| KERYX BIOPHARMACEUTICALS INC ITEM 1A RISK FACTORS You should carefully consider the following risks and uncertainties |
| If any of the following occurs, our business, financial condition or operating results could be materially harmed |
| These factors could cause the trading price of our common stock to decline, and you could lose all or part of your investment |
| Risks Related to Our Business We have a limited operating history and have incurred substantial operating losses since our inception |
| We expect to continue to incur losses in the future and may never become profitable |
| You should consider our prospects in light of the risks and difficulties frequently encountered by early stage companies |
| In addition, we have incurred operating losses since our inception and expect to continue to incur operating losses for the foreseeable future and may never become profitable |
| As of December 31, 2005, we had an accumulated deficit of approximately dlra114dtta4 million |
| As we expand our research and development efforts, we will incur increasing losses |
| We may continue to incur substantial operating losses even if we begin to generate revenues from our drug candidates or technologies |
| We have not yet commercialized any products or technologies and cannot be sure we will ever be able to do so |
| Even if we commercialize one or more of our drug candidates or technologies, we may not become profitable |
| Our ability to achieve profitability depends on a number of factors, including our ability to complete our development efforts, obtain regulatory approval for our drug candidates, successfully complete any post-approval regulatory obligations and successfully commercialize our drug candidates and technologies |
| Risks Associated with Our Product Development Efforts If we are unable to successfully complete our clinical trial programs, or if such clinical trials take longer to complete than we project, our ability to execute our current business strategy will be adversely affected |
| Whether or not and how quickly we complete clinical trials is dependent in part upon the rate at which we are able to engage clinical trial sites and, thereafter, the rate of enrollment of patients |
| Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, the existence of competitive clinical trials, and whether existing or new drugs are approved for the indication we are studying |
| We are aware that other companies are planning clinical trials that will seek to enroll patients with the same diseases as we are studying |
| In addition, one of our current trials for Sulonex is designed to continue until a pre-determined number of events have occurred to the patients enrolled |
| Trials such as this are subject to delays stemming from patient withdrawal and from lower than expected event rates and may also incur increased costs if enrollment is increased in order to achieve the desired number of events |
| If we experience delays in identifying and contracting with sites and/or in patient enrollment in our clinical trial programs, we may incur additional costs and delays in our development programs, and may not be able to complete our clinical trials on a cost-effective or timely basis |
| Additionally, we have finalized an SPA agreement with the FDA for the Phase III and Phase IV clinical trials of Sulonex |
| The clinical plan to support an NDA approval for Sulonex under subpart H, as agreed upon with the FDA under an SPA, consists of: (i) a single Phase III trial in patients with microalbuminuria based on the surrogate marker of regression of microalbuminuria as the primary endpoint; (ii) supportive data from previously conducted clinical studies; and (iii) substantial recruitment into our Phase IV confirmatory study that will measure clinical outcomes in patients with overt nephropathy, or macroalbuminuria |
| The subpart H process is complex and requires careful execution |
| No assurance can be given that we will be able to meet the requirements set forth in the SPA Even if we meet those requirements, the FDA is not obligated to grant approval of our NDA for Sulonex |
| If the FDA approves Sulonex for marketing on the basis of our Phase III trial, our Phase IV clinical trial may yield insufficient efficacy data or give rise to safety concerns, which could result in withdrawal of such approval or could cause us to withdraw the product from the market |
| Many companies who have been granted the right to utilize an accelerated approval approach have failed to obtain approval |
| Moreover, negative or inconclusive results from the clinical trials we hope to conduct or adverse medical events could cause us to have to repeat or terminate the clinical trials |
| Accordingly, we may not be able to complete the clinical trials within an acceptable time frame, if at all |
| If our drug candidates do not receive the necessary regulatory approvals, we will be unable to commercialize our drug candidates |
| We have not received, and may never receive, regulatory approval for the commercial sale of any of our drug candidates |
| We will need to conduct significant additional research and human testing before we can apply for product approval with the FDA or with regulatory authorities of other countries |
| Pre-clinical testing and clinical development are long, expensive and uncertain processes |
| Satisfaction of regulatory requirements typically depends on the nature, complexity and novelty of the product and requires the expenditure of substantial resources |
| Data obtained from pre-clinical and clinical tests can be interpreted in different ways, which could delay, limit or prevent regulatory approval |
| It may take us many years to complete the testing of our drug candidates and failure can occur at any stage of this process |
| Negative or inconclusive results or medical events during a clinical trial could cause us to delay or terminate our development efforts |
| 18 _________________________________________________________________ Furthermore, interim results of preclinical or clinical studies do not necessarily predict their final results, and acceptable results in early studies might not be obtained in later studies |
| Drug candidates in the later stages of clinical development may fail to show the desired safety and efficacy traits despite positive results in initial clinical testing |
| There can be no assurance that the results from the Phase III study will track the data from the Phase II study, or that the results from the Phase IV study will yield sufficient efficacy data |
| With respect to Sulonex, the recommendation to move into our pivotal program, as well as the announced Phase II data, may not be indicative of results from future clinical trials and the risk remains that the pivotal program for Sulonex may generate efficacy data that will be insufficient for the approval of the drug, or may raise safety concerns that may prevent approval of the drug |
| Clinical trials also have a high risk of failure |
| A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after achieving promising results in earlier trials |
| If we experience delays in the testing or approval process or if we need to perform more or larger clinical trials than originally planned, our financial results and the commercial prospects for our drug candidates may be materially impaired |
| In addition, we have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approval in the United States and abroad and, accordingly, may encounter unforeseen problems and delays in the approval process |
| Because all of our proprietary technologies are licensed to us by third parties, termination of these license agreements would prevent us from developing our drug candidates |
| We do not own any of our drug candidates |
| We have licensed the patent rights to these drugs candidates from others |
| These license agreements require us to meet development or financing milestones and impose development and commercialization due diligence requirements on us |
| In addition, under these agreements, we must pay royalties on sales of products resulting from licensed technologies and pay the patent filing, prosecution and maintenance costs related to the licenses |
| If we do not meet our obligations in a timely manner or if we otherwise breach the terms of our license agreements, our licensors could terminate the agreements, and we would lose the rights to our drug candidates |
| We rely on third parties to manufacture our products |
| If these third parties do not successfully manufacture our products, our business will be harmed |
| We have no experience in manufacturing products for clinical or commercial purposes and do not have any manufacturing facilities |
| We intend to continue, in whole or in part, to use third parties to manufacture our products for use in clinical trials and for future sales |
| Contract manufacturers often encounter difficulties in scaling up production, including problems involving production yields, quality control and assurance, shortage of qualified personnel, compliance with FDA and foreign regulations, production costs and development of advanced manufacturing techniques and process controls |
| Our third-party manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required by us to successfully produce and market our drug candidates |
| In addition, our contract manufacturers will be subject to ongoing periodic, unannounced inspections by the FDA and corresponding foreign governmental agencies to ensure strict compliance with, among other things, current good manufacturing practices, in addition to other governmental regulations and corresponding foreign standards |
| We will not have control over, other than by contract, third-party manufacturers &apos compliance with these regulations and standards |
| Switching or engaging multiple manufacturers may be difficult because the number of potential manufacturers is limited and, particularly in the case of Sulonex, the process by which multiple manufacturers make the drug substance must be identical at each manufacturing facility |
| It may be difficult for us to find and engage replacement or multiple manufacturers quickly and on terms acceptable to us, if at all |
| Moreover, if we need to change manufacturers, the FDA and corresponding foreign regulatory agencies must approve these manufacturers in advance, which will involve testing and additional inspections to ensure compliance with FDA and foreign regulations and standards |
| If third-party manufacturers fail to deliver the required quantities of our drug candidates on a timely basis and at commercially reasonable prices, we will not be able to commercialize our products as planned |
| 19 _________________________________________________________________ We have entered into a relationship with a US-based contract manufacturer for Sulonex which we believe will be adequate to satisfy our current clinical supply needs; however, as we scale-up for commercial manufacturing, we will need to ensure that we accurately reproduce the established process on a larger scale |
| As with all heparin-like compounds, the end product is highly sensitive to the manufacturing process utilized |
| Accordingly, as we scale-up, reproducibility will be required for the successful commercialization of Sulonex |
| Additionally, as we scale-up, we will incur capital expenditures to enable larger scale production |
| If we are not able to obtain the raw materials required for the manufacture of our lead product candidate, Sulonex, our ability to develop and market this product candidate will be substantially harmed |
| Source materials for Sulonex, our lead product candidate, are derived from porcine mucosa |
| Long-term supplies for Sulonex could be affected by limitations in the supply of porcine mucosa and the demand for other heparin products, over which we will have no control |
| Additionally, diseases affecting the world supply of pigs could have an actual or perceived negative impact on our ability, or the ability of our contract manufacturers, to source, make and/or sell Sulonex |
| Such negative impact could materially affect the commercial success of Sulonex |
| If we do not establish or maintain manufacturing, drug development and marketing arrangements with third parties, we may be unable to commercialize our products |
| We are an emerging company and do not possess all of the capabilities to fully commercialize our products on our own |
| From time to time, we may need to contract with third parties to: ● manufacture our product candidates; ● assist us in developing, testing and obtaining regulatory approval for and commercializing some of our compounds and technologies; and ● market and distribute our drug products |
| We can provide no assurance that we will be able to successfully enter into agreements with such third parties on terms that are acceptable to us, if at all |
| If we are unable to successfully contract with third parties for these services when needed, or if existing arrangements for these services are terminated, whether or not through our actions, or if such third parties do not fully perform under these arrangements, we may have to delay, scale back or end one or more of our drug development programs or seek to develop or commercialize our products independently, which could result in delays |
| Furthermore, such failure could result in the termination of license rights to one or more of our products |
| If these manufacturing, development or marketing agreements take the form of a partnership or strategic alliance, such arrangements may provide our collaborators with significant discretion in determining the efforts and resources that they will apply to the development and commercialization of our products |
| Accordingly, to the extent that we rely on third parties to research, develop or commercialize our products, we are unable to control whether such products will be scientifically or commercially successful |
| Our reliance on third parties, such as clinical research organizations, or CROs, may result in delays in completing, or a failure to complete, clinical trials if they fail to perform under our agreements with them |
| In the course of product development, we engage CROs to conduct and manage clinical studies and to assist us in guiding our products through the FDA review and approval process |
| Because we have engaged and intend to continue to engage CROs to help us obtain market approval for our drug candidates, many important aspects of this process have been and will be out of our direct control |
| If the CROs fail to perform their obligations under our agreements with them or fail to perform clinical trials in a satisfactory manner, we may face delays in completing our clinical trials, as well as commercialization of one or more drug candidates |
| Furthermore, any loss or delay in obtaining contracts with such entities may also delay the completion of our clinical trials and the market approval of drug candidates |
| Other Risks Related to Our Business If we are unable to develop adequate sales, marketing or distribution capabilities or enter into agreements with third parties to perform some of these functions, we will not be able to commercialize our products effectively |
| In the event Sulonex is approved by the FDA, we currently plan to conduct our own sales and marketing effort to support the drug, and we may adopt this strategy with respect to future drug products |
| We currently have no experience in sales, marketing or distribution |
| To directly market and distribute any products, we must build a sales and marketing organization with appropriate technical expertise and distribution capabilities |
| We may attempt to build such a sales and marketing organization on our own or with the assistance of a contract sales organization |
| For some market opportunities, we may need to enter into co-promotion or other licensing arrangements with larger pharmaceutical or biotechnology firms in order to increase the commercial success of our products |
| We may not be able to establish sales, marketing and distribution capabilities of our own or enter into such arrangements with third parties in a timely manner or on acceptable terms |
| To the extent that we enter into co-promotion or other licensing arrangements, our product revenues are likely to be lower than if we directly marketed and sold our products, and some or all of the revenues we receive will depend upon the efforts of third parties, and these efforts may not be successful |
| Additionally, building marketing and distribution capabilities may be more expensive than we anticipate, requiring us to divert capital from other intended purposes or preventing us from building our marketing and distribution capabilities to the desired levels |
| 20 _________________________________________________________________ Even if we obtain FDA approval to market our drug products, if they fail to achieve market acceptance, we will never record meaningful revenues |
| Even if our products are approved for sale, they may not be commercially successful in the marketplace |
| Market acceptance of our drug products will depend on a number of factors, including: ● perceptions by members of the health care community, including physicians, of the safety and efficacy of our product candidates; ● the rates of adoption of our products by medical practitioners and the target populations for our products; ● the potential advantages that our products offer over existing treatment methods; ● the cost-effectiveness of our products relative to competing products; ● the availability of government or third-party payor reimbursement for our products; ● the side effects or unfavorable publicity concerning our products or similar products; and ● the effectiveness of our sales, marketing and distribution efforts |
| Because we expect sales of our products, if approved, to generate substantially all of our revenues in the long-term, the failure of our drugs to find market acceptance would harm our business and could require us to seek additional financing or other sources of revenue |
| If our competitors develop and market products that are less expensive, more effective or safer than our drug products, our commercial opportunities may be reduced or eliminated |
| The pharmaceutical industry is highly competitive |
| Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and public and private research institutions |
| In addition, companies that are active in different but related fields represent substantial competition for us |
| Many of our competitors have significantly greater capital resources, larger research and development staffs and facilities and greater experience in drug development, regulation, manufacturing and marketing than we do |
| These organizations also compete with us to recruit qualified personnel, attract partners for joint ventures or other collaborations, and license technologies that are competitive with ours |
| As a result, our competitors may be able to more easily develop technologies and products that could render our drug products obsolete or noncompetitive |
| To compete successfully in this industry we must identify novel and unique drugs or methods of treatment and then complete the development of those drugs as treatments in advance of our competitors |
| The drugs that we are attempting to develop will have to compete with existing therapies |
| In addition, our commercial opportunities may be reduced or eliminated if our competitors develop and market products that are less expensive, more effective or safer than our drug products |
| Other companies have drug candidates in various stages of pre-clinical or clinical development to treat diseases for which we are also seeking to discover and develop drug products |
| Some of these potential competing drugs are further advanced in development than our drug candidates and may be commercialized earlier |
| Even if we are successful in developing effective drugs, our products may not compete successfully with products produced by our competitors |
| 21 _________________________________________________________________ If we lose our key personnel or are unable to attract and retain additional personnel, our operations could be disrupted and our business could be harmed |
| As of February 28, 2006, we had 29 full and part-time employees |
| To successfully develop our drug candidates, we must be able to attract and retain highly skilled personnel |
| In addition, if we lose the services of our current personnel, in particular, Michael S Weiss, our Chairman and Chief Executive Officer, our ability to continue to execute on our business plan could be materially impaired |
| In addition, although we have an employment agreement with Mr |
| Weiss, this agreement does not prevent him from terminating his employment with us |
| Any acquisitions we make may require a significant amount of our available cash and may not be scientifically or commercially successful |
| As part of our business strategy, we may effect acquisitions to obtain additional businesses, products, technologies, capabilities and personnel |
| If we make one or more significant acquisitions in which the consideration includes cash, we may be required to use a substantial portion of our available cash |
| Acquisitions involve a number of operational risks, including: ● difficulty and expense of assimilating the operations, technology and personnel of the acquired business; ● our inability to retain the management, key personnel and other employees of the acquired business; ● our inability to maintain the acquired companyapstas relationship with key third parties, such as alliance partners; ● exposure to legal claims for activities of the acquired business prior to the acquisition; ● the diversion of our managementapstas attention from our core business; and ● the potential impairment of goodwill and write-off of in-process research and development costs, adversely affecting our reported results of operations |
| The status of reimbursement from third-party payors for newly approved health care drugs is uncertain and failure to obtain adequate reimbursement could limit our ability to generate revenue |
| Our ability to commercialize pharmaceutical products may depend, in part, on the extent to which reimbursement for the products will be available from: ● government and health administration authorities; ● private health insurers; ● managed care programs; and ● other third-party payors |
| Significant uncertainty exists as to the reimbursement status of newly approved health care products |
| Third-party payors, including Medicare, are challenging the prices charged for medical products and services |
| Government and other third-party payors increasingly are attempting to contain health care costs by limiting both coverage and the level of reimbursement for new drugs and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval |
| Third-party insurance coverage may not be available to patients for our products |
| If government and other third-party payors do not provide adequate coverage and reimbursement levels for our products, their market acceptance may be reduced |
| Health care reform measures could adversely affect our business |
| The business and financial condition of pharmaceutical and biotechnology companies are affected by the efforts of governmental and third-party payors to contain or reduce the costs of health care |
| In the United States and in foreign jurisdictions there have been, and we expect that there will continue to be, a number of legislative and regulatory proposals aimed at changing the health care system, such as those relating to reimportation of drugs into the US from other countries where they are sold at a lower price and government control of prescription drug pricing |
| The pendency or approval of such proposals could result in a decrease in our stock price or limit our ability to raise capital or to obtain strategic partnerships or licenses |
| 22 _________________________________________________________________ We face product liability risks and may not be able to obtain adequate insurance |
| The use of our drug candidates in clinical trials, and the future sale of any approved products, exposes us to liability claims |
| Although we are not aware of any historical or anticipated product liability claims against us, if we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to cease clinical trials of our drug candidates or limit commercialization of any approved products |
| We believe that we have obtained sufficient product liability insurance coverage for our clinical trials |
| We intend to expand our insurance coverage to include the commercial sale of any approved products if marketing approval is obtained; however, insurance coverage is becoming increasingly expensive |
| We may not be able to maintain insurance coverage at a reasonable cost |
| We may not be able to obtain additional insurance coverage that will be adequate to cover product liability risks that may arise |
| Regardless of merit or eventual outcome, product liability claims may result in: ● decreased demand for a product; ● injury to our reputation; ● our inability to continue to develop a drug candidate; ● withdrawal of clinical trial volunteers; and ● loss of revenues |
| Consequently, a product liability claim or product recall may result in losses that could be material |
| In connection with providing our clinical trial management and site recruitment services, we may be exposed to liability that could have a material adverse effect on our financial condition and results of operations |
| The Online Collaborative Oncology Group, Inc, or OCOG, a subsidiary we acquired through our acquisition of ACCESS Oncology, provides clinical trial management and site recruitment services to us as well as other biotechnology and pharmaceutical companies |
| In conducting the activities of OCOG, any failure on our part to comply with applicable governmental regulations or contractual obligations could expose us to liability to our clients and could have a material adverse effect on us |
| We also could be held liable for errors or omissions in connection with the services we perform |
| In addition, the wrongful or erroneous delivery of health care information or services may expose us to liability |
| If we were required to pay damages or bear the costs of defending any such claims, the losses could be material |
| Our corporate compliance efforts cannot guarantee that we are in compliance with all potentially applicable regulations |
| The development, manufacturing, pricing, sales, and reimbursement of our products, together with our general operations, are subject to extensive regulation by federal, state and other authorities within the United States and numerous entities outside of the United States |
| We are a relatively small company with 29 employees |
| We also have significantly fewer employees than many other companies that have a product candidate in late-stage clinical development, and we rely heavily on third parties to conduct many important functions |
| While we have developed and instituted a corporate compliance program based on what we believe are the current best practices, we cannot assure you that we are or will be in compliance with all potentially applicable regulations |
| If we fail to comply with any of these regulations we could be subject to a range of regulatory actions, including suspension or termination of clinical trials, the failure to approve a product candidate, restrictions on our products or manufacturing processes, withdrawal of products from the market, significant fines, or other sanctions or litigation |
| Risks Related to Our Financial Condition Our current cash, cash equivalents and investment securities may not be adequate to support our operations for the next 24 months as we have estimated |
| We believe that our dlra100dtta7 million in cash, cash equivalents, interest receivable and investment securities as of December 31, 2005 will be sufficient to enable us to meet our planned operating needs and capital expenditures for at least the next 24 months |
| Our forecast of the period of time through which our cash, cash equivalents, interest receivable and investment securities will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties |
| These factors include the following: 23 _________________________________________________________________ ● the timing of expenses associated with manufacturing and product development of the proprietary drug candidates within our portfolio and those that may be in-licensed, partnered or acquired; ● the timing of the in-licensing, partnering and acquisition of new product opportunities; ● the progress of the development efforts of parties with whom we have entered, or may enter, into research and development agreements; ● our ability to achieve our milestones under our licensing arrangements; and ● the costs involved in prosecuting and enforcing patent claims and other intellectual property rights |
| If we are unable to obtain additional funds on terms favorable to us, or at all, our business would be harmed |
| We expect to use, rather than generate, funds from operations for the foreseeable future |
| Based on our current plans, we believe our existing cash and cash equivalents, interest receivable and investment securities will be sufficient to fund our operating expenses and capital requirements for at least the next 24 months; however, the actual amount of funds that we will need prior to or after that date will be determined by many factors, some of which are beyond our control |
| As a result, we may need funds sooner or in different amounts than we currently anticipate, depending upon: ● the progress of our development activities; ● the progress of our research activities; ● the number and scope of our development programs; ● the costs associated with commercialization activities, including manufacturing, marketing and sales; ● our ability to establish and maintain current and new licensing or acquisition arrangements; ● our ability to achieve our milestones under our licensing arrangements; ● the costs involved in enforcing patent claims and other intellectual property rights; and ● the costs and timing of regulatory approvals |
| If our capital resources are insufficient to meet future capital requirements, we will have to raise additional funds |
| If we are unable to obtain additional funds on terms favorable to us or at all, we may be required to cease or reduce our operating activities or sell or license to third parties some or all of our intellectual property |
| If we raise additional funds by selling additional shares of our capital stock, the ownership interests of our stockholders will be diluted |
| If we need to raise additional funds through the sale or license of our intellectual property, we may be unable to do so on terms favorable to us |
| Our prior restructurings may result in additional Israeli-related liabilities |
| In July 2003, our Israeli subsidiary vacated its Jerusalem facility, after giving advance notice to the landlord |
| On May 1, 2005, the landlord of the Jerusalem facility filed suit in Israel claiming that we were liable as a result of the alleged breach of the lease agreement by our subsidiary |
| The amount demanded by the landlord totals 4cmam345cmam313 NIS or approximately dlra946cmam000 at the December 31, 2005 exchange rate, and includes rent for the entire remaining term of the lease, as well as property taxes and other costs allegedly incurred by the landlord |
| In August 2003, the landlord claimed a bank deposit, in the amount of dlra222cmam000, which was previously provided as security in connection with the lease agreement |
| We intend to vigorously defend the suit |
| filed an answer to the landlord’s complaint |
| filed an answer to the landlord’s complaint |
| Generally, each answer challenges the merits of the landlord’s cause of action as to each defendant |
| All defendants, except Keryx (Israel) Ltd, have also filed a motion to dismiss the complaint |
| The plaintiff has filed a response to each answer and a hearing date has been set by the Circuit Court of Jerusalem |
| To date, we have not yet recorded a charge to reflect any potential liability associated with this lawsuit as it is too early to accurately estimate the amount of the charge, if any |
| 24 _________________________________________________________________ In September 2001, one of our Israeli subsidiaries received the status of an "e Approved Enterprise, "e a status which grants certain tax benefits in Israel in accordance with the "e Law for the Encouragement of Capital Investments, 1959 "e |
| Through December 31, 2003, our Israeli subsidiary, which ceased operations in 2003, has received tax benefits in the form of exemptions of approximately dlra744cmam000 as a result of our subsidiaryapstas status as an "e Approved Enterprise "e |
| As part of the restructuring implemented during 2003, we closed down our Jerusalem laboratory facility |
| In October 2003, the subsidiary received a letter from the Israeli Ministry of Industry and Trade that its Approved Enterprise status was cancelled as of July 2003 and that past benefits would not need to be repaid |
| The Israeli tax authorities have yet to confirm this position; however, we believe that, based on the letter received from the Ministry of Industry and Trade, it is unlikely that past benefits will need to be repaid, and therefore, we have not recorded any charge with respect to this potential liability |
| There can be no assurances that the Israeli tax authorities will confirm this position |
| As a result, we may be liable to repay some or all of the tax benefits received to date, which could adversely affect our cash flow and results of operations |
| Risks Related to Our Intellectual Property If we are unable to adequately protect our intellectual property, third parties may be able to use our intellectual property, which could adversely affect our ability to compete in the market |
| Our commercial success will depend in part on our ability and the ability of our licensors to obtain and maintain patent protection on our drug products and technologies and successfully defend these patents against third-party challenges |
| The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions |
| No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date |
| Accordingly, the patents we use may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products |
| Furthermore, others may independently develop similar or alternative drug products or technologies or design around our patented drug products and technologies |
| The patents we use may be challenged or invalidated or may fail to provide us with any competitive advantage |
| We rely on trade secrets to protect our intellectual property where we believe patent protection is not appropriate or obtainable |
| Trade secrets are difficult to protect |
| While we require our employees, collaborators and consultants to enter into confidentiality agreements, this may not be sufficient to adequately protect our trade secrets or other proprietary information |
| In addition, we share ownership and publication rights to data relating to some of our drug products and technologies with our research collaborators and scientific advisors |
| If we cannot maintain the confidentiality of this information, our ability to receive patent protection or protect our trade secrets or other proprietary information will be at risk |
| Litigation or third-party claims of intellectual property infringement could require us to spend substantial time and money defending such claims and adversely affect our ability to develop and commercialize our products |
| Third parties may assert that we are using their proprietary intellectual property without authorization |
| In addition, third parties may have or obtain patents in the future and claim that our drug products or technologies infringe their patents |
| If we are required to defend against patent suits brought by third parties, or if we sue third parties to protect our patent rights, we may be required to pay substantial litigation costs, and our managementapstas attention may be diverted from operating our business |
| In addition, any legal action against our licensors or us that seeks damages or an injunction of our commercial activities relating to the affected our drug products or technologies could subject us to monetary liability and require our licensors or us to obtain a license to continue to use the affected our drug products or technologies |
| We cannot predict whether our licensors or we would prevail in any of these types of actions or that any required license would be made available on commercially acceptable terms, if at all |
| Risks Related to Our Common Stock Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions |
| As of December 31, 2005, our executive officers, directors and principal stockholders (including their affiliates) beneficially owned, in the aggregate, approximately 21dtta7prca of our outstanding common stock, including, for this purpose, currently exercisable options and warrants held by our executive officers, directors and principal stockholders |
| As a result, these persons, acting together, may have the ability to significantly influence the outcome of all matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets |
| In addition, such persons, acting together, may have the ability to effectively control our management and affairs |
| Accordingly, this concentration of ownership may depress the market price of our common stock |
| 25 _________________________________________________________________ Future sales or other issuances of our common stock could depress the market for our common stock |
| Sales of a substantial number of shares of our common stock, or the perception by the market that those sales could occur, could cause the market price of our common stock to decline or could make it more difficult for us to raise funds through the sale of equity in the future |
| On December 30, 2005, we filed with the SEC a shelf registration statement on Form S-3, that was declared effective by the SEC on January 13, 2006, providing for the offering of up to dlra150 million of our common stock |
| Future sales pursuant to this registration statement could depress the market for our common stock |
| If we make one or more significant acquisitions in which the consideration includes stock or other securities, your equity in us may be significantly diluted |
| We may be required to issue up to 3cmam372cmam422 shares of our common stock to former stockholders of ACCESS Oncology upon the achievement of certain milestones |
| In addition, we may enter into arrangements with third parties permitting us to issue shares of common stock in lieu of certain cash payments upon the achievement of milestones |
| As of December 31, 2005, our executive officers, directors, and principal stockholders beneficially own, in the aggregate, approximately 21dtta7prca of our common stock, including currently exercisable warrants and options held by them |
| If some or all of them should decide to sell a substantial number of their holdings, it could have a material adverse effect on the market for our common stock |
| Our stock price can be volatile, which increases the risk of litigation, and may result in a significant decline in the value of your investment |
| The trading price of our common stock is likely to be highly volatile and subject to wide fluctuations in price in response to various factors, many of which are beyond our control |
| These factors include: ● developments concerning our drug candidates; ● announcements of technological innovations by us or our competitors; ● introductions or announcements of new products by us or our competitors; ● announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments; ● changes in financial estimates by securities analysts; ● actual or anticipated variations in quarterly operating results; ● expiration or termination of licenses, research contracts or other collaboration agreements; ● conditions or trends in the regulatory climate and the biotechnology and pharmaceutical industries; ● changes in the market valuations of similar companies; and ● additions or departures of key personnel |
| In addition, equity markets in general, and the market for biotechnology and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies traded in those markets |
| These broad market and industry factors may materially affect the market price of our common stock, regardless of our development and operating performance |
| In the past, following periods of volatility in the market price of a companyapstas securities, securities class-action litigation has often been instituted against that company |
| Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert managementapstas attention and resources, which could seriously harm our business |
| 26 _________________________________________________________________ Certain anti-takeover provisions in our charter documents and Delaware law could make a third-party acquisition of us difficult |
| This could limit the price investors might be willing to pay in the future for our common stock |
| Provisions in our amended and restated certificate of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, or control us |
| These factors could limit the price that certain investors might be willing to pay in the future for shares of our common stock |
| Our amended and restated certificate of incorporation allows us to issue preferred stock with rights senior to those of the common stock |
| The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of our common stock or could adversely affect the rights and powers, including voting rights, of such holders |
| In certain circumstances, such issuance could have the effect of decreasing the market price of our common stock |
| Our amended and restated bylaws eliminate the right of stockholders to call a special meeting of stockholders, which could make it more difficult for stockholders to effect certain corporate actions |