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EXHIBIT 99.1
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
From time to time, Cambridge NeuroScience, Inc. (the "Company"),
through its management, may make forward-looking public statements, such as
statements concerning then expected future revenues or earnings or concerning
projected plans, performance, product development and commercialization, as well
as other estimates relating to future operations. There are certain key factors
that could cause future results to differ materially from those anticipated by
management, including, but not limited to, the following:
UNCERTAINTIES RELATED TO CLINICAL TRIALS AND FURTHER DEVELOPMENT OF CERESTAT(1)
Before obtaining regulatory approvals for the commercial sale of any of
its products under development, the Company must demonstrate through preclinical
studies and clinical trials that the product is safe and effective for use in
each target indication. The results from preclinical studies and early clinical
trials may not be predictive of results that will be obtained in large-scale
clinical trials, and there can be no assurance that clinical trials of the
Company's product candidates will demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals or will result in marketable products.
Clinical trials are often conducted with patients that are critically ill.
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. A number
of companies in the pharmaceutical industry have suffered significant setbacks
in advanced clinical trials, even after promising results in earlier trials.
The completion of clinical trials of the Company's product candidates
may be delayed by many factors and there can be no assurance that delays or
terminations will not occur. One such factor is the rate of enrollment of
patients, which generally varies throughout the course of a clinical trial and
which depends on the size of the patient population, the number of clinical
trial sites, the proximity of patients to clinical trial sites, the eligibility
criteria for the trial and the existence of competitive clinical trials. The
Company cannot control the rate at which patients present themselves for
enrollment, and there can be no assurance that the rate of patient enrollment
will be consistent with the Company's expectations or be sufficient to enable
clinical trials of the Company's product candidates to be completed in a timely
manner. Any significant delays in, or termination of, clinical trials of the
Company's product candidates would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's lead product candidate is CERESTAT, an ion-channel
blocker under development for the treatment of stroke and TBI. The Company
commenced Phase III clinical trials for CERESTAT in TBI in March 1996 and in
stroke in July 1996. These trials are being managed by the Company and its
collaborative partner, Boehringer Ingelheim International GmbH ("BI"). In June
1997, the Company and BI suspended patient enrollment into the stroke trial
after a planned interim analysis of the data raised concerns over the benefit to
risk ratio of drug treatment. In September 1997, the Company announced the
discontinuation of the TBI trial because a planned interim analysis of the data
showed insufficient evidence of positive clinical impact. In December 1997,
following an expanded analysis on all patients enrolled in the stroke trial as
of June 1997, the partners announced that enrollment into the stroke trial would
not resume due to insufficient evidence of positive clinical impact. At that
time, the Company announced its plan to further evaluate the data before making
any decisions about the future development of CERESTAT.
In March 1998, the Company reported that further analysis of the Phase
III data indicated that: (i) CERESTAT has an attractive safety profile in the
TBI patient population, and (ii) CERESTAT had a potential therapeutic benefit in
a subset of the stroke patient population which the Company and BI were
continuing to investigate. The Company and BI are expending additional efforts
to further evaluate the stroke findings and to determine if additional clinical
studies in the stroke indication will be pursued, either together or by the
Company independently. There can be no assurance that the results of the
analysis will lead the Company to go forward with additional development of
CERESTAT. Additionally, if the Company elects to continue development, there can
(1) CERESTAT is a registered trademark of Boehringer Ingelheim International,
GmbH.
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be no assurance that BI will concur with that decision. If the Company were to
elect to go forward with additional clinical trials of CERESTAT and BI elected
not to go forward, the Company would retain all commercial rights to CERESTAT
but would likely not have sufficient funds available to complete development of
the drug. If CERESTAT is not shown to be safe and effective in clinical trials,
the resulting delays would have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's most advanced growth factor product candidate is
recombinant human Glial Growth Factor 2 ("rhGGF2"). Currently, there are no
FDA-approved glial growth factors for the treatment of multiple sclerosis
("MS"). There can be no assurance that significant effects on the outcome
measures being used by the Company in preclinical trials for rhGGF2 or in
preclinical or clinical trials for any of the Company's other product
candidates will be acceptable to regulatory authorities, including the FDA, as
the basis for marketing approval. In addition, clinical trials may be
terminated at any time for safety reasons or if little or no efficacy is
demonstrated on an interim basis.
There can be no assurance that regulatory authorities will permit
additional clinical trials for CERESTAT or clinical trials for the Company's
other product candidates. Additional animal studies could be required to obtain
additional safety data prior to commencing clinical trials of NMDA ion-channel
blockers for indications that are less life-threatening than TBI or stroke. If
trials are conducted, there can be no assurance that any of the Company's
product candidates will prove to be safe and efficacious or will receive
regulatory approvals.
HISTORY OF LOSSES; UNCERTAINTY OF CONTINUED OPERATIONS AND FUTURE PROFITABILITY
As of December 31, 1997, the Company had an accumulated deficit of
$103.5 million. The Company anticipates that it will incur substantial losses in
the future, potentially greater than losses incurred in prior years. There can
be no assurance that the Company's product candidates will be successfully
developed or that its products, if successfully developed, will generate
revenues sufficient to enable the Company to earn a profit. Cambridge
NeuroScience expects to incur substantial additional operating expenses over the
next several years to the extent that its research, development and clinical
trial activities increase. To the extent that the Company is unable to obtain
additional third-party funding for expenses, the Company expects that increased
expenses will result in increased losses from operations. The Company's ability
to achieve profitability depends in part on the ability of the Company to enter
into agreements for the development and commercialization of the Company's
products. There can be no assurance that Cambridge NeuroScience or its strategic
partners will obtain required regulatory approvals and successfully identify,
test, manufacture and market any product candidates, or that the Company will
ever achieve product revenues or profitability. Cambridge NeuroScience does not
expect to generate revenues from the sale of products, if any, for several
years.
On March 9, 1998, the Company implemented a cost reduction plan which
included a reduction in headcount from 60 to 30 staff members. The one-time
cost associated with this reduction in staff, consisting primarily of severance
and related benefits, is estimated to be approximately $800,000, which will be
expensed in the first quarter of 1998. Following this reduction in headcount,
the Company intends to sub-lease approximately half of its existing laboratory
and office facilities space. The Company is continuing to evaluate alternatives
for maximizing shareholder value, which may include the sale of some or all of
the Company's technology assets. On March 9, 1998, the Company's Board of
Directors declared a dividend in the amount of $1.00 per share payable on April
14, 1998 to shareholders of record on April 2, 1998. The total dividend payable
is expected to be approximately $18 million, based upon the number of common
shares outstanding at February 28, 1998. At February 28, 1998, the Company had
cash and cash equivalents of $11.8 million and investments in marketable
securities of $24.6 million. Although the Company believes that, following
payment of the dividend, it will have adequate resources to pursue the
development of CERESTAT with BI, if warranted, this reduction in headcount and
dividend payment will result in fewer resources being devoted to the Company's
other research and development programs.
UNCERTAINTIES RELATED TO EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTIES
All of the Company's product candidates are in the research or
development stage, and all revenues to date have been generated from
collaborative research agreements, government grants and financing activities,
or from interest income earned on these funds. No revenues have been generated
from product sales. There can be no
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assurance that product revenues can be realized on a timely basis, if ever.
Cambridge NeuroScience has not yet requested or received regulatory
approval for any product from the FDA or any other regulatory authority. There
can be no assurance that Cambridge NeuroScience or its strategic partners will
succeed in the development and marketing of any therapeutic product. To achieve
profitable operations, the Company must, alone or with others, successfully
identify, develop, introduce and market proprietary products. If potential
products are identified, they will require significant additional investment,
development, preclinical testing and clinical trials prior to potential
regulatory approval and commercialization. The Company is devoting its efforts
to the research and development of potential products based on NMDA ion-channel
blockers and other technology platforms. Neither the Company, nor to its
knowledge any other company, has successfully obtained marketing approval for a
product based on NMDA ion-channel blockers to treat either TBI or stroke.
The development of new pharmaceutical products is highly uncertain and
subject to a number of 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 to be ineffective or cause harmful
side effects during preclinical testing or clinical trials, fail to receive
necessary regulatory approvals, be difficult to manufacture on a large scale,
be uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. CERESTAT has not been
proven safe and effective in humans. There can be no assurance that the
Company's product development efforts will be successfully completed, that
required regulatory approvals can be obtained or that any products, if
introduced, will be successfully marketed or achieve customer acceptance.
Commercial availability of any Cambridge NeuroScience products is not expected
for a number of years, if at all. The Company recently announced the
discontinuation of enrollment in Phase III clinical trials for its lead product
candidate, CERESTAT. See "-- Uncertainties Related to Clinical Trials and
Future Development of CERESTAT."
DEPENDENCE ON STRATEGIC ALLIANCES; POTENTIAL CONFLICTS OF INTEREST
The Company's strategy for research, development and commercialization
of its product candidates includes the establishment of various corporate
collaborations, licensing agreements and other arrangements. In some cases, the
Company will be dependent upon these outside parties to conduct preclinical
testing and clinical trials and to provide adequate funding for the Company's
development programs. The Company has entered into collaborative arrangements
with Boehringer Ingelheim International GmbH ("BI") for the development and
commercialization of CERESTAT and with Allergan for the development of NMDA
ion-channel blockers, sodium ion-channel blockers and combination ion-channel
blockers for the treatment of ophthalmic diseases, including glaucoma. A
substantial portion of the payments to be received by the Company from BI and
Allergan are dependent on the Company achieving certain program development
milestones. There can be no assurance that such milestones will be achieved on a
timely basis, if ever. There can be no assurance that the Company will be able
to maintain existing collaboration agreements, negotiate collaborative
arrangements in the future on acceptable terms, if at all, or that any such
collaborative arrangements will be successful. To the extent that the Company is
not able to maintain or establish such arrangements, the Company would be
required to undertake product development and commercialization activities at
its own expense, which would increase the Company's capital requirements or
require the Company to limit the scope of its development and commercialization
activities. In addition, the Company may encounter significant delays in
introducing its products into certain markets or find that the development,
manufacture or sale of its products in such markets is adversely affected by the
absence of such collaborative agreements. While the Company believes that BI,
Allergan and other potential strategic partners will have an economic motivation
to succeed in performing their obligations under collaboration arrangements with
the Company, the amount and timing of funds and other resources to be devoted
under such arrangements will be controlled by such other parties and would be
subject to financial or other difficulties that may befall such other parties.
The Company cannot control the amount and timing of resources which its
strategic partners devote to the Company's programs or potential products, which
may vary because of factors unrelated to the potential products. If any of the
Company's strategic partners breach or terminate their agreements with the
Company or otherwise fail to conduct their collaborative activities in a timely
manner, the preclinical or clinical development or commercialization of product
candidates or research programs may be delayed, and the Company will be required
to devote additional resources to product development and commercialization or
terminate certain development
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programs. Under the Company's collaboration agreement with BI, BI has certain
termination rights including the right in its sole discretion to terminate its
agreement upon 90 days written notice. Allergan may also terminate its agreement
with the Company for breach and under certain other circumstances upon six
months notice. The termination of the BI or Allergan agreement or of other
collaborative arrangements which the Company may in the future enter into would
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that disputes will not
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.
Cambridge NeuroScience's strategic partners may develop, either alone
or with others, products that compete with the development and marketing of the
Company's products. Competing products, either developed by the strategic
partners or to which the strategic partners have rights, may result in the
Company's partners withdrawing research, development or marketing support with
respect to all or a portion of the Company's technology, which would have a
material adverse effect on the Company's business, financial condition and
results of operation.
The Company and BI have discontinued enrollment in the Phase III trials
for CERESTAT, the Company's lead product candidate. The Companies are expending
additional efforts to further evaluate the stroke findings and to determine if
additional clinical studies in the stroke indication will be pursued, either
together or by CNSI independently. There can be no assurance that clinical
trials for CERESTAT will be resumed or that, if resumed, such trials will be for
therapeutic indications for which significant market opportunities exist or can
be developed. In addition, there can be no assurance that BI will elect to
continue the collaboration with the Company for CERESTAT or any other product
candidate. If the Company were to elect to go forward with additional clinical
trials of CERESTAT and BI elected not to go forward, the Company would retain
all commercial rights to CERESTAT but would likely not have sufficient funds
available to complete development of the drug.
NEED FOR FUTURE FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
The Company is currently evaluating alternatives for maximizing
shareholder value, which may include the sale of some or all of the Company's
technology assets. If the Company continues to engage in ongoing operations,
it will require substantial additional funding in order to continue research,
product development, preclinical testing and clinical trials of its product
candidates. The Company will also require additional funding for operating
expenses, the pursuit of regulatory approvals for its product candidates and to
establish marketing and sales capabilities. 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 preclinical testing and clinical trials, the time
and costs involved in obtaining regulatory approvals, 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. There can be no assurance that the Company's cash reserves and other
liquid assets and funding that may be received from the Company's strategic
partners and interest income earned thereon, will be adequate to satisfy its
capital and operating requirements.
To the extent the Company requires subtantial additional funding, it
may seek such funding through arrangements with strategic 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, Cambridge NeuroScience may be required to curtail significantly or
terminate one or more of its research and development programs and/or obtain
funds through arrangements with collaborative partners or others that may
require Cambridge NeuroScience to relinquish rights to certain of its
technologies or product candidates.
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INTENSE COMPETITION AND RISK OF TECHNOLOGICAL CHANGE
The fields in which Cambridge NeuroScience is involved are
characterized by rapid technological progress. New developments are expected to
continue at a rapid pace in both industry and academia. There are many
companies, both public and private, including large pharmaceutical companies,
chemical companies and specialized genetic engineering companies, engaged in
developing products competitive with products under development by the Company.
Many of these companies have greater capital, human resources and research and
development, manufacturing and marketing experience than Cambridge NeuroScience.
Such companies may succeed in developing products that are more effective or
less costly than any that may be developed by Cambridge NeuroScience and may
also prove to be more successful than Cambridge NeuroScience in production and
marketing. Competition may increase further as a result of potential advances in
the commercial applicability of biotechnology and greater availability of
capital for investment in these fields. In addition, academic, government and
industry-based research is intense, resulting in considerable competition in
obtaining qualified research personnel, submitting patent filings for protection
of intellectual property rights and establishing corporate strategic alliances.
There can be no assurance that research, discoveries and commercial developments
by others will not render any of the Company's programs or potential products
noncompetitive.
In July 1996, the FDA approved the use of tPA for the treatment of
patients who had suffered a stroke within the preceding three hours and for whom
a CT scan showed no evidence of hemorrhage. Intravenous tPA acts by dissolving
blood clots that might have led to stroke. In addition, a number of companies
are developing other drugs to treat TBI and/or stroke. The Company believes that
the most significant competition for CERESTAT will come from other inhibitors of
responses mediated via specific ion channels. For instance, Novartis is
conducting a Phase III clinical trial in Europe of D-CPPene, which is being
developed for TBI only, and acts through a mechanism similar to, but distinct
from, that of CERESTAT. A New Drug Application (NDA) for the use of Lubeluzole
(Janssen Pharmaceutical, N.V., a subsidiary of Johnson & Johnson) in stroke was
submitted in 1997 and was accepted for filing by the U.S. Food and Drug
Administration (FDA). However, the Company believes that further regulatory
action will not be taken until results are available from an ongoing subsequent
Phase III clinical trial. There are ongoing Phase III clinical trials for
Fosphenytoin (Warner-Lambert Company) in stroke and SNX-111 (Neurex Corporation
for TBI. Lubeluzole, Fosphenytoin and SNX-111 have actions on ion channels and
are claimed to be neuroprotective, but act through mechanisms other than the
NMDA ion-channel complex. Some compounds under development act at different
stages in the nerve cell death cascade. In 1997, Interneuron Pharmaceuticals,
Inc. submitted an NDA to the U.S. FDA for CerAxon (citicoline sodium) to treat
patients with ischemic stroke. The Company believes that CerAxon does not act on
ion channels but on other aspects of the nerve cell death cascade. The Company
believes that, even if these compounds prove to be efficacious, those that act
at other stages in the cascade will be synergistic, rather than competitive with
CERESTAT.
The Company is aware of three therapeutics currently being marketed to
treat M.S. Betaseron(R) (Chiron Corporation/Schering AG), Avonex(R) (Biogen,
Inc.) and Copaxone(R) (Teva Pharmaceuticals Industries Ltd./Hoechst Marion
Roussel Ltd.) are all based on an immunosuppression approach to the disease,
rather than the growth factors approach being pursued by the Company. There can
be no assurance that the introduction of these or other products that the
Company is unaware of will not have an adverse effect on the Company's business,
financial condition and results of operations.
The Company will, for the foreseeable future, rely on its strategic
partners for certain preclinical evaluation and clinical development of its
product candidates and manufacturing and marketing of any products. In addition,
the Company relies on its strategic partners, in part, for support in its drug
discovery operations. Generally, the Company's agreements with its strategic
partners do not prohibit the strategic partners from engaging in competitive
activities with the Company. The pharmaceutical companies with which the Company
has collaborations are in some cases attempting to develop other products to
treat diseases within the fields of the collaborations with the Company. 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
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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.
PATENT AND LICENSE UNCERTAINTIES
Proprietary rights relating to the Company's products will be protected
from unauthorized use by third parties only to the extent that they are covered
by valid and enforceable patents or are maintained as trade secrets, and to the
extent that the Company diligently enforces its rights against infringement of
its patent rights and against misappropriation of its trade secrets and
proprietary information. The biotechnology and pharmaceutical industries place
considerable importance on obtaining patent and trade secret protection for new
technologies, products and processes, and the Company's success will depend, in
part, on its ability to obtain patent protection for its products and
manufacturing processes, preserve its trade secrets and operate without
infringing the proprietary rights of third parties. Some of the technology that
may be used in the Company's products may not covered by any patent or patent
application. In instances where the Company's products are not covered by valid
and enforceable patents, there can be no assurance that third parties will not
be able to market similar or related products, nor can there be any assurance
that patent or other proprietary rights held by the Company with respect to
these products will afford commercially significant protection. In addition,
there can be no assurance that confidentiality arrangements to which the Company
is a party will be effective in protecting the Company's confidential
information or trade secrets.
There can be no assurance that any patent applications relating to the
Company's products will be filed in the future or that any currently pending
applications will issue on a timely basis, if ever. Since patent applications in
the United States are maintained in secrecy until patents issue and since
publication of discoveries in the scientific or patent literature often lag
behind actual discoveries, the Company cannot be certain that it was the first
to make the inventions covered by each of its pending patent applications or
that it was the first to file patent applications for such inventions. Even if
patents are issued, the degree of protection afforded by such patents will
depend upon the scope, validity, enforceability of the claims obtained in such
patents and the Company's willingness and financial ability to enforce and/or
defend them. The patent position of biotechnology and pharmaceutical firms is
often highly uncertain and usually involves complex legal and factual questions.
Moreover, no consistent policy has emerged in the United States and in many
other countries regarding the breadth of claims allowed in biotechnology
patents. The Company could incur substantial costs in defending itself in suits
brought against it by others or in suits in which the Company may assert its
patents against others. If the outcome of any such litigation is adverse to the
Company, the Company's business, financial condition and results of operations
could be adversely affected. If competitors of the Company prepare and file
patent applications in the United States that claim technology also claimed by
the Company, the Company may be required to participate in interference
proceedings declared by the United States Patent and Trademark Office to
determine priority of invention, which could result in substantial cost to the
Company. Patents granted to the Company in certain foreign countries may be
subject to opposition proceedings brought by third parties. The Company may
incur substantial costs defending such proceedings. There can be no assurance
that the Company would prevail in any such proceedings or that such proceedings
would not result in a material adverse effect on the Company's business,
financial condition or results of operations. In addition, patents blocking the
Company's manufacture, use or sale of its products could be issued to third
parties in the United States or foreign countries. The issuance of blocking
patents or an adverse outcome in an interference or opposition proceeding could
subject the Company to significant liabilities to third parties and require the
Company to license disputed rights from third parties or cease using the
technology. There can be no assurance that such license would be available on
commercially acceptable terms, if at all.
There are patents held by third parties that relate to the manufacture,
development and use of the Company's product candidates for which the Company
has licenses. There can be no assurance that the Company will not in the future
require licenses to additional patents, that such licenses will be available on
commercially reasonable terms, if at all, that existing or future licenses will
not be terminated or that any such termination or failure to obtain a license
will not have a material adverse effect on the Company's business, financial
condition or results of operations.
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The Company is also aware of third-party patent and pending patent
applications in the United States and corresponding patent applications pending
in some foreign countries that, if issued and valid, may be construed to cover
aspects of the Company's rhGGF2 product candidates. There can be no assurance
that the claims of the issued U.S. patents are not infringed, and that the
claims of future patents issuing from the patent applications, if any, will not
be infringed by the Company's proposed manufacture, use or sale of products
based on the rhGGF2 technology. Furthermore, there can be no assurance that
Cambridge NeuroScience would prevail in any legal action seeking damages or
injunctive relief for infringement of the existing patent or any patent that
might issue from such applications or that any license required under any such
patent would be available or, if available, would be available on commercially
reasonable terms. Failure to obtain a required license or to successfully
establish non-infringement of, or the invalidity or unenforceability of, such
third-party patents could preclude the manufacture, marketing, sale and use of
the Company's products based on such rhGGF2 technology.
NO MANUFACTURING EXPERIENCE; RELIANCE ON THIRD-PARTY MANUFACTURING
The Company has no experience in manufacturing products for commercial
purposes and does not have manufacturing facilities. Consequently, the Company
is dependent on contract manufacturers for the production of products for
development and commercial purposes. In the event that the Company is unable to
obtain or retain third-party manufacturing arrangements, it will not be able to
commercialize its products as planned which would have a material adverse effect
on the Company's business, financial condition and results of operations. The
manufacture of the Company's products for clinical trials and commercial
purposes is subject to current Good Manufacturing Practices ("GMP") regulations
promulgated by the FDA. There can be no assurance that the Company will be able
to enter into agreements for the manufacture of future products with
manufacturers whose facilities and procedures comply with GMP and other
regulatory requirements. The Company does not intend to develop or acquire
facilities for the manufacture of drug products for clinical trials or
commercial purposes, and has been, and will remain, dependent on its strategic
partners or third parties for the manufacture of product candidates for
preclinical, clinical and commercial purposes.
Under the terms of its collaboration agreement for CERESTAT with BI,
the Company has retained worldwide manufacturing rights, subject to BI's option
to acquire such rights in exchange for increased royalty payments. Although the
Company has an agreement with a third-party manufacturer to provide quantities
of CERESTAT sufficient to complete the development program for this product, the
Company currently has no agreement for the manufacture of CERESTAT for
commercial purposes. The Company's current dependence upon others for the
manufacture of its products may adversely affect its profit margin, if any, on
the sale of future products and the Company's ability to develop and deliver
products on a timely and competitive basis.
UNCERTAINTIES RELATED TO MARKETING AND SALES
Under its collaboration agreement for CERESTAT with BI, the Company has
granted exclusive marketing rights to BI in Europe and other geographic regions
in return for royalties on product sales. If BI terminates the agreement or
fails to market CERESTAT successfully, the Company's business, financial
condition and results of operations will be adversely affected.
Under its agreement with BI, Cambridge NeuroScience has an option to
co-promote CERESTAT in the United States. The Company has notified BI of its
intent to exercise this option. Co-promotion of CERESTAT would require the
Company to develop its own sales force to promote CERESTAT or make arrangements
with a third party to do so. Cambridge NeuroScience currently has no experience
in marketing or selling pharmaceutical products. In order to achieve commercial
success for any approved product, Cambridge NeuroScience must either develop a
marketing and sales force or, where appropriate or permissible, enter into
arrangements with third parties to market and sell its products. There can be no
assurance that Cambridge NeuroScience will successfully develop marketing and
sales experience or that it will be able to enter into marketing and sales
agreements with others on acceptable terms, if at all. If the Company develops
its own marketing and sales capability, it will compete with other companies
that currently have experienced and well funded marketing and sales operations.
To the extent that the Company enters into co-promotion or other sales and
marketing arrangements with other companies, any revenues to be received by
Cambridge NeuroScience will be dependent on the efforts of others and there can
be no assurance that their efforts will be successful. When the Company and BI
terminated enrollment into the Phase III
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trials of CERESTAT, the Companies agreed to delay the negotiation of a
co-promotion agreement until such time as the development pathway of CERESTAT
becomes known.
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
Prior to marketing, any product developed by the Company must undergo
an extensive regulatory approval process. This regulatory process, which
includes preclinical 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 preclinical and clinical activities are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. In addition, delays or rejections may be encountered based
upon changes in FDA policy for drug approval during the period of product
development and FDA regulatory review of each submitted new drug application
("NDA"). Similar delays may also be encountered in foreign countries. There can
be no assurance that regulatory approval will be obtained for any products
developed by the Company. The Company recently announced the discontinuation of
enrollment in Phase III clinical trials for its lead product candidate,
CERESTAT. See "-- Uncertainties Related to Clinical Trials and Future
Development of CERESTAT."
Moreover, regulatory approval may entail limitations on the indicated
uses of the drug. Further, 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 or manufacturer may have a material
adverse effect on the Company's business, financial condition and results of
operations, including withdrawal of the product from the market. Violations of
regulatory requirements at any stage of the regulatory process may result in
various adverse consequences, 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. The Company has not had any product approved for commercialization in
the United States or elsewhere. No assurance can be given that the Company will
be able to obtain FDA approval for any products. Failure to obtain requisite
regulatory-approvals or failure to obtain approvals of the scope requested will
delay or preclude the Company or its licensees or strategic partners from
marketing the Company's products or limit the commercial use of the products and
will have a material adverse effect on the Company's business, financial
condition and results of operations.
UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT
The Company's successful commercialization of its pharmaceutical
products will depend in part on the extent to which reimbursement for the costs
of such products and related treatments will be available from government health
administration authorities, private health insurers and other third-party
payors. Significant uncertainty exists as to the reimbursement status of newly
approved health care products, and third-party payors 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 developed by the Company. 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
marketing approval. In particular, the Company anticipates that a large
percentage of patients who receive CERESTAT for the treatment of stroke will be
covered by Medicare and be subject to limitations on reimbursement. If adequate
coverage and reimbursement levels are not provided by government and 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.
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The Company's business may be materially adversely affected by the
continuing efforts of governmental and third-party payors to contain or reduce
the costs of health care through various means. For example, in certain foreign
markets, pricing or profitability of prescription pharmaceuticals is subject to
government control. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement similar government control. In addition, an increasing emphasis on
managed care in the United States has and will continue to put pressure on
pharmaceutical pricing. Such initiatives and proposals, if adopted, could
decrease the price that the Company receives for any products it may develop and
sell in the future and thereby have a material adverse effect on the Company's
business, financial condition and results of operations. Further, to the extent
that such proposals or initiatives have a material adverse effect on other
pharmaceutical companies that are collaborators or prospective collaborators for
certain of the Company's potential products, the Company's ability to
commercialize its potential products may be adversely affected.
POTENTIAL PRODUCT LIABILITY; UNCERTAINTIES RELATED TO INSURANCE
The use of any of the Company's potential products in clinical trials
and the sale of any approved products, including the testing and
commercialization of CERESTAT, 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 or others. The Company
maintains product liability insurance coverage for claims arising from the use
of its products in clinical trials in the amount of $5.0 million per occurrence
and $5.0 million in aggregate. No assurance can be given that the Company will
be able to maintain insurance at a reasonable cost or in sufficient amounts to
protect the Company against losses due to liability that 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 would have a material adverse effect on its
business, financial condition and results of operations.
VOLATILITY OF COMMON STOCK PRICE
The market prices for securities of biotechnology and pharmaceutical
companies, including Cambridge NeuroScience, have historically been highly
volatile, and the market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Factors such as fluctuations in the Company's operating
results, announcements of technological innovations or new therapeutic products
by the Company or others, clinical trial results, developments concerning
agreements with collaborators, governmental regulation, developments in patent
or other proprietary rights, public concern as to the safety of products
developed by the Company or others, future sales of substantial amounts of
Common Stock by existing stockholders and general market conditions can have an
adverse effect on the market price of the Common Stock. The realization of any
of the risks described in these "Risk Factors" could have a dramatic and adverse
impact on market price.
CONCENTRATION OF OWNERSHIP
Directors, officers and stockholders affiliated with members of the
Board of Directors of the Company beneficially own approximately 31% of the
outstanding Common Stock. These stockholders effectively would be able to
significantly influence the election of the Company's Board of Directors and
other corporate actions.
DEPENDENCE ON QUALIFIED PERSONNEL
Because of the specialized scientific nature of the Company's business,
Cambridge NeuroScience is highly dependent upon its ability to continue to
attract and retain qualified scientific and technical personnel. There is
intense competition for qualified personnel in the areas of the Company's
activities and there can be no assurance that Cambridge NeuroScience will be
able to continue to attract and retain the qualified personnel necessary for the
development of its business. Loss of the services of, or failure to recruit, key
scientific and technical personnel
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would be significantly detrimental to the Company's product development
programs, and could have a material adverse effect on the Company's business,
financial condition and results of operations. On March 9, 1998, the Company
implemented a cost reduction plan which included a reduction in headcount from
60 to 30 staff members. See "-- History of Losses; Uncertainty of Continued
Operations and Future Profitability."
ANTITAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation authorizes the
Board of Directors to issue, without stockholder approval, up to 10,000,000
shares of preferred stock with voting, conversion and other rights and
preferences that could adversely affect the voting power or other rights of the
holders of Common Stock. The issuance of preferred stock or rights to purchase
preferred stock could be used to discourage an unsolicited acquisition proposal.
In addition, the possible issuance of preferred stock could discourage a proxy
contest, make more difficult the acquisition of a substantial block of the
Company's Common Stock or limit the price that investors might be willing to pay
for shares and the Company's Common Stock. In addition, certain provisions of
the Delaware corporate law may have the effect of deterring hostile takeovers or
delaying or preventing changes in the control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over the then current market prices.
ABSENCE OF DIVIDENDS
Prior to March 9, 1998, the Company had never declared nor paid cash dividends
on any of its capital stock. On March 9, 1998 the Company's Board of Directors
declared an extraordinary dividend on its capital stock of $1.00 per share of
outstanding Common Stock, payable on April 14, 1998 to holders of record as of
April 2, 1998. Future cash dividends, if any, will be paid at the discretion of
the Company's Board of Directors and will depend, among other things, upon the
Company's future operations, capital requirements, general financial condition
and such other factors as the Board of Directors may deem relevant.
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