| DENDREON CORP ITEM 1A RISK FACTORS You should carefully consider each of the risks and uncertainties we describe below and all of the other information in this annual report |
| The risks and uncertainties we describe below are not the only ones we face |
| Additional risks and uncertainties of which we are currently unaware or that we currently believe to be immaterial may also adversely affect our business |
| Risks Relating to our Clinical and Commercialization Pursuits Our near-term prospects are highly dependent on Provenge, our lead product candidate |
| If we fail to obtain FDA approval for Provenge or fail to successfully commercialize Provenge, our business would be harmed and our stock price would likely decline |
| Our most advanced product candidate is Provenge, an active immunotherapy for advanced prostate cancer |
| FDA approval of Provenge depends on, among other things, our successful preparation and submission of a BLA based on the data from our completed Phase 3 clinical trials, manufacturing protocol and controls, and composition of the product and the FDA finding the data sufficient to support approval |
| We plan to submit a BLA for Provenge based primarily on the demonstration of a survival benefit over placebo with asymptomatic, metastatic androgen-independent prostate cancer in a Phase 3 study, D9901, as well as supportive evidence on survival from another Phase 3 study, D9902A Although the FDA has indicated that the survival benefit observed in the D9901 study in conjunction with the supportive data obtained from study D9902A and the absence of significant toxicity in both studies is sufficient to serve as the clinical basis of a BLA submission for Provenge, the FDA may ultimately determine the data from these two studies fails to provide sufficient evidence of efficacy for Provenge and may require that we provide data from ongoing clinical trials, or commence additional trials to provide further supporting clinical data and/or testing in a wider patient population |
| Survival was not originally a primary or secondary endpoint in either of these studies |
| Neither study achieved statistical significance on its prespecified primary endpoint, time to disease progression |
| In addition, our D9902A Phase 3 study did not show a statistically significant improvement in survival over placebo in a log-rank analysis |
| For example, the CMC portion of our BLA is dependent on the readiness of our manufacturing facility in New Jersey, as well as approval of the facility of Diosynth, our third-party component manufacturer for the Antigen Delivery Cassette used in the preparation of Provenge |
| Difficulties or delays in qualification of these facilities, or in the manufacture or supply of necessary components for the manufacture of Provenge could significantly delay the application process for our BLA Even if we receive FDA approval, we might not be successful in commercializing Provenge |
| If any of these things occur, our business would be harmed and the price of our common stock would likely decline |
| Provenge and our other product candidates are based on novel technologies, which may raise new regulatory issues that could delay or make FDA approval more difficult |
| The process of obtaining required FDA and other regulatory approvals, including foreign approvals, is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved |
| Provenge and our other investigational active immunotherapies are novel; therefore, regulatory agencies may lack experience with them, which may lengthen the regulatory review process, increase our development costs and delay or prevent commercialization of Provenge and our other active immunotherapy products under development |
| To date, the FDA has not approved for commercial sale in the United States any active immunotherapy designed to stimulate an immune response against cancer |
| Consequently, there is no precedent for the successful commercialization of products based on our technologies in this area |
| In addition, we have had only limited experience in filing and pursuing the applications necessary to gain regulatory approvals for marketing and 16 ______________________________________________________________________ commercial sale, which may impede our ability to obtain FDA approvals |
| We will not be able to commercialize any of our potential products until we obtain FDA approval |
| If testing of a particular product candidate does not yield successful results, then we will be unable to commercialize that product |
| Our product candidates in clinical trials must meet rigorous testing standards |
| We must demonstrate the safety and efficacy of our potential products through extensive preclinical and clinical testing |
| Clinical trials are subject to continuing oversight by governmental regulatory authorities and institutional review boards and must meet the requirements of these authorities in the United States, including those for informed consent and good clinical practices |
| We may not be able to comply with these requirements, which could disqualify completed or ongoing clinical trials |
| We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of Provenge or our other product candidates, including the following: • safety and efficacy results from human clinical trials may show the product candidate to be less effective or safe than desired or those results may not be replicated in later clinical trials; • the results of preclinical studies may be inconclusive or they may not be indicative of results that will be obtained in human clinical trials; • after reviewing relevant information, including preclinical testing or human clinical trial results, we or our collaborators may abandon or substantially restructure projects that we might previously have believed to be promising; • we, our collaborators or the FDA may suspend or terminate clinical trials if the participating patients are being exposed to unacceptable health risks or for other reasons; and • the effects of our product candidates may not be the desired effects or may include undesirable side effects or other characteristics that interrupt, delay or cause us, our collaborators or the FDA to halt clinical trials or cause the FDA or foreign regulatory authorities to deny approval of the product candidate for any or all target indications |
| Data from our clinical trials may not be sufficient to support approval by the FDA for Provenge or our other product candidates |
| The clinical trials of Provenge or our other product candidates may not be completed as or when planned, and the FDA may not approve any of our product candidates for commercial sale |
| If we fail to demonstrate the safety or efficacy of a product candidate to the satisfaction of the FDA, this will delay or prevent regulatory approval of that product candidate |
| Therefore, any delay in obtaining, or inability to obtain, FDA approval of any of our product candidates could materially harm our business and cause our stock price to decline |
| The FDA or its Advisory Committee may determine our clinical trials data regarding safety or efficacy are insufficient for regulatory approval |
| We discuss with and obtain guidance from regulatory authorities on certain of our clinical development activities |
| These discussions are not binding obligations on the part of regulatory authorities |
| Under certain circumstances, regulatory authorities may revise or retract previous guidance during the course of our clinical activities or after the completion of our clinical trials |
| The FDA may also disqualify a clinical trial in whole or in part from consideration in support of approval of a potential product for commercial sale or otherwise deny approval of that product |
| Even if we obtain successful clinical safety and efficacy data, we may be required to conduct additional, expensive trials to obtain regulatory approval |
| Prior to regulatory approval, the FDA may elect to obtain advice from outside experts regarding scientific issues and/or marketing applications under FDA review |
| These outside experts are convened through the FDA’s Advisory Committee process |
| An Advisory Committee will report to the FDA and make recommendations |
| Views of the Advisory Committee may differ 17 ______________________________________________________________________ from those of the FDA We will not know whether Provenge will be reviewed by an Advisory Committee until sometime during the FDA’s review of our BLA for Provenge |
| If Provenge is reviewed by an Advisory Committee, we may experience delays in obtaining approval by the FDA because of the time associated with the Advisory Committee’s process, or we may not obtain approval of the BLA from the FDA because the Advisory Committee advises against it |
| We may take longer to complete our clinical trials than we project, or we may not be able to complete them at all |
| A number of factors, including unexpected delays in the initiation of clinical sites, slower than projected enrollment, competition with ongoing clinical trials and scheduling conflicts with participating clinicians, regulatory requirements, limits on manufacturing capacity and failure of a product candidate to meet required standards for administration to humans may cause significant delays in the completion of our clinical trials |
| In addition, it may take longer than we project to achieve study endpoints and complete data analysis for a trial |
| Even if our product candidates proceed successfully through clinical trials and receive regulatory approval, there is no guarantee that an approved product can be manufactured in commercial quantities at reasonable cost or that such a product will be successfully marketed |
| We rely on academic institutions, physician practices and clinical research organizations to conduct, supervise or monitor some or all aspects of clinical trials involving our product candidates |
| We have less control over the timing and other aspects of these clinical trials than if we conducted the monitoring and supervision entirely on our own |
| Third parties may not perform their responsibilities for our clinical trials on our anticipated schedule or consistent with a clinical trial protocol or applicable regulations |
| We also rely on clinical research organizations to perform much of our data management and analysis |
| They may not provide these services as required or in a timely manner |
| If we fail to commence, complete or experience delays in any of our other present or planned clinical trials, our ability to conduct our business as currently planned could materially suffer |
| Our development costs will increase if we experience delays in our ability to submit a BLA for Provenge or if we are required to complete additional or larger clinical trials for Provenge prior to FDA approval or with respect to other product candidates |
| If the delays or costs are significant, our financial results and our ability to commercialize Provenge or our other product candidates will be adversely affected |
| If we encounter difficulties enrolling patients in our clinical trials, our trials could be delayed or otherwise adversely affected |
| Clinical trials for our product candidates may require that we identify and enroll a large number of patients with the disease under investigation |
| We may not be able to enroll a sufficient number of patients to complete our clinical trials in a timely manner |
| We have in the past experienced some difficulty in enrollment in our clinical trials due to the criteria specified for eligibility for these trials, and we may encounter these difficulties in our ongoing clinical trials for Provenge or our other product candidates |
| Patient enrollment is affected by factors including: • design of the trial protocol; • the size of the patient population; • eligibility criteria for the study in question; • perceived risks and benefits of the product candidate under study; • availability of competing therapies and clinical trials; • efforts to facilitate timely enrollment in clinical trials; 18 ______________________________________________________________________ • patient referral practices of physicians; • the ability to monitor patients adequately during and after treatment; and • proximity and availability of clinical trial sites for prospective patients |
| If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing or planned clinical trials, either of which would have a negative effect on our business |
| We must expand our operations to commercialize our products, which we may not be able to do |
| We will need to expand and effectively manage our operations and facilities and develop the necessary infrastructure to commercialize Provenge and pursue development of our other product candidates |
| We will need to add manufacturing capabilities, information technology systems, a distribution network and personnel related to these functions |
| In August 2005, we entered into an agreement to lease a facility in New Jersey that will provide manufacturing capabilities and related supporting facilities, as well as clean rooms, the build-out of which is estimated to extend through mid-2006 |
| This facility will be inspected by the FDA as part of the BLA review |
| We will also need to add quality control, quality assurance, marketing and sales personnel, and personnel in all other areas of our operations, which may strain our existing managerial, operational, financial and other resources |
| Our failure to ready our manufacturing facilities on a timely basis during 2006 could delay our submission of the CMC portion of our BLA and effect the overall timing of the submission of a completed BLA We have no experience in commercial-scale manufacturing, the installation and management of large-scale information technology systems, or the management of a large-scale distribution network |
| We also have no experience in sales, marketing or distribution of products in commercial quantities |
| As we begin to build our sales capability in anticipation of the approval and commercial launch of Provenge, we may be unable to successfully recruit an adequate number of qualified sales representatives or retain a third party to provide sales, marketing or distribution resources |
| If we fail to manage our growth effectively, recruit required personnel or expand our operations within our planned time and budget, our product development and commercialization efforts for Provenge or our other product candidates could be curtailed or delayed |
| Risks Relating to our Financial Position and Need for Additional Financing We have a history of operating losses |
| We expect to continue to incur losses for the near future, and we may never become profitable |
| At December 31, 2005, we had an accumulated deficit of dlra300dtta7 million |
| We do not have any products that generate revenue from commercial product sales |
| Operating losses have resulted principally from costs incurred in pursuing our research and development programs, clinical trials, manufacturing, marketing and general and administrative expenses in support of operations |
| We do not expect to achieve commercial product sales during the next year, and we may never achieve this goal |
| We expect to incur additional operating losses over the next few years, and these losses may increase significantly as we continue preclinical research and clinical trials, apply for regulatory approvals, expand our operations and develop the manufacturing and marketing infrastructure to support commercialization of Provenge and our other potential product candidates |
| These losses have caused and may continue to cause our stockholders’ equity and working capital to decrease |
| We may not be successful in commercializing any of our product candidates, and our operations may not be profitable even if any of our product candidates are commercialized |
| 19 ______________________________________________________________________ We are likely to require additional funding, and our future access to capital is uncertain |
| It is expensive to develop and commercialize cancer immunotherapy, monoclonal antibody and small molecule product candidates |
| We plan to continue to simultaneously conduct clinical trials and preclinical research for a number of product candidates |
| Our product development efforts may not lead to commercial products, either because our product candidates fail to be found safe or effective in clinical trials or because we lack the necessary financial or other resources or relationships to pursue our programs through commercialization |
| Even if commercialized, a product may not achieve revenues that exceed the costs of producing and selling it |
| Our capital and future cash flow may not be sufficient to support the expenses of our operations and we may need to raise additional capital depending on a number of factors, including the following: • timing of preparing and supporting a BLA for FDA approval of Provenge; • the costs of developing the manufacturing, marketing and other supporting resources and systems to support FDA approval of Provenge; • our timetable and costs for the development of marketing, manufacturing, information technology and other infrastructure and activities related to the commercialization of Provenge; • the rate of progress and cost of our research and development and clinical trial activities; • the amount and timing of payments we receive from collaborators or changes in or terminations of our existing collaboration and licensing arrangements; • the introduction of competing products and other adverse market developments; and • whether we enter into a collaboration for the commercialization of Provenge |
| We may not be able to obtain additional financing on favorable terms or at all |
| If we are unable to raise additional funds, we may have to delay, reduce or eliminate some of our clinical trials and our development programs |
| If we raise additional funds by issuing equity securities, further dilution to our existing stockholders will result |
| We may elect to issue additional shares of our common stock, which could result in further dilution to our existing stockholders |
| We may sell up to dlra98dtta2 million of our common stock under our outstanding shelf registration statement |
| Future sales under this or any future shelf registration statement will depend primarily on the market price of our common stock, the interest in our company by institutional investors and our cash needs |
| In addition, we may register additional shares with the SEC for sale in the future |
| Each of our issuances of common stock to investors under a registration statement or otherwise will proportionately decrease our existing stockholders’ percentage ownership of our total outstanding equity interests and may reduce our stock price |
| Risks Related to Regulation of our Industry The industry within which we operate and our business is subject to extensive regulation, which is costly, time consuming and may subject us to unanticipated delays |
| Our business, including preclinical studies, clinical trials and manufacturing, is subject to extensive regulation by the FDA and comparable authorities outside the United States |
| Preclinical studies involve laboratory evaluation of product characteristics and animal studies to assess the efficacy and safety of a potential product |
| The FDA regulates preclinical studies under a series of regulations called the current Good Laboratory Practices |
| If we violate these regulations, the FDA, in some cases, may not accept the studies and require that we replicate those studies |
| 20 ______________________________________________________________________ An IND must become effective before human clinical trials may commence |
| The IND application is automatically effective 30 days after receipt by the FDA unless, before that time, the FDA raises concerns or questions about the product’s safety profile or the design of the trials as described in the application |
| In the latter case, any outstanding concerns must be resolved with the FDA before clinical trials can proceed |
| Thus, the submission of an IND may not result in FDA authorization to commence clinical trials in any given case |
| After authorization is received, the FDA retains authority to place the IND, and clinical trials under that IND, on clinical hold |
| If we are unable to commence clinical trials or clinical trials are delayed indefinitely, we would be unable to develop our product candidates and our business would be materially harmed |
| Commercialization of our product candidates in the United States requires FDA approval, which may not be granted, and foreign commercialization requires similar approvals |
| The FDA can delay, limit or withhold approval of a product candidate for many reasons, including the following: • a product candidate may not demonstrate sufficient safety in human trials or efficacy in treatment; • the FDA may interpret data from preclinical testing and clinical trials in different ways than we interpret the data or may require additional and/or different categories of data than what we obtained in our clinical trials; • the FDA may require additional information about the efficacy, safety, purity, stability, identity or functionality of a product candidate; • the FDA may not approve our manufacturing processes or facilities or the processes or facilities of our collaborators or contract manufacturers; and • the FDA may change its approval policies or adopt new regulations |
| The FDA also may approve a product for fewer indications than are requested or may condition approval on the performance of post-approval clinical studies |
| Even if we receive FDA and other regulatory approvals, our products may later exhibit adverse effects that limit or prevent their widespread use or that force us to withdraw those products from the market |
| Any product and its manufacturer will continue to be subject to strict regulations after approval, including but not limited to, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping |
| Any problems with an approved product or any violation of regulations could result in restrictions on the product, including its withdrawal from the market |
| The process of obtaining approvals in foreign countries is subject to delay and failure for many of the same reasons |
| Failure to comply with foreign regulatory requirements governing human clinical trials and marketing approval for product candidates could prevent us from selling our products in foreign markets, which may adversely affect our operating results and financial condition |
| The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement outside the United States vary greatly from country to country |
| The time required to obtain approvals outside the United States may differ from that required to obtain FDA approval |
| We may not obtain foreign regulatory approvals on a timely basis, if at all |
| Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA and foreign regulatory authorities could require additional testing |
| Failure to comply with these regulatory requirements or obtain required approvals could impair our ability to develop foreign markets for our products and may have a material adverse effect on our results of operations and financial condition |
| 21 ______________________________________________________________________ Even if approved, Provenge and any other product we may commercialize and market may be later withdrawn from the market or subject to promotional limitations |
| We may not be able to obtain the labeling claims necessary or desirable for the promotion of our products |
| We may also be required to undertake post-marketing clinical trials |
| If the results of such post-marketing studies are not satisfactory, the FDA may withdraw marketing authorization or may condition continued marketing on commitments from us that may be expensive and/or time consuming to fulfill |
| In addition, if we or others identify adverse side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products and additional marketing applications may be required |
| The availability and amount of reimbursement for our product candidates and the manner in which government and private payers may reimburse for our potential products is uncertain |
| We expect that many of the patients who seek treatment with Provenge or any other of our products that are approved for marketing will be eligible for Medicare benefits |
| Other patients may be covered by private health plans or uninsured |
| The application of existing Medicare regulations, and interpretive coverage and payment determinations to newly approved products, especially novel products such as ours, is uncertain, and those regulations and interpretive determinations are subject to change |
| The Medicare Prescription Drug, Improvement, and Modernization Act (“Medicare Modernization Act”), enacted in December 2003, provides for a change in reimbursement methodology that reduces the Medicare reimbursement rates for many drugs, including oncology therapeutics, which may adversely affect reimbursement for Provenge, if it is approved for sale, or our other product candidates |
| If we are unable to obtain or retain adequate levels of reimbursement from Medicare or from private health plans, our ability to sell Provenge and our other potential products will be adversely affected |
| Medicare regulations and interpretive determinations also may determine who may be reimbursed for certain services |
| This may adversely affect our ability to market or sell Provenge or our other potential products, if approved |
| Federal, state and foreign governments continue to propose legislation designed to contain or reduce health care costs |
| Legislation and regulations affecting the pricing of products like our potential products may change further or be adopted before Provenge or any of our potential products are approved for marketing |
| Cost control initiatives by governments or third party payers could decrease the price that we receive for any one or all of our potential products or increase patient coinsurance to a level that makes Provenge and our other products under development unaffordable |
| In addition, government and private health plans persistently challenge the price and cost-effectiveness of therapeutic products |
| Accordingly, these third parties may ultimately not consider Provenge or any or all of our products under development to be cost-effective, which could result in products not being covered under their health plans or covered only at a lower price |
| Any of these initiatives or developments could prevent us from successfully marketing and selling any of our potential products |
| We are unable to predict what impact the Medicare Modernization Act or other future regulation or third party payer initiatives, if any, relating to reimbursement for Provenge or any of our other potential products will have on sales of Provenge or those other product candidates, if any of them are approved for sale |
| Risks Relating to Manufacturing Activities We have no commercial or other large-scale manufacturing experience |
| To be successful, our product candidates must be capable of being manufactured in sufficient quantities, in compliance with regulatory requirements and at an acceptable cost |
| We have no commercial or other large-scale manufacturing experience |
| We currently rely on third parties for certain aspects of the commercial and clinical trial manufacture of Provenge and its components and our other product candidates |
| In August 2005, we entered into a lease agreement for a facility in Hanover, New Jersey, which will include commercial manufacturing space |
| The build-out of this space will require a substantial investment and is expected to extend through mid-2006 |
| We will also be required to hire and train a significant number of employees and comply with 22 ______________________________________________________________________ applicable regulations for these facilities, which are extensive |
| A limited number of contract manufacturers are capable of manufacturing the components of Provenge or the final manufacture of Provenge |
| If we encounter delays or difficulties with manufacturers and cannot manufacture the contracted components or product candidate ourselves, we may not be able to conduct clinical trials as planned or to meet demand for Provenge, if it is approved, any of which could harm our business |
| We will need to demonstrate that Provenge manufactured at our new facility is comparable to Provenge used in clinical trials |
| In addition to increased production efforts, we may make manufacturing changes to the components or to the manufacturing process for Provenge |
| These changes could result in delays in the development or regulatory approval of Provenge or in reduction or interruption of commercial sales, in the event Provenge is approved, any of which could materially harm our business |
| We will be required to demonstrate product comparability for each manufacturing site |
| We have not yet submitted a plan for carrying out this comparability testing to the FDA The FDA may disagree with our plans or require substantial additional testing beyond what we propose |
| In addition, we may not be able to demonstrate product comparability to clinical trial materials |
| We intend to rely on results of preclinical studies and clinical trials performed using the form of the product candidate produced using the prior formulation or production method or at the prior scale |
| Depending upon the type and degree of differences between manufacturing processes or component substitutions for a product candidate, we may be required to conduct additional studies or clinical trials to demonstrate that the new method(s) or substitute component or product candidate is sufficiently similar to the previously produced material |
| We and our contract manufacturers are subject to significant regulation with respect to manufacturing of our products |
| All of those involved in the preparation of a therapeutic drug for clinical trials or commercial sale, including our existing contract manufacturer for the Antigen Delivery Cassette used in Provenge, and clinical trial investigators, are subject to extensive regulation by the FDA Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMP, a series of complex regulations |
| These regulations govern manufacturing processes and procedures and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale |
| Our facilities and quality systems and the facilities and quality systems of some or all of our third party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of FDA approval of Provenge or any of our other potential products |
| In addition, the FDA may, at any time, audit or inspect a manufacturing facility involved with the preparation of Provenge or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted |
| The FDA also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third party contractors |
| If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulation occurs independent of such an inspection or audit, we or the FDA may require remedial measures that may be costly and/or time consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility |
| Any such remedial measures imposed upon us or third parties with whom we contract could harm our business |
| If we make changes in our manufacturing processes for a product candidate, or change components of a drug, the FDA and corresponding foreign authorities may require us to demonstrate that the changes have not caused the product candidate to differ significantly from that previously produced |
| Expansion of our production capabilities or facilities might also require reexamination of our manufacturing processes |
| 23 ______________________________________________________________________ We must rely at present on relationships with third-party contract manufacturers, which will limit our ability to control the availability of, and manufacturing costs for, our product candidates in the near-term |
| We will rely upon contract manufacturers for components of Provenge for commercial sale, if it is approved for sale |
| We have contracts with contract manufacturers for commercial level production for some, but not all, of these components |
| While we plan to negotiate contracts for commercial level production with contract manufacturers for all components that we do not produce ourselves, there is no assurance that we will be able to do so on acceptable terms or at all |
| Failure to negotiate such contracts and to maintain sufficient capacity under these arrangements for manufacturing needs could cause inventory shortfalls, and delay or prevent the successful commercialization of Provenge |
| In addition, problems with any of our or our contract manufacturers’ facilities or processes could result in failure to produce or a delay in production of adequate supplies of antigen, components or finished Provenge |
| This could delay or reduce commercial sales and harm our business |
| Any prolonged interruption in the operations of our or our contract manufacturers’ facilities could result in cancellation of shipments, loss of components in the process of being manufactured or a shortfall in availability of a product |
| A number of factors could cause interruptions, including the inability of a supplier to provide raw materials, equipment malfunctions or failures, damage to a facility due to natural disasters, changes in FDA regulatory requirements or standards that require modifications to our manufacturing processes, action by the FDA or by us that results in the halting or slowdown of production of components or finished product due to regulatory issues, a contract manufacturer going out of business or failing to produce product as contractually required or other similar factors |
| Because manufacturing processes are highly complex and are subject to a lengthy FDA approval process, alternative qualified production capacity may not be available on a timely basis or at all |
| Difficulties or delays in our contract manufacturers’ manufacturing and supply of components could delay completion of our BLA submission and clinical trials, increase our costs, damage our reputation and, for Provenge, if it is approved for sale, cause us to lose revenue or market share if we are unable to timely meet market demands |
| If our contract manufacturers are not in compliance with regulatory requirements at any stage, including post-marketing approval, we may be fined, forced to remove a product from the market and/or experience other adverse consequences, including delays, which could materially harm our financial results |
| We use hazardous materials in our business and must comply with environmental laws and regulations, which can be expensive |
| Our operations produce hazardous waste products, including chemicals and radioactive and biological materials |
| We are subject to a variety of federal, state and local regulations relating to the use, handling, storage and disposal of these materials |
| Although we believe that our safety procedures for handling and disposing of these materials complies with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be eliminated |
| We generally contract with third parties for the disposal of such substances and store our low level radioactive waste at our facilities until the materials are no longer considered radioactive |
| We may be required to incur further costs to comply with current or future environmental and safety regulations |
| In addition, in the event of accidental contamination or injury from these materials, we could be held liable for any damages that result and any such liability could exceed our resources |
| Risks from Competitive Factors Our competitors may develop and market products that are less expensive, more effective, safer or reach the market sooner, which may diminish or eliminate the commercial success of any products we may commercialize |
| Competition in the cancer therapeutics field is intense and is accentuated by the rapid pace of advancements in product development |
| We anticipate that we will face increased competition in the future as new companies enter our markets |
| Some competitors are pursuing a product development strategy competitive with ours |
| Certain 24 ______________________________________________________________________ of these competitive products may be in a more advanced stage of product development and clinical trials |
| In addition, we compete with other clinical-stage companies and institutions for clinical trial participants, which could reduce our ability to recruit participants for our clinical trials |
| Delay in recruiting clinical trial participants could adversely affect our ability to bring a product to market prior to our competitors |
| Further, research and discoveries by others may result in breakthroughs that render Provenge or our other potential products obsolete even before they begin to generate any revenue |
| There are products currently under development by others that could compete with Provenge or other products that we are developing |
| and Therion Biologics Corporation are developing prostate cancer therapeutics that could potentially compete with Provenge |
| Therion Biologics Corporation has completed enrollment in a Phase 2 clinical trial of its prostate cancer immunotherapy and plans to initiate a Phase 3 trial in 2006 |
| Cell Genesys, Inc |
| has initiated Phase 3 clinical trials of its prostate cancer immunotherapy |
| Other products such as chemotherapeutics, antisense compounds, angiogenesis inhibitors and gene therapies for cancer are also under development by a number of companies and could potentially compete with Provenge and our other product candidates |
| A chemotherapeutic, Taxotere, was approved by the FDA in 2004 for the therapeutic treatment of metastatic androgen-independent prostate cancer |
| Some of our competitors in the cancer therapeutics field have substantially greater research and development capabilities and manufacturing, marketing, financial and managerial resources than we do |
| In addition, our competitors may obtain patent protection or FDA approval and commercialize products more rapidly than we do, which may impact future sales of our products |
| If we are permitted by the FDA to commence commercial sales of products, we will also be competing with respect to marketing capabilities and manufacturing efficiency, areas in which we have limited or no experience |
| We expect that competition among products approved for sale will be based, among other things, on product efficacy, price, safety, reliability, availability, patent protection, and sales, marketing and distribution capabilities |
| Our profitability and financial position will suffer if our products receive regulatory approval, but cannot compete effectively in the marketplace |
| Our products may not be accepted in the marketplace; therefore, we may not be able to generate significant revenue, if any |
| Even if Provenge or any of our other potential products is approved and sold, physicians and the medical community may not ultimately use it or may use it only in applications more restricted than we expect |
| Our products, if successfully developed, will compete with a number of traditional products and immunotherapies manufactured and marketed by major pharmaceutical and other biotechnology companies |
| Our products will also compete with new products currently under development by such companies and others |
| Physicians will only prescribe a product if they determine, based on experience, clinical data, side effect profiles and other factors, that it is beneficial and preferable to other products currently in use |
| Many other factors influence the adoption of new products, including marketing and distribution restrictions, course of treatment, adverse publicity, product pricing, the views of thought leaders in the medical community, and reimbursement by government and private third party payers |
| Failure to retain key personnel could impede our ability to develop our products and to obtain new collaborations or other sources of funding |
| We depend, to a significant extent, on the efforts of our key employees, including senior management and senior scientific, clinical, regulatory and other personnel |
| The development of new therapeutic products requires expertise from a number of different disciplines, some of which are not widely available |
| We depend upon our scientific staff to discover new product candidates and to develop and conduct preclinical studies of those new potential products |
| Our clinical and regulatory staff is responsible for the design and execution of clinical trials in accordance with FDA requirements and for the advancement of our product candidates toward FDA approval and submission of data supporting approval |
| The quality and reputation of our scientific, clinical and regulatory staff, 25 ______________________________________________________________________ especially the senior staff, and their success in performing their responsibilities, may directly influence the success of our product development programs |
| In addition, our Chief Executive Officer and other executive officers are involved in a broad range of critical activities, including providing strategic and operational guidance |
| The loss of these individuals, or our inability to retain or recruit other key management and scientific, clinical, regulatory and other personnel, may delay or prevent us from achieving our business objectives |
| We face intense competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations |
| Risks Relating to Collaboration Arrangements If we fail to enter into any needed collaboration agreements for our product candidates, we may be unable to commercialize them effectively or at all |
| To successfully commercialize Provenge, we will need substantial financial resources and we will need to develop or access expertise and physical resources and systems, including building out our manufacturing facilities, a distribution network, an information technology platform and sales and marketing and other resources that we currently do not have or may be in the process of developing |
| We may elect to develop some or all of these physical resources and systems and expertise ourselves or we may seek to collaborate with another biotechnology or pharmaceutical company that can provide some or all of such physical resources and systems as well as financial resources and expertise |
| Such collaborations are complex and any potential discussions may not result in a definitive agreement for many reasons |
| For example, whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors |
| Those factors may include the design or results of our Provenge clinical trials, the potential market for Provenge, the costs and complexities of manufacturing and delivering Provenge to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally |
| If we were to determine that a collaboration for Provenge is necessary and were unable to enter into such a collaboration on acceptable terms, we might elect to delay or scale back the commercialization of Provenge in order to preserve our financial resources or to allow us adequate time to develop the required physical resources and systems and expertise ourselves |
| If we enter into a collaboration agreement we consider acceptable, the collaboration may not proceed as quickly, smoothly or successfully as we plan |
| The risks in a collaboration agreement for Provenge include the following: • the collaborator may not apply the expected financial resources or required expertise in developing the physical resources and systems necessary to successfully commercialize Provenge; • the collaborator may not invest in the development of a sales and marketing force and the related infrastructure at levels that ensure that sales of Provenge reach their full potential; • disputes may arise between us and a collaborator that delay the commercialization of Provenge or adversely affect its sales or profitability; or • the collaborator may independently develop, or develop with third parties, products that could compete with Provenge |
| With respect to a collaboration for Provenge or any of our other product candidates, we are dependent on the success of our collaborators in performing their respective responsibilities and the continued cooperation of our collaborators |
| Our collaborators may not cooperate with us to perform their obligations under our agreements with them |
| We cannot control the amount and timing of our collaborators’ resources that will be devoted to activities related to our collaborative agreements with them |
| Our collaborators may choose to pursue existing or alternative technologies in preference to those being developed in collaboration with us |
| Disputes may arise 26 ______________________________________________________________________ between us and our collaborators that delay the development and commercialization of our product candidates |
| In addition, a collaborator for Provenge may have the right to terminate the collaboration at its discretion |
| Any termination may require us to seek a new collaborator, which we may not be able to do on a timely basis, if at all, or require us to delay or scale back the commercialization efforts |
| The occurrence of any of these events could adversely affect the commercialization of Provenge and harm our business and stock price by delaying the date on which sales of the product may begin, if it is approved by the FDA, by slowing the pace of growth of such sales, by reducing the profitability of the product or by adversely affecting the reputation of the product in the market |
| We have existing collaboration agreements that may not achieve the desired results, or could terminate abruptly |
| We have a collaboration with Genentech, Inc |
| for the research, development and commercialization of potential therapies targeting trp-p8 |
| We also have a collaboration with Abgenix, Inc |
| for the research, development and commercialization of monoclonal antibodies for a selected antigen from our portfolio of serine proteases |
| It is possible that we could encounter difficulties with these collaborators in the future that could have a material adverse effect on our business |
| Risks in Protecting our Intellectual Property If we are unable to protect our proprietary rights or to defend against infringement claims, we may not be able to compete effectively or operate profitably |
| We invent and develop technologies that are the basis for or incorporated in our potential products |
| We protect our technology through United States and foreign patent filings, trademarks and trade secrets |
| We have a number of issued patents, and applications for US and foreign patents in various stages of prosecution |
| We expect that we will continue to file and prosecute patent applications and that our success depends in part on our ability to establish and defend our proprietary rights in the technologies that are the subject of issued patents and patent applications |
| The fact that we have filed a patent application or that a patent has issued, however, does not ensure that we will have meaningful protection from competition with regard to the underlying technology or product |
| Patents, if issued, may be challenged, invalidated, declared unenforceable or circumvented |
| In addition, our pending patent applications as well as those we may file in the future may not result in issued patents |
| Patents may not provide us with adequate proprietary protection or advantages against competitors with, or who could develop, similar or competing technologies or who could design around our patents |
| We also rely on trade secrets and unpatentable know-how that we seek to protect, in part, by using confidentiality agreements |
| Our policy is to require our officers, employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers and other advisors to execute confidentiality agreements |
| These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties except in specific limited circumstances |
| We also require signed confidentiality agreements from companies that receive our confidential data |
| For employees, consultants and contractors, we require confidentiality agreements providing that all inventions conceived while rendering services to us shall be assigned to us as our exclusive property |
| It is possible, however, that these parties may breach those agreements, and we may not have adequate remedies for any breach |
| It is also possible that our trade secrets or unpatentable know-how will otherwise become known to or be independently developed by competitors |
| From time to time, we have received invitations to license third party patents |
| We are also subject to the risk of claims, whether meritorious or not, that our immunotherapy candidates infringe or misappropriate third party intellectual property rights |
| If we are found to infringe or misappropriate third party intellectual property, we 27 ______________________________________________________________________ could be required to seek a license or discontinue our products or cease using certain technologies or delay commercialization of the affected product(s), and we could be required to pay substantial damages, which could materially harm our business |
| We may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome |
| Our business may bring us into conflict with our licensees, licensors or others with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours |
| If we are unable to resolve those conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by or against us |
| That litigation is likely to be expensive and may require a significant amount of management’s time and attention, at the expense of other aspects of our business |
| Litigation relating to the ownership and use of intellectual property is expensive, and our position as a relatively small company in an industry dominated by very large companies may cause us to be at a disadvantage in defending our intellectual property rights and in defending against claims that our immunotherapy candidates infringe or misappropriate third party intellectual property rights |
| Even if we are able to defend our position, the cost of doing so may adversely affect our profitability |
| We have not yet experienced patent litigation |
| This may reflect, however, the fact that we have not yet commercialized any products |
| We may in the future be subject to such litigation and may not be able to protect our intellectual property at a reasonable cost if such litigation is initiated |
| The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business |
| We are exposed to potential product liability claims, and insurance against these claims may not be available to us at a reasonable rate in the future |
| Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing, marketing and sale of therapeutic products |
| We have clinical trial insurance coverage, and we intend to obtain commercial product liability insurance coverage in the future |
| However, this insurance coverage may not be adequate to cover claims against us or available to us at an acceptable cost, if at all |
| Regardless of their merit or eventual outcome, product liability claims may result in decreased demand for a product, injury to our reputation, withdrawal of clinical trial volunteers and loss of revenues |
| Thus, whether or not we are insured, a product liability claim or product recall may result in losses that could be material |
| Risks Relating to an Investment in Our Common Stock Market volatility may affect our stock price, and the value of your investment in our common stock may be subject to sudden decreases |
| The trading price for our common stock has been, and we expect it to continue to be, volatile |
| The price at which our common stock trades depends on a number of factors, including the following, many of which are beyond our control: • timing and outcome of FDA review of our product development activities and our BLA for Provenge that we intend to submit; • preclinical and clinical trial results; • our historical and anticipated operating results, including fluctuations in our financial and operating results; • changes in government regulations affecting product approvals, reimbursement or other aspects of our or our competitors’ businesses; • announcements of technological innovations or new commercial products by us or our competitors; 28 ______________________________________________________________________ • developments concerning our key personnel and intellectual property rights; • announcements regarding significant collaborations or strategic alliances; • publicity regarding actual or potential performance of products under development by us or our competitors; • market perception of the prospects for biotechnology companies as an industry sector; and • general market and economic conditions |
| In addition, the stock market has from time to time experienced extreme price and volume fluctuations |
| These broad market fluctuations may lower the market price of our common stock and affect the volume of trading in our stock |
| The high and low intraday prices per share of our common stock on the Nasdaq National Market were dlra10dtta50 and dlra1dtta26 respectively in 2002, dlra10dtta50 and dlra4dtta01 respectively in 2003, dlra16dtta72 and dlra7dtta23 respectively in 2004, and dlra11dtta04 and dlra4dtta31 respectively in 2005 |
| The average daily trading volume of our common stock on the Nasdaq National Market was 132cmam760 shares in 2002, 669cmam347 shares in 2003, and 1cmam344cmam235 shares in 2004, and 1cmam270cmam008 shares in 2005 |
| During periods of stock market price volatility, share prices of many biotechnology companies have often fluctuated in a manner not necessarily related to their individual operating performance |
| Accordingly, our common stock may be subject to greater price volatility than the stock market as a whole |
| Anti-takeover provisions in our charter documents and under Delaware law and our stockholders’ rights plan could make an acquisition of us, which may be beneficial to our stockholders, more difficult |
| Provisions of our certificate of incorporation and bylaws will make it more difficult for a third party to acquire us on terms not approved by our board of directors and may have the effect of deterring hostile takeover attempts |
| Our certificate of incorporation authorizes our board of directors to issue up to 10cmam000cmam000 shares of preferred stock, of which 1cmam000cmam000 shares have been designated as “Series A Junior Participating Preferred Stock,” and to fix the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders |
| The rights of the holders of our common stock will be subject to, and may be junior to the rights of the holders of any preferred stock that may be issued in the future |
| The issuance of preferred stock could reduce the voting power of the holders of our common stock and the likelihood that common stockholders will receive payments upon liquidation |
| In addition, our certificate of incorporation divides our board of directors into three classes having staggered terms |
| This may delay any attempt to replace our board of directors |
| We have also implemented a stockholders’ rights plan, also called a poison pill, which would substantially reduce or eliminate the expected economic benefit to an acquirer from acquiring us in a manner or on terms not approved by our board of directors |
| These and other impediments to a third party acquisition or change of control could limit the price investors are willing to pay in the future for shares of our common stock |
| Our board of directors adopted a Change of Control Executive Severance Plan providing severance benefits for participants in the event that their employment terminates involuntarily without cause or for good reason within twelve months after a change of control of us |
| This plan could affect the terms of a third party acquisition |
| We are also subject to provisions of Delaware law that could have the effect of delaying, deferring or preventing a change in control of our company |
| One of these provisions prevents us from engaging in a business combination with any interested stockholder for a period of three years from the date the person becomes an interested stockholder, unless specified conditions are satisfied |