| In addition to the other information in this report on Form 10-K, you should carefully consider the risks described below before purchasing our securities |
| If any of the following risks actually occur, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected |
| As a result, the trading price of our securities could decline, and you might lose all or part of your investment |
| Risks Associated with our Businesses as a Whole We have incurred losses, and our business will suffer if we fail to achieve profitability in the future |
| Because product discovery and development require substantial lead-time and money prior to commercialization, our expenses have exceeded our revenue since we were founded in January 1989 |
| As of December 31, 2005, we had accumulated losses of approximately dlra770dtta8 million and stockholders’ equity of approximately dlra2dtta7 million |
| Most of the losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations |
| Most of our revenue has come from collaborative arrangements, with additional revenue from interest income and research grants and the sale or licensing of patents |
| We currently have only one product, Vitravene, approved for commercial use |
| This product has limited sales potential |
| We expect to incur additional operating losses over the next several years, and these losses may increase if we cannot increase or sustain revenue |
| We may not successfully develop any additional products or services, or achieve or sustain future profitability |
| If we fail to obtain timely funding, we may need to curtail or abandon some of our programs |
| All of our product candidates are undergoing clinical trials or are in the early stages of research and development |
| All of our products under development will require significant additional research, development, preclinical and/or clinical testing, regulatory approval and a commitment of significant additional resources prior to their commercialization |
| Based on our current operating plan with reasonable assumptions for new sources of revenue and cash, we believe our resources will be sufficient to meet our anticipated requirements at least through 2007 |
| If we do not meet our goals to commercialize our products, 31 ______________________________________________________________________ or to license our drugs and proprietary technologies, we will need additional funding in the future |
| Our future capital requirements will depend on many factors, such as the following: · changes in existing collaborative relationships and our ability to establish and maintain additional collaborative arrangements; · continued scientific progress in our research, drug discovery and development programs; · the size of our programs and progress with preclinical and clinical trials; · the time and costs involved in obtaining regulatory approvals; · competing technological and market developments, including the introduction by others of new therapies that address our markets; · success in developing and commercializing a business based on our TIGER system to identify infectious organisms; and · the profile and launch timing of our drugs |
| If we need additional funds, we may need to raise them through public or private financing |
| Additional financing may not be available at all or on acceptable terms |
| In addition, if our stockholders do not approve an increase in our authorized capital stock, it may limit our ability to raise funds |
| If we raise additional funds by issuing equity securities, the shares of existing stockholders will be diluted and their price, as well as the price of our other securities, may decline |
| If adequate funds are not available, or not available on acceptable terms, we may have to cut back on one or more of our research, drug discovery or development programs |
| For example, in January 2005 we decided to terminate the development of two lower priority drugs, ISIS 14803 and ISIS 104838 |
| Alternatively, we may obtain funds through arrangements with collaborative partners or others, which could require us to give up rights to certain of our technologies, product candidates or products |
| If any of our collaborative partners fail to fund our collaborative programs or develop or sell any of our products under development, or if we cannot obtain additional partners, we may have to delay or stop progress on our product development programs |
| To date, corporate partnering has played a key role in our strategy to fund our development programs and to add key development resources |
| We plan to continue to rely on additional collaborative arrangements to develop and commercialize our products |
| However, we may not be able to negotiate additional attractive collaborative arrangements, and, even if negotiated, the collaborative arrangements may not be successful |
| We have entered into collaborative arrangements with third parties to develop many of our product candidates |
| We enter into these collaborations in order to: · Fund our research and development activities; · Access manufacturing by third parties; · Seek and obtain regulatory approvals; · Conduct clinical trials; and · Successfully commercialize existing and future products |
| If any of our partners fails to develop or sell any drug in which we have retained a financial interest, our business may suffer |
| These collaborations may not continue or result in commercialized drugs |
| Our collaborators can terminate their relationships with us under certain circumstances, some of which are outside of our control |
| For example, in November 2004 based on the outcome of both Phase 3 trials, Lilly discontinued its investment in Affinitak |
| 32 ______________________________________________________________________ Other drugs in our development pipeline are being developed and/or funded by corporate partners, including Antisense Therapeutics Limited, iCo Therapeutics, Inc, OncoGenex Technologies Inc |
| We have received significant financial support from United States Government-funded grants and contracts for our Ibis division and the development of our TIGER biosensor system |
| The United States Government can unilaterally terminate these contracts and grants at its convenience at any time, even if we have fully performed our obligations |
| If any of these pharmaceutical companies or government partners stopped funding and/or developing these products, our business could suffer and we may not have the resources available to develop these products on our own |
| Certain of our partners are pursuing other technologies or developing other drugs either on their own or in collaboration with others, including our competitors, to develop treatments for the same diseases targeted by our own collaborative programs |
| Competition may negatively impact a partner’s focus on and commitment to our drug and, as a result, could delay or otherwise negatively affect the commercialization of our drug |
| In addition, the disappointing results of the two Affinitak trials, our Phase 3 clinical trials of alicaforsen in patients with active Crohn’s disease, or any future clinical trial failures could impair our ability to attract new collaborative partners |
| If we cannot continue to secure additional collaborative partners, our revenues could decrease and the development of our drugs could suffer |
| If we cannot protect our patents or our proprietary rights, others may compete more directly against us |
| Our success depends to a significant degree upon our ability to continue to develop and secure intellectual property rights to proprietary products and services |
| However, we may not receive issued patents on any of our pending patent applications in the United States or in other countries |
| In addition, the scope of any of our issued patents may not be sufficiently broad to provide us with a competitive advantage |
| Furthermore, our issued patents or patents licensed to us may be successfully challenged, invalidated or circumvented so that our patent rights would not create an effective competitive barrier or revenue source |
| Intellectual property litigation could be expensive and prevent us from pursuing our programs |
| It is possible that in the future we may have to defend our intellectual property rights |
| In the event of an intellectual property dispute, we may be forced to litigate to defend our rights or assert them against others |
| Disputes could involve arbitration, litigation or proceedings declared by the United States Patent and Trademark Office or the International Trade Commission or foreign patent authorities |
| Intellectual property litigation can be extremely expensive, and this expense, as well as the consequences should we not prevail, could seriously harm our business |
| If a third party claims that our products or technology infringe their patents or other intellectual property rights, we may have to discontinue an important product or product line, alter our products and processes, pay license fees or cease certain activities |
| We may not be able to obtain a license to needed intellectual property on favorable terms, if at all |
| There are many patents issued or applied for in the biotechnology industry, and we may not be aware of patents or applications held by others that relate to our business |
| This is especially true since patent applications in the United States are filed confidentially |
| Moreover, the validity and breadth of biotechnology patents involve complex legal and factual questions for which important legal issues remain unresolved |
| If we do not progress in our programs as anticipated, the price of our securities could decrease |
| For planning purposes, we estimate the timing of a variety of clinical, regulatory and other milestones, like when a certain product candidate will enter the clinic, when we will complete a clinical trial, or when we will file an application for marketing approval |
| We base our estimates on present facts and a variety of assumptions |
| Many of the underlying assumptions are outside of our control |
| If we do not achieve 33 ______________________________________________________________________ milestones when we expect to, investors could be disappointed and the price of our securities would likely decrease |
| The loss of key personnel, or the inability to attract and retain highly skilled personnel, could make it more difficult to run our business and reduce our likelihood of success |
| We are dependent on the principal members of our management and scientific staff |
| We do not have employment agreements with any of our executive officers |
| The loss of our management and key scientific employees might slow the achievement of important research and development goals |
| It is also critical to our success that we recruit and retain qualified scientific personnel to perform research and development work |
| We may not be able to attract and retain skilled and experienced scientific personnel on acceptable terms because of intense competition for experienced scientists among many pharmaceutical and health care companies, universities and non-profit research institutions |
| Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel |
| If the price of our securities continues to be highly volatile, this could make it harder for you to liquidate your investment and could increase your risk of suffering a loss |
| The market price of our common stock, like that of the securities of many other biopharmaceutical companies, has been and is likely to continue to be highly volatile |
| These fluctuations in our common stock price may significantly affect the trading price of our securities |
| During the 12 months preceding December 31, 2005, the market price of our common stock ranged from dlra2dtta76 to dlra6dtta09 per share |
| On February 17, 2006, the closing price of our common stock on the Nasdaq National Market was dlra8dtta24 |
| Many factors can affect the market price of our securities, including, for example, fluctuations in our operating results, announcements of collaborations, clinical trial results, technological innovations or new products being developed by us or our competitors, governmental regulation, regulatory approval, developments in patent or other proprietary rights, public concern regarding the safety of our drugs and general market conditions |
| If a natural or man-made disaster strikes our research and development facilities, it could delay our progress developing and commercializing our drugs or our TIGER biosensor system |
| We are developing our TIGER biosensor system in our facility located in Carlsbad, California |
| Additionally, we manufacture our research and clinical supplies in a separate manufacturing facility located in Carlsbad, California |
| The facilities and the equipment we use to develop the TIGER biosensor system and manufacture our drugs would be costly to replace and could require substantial lead time to repair or replace |
| Either of our facilities may be harmed by natural or man-made disasters, including, without limitation, earthquakes, floods and fires, and in the event they are affected by a disaster, our development and commercialization efforts would be delayed |
| Although we possess insurance for damage to our property and the disruption of our business from casualties, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all |
| Provisions in our certificate of incorporation, other agreements and Delaware law may prevent stockholders from receiving a premium for their shares |
| Our certificate of incorporation provides for classified terms for the members of our board of directors |
| Our certificate also includes a provision that requires at least 66prca of our voting stockholders to approve a merger or certain other business transactions with, or proposed by, any holder of 15prca or more of our voting stock, except in cases where certain directors approve the transaction or certain minimum price criteria and other procedural requirements are met |
| 34 ______________________________________________________________________ Our certificate of incorporation also requires that any action required or permitted to be taken by our stockholders must be taken at a duly called annual or special meeting of stockholders and may not be taken by written consent |
| In addition, only our board of directors, chairman of the board or chief executive officer can call special meetings of our stockholders |
| We also have implemented a stockholders’ rights plan, also called a poison pill, which could make it uneconomical for a third party to acquire our company on a hostile basis |
| These provisions, as well as Delaware law and other of our agreements, may discourage certain types of transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices, and may limit the ability of our stockholders to approve transactions that they think may be in their best interests |
| In addition, our board of directors has the authority to fix the rights and preferences of and issue shares of preferred stock, which may have the effect of delaying or preventing a change in control of our company without action by our stockholders |
| If registration rights that we have previously granted are exercised, then the price of our securities may be negatively affected |
| We have granted registration rights to Lilly, which cover approximately 2dtta5 million shares of our common stock, which we issued to Lilly upon the conversion of outstanding convertible securities |
| We also registered for resale 12cmam000cmam000 shares of our common stock and 2cmam999cmam998 shares of our common stock issuable upon the exercise of warrants, which we issued as part of our August 2005 private placement |
| In addition, on December 22, 2005, we filed a Form S-3 shelf registration statement with the SEC to register up to dlra200cmam000cmam000 worth of our common stock for possible issuance |
| The addition of these shares into the market may have an adverse effect on the price of our securities |
| Our business is subject to changing regulations for corporate governance and public disclosure that has increased both our costs and the risk of noncompliance |
| Each year we are required to evaluate our internal controls systems in order to allow management to report on, and our Independent Registered Public Accounting Firm to attest to, our internal controls as required by Section 404 of the Sarbanes-Oxley Act |
| As a result, we will incur additional expenses and will suffer a diversion of management’s time |
| In addition, if we cannot continue to comply with the requirements of Section 404 in a timely manner, we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission, the Public Company Accounting Oversight Board (PCAOB), or the NASDAQ Stock Exchange |
| Any such action could adversely affect our financial results and the market price of our common stock |
| Risks Associated with our Drug Discovery and Development Business If we or our partners fail to obtain regulatory approval for our drug candidates, we will not be able to sell them |
| We and our partners must conduct time-consuming, extensive and costly clinical trials to show the safety and efficacy of each of our drugs before a drug can be approved for sale |
| We must conduct these trials in compliance with United States Food and Drug Administration regulations and with comparable regulations in other countries |
| If the FDA or another regulatory agency believes that we or our partners have not sufficiently demonstrated the safety or efficacy of our drugs, it will not approve them or will require additional studies, which can be time consuming and expensive and which will delay commercialization of a drug |
| We and our partners may not be able to obtain necessary regulatory approvals on a timely basis, if at all, for any of our drugs |
| Failure to receive these approvals or delays in these approvals could prevent or delay commercial introduction of a product and, as a result, could negatively impact our ability to generate revenue from product sales |
| In addition, following approval of a drug, we and our partners must comply with comprehensive government regulations regarding how we manufacture, market and distribute drug products |
| If we fail to comply with these regulations, regulators 35 ______________________________________________________________________ could force us to withdraw a drug from the market or impose other penalties or requirements that also could have a negative impact on our financial results |
| We have only introduced one commercial drug product, Vitravene |
| We cannot guarantee that any of our other drugs will be safe and effective, will be approved for commercialization or that our partners or we can successfully commercialize these drugs |
| If the results of clinical testing indicate that any of our drugs under development are not suitable for commercial use, or if additional testing is required to demonstrate suitability, we may need to abandon one or more of our drug development programs |
| Drug discovery and development has inherent risks, including the risk that molecular targets prove not to be important in a particular disease; the risk that compounds that demonstrate attractive activity in preclinical studies do not demonstrate similar activity in human beings; the risk that a compound is not safe or effective for use in humans; and the risk that successful results in early human clinical trials may not be indicative of results in late-stage clinical trials |
| Antisense technology in particular is relatively new and unproven |
| We are applying most of our resources to create safe and effective drugs for human use |
| Any of the risks described above could prevent us from meeting this goal |
| In March 2003, we reported the results of a Phase 3 clinical trial of Affinitak in patients with late stage non-small cell lung cancer and in October 2004, we reported the results of a second similar Phase 3 clinical trial |
| In each case, Affinitak failed to demonstrate improved survival sufficient enough to support an NDA filing |
| In December 2004, we reported the results of our Phase 3 clinical trials of alicaforsen in patients with active Crohn’s disease, in which alicaforsen did not demonstrate statistically significant induction of clinical remissions compared to placebo |
| If any of our drugs in clinical studies do not show sufficient efficacy in patients with the targeted indication, it could negatively impact our development and commercialization goals for this and other drugs and our stock price could decline |
| Our success will depend upon the medical community, patients and third-party payers accepting our products as medically useful, cost-effective and safe |
| We cannot guarantee that, if approved for commercialization, doctors will use our products to treat patients |
| We currently have one commercially available drug product, Vitravene, a treatment for cytomegalovirus, or CMV, retinitis in AIDS patients, which addresses a small market |
| Our partners and we may not successfully commercialize additional products |
| The degree of market acceptance for any of our products depends upon a number of factors, including: · The receipt and scope of regulatory approvals; · The establishment and demonstration in the medical and patient community of the efficacy and safety of our drugs and their potential advantages over competing products; · The cost and effectiveness of our drugs compared to other available therapies; · The patient convenience of the dosing regimen for our drugs; and · Reimbursement policies of government and third party payers |
| Based on the profile of our drugs, physicians, patients, patient advocates, payers or the medical community in general may not accept and use any products that we may develop |
| 36 ______________________________________________________________________ If we cannot manufacture our drug products or contract with a third party to manufacture our drug products at costs that allow us to charge competitive prices to buyers, we will not be able to market products profitably |
| If we successfully commercialize any of our drugs, we may be required to establish large-scale commercial manufacturing capabilities |
| In addition, as our drug development pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity |
| We have limited experience manufacturing pharmaceutical products of the chemical class represented by our drugs, called oligonucleotides, on a commercial scale for the systemic administration of a drug |
| There are a small number of suppliers for certain capital equipment and raw materials that we use to manufacture our drugs, and some of these suppliers will need to increase their scale of production to meet our projected needs for commercial manufacturing |
| Further, we must continue to improve our manufacturing processes to allow us to reduce our product costs |
| We may not be able to manufacture at a cost or in quantities necessary to make commercially successful products |
| Also, manufacturers, including us, must adhere to the FDA’s current Good Manufacturing Practices regulations which the FDA enforces through its facilities inspection program |
| We and our contract manufacturers may not be able to comply or maintain compliance with Good Manufacturing Practices regulations |
| Non-compliance could significantly delay our receipt of marketing approval for potential products or result in FDA enforcement action after approval that could limit the commercial success of our potential product |
| If our drug discovery and development business fails to compete effectively, our drugs will not contribute significant revenues |
| Our competitors are engaged in all areas of drug discovery throughout the world, are numerous, and include, among others, major pharmaceutical companies and specialized biopharmaceutical firms |
| Other companies are engaged in developing antisense technology or unique methods of identifying infectious organisms |
| Our competitors may succeed in developing drugs or technologies that are more effective than any drugs or technologies that we are developing |
| These competitive developments could make our products obsolete or non-competitive |
| Many of our competitors have substantially greater financial, technical and human resources than we do |
| In addition, many of these competitors have significantly greater experience than we do in conducting preclinical testing and human clinical trials of new pharmaceutical products and in obtaining FDA and other regulatory approvals of products for use in health care |
| Accordingly, our competitors may succeed in obtaining regulatory approval for products earlier than we do |
| We will also compete with respect to marketing and sales capabilities, areas in which we have limited or no experience |
| We depend on third parties in the conduct of our clinical trials for our product candidates and any failure of those parties to fulfill their obligations could adversely affect our development and commercialization plans |
| We depend on independent clinical investigators, contract research organizations and other third party service providers in the conduct of our clinical trials for our product candidates and expect to continue to do so in the future |
| We rely heavily on these parties for successful execution of our clinical trials, but do not control many aspects of their activities |
| For example, the investigators are not our employees |
| However, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial |
| Third parties may not complete activities on schedule, or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols |
| The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates |
| 37 ______________________________________________________________________ Risks Associated with our Ibis Division We may not successfully develop or derive revenues from our business based on our TIGER biosensor system |
| Our TIGER biosensor system is subject to the risks inherent in developing tools based on innovative technologies |
| Our product is at an early stage of development and requires additional research and development prior to marketing |
| If our potential customers fail to purchase our TIGER biosensor system due to competition or other factors, or if we fail to develop applications that lead to market acceptance, we could lose our investment in this technology and our TIGER business could fail to meet our business and financial objectives |
| If we fail to secure commercial partners for our TIGER biosensor system, our commercialization efforts for our TIGER biosensor may be harmed or delayed |
| We expect to depend on third parties to commercialize our TIGER biosensor system, particularly in the areas of manufacturing, selling and servicing the instruments |
| In addition, we expect to depend on third parties to sell and distribute our infectious organism ID kits to non-government customers in the healthcare-associated infection control and infectious disease diagnostic markets |
| If we are unable to reach agreements with suitable third parties, we may fail to meet our business objectives for the TIGER biosensor system |
| We may not successfully establish a distribution, manufacturing, sale or service relationship or be able to make alternative arrangements |
| Moreover, these relationships may not succeed, may require us to give up a part of our ownership interest, or may diminish our profit margins on our TIGER instruments and ID kits |
| We depend on government contracts for most of our revenues and the loss of government contracts or a decline in funding of existing or future government contracts could adversely affect our revenues and cash flows and our ability to fund our growth |
| Virtually all of our TIGER business’ revenue is from the sale of services and products to the United States government |
| The US government may cancel these contracts at any time without penalty or may change its requirements, programs or contract budget or decline to exercise option periods, any of which could reduce our revenues and cash flows from US government contracts |
| Our revenues and cash flow from US government contracts could also be reduced by declines in US defense, homeland security and other federal agency budgets |
| For the three months and fiscal year ended December 31, 2005, Isis derived approximately 21prca and 30prca, respectively, of its revenue from agencies of the United States government, including through our subcontract with SAIC Because of the concentration of our contracts, we are vulnerable to adverse changes in our revenues and cash flows if a significant number of our United States Government contracts and subcontracts are simultaneously delayed or canceled for budgetary performance or other reasons |
| If United States defense and other federal agencies choose to reduce their purchases under our contracts, exercise their right to terminate contracts, fail to exercise options to renew contracts or limit our ability to obtain new contract awards, our revenues and cash flows could be adversely affected |
| We may be liable for penalties under a variety of procurement rules and regulations, and changes in government regulations could adversely impact our revenues, operating expenses and operating margins |
| Under our agreements with the United States government, we must comply with and are affected by various government regulations that impact our operating costs, operating margins and our internal organization and operation of our businesses |
| These regulations affect how our customers and Isis do business and, in some instances, impose added costs on our businesses |
| Any changes in applicable laws could adversely affect the financial performance of our TIGER business |
| With respect to US government 38 ______________________________________________________________________ contracts, any failure to comply with applicable laws could result in contract termination, price or fee reductions or suspension or debarment from contracting with the US government |
| Among the most significant regulations are the following: · the US Federal Acquisition Regulations, which comprehensively regulate the formation, administration and performance of government contracts; · the US Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations; and · the US Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based government contracts |
| If our TIGER biosensor system’s reliability does not meet market expectations, we may be unable to retain our existing customers and attract new customers |
| Complex diagnostic instruments such as our TIGER biosensor system typically require operating and reliability improvements following their initial introduction |
| As we continue to develop our TIGER biosensor system and its related applications we will need to make sure our customers are satisfied with the sensor’s reliability |
| Our efforts to satisfy our customer’s needs for instrument reliability could result in greater than anticipated service expenses or divert other resources |
| Additionally, if we fail to resolve reliability issues as they develop, we could materially damage our reputation which could prevent us from retaining our existing customers and attracting new customers |
| If we had to replace a supplier of one of the major hardware components of our TIGER biosensor system, it could delay our commercialization efforts and lengthen our sales cycle |
| We have a single supplier for each major hardware component of our TIGER biosensor system |
| Although, we believe we would be able to find a replacement provider, if any of these suppliers stopped providing us with their respective components, identifying and securing a suitable replacement could delay our commercialization efforts and lengthen our sales cycle |
| If our TIGER business fails to compete effectively, it may not succeed or contribute significant revenues |
| Many of our competitors have, and in the future these and other competitors may have, significantly greater financial, marketing, sales, manufacturing, distribution and technological resources than us |
| Moreover, these companies may have substantially greater expertise in conducting clinical trials and research and development, greater ability to obtain necessary intellectual property licenses and greater brand recognition than we do |
| In addition, our competitors may be in better a position to respond quickly to new or emerging technologies, may be able to undertake more extensive marketing campaigns, may adopt more aggressive pricing policies and may be more successful in attracting potential customers, employees and strategic partners than we are |
| The diagnostics industry is highly competitive |
| Currently, large reference laboratories, public health laboratories and hospitals perform the majority of diagnostic tests used by physicians and other health care providers |
| We expect that these laboratories will compete vigorously to maintain their dominance in the diagnostic testing market |
| In order to achieve market acceptance of our TIGER biosensor system, we will be required to demonstrate that it provides accurate, cost-effective and/or time saving alternatives to tests performed by traditional laboratory procedures and products made by our competitors |
| 39 ______________________________________________________________________ Improvements in preventing major diseases could reduce the need for our TIGER biosensor instruments and ID kits, which in turn could reduce our revenues |
| We expect to derive a significant portion of our revenues from the sale of the infectious organism ID kits necessary to use our TIGER biosensor system |
| The need to quickly identify and contain major threats, such as the avian flu, could increase the demand for our infectious organism ID kits |
| Conversely, improvements in containing or treating a threat, such as vaccines, would significantly reduce the need to identify and contain the threat |
| Any reduction in the need to identify or contain a threat could diminish the need for our infectious organism ID kits, which could reduce our revenues |
| If we cannot access or license rights to particular nucleic acid sequences for targeted diseases in the future, we may be limited in our ability to develop new products and access new markets |
| Although our research staff seeks to discover particular nucleic acid sequences for targeted diseases, our ability to offer diagnostic tests for diseases may depend on the ability of third parties to discover particular sequences or markers and correlate them with disease, as well as the rate at which such discoveries are made |
| Our ability to design products that target these diseases may depend on our ability to obtain the necessary access to raw materials or intellectual property rights from third parties who make any of these discoveries |
| If we are unable to access new technologies or the rights to particular sequences or markers necessary for additional diagnostic products on commercially reasonable terms, we may not be able to develop new diagnostic products or enter new markets |
| The sales cycles for our TIGER biosensors systems are lengthy, and we may expend substantial funds and management effort with no assurance of successfully selling our TIGER biosensors systems or services |
| The sales cycles for TIGER biosensor systems are typically lengthy |
| Our sales and licensing efforts, and those of our partners, will require the effective demonstration of the benefits, value, and differentiation and validation of our products and services, and significant training of multiple personnel and departments within a potential customer organization |
| We or our partners may be required to negotiate agreements containing terms unique to each prospective customer or licensee which would lengthen the sales cycle |
| We may expend substantial funds and management effort with no assurance that we will sell our products |
| In addition, this lengthy sales cycle makes it more difficult for us to accurately forecast revenue in future periods and may cause revenues and operating results to vary significantly in future periods |
| If we or our partners are required to obtain regulatory approval for our TIGER biosensor system applications, we may not successfully obtain approval |
| Depending on their intended use, our TIGER biosensor systems may be regulated as medical device by the FDA and comparable agencies of other countries and require either premarket approval (PMA) or 510(k) clearance from the FDA, prior to marketing |
| The 510(k) clearance process usually takes from three to twelve months from submission, but can take longer |
| The premarket approval process is much more costly, lengthy, uncertain and generally takes from six months to two years or longer from submission |
| In addition, commercialization of any diagnostic or other product that our licensees or collaborators or we develop would depend upon successful completion of preclinical testing and clinical trials |
| Preclinical testing and clinical trials are long, expensive and uncertain processes, and we do not know whether we, our licensees or any of our collaborators, would be permitted or able to undertake clinical trials of any potential products |
| It may take us or our licensees or collaborators many years to complete any such testing, and failure could occur at any stage |
| Preliminary results of trials do not necessarily predict final results, and acceptable results in early trials may not be repeated in later trials |
| We or our collaborators may encounter delays or rejections of potential products may be encountered based on changes in 40 ______________________________________________________________________ regulatory policy for product approval during the period of product development and regulatory agency review |