| LUMINEX CORP ITEM 1A RISK FACTORS We have a history of losses and an accumulated deficit of approximately dlra86dtta6 million as of December 31, 2005 |
| We have incurred significant net losses since our inception, including losses of dlra2dtta7 million for the year ended December 31, 2005, dlra3dtta6 million in 2004 and dlra4dtta2 million in 2003 |
| At December 31, 2005, we had an accumulated deficit of approximately dlra86dtta6 million |
| To achieve profitability, we need to generate and sustain substantially higher revenue while achieving reasonable cost and expense levels |
| If we fail to achieve profitability within the time frame expected by securities analysts or investors, the market price of our common stock will likely decline |
| Furthermore, as we continue to incur losses and utilize cash to support operations, we may further decrease the cash available to the Company |
| As of December 31, 2005, cash, cash equivalents and short-term and long-term investments totaled dlra41dtta6 million, an increase of dlra5dtta5 million from dlra36dtta1 million at December 31, 2004, primarily attributable to more efficient management of our inventory levels and receipt of significant license fees |
| We do not know when or if we will become profitable |
| If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or an annual basis |
| We expect our operating results to continue to fluctuate from quarter to quarter |
| The sale of bioassay testing devices typically involves a significant technical evaluation and commitment of capital by partners |
| Accordingly, the sales cycle associated with our products typically is lengthy and subject to a number of significant risks, including partners’ budgetary constraints, inventory management practices, regulatory approval and internal acceptance reviews, all of which are beyond our control |
| As a result of this lengthy and unpredictable sales cycle, our operating results have historically fluctuated significantly from quarter to quarter |
| We expect this trend to continue for the foreseeable future |
| The vast majority of our system sales are made to our strategic partners |
| Our partners typically purchase instruments in three phases during their commercialization cycle: first, instruments necessary to support internal assay development; second, instruments for sales force demonstrations; and finally, instruments for resale to their customers |
| As a result, most of our system placements are highly dependent on the commercialization timetables of our strategic partners and can fluctuate from quarter to quarter as our strategic partners move from phase to phase |
| We expect this trend to continue for the foreseeable future |
| Because of the effect of bulk purchases, we continue to experience fluctuations in the percentage of our quarterly revenues derived from our highest margin items, consumables and royalties |
| Our gross margin is highly dependent upon the mix of revenue components each quarter |
| These fluctuations contribute to the variability and lack of predictability of both gross margin percentage and total gross profit from quarter to quarter |
| Our success depends largely on the establishment and maintenance of successful relationships with our strategic partners |
| Currently, a limited number of strategic partners constitute a majority of our revenue and the loss of any one of these partners could have a material adverse effect on the Company |
| The development and commercialization of our xMAP technology is highly dependent on our ability to establish successful strategic relationships with a number of partners |
| As of December 31, 2005, we had 24 strategic partners who were paying royalties and had either commercialized products using the Luminex platform or were reselling 12 _________________________________________________________________ [48]Table of Contents our products |
| Furthermore, for the year ended December 31, 2005, two partners individually represented greater than 10prca of the Company’s revenue and collectively represented 39prca of total revenue (Bio-Rad Laboratories, Inc |
| – 23prca; One Lambda, Inc |
| We had three additional partners who individually represented 5prca or more of our total revenue and collectively represented 18prca of the Company’s revenue for the year ended December 31, 2005 |
| In total, for the year ended December 31, 2005, we had five partners who represented 57prca of our total revenue |
| For comparative purposes for the year ended December 31, 2004, two partners individually represented greater than 10prca of the Company’s revenue and collectively represented 35prca of our total revenue |
| We had two additional partners who individually represented 5prca or more of our total revenue and collectively represented 10prca of the Company’s revenue for the year ended December 31, 2004 |
| In total, for the year ended December 31, 2004, we had four partners who represented 45prca of our total revenue |
| The loss of any of our significant strategic partners, or any of our significant customers, could have a material adverse effect on our growth and future results of operations |
| Delays in implementation, delays in obtaining regulatory approval, changes in strategy or the financial difficulty of our strategic partners for any reason could have a material adverse effect on our business, financial condition and results of operations |
| Our ability to enter into agreements with additional strategic partners depends in part on convincing them that our technology can help achieve and accelerate their goals or efforts |
| We will expend substantial funds and management efforts with no assurance that any additional strategic relationships will result |
| We cannot assure you that we will be able to negotiate additional strategic agreements in the future on acceptable terms, if at all, or that current or future strategic partners will not pursue or develop alternative technologies either on their own or in collaboration with others |
| Some of the companies we are targeting as strategic partners offer products competitive with our xMAP technology, which may hinder or prevent strategic relationships |
| Termination of strategic relationships, or the failure to enter into a sufficient number of additional agreements on favorable terms, could reduce sales of our products, lower margins on our products and limit the creation of market demand and acceptance |
| In addition, we have entered into non-exclusive relationships with most of our existing strategic partners |
| The lack of exclusivity could deter existing strategic partners from commercializing xMAP technology and may deter new strategic partners from entering into agreements with Luminex |
| The majority of our future revenues will come from sales of our systems and the development and sale of bioassay kits utilizing our technology by our strategic partners and from use of our technology by our strategic partners in performing services offered to third parties |
| We believe that our strategic partners will have economic incentives to develop and market these products, but we cannot predict future sales and royalty revenues because most of our existing strategic partner agreements do not include minimum purchase requirements or royalty commitments |
| In addition, we do not have the right or ability to provide incentives to our strategic partners’ sales personnel to sell products based on xMAP technology or to control the timing of the release of products by our strategic partners |
| The amount of these revenues will depend on a variety of factors that are outside our control, including the amount and timing of resources that current and future strategic partners devote to develop and market products incorporating our technology |
| Further, the development and marketing of certain bioassay kits will require our strategic partners to obtain governmental approvals, which could delay or prevent their commercialization efforts |
| If our current or future strategic partners do not successfully develop and market products based on our technology and obtain necessary government approvals, our revenues from product sales and royalties will be significantly reduced |
| If our technology and products do not become widely used in the life sciences industry, it is unlikely that we will ever become profitable |
| Life sciences companies have historically conducted biological tests using a variety of technologies, including bead-based analysis |
| Our xMAP technology is relatively new and unproven, in certain testing areas, and the use of our technology by life sciences companies is limited |
| The commercial success of our technology will depend upon its widespread adoption as a method to perform bioassays |
| In order to be successful, we must convince potential partners to utilize our system instead of competing technologies |
| Market acceptance will depend on many factors, including our ability to: 13 _________________________________________________________________ [49]Table of Contents – convince prospective strategic partners and customers that our technology is an attractive alternative to other technologies for pharmaceutical, research, clinical and biomedical testing and analysis; – encourage these partners to develop and market products using our technology; – manufacture products in sufficient quantities with acceptable quality and at an acceptable cost; – obtain and maintain sufficient pricing and royalties from partners on such Luminex products; and – place and service sufficient quantities of our products, including the ability to provide the level of service required in the mainstream clinical diagnostics market segment |
| Because of these and other factors, our products may not gain sufficient market acceptance to achieve profitability |
| Our reliance on strategic partners to market our products makes forecasting difficult |
| Primarily as a result of our reliance on partner performance, it is difficult to accurately forecast future operating results |
| Our operating expenses are largely based on anticipated revenue trends, and a high percentage of our expenses are, and will continue to be, fixed in the short-term |
| The level of our revenues will depend upon the rate and timing of the adoption of our technology as a method to perform bioassays |
| Due to our limited operating history, predicting this timing and rate of adoption is difficult |
| In addition, we currently anticipate that the vast majority of future sales of our products and products incorporating our technology will be made by our strategic partners |
| For the following reasons, estimating the timing and amount of sales of these products that may be made by our strategic partners is particularly difficult: – We have no control over the timing or extent of product development, marketing or sale of our products by our strategic partners |
| – Most of our strategic partners are not committed to minimum purchase commitments, and we do not control the incentives provided by our strategic partners to their sales personnel |
| – A significant number of our strategic partners intend to produce clinical diagnostic applications that may need to be approved by the Food and Drug Administration, or other regulatory bodies in jurisdictions outside of the United States |
| – Certain strategic partners may have unique requirements for their applications and systems |
| Assisting the various strategic partners may strain our research and development and manufacturing resources |
| To the extent that we are not able to timely assist our strategic partners, the commercialization of their products will likely be delayed |
| – Certain strategic partners may fail to deliver products that satisfy market requirements, or such products may fail to perform properly |
| – We have limited access to partner confidential corporate information |
| A sudden unexpected change in ownership, strategy or other material event could adversely impact partner purchases of our products |
| The life sciences industry is highly competitive and subject to rapid technological change and we may not have the resources necessary to compete successfully |
| We compete with companies in the United States and abroad that are engaged in the development and production of similar products |
| We will continue to face intense competition from existing competitors and other companies seeking to develop new technologies |
| Many of our competitors have access to greater financial, technical, scientific, research, marketing, sales, distribution, service and other resources than we do |
| These companies may develop technologies that are superior alternatives to our technologies or may be more effective at commercializing their technologies in products |
| 14 _________________________________________________________________ [50]Table of Contents The life sciences industry is characterized by rapid and continuous technological innovation |
| We may need to develop new technologies for our products to remain competitive |
| One or more of our current or future competitors could render our present or future products obsolete or uneconomical by technological advances |
| In addition, the introduction or announcement of new products by us or others could result in a delay of or decrease in sales of existing products, as we await regulatory approvals and as customers evaluate these new products |
| We may also encounter other problems in the process of delivering new products to the marketplace, including products from our Biosciences Group, such as problems related to design, development or manufacturing of such products, and as result we may be unsuccessful in selling such products |
| Our future success will depend on our ability to compete effectively against current technologies, as well as to respond effectively to technological advances by developing and marketing products that are competitive in the continually changing technological landscape |
| Our success depends on our ability to service and support our products directly or in collaboration with our strategic partners |
| To the extent that the Company or its strategic partners fail to maintain a high quality level of service and support for xMAP technology products, there is a risk that the perceived quality of our xMAP technology products will be diminished in the marketplace |
| Likewise, the Company may fail to provide the level, quantity or quality, of service expected by the marketplace |
| This could result in slower adoption rates and lower than anticipated utilization of xMAP products causing a material adverse affect on our business |
| The intellectual property rights we rely upon to protect the technology underlying our products may not be adequate to maintain market exclusivity |
| Inadequate intellectual property protection could enable third parties to exploit our technology or use very similar technology and could reduce our ability to distinguish our products in the market |
| Our success will depend, in part, on our ability to obtain, protect and enforce patents on our technology and to protect our trade secrets |
| Any patents we own may not afford full protection for our technology and products |
| Others may challenge our patents and, as a result, our patents could be narrowed or invalidated |
| In addition, our current and future patent applications may not result in the issuance of patents in the United States or foreign countries |
| Competitors may develop products that are not covered by our patents |
| Further, there is a substantial backlog of patent applications at the US Patent and Trademark Office, and the approval or rejection of patent applications may take several years |
| We have obtained 32 patents in the United States and foreign jurisdictions directed to various aspects and applications of our technology |
| We have 62 pending applications in the United States and foreign jurisdictions |
| In Japan, due to a procedural omission, we are unable to obtain patent protection for our method of “real time” detection and quantification of multiple analytes from a single sample similar to the protection we have obtained in the United States |
| Although we are pursuing patent protection in Japan for other aspects of our technology, we may not be able to prevent competitors from developing and marketing technologies similar to our xMAP technology in Japan |
| We require our employees, consultants, strategic partners and other third parties to execute confidentiality agreements |
| Our employees and third-party consultants also sign agreements requiring that they assign to us their interests in inventions and original expressions and any corresponding patents and copyrights arising from their work for us |
| In addition, the Company has implemented a patent process to file patent applications on its key technology |
| However, we cannot guarantee that these agreements or this patent process will provide us with adequate protection against improper use of our intellectual property or disclosure of confidential information |
| In addition, in some situations, these agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants or advisors have prior employment or consulting relationships |
| Further, others may independently develop substantially equivalent proprietary technology and techniques, or otherwise gain access to our trade secrets |
| Our failure to protect our proprietary information and techniques may inhibit or limit our ability to exclude certain competitors from the market |
| In order to protect or enforce our patent rights, we may have to initiate legal proceedings against third parties, such as infringement suits or interference proceedings |
| These legal proceedings could be expensive, take significant 15 _________________________________________________________________ [51]Table of Contents time and/or divert management’s attention from other business concerns |
| These proceedings may cause us to lose the benefit of some of our intellectual property rights, the loss of which may inhibit or preclude our ability to exclude certain competitors from the market |
| We also may provoke these third parties to assert claims against us |
| The patent position of companies like ours generally is highly uncertain, involves complex legal and factual questions and has recently been the subject of much litigation |
| No consistent policy has emerged from the US Patent and Trademark Office or the courts regarding the breadth of claims allowed or the degree of protection afforded under patents like ours |
| Our success will depend partly on our ability to operate without infringing on or misappropriating the proprietary rights of others |
| We may be sued for infringing the intellectual property rights of others |
| In addition, we may find it necessary, if threatened, to initiate a lawsuit seeking a declaration from a court that we do not infringe on the proprietary rights of others or that their rights are invalid or unenforceable |
| Intellectual property litigation is costly, and, even if we prevail, the cost of such litigation could affect our profitability |
| Furthermore, litigation is time consuming and could divert management’s attention and resources away from our business |
| If we do not prevail in any litigation, we may have to pay damages and could be required to stop the infringing activity or obtain a license |
| Any required license may not be available to us on acceptable terms, if at all |
| Moreover, some licenses may be nonexclusive, and therefore, our competitors may have access to the same technology licensed to us |
| If we fail to obtain a required license or are unable to design around a patent, we may be unable to sell some of our products, which could have a material adverse affect on our business, financial condition and results of operations |
| We are aware of a European patent granted to Dr |
| Ioannis Tripatzis, which covers certain testing agents and certain methods of their use |
| Tripatzis has publicly stated his belief that his European patent covers aspects of our technology if practiced in Europe |
| This European patent expired in November 2004 |
| We have only produced our products in limited quantities and we may experience problems in scaling our manufacturing operations or delays or component shortages that could limit the growth of our revenue |
| To date, we have produced our products in limited quantities compared to the quantities necessary to achieve desired revenue growth |
| We may not be able to produce sufficient quantities or maintain consistency between differing lots of consumables |
| If we encounter difficulties in scaling our manufacturing operations as a result of, among other things, quality control and quality assurance and availability of component and raw material supplies, we will likely experience reduced sales of our products, increased repair or re-engineering costs due to product returns and defects and increased expenses due to switching to alternate suppliers, any of which would reduce our revenues and gross margins |
| We presently outsource certain aspects of the assembly of our systems to contract manufacturers |
| Because of a long lead-time to delivery, we are required to place orders for a variety of items well in advance of scheduled production runs |
| We recently increased our flexibility to purchase strategic components within shorter lead times by entering into supply agreements with the suppliers of these components |
| Although we attempt to match our parts inventory and production capabilities to estimates of marketplace demand, to the extent system orders materially vary from our estimates, we may experience continued constraints in our systems production and delivery capacity, which could adversely impact revenue in a given fiscal period |
| Should the Company’s need for raw materials and components used in production continue to fluctuate, we could incur additional costs associated with either expediting or postponing delivery of those materials |
| In an effort to control costs in the last quarter of 2005 manufacturing implemented a lean production system |
| Managing the change from discrete to continuous flow production requires time and management commitment |
| Implementation of lean initiatives and our supply chain capabilities may result in part shortages that delay shipments and cause fluctuations in revenue in a given period |
| Certain key components of our product line are currently purchased from a limited number of outside sources and may only be available through a limited number of providers |
| We do not have agreements with all of our suppliers |
| Our reliance on our suppliers and contract manufacturers exposes us to risks including: – the possibility that one or more of our suppliers or our assemblers that do not have supply agreements with the Company could terminate their services at any time without penalty; 16 _________________________________________________________________ [52]Table of Contents – the potential obsolescence and/or inability of our suppliers to obtain required components; – the potential delays and expenses of seeking alternate sources of supply or manufacturing services; – the inability to qualify alternate sources without impacting performance claims of our products; – reduced control over pricing, quality and timely delivery due to the difficulties in switching to alternate suppliers or assemblers; and – increases in prices of raw materials and key components |
| Consequently, in the event that supplies of components or work performed by any of our assemblers are delayed or interrupted for any reason, our ability to produce and supply our products could be impaired |
| The capital spending policies of our customers has a significant effect on the demand for our products |
| Customers include clinical diagnostic, pharmaceutical, biotechnological, chemical and industrial companies, and the capital spending policies of these companies can have a significant effect on the demand for our products |
| These policies are based on a wide variety of factors, including governmental regulation or price controls, the resources available for purchasing research equipment, the spending priorities among various types of analytical equipment and the policies regarding capital expenditures during recessionary periods |
| Any decrease in capital spending by life sciences companies could cause our revenues to decline |
| As a result, we are subject to significant volatility in revenue |
| Therefore, our operating results can be materially affected (negatively and positively) by the spending policies and priorities of our customers |
| If we fail to comply with government regulations that affect our business, we could be subject to enforcement actions, injunctions and civil and criminal penalties that could delay or prevent marketing of our products |
| The production, testing, labeling, marketing and distribution of our products for some purposes and products based on our technology are subject to governmental regulation by the United States Food and Drug Administration (FDA) and by similar agencies in other countries |
| Some of our products and products based on our technology for in vitro diagnostic purposes are subject to approval or clearance by the FDA prior to marketing for commercial use |
| To date, 8 strategic partners have obtained such approvals or clearances |
| The process of obtaining necessary FDA clearances or approvals can be time-consuming, expensive and uncertain |
| Further, clearance or approval may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed |
| In addition, because some of our products employ laser technology, we are also required to comply with FDA requirements relating to radiation performance safety standards (21 CFR 1040dtta1 and 1040dtta11) |
| Approved or cleared medical device products are subject to continuing FDA requirements relating to, among others, manufacturing quality control and quality assurance, maintenance of records and documentation, registration and listing, import/export, adverse event and other reporting, distribution, labeling and promotion and advertising of medical devices |
| Our inability, or the inability of our strategic partners, to obtain required regulatory approval or clearance on a timely or acceptable basis could harm our business |
| In addition, failure to comply with applicable regulatory requirements could subject us or our strategic partners to regulatory enforcement action, including warning letters, product seizures, recalls, withdrawal of clearances or approvals, restrictions on or injunctions against marketing our products or products based on our technology, and civil and criminal penalties |
| Medical device laws and regulations are also in effect in many countries outside the United States |
| These range from comprehensive device approval requirements for some or all of our medical device products to requests for product data or certifications |
| As part of the Council Directive 2002/96 of February 13, 2003 (WEEE), we are expected to comply with certain requirements regarding the labeling of our products containing electronic devices beginning on August 13, 2005 in each of the EU member states where our regulated products are distributed |
| While we are taking steps to comply with the requirements of WEEE, we cannot be certain that we will comply with the national stage implementation of WEEE in all member states |
| Our products are currently exempt from the Council 17 _________________________________________________________________ [53]Table of Contents Directive 2002/95 of January 27, 2003, Restriction of Hazardous Substances (RoHS), which requires the removal of certain specified hazardous substances for certain products beginning July 1, 2006 in each of the member states |
| However, the European Union has indicated that it may include medical devices, including some of our products, under the jurisdiction of RoHS The number and scope of these requirements are increasing |
| Failure to comply with applicable federal, state and foreign medical device laws and regulations may harm our business, financial condition and results of operations |
| We are also subject to a variety of other laws and regulations relating to, among other things, environmental protection and work place safety |
| Our strategic partners and customers expect our organization to operate on an established quality management system compliant with FDA Quality System Regulations and industry standards, the In Vitro Diagnostic Directive 98/79/EC of 27 October 1998 (“Directive”) as implemented nationally in the EU member states and industry standards, such as ISO 9000 |
| We became ISO 9001:2000 certified in March 2002 and self-declared our Luminex 100 and Luminex 200 devices are in conformity with Article 1, Article 9, Annex I (Essential Requirements), and Annex III, and the additional provisions of IVDD 98/79/EC as of December 7, 2003 |
| Subsequent audits are carried out annually to ensure we maintain our system in substantial compliance with ISO and other applicable regulations and industry standards |
| Failure to maintain compliance with FDA, CMDCAS and EU regulations and other medical device laws, or to obtain applicable registrations where required, could reduce our competitive advantage in the markets in which we compete and also decrease satisfaction and confidence levels with our partners |
| If we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage |
| Our business exposes us to potential product liability claims that are inherent in the testing, production, marketing and sale of human diagnostic and therapeutic products |
| Although we believe that we are reasonably insured against these risks and we have indemnity protections in our supplier agreements, there can be no assurance that we will be able to obtain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities |
| A product liability claim in excess of our insurance coverage or claim that is outside or exceeds our indemnity protections in our supplier agreements or a recall of one of our products would have to be paid out of our cash reserves |
| If third-party payors increasingly restrict payments for healthcare expenses or fail to adequately pay for multi-analyte testing, we may experience reduced sales which would hurt our business and our business prospects |
| Third-party payors, such as government entities, health maintenance organizations and private insurers, are restricting payments for healthcare |
| These restrictions may decrease demand for our products and the price we can charge |
| Increasingly, Medicaid and other third-party payors are challenging the prices charged for medical services, including clinical diagnostic tests |
| They are also attempting to contain costs by limiting coverage and the reimbursement level of tests and other healthcare products |
| Without adequate coverage and reimbursement, consumer demand for tests will decrease |
| Decreased demand could cause sales of our products, and sales and services by our strategic partners, to fall |
| In addition, decreased demand could place pressure on us, or our strategic partners, to lower prices on these products or services, resulting in lower margins |
| Reduced sales or margins by us, or our strategic partners, would hurt our business, profitability and business prospects |
| We may be unsuccessful in implementing our acquisition strategy |
| Acquisitions of assets or entities designed to accelerate the implementation of our strategic plan are an element of our long-term strategy |
| We may be unable to identify and complete appropriate acquisitions in a timely manner and no assurance can be provided that the market price of potential business acquisitions will be acceptable |
| In addition, many of our competitors have greater financial resources than we have and may be willing to pay more for these businesses or selected assets |
| Should we identify suitable acquisition targets, we may be unable to complete acquisitions or obtain the financing, if necessary, for these acquisitions on terms favorable to us |
| Potential acquisitions pose a number of risks, including, among others, that: 18 _________________________________________________________________ [54]Table of Contents – we may not be able to accurately estimate the financial effect of acquisitions on our business; – future acquisitions may require us to issue capital stock or spend significant cash or may result in a decrease in our future operating income or operating margins; – we may be unable to realize the anticipated benefits and synergies from acquisitions as a result of inherent risks and uncertainties, including difficulties integrating acquired businesses or retaining their personnel, partners, customers or other key relationships and risks that acquired entities may not operate profitably or that acquisitions may not result in improved operating performance; and – acquisitions may disrupt our business and distract our management from other responsibilities |
| Our operating results may be affected by current economic and political conditions |
| The continuing events in the Middle East and concern for future terrorist attacks, leave many economic and political uncertainties |
| These uncertainties could adversely affect our business and revenues in the short or long term in ways that cannot presently be predicted |
| Our success will depend on our ability to attract and retain our management and staff |
| We depend on the principal members of our management and scientific staff, including our chief executive officer, marketing, research and development, technical support, technical service and sales staff |
| The loss of services of key members of management could delay or reduce our product development, marketing and sales and technical support efforts |
| In addition, recruiting and retaining qualified scientific and other personnel to perform research and development, technical support, technical service and marketing and sales work will be critical to our success |
| There is a shortage in our industry of qualified management and scientific personnel, and competition for these individuals is intense |
| There can be no assurance that we will be able to attract additional and retain existing personnel necessary to achieve our business objectives |
| The trading price of our common stock has been and is likely to continue to be highly volatile and subject to wide fluctuations in price |
| This volatility is in response to various factors, many of which are beyond our control, including: – general economic conditions and interest rates; – instability in the United States and other financial markets and the ongoing and possible escalation of unrest in the Middle East, other armed hostilities or further acts or threats of terrorism in the United States or elsewhere; – actual or anticipated variations in quarterly operating results from historical results or estimates of results prepared by securities analysts; – announcements of technological innovations or new products or services by us or our competitors; – changes in financial estimates by securities analysts; – conditions or trends in the life science, biotechnology and pharmaceutical industries; – announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments; – additions or departures of key personnel; – sales of our common stock; and – the potential adverse impact of the secondary trading of our stock on foreign exchanges which are subject to less regulatory oversight than The Nasdaq National Market, without our permission, and the activity of the market makers of our stock on such exchanges, including the risk that such market makers may engage in naked short 19 _________________________________________________________________ [55]Table of Contents sales and/or other deceptive trading practices which may artificially depress or otherwise affect the price of our common stock on The Nasdaq National Market |
| In addition, the stock market in general, and The Nasdaq Stock Market and the market for technology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies |
| Further, there has been particular volatility in the market prices of securities of life sciences companies |
| These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance |
| In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted |
| A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management’s attention and resources |
| Anti-takeover provisions in our certificate of incorporation, bylaws and stockholder rights plan and Delaware law could make a third party acquisition of us difficult |
| Our certificate of incorporation, bylaws and stockholder rights plan contain provisions that could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders |
| We are also subject to certain provisions of Delaware law that could delay, deter or prevent a change in control of us |
| These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock |