| QUESTCOR PHARMACEUTICALS INC Item 1A Risk Factors We have a history of operating losses and may never generate sufficient revenue to achieve profitability |
| We have a history of recurring operating losses, and our accumulated deficit through December 31, 2005 was dlra79dtta1 million |
| We recognized net income applicable to common shareholders for the year ended December 31, 2005 of dlra5dtta1 million, however, this included a one-time gain of dlra9dtta6 million on the divestment of our non-core product lines |
| Our net loss applicable to common shareholders was dlra1dtta5 million and dlra5dtta9 million for years ended December 31, 2004 and 2003, respectively |
| To date, our revenues have been generated principally from sales of Acthar, Nascobal, Ethamolin, Glofil-125, Inulin and VSL#3 |
| In October 2005, we sold the Nascobal, Ethamolin and Glofil-125 product lines, and accordingly we are no longer selling such products |
| Our agreement to promote VSL#3 expired in January 2005, and we are no longer selling VSL#3 |
| We discontinued selling Inulin in September 2003 |
| Our ability to achieve a consistent, profitable level of operations will be dependent in large part upon our ability to: • develop, finance and implement an effective promotional strategy for Acthar, • finance and acquire additional commercial products, • finance operations until consistent positive cash flows are achieved, • continue to receive finished product and API from our sole-source contract manufacturers on a timely basis and at acceptable costs, • continue to control our operating expenses, and • ensure customers’ compliance with our sales and product return policies |
| If we are unable to generate sufficient revenues from sales of Acthar, or if we are unable to contain costs and expenses, we may not achieve profitability and may ultimately be unable to fund our operations |
| If our revenues from sales of Acthar decline or fail to grow, we may not have sufficient revenues to fund our operations |
| We currently rely exclusively on sales of Acthar |
| We expect to continue to rely on sales of this product in the foreseeable future |
| We review external data sources to estimate customer demand for Acthar |
| In the event that demand for Acthar is less than our sales to wholesalers, excess inventory may result at the wholesaler level, which may impact future product sales |
| We monitor the amount of Acthar at the wholesale level as well as prescription data obtained from third party sources to help assess product demand |
| Although our goal is to actively promote Acthar, and we have no reason to 8 _________________________________________________________________ [62]Table of Contents believe that our promotion of Acthar will not be successful, we cannot predict whether the demand for Acthar will continue in the future or that we will continue to generate significant revenues from sales of Acthar |
| We may choose, in the future, to reallocate our sales and promotion efforts for Acthar which may result in a decrease in revenues from this product |
| If the demand for Acthar declines, or if we are forced to reduce the price, or if returns of expired products are higher than anticipated, or if we are forced to re-negotiate contracts or terms, or if our customers do not comply with our existing policies, our revenues from the sale of Acthar would decline |
| If the cost to produce Acthar increases, and we are unable to raise the price correspondingly, our gross margins on the sale of Acthar would decline |
| If our revenues from the sale of Acthar decline or fail to grow, our total revenues, gross margins and operating results would be harmed and we may not have sufficient revenues to fund our operations |
| Our business will be harmed if we are unable to implement our growth strategy successfully |
| Our growth strategy primarily includes the following components: • initially focusing our promotional efforts on Acthar, our CNS product, • acquiring additional commercial products that have sales growth potential, are promotionally responsive to a focused and targeted sales and marketing effort, complement our therapeutic focus on neurology and can be acquired at a reasonable valuation relative to our cost of capital, and • developing new medications focused in CNS with our corporate resources and through corporate collaborations |
| Any failure on our part to implement any or all of our growth strategies successfully would likely have a material adverse effect on our financial condition |
| We have little or no control over our wholesalers’ buying patterns, which may impact future revenues, returns and excess inventory |
| We sell Acthar primarily through major drug wholesalers located in the United States |
| Consistent with the pharmaceutical industry, most of our revenues are derived from the three largest drug wholesalers |
| These wholesalers represented 87prca of our gross product sales for the year ended December 31, 2005 |
| While we attempt to estimate inventory levels of Acthar at the three largest wholesalers using inventory data obtained from them, historical prescription information and historical purchase patterns, this process is inherently imprecise |
| We rely solely upon the wholesalers to effect the distribution allocation of Acthar |
| There can be no assurance that these wholesalers will adequately manage their local and regional inventories to avoid outages or inventory build-ups |
| On occasion we note that the wholesalers buy quantities of product in excess of the quantities being sold by them, resulting in increasing inventories |
| Acthar has an expiration date that is 18 months from date of manufacture |
| We will generally accept for credit pharmaceutical products returned within the six month period following the expiration date |
| We establish reserves for these credit memoranda at the time of sale |
| There can be no assurance that we will be able to accurately forecast the reserve requirements needed to provide for credit memoranda issued in the future |
| Although our estimates are reviewed quarterly for reasonableness, our product return activity could differ significantly from our estimates because our analyses of product shipments, prescription trends and the amount of product in the distribution channel may not be accurate |
| Actual amounts could be significantly different from the estimates and such differences are accounted for in the period in which they become known |
| We do not control or significantly influence the purchasing patterns of the drug wholesalers who purchase Acthar |
| These wholesalers are sophisticated companies that purchase our product in a manner consistent with their industry practices and perceived business interests |
| Our sales are subject to the purchase requirements of the major wholesalers, which, presumably, are based upon their projected demand levels |
| Purchases by any customer, during any period, may be above or below actual prescription volumes of our product during the same period, resulting in increases or decreases in product inventory existing in the distribution channel |
| We provide reserves for potentially excess, dated or otherwise impaired inventory |
| Reserves for excess finished goods and work-in-process inventories are based on an analysis of expected future sales that will occur before the 9 _________________________________________________________________ [63]Table of Contents inventory on hand expires |
| Reserves for raw material inventories are based on viability and projected future use |
| Judgment is required in estimating reserves for excess or impaired inventories |
| Actual amounts of required reserves could be different from the estimates and such differences are accounted for in the period in which they become known |
| Our inability to secure additional funding could lead to a loss of your investment |
| We anticipate that our capital resources based on our internal forecasts and projections will be adequate to fund operations and capital expenditures through at least December 31, 2006 |
| If we experience unanticipated cash requirements and if revenues are less than we expect, we could be required to raise additional capital |
| Regardless, we may seek additional funds before December 31, 2006, through public or private equity financing or from other sources |
| Additionally, we may seek to raise capital whenever conditions in the financial markets are favorable, even if we do not have an immediate need for additional cash at that time |
| There can be no assurance that additional funds can be obtained on desirable terms or at all |
| If revenues from product sales are less than we expect or if further capital resources are not available, or if such resources cannot be obtained on attractive terms to us, this may further limit our ability to fund operations |
| Our future capital requirements will depend on many factors, including the following: • existing product sales performance, • successfully implementing our growth strategy, • achieving better operating efficiencies, • maintaining customer compliance with our policies, • obtaining product from our sole-source contract manufacturers, and • acquiring or developing additional products |
| We may obtain additional financing through public or private debt or equity financings |
| However, additional financing may not be available to us on acceptable terms, if at all |
| Further, additional equity financings will be dilutive to our stockholders |
| If sufficient capital is not available, then we may be required to reduce our operations or to delay, reduce the scope of, eliminate or divest one or more of our products or manufacturing efforts |
| If we are unable to contract with third party contract manufacturers, we may be unable to meet the demand for our products and lose potential revenues |
| We rely on contract manufacturers to produce our marketed product, Acthar, and will likely do the same for other products that we may develop, commercialize or acquire in the future |
| Contract manufacturers may not be able to meet our needs with respect to timing, cost, quantity or quality |
| All our manufacturers are sole-source manufacturers and no currently qualified alternative suppliers exist |
| If we are unable to contract for a sufficient supply of our required products and services on acceptable terms, or if we should encounter delays or difficulties in our relationships with our manufacturers, or if the required approvals by the FDA and other regulatory authorities do not occur on a timely basis, we will lose sales |
| Moreover, contract manufacturers that we may use must continually adhere to current good manufacturing practices enforced by the FDA If the facilities of these manufacturers cannot pass an inspection, we may lose FDA approval of our products |
| Failure to obtain products for sale for any reason may result in an inability to meet product demand and a loss of potential revenues |
| If our third party distributors are unable to distribute our product or the costs to distribute our product increases substantially, we will lose potential revenues and profits |
| We transferred certain product distribution functions, including warehousing, shipping and quality control studies, to third party distributors |
| The outsourcing of these functions is complex, and we may experience difficulties at the third party contractor level that could reduce, delay or stop shipments of our product |
| If we 10 _________________________________________________________________ [64]Table of Contents encounter such distribution problems, our product could become unavailable and we could lose revenues, or the costs to distribute our product could become higher than we anticipated |
| For the year ended December 31, 2005, 87prca of our gross product sales were derived from the three largest drug wholesalers |
| Two of these three wholesalers mandate a distribution fee for handling our product |
| If other wholesalers institute similar fees, or if such fees increase in magnitude in the future, our costs to distribute our product will increase, and our gross profit margins will decline |
| We have experienced changes in key personnel which will have an uncertain impact on future operations |
| On February 18, 2005, Mr |
| James L Fares was named President and Chief Executive Officer, succeeding Mr |
| Charles J Casamento who resigned as Chairman, President and Chief Executive Officer on August 5, 2004 |
| Steve Cartt was named Executive Vice President of Commercial Development |
| We are highly dependent on the services of our President and Chief Executive Officer, Mr |
| James L Fares and our Executive Vice President of Commercial Development, Mr |
| Fares or Mr |
| Cartt as employees, our business could be harmed |
| We do not carry key person life insurance for our senior management or other personnel |
| Additionally, the future potential growth and expansion of our business is expected to place increased demands on our management skills and resources |
| Although some changes in staffing levels are expected during 2006, recruiting and retaining management and operational personnel to perform sales and marketing, financial operations, business development, regulatory affairs, quality assurance, medical affairs and contract manufacturing in the future will also be critical to our success |
| We do not know if we will be able to attract and retain skilled and experienced management and operational personnel in the future on acceptable terms given the intense competition among numerous pharmaceutical and biotechnology companies for such personnel |
| If we are unable to hire necessary skilled personnel in the future, our business could be harmed |
| Our products may not be accepted by the market, which may result in lower future revenues as well as a decline in our competitive positioning |
| Acthar and any products that we successfully acquire or develop in the future, if approved for marketing, may never achieve market acceptance |
| These products, if successfully developed, will compete with drugs and therapies manufactured and marketed by major pharmaceutical and other biotechnology companies |
| Physicians, patients or the medical community in general may not accept and utilize the products that we may develop or that our corporate partners may develop |
| The degree of market acceptance of our commercial products and any products that we successfully develop will depend on a number of factors, including: • the establishment and demonstration of the clinical efficacy and safety of the product candidates, • their potential advantage over alternative treatment methods and competing products, • reimbursement policies of government and third party payors, and • our ability to market and promote the products effectively |
| The failure of our products to achieve market acceptance may result in lower future revenues as well as a decline in our competitive positioning |
| A large percentage of our voting stock is beneficially owned by a small number of stockholders, who in the future could attempt to take control of our management and operations or exercise voting power to advance their own best interests and not necessarily those of other stockholders |
| As of December 31, 2005, Sigma-Tau Finanziaria SpA and its affiliates (“Sigma-Tau”) beneficially owned, directly or indirectly, approximately 21prca of the voting power of our outstanding voting capital stock, and they beneficially owned approximately 25prca of our outstanding common stock |
| Additionally, we have other stockholders who own significant amounts of our voting capital stock, as reported on various Schedule 13D’s filed with the 11 _________________________________________________________________ [65]Table of Contents Securities and Exchange Commission |
| Accordingly, these stockholders, acting individually or together, could control the outcome of certain shareholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our Articles of Incorporation, and the approval of significant corporate transactions |
| This level of concentrated ownership may, at a minimum, have the effect of delaying or preventing a change in the management or voting control of us by a third party |
| It may also place us in the position of having these large stockholders take control of us and having new management inserted and new objectives adopted |
| If competitors develop and market products that are more effective than ours, our commercial opportunity will be reduced or eliminated |
| The pharmaceutical and biotechnology industries are intensely competitive and subject to rapid and significant technological change |
| A number of companies are pursuing the development of pharmaceuticals and products that target the same diseases and conditions that we target |
| For example, there are products on the market that compete with Acthar |
| Moreover, technology controlled by third parties that may be advantageous to our business may be acquired or licensed by competitors of ours, preventing us from obtaining this technology on favorable terms, or at all |
| Our ability to compete will depend on our ability to create and maintain scientifically advanced technology, and to develop, acquire and commercialize pharmaceutical products based on this technology, as well as our ability to attract and retain qualified personnel, obtain patent protection, or otherwise develop proprietary technology or processes, and secure sufficient capital resources for the expected substantial time period between technological conception and commercial sales of products based upon our technology |
| Many of the companies developing competing technologies and products have significantly greater financial resources and expertise in development, manufacturing, obtaining regulatory approvals, and marketing than we do |
| Other smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies |
| Academic institutions, government agencies and other public and private research organizations may also seek patent protection and establish collaborative arrangements for clinical development, manufacturing, and marketing of products similar to ours |
| These companies and institutions will compete with us in recruiting and retaining qualified sales and marketing and management personnel, as well as in acquiring technologies complementary to our programs |
| We will face competition with respect to: • product efficacy and safety, • the timing and scope of regulatory approvals, • availability of resources, • price, and • patent position, including potentially dominant patent positions of others |
| If our competitors succeed in developing technologies and drugs that are more effective or less costly than any that we develop or acquire, our technology and future drugs may be rendered obsolete and noncompetitive |
| In addition, our competitors may succeed in obtaining the approval of the FDA or other regulatory approvals for drug candidates more rapidly than we will |
| Companies that complete clinical trials, obtain required regulatory agency approvals and commence commercial sale of their drugs before their competitors may achieve a significant competitive advantage, including patent and FDA marketing exclusivity rights that would delay our ability to market specific products |
| We do not know if drugs resulting from the joint efforts of our existing or future collaborative partners will be able to compete successfully with our competitors’ existing products or products under development or whether we will obtain regulatory approval in the US or elsewhere |
| 12 _________________________________________________________________ [66]Table of Contents If we fail to maintain or enter into new contracts related to collaborations and in-licensed or acquired technology and products, our product development and commercialization could be delayed |
| Our business model has been dependent on our ability to enter into licensing and acquisition arrangements with commercial or academic entities to obtain technology for commercialization or marketed products |
| If we are unable to enter into any new agreements in the future, our development and commercialization efforts will be delayed |
| Disputes may arise regarding the inventorship and corresponding rights in inventions and know-how resulting from the joint creation or use of intellectual property by us and our licensors or scientific collaborators |
| We may not be able to negotiate additional license and acquisition agreements in the future on acceptable terms, if at all |
| In addition, current license and acquisition agreements may be terminated, and we may not be able to maintain the exclusivity of our exclusive licenses |
| If collaborators do not commit sufficient development resources, technology, regulatory expertise, manufacturing, marketing and other resources towards developing, promoting and commercializing products incorporating our discoveries, the progress of our licensed products development will be stalled |
| Further, competitive conflicts may arise among these third parties that could prevent them from working cooperatively with us |
| The amount and timing of resources devoted to these activities by the parties could depend on the achievement of milestones by us and otherwise generally may be controlled by other parties |
| In addition, we expect that our agreements with future collaborators will likely permit the collaborators to terminate their agreements upon written notice to us |
| This type of termination would substantially reduce the likelihood that the applicable research program or any lead candidate or candidates would be developed into a drug candidate, would obtain regulatory approvals and would be manufactured and successfully commercialized |
| If none of our collaborations are successful in developing and commercializing products, or if we do not receive milestone payments or generate revenues from royalties sufficient to offset our significant investment in product development and other costs, then our business could be harmed |
| Disagreements with our collaborators could lead to delays or interruptions in, or termination of, development and commercialization of certain potential products or could require or result in litigation or arbitration, which could be time-consuming and expensive and may result in lost revenues and substantial legal costs which could negatively impact our results from operations |
| In addition, if we are unable to acquire new marketed products on a timely basis at an appropriate purchase price and terms, we may not reach profitability and may not generate sufficient cash to fund operations |
| If we are unable to protect our proprietary rights, we may lose our competitive position and future revenues |
| Our success will depend in part on our ability to: • obtain patents for our products and technologies, • protect trade secrets, • operate without infringing upon the proprietary rights of others, and • prevent others from infringing on our proprietary rights |
| We will only be able to protect our proprietary rights from unauthorized use by third parties to the extent that these rights are covered by valid and enforceable patents or are effectively maintained as trade secrets and are otherwise protectable under applicable law |
| We will attempt to protect our proprietary position by filing US and foreign patent applications related to our proprietary products, technology, inventions and improvements that are important to the development of our business |
| The patent positions of biotechnology and biopharmaceutical companies involve complex legal and factual questions and, therefore, enforceability cannot be predicted with certainty |
| Patents, if issued, may be challenged, invalidated or circumvented |
| Thus, any patents that we own or license from third parties may not provide any protection against competitors |
| Pending patent applications we may file in the future, or those we may license from third parties, may not result in patents being issued |
| Also, patent rights may not provide us with proprietary protection or competitive advantages against competitors with similar technology |
| Furthermore, others may independently develop similar technologies or duplicate any technology that we have developed or we will 13 _________________________________________________________________ [67]Table of Contents develop |
| The laws of some foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States |
| In addition to patents, we rely on trade secrets and proprietary know-how |
| We currently seek protection, in part, through confidentiality and proprietary information agreements |
| These agreements may not provide meaningful protection or adequate remedies for proprietary technology in the event of unauthorized use or disclosure of confidential and proprietary information |
| The parties may not comply with or may breach these agreements |
| Furthermore, our trade secrets may otherwise become known to, or be independently developed by competitors |
| Our success will further depend, in part, on our ability to operate without infringing the proprietary rights of others |
| If our activities infringe on patents owned by others, we could incur substantial costs in defending ourselves in suits brought against a licensor or us |
| Should our products or technologies be found to infringe on patents issued to third parties, the manufacture, use and sale of our products could be enjoined, and we could be required to pay substantial damages |
| In addition, we, in connection with the development and use of our products and technologies, may be required to obtain licenses to patents or other proprietary rights of third parties, which may not be made available on terms acceptable to us, if at all |
| Since we must obtain regulatory approval to market our products in the United States and in foreign jurisdictions, we cannot predict whether or when we will be permitted to commercialize our products |
| Any products that we develop are subject to regulation by federal, state and local governmental authorities in the United States, including the FDA, and by similar agencies in other countries |
| Any product that we develop must receive all relevant regulatory approvals or clearances before it may be marketed in a particular country |
| The regulatory process, which includes extensive preclinical studies and clinical trials of each product to establish its safety and efficacy, is uncertain, can take many years, and requires the expenditure of substantial resources |
| Data obtained from preclinical and clinical activities are susceptible to varying interpretations that could delay, limit or prevent regulatory approval or clearance |
| In addition, delays or rejections may be encountered based upon changes in regulatory policy during the period of product development and the period of review of any application for regulatory approval or clearance for a product |
| Delays in obtaining regulatory approvals or clearances could: • stall the marketing, selling and distribution of any products that our corporate partners or we develop, • impose significant additional costs on our corporate partners and us, • diminish any competitive advantages that we or our corporate partners may attain, and • decrease our ability to receive royalties and generate revenues and profits |
| Regulatory approval, if granted, may entail limitations on the indicated uses for which a new product may be marketed that could limit the potential market for the product |
| Product approvals, once granted, may be withdrawn if problems occur after initial marketing |
| Furthermore, manufacturers of approved products are subject to pervasive review, including compliance with detailed regulations governing FDA good manufacturing practices |
| The FDA periodically revises the good manufacturing practices regulations |
| Failure to comply with applicable regulatory requirements can result in warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the government to grant marketing applications and criminal prosecution |
| In addition, we cannot predict the extent of government regulations or the impact of new governmental regulations that may result in a delay in the development, production and marketing of our products |
| As such, we may be required to incur significant costs to comply with current or future laws or regulations |
| Our ability to generate revenues is affected by the availability of reimbursement on our product, and our ability to generate revenues will be diminished if we fail to obtain an adequate level of reimbursement for our product from third party payors |
| In both domestic and foreign markets, the sale of our product will depend in part on the availability of reimbursement from third party payors such as state and federal governments (for example, under Medicare and Medicaid programs in the United States) and private insurance plans |
| In certain foreign markets, the pricing and 14 _________________________________________________________________ [68]Table of Contents profitability of our product generally is subject to government controls |
| In the United States, there have been, and we expect there will continue to be, a number of state and federal proposals that limit the amount that state or federal governments will pay to reimburse the cost of drugs |
| We believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of our product, which may also impact product sales |
| Further, when a new therapeutic is approved, the reimbursement status and rate of such a product is uncertain |
| In addition, current reimbursement policies for our existing product may change at any time |
| Changes in reimbursement or our failure to obtain reimbursement for our products may reduce the demand for, or the price of, our product, which could result in lower product sales or revenues, thereby weakening our competitive position and negatively impacting our results of operations |
| In the United States, proposals have called for substantial changes in the Medicare and Medicaid programs |
| Any such changes enacted may require significant reductions from currently projected government expenditures for these programs |
| The Medicare Prescription Drug Improvement Act, enacted in December 2003, provides for, among other things, an immediate reduction in the Medicare reimbursement rates for many drugs administered in a physician’s office |
| The Medicare Act, as well as other changes in government legislation or regulation or in private third party payors’ policies toward reimbursement for our products, may reduce or eliminate reimbursement of our products’ costs |
| Driven by budget concerns, Medicaid managed care systems have been implemented in several states and local metropolitan areas |
| If the Medicare and Medicaid programs implement changes that restrict the access of a significant population of patients to innovative medicines, the market acceptance of these products may be reduced |
| We are unable to predict what impact the Medicare Act or other future legislation, if any, relating to third party reimbursement, will have on our product sales |
| To facilitate the availability of our product for Medicaid patients, we have contracted with the Center for Medicare and Medicaid Services |
| As a result, we pay quarterly rebates consistent with the utilization of our product by individual states |
| We also give discounts under contract on purchases or reimbursements of pharmaceutical products by certain other federal and state agencies and programs |
| If these discounts and rebates become burdensome to us and we are not able to sell our product through these channels, our net sales could decline |
| Our business is subject to changing regulation of corporate governance and public disclosure that has increased both our costs and the risk of noncompliance |
| Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded |
| These entities, including the Public Company Accounting Oversight Board, the SEC and the American Stock Exchange, have recently issued new requirements and regulations and continue developing additional regulations and requirements in response to recent corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002 |
| Our efforts to comply with these new regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue-generating activities to compliance activities |
| In particular, our efforts to prepare to comply with Section 404 of the Sarbanes-Oxley Act and related regulations for fiscal years ending on or after July 15, 2007 regarding our management’s required assessment of our internal control over financial reporting and our independent auditors’ attestation of that assessment will require the commitment of significant financial and managerial resources |
| Although management believes that ongoing efforts to assess our internal control over financial reporting will enable management to provide the required report, and our independent auditors to provide the required attestation, under Section 404, we can give no assurance that such efforts will be completed on a timely and successful basis to enable our management and independent auditors to provide the required report and attestation in order to comply with SEC rules effective for us |
| Moreover, because the new and changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies |
| This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices |
| 15 _________________________________________________________________ [69]Table of Contents Our stock price has a history of volatility, and an investment in our stock could decline in value |
| The price of our common stock, like that of other specialty pharmaceutical companies, is subject to significant volatility |
| The price per share of our common stock ranged in value from dlra0dtta38 to dlra1dtta23 during the two year period ended December 31, 2005 |
| Any number of events, both internal and external to us, may continue to affect our stock price |
| These include, without limitation, our quarterly and yearly revenues and earnings or losses; our ability to acquire and market appropriate pharmaceuticals; announcement by us or our competitors regarding product development efforts, including the status of regulatory approval applications; the outcome of legal proceedings, including claims filed by us against third parties to enforce our patents and claims filed by third parties against us relating to patents held by the third parties; the launch of competing products; our ability to obtain product from our contract manufacturers; the resolution of (or failure to resolve) disputes with collaboration partners and corporate restructuring by us |
| If product liability lawsuits are successfully brought against us or we become subject to other forms of litigation, we may incur substantial liabilities and costs and may be required to limit commercialization of our products |
| Our business will expose us to potential liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical products |
| The use of any drug candidates ultimately developed by us or our collaborators in clinical trials may expose us to product liability claims and possible adverse publicity |
| These risks will expand for any of our drug candidates that receive regulatory approval for commercial sale and for those products we currently market |
| Product liability insurance for the pharmaceutical industry is generally expensive, if available at all |
| We currently have product liability insurance for claims up to dlra10dtta0 million |
| However, if we are unable to maintain insurance coverage at acceptable costs, in a sufficient amount, or at all, or if we become subject to a product liability claim, our reputation, stock price and ability to devote the necessary resources to the commercialization of our products could be negatively impacted |