| ZONAGEN INC ITEM 1A RISK FACTORS Our product candidates are at an early stage of development, and if we are not able to successfully develop and commercialize them, we may not generate sufficient revenues to continue our business operations |
| We currently have only two product candidates that are in clinical trials, and our phentolamine-based products, VASOMAX, Bimexes and ERxin, on partial clinical hold in the United States and under review in certain non-United States countries |
| Androxal is in a Phase III, 200-patient safety study in the United States for the treatment of men with testosterone deficiency, and Proellex is presently in a Phase II, 150-patient study in the United States for the treatment of uterine fibroids and in a Phase Ib/II study in Europe for the treatment of endometriosis |
| We have expended significant time, money and effort in the development of Proellex, Androxal -12- _________________________________________________________________ [60]Table of Contents and our phentolamine products, and we will have to spend considerable additional time, money and effort before seeking regulatory approval to market these product candidates |
| Our business depends primarily on our ability to successfully complete clinical trials, obtain required regulatory approvals and successfully commercialize our product candidates |
| If we fail to commercialize one or more of our product candidates, we may be unable to generate sufficient revenues to attain profitability or continue our business operations and our reputation in the industry and in the investment community could likely be significantly damaged, each of which would cause our stock price to decline |
| Because the data from preclinical studies and early clinical trials for our product candidates are not necessarily predictive of future results, we can provide no assurances that any of them will have favorable results in clinical trials or receive regulatory approval |
| Before we can obtain regulatory approval for the commercial sale of any product candidate that we wish to develop, we are required to complete preclinical development and extensive clinical trials in humans to demonstrate its safety and efficacy |
| Positive data from preclinical studies or early clinical trials should not be relied upon as evidence that those studies or trials will produce positive results, or that later or larger-scale clinical trials will succeed |
| Initial clinical trials for Proellex and Androxal have been conducted only in small numbers of patients that may not fully represent the diversity present in larger populations, and thus the limited data we have obtained may not predict results from studies in larger numbers of patients drawn from more diverse populations, and therefore may not predict the ability of Proellex to treat uterine fibroids and endometriosis or Androxal to treat testosterone deficiency |
| We will be required to demonstrate through larger-scale clinical trials that these product candidates are safe and effective for use in a diverse population before we can seek regulatory approvals for their commercial sale |
| There is typically an extremely high rate of attrition from the failure of drug candidates proceeding through clinical trials |
| We will also be required to complete a two year rat carcinogenicity study before we are permitted to file a new drug application, or NDA, for Androxal and Proellex |
| If Proellex, Androxal, or any other potential future product candidate fails to demonstrate sufficient safety and efficacy in any clinical trial, we would experience potentially significant delays in, or be required to abandon, development of that product candidate |
| If we delay or abandon our development efforts related to Proellex or Androxal, we may not be able to generate sufficient revenues to continue operations or become profitable |
| If we fail to obtain the capital necessary to fund our operations, we will have to delay, reduce or eliminate our research and development programs or commercialization efforts |
| We expect to make additional capital outlays and to increase operating expenditures over the next several years to support our preclinical development and clinical trial activities, particularly with respect to pivotal clinical trials for Proellex and Androxal |
| Our existing financial resources are expected to be sufficient to fund our operations through December 31, 2006, depending on the timing and success of our clinical trials |
| Therefore we will need to seek additional funding through public or private financings, including equity or debt financings, and/or through other means, including collaborations and license agreements |
| We do not know whether additional financing will be available when needed, or that, if available, we will obtain financing on terms favorable to our stockholders or us |
| If adequate funds are not available to us, we may be required to: • delay, reduce the scope of or eliminate one or more of our development programs; • relinquish, license or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves at an earlier stage or on terms that are less favorable than might otherwise be available; or • liquidate and dissolve our company |
| Our future capital requirements will depend upon a number of factors, including: • the size, complexity, results and timing of our clinical programs; • the cost to obtain sufficient supply of the compounds necessary for our product candidates at a reasonable cost; • the time and costs involved in obtaining regulatory approvals; • the costs involved in preparing, filing , prosecuting, maintaining, defending and enforcing patent claims; and • competing technological and market developments |
| These factors could result in variations from our currently projected operating and liquidity requirements |
| -13- _________________________________________________________________ [61]Table of Contents We have a history of operating losses, and we expect to incur increasing net losses and may not achieve or maintain profitability for some time or at all |
| We have experienced significant operating losses in each fiscal year since our inception |
| As of December 31, 2005, we had an accumulated deficit of approximately dlra94dtta1 million |
| We expect to continue incurring net losses and may not achieve or maintain profitability for some time or at all |
| As we increase expenditures for clinical development of Proellex and Androxal, we expect our operating losses to increase for at least the next few years |
| Our ability to achieve profitability will depend, among other things, on successfully completing the development of Proellex, Androxal and our phentolamine product family, obtaining regulatory approvals, establishing marketing, sales and manufacturing capabilities or collaborative arrangements with others that possess such capabilities, and raising sufficient funds to finance our activities |
| There can be no assurance that we will be able to achieve profitability or that profitability, if achieved, can be sustained |
| Raising additional funds by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders, restrict our operations or require us to relinquish propriety rights |
| We may raise additional funds through public or private equity offerings, debt financings or corporate collaborations and licensing arrangements |
| We cannot be certain that additional funding will be available on acceptable terms, or at all |
| To the extent that we raise additional capital by issuing equity securities, our stockholders’ ownership will be diluted |
| Any debt financing we enter into may involve covenants that restrict our operations |
| These restrictive covenants may include limitations on borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem capital stock or make investments |
| In addition, if we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish potentially valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us |
| For example, we might be forced to relinquish all or a portion of our sales and marketing rights with respect to Proellex, Androxal or other potential products or license intellectual property that enables licensees to develop competing products |
| We licensed our rights to Proellex from the National Institutes of Health, or NIH, and our inability to fulfill our commitments and obligations under such license may result in forfeiture of our rights |
| Our rights to Proellex are licensed exclusively to us from the NIH under a license agreement |
| This license agreement contains numerous detailed performance obligations, with time sensitive dates for compliance, relating to clinical development and commercialization activities required by us or our designated third-party providers, as well as additional financial milestones and royalties |
| Failure to achieve the benchmarks specified in the commercial development plan attached to the license agreement or meet payment obligations could result in termination of the license agreement and the loss of our rights to develop and commercialize Proellex |
| During the period when we were considering redeployment of our assets, we were not in compliance with all of the original requirements stated in the commercial development plan |
| In July 2002, the license agreement was amended to include a revision of the original commercial development plan relating to the targeted dates for certain objectives |
| Additional updates of the original commercial development plan have been reached with the NIH thereafter as development plans have evolved |
| There can be no assurance that we will be able to meet any or all of such performance objectives in the future on a timely basis or at all, or that, if we fail to meet any of such objectives, the NIH will again agree to such revised objectives |
| The NIH has the ability to terminate the agreement for failure to comply with the material terms contained in the license agreement and for other reasons as outlined in the agreement |
| Should the NIH terminate the license agreement, we would lose all rights to commercialize Proellex, which would have a material adverse effect on us |
| There is a patent holder that claims priority over our patent application for Androxal |
| A third party holds an issued patent related to the use of an anti-estrogen such as clomiphene citrate for use in the treatment of androgen deficiency and disorders related thereto |
| In our prior filings with the SEC, we have described our request to the US Patent and Trademark Office, or PTO, for re-examination of this third party’s patent based on several printed publications previously available in the public domain |
| The third party amended the claims in the reexamination proceedings, which has led the PTO to determine that the amended claims are patentable in view of the publications under consideration |
| We believe that the amended claims are invalid based on, among other things, additional prior publications not yet considered by the PTO We intend to seek further reexamination of the third party’s patent in light of a number of these publications |
| There is no assurance that the patent ultimately will be reversed |
| If such patent is not cancelled, we may then be required to obtain a license from the holder of such patent in order to develop Androxal further, and such license may not be available on acceptable terms or at all |
| In this case, we may not be able to develop or commercialize Androxal |
| We cannot assure that our manufacture, use or sale of our product candidates will not infringe on the patent rights of others |
| There can be no assurance that the manufacture, use or sale of any of our product candidates will not infringe the patent rights of others |
| We may be unable to avoid infringement of the patent rights of others and may be required to seek a license, defend an infringement action or challenge the validity of the patents in court |
| There can be no assurance that a license to the allegedly infringed -14- _________________________________________________________________ [62]Table of Contents patents will be available to us on terms and conditions acceptable to us, if at all, or that we will prevail in any patent litigation |
| Patent litigation is extremely costly and time-consuming, and there can be no assurance that we will have sufficient resources to defend any possible litigation related to such infringement |
| If we do not obtain a license on acceptable terms under such patents, or are found liable for infringement, or are not able to have such patents declared invalid, we may be liable for significant money damages, may encounter significant delays in bringing our product candidates to market, or may be precluded from participating in the manufacture, use or sale of any such product candidates, any of which would materially and adversely affect our business |
| We face substantial uncertainty in our ability to protect our patents and proprietary technology |
| Our ability to commercialize our products will depend, in part, on our or our licensors’ ability to obtain patents, to enforce those patents and preserve trade secrets, and to operate without infringing on the proprietary rights of others |
| The patent positions of biopharmaceutical companies are highly uncertain and involve complex legal and factual questions |
| There can be no assurance that: • patent applications for our product Androxal will result in issued patents; • patent protection will be secured for any particular technology; • any patents that have been or may be issued to us, such as our pending patent application for Androxal, or our licensors, such as the patent(s) and application(s) underlying our Proellex compound, when issued, will be valid or enforceable; • any patents will provide meaningful protection to us; • others will not be able to design around the patents; or • our patents will provide a competitive advantage or have commercial application |
| The failure to obtain and maintain adequate patent protection would have a material adverse effect on us and may adversely affect our ability to enter into, or affect the terms of, any arrangement for the marketing of any product |
| We cannot assure that our patents will not be challenged by others |
| We could incur substantial costs in proceedings, including interference proceedings before the PTO and comparable proceedings before similar agencies in other countries in connection with any claims that may arise in the future |
| These proceedings could result in adverse decisions about the patentability of our or our licensors’ inventions and products, as well as about the enforceability, validity or scope of protection afforded by the patents |
| Any adverse decisions about the patentability of our product candidates could cause us to either lose rights to develop and commercialize our product candidates or to license such rights at substantial cost to us |
| In addition, even if we were successful in such proceedings, the cost and delay of such proceedings would most likely have a material adverse effect on our business |
| Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information, may not adequately protect our intellectual property, and will not prevent third parties from independently discovering technology similar to or in competition with our intellectual property |
| We rely on trade secrets and other unpatented proprietary information in our product development activities |
| To the extent we rely on trade secrets and unpatented know-how to maintain our competitive technological position, there can be no assurance that others may not independently develop the same or similar technologies |
| We seek to protect trade secrets and proprietary knowledge, in part, through confidentiality agreements with our employees, consultants, advisors, collaborators and contractors |
| Nevertheless, these agreements may not effectively prevent disclosure of our confidential information and may not provide us with an adequate remedy in the event of unauthorized disclosure of such information |
| If our employees, scientific consultants, advisors, collaborators or contractors develop inventions or processes independently that may be applicable to our technologies, product candidates or products, disputes may arise about ownership of proprietary rights to those inventions and processes |
| Such inventions and processes will not necessarily become our property, but may remain the property of those persons or their employers |
| Protracted and costly litigation could be necessary to enforce and determine the scope of our proprietary rights |
| If we fail to obtain or maintain trade secret protection for any reason, the competition we face could increase, reducing our potential revenues and adversely affecting our ability to attain or maintain profitability |
| Delays in the commencement of clinical testing of our current and potential product candidates could result in increased costs to us and delay our ability to generate revenues |
| Our product candidates will require continued preclinical testing and extensive clinical trials prior to the submission of a regulatory application for commercial sales |
| We recently commenced our Phase III clinical trial for Androxal in the United States for -15- _________________________________________________________________ [63]Table of Contents the treatment of men with testosterone deficiency and our Phase II clinical trial for Proellex in the United States for the treatment of symptoms associated with uterine fibroids |
| We also recently commenced a Phase II clinical trial in Europe for the treatment of women suffering from endometriosis |
| We have limited experience conducting clinical trials for these product candidates |
| In part, because of this limited experience, we do not know whether future planned clinical trials will begin on time, if at all |
| Delays in the commencement of clinical testing could significantly increase our product development costs and delay any product commercialization |
| In addition, many of the factors that may cause, or lead to, a delay in the commencement of clinical trials may also ultimately lead to denial of regulatory approval of a product candidate |
| The commencement of clinical trials can be delayed for a variety of reasons, including delays in: • conducting and completing a two-year rat carcinogenicity study required by the FDA prior to submission of an NDA for Androxal and Proellex; • demonstrating sufficient safety and efficacy in past clinical trials to obtain regulatory approval to commence a further clinical trial; • reaching agreement on acceptable terms with prospective contract manufacturers for manufacturing sufficient quantities of a product candidate; and • obtaining institutional review board approval to conduct a clinical trial at a prospective site |
| In addition, the commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites, the availability of effective treatments for the relevant disease, and the eligibility criteria for the clinical trial |
| Delays in the completion of, or the termination of, clinical testing of our current and potential product candidates could result in increased costs to us, and could delay or prevent us from generating revenues |
| Once a clinical trial has begun, it may be delayed, suspended or terminated by us or the FDA, or other regulatory authorities due to a number of factors, including: • ongoing discussions with the FDA or other regulatory authorities regarding the scope or design of our clinical trials; • the FDA may not accept data obtained from clinical studies conducted in Europe or other non-United States jurisdictions as meeting all applicable FDA clinical trial standards; • lower than anticipated retention rate of patients in clinical trials; • inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold; • lack of adequate funding to continue clinical trials; • insufficient supply or deficient quality of drug candidates or other materials necessary for the conduct of our clinical trials; or • serious adverse events or other undesirable drug-related side effects experienced by participants |
| Many of these factors that may lead to a delay, suspension or termination of clinical testing of a current or potential product candidate may also ultimately lead to denial of regulatory approval of a current or potential product candidate |
| We experienced a clinical hold beginning in 1999 during our development of VASOMAX, which has resulted in our delaying development of that product candidate |
| We have not yet been able to have the partial clinical hold removed |
| In addition, while VASOMAX was previously approved in eight countries in Latin America, such approval is not current |
| We cannot assure that we will be able to (i) have the partial clinical hold removed by the FDA in the United States, (ii) develop VASOMAX or our other phentolamine-based products to a point where they are attractive acquisition candidates by third parties or (iii) re-establish approval status in any of the Latin American countries in which we were previously approved |
| If we experience delays in the completion of, or termination of, clinical testing of any product candidates in the future, our financial results and the commercial prospects for our product candidates will be harmed, and our ability to generate product revenues will be delayed |
| -16- _________________________________________________________________ [64]Table of Contents Even if we successfully complete clinical trials for Proellex and Androxal, there are no assurances that we will be able to submit, or obtain FDA approval of, a new drug application |
| There can be no assurance that, if our clinical trials for Proellex and Androxal are successfully completed, we will be able to submit a new drug application, or NDA, to the FDA or that any NDA we submit will be approved by the FDA in a timely manner, if at all |
| After completing clinical trials for a product candidate in humans, a drug dossier is prepared and submitted to the FDA as an NDA, and includes all preclinical and clinical trial data that clearly establish both short-term and long-term safety, as well as carcinogenicity studies for a product candidate that will be used as a chronic treatment, and data that establishes the statistically significant efficacy of a product candidate, in order to allow the FDA to review such drug dossier and to consider a product candidate for approval for commercialization in the United States |
| If we are unable to submit an NDA with respect to Proellex or Androxal, or if any NDA we submit is not approved by the FDA, we will be unable to commercialize that product |
| The FDA can and does reject NDAs and requires additional clinical trials, even when drug candidates perform well or achieve favorable results in large-scale Phase III clinical trials |
| If we fail to commercialize Proellex or Androxal, we may be unable to generate sufficient revenues to continue operations or attain profitability and our reputation in the industry and in the investment community would likely be damaged |
| If commercialized, our product candidates may not be approved for sufficient governmental or third-party reimbursements, which would adversely affect our ability to market our product candidates |
| In the United States and elsewhere, sales of pharmaceutical products depend in significant part on the availability of reimbursement to the consumer from third-party payers, such as government and private insurance plans |
| Since we have no commercial products, we have not had to face this issue yet; however, third-party payers are increasingly challenging the prices charged for medical products and services |
| It will be time consuming and expensive for us to go through the process of seeking reimbursement from Medicaid, Medicare and private payers for Proellex and Androxal |
| Our products may not be considered cost effective, and coverage and reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable basis |
| The passage of the Medicare Prescription Drug and Modernization Act of 2003 imposes new requirements for the distribution and pricing of prescription drugs which may negatively affect the marketing of our potential products |
| If we successfully develop products but those products do not achieve and maintain market acceptance, our business will not be profitable |
| Even if our product candidates are approved for commercial sale by the FDA or other regulatory authorities, the degree of market acceptance of any approved product by physicians, healthcare professionals and third-party payers and our profitability and growth will depend on a number of factors, including: • relative convenience and ease of administration; • the prevalence and severity of any adverse side effects; • availability, effectiveness and cost of alternative treatments; • pricing and cost effectiveness of our drugs; • effectiveness of our or our collaborators’ sales and marketing strategies; and • our ability to obtain sufficient third-party insurance coverage or reimbursement |
| If Proellex does not provide a treatment regimen that is more beneficial than Lupron, a GnRH agonist and the current therapeutic standard of care for uterine fibroids, or otherwise provide patient benefit, it likely will not be accepted favorably by the market |
| Similarly, if Androxal does not provide a treatment regime that is more beneficial than Androgel, the current standard of care for the treatment of testosterone deficiency, or otherwise provide patient benefit, it likely will not be accepted favorably by the market |
| And if VASOMAX, Bimexes or ERxin do not provide a treatment regime more beneficial than Viagra, Cialis or other drugs already on the market for male erectile dysfunction, they will likely not be accepted favorably by the market |
| If any products we may develop do not achieve market acceptance, then we will not generate sufficient revenue to achieve or maintain profitability |
| In addition, even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if: • new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete; • unforeseen complications arise with respect to use of our products; or -17- _________________________________________________________________ [65]Table of Contents • sufficient third-party insurance coverage or reimbursement does not remain available |
| We currently rely on third-party manufacturers and other third parties for production of our product candidates, and our dependence on these manufacturers may impair the development of our product candidates |
| Currently, we do not have the ability internally to manufacture the product candidates that we need to conduct our clinical trials |
| We have entered into purchase orders with third-party manufacturers to produce our supplies of Proellex and Androxal; however, we have no long-term contracts with suppliers of either product candidate |
| To date, other than some initial amounts from the NIH, we have obtained all of our supply of Proellex for our clinical trials from Bridge Organics pursuant to purchase orders on an as needed basis |
| We are in the process of identifying a manufacturer for a long-term supply contract of Proellex |
| There are several potential manufacturers capable of manufacturing Proellex |
| However, there can be no assurance that we will be able to successfully negotiate a long-term agreement with any of such potential manufacturers at a reasonable price and on other acceptable terms or that any potential manufacturer will be able to reproduce the results obtained by Bridge Organics in manufacturing Proellex to date |
| We have not faced any material problems with BioVectra in supplying us with our necessary quantities of Androxal for our clinical trials and anticipate utilizing them for commercial production if Androxal is approved |
| There are numerous other suitable manufacturers capable of manufacturing Androxal |
| For the foreseeable future, we expect to continue to rely on third-party manufacturers and other third parties to produce, package and store sufficient quantities of Proellex, Androxal and any future product candidates for use in our clinical trials |
| These product candidates are complicated and expensive to manufacture |
| If our third-party manufacturers fail to deliver our product candidates for clinical use on a timely basis, with sufficient quality, and at commercially reasonable prices, we may be required to delay or suspend clinical trials or otherwise discontinue development and production of our product candidates |
| While we may be able to identify replacement third-party manufacturers or develop our own manufacturing capabilities for these product candidates, this process would likely cause a delay in the availability of our product candidates and an increase in costs |
| We may also be required to enter into long-term manufacturing agreements that contain exclusivity provisions and/or substantial termination penalties |
| In addition, third-party manufacturers may have a limited number of facilities in which our product candidates can be produced, and any interruption of the operation of those facilities due to events such as equipment malfunction or failure or damage to the facility by natural disasters could result in the cancellation of shipments, loss of product in the manufacturing process or a shortfall in available product candidates |
| We also depend on outside vendors for the supply of the active pharmaceutical ingredients and raw materials used to produce our product candidates |
| Although we believe there are numerous third-party suppliers available, if our current third-party suppliers were to cease production or otherwise fail to supply us with quality raw materials and we were unable to contract on acceptable terms for these raw materials with alternative suppliers, our ability to have our product candidates manufactured and to conduct preclinical testing and clinical trials of our product candidates would be adversely affected |
| Our product candidates have only been manufactured in small quantities to date, and we may face delays or complications in manufacturing quantities of our product candidates in sufficient quantities to meet the demands of late stage clinical trials and marketing |
| We cannot assure that we will be able to successfully increase the manufacturing capacity or scale-up manufacturing volume per batch, whether on our own or in reliance on third-party manufacturers, for any of our product candidates in a timely or economical manner, or at all |
| To date our non-phentolamine-based product candidates have been manufactured exclusively by third parties in small quantities for pre-clinical and clinical trials |
| We will need to arrange for the production of significantly larger quantities of such product candidates for future clinical trials and for future commercial sale in the event that our product candidates are approved by the FDA or foreign regulatory bodies |
| Significant scale-up of manufacturing may require certain additional validation studies, which the FDA must review and approve |
| If we or our third-party manufacturers are unable to successfully increase the manufacturing capacity for a product candidate, the regulatory approval or commercial launch of that product candidate may be delayed or there may be a shortage in supply of that product candidate |
| Our product candidates require precise, high-quality manufacturing which may not be available at acceptable costs |
| Proellex and Androxal are novel compounds that have never been produced in large scale |
| As in the development of any new compound, there are underlying risks associated with its manufacture |
| These risks include, but are not limited to, cost, process scale-up, process reproducibility, construction of a suitable process plant, timely availability of raw materials, as well as regulatory issues associated with the manufacture of an active pharmaceutical agent |
| Any of these risks may prevent us from successfully developing Proellex or Androxal |
| Our failure, or the failure of our third-party manufacturers to achieve and maintain these high manufacturing standards, including the incidence of manufacturing errors and reliable product packaging for diverse environmental conditions, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously hurt our business |
| -18- _________________________________________________________________ [66]Table of Contents We may experience delays in the development of our product candidates if the third-party manufacturers of our product candidates cannot meet FDA requirements relating to Good Manufacturing Practices |
| Our third-party manufacturers are required to produce our product candidates under FDA current Good Manufacturing Practices in order to meet acceptable standards for our clinical trials |
| If such standards change, the ability of third-party manufacturers to produce our product candidates on the schedule we require for our clinical trials may be affected |
| In addition, third-party manufacturers may not perform their obligations under their agreements with us or may discontinue their business before the time required by us to gain approval for or commercialize our product candidates |
| Any difficulties or delays in the manufacturing and supply of our product candidates could increase our costs or cause us to lose revenue or postpone or cancel clinical trials |
| The FDA also requires that we demonstrate structural and functional comparability between the same drug product produced by different third-party manufacturers |
| Because we may use multiple sources to manufacture Proellex and Androxal, we may need to conduct comparability studies to assess whether manufacturing changes have affected the product safety, identity, purity or potency of any commercial product candidate compared to the product candidate used in clinical trials |
| If we are unable to demonstrate comparability, the FDA could require us to conduct additional clinical trials, which would be expensive and significantly delay commercialization of our product candidates |
| We rely on third parties to conduct clinical trials for our product candidates, and their failure to timely and properly perform their obligations may result in costs and delays that prevent us from obtaining regulatory approval or successfully commercializing our product candidates |
| We rely on independent contractors, including researchers at clinical research organizations and universities, in certain areas that are particularly relevant to our research and product development plans, such as the conduct of clinical trials |
| Pharm-Olam International Ltd |
| conducted our previous clinical trial in Poland for Proellex for the treatment of uterine fibroids and has been engaged to conduct our clinical trials in the United States for Proellex for uterine fibroids and Androxal for the treatment of testosterone deficiency |
| The competition for these relationships is intense, and we may not be able to maintain our relationships with them on acceptable terms |
| Independent contractors generally may terminate their engagements at any time, subject to notice |
| As a result, we can control their activities only within certain limits, and they will devote only a certain amount of their time conducting research on and trials of our product candidates and assisting in developing them |
| If they do not successfully carry out their duties under their agreements with us, fail to inform us if these trials fail to comply with clinical trial protocols, or fail to meet expected deadlines, our clinical trials may need to be extended, delayed or terminated |
| We may not be able to enter into replacement arrangements without undue delays or excessive expenditures |
| If there are delays in testing or regulatory approvals as a result of the failure to perform by our independent contractors or other outside parties, our drug development costs will increase and we may not be able to attain regulatory approval for or successfully commercialize our product candidates |
| Our liability insurance may not provide adequate coverage nor may it always be available on favorable terms or at all |
| Proellex, Androxal and the phentolamine-based product family have not been approved for commercial sale |
| However, the current and future use of our product candidates by us and potential corporate collaborators in clinical trials, and the sale of any approved products in the future, may expose us to liability claims |
| These claims might be made directly by consumers or healthcare providers or indirectly by pharmaceutical companies, potential corporate collaborators or others selling such products |
| We may experience financial losses in the future due to product liability claims |
| We have obtained limited general commercial liability insurance coverage for our clinical trials |
| We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates |
| However, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses |
| If a successful product liability claim or series of claims is brought against us for uninsured liabilities or for liabilities in excess of our insurance limits, our assets may not be sufficient to cover such claims and our business operations could be impaired |
| We face significant competition with many companies with substantially greater resources than we have and other possible advantages |
| We are engaged in biopharmaceutical product development, an industry that is characterized by extensive research efforts and rapid technological progress |
| The biopharmaceutical industry is also highly competitive |
| Our success will depend on our ability to acquire, develop and commercialize products and our ability to establish and maintain markets for any products for which we receive marketing approval |
| Potential competitors in North America, Europe and elsewhere include major pharmaceutical companies, specialty pharmaceutical companies and biotechnology firms, universities and other research institutions and government agencies |
| Many of our competitors have substantially greater research and development and regulatory capabilities and experience, and substantially greater management, manufacturing, distribution, marketing and financial resources, than we do |
| Accordingly, our competitors may: -19- _________________________________________________________________ [67]Table of Contents • develop or license products or other novel technologies that are more effective, safer or less costly than the product candidates that we are developing; • obtain regulatory approval for products before we do; or • commit more resources than we can to developing, marketing and selling competing products |
| The main therapeutic products competitive with Proellex for the treatment of uterine fibroids and endometriosis are GnRH agonists, including Lupron, which is marketed by TAP Pharmaceuticals |
| There are additional companies developing similar progesterone-blocking technology |
| Asoprisnil, an anti-progestin being developed by TAP Pharmaceuticals in partnership with Schering AG, is currently in Phase III clinical trials |
| TAP Pharmaceuticals is a much larger company than we are with greater resources and greater ability to promote their products than we currently have |
| In addition, surgical treatment of both uterine fibroids and endometriosis competes with Proellex by removing uterine fibroids and by removing misplaced tissue in women with endometriosis |
| Our main competitors for the treatment of testosterone deficiency are the testosterone replacement therapies currently being marketed |
| The current standard of care is Androgel, a topical gel for the replacement of testosterone developed by Solvay Pharmaceuticals |
| Solvay is a much larger company than we are with greater resources and marketing ability |
| Androxal would also compete with other forms of testosterone replacement therapies such as oral treatments, patches, injectables and a tablet applied to the upper gum |
| There is another topical gel currently marketed by Auxilium Pharmaceuticals called Testim, and a transdermal patch marketed by Watson Pharmaceuticals called AndroDerm |
| There can be no assurance that our product candidates will be more successful than competitive products |
| In addition, other potential competitors may be developing testosterone therapies similar to ours |
| The erectile dysfunction market is well established and intensely competitive |
| Our main competitors are already existing products such as Viagra^®, which is marketed by Pfizer; Levitra^®, which is being marketed by Bayer AG outside the United States and GlaxoSmithKline and Schering-Plough Corporation in the United States; and Cialis, which is being marketed by Icos Lilly |
| In addition, there are several other biopharmaceutical companies that are also developing products that would directly compete with our phentolamine-based products |
| We are thinly staffed and highly dependent on a limited number of management persons and key personnel, and if we lose these members of our team or are unable to attract and retain additional qualified personnel, our future growth and ability to compete would suffer |
| The competition for qualified personnel in the biopharmaceutical field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees |
| We have only 6 full-time employees at the present time, including our President and CEO, Joseph S Podolski, and our Vice President, Business Development and CFO, Louis Ploth, Jr |
| We are highly dependent on Messrs |
| Podolski and Ploth for the management of our company and the development of our technologies |
| Both Messrs |
| Podolski and Ploth have employment agreements with us |
| Podolski and Ploth will remain with us through development of our current product candidates |
| We do not maintain key person life insurance on any of our directors, officers or employees |
| Podolski or Mr |
| Ploth could delay or curtail our research and product development efforts |
| Additionally, in order to commercialize our products successfully, we will be required to expand our workforce, particularly in the areas of clinical trials management, regulatory affairs, business development, sales and marketing and administrative and accounting functions |
| These activities will require the addition of new personnel and the development of additional expertise by management |
| We face intense competition for qualified individuals from numerous biopharmaceutical companies, as well as academic and other research institutions |
| Our intention is to hire up to seven employees over the next two years |
| To the extent we are not able to attract and retain employees on favorable terms; we may face delays in the development or commercialization of our product candidates and extensive costs in retaining current employees or searching for and training new employees |
| Our plan to use collaborations to leverage our capabilities may not be successful |
| As part of our business strategy, we intend to enter into collaboration arrangements with strategic partners to develop and commercialize our product candidates |
| For our collaboration efforts to be successful, we must identify partners whose competencies complement ours |
| We must also successfully enter into collaboration agreements with them on terms attractive to us and integrate and coordinate their resources and capabilities with our own |
| We may be unsuccessful in entering into collaboration agreements with acceptable partners or negotiating favorable terms in these agreements |
| In addition, we may face a disadvantage in seeking to enter into or negotiating collaborations with potential partners because other potential collaborators may have greater management and financial resources than we do |
| Also, we may be unsuccessful in integrating the resources or capabilities of these collaborators |
| In addition, our collaborators may prove difficult to work with or less skilled than we originally expected |
| If we are unsuccessful in our collaborative efforts, our ability to develop and market product candidates could be severely limited |
| -20- _________________________________________________________________ [68]Table of Contents Healthcare reform measures could adversely affect our business |
| The business and financial condition of pharmaceutical companies are affected by the efforts of governmental and third-party payers to contain or reduce the costs of healthcare |
| In the United States and in foreign jurisdictions there have been, and we expect that there will continue to be, a number of legislative and regulatory proposals aimed at changing the healthcare system |
| For example, in some countries other than the United States, pricing of prescription drugs is subject to government control, and we expect proposals to implement similar controls in the United States to continue |
| The pendency or approval of such proposals could result in a decrease in our stock price or limit our ability to raise capital or to obtain strategic collaborations or licenses |
| We face high volatility in our stock price |
| We are a development stage company and the market prices for securities of development companies in the biotechnology sector have been highly volatile and may continue to be very volatile in the future |
| The following listed factors as well as other factors may have a significant impact on the price of our common stock: • announcements of technology innovations and new products developed by other competitors; • developments relating to proprietary rights and patents; • publicity relating to actual or potential medical results relating to products under development or being commercialized by our other competitors; • regulatory developments concerning our products in the United States and foreign countries; • issues concerning the safety of our products in development or similar products being developed by our competitors; and • economic and other external factors or a disaster or crisis |