| GENTA INC DE/ Item 1A Risk Factors You should carefully consider the following risks and all of the other information set forth in this Form 10K before deciding to invest in shares of our common stock |
| The risks described below are not the only ones facing our Company |
| Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations |
| If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer |
| In such case, the market price of our common stock would likely decline due to the occurrence of any of these risks, and you may lose all or part of your investment |
| 17 ______________________________________________________________________ Risks Related to Our Business We may be unsuccessful in our efforts to obtain approval from the FDA or EMEA and commercialize Genasense® or our other pharmaceutical products |
| The commercialization of our pharmaceutical products involves a number of significant challenges |
| In particular, our ability to commercialize products, such as Ganite® and Genasense®, depends, in large part, on the success of our clinical development programs, our efforts to obtain regulatory approvals and our sales and marketing efforts directed at physicians, patients and third-party payors |
| A number of factors could affect these efforts, including: o our ability to demonstrate clinically that our products are useful and safe in particular indications; o delays or refusals by regulatory authorities in granting marketing approvals; o our limited financial resources and sales and marketing experience relative to our competitors; o actual and perceived differences between our products and those of our competitors; o the availability and level of reimbursement for our products by third-party payors; o incidents of adverse reactions to our products; o side effects or misuse of our products and the unfavorable publicity that could result; and o the occurrence of manufacturing, supply or distribution disruptions |
| We cannot assure you that Genasense® will receive FDA or EMEA approval |
| Our financial condition and results of operations have been and will continue to be significantly affected by FDA and EMEA action with respect to Genasense® |
| Any adverse events with respect to FDA and/or EMEA approvals could negatively impact our ability to obtain additional funding or identify potential partners |
| For example, on January 3, 2006, we announced that we had completed a Marketing Authorization Application, or MAA, to the EMEA that seeks approval for use of Genasense® plus dacarbazine for the treatment of patients with advanced melanoma who have not previously received chemotherapy |
| On February 1, 2006, we announced that we had received notice from the EMEA that our MAA was validated for review by the EMEA We anticipate receiving consolidated questions from the EMEA approximately 120 days from the date of the MAA’s validation |
| The centralized licensing procedure provides a single marketing authorization that is valid in all 25-member states of the European Community |
| Review of the application is coordinated by the EMEA, and Spain and France have been appointed as rapporteur and co-rapporteur countries, respectively |
| On December 28, 2005, we completed submission of an NDA to the FDA that sought accelerated approval for the use of Genasense® in combination with fludarabine plus cyclophosphamide for the treatment of patients with relapsed or refractory CLL who have previously received fludarabine |
| Genasense® has received Fast Track designation by the FDA in CLL, meaning that the indication represents an unmet medical need |
| Genasense® has also been granted designation as an Orphan Drug by the FDA On March 1, 2006, we announced that the NDA had been accepted for review by the FDA with a target action date of October 28, 2006 |
| However, acceptance of this NDA does not necessarily lead to FDA approval |
| After reviewing in May 2005 a summary of our preliminary clinical data that were released in November 2004 from our CLL trial, the FDA expressed concern that simply achieving statistical significance in the primary endpoint (complete plus nodular partial responses [CR/nPR]) may not be likely to convey or predict clinical benefit, particularly absent improvement in time-to-progression |
| Subsequent to preparation of the preliminary data summary, the Company compiled additional information to support its claims of clinical benefit |
| First, the proportion of patients who relapsed from CR/nPR increased substantially over time from 25prca to 75prca in the patient group treated with chemotherapy alone |
| By contrast, the comparable increase in the Genasense® group was 16prca to 25prca, which indicated a lower risk of relapse |
| Second, the preliminary clinical data indicated that the median duration of CR/nPR had not been reached in either treatment group |
| Further follow-up showed that CR/nPRs achieved with the addition of Genasense® to chemotherapy were significantly longer when compared with those responses achieved with chemotherapy alone |
| For example, the median CR/nPR duration in the chemotherapy alone group was reached at 22 months, whereas the median has still not been reached in the Genasense® group [P=0dtta03] |
| Third, the Company had prospectively collected data regarding specific parameters of disease-related morbidity, including but not limited to symptoms |
| Subsequent analysis of these data showed that patients in the Genasense® treatment group who achieved CR/nPR also attained substantial improvement in these disease parameters |
| The NDA that was submitted by the Company in December 2005, which includes these data, was subsequently accepted for review by the FDA in February 2006 |
| 18 ______________________________________________________________________ Following its review of all our information concerning Genasense®, the FDA may refuse to approve altogether, or may ask for more data to be obtained, so that approval can be reconsidered |
| Any of these decisions by the FDA would have a material adverse effect on our business |
| One requirement for Accelerated Approval is that we will be required to conduct a confirmatory trial |
| We have formulated a design for such a trial and have submitted a proposal to the FDA for review as a Special Protocol Assessment, or SPA The submitted proposal incorporated initial comments received from the FDA Final comments on the submission are expected during the first half of 2006 |
| Formal initiation of the trial will depend upon resolution of trial design issues with the FDA, among other factors |
| Although Fast Track designation, Orphan Drug designation and Accelerated Approval provisions are beneficial, we cannot assure you that the NDA will be approved |
| In particular, the FDA may not be satisfied that achievement of the primary endpoint used in our recent clinical trial, which was an increased proportion of complete responses/nodular partial responses compared to patients treated with standard chemotherapy, is a sufficient basis for approval |
| Further, increased symptom-free time may not be considered to be sufficient demonstration of clinical benefit |
| Ultimately, our efforts may not prove to be as effective as those of our competitors |
| In the United States and elsewhere, our products will face significant competition |
| The principal conditions on which our product development efforts are focused and some of the other disorders for which we are conducting additional studies, are currently treated with several drugs, many of which have been available for a number of years or are available in inexpensive generic forms |
| Thus, even if we obtain regulatory approvals, we will need to demonstrate to physicians, patients and third-party payors that the cost of our products is reasonable and appropriate in light of their safety and efficacy, the price of competing products and the relative health care benefits to the patient |
| If we are unable to demonstrate that the costs of our products are reasonable and appropriate in light of these factors, we will likely be unsuccessful in commercializing our products |
| Recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern |
| Our recurring losses from operations and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statement for the year ended December 31, 2005 with respect to this uncertainty |
| Substantial doubt about our ability to continue as a going concern may create negative reactions to the price of the common shares of our stock and we may have a more difficult time obtaining financing |
| We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business |
| The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue in existence |
| Our business will suffer if we fail to obtain timely funding |
| We may be unable to raise additional capital when needed and may not continue as a going concern |
| Our operations to date have required significant cash expenditures |
| As a result of Aventis’ termination of the Collaborative Agreement, after May 8, 2005, we became solely responsible for all Genasense® related costs |
| Our future capital requirements will depend on the results of our research and development activities, preclinical studies and clinical trials, competitive and technological advances, and regulatory activities of the FDA and other regulatory authorities |
| In order to commercialize our products, we will need to raise additional funds |
| On August 11, 2005, we sold 19dtta1 million shares of common stock at a price of dlra0dtta92 per share, raising dlra16dtta0 million, net of fees and expenses |
| In addition, on March 6, 2006, we executed definitive subscription agreements with institutional investors to sell 19 million shares of our common stock at a price of dlra2dtta15 per share raising approximately dlra37dtta8 million, net of estimated fees and expenses |
| Assuming the completion of this financing, management believes that at the projected rate of spending, including building our sales and marketing team and capabilities, we should have sufficient cash funds to maintain our present operations into the first quarter of 2007 |
| We will need to obtain more funding in the future through collaborations or other arrangements with research institutions and corporate partners or public and private offerings of our securities, including debt or equity financing |
| We may not be able to obtain adequate funds for our operations from these sources when needed or on acceptable terms |
| Future collaborations or similar arrangements may require us to license valuable intellectual property to, or to share substantial economic benefits with, our collaborators |
| If we raise additional capital by issuing additional equity or securities convertible into equity, our stockholders may experience dilution and our share price may decline |
| Any debt financing may result in restrictions on our spending |
| 19 ______________________________________________________________________ If we are unable to raise additional funds, we will need to do one or more of the following: o delay, scale back or eliminate some or all of our research and product development programs; o license third parties to develop and commercialize products or technologies that we would otherwise seek to develop and commercialize ourselves; o attempt to sell our company; o cease operations; or o declare bankruptcy |
| We intend to be a direct marketer of some products in the United States |
| This effort will consume large amounts of our resources and management time and we may not be successful in our efforts |
| Currently we do not have a sales force |
| Our sales force was eliminated in 2004 following our decision to withdraw the NDA for Genasense® for the treatment of advanced melanoma |
| We intend to build a sales force throughout the second and third quarters of 2006 |
| In January 2006, we announced that we had appointed W Lloyd Sanders as Vice-President of Sales and Marketing |
| Sanders was Vice President, Oncology Sales, at sanofi-aventis Group |
| If we are unable to build a sales force capable of marketing our products, our sales will be adversely affected, and the commercial success of our products will be limited |
| On May 10, 2005, we announced that we and Aventis Pharmaceuticals Inc, part of sanofi-aventis Group, or Aventis, had signed an agreement to terminate their development and commercialization collaboration for Genasense® |
| We lost a significant source of funding for Genasense® as a result of this termination |
| In April 2002, we entered into a series of agreements relating to the development and commercialization of Genasense®, to which we refer collectively as the Collaborative Agreement, with Aventis and its affiliates |
| On November 8, 2004, we received from Aventis a notice of termination of the Collaborative Agreement |
| On May 10, 2005, we announced that we had signed an agreement with Aventis to terminate our development and commercialization collaboration for Genasense® |
| The termination agreement provided for no future financial obligations by either party |
| Aventis also returned its then current inventory of Genasense® drug supply to us |
| In addition, we assumed responsibility for the randomized clinical trial of Genasense® in combination with docetaxel (Taxotere®; sanofi-aventis) in patients with hormone-refractory prostate cancer, which recently completed accrual |
| Among other provisions, the Standstill and Voting Agreement and Registration Rights Agreement that were established pursuant to the Aventis investment in our common stock in 2002 did not terminate at this time |
| We are seeking a new partner for the development and commercialization of Genasense®, and if we are unable to do so, we may not have sufficient resources to fully develop and commercialize Genasense® |
| If we are unable to identify a partner, we will be solely responsible for the development and commercialization of Genasense®, including the costs associated therewith |
| We may not have sufficient resources to do so |
| Even if we are able to identify a partner, we may not be able to enter into an agreement on acceptable terms or at all |
| We have relied on and continue to rely on our contractual collaborative arrangements with research institutions and corporate partners for development and commercialization of our products |
| Our business could suffer if we are not able to enter into suitable arrangements, maintain existing relationships, or if our collaborative arrangements are not successful in developing and commercializing products |
| We have entered into collaborative relationships relating to the conduct of clinical research and other research activities in order to augment our internal research capabilities and to obtain access to specialized knowledge and expertise |
| Our business strategy depends in part on our continued ability to develop and maintain relationships with leading academic and research institutions and with independent researchers |
| The competition for these relationships is intense, and we can give no assurances that we will be able to develop and maintain these relationships on acceptable terms |
| 20 ______________________________________________________________________ We also seek strategic alliances with corporate partners, primarily pharmaceutical and biotechnology companies, to help us develop and commercialize drugs |
| Various problems can arise in strategic alliances |
| A partner responsible for conducting clinical trials and obtaining regulatory approval may fail to develop a marketable drug |
| A partner may decide to pursue an alternative strategy or focus its efforts on alliances or other arrangements with third parties |
| A partner that has been granted marketing rights for a certain drug within a geographic area may fail to market the drug successfully |
| Consequently, strategic alliances that we may enter into may not be scientifically or commercially successful |
| In this regard, in April 2002, we entered into a series of agreements relating to the development and commercialization of Genasense® with Aventis and its affiliates |
| On May 10, 2005, we announced that we and Aventis had signed an agreement to terminate our development and commercialization collaboration for Genasense® as described above |
| We cannot control the resources that any collaborator may devote to our products |
| Any of our present or future collaborators may not perform their obligations as expected |
| These collaborators may breach or terminate their agreements with us, for instance upon changes in control or management of the collaborator, or they may otherwise fail to conduct their collaborative activities successfully and in a timely manner |
| In addition, our collaborators may elect not to develop products arising out of our collaborative arrangements or to devote sufficient resources to the development, regulatory approval, manufacture, marketing or sale of these products |
| If any of these events occur, we may not be able to develop our products or commercialize our products |
| An important part of our strategy involves conducting multiple product development programs |
| We may pursue opportunities in fields that conflict with those of our collaborators |
| In addition, disagreements with our collaborators could develop over rights to our intellectual property |
| The resolution of such conflicts and disagreements may require us to relinquish rights to our intellectual property that we believe we are entitled to |
| In addition, any disagreement or conflict with our collaborators could reduce our ability to obtain future collaboration agreements and negatively impact our relationship with existing collaborators |
| Such a conflict or disagreement could also lead to delays in collaborative research, development, regulatory approval or commercialization of various products or could require or result in litigation or arbitration, which would be time consuming and expensive, divert the attention of our management and could have a significant negative impact on our business, financial condition and results of operations |
| We anticipate that we will incur additional losses and we may never be profitable |
| We have never been profitable |
| We have incurred substantial annual operating losses associated with ongoing research and development activities, preclinical testing, clinical trials, regulatory submissions and manufacturing activities |
| From the period since our inception to December 31, 2005, we have incurred a cumulative net loss of dlra358dtta2 million |
| We may never achieve revenue sufficient for us to attain profitability |
| Achieving profitability is unlikely unless Genasense® receives approval from the FDA for commercial sale in one or more indications |
| Our business depends heavily on a small number of products |
| We currently market and sell one product, Ganite® and the principal patent covering its use for the approved indication expired in April 2005 |
| We do not expect to expand our marketed product portfolio significantly in the short term unless Genasense® receives marketing approval |
| If Genasense® is not approved, if approval is significantly delayed, or if in the event of approval, the product is commercially unsuccessful, we do not expect significant sales of other products to offset this loss of potential revenue |
| To diversify our product line in the long term, it will be important for us to identify suitable technologies and products for acquisition or licensing and development |
| If we are unable to identify suitable technologies and products, or if we are unable to acquire or license products we identify, we may be unable to diversify our product line and to generate long-term growth |
| 21 ______________________________________________________________________ We may be unable to obtain or enforce patents, other proprietary rights and licenses to protect our business; we could become involved in litigation relating to our patents or licenses that could cause us to incur additional costs and delay or prevent our introduction of new drugs to market |
| Our success will depend to a large extent on our ability to: o obtain US and foreign patent or other proprietary protection for our technologies, products and processes; o preserve trade secrets; and o operate without infringing the patent and other proprietary rights of third parties |
| Legal standards relating to the validity of patents covering pharmaceutical and biotechnological inventions and the scope of claims made under these types of patents are still developing, and they involve complex legal and factual questions |
| If we are unable to obtain and enforce patents and licenses to protect our drugs, our business, results of operations and financial condition could be adversely affected |
| We hold numerous US, foreign and international patents covering various aspects of our technology, which include novel compositions of matter, methods of large-scale synthesis and methods of controlling gene expression and methods of treating disease |
| In the future, however, we may not be successful in obtaining additional patents despite pending or future applications |
| Moreover, our current and future patents may not be sufficient to protect us against competitors who use similar technology |
| Additionally, our patents, the patents of our business partners and the patents for which we have obtained licensing rights may be challenged, narrowed, invalidated or circumvented |
| Furthermore, rights granted under our patents may not be broad enough to cover commercially valuable drugs or processes and therefore may not provide us with sufficient competitive advantage with respect thereto |
| The pharmaceutical and biotechnology industries have been greatly affected by time-consuming and expensive litigation regarding patents and other intellectual property rights |
| We may be required to commence, or may be made a party to, litigation relating to the scope and validity of our intellectual property rights or the intellectual property rights of others |
| Such litigation could result in adverse decisions regarding the patentability of our inventions and products, the enforceability, validity or scope of protection offered by our patents or our infringement of patents held by others |
| Such decisions could make us liable for substantial money damages, or could bar us from the manufacture, sale or use of certain products |
| The costs of any license may be prohibitive and we may not be able to enter into any required licensing arrangement on terms acceptable to us |
| The cost to us of any litigation or proceeding relating to patent or license rights, even if resolved in our favor, could be substantial |
| Some of our competitors may be able to sustain the costs of complex patent or licensing litigation more effectively than we can because of their substantially greater resources |
| Uncertainties resulting from the initiation and continuation of any patent or related litigation could have a material adverse effect on our ability to compete in the marketplace |
| We also may be required to participate in interference proceedings declared by the US Patent and Trademark Office in opposition or similar proceedings before foreign patent offices and in International Trade Commission proceedings aimed at preventing the importation of drugs that would compete unfairly with our drugs |
| These types of proceedings could cause us to incur considerable costs |
| The principal patent covering the use of Ganite® for its approved indication expired, including Hatch-Waxman extensions, in April 2005 |
| We have licensed a portfolio of US patents and applications from the University of Pennsylvania and the NIH relating to Genasense® and its backbone chemistry that expire between 2008 and 2015 |
| Corresponding patent applications have been filed in Canada, Europe and Japan |
| The claims of these patents cover our proprietary antisense oligonucleotide molecules which target the Bcl-2 mRNA and methods employing them |
| We also hold several US patent applications relating to methods of using Genasense® that expire in 2020, with approximately 45 corresponding foreign patent applications |
| 22 ______________________________________________________________________ Most of our products are in an early stage of development, and we may never receive regulatory approval for these products |
| Most of our resources have been dedicated to the research and development of potential antisense pharmaceutical products such as Genasense®, based upon oligonucleotide technology |
| While we have demonstrated the activity of antisense oligonucleotide technology in model systems in vitro and in animals, Genasense® is our only antisense product to have been tested in humans |
| Several of our other technologies that serve as a possible basis for pharmaceutical products are only in preclinical testing |
| Results obtained in preclinical studies or early clinical investigations are not necessarily indicative of results that will be obtained in extended human clinical trials |
| Our products may prove to have undesirable and unintended side effects or other characteristics that may prevent our obtaining FDA or foreign regulatory approval for any indication |
| In addition, it is possible that research and discoveries by others will render our oligonucleotide technology obsolete or noncompetitive |
| We will not be able to commercialize our product candidates if our preclinical studies do not produce successful results or if our clinical trials do not demonstrate safety and efficacy in humans |
| Our success will depend on the success of our currently ongoing clinical trials and subsequent clinical trials that have not yet begun |
| It may take several years to complete the clinical trials of a product, and a failure of one or more of our clinical trials can occur at any stage of testing |
| We believe that the development of each of our product candidates involves significant risks at each stage of testing |
| If clinical trial difficulties and failures arise, our product candidates may never be approved for sale or become commercially viable |
| We do not believe that any of our product candidates have alternative uses if our current development activities are unsuccessful |
| There are a number of difficulties and risks associated with clinical trials |
| These difficulties and risks may result in the failure to receive regulatory approval to sell our product candidates or the inability to commercialize any of our product candidates |
| The possibility exists that: · we may discover that a product candidate does not exhibit the expected therapeutic results in humans, may cause harmful side effects or have other unexpected characteristics that may delay or preclude regulatory approval or limit commercial use if approved; · the results from early clinical trials may not be statistically significant or predictive of results that will be obtained from expanded, advanced clinical trials; · institutional review boards or regulators, including the FDA, may hold, suspend or terminate our clinical research or the clinical trials of our product candidates for various reasons, including noncompliance with regulatory requirements or if, in their opinion, the participating subjects are being exposed to unacceptable health risks; · subjects may drop out of our clinical trials; · our preclinical studies or clinical trials may produce negative, inconsistent or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials; and · the cost of our clinical trials may be greater than we currently anticipate |
| For example, in November 2004, we reported that our randomized Phase 3 clinical trial of Genasense® in patients with multiple myeloma did not meet its primary endpoint |
| The trial had been designed to evaluate whether the addition of Genasense® to standard therapy with high-dose dexamethasone could increase the time to development of progressive disease in patients who previously had received extensive therapy |
| Based on the results of the Phase 3 trial, we have no plans to submit an NDA in this indication to the FDA at the current time |
| We have not yet determined what additional clinical trials, if any, may be undertaken in patients with multiple myeloma |
| 23 ______________________________________________________________________ We cannot assure you that our ongoing preclinical studies and clinical trials will produce successful results in order to support regulatory approval of Genasense® in any territory or for any indication |
| Failure to obtain approval, or a substantial delay in approval of Genasense® for these or any other indications would have a material adverse effect on our results of operations and financial condition |
| Clinical trials are costly and time consuming and are subject to delays; our business would suffer if the development process relating to our products were subject to meaningful delays |
| Clinical trials are very costly and time-consuming |
| The length of time required to complete a clinical study depends upon many factors, including but not limited to the size of the patient population, the ability of patients to get to the site of the clinical study, the criteria for determining which patients are eligible to join the study and other issues |
| Delays in patient enrollment and other unforeseen developments could delay completion of a clinical study and increase its costs, which could also delay any eventual commercial sale of the drug that is the subject of the clinical trial |
| Our commencement and rate of completion of clinical trials also may be delayed by many other factors, including the following: o inability to obtain sufficient quantities of materials for use in clinical trials; o inability to adequately monitor patient progress after treatment; o unforeseen safety issues; o the failure of the products to perform well during clinical trials and o government or regulatory delays |
| If we fail to obtain the necessary regulatory approvals, we cannot market and sell our products in the United States or in other countries |
| The FDA and comparable regulatory agencies in foreign countries (such as the EMEA) impose substantial pre-market approval requirements on the introduction of pharmaceutical products |
| These requirements involve lengthy and detailed preclinical and clinical testing and other costly and time-consuming procedures |
| Satisfaction of these requirements typically takes several years or more depending upon the type, complexity and novelty of the product |
| We cannot apply for FDA approval to market any of our products under development until preclinical and clinical trials on the product are successfully completed |
| Several factors could prevent successful completion or cause significant delays of these trials, including an inability to enroll the required number of patients or failure to demonstrate adequately that the product is safe and effective for use in humans |
| If safety concerns develop, the FDA could stop our trials before completion |
| We may not market or sell any product for which we have not obtained regulatory approval |
| In May 2004, the application failed to gain a majority vote for marketing approval from ODAC As a consequence, we withdrew the NDA, which allows us to potentially resubmit the application |
| We cannot assure you that the FDA, the EMEA or other regulatory agencies will ever approve the use of our products that are under development |
| If the patient populations for which our products are approved are not sufficiently broad, or if approval is accompanied by unanticipated labeling restrictions, the commercial success of our products could be limited and our business, results of operations and financial condition could consequently be materially adversely affected |
| If the third party manufacturers upon which we rely fail to produce our products in the volumes that we require on a timely basis, or to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the commercialization of, or be unable to meet demand for, our products and may lose potential revenues |
| We do not manufacture any of our products or product candidates and we do not plan to develop any capacity to do so |
| We have contracted with third-party manufacturers to manufacture Ganite® and Genasense® |
| The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls |
| Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up initial production |
| These problems include difficulties with production costs and yields, quality control and assurance and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations |
| Our third-party manufacturers may not perform as agreed or may terminate their agreements with us |
| 24 ______________________________________________________________________ In addition to product approval, any facility in which Genasense® is manufactured or tested for its ability to meet required specifications must be approved by the FDA and/or the EMEA before it can manufacture Genasense® |
| Failure of the facility to be approved could delay the approval of Genasense® |
| We do not currently have alternate manufacturing plans in place |
| The number of third-party manufacturers with the expertise, required regulatory approvals and facilities to manufacture bulk drug substance on a commercial scale is limited, and it would take a significant amount of time to arrange for alternative manufacturers |
| If we need to change to other commercial manufacturers, the FDA and comparable foreign regulators must approve these manufacturers’ facilities and processes prior to our use, which would require new testing and compliance inspections, and the new manufacturers would have to be educated in or independently develop the processes necessary for the production of our products |
| Any of these factors could cause us to delay or suspend clinical trials, regulatory submissions, required approvals or commercialization of our products or product candidates, entail higher costs and result in our being unable to effectively commercialize our products |
| Furthermore, if our third-party manufacturers fail to deliver the required commercial quantities of bulk drug substance or finished product on a timely basis and at commercially reasonable prices, and we were unable to promptly find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volume and on a timely basis, we would likely be unable to meet demand for our products and we would lose potential revenues |
| Even if we obtain regulatory approval, we will be subject to ongoing regulation, and any failure by us or our manufacturers to comply with such regulation could suspend or eliminate our ability to sell our products |
| Ganite®, Genasense®, if it obtains regulatory approval, and any other product we may develop will be subject to ongoing regulatory oversight, primarily by the FDA Failure to comply with post-marketing requirements, such as maintenance by us or by the manufacturers of our products of current Good Manufacturing Practices as required by the FDA, or safety surveillance of such products or lack of compliance with other regulations could result in suspension or limitation of approvals or other enforcement actions |
| Current Good Manufacturing Practices are FDA regulations that define the minimum standards that must be met by companies that manufacture pharmaceuticals and apply to all drugs for human use including those to be used in clinical trials as well as those produced for general sale after approval of an application by the FDA These regulations define requirements for personnel, buildings and facilities, equipment, control of raw materials and packaging components, production and process controls, packaging and label controls, handling and distribution, laboratory controls and recordkeeping |
| Furthermore, the terms of any product candidate approval, including the labeling content and advertising restrictions, may be so restrictive that they could adversely affect the marketability of our product candidates |
| Any such failure to comply or the application of such restrictions could limit our ability to market our product candidates and may have a material adverse effect on our business, results of operations and financial condition |
| Such failures or restrictions may also prompt regulatory recalls of one or more of our products, which could have material and adverse effects on our business |
| The raw materials for our products are produced by a limited number of suppliers, and our business could suffer if we cannot obtain needed quantities at acceptable prices and qualities |
| The raw materials that we require to manufacture our drugs, particularly oligonucleotides, are available from only a few suppliers |
| If these suppliers cease to provide us with the necessary raw materials or fail to provide us with an adequate supply of materials at an acceptable price and quality, we could be materially adversely affected |
| 25 ______________________________________________________________________ If third-party payors do not provide coverage and reimbursement for use of our products, we may not be able to successfully commercialize our products |
| Our ability to commercialize drugs successfully will depend in part on the extent to which various third-party payors are willing to reimburse patients for the costs of our drugs and related treatments |
| These third-party payors include government authorities, private health insurers and other organizations, such as health maintenance organizations |
| Third-party payors often challenge the prices charged for medical products and services |
| Accordingly, if less costly drugs are available, third-party payors may not authorize or may limit reimbursement for our drugs, even if they are safer or more effective than the alternatives |
| In addition, the federal government and private insurers have changed and continue to consider ways to change the manner in which health care products and services are provided and paid for in the United States |
| In particular, these third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for new therapeutic products |
| In the future, it is possible that the government may institute price controls and further limits on Medicare and Medicaid spending |
| These controls and limits could affect the payments we collect from sales of our products |
| Internationally, medical reimbursement systems vary significantly, with some countries requiring application for, and approval of, government or third-party reimbursement |
| In addition, some medical centers in foreign countries have fixed budgets, regardless of levels of patient care |
| Even if we succeed in bringing therapeutic products to market, uncertainties regarding future health care policy, legislation and regulation, as well as private market practices, could affect our ability to sell our products in quantities, or at prices, that will enable us to achieve profitability |
| Our business exposes us to potential product liability that may have a negative effect on our financial performance and our business generally |
| The administration of drugs to humans, whether in clinical trials or commercially, exposes us to potential product and professional liability risks, which are inherent in the testing, production, marketing and sale of human therapeutic products |
| Product liability claims can be expensive to defend and may result in large judgments or settlements against us, which could have a negative effect on our financial performance and materially and adversely affect our business |
| We maintain product liability insurance (subject to various deductibles), but our insurance coverage may not be sufficient to cover claims |
| Furthermore, we cannot be certain that we will always be able to maintain or increase our insurance coverage at an affordable price |
| Even if a product liability claim is not successful, the adverse publicity and time and expense of defending such a claim may interfere with or adversely affect our business and financial performance |
| We may incur a variety of costs to engage in future acquisitions of companies, products or technologies, and the anticipated benefits of those acquisitions may never be realized |
| As a part of our business strategy, we may make acquisitions of, or significant investments in, complementary companies, products or technologies, although no significant acquisition or investments are currently pending |
| Any future acquisitions would be accompanied by risks such as: o difficulties in assimilating the operations and personnel of acquired companies; o diversion of our management’s attention from ongoing business concerns; o our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services; o additional expense associated with amortization of acquired assets; o maintenance of uniform standards, controls, procedures and policies; and o impairment of existing relationships with employees, suppliers and customers as a result of the integration of new management personnel |
| 26 ______________________________________________________________________ We cannot guarantee that we will be able to successfully integrate any business, products, technologies or personnel that we might acquire in the future, and our failure to do so could harm our business |
| We face substantial competition from other companies and research institutions that are developing similar products, and we may not be able to compete successfully |
| In many cases, our products under development will be competing with existing therapies for market share |
| In addition, a number of companies are pursuing the development of antisense technology and controlled-release formulation technology and the development of pharmaceuticals utilizing such technologies |
| We compete with fully integrated pharmaceutical companies that have more substantial experience, financial and other resources and superior expertise in research and development, manufacturing, testing, obtaining regulatory approvals, marketing and distribution |
| Smaller companies may also prove to be significant competitors, particularly through their collaborative arrangements with large pharmaceutical companies or academic institutions |
| Furthermore, academic institutions, governmental agencies and other public and private research organizations have conducted and will continue to conduct research, seek patent protection and establish arrangements for commercializing products |
| Such products may compete directly with any products that may be offered by us |
| Our competition will be determined in part by the potential indications for which our products are developed and ultimately approved by regulatory authorities |
| For certain of our potential products, an important factor in competition may be the timing of market introduction of our or our competitors’ products |
| Accordingly, the relative speed with which we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market are expected to be important competitive factors |
| We expect that competition among products approved for sale will be based, among other things, on product efficacy, safety, reliability, availability, price, patent position and sales, marketing and distribution capabilities |
| The development by others of new treatment methods could render our products under development non-competitive or obsolete |
| Our competitive position also depends upon our ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes and secure sufficient capital resources for the often-substantial period between technological conception and commercial sales |
| We cannot assure you that we will be successful in this regard |
| We are dependent on our key executives and scientists, and the loss of key personnel or the failure to attract additional qualified personnel could harm our business |
| Our business is highly dependent on our key executives and scientific staff |
| The loss of key personnel or the failure to recruit necessary additional or replacement personnel will likely impede the achievement of our development objectives |
| There is intense competition for qualified personnel in the pharmaceutical and biotechnology industries, and there can be no assurances that we will be able to attract and retain the qualified personnel necessary for the development of our business |
| Risks Related to Outstanding Litigation The outcome of and costs relating to pending shareholder class action and shareholder derivative actions are uncertain |
| In 2004, numerous complaints were filed in the United States District Court for the District of New Jersey against us and certain of our principal officers on behalf of purported classes of our shareholders who purchased our securities during several class periods |
| The complaints have been consolidated into a single action and allege that we and certain of our principal officers violated the federal securities laws by issuing materially false and misleading statements regarding Genasense® for the treatment of malignant melanoma that had the effect of artificially inflating the market price of our securities |
| The shareholder class action complaint in the various actions seeks monetary damages in an unspecified amount and recovery of plaintiffs’ costs and attorneys’ fees |
| On September 30, 2005, the court granted in part and denied in part our motion to dismiss the plaintiffs’ complaint |
| The court dismissed plaintiffs’ claim that the defendants engaged in a scheme or artifice to defraud plaintiffs, but allowed plaintiffs’ claims to proceed with respect to their allegations that defendants issued false and misleading public statements about Genasense® |
| If mediation is unsuccessful, the case is expected to proceed to discovery |
| In addition, two separate shareholder derivative actions have been filed against our directors and certain of our officers in New Jersey State and Federal courts |
| The Federal shareholder derivative action was consolidated with the securities action |
| The Federal derivative plaintiffs have not yet filed a consolidated amended complaint asserting their claims |
| Instead, the Federal shareholder derivative action has been stayed, pending developments in the Federal securities action |
| 27 ______________________________________________________________________ Based on facts substantially similar to those asserted in the shareholder class actions, the state derivative plaintiffs claim that defendants have breached their fiduciary duties to the shareholders and committed other violations of New Jersey law |
| On February 9, 2006, the Superior Court of New Jersey dismissed the plaintiffs &apos derivative complaint in the New Jersey State case based in part on plaintiffs failure to make a pre-suit demand on our Board of Directors and in part based on plaintiffs &apos failure to state a cause of action |
| Plaintiffs served a motion for reconsideration on February 27, 2006 |
| We believe these litigations are without merit and will continue to vigorously defend against these suits |
| Risks Related to Our Common Stock Provisions in our restated certificate of incorporation and bylaws and Delaware law may discourage a takeover and prevent our stockholders from receiving a premium for their shares |
| Provisions in our restated certificate of incorporation and bylaws may discourage third parties from seeking to obtain control of us and, therefore, could prevent our stockholders from receiving a premium for their shares |
| Our restated certificate of incorporation gives our board of directors the power to issue shares of preferred stock without approval of the holders of common stock |
| Any preferred stock that is issued in the future could have voting rights, including voting rights that could be superior to that of our common stock |
| The affirmative vote of 66-2/3prca of our voting stock is required to approve certain transactions and to take certain stockholder actions, including the amendment of certain provisions of our certificate of incorporation |
| Our bylaws contain provisions that regulate how stockholders may present proposals or nominate directors for election at annual meetings of stockholders |
| In addition, we are subject to Section 203 of the Delaware General Corporation Law, which contains restrictions on stockholder action to acquire control of us |
| On September 16, 2005, we announced that its Board of Directors approved a Stockholder Rights Plan and declared a dividend of one preferred stock purchase right (“Right”) for each share of our common stock held of record as of the close of business on September 27, 2005 |
| In addition, Rights shall be issued in respect of all shares of common stock issued after such date, including the shares issued hereunder, pursuant to the Plan |
| The Rights contain provisions to protect stockholders in the event of an unsolicited attempt to acquire us, including an accumulation of shares in the open market, a partial or two-tier tender offer that does not treat all stockholders equally and other activities that the Board believes are not in the best interests of shareholders |
| The Rights may discourage a takeover and prevent our stockholders from receiving a premium for their shares |
| We have not paid, and do not expect to pay in the future, cash dividends on our common stock |
| We have never paid cash dividends on our common stock and do not anticipate paying any such dividends in the foreseeable future |
| We currently intend to retain our earnings, if any, for the development of our business |
| The market price of our common stock, like that of the common stock of many other biopharmaceutical companies, has been and likely will continue to be highly volatile |
| Factors that could have a significant impact on the future price of our common stock include but are not limited to: o the results of preclinical studies and clinical trials by us or our competitors; o announcements of technological innovations or new therapeutic products by us or our competitors; o government regulation; o developments in patent or other proprietary rights by us or our respective competitors, including litigation; o fluctuations in our operating results; and o market conditions for biopharmaceutical stocks in general |
| 28 ______________________________________________________________________ At December 31, 2005, we had 114dtta5 million shares of common stock outstanding, 11dtta0 million additional shares reserved for the conversion of convertible preferred stock and the exercise of outstanding options and warrants and 5dtta1 million additional shares of common stock authorized for issuance and remaining to be granted under our stock option plans |
| Future sales of shares of our common stock by existing stockholders, holders of preferred stock who might convert such preferred stock into common stock and option and warrant holders who may exercise their options and warrants to purchase common stock also could adversely affect the market price of our common stock |
| Moreover, the perception that sales of substantial amounts of our common stock might occur could adversely affect the market price of our common stock |