| OXIGENE INC ITEM 1A RISK FACTORS Statements in this Annual Report under the captions “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company’s behalf, that are not historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 |
| Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any results expressed or implied by such forward-looking statements |
| Such factors include, but are not limited to, the risk factors set forth below |
| The Company does not intend to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events |
| 23 _________________________________________________________________ [88]Table of Contents We have a history of losses and we anticipate that we will continue to incur losses in the future |
| We have experienced net losses every year since our inception and, as of December 31, 2005, had an accumulated deficit of approximately dlra101cmam955cmam000 |
| We anticipate incurring substantial additional losses over at least the next several years due to, among other factors, the need to expend substantial amounts on our continuing clinical trials with respect to our VDA and OQP technologies, and anticipated research and development activities and the general and administrative expenses associated with those activities |
| We have not commercially introduced any product and our potential products are in varying early stages of development and testing |
| Our ability to attain profitability will depend upon our ability to develop products that are effective and commercially viable, to obtain regulatory approval for the manufacture and sale of our products and to license or otherwise market our products successfully |
| We may never achieve profitability, and even if we do, we may not be able to sustain being profitable |
| Our products have not completed clinical trials, and may never demonstrate sufficient safety and efficacy in order to do so |
| Our products are in an early stage of development |
| In order to achieve profitable operations, we, alone or in collaboration with others, must successfully develop, manufacture, introduce and market our products |
| The time frame necessary to achieve market success for any individual product is long and uncertain |
| The products currently under development by us will require significant additional research and development and extensive preclinical and clinical testing prior to application for commercial use |
| A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in clinical trials, even after showing promising results in early or later stage studies or clinical trials |
| Although we have obtained some favorable results to date in preclinical studies and clinical trials of certain of our potential products, such results may not be indicative of results that will ultimately be obtained in or throughout such clinical trials, and clinical trials may not show any of our products to be safe or capable of producing a desired result |
| Additionally, we may encounter problems in our clinical trials that will cause us to delay, suspend or terminate those clinical trials |
| Further, our research or product development efforts or those of our collaborative partners may not be successfully completed, any compounds currently under development by us may not be successfully developed into drugs, any potential products may not receive regulatory approval on a timely basis, if at all, and competitors may develop and bring to market products or technologies that render our potential products obsolete |
| If any of these problems occur, our business would be materially and adversely affected |
| We depend, and likely will continue to depend, on third parties for clinical development and manufacturing and marketing of our products |
| We have limited internal resources with respect to drug development, the regulatory approval process, manufacturing and marketing of products |
| Accordingly, we have depended, and in the future are likely to continue to depend, on others for assistance in many areas, including research, conducting preclinical testing and clinical trials, the regulatory approval process, manufacturing and marketing |
| Funding requirements, competitive factors or prioritization of other opportunities may lead us to seek additional arrangements with third parties |
| While we are likely to continue to explore other licensing and development opportunities for our technologies with other companies, we may not succeed in establishing new collaborative agreements or licensing arrangements |
| Further, strategic collaborations involving our product candidates pose the following risks to us: • collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may not pursue further development and commercialization of our product candidates or may elect not to continue or renew research and development programs based on preclinical or clinical trial results, changes in their strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities; 24 _________________________________________________________________ [89]Table of Contents • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or future products if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive; • a collaborator with marketing and distribution rights to one or more products may not commit enough resources to their marketing and distribution; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation; • disputes may arise between us and the collaborators that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; and • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development of the applicable product candidates |
| If third parties on which we rely for clinical trials do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our product candidates |
| We do not have the ability to independently conduct the clinical trials required to obtain regulatory approval for our product candidates |
| We depend on independent clinical investigators and, in some cases, contract research organizations and other third-party service providers to conduct the clinical trials of our product candidates and expect to continue to do so |
| We rely heavily on these parties for successful execution of our clinical trials and we do not control many aspects of their activities |
| Nonetheless, we are responsible for confirming that each of our clinical trials is conducted in accordance with its general investigational plan and protocol |
| Moreover, the FDA and corresponding foreign regulatory authorities require us to comply with regulations and standards, commonly referred to as good clinical practices, for conducting and recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected |
| Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements |
| Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements or the respective trial plans and 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 or result in enforcement action against us |
| We have licensed in rights to CA4P, OXi4503 and other programs from third parties |
| If our license agreements terminate, we may lose the licensed rights to our product candidates, including CA4P and OXi4503, and we may not be able to continue to develop them or, if they are approved, market or commercialize them |
| We depend on license agreements with third parties for certain intellectual property rights relating to our product candidates, including patent rights |
| Currently, we have licensed in patent rights from ASU and the Bristol-Myers Squibb Company for CA4P and OXi4503 and from Baylor University for other programs |
| In general, our license agreements require us to make payments and satisfy performance obligations in order to keep these agreements in effect and retain our rights under them |
| These payment obligations can include upfront fees, maintenance fees, milestones, royalties, patent prosecution expenses, and other fees |
| These performance obligations typically include diligence obligations |
| If we fail to pay, be diligent or otherwise perform as required under our license agreements, we could lose our rights under the patents and other intellectual property rights covered by the agreements |
| While we are not currently aware 25 _________________________________________________________________ [90]Table of Contents of any dispute with any licensors under our material agreements with them, if disputes arise under any of our in-licenses, including our in-licenses from ASU and the Bristol-Myers Squibb Company, and Baylor University, we could lose our rights under these agreements |
| Any such disputes may or may not be resolveable on favorable terms, or at all |
| Whether or not any disputes of this kind are favorably resolved, our management’s time and attention and our other resources could be consumed by the need to attend to and seek to resolve these disputes and our business could be harmed by the emergence of such a dispute |
| If we lose our rights under these agreements, we may not be able to conduct any further activities with the product candidate or program that the license covered |
| If this were to happen, we might not be able to develop our product candidates further, or following regulatory approval, if any, we might be prohibited from marketing or commercializing them |
| In particular, patents previously licensed to us might after termination be used to stop us from conducting these activities |
| We depend, and likely will continue to depend, on third parties for the manufacturing of our products |
| We rely on outside manufacturers for our drug substance and other active ingredients that meet appropriate standards for use in clinical studies of our products |
| Such third parties may not be able to produce our drug substance or drug product to appropriate standards for use in clinical trials or perform under any definitive manufacturing agreements with us |
| If we do not maintain important manufacturing relationships, we may fail to find replacement manufacturers or develop our own manufacturing capabilities which could delay or impair our ability to obtain regulatory approval for our products and substantially increase our costs or deplete profit margins, if any |
| If we do find replacement manufacturers, we may not be able to enter into agreements with them on terms and conditions favorable to us and, there could be a substantial delay before new facilities could be qualified and registered with the FDA and foreign regulatory authorities |
| The FDA and foreign regulatory authorities require manufacturers to register manufacturing facilities |
| The FDA and corresponding foreign regulators also inspect these facilities to confirm compliance with current good manufacturing practices, or cGMPs |
| Contract manufacturers may face manufacturing or quality control problems causing drug substance production and shipment delays or a situation where the contractor may not be able to maintain compliance with the applicable cGMP requirements |
| Any failure to comply with cGMP requirements or other FDA and comparable foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop our product candidates and market our products after approval |
| We will be required to raise additional funds to finance our operations; we may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us |
| Our operations to date have consumed substantial amounts of cash |
| Negative cash flow from our operations is expected to continue over at least the next several years |
| We do not currently have any commitments to raise additional capital by selling equity, issuing debt or entering into any collaboration that would provide material funding |
| Our actual capital requirements will depend on numerous factors, including: the progress of and results of our preclinical testing and clinical trials of our product candidates under development, including CA4P and OXi4503; the progress of our research and development programs; the time and costs expended and required to obtain any necessary or desired regulatory approvals; the resources, if any, that we devote to developing manufacturing methods and advanced technologies; our ability to enter into licensing arrangements, including any unanticipated licensing arrangements that may be necessary to enable us to continue our development and clinical trial programs; the costs and expenses of filing, prosecuting and, if necessary, enforcing our patent claims, or defending against possible claims of infringement by us of third party patent or other technology rights; the cost of commercialization activities and arrangements, if any, undertaken by us; and, if and when approved, the demand for our products, which demand depends in turn on circumstances and uncertainties that cannot be fully known, understood or quantified unless and until the time of approval, including the range of indications for which any product is granted approval |
| 26 _________________________________________________________________ [91]Table of Contents Under our current operating plan and capital budget, and based on our current cost expectations and levels of operations, we believe that our cash, cash equivalents and marketable securities will be sufficient to fund operations at least through fiscal 2007, including substantial advancement of currently ongoing clinical trials towards FDA approval of CA4P and OXi4503, our lead clinical-stage compounds |
| We cannot predict with any certainty the success of any clinical trials, whether or not FDA approval will ultimately be obtained, and if obtained, whether such approval will be conditioned or take longer than expected |
| Due to the numerous risks and uncertainties of the drug development and FDA approval process, we cannot guarantee that our current cash, cash equivalents and capital will be sufficient to fund operations for the full time period described above |
| If our existing funds are not sufficient, we would be required to seek additional funding and/or take other measures to reduce expenses |
| In addition, we will likely have to raise substantial additional funds: if FDA approval is obtained with respect to our CA4P and OXi4503 compounds, to bring such compounds to market, including arranging for or developing manufacturing capabilities and completing marketing and other commercialization activities related to CA4P and OXi4503; to complete the development of any additional products other than the development and FDA approval process related to CA4P and OXi4503; and to bring any other potential product to market |
| The issuance of additional equity securities by us, if required to support these or any other purposes, would result in dilution to our existing stockholders |
| Additional financing may not be available on acceptable terms when needed, if at all |
| If adequate funds are not available on acceptable terms when needed, we would be required to delay, scale back or eliminate one or more of our product development programs or seek to obtain funds through arrangements with collaborative partners or others, which arrangements may include a requirement that we relinquish rights to certain of our technologies or products or rights related to our technologies or products that we would not otherwise relinquish |
| Our failure to obtain funding when and in the amounts needed and/or our acceptance of funding on terms that are not favorable to us or less favorable to us than we would ordinarily desire, would have a material adverse effect on our financial position and results of operations |
| Our products are subject to extensive government regulation, which results in uncertainties and delays in the progress of our products through the clinical trial process |
| Our research and development activities, preclinical testing and clinical trials, and the manufacturing and marketing of our products are subject to extensive regulation by numerous governmental authorities in the United States and other countries |
| Preclinical testing and clinical trials and manufacturing and marketing of our products are and will continue to be subject to the rigorous testing and approval processes of the FDA and other corresponding foreign regulatory authorities |
| Clinical testing and the regulatory review process generally take many years and require the expenditure of substantial resources |
| In addition, delays or rejections may be encountered during the period of product development, clinical testing and FDA regulatory review of each submitted application |
| Similar delays may also be encountered in foreign countries |
| Even after such time and expenditures, regulatory approval may not be obtained for any potential products developed by us, and a potential product, if approved in one country, may not be approved in other countries |
| Moreover, even if regulatory approval of a potential product is granted, such approval may impose significant limitations on the indicated uses for which that product may be marketed |
| Further, even if such regulatory approval is obtained, a marketed product, its manufacturer and its manufacturing facilities are subject to continual review and periodic inspections, and later discovery of previously unknown problems, such as undiscovered side effects, or manufacturing problems, may result in restrictions on such product, manufacturer or facility, including a possible withdrawal of the product from the market |
| Failure to comply with the applicable regulatory requirements can, among other things, result in fines, suspensions of regulatory approvals, product recalls, operating restrictions, injunctions and criminal prosecution |
| Moreover, continued cost control initiatives by third party health care payers, including government programs such as Medicare may affect the financial ability and willingness of patients and their health care providers to utilize certain therapies which, in turn, could have a material adverse effect on us |
| 27 _________________________________________________________________ [92]Table of Contents The uncertainty associated with pharmaceutical reimbursement and related matters may adversely affect our business |
| Upon the marketing approval of any one or more of our products, if at all, sales of our products will depend significantly on the extent to which reimbursement for our products and related treatments will be available from government health programs, private health insurers and other third party payers |
| Third party payers and governmental health programs are increasingly attempting to limit and/or regulate the price of medical products and services |
| The Medicare Prescription Drug Improvement and Modernization Act, as well as other changes in governmental or in private third-party payers’ reimbursement policies may reduce or eliminate any currently expected reimbursement |
| Decreases in third-party reimbursement for our products could reduce physician usage of the product and have a material adverse effect on our product sales, results of operations and financial condition |
| Our industry is highly competitive, and our products may become technologically obsolete |
| We are engaged in a rapidly evolving field |
| Competition from other pharmaceutical companies, biotechnology companies and research and academic institutions is intense and expected to increase |
| Many of those companies and institutions have substantially greater financial, technical and human resources than we do |
| Those companies and institutions also have substantially greater experience in developing products, in conducting clinical trials, in obtaining regulatory approval and in manufacturing and marketing pharmaceutical products |
| Our competitors may succeed in obtaining regulatory approval for their products more rapidly than we do |
| Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for competitive products |
| We are aware of at least one other company that currently has a clinical-stage VDA for use in an oncology indication |
| Some of these competitive products may have an entirely different approach or means of accomplishing the desired therapeutic effect than products being developed by us |
| Our competitors may succeed in developing technologies and products that are more effective and/or cost competitive than those being developed by us, or that would render our technology and products less competitive or even obsolete |
| In addition, one or more of our competitors may achieve product commercialization or patent protection earlier than we do, which could materially adversely affect us |
| We depend extensively on our patents and proprietary technology, and we must protect those assets in order to preserve our business |
| To date, our principal product candidates have been based on certain previously known compounds |
| We anticipate that the products we develop in the future may include or be based on the same or other compounds owned or produced by unaffiliated parties, as well as synthetic compounds we may discover |
| Although we expect to seek patent protection for any compounds we discover and/or for any specific uses we discover for new or previously known compounds, any or all of them may not be subject to effective patent protection |
| Further, the development of regimens for the administration of pharmaceuticals, which generally involve specifications for the frequency, timing and amount of dosages, has been, and we believe, may continue to be, important to our efforts, although those processes, as such, may not be patentable |
| Our success will depend, in part, on our ability to obtain patents, protect our trade secrets and operate without infringing on the proprietary rights of others |
| As of December 31, 2005, we were the sole assignee or co-assignee of eleven (11) granted United States patents, seventeen (17) pending United States patent applications, and granted patents and/or pending applications in several other major markets, including the European Union, Canada and Japan |
| The patent position of pharmaceutical and biotechnology firms like us generally is highly uncertain and involves complex legal and factual questions, resulting in both an apparent inconsistency regarding the breadth of claims allowed in United States patents and general uncertainty as to their legal interpretation and enforceability |
| Accordingly, patent applications assigned or exclusively licensed to us may not result in patents being issued, any issued patents assigned or exclusively licensed to us may not provide us with competitive protection or may be challenged by others, and the current or future granted patents of others may have an adverse effect on our ability to do business and achieve profitability |
| Moreover, since some of the basic research relating to one or more of our patent 28 _________________________________________________________________ [93]Table of Contents applications and/or patents was performed at various universities and/or funded by grants, one or more universities, employees of such universities and/or grantors could assert that they have certain rights in such research and any resulting products |
| Further, others may independently develop similar products, may duplicate our products, or may design around our patent rights |
| In addition, as a result of the assertion of rights by a third party or otherwise, we may be required to obtain licenses to patents or other proprietary rights of others in or outside of the United States |
| Any licenses required under any such patents or proprietary rights may not be made available on terms acceptable to us, if at all |
| If we do not obtain such licenses, we could encounter delays in product market introductions while we attempt to design around such patents or could find that the development, manufacture or sale of products requiring such licenses is foreclosed |
| In addition, we could incur substantial costs in defending ourselves in suits brought against us or in connection with patents to which we hold licenses or in bringing suit to protect our own patents against infringement |
| We require employees, Scientific Advisory Board members and the institutions that perform our preclinical and clinical tests to enter into confidentiality agreements with us |
| Those agreements provide that all confidential information developed or made known to the individual during the course of the relationship with us is to be kept confidential and not to be disclosed to third parties, except in specific circumstances |
| Any such agreement may not provide meaningful protection for our trade secrets or other confidential information in the event of unauthorized use or disclosure of such information |
| We depend heavily on our executive officers, directors, and principal consultants, and the loss of their services would materially harm our business |
| We believe that our success depends, and will likely continue to depend, upon our ability to retain the services of our current executive officers, directors, principal consultants and others, particularly Joel-Tomas Citron, our Chairman of the Board, Dr |
| David Chaplin, our Chief Scientific Officer, and Frederick Driscoll, our President and Chief Executive Officer |
| The loss of the services of any of these individuals could have a material adverse effect on us |
| In addition, we have established relationships with universities, hospitals and research institutions, which have historically provided, and continue to provide, us with access to research laboratories, clinical trials, facilities and patients |
| Additionally, we believe that we may, at any time and from time to time, materially depend on the services of consultants and other unaffiliated third parties |
| Our products may result in product liability exposure, and it is uncertain whether our insurance coverage will be sufficient to cover any claims |
| The use of our product candidates in clinical trials and for commercial applications, if any, may expose us to liability claims, in the event such product candidates cause injury or disease, or result in adverse effects |
| These claims could be made directly by health care institutions, contract laboratories, patients or others using such products |
| Although we have obtained liability insurance coverage for our ongoing clinical trials, this coverage may not be in amounts sufficient to protect us from any product liability claims or product recalls which could have a material adverse effect on the financial condition and prospects of our company |
| Further, adverse product and similar liability claims could negatively impact our ability to obtain or maintain regulatory approvals for our technology and product candidates under development |
| The price of our common stock is volatile, and is likely to continue to fluctuate due to reasons beyond our control |
| The market price of the common stock has been, and likely will continue to be highly volatile |
| Factors, including our or our competitors’ financial results, clinical trial and research development announcements and government regulatory action affecting our potential products in both the United States and foreign countries, have had, and may continue to have, a significant effect on our results of operations and on the market price of our common stock |
| We cannot assure you that your initial investment in our common stock will not fluctuate significantly |
| One or more of these factors could 29 _________________________________________________________________ [94]Table of Contents significantly harm our business and cause a decline in the price of our common stock in the public market |
| Substantially all of the shares of the Company’s Common Stock issuable upon exercise of outstanding options have been registered for sale and may be sold from time to time hereafter |
| Such sales, as well as future sales of the Company’s Common Stock by existing stockholders, or the perception that sales could occur, could adversely affect the market price of the Company’s Common Stock |
| The price and liquidity of the Company’s Common Stock may also be significantly affected by trading activity and market factors related to the Nasdaq and Stockholm Stock Exchange markets, which factors and the resulting effects may differ between those markets |
| Our restated certificate of incorporation, our shareholder rights agreement and Delaware law could defer a change of our management which could discourage or delay offers to acquire us |
| Certain provisions of Delaware law and of our restated certificate of incorporation, as amended, and amended and restated by-laws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock |
| It is possible that these provisions could make it more difficult to accomplish, or could deter, transactions that stockholders may otherwise consider to be in their best interests or the best interests of OXiGENE Further, the rights issued under the shareholders rights agreement would cause substantial dilution to a person or group that attempts to acquire us on terms not approved in advance by our Board of Directors |