process includes similar risks to those associated with the FDA approval process |
| In addition, we are, or may become, subject to various federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research work |
| If we fail to comply with the laws and regulations pertaining to our business, we may be subject to sanctions, including the temporary or permanent suspension of operations, product recalls, marketing restrictions and civil and criminal penalties |
| Our product candidates and our collaborators’ product candidates will remain subject to ongoing regulatory review even if they receive marketing approval |
| If we or our collaborators fail to comply with continuing regulations, we could lose these approvals and the sale of our products could be suspended |
| Even if we receive regulatory approval to market a particular product candidate, the approval could be conditioned on us conducting costly post-approval studies or could limit the indicated uses included in our labeling |
| Moreover, the product may later cause adverse effects that limit or prevent its widespread use, force us to withdraw it from the market or impede or delay our ability to obtain regulatory approvals in additional countries |
| In addition, the manufacturer of the product and its facilities will continue to be subject to FDA review and periodic inspections to ensure adherence to applicable regulations |
| After receiving marketing approval, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping related to the product remain subject to extensive regulatory requirements |
| We may be slow to adapt, or we may never adapt, to changes in existing regulatory requirements or adoption of new regulatory requirements |
| If we fail to comply with the regulatory requirements of the FDA and other applicable United States and foreign regulatory authorities, or if previously unknown problems with our products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions, including: § restrictions on the products, manufacturers or manufacturing processes; § warning letters; § civil or criminal penalties; § fines; § injunctions; § product seizures or detentions; § import bans; § voluntary or mandatory product recalls and publicity requirements; § suspension or withdrawal of regulatory approvals; § total or partial suspension of production; and § refusal to approve pending applications for marketing approval of new drugs or supplements to approved applications |
| We rely on two third-party manufacturers to perform separate activities in the process of producing supplies of our cell-killing agents, DM1 and DM4 |
| Significant problems at either of these manufacturers could negatively impact the development of our own compounds and those of our collaborators |
| We rely on third-party suppliers to manufacture materials used to make TAP compounds |
| Our cell-killing agents DM1 and DM4 (collectively “DMx”) are manufactured from a precursor, ansamitocin P3 |
| As part of preparing to produce TAP compounds for later-stage clinical trials and commercialization, we are in the process of transitioning from our original supplier of ansamitocin P3 to a larger company with more commercial production experience |
| We believe we have ample inventory of ansamitocin P3 in place to meet the anticipated demands by us and our partners during the transition period |
| Should there be a serious problem with the transition to the new vendor, however, we would not be able to immediately obtain material from our original supplier and our ability to produce TAP compounds could be significantly impacted, which may impact our and our collaborators’ product development activities including clinical testing |
| Any problems experienced by this vendor could result in a delay or interruption in the supply of DMx to us until this vendor cures the problem or until we locate an alternative source of supply |
| Any delay or interruption in our supply of DMx could lead to a delay or interruption in our manufacturing operations and preclinical and clinical trials of our product candidates and our collaborators’ product candidates, which could negatively affect our business |
| We are currently working with a potential additional supplier to develop the capabilities to supply these materials |
| We cannot assume that we will be able to reach agreement with this supplier on acceptable terms, or at all |
| 18 _________________________________________________________________ Unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives applicable to our product candidates could limit our potential product revenue |
| Antibody-based anticancer products are often much more costly to produce than traditional chemotherapeutics and tend to have significantly higher prices |
| Factors that help justify the price include the high mortality associated with many types of cancer and the need for more and better treatment options |
| Regulations governing drug pricing and reimbursement vary widely from country to country |
| Some countries require approval of the sales price of a drug before it can be marketed |
| Some countries restrict the physicians that can authorize the use of more expensive medications |
| Some countries establish treatment guidelines to help limit the use of more expensive therapeutics and the pool of patients that receive them |
| In some countries, including the United States, third-party payers frequently seek discounts from list prices and are increasingly challenging the prices charged for medical products |
| Because our product candidates are in the development stage, we do not know the level of reimbursement, if any, we will receive for any products that we are able to successfully develop |
| If the reimbursement for any of our product candidates is inadequate in light of our development and other costs, our ability to achieve profitability would be affected |
| We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies |
| A number of legislative and regulatory proposals to change the healthcare system in the United States and other major healthcare markets have been proposed and adopted in recent years |
| For example, the United States Congress enacted a limited prescription drug benefit for Medicare recipients as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 |
| While the program established by this statute may increase demand for any products that we are able to successfully develop, if we participate in this program, our prices will be negotiated with drug procurement organizations for Medicare beneficiaries and are likely to be lower than prices we might otherwise obtain |
| Non-Medicare third-party drug procurement organizations may also base the price they are willing to pay on the rate paid by drug procurement organizations for Medicare beneficiaries |
| In addition, ongoing initiatives in the United States have and will continue to increase pressure on drug pricing |
| The announcement or adoption of any such initiative could have an adverse effect on potential revenues from any product candidate that we may successfully develop |
| We may be unable to establish the manufacturing capabilities necessary to develop and commercialize our potential products |
| Currently, we have only a conjugate manufacturing facility that we use to manufacture conjugated compounds for us and our collaborators for preclinical and initial clinical testing |
| We do not currently have the manufacturing capacity needed to make our product candidates for commercial sale |
| In addition, our manufacturing capacity may be insufficient to complete all clinical trials contemplated by us and our collaborators over time |
| We intend to rely in part on third-party contract manufacturers to produce sufficiently large quantities of drug materials that are and will be needed for clinical trials and commercialization of our potential products and are putting in place these suppliers |
| Third-party manufacturers may not be able to meet our needs with respect to timing, quantity or quality of materials |
| If we are unable to contract for a sufficient supply of needed materials on acceptable terms, or if we should encounter delays or difficulties in our relationships with manufacturers, our clinical trials may be delayed, thereby delaying the submission of product candidates for regulatory approval and the market introduction and subsequent commercialization of our potential products |
| Any such delays may lower our revenues and potential profitability |
| We may develop our manufacturing capacity in part by expanding our current facilities or building new facilities |
| Either of these activities would require substantial additional funds and we would need to hire and train significant numbers of employees to staff these facilities |
| We may not be able to develop manufacturing facilities that are sufficient to produce drug materials for clinical trials or commercial use |
| We and any third-party manufacturers that we may use must continually adhere to current Good Manufacturing Practice regulations enforced by the FDA through its facilities inspection program |
| If our facilities or the facilities of third-party manufacturers cannot pass a pre-approval plant inspection, the FDA will not grant approval to our product candidates |
| In complying with these regulations and foreign regulatory requirements, we and any of our third-party manufacturers will be obligated to expend time, money and effort on production, record-keeping and quality control to assure that our potential products meet applicable specifications and other requirements |
| If we or any third-party manufacturer with whom we may contract fail to maintain regulatory compliance, we or the third party may be subject to fines and/or manufacturing operations may be suspended |
| 19 _________________________________________________________________ We have only one conjugate manufacturing facility and any prolonged and significant disruption at that facility could impair our ability to manufacture products for clinical testing |
| Currently, we are contractually obligated to manufacture Phase I and non-pivotal Phase II clinical products for companies licensing our TAP technology |
| We manufacture this material in a conjugate manufacturing facility |
| We only have one such manufacturing facility in which we can manufacture clinical products |
| Our current manufacturing facility contains highly specialized equipment and utilizes complicated production processes developed over a number of years that would be difficult, time-consuming and costly to duplicate |
| Any prolonged disruption in the operations of our manufacturing facility would have a significant negative impact on our ability to manufacture products for clinical testing on our own and would cause us to seek additional third-party manufacturing contracts, thereby increasing our development costs |
| Even though we carry business interruption insurance policies, we may suffer losses as a result of business interruptions that exceed the coverage available or any losses may be excluded under our insurance policies |
| Certain events, such as natural disasters, fire, political disturbances, sabotage or business accidents, which could impact our current or future facilities, could have a significant negative impact on our operations by disrupting our product development efforts until such time as we are able to repair our facility or put in place third-party contract manufacturers to assume this manufacturing role |
| Any inability to license from third parties their proprietary technologies or processes which we use in connection with the development and manufacture of our product candidates may impair our business |
| Other companies, universities and research institutions have or may obtain patents that could limit our ability to use, manufacture, market or sell our product candidates or impair our competitive position |
| As a result, we would have to obtain licenses from other parties before we could continue using, manufacturing, marketing or selling our potential products |
| Any necessary licenses may not be available on commercially acceptable terms, if at all |
| If we do not obtain required licenses, we may not be able to market our potential products at all or we may encounter significant delays in product development while we redesign products or methods that are found to infringe on the patents held by others |
| We may be unable to establish sales and marketing capabilities necessary to successfully commercialize our potential products |
| We currently have no direct sales or marketing capabilities |
| We anticipate relying on third parties to market and sell most of our primary product candidates |
| If we decide to market our potential products through a direct sales force, we would need either to hire a sales force with expertise in pharmaceutical sales or to contract with a third party to provide a sales force which meets our needs |
| We may be unable to establish marketing, sales and distribution capabilities necessary to commercialize and gain market acceptance for our potential products and be competitive |
| In addition, co-promotion or other marketing arrangements with third parties to commercialize potential products could significantly limit the revenues we derive from these potential products, and these third parties may fail to commercialize our compounds successfully |
| If our product candidates or those of our collaborators do not gain market acceptance, our business will suffer |
| Even if clinical trials demonstrate the safety and efficacy of our product candidates and the necessary regulatory approvals are obtained, our product candidates may not gain market acceptance among physicians, patients, healthcare payors and other members of the medical community |
| The degree of market acceptance of any product candidates that we develop will depend on a number of factors, including: § their degree of clinical efficacy and safety; § their advantage over alternative treatment methods; § our/the marketer’s ability to gain acceptable reimbursement and the reimbursement policies of government and third-party payors; and § the quality of the distribution capabilities for product candidates, both ours and our collaborative partners |
| Physicians may not prescribe any of our future products until such time as clinical data or other factors demonstrate the safety and efficacy of those products as compared to conventional drug and other treatments |
| Even if the clinical safety and efficacy of therapies using our products is established, physicians may elect not to recommend the therapies for any number of other reasons, including whether the mode of administration of our products is effective for certain conditions, and whether the physicians are already using competing products that satisfy their treatment objectives |
| Physicians, patients, third-party payors and the medical community may not accept and use any product candidates that we, or our collaborative partners, develop |
| If our products do not achieve significant market acceptance and use, we will not be able to recover the significant investment we have made in developing such products and our business will be severely harmed |
| 20 _________________________________________________________________ We may be unable to compete successfully |
| The markets in which we compete are well established and intensely competitive |
| We may be unable to compete successfully against our current and future competitors |
| Our failure to compete successfully may result in pricing reductions, reduced gross margins and failure to achieve market acceptance for our potential products |
| Our competitors include pharmaceutical companies, biotechnology companies, and research institutions |
| Many of these organizations have substantially more experience and more capital, research and development, regulatory, manufacturing, sales, marketing, human and other resources than we do |
| As a result, they may: § develop products that are safer or more effective than our product candidates; § obtain FDA and other regulatory approvals or reach the market with their products more rapidly than we can, reducing the potential sales of our product candidates; § devote greater resources to market or sell their products; § adapt more quickly to new technologies and scientific advances; § initiate or withstand substantial price competition more successfully than we can; § have greater success in recruiting skilled scientific workers from the limited pool of available talent; § more effectively negotiate third-party licensing and collaboration arrangements; and § take advantage of acquisition or other opportunities more readily than we can |
| A number of pharmaceutical and biotechnology companies are currently developing products targeting the same types of cancer that we target, and some of our competitors’ products have entered clinical trials or already are commercially available |
| In addition, our product candidates, if approved and commercialized, will compete against well-established, existing, therapeutic products that are currently reimbursed by government health administration authorities, private health insurers and health maintenance organizations |
| We face and will continue to face intense competition from other companies for collaborative arrangements with pharmaceutical and biotechnology companies, for relationships with academic and research institutions, and for licenses to proprietary technology |
| In addition, we anticipate that we will face increased competition in the future as new companies enter our markets and as scientific developments surrounding antibody-based therapeutics for cancer continue to accelerate |
| While we will seek to expand our technological capabilities to remain competitive, research and development by others may render our technology or product candidates obsolete or noncompetitive or result in treatments or cures superior to any therapy developed by us |
| If we are unable to protect our intellectual property rights adequately, the value of our technology and our product candidates could be diminished |
| Our success depends in part on obtaining, maintaining and enforcing our patents and other proprietary rights and our ability to avoid infringing the proprietary rights of others |
| Patent law relating to the scope of claims in the biotechnology field in which we operate is still evolving, is surrounded by a great deal of uncertainty and involves complex legal, scientific and factual questions |
| To date, no consistent policy has emerged regarding the breadth of claims allowed in biotechnology patents |
| Accordingly, our pending patent applications may not result in issued patents |
| Although we own several patents, the issuance of a patent is not conclusive as to its validity or enforceability |
| Through litigation, a third party may challenge the validity or enforceability of a patent after its issuance |
| Also, patents and applications owned or licensed by us may become the subject of interference proceedings before the United States Patent and Trademark Office to determine priority of invention that could result in substantial cost to us |
| An adverse decision in an interference proceeding may result in our loss of rights under a patent or patent application |
| It is unclear how much protection, if any, will be given to our patents if we attempt to enforce them or if they are challenged in court or in other proceedings |
| A competitor may successfully challenge our patents or a challenge could result in limitations of the patents’ coverage |
| In addition, the cost of litigation or interference proceedings to uphold the validity of patents can be substantial |
| If we are unsuccessful in these proceedings, third parties may be able to use our patented technology without paying us licensing fees or royalties |
| Moreover, competitors may infringe our patents or successfully avoid them through design innovation |
| To prevent infringement or unauthorized use, we may need to file infringement claims, which are expensive and time-consuming |
| In an infringement proceeding, a court may decide that a patent of ours is not valid |
| Even if the validity of our patents were upheld, a court may refuse to stop the other party from using the technology at issue on the ground that its activities are not covered by our patents |
| Policing unauthorized use of our intellectual property is difficult, and we may not be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States |
| In addition to our patent rights, we also rely on unpatented technology, trade secrets, know-how and confidential information |
| Third parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology |
| We may not be able to effectively protect our rights in unpatented technology, trade secrets, know-how and confidential information |
| We require each of our employees, consultants and corporate partners to execute a confidentiality agreement at the commencement of an employment, consulting or collaborative relationship with us |
| However, these agreements may not provide effective protection of our information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies |
| 21 _________________________________________________________________ If we are forced to litigate or undertake other proceedings in order to enforce our intellectual property rights, we may be subject to substantial costs and liability or be prohibited from commercializing our potential products |
| Patent litigation is very common in the biotechnology and pharmaceutical industries |
| Third parties may assert patent or other intellectual property infringement claims against us with respect to our technologies, products or other matters |
| Any claims that might be brought against us alleging to infringement of patents may cause us to incur significant expenses and, if successfully asserted against us, may cause us to pay substantial damages and limit our ability to use the intellectual property subject to these claims |
| Even if we were to prevail, any litigation would be costly and time-consuming and could divert the attention of our management and key personnel from our business operations |
| Furthermore, as a result of a patent infringement suit, we may be forced to stop or delay developing, manufacturing or selling potential products that incorporate the challenged intellectual property unless we enter into royalty or license agreements |
| There may be third-party patents, patent applications and other intellectual property relevant to our potential products that may block or compete with our products or processes |
| In addition, we sometimes undertake research and development with respect to potential products even when we are aware of third-party patents that may be relevant to our potential products, on the basis that such patents may be challenged or licensed by us |
| If our subsequent challenge to such patents were not to prevail, we may not be able to commercialize our potential products after having already incurred significant expenditures unless we are able to license the intellectual property on commercially reasonable terms |
| We may not be able to obtain royalty or license agreements on terms acceptable to us, if at all |
| Even if we were able to obtain licenses to such technology, some licenses may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us |
| Ultimately, we may be unable to commercialize some of our potential products or may have to cease some of our business operations, which could severely harm our business |
| We use hazardous materials in our business, and any claims relating to improper handling, storage or disposal of these materials could harm our business |
| Our research and development and manufacturing activities involve the controlled use of hazardous materials, chemicals, biological materials and radioactive compounds |
| We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials and certain waste products |
| Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by applicable laws and regulations, we cannot completely eliminate the risk of accidental contamination or injury from these materials |
| In the event of such an accident, we could be held liable for any resulting damages, and any liability could exceed our resources |
| We may be required to incur significant costs to comply with these laws in the future |
| Failure to comply with these laws could result in fines and the revocation of permits, which could prevent us from conducting our business |
| We face product liability risks and may not be able to obtain adequate insurance |
| The use of our product candidates during testing or after approval entails an inherent risk of adverse effects, which could expose us to product liability claims |
| Regardless of their merit or eventual outcome, product liability claims may result in: § decreased demand for our product; § injury to our reputation and significant negative media attention; § withdrawal of clinical trial volunteers; § costs of litigation; § distraction of management; and § substantial monetary awards to plaintiffs |
| We may not have sufficient resources to satisfy any liability resulting from these claims |
| We currently have dlra5dtta0 million of product liability insurance for products which are in clinical testing |
| This coverage may not be adequate in scope to protect us in the event of a successful product liability claim |
| Further, we may not be able to maintain our current insurance or obtain general product liability insurance on reasonable terms and at an acceptable cost if we or our collaborative partners begin commercial production of our proposed product candidates |
| This insurance, even if we can obtain and maintain it, may not be sufficient to provide us with adequate coverage against potential liabilities |
| 22 _________________________________________________________________ We depend on our key personnel and we must continue to attract and retain key employees and consultants |
| We depend on our key scientific and management personnel |
| Our ability to pursue the development of our current and future product candidates depends largely on retaining the services of our existing personnel and hiring additional qualified scientific personnel to perform research and development |
| We will also need to hire personnel with expertise in clinical testing, government regulation, manufacturing, marketing and finance |
| Attracting and retaining qualified personnel will be critical to our success |
| We may not be able to attract and retain personnel on acceptable terms given the competition for such personnel among biotechnology, pharmaceutical and healthcare companies, universities and non-profit research institutions |
| Failure to retain our existing key management and scientific personnel or to attract additional highly qualified personnel could delay the development of our product candidates and harm our business |
| If we are unable to obtain additional funding when needed, we may have to delay or scale back some of our programs or grant rights to third parties to develop and market our products |
| We will continue to expend substantial resources developing new and existing product candidates, including costs associated with research and development, acquiring new technologies, conducting preclinical and clinical trials, obtaining regulatory approvals and manufacturing products as well as providing certain support to our collaborators in the development of their products |
| We believe that our current working capital and future payments, if any, from our collaboration arrangements, including committed research funding that we expect to receive from sanofi-aventis pursuant to the terms of our collaboration agreement, will be sufficient to meet our current and projected operating and capital requirements for at least the next two to three years |
| However, we may need additional financing sooner due to a number of factors including: § if either we or any of our collaborators incur higher than expected costs or experience slower than expected progress in developing product candidates and obtaining regulatory approvals; § lower revenues than expected under our collaboration agreements; or § acquisition of technologies and other business opportunities that require financial commitments |
| Additional funding may not be available to us on favorable terms, or at all |
| We may raise additional funds through public or private financings, collaborative arrangements or other arrangements |
| Debt financing, if available, may involve covenants that could restrict our business activities |
| If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, scale back or eliminate expenditures for some of our development programs or grant rights to develop and market product candidates that we would otherwise prefer to internally develop and market |
| If we are required to grant such rights, the ultimate value of these product candidates to us may be reduced |
| Our stock price can fluctuate significantly and results announced by us and our collaborators can cause our stock price to decline |
| Our stock price can fluctuate significantly due to business developments announced by us and by our collaborators, as a result of market trends and as a result of our low stock price |
| The business developments that could impact our stock price include disclosures related to clinical findings with compounds that make use of our TAP technology, new partnerships, and clinical advancement or discontinuation of product candidates that make use of our TAP technology |
| Our stock price can also fluctuate significantly with the level of overall investment interest in small-cap biotechnology stocks |
| Our revenue is unpredictable and may fluctuate due to the timing of non-recurring licensing fees, decisions of our collaborative partners with respect to our agreements with them, reimbursement for manufacturing services, the achievement of milestones and our receipt of the related milestone payments under new and existing licensing and collaboration agreements |
| Revenue historically recognized under our prior collaboration agreements may not be an indicator of revenue from any future collaborations |
| In addition, our expenses are unpredictable and may fluctuate from quarter to quarter due to the timing of expenses, which may include obligations to manufacture or supply product or payments owed by us under licensing or collaboration agreements |
| It is possible that our quarterly operating results will not meet the expectations of securities analysts or investors, causing the market price of our common stock to decline |
| We believe that quarter to quarter comparisons of our operating results are not good indicators of our future performance and should not be relied upon to predict the future performance of our stock price |
| We do not intend to pay cash dividends on our common stock |
| We have not paid cash dividends since our inception and do not intend to pay cash dividends in the foreseeable future |
| Therefore, shareholders will have to rely on appreciation in our stock price, if any, in order to achieve a gain on an investment |
| 23 _________________________________________________________________ A WARNING ABOUT FORWARD-LOOKING STATEMENTS This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 |
| These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts that are not yet determinable |
| These statements also relate to our future prospects, developments and business strategies |
| These forward-looking statements are identified by their use of terms and phrases, such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and other similar terms and phrases, including references to assumptions |
| These statements are contained in the “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections, as well as other sections of this report |
| Forward-looking statements in this report include, but are not limited to: § successfully finding and managing the relationships with collaborative partners; § the uncertainty as to whether our TAP compounds or those of our collaborators will succeed in entering human clinical trials and uncertainty as to the results of such trials; § the risk that we and/or our collaborators may not be able to obtain regulatory approvals necessary to commercialize product candidates; § the potential development by competitors of competing products and technologies; uncertainty whether our TAP technology will produce safe, effective and commercially viable products; § our ability to successfully protect our intellectual property; § our reliance on third-party manufacturers to achieve supplies of our cell-killing agents, DM1 and DM4; § the risk that we may be unable to establish the manufacturing capabilities necessary to develop and commercialize our potential products; § the adequacy of our liquidity and capital resources; § governmental regulation of our activities, facilities, products and personnel; the dependence on key personnel; § uncertainties as to the extent of reimbursement for the costs of our potential products and related treatments by government and private health insurers and other organizations; the potential adverse impact of government-directed health care reform; and § the risk of product liability claims; and economic conditions, both generally and those specifically related to the biotechnology industry |
| These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those contemplated by our forward-looking statements |
| These known and unknown risks, uncertainties and other factors are described in detail in the “Risk Factors” section and in other sections of this report |