EXHIBIT 99.1
RISK FACTORS
We have a history of significant operating losses and expect these losses to
continue in the future.
We have experienced significant operating losses each year since our
inception and expect these losses to continue for the foreseeable future. We had
a net loss of approximately $34,017,000 for the fiscal year ended December 31,
2002, and, as of December 31, 2002, we had an accumulated net loss of
approximately $125,775,000. The losses have resulted primarily from costs
incurred in research and development, including our clinical trials, and from
general and administrative costs associated with our operations. These costs
have exceeded our revenues which to date have been generated principally from
collaborations, government grants and sequencing services. We anticipate
incurring additional losses this year and in future years and cannot predict
when, if ever, we will achieve profitability. These losses may increase in the
near future as we expand our research and development and clinical trial
activities. In addition, our partners' product development efforts which utilize
our genomic discoveries are at an early stage and, accordingly, we do not expect
our losses to be substantially mitigated by revenues from milestone payments or
royalties under those agreements for a number of years, if ever.
Clinical trials are costly, time consuming and unpredictable, and we
have limited experience conducting and managing necessary pre-clinical and
clinical trials for our product candidates.
Our lead product candidate, Ramoplanin, is in a Phase III clinical
trial for the prevention of bloodstream infections caused by
vancomycin-resistant enterococci, also known as VRE, and a Phase II clinical
trial to assess the safety and efficacy of Ramoplanin to treat Clostridium
difficile-associated diarrhea (CDAD). Prior clinical and pre-clinical trials for
Ramoplanin were conducted by Biosearch Italia S.p.A. and its licensees, from
whom we acquired our license to develop Ramoplanin. We may not be able to
demonstrate the safety and efficacy of Ramoplanin or our other products to the
satisfaction of the U.S. Food and Drug Administration, commonly referred to as
the FDA, or other regulatory authorities. We may also be required to demonstrate
that our proposed product represents an improved form of treatment over existing
therapies and we may be unable to do so without conducting further clinical
studies. Negative, inconclusive or inconsistent clinical trial results could
prevent regulatory approval, increase the cost and timing of regulatory approval
or require additional studies or a filing for a narrower indication.
The speed with which we complete our clinical trials and our
applications for marketing approval will depend on several factors, including
the following:
. the rate of patient enrollment, which is a function of many
factors, including the size of the patient population, the
proximity of patients to clinical sites, the eligibility
criteria for the study and the nature of the protocol;
. fluctuations in the infection rates for patients enrolled in our
trials;
. compliance of patients and investigators with the protocol;
. prior regulatory agency review and approval of our applications
and procedures;
. analysis of data obtained from pre-clinical and clinical
activities which are susceptible to varying interpretations,
which interpretations could delay, limit or prevent regulatory
approval;
. changes in the policies of regulatory authorities for drug
approval during the period of product development; and
. the availability of skilled and experienced staff to conduct and
monitor clinical studies, to accurately collect data and to
prepare the appropriate regulatory applications.
In addition, the cost of human clinical trials varies dramatically based
on a number of factors, including the order and timing of clinical indications
pursued, the extent of development and financial support from alliance partners,
the number of patients required for enrollment, the difficulty of obtaining
clinical supplies of the product candidate, and the difficulty in obtaining
sufficient patient populations and clinicians.
We have limited experience in conducting and managing the pre-clinical
and clinical trials necessary to obtain regulatory marketing approvals. We may
not be able to obtain the approvals necessary to conduct clinical studies. Also,
the results of our clinical trials may not be consistent with the results
obtained in pre-clinical studies or the results obtained in later phases of
clinical trials may not be consistent with those obtained in earlier phases. A
number of companies in the biopharmaceutical industry have suffered significant
setbacks in advanced clinical trials, even after experiencing promising results
in early animal and human testing. If regulatory approval of a drug is granted,
such approval is likely to limit the indicated uses for which it may be
marketed. Furthermore, even if a product of ours gains regulatory approval, the
product and the manufacturer of the product will be subject to continuing
regulatory review. We may be restricted or prohibited from marketing or
manufacturing a product, even after obtaining product approval, if previously
unknown problems with the product or its manufacture are subsequently
discovered.
Use of genomic information to develop or commercialize products is unproven.
The development of new drugs and the diagnosis of disease based on
genomic information is unproven. Our business strategy is based on the
assumption that
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identifying and characterizing genes and sequencing select human genes and the
genomes of select pathogens may help scientists better understand complex
disease processes and develop drugs to treat these diseases. There is limited
understanding of the roles of genes in diseases. Few therapeutic vaccine or
diagnostic products based on genomic information have been developed and
commercialized. To date, no one has developed or commercialized any
pharmaceutical, diagnostic or vaccine products based on our technologies. If we
fail to identify genes useful for the discovery and development of such
products, or if partners are unable to use the genomic information that we
provide to them to develop such products, our current and potential customers
may lose confidence in our products or their value for drug discovery, and our
business may suffer as a result.
We rely heavily upon existing and prospective alliance partners and
licensees as a source of revenue for our operations and as a means of developing
and commercializing our products.
Our strategy for developing and commercializing therapeutic, vaccine and
diagnostic products depends, in part, on strategic alliances and licensing
arrangements with pharmaceutical and biotechnology partners. We currently have
alliances with AstraZeneca, Amgen, bioMerieux, Schering-Plough and Wyeth-Ayerst.
We have received a substantial portion of our revenue from these alliances, and
we expect to continue to do so. Under these arrangements, we are entitled to
receive payments and royalties based on the achievement by us and our partners
of certain development milestones and the successful development of products
arising from the collaborations. Although we have achieved many of the
scientific milestones under our agreements, we cannot assure you that we will
continue these achievements in the future or that milestones dependent on our
partners' development and commercialization activities will be attained.
In addition, we cannot assure that we will maintain our current
collaborations or establish additional collaborations. Competition among
genomics companies for collaborations with pharmaceutical companies is intense.
This competition is enhanced by the trend towards consolidation among large
pharmaceutical companies. Consequently, we cannot be sure that we will be able
to enter into new collaborations or maintain our existing ones, and any new or
renewed collaborations may be on terms less favorable to us than past
collaborations. Our failure to maintain existing collaborations or to enter into
additional collaborations would have a material adverse effect on our business.
In particular, if funding from partners were to become unavailable or were to be
reduced, we would need to devote additional internal resources to our research
programs or possibly scale back or terminate some programs.
If our partners develop products using our genomic information, we will
rely on these partners for product development, regulatory approval,
manufacturing and marketing of those products before we can receive some of the
milestone payments, royalties and other payments to which we may be entitled
under the terms of some of our alliance agreements. Our agreements with our
partners typically allow the partners significant discretion in electing whether
to pursue any of these activities. We cannot control the amount and timing of
resources our partners may devote to our programs or
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potential products. As a result, we cannot assure that our partners will perform
their obligations as expected. In addition, if a partner is involved in a
business combination, such as a merger or acquisition, or changes its business
focus, its performance under our agreement may suffer and, as a result, we may
not generate any revenues from the royalty, milestone and similar payment
provisions of our collaboration agreement with that partner.
Development of therapeutic, diagnostic and vaccine products based on our
discoveries will be subject to the high risks of failure inherent in the
development or commercialization of health care products. These risks include
the possibility that any such products will be found to be toxic, be found to be
ineffective, fail to receive necessary regulatory approvals, be difficult or
impossible to manufacture on a large scale, be uneconomical to market, fail to
be developed prior to the successful marketing of similar products by
competitors or infringe on proprietary rights of third parties.
Our strategy includes entering into multiple, concurrent alliances. We
cannot assure that we will be able to manage multiple alliances successfully.
The risks we face in managing multiple alliances include maintaining
confidentiality among partners, avoiding conflicts between partners and avoiding
conflicts between us and our partners. If we fail to manage our alliances
effectively, or if any of the problems described above arise, one or more of the
following could occur which could have a material adverse effect on our
business:
. use of significant resources to resolve conflicts,
. delay in research effects,
. legal claims involving significant time,
. expense,
. loss of reputation,
. termination of one or more alliances, or loss of capital and
loss of revenues.
We expect to raise additional funds in the future.
We believe that our existing cash and marketable securities together
with borrowings under equipment financing arrangements and anticipated cash flow
from operations will be sufficient to support our current plans for
approximately eighteen months. However, we expect to raise additional capital,
subject to market conditions and strategic considerations over the course of the
next 12 months. In particular, we will need additional funds to increase our
research and development activities and fund our clinical trials. We may seek
funding through additional public or private equity offerings, debt financings
or agreements with customers. If we raise additional capital by issuing equity
or convertible debt securities, the issuances may dilute share ownership of
existing investors and future investors may be granted rights superior to those
of current shareholders. Additional financing may not be available when needed,
or, if available,
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may not be available on favorable terms. If we cannot obtain adequate financing
on acceptable terms when such financing is required, our business will be
adversely affected.
We have issued $15 million of convertible notes due December 31, 2004,
which contain restrictive covenants, including covenants that can cause early
repayment of the Notes.
On March 5, 2002, we issued convertible notes, bearing interest at 6%
per annum, to two institutional investors in the aggregate principal amount of
$15 million. The notes are due on December 31, 2004, but if at any time on or
after December 31, 2003, we maintain a net cash balance (i.e., cash and cash
equivalents less obligations for borrowed money bearing interest) of less than
$35 million, then the holders of the notes can require that all or any part of
the outstanding principal balance of the notes plus all accrued but unpaid
interest be repaid. If we have to repay the notes early, our cash position and
ability to execute our business plan could be adversely affected. The notes also
contain provisions limiting our ability to incur debt that is senior to the
notes, with an exception for certain equipment financing, and provisions that
can cause the payment of a premium to the holders of the notes on a change of
control transaction.
The notes are convertible into our common stock at a price of $8 per
share (subject to anti-dilution and other adjustments). As part of the
transaction, the purchasers also received warrants to purchase up to 487,500
shares of our common stock at an exercise price of $8.00 per share (subject to
anti-dilution and other adjustments), which become exercisable to the extent the
notes are converted or if certain other redemptions or repayments of the notes
occur. The shares underlying the notes and the warrants will be registered for
re-sale and if the notes are converted and the warrants exercised, these shares
could be sold into the market creating dilution of the ownership of our
shareholders at that time.
We will need to develop marketing and sales capabilities to successfully
commercialize our product candidates.
Because we have only recently acquired a license to develop our first
product candidate, we currently have no marketing or sales experience. We will
need to develop a marketing and sales staff to successfully commercialize our
product candidates, including Ramoplanin. The development of marketing and sales
capabilities will require significant expenditures, management resources and
time. We may be unable to build such a sales force, the cost of establishing
such a sales force may exceed any product revenues, or our marketing and sales
efforts may be unsuccessful. Failure to successfully establish sales and
marketing capabilities in a timely manner or find suitable sales and marketing
partners may materially adversely affect our business and results of operation.
Even if we are able to develop a sales force or find a suitable marketing
partner, our products may not be accepted by health care providers or consumers.
Health care insurers and other payers may not pay for our products or
may impose limits on reimbursement.
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Our ability to commercialize Ramoplanin and our future products will
depend, in part, on the extent to which reimbursement for such products will be
available from third-party payers, such as Medicare, Medicaid, health
maintenance organizations, health insurers and other public and private payers.
If we succeed in bringing Ramoplanin or other products in the future to market,
we cannot assure you that third-party payers will pay for Ramoplanin or other
products or will establish and maintain price levels sufficient for realization
of an appropriate return on our investment in product development. If adequate
coverage and reimbursement levels are not provided by government and private
payers for use of our products, our products may fail to achieve market
acceptance and our results of operations may be materially adversely affected.
Many health maintenance organizations and other third-party payers use
formularies, or lists of drugs for which coverage is provided under a health
care benefit plan, to control the costs of prescription drugs. Each payer that
maintains a drug formulary makes its own determination as to whether a new drug
will be added to the formulary and whether particular drugs in a therapeutic
class will have preferred status over other drugs in the same class. This
determination often involves an assessment of the clinical appropriateness of
the drug and sometimes the cost of the drug in comparison to alternative
products. We cannot assure you that Ramoplanin or any of our future products
will be added to payer's formularies, whether our products will have preferred
status to alternative therapies, nor whether the formulary decisions will be
conducted in a timely manner. We may also decide to enter into discount or
formulary fee arrangements with payers, which could result in us receiving lower
or discounted prices for Ramoplanin or future products.
We currently depend and will in the future depend on third parties to
manufacture our product candidates, including Ramoplanin.
We do not have the internal capability to manufacture commercial
quantities of pharmaceutical products under the FDA's current Good Manufacturing
Practices. We have entered into an agreement with Biosearch (which merged with
Versicor Inc. in March 2003 and subsequently changed its name to Vicuron
Pharmaceuticals Inc.) for the manufacture of Ramoplanin and expect to enter into
similar agreements with third parties for the manufacture of future product
candidates. We cannot be certain that Vicuron or future manufacturers will be
able to deliver commercial quantities of product candidates to us or that such
deliveries will be made on a timely basis. If we are required to find additional
or alternative sources of supply for Ramoplanin or other future product
candidates, we may face additional cost and delay in product development and
commercialization. We may not be able to enter into alternative supply
arrangements at commercially acceptable rates, if at all. Also, if we change the
source or location of supply or modify the manufacturing process, regulatory
authorities will require us to demonstrate that the product produced by the new
source or from the modified process is equivalent to the product used in any
clinical trials that we had conducted.
In addition, any contract manufacturers that we may use must adhere to
the FDA's regulations on current Good Manufacturing Practices, which are
enforced by the FDA through its facilities inspection program. These facilities
are subject to periodic
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inspection by the FDA. The manufacture of products at these facilities will be
subject to strict quality control testing and recordkeeping requirements.
Moreover, while we may choose to manufacture products in the future, we
have no experience in the manufacture of pharmaceutical products for clinical
trials or commercial purposes. If we decide to manufacture products, we would be
subject to the regulatory requirements described above. In addition, we would
require substantial additional capital and would be subject to delays or
difficulties encountered in manufacturing pharmaceutical products. No matter who
manufactures the products, we will be subject to continuing obligations
regarding the submission of safety reports and other post-market information.
Future acquisitions may absorb significant resources and may be unsuccessful.
As part of our strategy, we may pursue acquisitions of businesses or
assets, investments and other relationships and alliances. Acquisitions may
involve significant cash expenditures, debt incurrence, additional operating
losses, dilutive issuances of equity securities, and expenses that could have a
material adverse effect on our financial condition and results of operations.
For example, to the extent that we elect to pay the purchase price for such
acquisitions in shares of our stock, the issuance of additional shares of our
stock will be dilutive to our stockholders. Acquisitions involve numerous other
risks, including:
. difficulties integrating acquired technologies and personnel
into our business;
. diversion of management from daily operations;
. inability to obtain required financing on favorable terms;
. entering new markets in which we have little or no previous
experience;
. potential loss of key employees or customers of acquired
companies;
. assumption of the liabilities and exposure to unforeseen
liabilities of acquired companies; and
. amortization of the intangible assets of acquired companies.
It may be difficult for us to complete these types of transactions
quickly and to integrate the businesses efficiently into our current business.
Any acquisitions or investments by us may ultimately have a negative impact on
our business and financial condition.
The biopharmaceutical industry is intensely competitive and rapidly evolving.
There is intense competition among entities in the biopharmaceutical
field to develop and commercialize pharmaceutical and diagnostic products and
services. We face competition in these areas from pharmaceutical, biotechnology,
diagnostic and
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genomics companies. Many of our competitors have substantially greater capital
resources, research and development staffs, facilities, manufacturing and
marketing experience, distribution channels and human resources than us.
Furthermore, many of our competitors are more experienced than we are in drug
discovery, development and commercialization, and obtaining regulatory
approvals. As a result, our competitors may discover, develop and commercialize
pharmaceutical products or services before us. In addition, our competitors may
discover, develop and commercialize products or services that are more effective
than, or otherwise render non-competitive or obsolete, the products or services
that we or our collaborators are seeking to develop and commercialize. Moreover,
these competitors may obtain patent protection or other intellectual property
rights that would limit our rights or the ability of our collaborators to
develop or commercialize pharmaceutical products or services.
Our intellectual property protection may be inadequate to protect our
proprietary rights.
Our success will depend, in part, on our ability to obtain commercially
valuable patent claims and protect our intellectual property. Our patent
position involves complex legal and factual questions, and legal standards
relating to the validity and scope of claims in our technology field are still
evolving. Therefore, the degree of future protection for our proprietary rights
is uncertain.
The risks and uncertainties that we face with respect to our patents and
other proprietary rights include the following:
. the pending patent applications we have filed or to which we
have exclusive rights may not result in issued patents or may
take longer than we expect to result in issued patents;
. the claims of any patents which are issued may be limited from
those in our patent applications and
. may not provide meaningful protection;
. we may not be able to develop additional proprietary
technologies that are patentable;
. the patents licensed or issued to us or our customers may not
provide a competitive advantage;
. other companies may challenge patents licensed or issued to us
or our customers;
. patents issued to other companies may harm our ability to do
business;
. other companies may independently develop similar or alternative
technologies or duplicate our technologies; and
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. other companies may design around technologies we have licensed
or developed.
We may apply for patent protection for compositions and methods relating
to gene expression and disease-specific patterns of gene expression that we
identify and individual disease genes and targets that we discover. These patent
applications may include claims relating to novel genes, gene fragments, single
nucleotide polymorphisms (SNPs) or encoded protein and to novel uses for known
genes, gene fragments, SNPs or proteins identified from the use of our genomic
information and our databases.
We may not be able to obtain meaningful patent protection for our
discoveries. Even if patents are issued, their scope of coverage or protection
is uncertain. For example, we or our collaborators have filed patent
applications with respect to a number of full length genes and corresponding
proteins and partial genes of H. pylori, of M. leprae and several other
organisms. These applications seek to protect these full-length and partial gene
sequences and corresponding proteins, as well as equivalent sequences and
products and uses derived from these sequences and proteins. Some court
decisions and US Patent and Trademark Office guidelines indicate that disclosure
of a partial sequence may not be sufficient to support the patentability of a
full-length sequence.
In addition, we are aware that some companies have published patent
applications relating to nucleic acids encoding several H. pylori proteins and,
in other disease programs, relating to genes for which we have found mutations
of interest. If these companies are issued patents, their patents may limit our
ability and the ability of our collaborators to practice under any patents that
may be issued to our collaborators or us. Because of this, we or our
collaborators may not be able to obtain patents with respect to the genes of
infectious agents such as H. pylori, or the value of certain other patents
issued to us or our collaborators may be limited. Also, even if a patent were
issued to us, the scope of coverage or protection afforded to such patent may be
limited.
Our proprietary position may depend on our ability to protect trade secrets.
We rely on trade secret protection for our confidential and proprietary
information and procedures, including procedures related to sequencing genes and
to searching and identifying important regions of genetic information. We
currently protect such information and procedures as trade secrets. We protect
our trade secrets through recognized practices, including access control,
confidentiality agreements with employees, consultants, collaborators, and
customers, and other security measures. These confidentiality agreements may be
breached, however, and we may not have adequate remedies for any such breach. In
addition, our trade secrets may otherwise become known or be independently
developed by competition.
We may infringe the intellectual property rights of third parties and may become
involved in expensive intellectual property litigation.
The intellectual property rights of biotechnology companies, including
our company, are generally uncertain and involve complex legal, scientific and
factual
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questions. Our success in the functional genomic field may depend, in part, on
our ability to operate without infringing on the intellectual property rights of
others and to prevent others from infringing on our intellectual property
rights.
There has been substantial litigation regarding patents and other
intellectual property rights in the genomic industry. We may become party to
patent litigation or proceedings at the U.S. Patent and Trademark Office or a
foreign patent office to determine our patent rights with respect to third
parties which may include subscribers to our database information services.
Interference proceedings in the U.S. Patent and Trademark Office or opposition
proceedings in a foreign patent office may be necessary to establish which party
was the first to discover such intellectual property. We may become involved in
patent litigation against third parties to enforce our patent rights, to
invalidate patents held by such third parties, or to defend against such claims.
The cost to us of any patent litigation or similar proceeding could be
substantial, and it may absorb significant management time. If an infringement
litigation against us is resolved unfavorably, we may be enjoined from
manufacturing or selling certain of our products or services without a license
from a third party. We may not be able to obtain such a license on commercially
acceptable terms, or at all.
We may not be able to obtain meaningful patent protection for discoveries under
our government contracts.
Under our government grants and contracts, the government has a
statutory right to practice or have practiced any inventions developed under the
government research contracts. In addition, under certain circumstances, such as
inaction on the part of us or our licensees to achieve practical application of
the invention or a need to alleviate public health or safety concerns not
reasonably satisfied by us or our licensees, the government has the right to
grant to other parties licenses to any inventions first reduced to practice
under the government grants and contracts. If the government grants such a
license to a third party, our patent position may be jeopardized. In addition,
the government has ownership rights in the data, clones, genes and other
material derived from the material furnished to us by the government, while we
have ownership rights in other technology developed solely by us. We are also
obligated under certain government grants to submit sequencing data and
materials resulting from our research to public databases within 24 hours from
the date such data and materials are developed. Our ability to obtain patent
protection for our discoveries and inventions may be adversely affected by this
publication.
International patent protection is uncertain.
Patent law outside the United States is uncertain and is currently
undergoing review and revision in many countries. Further, the laws of some
foreign countries may not protect our intellectual property rights to the same
extent as U.S. laws. We may participate in opposition proceedings to determine
the validity of our or our competitors' foreign patents, which could result in
substantial costs and diversion of our efforts. Finally, some of our patent
protection in the United States is not available to us in foreign countries due
to the laws of those countries.
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Our research and product development depends on access to tissue samples and
other biological materials from individuals.
To continue to build our database products, we will need access to
normal and diseased human and other tissue samples, other biological materials
and related clinical and other information, which may be in limited supply. We
compete with many other companies for these materials and information. We may
not be able to obtain or maintain access to these materials and information on
acceptable terms. In addition, government regulation in the United States and
foreign countries could result in restricted access to, or use of, human and
other tissue samples. If we lose access to sufficient numbers or sources of
tissue samples, or if tighter restrictions are imposed on our use of the
information generated from tissue samples, our business may be harmed.
Competition among genomics companies is also increasing for access to unique
data from related individuals that we use to identify genes for specific human
diseases.
Ethical, legal and social issues related to the use of genetic information and
genetic testing may cause less demand for our products.
Genetic testing has raised issues regarding confidentiality and the
appropriate uses of the resulting information. For example, consumers have
expressed concerns towards insurance carriers and employers using such tests to
discriminate on the basis of such information, resulting in barriers to the
acceptance of such tests. This could lead to governmental authorities calling
for limits on or regulation of the use of genetic testing or prohibit testing
for genetic predisposition to certain diseases, particularly those that have no
known cure. Any of these scenarios could reduce the potential markets for our
products.
We may not succeed in realizing any additional revenue from the PathoGenome
Database.
In 1997, we introduced the PathoGenome Database that consists of genetic
information from more than thirty microbial organisms. In the past, our strategy
for our database depended on entering into subscription agreements with
pharmaceutical, biotechnology and other companies for the use of our database.
Each of the agreements that we may have with our customers is for a specific
term, and we anticipate that they may not be renewed upon expiration or may be
renewed at a substantially lower price. If any agreements expire and are not
renewed, our revenue would suffer.
Our sales cycle is lengthy and we may spend considerable resources on
unsuccessful negotiation efforts or may not be able to complete deals on the
schedule anticipated.
Our ability to obtain new customers for genomic information products
depends on our customers' belief that we can help accelerate their drug
discovery efforts. Our negotiation cycle is typically lengthy because we need to
educate potential customers and sell the benefits of our products and services
to a variety of constituencies within companies. In addition, each agreement
involves the negotiation of unique terms. We may expend substantial funds and
management effort with no assurance that an
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agreement will result. Actual and proposed consolidations of pharmaceutical
companies have affected and may in the future affect the timing and progress of
our ability to conclude deals with collaborative partners.
We depend on key personnel in a highly competitive market for skilled personnel.
We are highly dependent on the principal members of our senior
management and key scientific and technical personnel. The loss of any of these
personnel could have a material adverse effect on our ability to achieve our
goals. Our future success is also dependent upon our ability to attract and
retain additional qualified scientific, technical and managerial personnel. Our
plan to expand our biopharmaceutical program will require us to hire a number of
new personnel with expertise in the areas of clinical trials and sales and
marketing. We experience intense competition for qualified personnel and may not
be able to continue to attract and retain skilled personnel necessary for the
development of our business.
Our activities involve hazardous materials and may subject us to environmental
liability.
Our research and development involve the controlled use of hazardous and
radioactive materials and biological waste. We are subject to federal, state and
local laws and regulations governing the use, manufacture, storage, handling and
disposal of these materials and certain waste products. Although we believe that
our safety procedures for handling and disposing of these materials comply with
legally prescribed standards, we cannot completely eliminate the risk of
accidental contamination or injury from these materials. In the event of an
accident, we could be held liable for damages or penalized with fines, and this
liability could exceed our resources.
We believe that we are in compliance in all material respects with
applicable environmental laws and regulations and currently do not expect to
make material additional capital expenditures for environmental control
facilities in the near term. However, we may have to incur significant costs to
comply with current or future environmental laws and regulations.
Multiple factors beyond our control may cause fluctuations in our operating
results and may cause our business to suffer.
Our revenues and results of operations may fluctuate significantly,
depending on a variety of factors, including the following:
. our success in concluding deals for, and changes in the demand
for, our products;
. variations in the timing of payments from partners and customers
and the recognition of these payments as revenues;
. the terms we are able to negotiate in our deals;
. the progress of our pre-clinical and clinical trials;
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. the timing of our new product introductions, if any;
. changes in the research and development budgets of our customers
and potential customers;
. the introduction of new products and services by our
competitors;
. regulatory actions;
. expenses related to, and the results of, litigation and other
proceedings relating to intellectual property rights;
. the cost and timing of our adoption of new technologies;
. the cost, quality and availability of cell and tissue samples,
reagents and related components and technologies, including
those supplied to us pursuant to contractual arrangements; and
. the lengthy nature of our sales cycle for concluding alliances
and other deals.
We will not be able to control many of these factors. In addition, if
our revenues in a particular period do not meet expectations, we may not be able
to adjust our expenditures in that period, which could cause our business to
suffer. We believe that period-to-period comparisons of our financial results
will not necessarily be meaningful. You should not rely on these comparisons as
an indication of our future performance. If our operating results in any future
period fall below the expectations of securities analysts and investors, our
stock price may fall, possibly by a significant amount.
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