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EXHIBIT 99
CAUTIONARY FACTORS FOR CONSIDERATION IN
CONNECTION WITH FORWARD LOOKING STATEMENTS
The following risks and uncertainties, among others, could cause OSI
Pharmaceuticals, Inc.'s (the "Company's" or "OSI's") actual results to differ
materially from those described in forward looking statements made in this
report or presented elsewhere by management from time to time:
UNCERTAINTIES RELATED TO CLINICAL TRIALS
The Company has limited experience in conducting clinical trials and
intends to rely primarily on the pharmaceutical companies with which it
collaborates, including Novartis Pharma AG ("Novartis"), Pfizer Inc. ("Pfizer"),
Hoechst Marion Roussel, Inc. ("HMRI"), BioChem Pharma (International) Inc.
("BioChem Pharma"), Sankyo Company, Ltd. ("Sankyo"), and Sepracor, Inc.
("Sepracor") for clinical development and regulatory approval of its product
candidates. Before obtaining regulatory approvals for the commercial sale of its
products, the Company or its collaborative partners will be required to
demonstrate through pre-clinical studies and clinical trials that the proposed
products are safe and effective for use in each target indication. The results
from pre-clinical studies and early clinical trials may not be predictive of
results that will be obtained in large-scale testing, and there can be no
assurance that the clinical trials conducted by the Company or its partners will
demonstrate sufficient safety and efficacy to obtain the required regulatory
approvals or will result in marketable products. In addition, clinical trials
are often conducted with patients having the most advanced stages of disease.
During the course of treatment, these patients can die or suffer other adverse
medical effects for reasons that may not be related to the pharmaceutical agent
being tested, but which can nevertheless affect clinical trial results. Various
companies in the pharmaceutical industry have suffered significant setbacks in
advanced clinical trials, even after promising results in earlier trials. In
addition, clinical trials for the product candidates being developed by the
Company and its collaborators may be delayed by many factors. Any delays in, or
termination of, the clinical trials of any of the Company's product candidates
would have a material adverse effect on the Company's business, financial
condition and results of operations.
In the Company's small molecule drug discovery operations, only one
product candidate has entered clinical trials. Furthermore, none of the
compounds discovered using the Company's small molecule discovery technology
have not yet been proven safe or effective in humans. Moreover, the Company's
drug discovery assays are focused on several target genes, the functions of
which have not yet been fully elucidated. As such, the safety and efficacy of
drugs that alter the transcription of these genes have not yet been established.
No assurance can be given that any lead small molecule compounds or diagnostic
product candidates emerging from the Company's discovery and development
operations will successfully complete clinical trials or receive marketing
approval from the U.S. Food and Drug Administration ("FDA") or any foreign
regulatory authorities on a timely basis or at all.
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company does not intend to conduct late-stage clinical trials or
manufacturing or marketing activities with respect to any of its product
candidates in the foreseeable future. The Company has collaborations with
Novartis, Pfizer, HMRI, Sankyo, Sepracor, and BioChem Pharma for the development
of potential drug candidates, and to date, its most advanced programs are in
TGF-Beta3 with Novartis for wound healing and oral mucositis and an oncogene
inhibitor with Pfizer for the treatment of certain cancers. The Company is
dependent on the pharmaceutical companies with which it collaborates for the
pre-clinical testing, clinical development, regulatory approval, manufacturing
and marketing of its products. The Company's collaborative agreements allow its
collaborative partners significant discretion in electing to pursue or not to
pursue any of these activities. The Company cannot control the amount and timing
of resources its collaborative partners devote to the Company's programs or
potential products. If any of the Company's collaborative partners were to
breach or terminate its agreements with the Company or otherwise fail to conduct
its collaborative activities successfully in a timely manner, the pre-clinical
or clinical development or commercialization of product candidates or research
programs would be delayed or terminated. Any such delay or termination could
have a material adverse effect on the Company's business, financial condition
and results of operations.
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The Company has a collaborative research agreement with Novartis
relating to the clinical development, manufacturing and marketing of the
Company's recombinant protein TGF-Beta3 for various indications. Under this
agreement, Novartis has the right to manufacture TGF-Beta3 for clinical
development and commercial purposes for all indications. The Company and other
potential licensees of TGF-Beta3 are, and will be, dependent on Novartis as the
sole manufacturer of TGF-Beta3. No assurance can be given that Novartis will
supply TGF-Beta3 to the Company and its licensees as needed. In addition, a
substantial milestone payment to the Company by Novartis under this
collaboration is dependent on Novartis accomplishing certain clinical
development objectives, over which the Company has no control. Failure of
Novartis to complete clinical development and obtain regulatory approval for
TGF-Beta3 in one or more indications could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company relies on its collaborative partners to provide funding in
support of its research operations. As of September 30, 1997, the Company had
received or accrued an aggregate of $81.2 million in research funding and
milestone payments from its collaborative partners. The Company would be
required to devote additional internal resources to product development, or
scale back or terminate certain development programs or seek alternative
collaborative partners, if funding from one or more of its collaborative
programs were reduced or terminated.
Although the Company has worked to expand its proprietary compound
libraries (through acquisition of the fungi collection of MYCOsearch, Inc. and
the licensing of The Dow Chemical Company's library of approximately 140,000
small molecule compounds), the Company still owns or controls the rights to only
a relatively small number of the compounds that it tests in its drug discovery
operations. The Company is dependent on access to the compound libraries of its
collaborative partners and others in order to enhance the value of its drug
discovery platforms. Failure by the Company to gain access to the compound
libraries of its collaborative partners and others would restrict its ability to
exploit fully its high throughput screening capabilities and would have a
material adverse effect on its business, financial condition and results of
operations.
Disputes may arise in the future with respect to the ownership of
rights to any technology developed with third parties. These and other possible
disagreements between collaborators and the Company could lead to delays in the
collaborative research, development or commercialization of certain product
candidates, or could require or result in litigation or arbitration, which would
be time-consuming and expensive, and would have a material adverse effect on the
Company's business, financial condition and results of operations.
Generally, in its collaborative research agreements, the Company agrees
not to conduct independently, or with any third party, any research that is
competitive with the research conducted under its collaborative programs. The
Company's collaborative relationships may have the effect of limiting the areas
of research the Company may pursue. For example, under its collaborative
research agreements with its partners, the Company is prohibited during the term
of the agreements from pursuing or sponsoring research aimed at the discovery of
drugs which are the subject of the collaborations. However, the Company's
collaborative partners may develop, either alone or with others, products that
are similar to or competitive with the products or potential products that are
the subject of the Company's collaborations with such partners. Competing
products, either developed by the collaborative partners or to which the
collaborative partners have rights, may result in their withdrawal of support
for the Company's product candidates, which would have a material adverse effect
on the Company's business, financial condition and results of operations.
All of the Company's collaborative programs with pharmaceutical
companies have terms of six or fewer years, which is generally less than the
period required for the discovery, clinical development and commercialization of
most drugs. The continuation of any of the Company's drug discovery and
development programs is dependent on the periodic renewal of the relevant
collaborative partnership. Furthermore, all of the Company's collaborative
research agreements are subject to termination under various circumstances.
Certain of the Company's collaborative research agreements provide that, upon
expiration of a specified period after commencement of the agreement, its
collaborative partners have the right to terminate the agreement on short notice
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without cause. The termination or nonrenewal of any collaborative relationship
could have a material adverse effect on the Company's business, financial
condition and results of operations.
There have been a significant number of consolidations among large
pharmaceutical and diagnostic companies. Such consolidations among these
companies with which the Company is engaged in collaborative research can result
in the diminution or termination of, or delays in, one or more of the Company's
collaborative programs. For example, in 1995, the pharmaceutical operations of
three companies with which the Company had collaborative research agreements,
Hoechst AG ("Hoechst"), Hoechst Roussel Pharmaceuticals, Inc. ("Hoechst
Roussel") and Marion Merrell Dow Inc. ("MMDI") were combined in one entity,
HMRI. This combination resulted in delays in the Company's collaborative
programs with each of the constituent companies and a reduction in the aggregate
funding received by the Company.
The Company's strategy for the discovery, development, clinical
testing, manufacturing and marketing of certain of its potential products
includes establishing additional collaborations. There can be no assurance that
the Company will be able to negotiate such collaborative arrangements on
acceptable terms, if at all, or that such collaborations will be successful.
UNCERTAINTIES RELATED TO THE EARLY STAGE OF DEVELOPMENT;
TECHNOLOGICAL UNCERTAINTIES
To date, the Company has generated no revenue from the sale of
pharmaceutical products. Except for CP-358,774, with respect to which Pfizer is
conducting Phase I safety and toxicity studies, all of the lead compounds in the
Company's small molecule drug discovery programs are either in the discovery or
the pre-clinical evaluation phase. TGF-Beta3, which is the Company's product
candidate most advanced in clinical development, remains subject to further
clinical evaluation. The Company has commercialized one diagnostic product,
which to date has not generated significant sales and is not expected to
generate significant sales in the future. Any products resulting from the
Company's development programs are not expected to be commercially available for
several years, if at all.
All of the Company's potential products will require significant
research and development and are subject to significant risks. Potential
products that appear to be promising at early stages of development may not
reach the market for a number of reasons. Potential products may be found
ineffective or cause harmful side effects during pre-clinical testing or
clinical trials, fail to receive necessary regulatory approvals, be difficult to
manufacture on a large scale, be uneconomical to produce, fail to achieve market
acceptance or be precluded from commercialization by proprietary rights of third
parties. There can be no assurance that the Company's or its collaborative
partners' product development efforts will be successfully completed, that
required regulatory approvals will be obtained or that any products, if
introduced, will be successfully marketed or achieve customer acceptance.
The Company's live-cell assays are novel as a drug discovery method and
have not yet been shown to be successful in the development of any
commercialized drug. Furthermore, the Company's drug discovery assays are
focused on several target genes and other molecular targets, the functions of
which have not yet been fully elucidated. There can be no assurance that the
Company's live-cell assay technology will result in lead compounds that will be
safe and efficacious. Development of new pharmaceutical products is highly
uncertain, and no assurance can be given that the Company's drug discovery
technology will result in any commercially successful products.
UNCERTAINTY OF FUTURE PROFITABILITY
OSI has had net operating losses since its inception in 1983. At
September 30, 1997, the Company's accumulated deficit was approximately $45.7
million. The Company's losses have resulted principally from costs incurred in
research and development, and from general and administrative costs associated
with the Company's operations. These costs have exceeded the Company's revenues,
which to date have been generated principally from collaborative research
agreements. OSI expects to incur substantial additional operating expenses over
the next several years as a result of increases in its expenses for research and
development, including enhancements in its drug discovery technologies, and with
respect to its internal proprietary projects and co-ventures with pharmaceutical
companies. If the Company does not obtain additional third party funding for
such expenses, the
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Company expects that such expenses will result in increased losses from
operations. OSI does not expect to generate revenues from the sale of its small
molecule products for several years. The Company currently has limited sales of
only one diagnostic product. The Company's future profitability depends, in
part, on its collaborative partners obtaining regulatory approval for products
derived from its collaborative research efforts, the Company's collaborative
partners successfully producing and marketing products derived from technology
or rights licensed from the Company, and the Company's entering into agreements
for the development, commercialization, manufacture and marketing of any
products derived from the Company's internal proprietary programs. There can be
no assurance that the Company or its collaborative partners will obtain required
regulatory approvals, or successfully develop, commercialize, manufacture and
market product candidates or that the Company will ever achieve product revenues
or profitability.
NEED FOR ADDITIONAL FUNDING, UNCERTAINTY OF ACCESS TO CAPITAL
The Company will require substantial additional funding in order to
continue its research, product development, pre-clinical testing and clinical
trials of its product candidates. The Company's co-ventures with pharmaceutical
companies, internal proprietary programs and operations will require a
significant amount of funding that will not be provided by the Company's
existing collaborative partners. The Company's strategy includes, in addition to
its funded collaborations, (i) forming co-ventures with pharmaceutical companies
and (ii) developing product candidates in its internal proprietary programs
through early stage clinical development, before forming collaborations for the
further development of such product candidates. These activities will require
investment of significant funds by the Company. No assurance can be given that
the Company will have adequate resources to support such existing and future
activities or that the Company will be able to enter into collaborative
arrangements on acceptable terms, if at all.
The Company's future capital requirements will depend on many factors,
including continued scientific progress in its research and development
programs, the size and complexity of these programs, progress with pre-clinical
testing and early stage clinical trials, the time and costs involved in
obtaining regulatory approvals for its product candidates, the costs involved in
filing, prosecuting and enforcing patent claims, competing technological and
market developments, the establishment of additional collaborative arrangements,
the cost of manufacturing arrangements, commercialization activities, and the
cost of product in-licensing and strategic acquisitions, if any. The Company
evaluates on an ongoing basis potential collaborative arrangements with third
parties and acquisitions of companies or technologies that may complement its
business.
The Company intends to seek additional funding through arrangements
with corporate collaborators and through public or private sales of the
Company's securities, including equity securities. There can be no assurance,
however, that additional funding will be available on reasonable terms, if at
all. Any additional equity financings would be dilutive to the Company's
stockholders. If adequate funds are not available, the Company may be required
to curtail significantly one or more of its research and development programs or
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies or
product candidates, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
Generally, the Company's funding pursuant to any particular
collaborative research agreement is subject to reduction or termination under
various circumstances. There can be no assurance that scheduled payments will be
made by third parties, that current agreements will not be cancelled, that
government research grants will continue to be received at current levels or
that unanticipated events requiring the expenditure of funds will not occur.
There can be no assurance that the Company's cash reserves and other liquid
assets, including the net proceeds of this offering and funding that may be
received from the Company's collaborative partners and interest income earned
thereon, will be adequate to satisfy its capital and operating requirements for
the foreseeable future.
NO ASSURANCE OF PROTECTION OF PATENTS AND PROPRIETARY TECHNOLOGY
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The Company's success will depend in part on its ability or the ability
of its collaborative partners to obtain patent protection for product
candidates, to maintain trade secret protection and operate without infringing
on the proprietary rights of third parties.
The Company is aware of several U.S. and foreign patents owned by
others who may allege infringement by TGF-Beta3, which the Company is seeking to
develop in collaboration within Novartis. Genentech, Inc. has U.S. patents
relating to certain recombinant materials and procedures for producing members
of the TGF-Beta family, including TGF-Beta3. In addition, the Company believes
that Genentech, Inc. has license rights under a U.S. Government patent relating
to work done at the National Institute of Health of the U.S. Department of
Health and Human Services involving the identification and isolation of
TGF-Beta1. Furthermore, Celtrix Pharmaceuticals, Inc. ("Celtrix") has been
granted a European patent relating to TGF-Beta2. There can be no assurance that
the activities or products of the Company or its collaborative partners do not
or will not infringe the claims of these or other issued patents held by third
parties or any other patent issued in the future. Furthermore, there can be no
assurance that any license required under any such patents would be made
available or, if available, would be available on acceptable terms. Failure to
obtain patent protection or a required license could prevent the Company and
Novartis from commercializing TGF-Beta3 products. The inability of the Company
and Novartis to commercialize TGF-Beta3 products could have a material adverse
effect on the Company's business, financial condition and results of operations.
In the cancer diagnostics area, the Company has an issued U.S. patent
and a granted European patent relating to an assay which the Company in
collaboration with Bayer, is seeking to develop for the detection of a protein
encoded by the neu oncogene ("neu") in serum. The U.S. Patent Office has
declared an interference between the Company's issued U.S. Patent and a pending
patent application owned by Chiron Diagnostics Inc. ("Chiron"). In addition,
Chiron has filed an opposition against the corresponding granted European
patent. These legal proceedings, if not settled, could result in substantial
legal expenses being incurred by the Company. Also, the Company cannot predict
whether it would prevail in these proceedings. If the Company does not prevail,
it may not be able to commercialize its assay for neu in serum without a license
from Chiron, which may not be available on acceptable terms or at all.
The patent positions of pharmaceutical, biopharmaceutical and
biotechnology companies, including OSI, are generally uncertain and involve
complex legal and factual questions. There can be no assurance that any of the
Company's pending patent applications will be approved, that the Company will
develop additional proprietary technologies that are patentable, that any
patents issued to the Company or its licensors will provide a basis for
commercially viable products or will provide the Company with any competitive
advantages or will not be challenged by third parties, or that the patents of
others will not have an adverse effect on the ability of the Company to do
business. In addition, patent law relating to the scope of claims in the
technology fields in which the Company operates is still evolving. The degree of
future protection for the Company's proprietary rights, therefore, is uncertain.
Furthermore, there can be no assurance that others will not independently
develop similar or alternative technologies, duplicate any of the Company's
technologies, or, if patents are issued to the Company, design around the
patented technologies developed by the Company. In addition, the Company could
incur substantial costs in litigation if it is required to defend itself in
patent suits brought by third parties or if it initiates such suits.
The extent to which efforts by other researchers have resulted or will
result in patents and the extent to which the issuance of patents to others
would have a material adverse effect on the Company or would force the Company
or its collaborative partners or other licensees to obtain licenses from others,
if available, is currently unknown. Generally, the Company's royalties on any
commercialized products could be reduced by up to 50% if its licensees or
collaborative partners are required to obtain such licenses. There can be no
assurance that the Company's products, operations or technology will not
infringe upon the rights of any third party.
The Company relies on trade secrets to protect technology where patent
protection is not believed to be appropriate or obtainable. The Company has
entered, and will continue to enter, into confidentiality agreements with its
employees, consultants, licensors and collaborative partners. There can be no
assurance, however, that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise
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gain access to the Company's trade secrets, that such obligations of
confidentiality will be honored or that the Company will be able to effectively
protect its rights to proprietary information.
COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE
The pharmaceutical, biotechnology and diagnostics industries are
intensely competitive, and the Company faces, and will continue to face, intense
competition from organizations such as large pharmaceutical companies,
diagnostic companies, biotechnology companies, academic and research
institutions and government agencies. The Company is subject to significant
competition from industry participants who are pursuing the same or similar
technologies as those which constitute the Company's technology platform and
from organizations that are pursuing pharmaceutical products or therapies or
diagnostic products that are competitive with the Company's potential products.
Most of the organizations competing with the Company have greater capital
resources, research and development staffs and facilities, and greater
experience in drug discovery and development, obtaining regulatory approval and
pharmaceutical product manufacturing and marketing. The Company's major
competitors include fully integrated pharmaceutical companies, such as Merck &
Co., Inc., Glaxo Wellcome Inc. and Smith Kline Beecham, that have extensive drug
discovery efforts and are developing novel small molecule pharmaceuticals, as
well as numerous smaller companies.
The Company's technology platform consists principally of utilizing
genetically engineered live cells, gene transcription technologies and high
throughput drug screening. Pharmaceutical and biotechnology companies and others
are active in all of these areas, and there can be no assurance that other
organizations will not acquire or develop technology superior to that of the
Company. Ligand Pharmaceuticals Inc. and Aurora Biosciences, Inc., publicly
owned companies, employ live-cell assays, gene transcription, and high
throughput robotics in their drug discovery operations. Numerous other companies
use one or more of these technologies. Several private companies, including
Tularik Inc., Signal Pharmaceuticals Inc. and Scriptgen Pharmaceuticals, Inc.,
pursue drug discovery using gene transcription methods.
Companies pursuing different but related fields also present
significant competition for the Company. For example, research efforts with
respect to gene sequencing and mapping are identifying new and potentially
superior target genes. In addition, alternative drug discovery strategies, such
as rational drug design, may prove more effective than those pursued by the
Company. Furthermore, competing entities may have access to more diverse
compounds for testing by virtue of larger compound libraries or through
combinatorial chemistry skills or other means. These include Pharmacopeia, Inc.,
a publicly traded company, CombiChem, Inc. and ArQule, Inc., all of which have
major collaborations with leading pharmaceutical companies. There can be no
assurance that the Company's competitors will not succeed in developing
technologies or products that are more effective than those of the Company or
that would render the Company's products or technologies obsolete or
noncompetitive.
With respect to the Company's small molecule drug discovery programs,
other companies have potential drugs in clinical trials to treat all the disease
areas for which the Company is seeking to discover and develop drug candidates.
These competing drug candidates are further advanced in clinical development
than are any of the Company's potential products in its small molecule programs
and may result in effective, commercially successful products. Even if the
Company and its collaborative partners are successful in developing effective
drugs, there can be no assurance that the Company's products will compete
effectively with such products. No assurance can be given that the Company's
competitors will not succeed in developing and marketing products either that
are more effective than those that may be developed by the Company and its
collaborators or that are marketed prior to any products developed by the
Company or its collaborators.
With respect to its efforts to develop TGF-Beta3 for various
indications, the Company is aware of competing growth factor proteins in
clinical trials, and competing treatment regimens, for wound healing
indications. Platelet Derived Growth Factor ("PDGF") for diabetic skin ulcers,
under development by Chiron Corporation and Johnson & Johnson, has completed
Phase III clinical trials in the U.S. Chiron Corporation and Johnson & Johnson
have announced that they intend to file a Product Licensing Application ("PLA")
for PDGF with the FDA and in July 1997, an FDA advisory panel recommended
approval. Fibroblast growth factor ("FGF") for chronic dermal ulcers, under
development by Scios Nova Inc. and Kaken Pharmaceutical Co., Ltd., is in Phase
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III clinical trials in Japan. TGF-Beta2 for leg ulcers, under development by
Genzyme Corp. and Celtrix Pharmaceuticals, Inc., is in Phase II clinical trials
in the U.S. No assurance can be given that the Company and Novartis will
successfully develop TGF-Beta3 for any indication, including wound healing.
Furthermore, if any of the competing growth factor product candidates listed
above or other growth factors prove to be effective for wound healing
indications, there can be no assurance that any TGF-Beta3 product developed by
the Company will be able to compete effectively with such product or products.
Other competing approaches to the treatment of chronic wounds include
comprehensive service-based patient centers, which are dedicated to intensive
wound management. These centers may include the use of autologous growth factor
therapy, in which extracts prepared from the patient's own platelets are used to
treat the wounds. Surgical intervention is also frequently employed, which may
involve partial amputation and/or surgical revascularization. The use of skin
grafts to treat wounds, either autografts (skin from elsewhere on the same
patient) or cultured allografts, are also being investigated by several
companies, including Advanced Tissues Sciences, Inc. and Organogenesis, Inc.
Organogenesis, Inc. presently has an application for Apligraft(TM), a treatment
for wounds after autografting, pending premarket approval. No assurance can be
given that TGF-Beta3 will prove to be safe and effective or will compete
successfully against current and emerging therapies for any particular clinical
indication.
The Company will, for the foreseeable future, rely on its collaborative
partners for pre-clinical evaluation and clinical development of its potential
products and manufacturing and marketing of any products. In addition, the
Company relies on its collaborative partners for support in its drug discovery
operations. It is likely that all of the pharmaceutical companies with which the
Company has collaborations are conducting multiple product development efforts
within each disease area. Generally, the Company's collaborative research
agreements do not restrict a party from pursuing competing internal development
efforts based on reasonable commercial judgment and other factors. Any product
candidate of the Company, therefore, may be subject to competition with a
potential product under development by the pharmaceutical company with which the
Company is collaborating in connection with such product candidate.
Biotechnology and related pharmaceutical technology have undergone
rapid and significant change. The Company expects the technology associated with
the Company's research and development will continue to develop rapidly, and the
Company's future success will depend in large part on its ability to maintain a
competitive position with respect to this technology. Rapid technological
development by the Company or others may result in compounds, products or
processes becoming obsolete before the Company recovers any expenses it incurs
in connection with developing such products.
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
Prior to marketing by a collaborative partner, any new drug discovered
by the Company must undergo an extensive regulatory approval process in the U.S.
and other countries. This regulatory process, which includes pre-clinical
testing and clinical trials, and may include post-marketing surveillance, of
each compound to establish its safety and efficacy, can take many years and
require the expenditure of substantial resources. Data obtained from
pre-clinical and clinical activities are susceptible to varying interpretations
that could delay, limit or prevent regulatory approval. In addition, delays or
rejections may be encountered based upon changes in FDA policies for drug
approval during the period of product development and FDA regulatory review of
each submitted new drug application ("NDA") in the case of new pharmaceutical
agents, or PLA in the case of a biologic, such as the Company's TGF-Beta3
product candidate. Similar delays may also be encountered in the regulatory
approval of any diagnostic product. Such delays may also be encountered in
obtaining regulatory approval in foreign countries. There can be no assurance
that regulatory approval will be obtained for any drugs discovered, or
diagnostic products developed, by the Company. Furthermore, regulatory approval
may entail limitations on the indicated use of the drug.
Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product of the Company or its manufacturer may have adverse
effects on the Company's business, financial condition and results of
operations, including withdrawal of
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the product from the market. Violations of regulatory requirements at any stage,
including pre-clinical testing and clinical trials, the approval process or
post-approval, may result in various adverse consequences to the Company,
including the FDA's delay in approving or its refusal to approve a product,
withdrawal of an approved product from the market and the imposition of criminal
penalties against the manufacturer and NDA holder. Although Pfizer submitted an
Investigational New Drug application ("IND") to the FDA with respect to the EGFR
inhibitor CP-358,774, the Company has not submitted an IND for any product
candidate, and no product candidate has been approved for commercialization in
the United States or elsewhere. The Company intends to file INDs for product
candidates in its internal proprietary programs, but to rely on its partners to
file INDs in its collaborative programs. No assurance can be given that the
Company or any of its collaborative partners will be able to conduct clinical
testing or obtain the necessary approvals from the FDA or other regulatory
authorities for any products. Failure to obtain required governmental approvals
will delay or preclude the Company's partners from marketing drugs discovered,
or diagnostic products developed, by the Company or limit the commercial use of
such products and will have a material adverse effect on the Company's business,
financial condition and results of operations.
NO MANUFACTURING CAPACITY, RELIANCE ON THIRD-PARTY MANUFACTURING
The Company does not intend to develop or acquire facilities for the
manufacture of drug candidates or diagnostic products for clinical trials or
commercial purposes, and has been, and will remain, dependent on its
collaborative partners or third parties for the manufacture of product
candidates for pre-clinical, clinical and commercial purposes.
The manufacture of the Company's candidate products for clinical trials
and the manufacture of resulting products for commercial purposes is subject to
current Good Manufacturing Practices ("GMP") regulations promulgated by the FDA.
The Company will rely on collaborative partners or outside contractors to
manufacture its products in their FDA approved manufacturing facilities. The
Company's products may be in competition with other products for priority of
access to these facilities. Consequently, the Company's products may be subject
to delays in manufacture, if collaborative partners or outside contractors give
other products greater priority than the Company's products. For this and other
reasons, there can be no assurance that the Company's collaborative partners
will manufacture such products in an effective or timely manner. If not
performed in a timely manner, the clinical trial development of the Company's
product candidates or their submission for regulatory approval could be delayed
and the Company's ability to deliver products on a timely basis could be
impaired or precluded. There can be no assurance that the Company will be able
to enter into any necessary third party manufacturing arrangements on acceptable
terms if at all. The Company's current dependence upon others for the
manufacture of its products may adversely affect its future profit margin, if
any, and its ability to commercialize products on a timely and competitive
basis.
UNCERTAINTIES RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT
The Company's business, financial condition and results of operations
may be materially adversely affected by the continuing efforts of government and
third-party payors to contain or reduce the costs of health care through various
means. For example, in certain foreign markets, pricing and profitability of
prescription pharmaceuticals are subject to government control. In the United
States, the Company expects that there will continue to be a number of federal
and state proposals to implement similar government control. In addition,
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical products and diagnostic tests. Cost
control initiatives could decrease the price that the Company or any of its
collaborative partners or other licensees receives for any drugs it may discover
or develop or diagnostic products it may develop in the future and have a
material adverse effect on the Company's business, financial condition and
results of operations. Further, to the extent that cost control initiatives have
a material adverse effect on the Company's collaborative partners, the Company's
ability to commercialize its products and to realize royalties may be adversely
affected.
The Company's or any collaborative partner's or licensee's ability to
commercialize pharmaceutical or diagnostic products may depend in part on the
extent to which reimbursement for the products will be available from government
and health administration authorities, private health insurers and other
third-party payors.
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Significant uncertainty exists as to the reimbursement status of newly approved
health care products. Third-party payors, including Medicare, are increasingly
challenging the prices charged for medical products and services. There can be
no assurance that any third-party insurance coverage will be available to
patients for any products discovered and developed by the Company and its
collaborative partners. Government and other third-party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted labeling approval. If adequate coverage and
reimbursement levels are not provided by government and other third-party payors
for the Company's products, the market acceptance of these products would be
adversely affected, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
POTENTIAL PRODUCT LIABILITY
The use of any of the Company's potential products in clinical trials
and the sale of any approved products may expose the Company to liability claims
resulting from the use of products or product candidates. These claims might be
made directly by consumers, pharmaceutical companies, including the Company's
collaborative partners or others. The Company is currently an additional named
insured under a clinical trials liability insurance policy carried by Novartis
with respect to its TGF-Beta3 clinical trials in the amount of $3 million. The
Company does not independently maintain product liability insurance coverage for
claims arising from the use of its products in clinical trials. Insurance
coverage is becoming increasingly expensive, and no assurance can be given that
the Company will continue to be a named insured with respect to trials underway
or obtain insurance in the future at a reasonable cost or in sufficient amounts
to protect the Company. The Company's inability to obtain adequate liability
insurance could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will be able to obtain commercially reasonable product liability
insurance for any product approved for marketing in the future or that insurance
coverage and the resources of the Company would be sufficient to satisfy any
liability resulting from product liability claims. A successful product
liability claim or series of claims brought against the Company could have a
material adverse effect on its business, financial condition and results of
operations.
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