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EXHIBIT 99.1
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
From time to time, Cambridge NeuroScience, Inc. ("Cambridge NeuroScience"
or 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 statements 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 FURTHER DEVELOPMENT OF THE COMPANY'S LEAD PRODUCT
CANDIDATES
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. 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. 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.
Aptiganel
The Company's most advanced product candidate is aptiganel hydrochloride
("aptiganel"), formerly known as CERESTAT(R), an N-methyl D-aspartate ("NMDA")
ion-channel blocker under development for the treatment of stroke. The Company
and its collaborator at the time, Boehringer Ingelheim International GmbH ("BI")
commenced Phase III clinical trials for aptiganel in both traumatic brain injury
("TBI") and stroke in 1996. The Phase III clinical trials of aptiganel were
suspended prior to completion, based on the results of scheduled interim
analyses of the data in each trial. To date, aptiganel has not been proven safe
and effective in humans. In November 1998, the parties terminated the
collaboration and all rights were returned to the Company, subject to the
Company's agreement to pay BI a royalty on any future product sales.
In March 1998, the Company reported that further analysis of the Phase III
data indicated that aptiganel had: (i) an attractive safety profile at
relatively high doses in the TBI patient population, and (ii) a potential
therapeutic benefit in a subset of the stroke patient population. Based on input
from an independent panel of stroke experts, which convened in October 1998, and
the Company's review and analysis of the trial data, the Company remains
committed to the continued development of aptiganel for stroke. Any further
clinical trial will require outside funding, either through a corporate
collaboration or a government grant. However, there can be no assurance that
such funding will be available or that further development of aptiganel will
occur.
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CERESTAT is a registered trademark of Boehringer Ingelheim International GmbH.
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There can be no assurance that regulatory authorities will permit additional
clinical trials for aptinagel. If additional clinical trials of aptiganel are
conducted, there can be no assurance that the product candidate will prove to be
safe and efficacious or will receive regulatory approvals.
OTHER NMDA ION-CHANNEL BLOCKERS
The Company is also developing CNS 5161 an N-methyl D-aspartate ("NMDA")
ion-channel blocker compound, which has completed two Phase I clinical trials,
including one trial in a pain model. The Company may consider the development
of CNS 5161 for certain chronic neurodegenerative disorders, such as
Parkinson's disease and MS.
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 stroke. There can be no
assurance that regulatory authorities will permit clinical trials for the
Company's other NMDA ion-channel blocker product candidates. 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.
GGF2
The Company's growth factor product candidate is recombinant human Glial
Growth Factor 2 ("GGF2"), a potential treatment for degenerative diseases of the
nervous system, including multiple sclerosis ("MS") and peripheral neuropathies.
In December 1998, the Company entered into a licensing and research
collaboration agreement with Bayer AG ("Bayer") with respect to the development
of GGF2 for the treatment of MS and other neurodegenerative diseases. The
Company and Bayer will work together to accomplish the tasks associated with
preclinical development, with Bayer providing financial support for this work.
Bayer will be responsible for the clinical development of GGF2. A series of
pre-IND studies has been initiated. Such studies include toxicity studies and
other work required by the Federal Drug Administration ("FDA") to file an
Investigational New Drug ("IND") application. There can be no assurance that
GGF2 will not demonstrate adverse toxicological effects in the planned studies.
Certain results from these studies could cause the partners to decide not to
proceed with clinical trials.
Currently, there are no Federal Drug Administration ("FDA") approved glial
growth factors for the treatment of MS. There can be no assurance that
significant effects on the outcome measures being used by the Company or its
collaborative partners in preclinical trials for rhGGF2 or in preclinical or
clinical trials for any of the Company's 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.
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 assurance that product revenues can be realized on a timely basis, if
ever.
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.
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, regulatory approval and marketing of any therapeutic
product. To achieve profitable operations, the Company must, alone or with
others, successfully identify, develop, obtain approval for, 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 stroke.
There can be no assurance that the Company's product development efforts
will be successfully completed, that the Company will obtain the required
regulatory approvals or that any products, if introduced, will be successfully
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marketed or achieve customer acceptance. Commercial availability of any
Cambridge NeuroScience products is not expected for a number of years, if at
all. See "-- Uncertainties Related to Further Development of the Company's Lead
Product Candidates."
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 can require the expenditure of substantial resources. Data
obtained from preclinical 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
policy for drug approval during the period of product development and FDA
regulatory review of each submitted 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.
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 New Drug
Application ("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.
HISTORY OF LOSSES; UNCERTAINTY OF CONTINUED OPERATIONS AND FUTURE PROFITABILITY
As of December 31, 1998, the Company had an accumulated deficit of $106.4
million. The Company has not been profitable from inception and expects to
continue to incur operating losses for at least the next several years. In March
1998, the Company implemented a cost reduction plan that included a reduction in
headcount by 34 employees. In June 1998, the Company entered into an agreement
with a third party to sub-lease approximately half of the Company's office and
laboratory facilities, thereby reducing facilities-related operating expenses.
The Company believes that cash, cash equivalents and investments in
marketable securities of $12.7 million at February 28, 1999 will be sufficient
to maintain operations through 2000. The Company anticipates that it will
require substantial additional funds to further its research and product
development programs and for other operating activities and expects to continue
to incur losses for at least the next several 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. The Company's ability to further the development
of its research and development programs and achieve profitability depends 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 the
Company will be successful in its efforts to obtain third party funding for its
research and development programs. In addition, there can be no assurance that
Cambridge NeuroScience or its strategic partners will obtain the required
regulatory approvals and successfully identify, test, manufacture and market any
product candidates. Cambridge NeuroScience does not expect to generate revenues
from the sale of products, if any, for several years.
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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 with third parties.
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 currently has an ongoing
collaborative arrangement 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, and with Bayer for the
development of GGF2 for MS and other neurodegenerative diseases. A substantial
portion of the payments to be received by the Company from Allergan and Bayer
are dependent on the subject compounds achieving certain program development
milestones. The Company is dependent on the collaborator making progress with
the development of the subject compounds to achieve these milestone events.
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 Allergan, Bayer 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 is actively
pursuing the possibility of extending the term of its collaboration with
Allergan, the initial term of which expires in November 1999. However, there can
be no assurance that the terms of this collaboration will be extended or that
the Company will be successful in obtaining sufficient funding to enable it to
continue this area of research.
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 programs. Allergan may terminate its agreement
with the Company for breach and under certain other circumstances upon six
months notice. Bayer may terminate its agreement with the Company at any time,
upon 120 days written notice. Either the Company or Bayer may terminate such
agreement at any time for cause.
The termination of the Allergan or Bayer agreements or of other
collaborative arrangements which the Company may enter into in the future 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,
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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.
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, for 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 substantial 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.
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 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 rt-PA (Genentech, Inc.) for the
treatment of patients who have suffered a stroke within the preceding three
hours and for whom a CT scan shows no evidence of hemorrhage. Intravenous rt-PA
dissolves blood clots that might have caused a stroke by blocking arteries
supplying brain tissue with oxygen and nutrients. Other drug treatments that
have the potential to restore blood flow to the brain and are in Phase III
clinical trials, are Ancrod(R) (Knoll AG) and Abbokinase(R) (Abbott
Laboratories). In addition, a number of companies are developing other drugs to
limit the extent of brain damage resulting from a stroke by protecting nerve
cells from the biochemical processes which are responsible for cell death. In
animal studies, these "neuroprotective" drugs have been shown to limit brain
damage even when blood supply to brain tissue is not restored. The Company
believes that the most significant competition for aptiganel will come from
neuroprotective drugs that
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limit nerve cell death by inhibiting responses mediated via specific ion
channels. There are ongoing Phase III clinical trials in stroke patients for
fos-phenytoin (Warner-Lambert Company) and GV150526 (Glaxo-Wellcome).
Fos-phenytoin has actions on ion channels and is claimed to be neuroprotective,
but acts through mechanisms other than the NMDA ion-channel complex. GV150526 is
an antagonist of responses mediated via the NMDA ion-channel complex, but acts
through a mechanism distinct from the mechanism of action of aptiganel. The
Company believes that aptiganel is the only neuroprotective drug candidate at
its stage of development for stroke that acts by directly blocking the ion
channel of the NMDA ion-channel complex. In 1997, Interneuron Pharmaceuticals,
Inc. submitted an NDA to the FDA for CerAxon (citicoline sodium) to treat
patients with ischemic stroke. In 1998, Interneuron withdrew its NDA application
and commenced a third large clinical trial of CerAxon in ischemic stroke. The
Company believes that CerAxon does not act on ion channels but on other
biochemical mechanisms of nerve cell death or recovery from injury. The Company
believes that, if approved for marketing, aptiganel will be used in conjunction
with tPA, or other approved drugs that can restore tissue blood flow.
Furthermore, even if other neuroprotective compounds prove to be efficacious and
are approved for marketing, those that act on mechanisms of cell death other
than inhibition of responses mediated by the NMDA ion-channel complex will be
used in conjuction with, rather than as alternatives to aptiganel.
The Company is aware of four therapeutics currently being marketed to treat
MS. Betaseron(R) (Chiron Corporation/Schering AG), Avonex(R) (Biogen, Inc.),
Copaxone(R) (Teva Pharmaceuticals Industries Ltd./Hoechst Marion Roussel Ltd.)
aNd Rebif (Serono) are all based on an immunosuppression approach to the
disease, rather than the growth factor remyelination approach being pursued by
the Company. Rebif has been excluded from the U.S. market by the FDA until 2003.
There can be no assurance that these products or the introduction of 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 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 be 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
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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.
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 GGF2 product candidates. There can be no assurance that
the Company will not infringe any such issued U.S. third-party patents, and that
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 GGF2 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 GGF2 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-
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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.
Pursuant to the research collaboration and licensing agreement for the
development of GGF2, Bayer will manufacture all material needed in the conduct
of the development activities and shall be responsible for all associated costs.
Pursuant to the termination of the collaboration agreements with BI, the Company
has the right to purchase 56kg of aptiganel from BI within two years from the
date of the termination agreement.
UNCERTAINTIES RELATED TO MARKETING AND SALES
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. Pursuant to the collaboration agreement with Bayer
for the development of GGF2, Bayer has acquired the sole right to commercialize
any products derived from the collaboration and will bear all associated costs.
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 would receive aptinagel 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.
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
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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 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 the
Company's 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.
On January 22, 1999, the Company's common stock was delisted from the
Nasdaq National Market System due to a failure to maintain a minimum bid price
per share of $1.00. Immediately following the delisting, the Company began
trading on the Over the Counter Bulletin Board ("OTCBB"). The delisting of the
Company's common stock could have an adverse effect on the liquidity of the
common stock held by investors and on the Company's ability to raise equity in
the future.
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 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 by approximately half. See "-- History of Losses;
Uncertainty of Continued Operations and Future Profitability." At February 28,
1999, the Company had 17 full-time employees. Due to the small number of
employees at the Company, the loss of several employees could have an adverse
effect on the Company's ability to meet its obligations to its collaborative
partners, on the progress of its own scientific programs and ultimately on its
business, financial condition and results of operations.
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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 the
Company's 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 of 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 common 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, or $17.9 million, which was paid on April 14,
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. The Company
does not anticipate paying dividends in the foreseeable future.
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