Exhibit 99.1
FACTORS TO CONSIDER IN CONNECTION WITH FORWARD LOOKING STATEMENTS
We have incurred losses since inception and anticipate that we will incur
continued losses for the foreseeable future. We do not have a current source of
product revenue and may never be profitable.
We are a development stage company with no current source of revenue. We
have incurred significant losses in each year since our inception. As of April
30, 2000, our accumulated deficit was $56,372,000. We have funded our activities
primarily through public and private sales of our stock.
We expect to continue to incur substantial operating losses in the future.
Our profitability will depend on our ability to develop, obtain regulatory
approvals for marketing ONCONASE(R). The FDA has not approved ONCONASE(R) and we
cannot assure you that it will. We may never successfully develop our products
or sell sufficient product to generate enough revenues to enable us to earn a
profit.
We will seek to generate revenue through licensing, marketing and
development arrangements prior to receiving revenue from the sale of our
product. We cannot assure you that we will be able to successfully consummate
any licensing, marketing or development arrangements.
We do not know when or if we will complete our product development efforts,
receive regulatory approval of any of our product candidates or successfully
commercialize any approved products. As a result, we are unable to predict the
extent of any future losses or the time required to achieve profitability, if at
all.
We need additional financing to continue operations and this financing may not
be available when we need it, if it is available at all.
We estimate that our existing capital will enable us to fund operations
through July 2000. We need financing immediately in order to continue the
ongoing study and to file an NDA. Even if an NDA is filed, we will need
additional financing to complete the approval process. We may not be successful
in obtaining additional financing to continue operations.
There is doubt regarding our ability to continue as a going concern.
We incurred a net loss of $3,157,000 for the year ended July 31, 1999, and
$1,418,000 for the nine- months ended April 30, and an accumulated deficit of
$56,372,000 as of April 30, 2000. The report of our independent auditors on our
July 31, 1999 financial statements included an explanatory paragraph which
states that our recurring losses and limited liquid resources raise substantial
doubt about our ability to continue as a going concern. The financial statements
at July 31, 1999 or April 30, 2000 do not include any adjustments that might
result from the outcome of this uncertainty. In order to continue to operate our
company, develop ONCONASE(R), complete the necessary clinical testing, seek
regulatory approval and develop marketing and distribution channels for our
products, we will need to raise significant additional funds through equity or
debt financing, strategic alliances or the sale of ONCONASE(R). We believe that
our cash and cash equivalents will be sufficient to meet our expected cash needs
through the fiscal year ending July 2000. If we are unable to secure sufficient
future financing, we may need to curtail or discontinue our research and
development activities or cease operations.
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The results of larger scale clinical trials may not show the same promising
results as earlier trials resulting in the abandonment of a failed candidate
after the expenditure of significant additional funds.
During the course of our research and development, we may find that
products that initially appeared promising no longer appear promising in
larger-scale Phase III clinical trials. Like many companies in the
pharmaceutical and biotechnology industries, we have experienced negative
results in clinical trials after experiencing promising results in earlier
trials. For example, in July 1998, we discontinued two Phase III clinical trials
testing ONCONASE(R) with tamoxifen as a treatment for pancreatic cancer due to
the lack of a statistically significant survival benefit. If we experience
negative results in the ongoing Phase III clinical trial, we may have tocurtail,
redirect or eliminate this product development program.
Our clinical trials could take longer to complete and cost more than we expect.
We are currently conducting a Phase III clinical trial of ONCONASE for the
treatment of malignant mesothelioma. The rate of completion of clinical trial
depends upon many factors, including the rate of enrollment of patients. If we
are unable to accrue sufficient additional clinical patients in our trial during
the appropriate period, the completion of the trial may be delayed and will
likely incur significant additional costs.
The cost of human clinical trials varies dramatically based on a number of
factors, including:
> the order and timing of clinical indications pursued,
> the extent of development and financial support from corporate
collaborators,
> the number of patients required for enrollment,
> the difficulty of obtaining clinical supplies of the product
candidate, and
> the difficulty in obtaining sufficient patient populations and
clinicians.
All statutes and regulations governing the conduct of clinical trials are
subject to change in the future, which could affect the cost of our clinical
trials. Any unanticipated costs or delays in our clinical studies would harm our
business and financial condition.
We cannot assure you that we will be able to successfully develop our products.
Our research and development programs are at various stages of development,
from the preclinical stage to Phase III clinical trials. We will need to do
substantial additional research and development in order to develop and obtain
regulatory approval for our products. We cannot assure you that our research and
development programs will lead to products that:
> are shown to be safe and effective in clinical trials,
> are commercially viable,
> meet regulatory standards,
> receive FDA marketing approval,
> are eligible for third party reimbursement from governmental or
private insurers, or
> are successfully marketed.
We cannot assure you that the FDA will approve our product candidates.
The sale of ONCONASE(R)for use in humans in the United States will require
the approval of the FDA. Most foreign countries also require the approval of
comparable agencies for the sale of pharmaceutical products in those countries.
State, local and other authorities also regulate pharmaceutical manufacturing
facilities. It
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may take several years and significant expenditures to obtain FDA approval of a
new pharmaceutical product. ONCONASE(R) has not been approved for sale in the
United States or elsewhere. We cannot assure you that we will be able to get FDA
approval for ONCONASE(R) or any other product. Inability to obtain the approval
of the FDA or other agencies may adversely affect our financial condition by
delaying or precluding us from marketing our products while the products are
under patent protection or limiting the commercial use of the products. Even if
we do obtain the approval of the FDA and other agencies, it is possible that the
subsequent review of a new drug will lead to the discovery of a previously
unknown problem.
Our product candidates may not be accepted by the market, which would harm our
business and results of operations.
Even if approved by the FDA and other regulatory authorities, our product
candidates may not achieve market acceptance and we may not receive revenues
from these products as anticipated. The degree of market acceptance will depend
upon a number of factors, including:
> the receipt and timing of regulatory approvals,
> the availability of third-party reimbursement, and
> the establishment and demonstration in the medical community of the
clinical safety, efficacy and cost-effectiveness of drug candidates,
as well as their advantages over existing technologies and
therapeutics.
We may not be able to successfully market our products even if they perform
successfully in clinical trials. Furthermore, physicians or the medical
community in general may not accept and utilize any of our products.
We may not be able to protect our proprietary technology or enforce our patents.
We currently own six U.S. patents, three European patents and one Japanese
patent. We also have patent applications that are pending in the United States,
Europe and Japan, and an undivided interest in two patent applications that are
pending in the United States. The scope of protection afforded by patents for
biotechnological inventions can be uncertain, and such uncertainty may apply to
our patents as well. The patent applications we have filed, or that we may file
in the future, may not result in patents. Our patents may not give us
competitive advantages, may be wholly or partially invalidated or held
unenforceable, or may be held uninfringed by products that compete with our
products. Patents owned by others may adversely affect our ability to do
business. Furthermore, others may independently develop products that are
similar to our products, and may design around the claims of our patents.
Although we believe that our patents and patent applications are of substantial
value to us, we cannot assure you that our patents and patent applications will
be of commercial benefit to us, will adequately protect us from competing
products or will not be challenged, declared invalid or declared infringed.
Patent litigation and intellectual property litigation are expensive, and if we
were to become involved in such litigation, we could not assure you that we
would have the funds necessary to carry on the litigation in an effective
manner.
We are uncertain of the availability of health care reimbursement.
Our ability to sell our products will depend in part on whether government
health administration authorities, private health insurers and others will
reimburse the costs of our products. We cannot assure you that adequate
third-party reimbursement coverage will be available to maintain price levels
sufficient to achieve an appropriate return on the investment we have made in
developing our products. Government and others are increasingly trying to
contain health care costs by limiting coverage and the amount of reimbursement
for new
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drug products approved by the FDA and refusing to provide coverage for the use
of FDA-approved products for the treatment of medical conditions for which the
FDA has not granted marketing approval. If the government and other third
parties do not provide adequate insurance coverage and reimbursement amounts for
uses of our product candidates, our ability to sell our products will be
adversely affected.
We are and will be dependent on third parties for manufacturing.
Our facilities are not large enough or equipped to manufacture our products
in commercial quantities. For the foreseeable future, we intend to rely on third
parties to manufacture our products. To acquire our own facility, we would need
significant additional funds and additional personnel to comply with the FDA's
extensive regulations applicable to pharmaceutical manufacturing facilities.
Even if we decided to develop our own manufacturing facilities, we could not
assure you that we would be able to make a successful transition to commercial
production.
We will be dependent on third parties for marketing.
None of our officers or employees has marketing experience in the
pharmaceutical industry. We intend to enter into development and marketing
agreements with third parties. We expect that under the marketing agreements we
would act as a co-marketing partner or would grant exclusive marketing rights to
our corporate partners in return for up-front fees, milestone payments and
royalties on sales. Under these marketing agreements, our marketing partner may
be responsible for a significant portion of development of the product and
regulatory approval. If the marketing partner is unable to develop a marketable
product or market a product successfully, our business may be adversely
affected. If we were to market our products ourselves, we would need to invest
significant additional management time and money to develop an internal sales
force. We cannot assure you that an internal sales force would be successful in
marketing our products.
We are and will remain dependent upon key personnel.
We are managed by a very small number of key management and operating
personnel. The loss of key management personnel, particularly Kuslima Shogen,
our Chairman and Chief Executive Officer, would most likely have a material
adverse effect on our business. We carry key person life insurance on the life
of Ms. Shogen with a face value of $1,000,000.
We may not be able to utilize all of our net operating loss carryforwards
At July 31, 1999, we had federal net operating loss carryforwards of
approximately $40,296,000 that expire from 2000 to 2019. We also had investment
tax credit carryforwards of approximately $33,015 and research and
experimentation tax credit carryforwards of approximately $810,403 that expire
from 2000 to 2019. New Jersey approved for sale approximately $2.4 million of
our state tax loss carryforwards and state research and development credits or
tax benefits, of which approximately $1 million was allocated to be sold between
July 1, 1999 and June 30, 2000. In December 1999, we realized net proceeds of
$755,854 from the sale of our allocated tax benefits. We will attempt to sell
the remainder between July 1, 2000 and June 30, 2001, but there is no assurance
we will be successful. Additionally, ultimate utilization/availability of the
net operating losses and credits may be significantly curtailed if a significant
change in ownership occurs.
We are subject to intense competition and technological obsolescence.
Several companies, universities, research teams and scientists are
developing products to treat the same medical conditions our products are
intended to treat. Many of these entities have greater financial resources,
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larger staffs and larger facilities than ours. Most of our competitors are more
experienced and have greater clinical, marketing and regulatory capabilities and
managerial resources than we do. Our competitors may develop products to treat
the same medical conditions our products are intended to treat before we are
able to complete the development of our competing product.
Our business is very competitive and involves rapid changes in the
technologies involved in developing new drugs. If others experience rapid
technological development, our products may become obsolete before we are able
to recover expenses incurred with respect to our products. We will probably face
new competitors as new technologies develop. Our success depends on our ability
to remain competitive in the development of new drugs. We cannot assure you that
we will be able to compete successfully.
We may be sued for product liability.
The use of our products by humans during testing of those products or after
regulatory approval entails a risk of adverse effects which could expose us to
product liability claims. We maintain product liability insurance in the amount
of $6,000,000 for claims arising from the use of our products in clinical trials
prior to FDA approval. We cannot assure you that we will be able maintain our
existing insurance coverage or obtain coverage for the use of our products in
the future. While we believe that we maintain adequate insurance coverage, we
cannot assure you that our current insurance coverage and our financial
resources would be sufficient to pay any liability arising from a product
liability claim. A product liability claim may have a material adverse effect on
our business, financial condition or results of operations.
Our stock is thinly traded.
Our common stock has been quoted on the OTC Bulletin Board since April 28,
1999, and is currently thinly traded. You may be unable to sell our common stock
if the trading market continues to be limited.
We have not paid, and do not intend to pay, any dividends in the foreseeable
future.
We have not paid any dividends on our common stock since our inception. We
do not expect to pay cash dividends on our common stock in the future. We
currently intend to retain all earnings, if any, to finance the growth of our
operations.
The price of our common stock has been, and may continue to be, volatile.
The market price of our common stock, like that of the securities of many
other development stage biotechnology companies, has fluctuated over a wide
range and it is likely that the price of our common stock will fluctuate in the
future. The market price of our common stock could be impacted by a variety of
factors, including:
> announcements of technological innovations or new commercial products
by us or our competitors,
> disclosure of the results of pre-clinical testing and clinical trials
by us or our competitors,
> disclosure of the results of regulatory proceedings,
> changes in government regulation,
> developments in the patents or other proprietary rights owned or
licensed by us or our competitors,
> public concern as to the safety and efficacy of products developed by
us or others,
> litigation, and
> general market conditions in our industry.
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In addition, the stock market continues to experience extreme price and
volume fluctuations. These fluctuations have especially affected the market
price of many biotechnology companies. Such fluctuations have often been
unrelated to the operating performance of these companies. Nonetheless, these
broad market fluctuations may negatively affect the market price of our common
stock.
Our charter documents and Delaware law may discourage a takeover of our company.
We are currently authorized to issue 1,000,000 shares of preferred stock,
par value $.001 per share. Our Board of Directors is authorized, without any
approval of the stockholders, to issue the preferred stock and determine the
terms of the preferred stock. There are no shares of preferred stock
outstanding. The authorized and unissued shares of preferred stock may be
classified as an "anti-takeover" measure and may discourage attempted takeovers
of our company which are not approved by our Board of Directors. The authorized
shares of preferred stock will remain available for general corporate purposes,
may be privately placed and can be used to make a change in control of our
company more difficult. Under certain circumstances, our Board of Directors
could create impediments to or frustrate persons seeking to effect a takeover or
transfer in control of our company by causing shares of preferred stock to be
issued to a stockholder who might side with the Board of Directors in opposing a
takeover bid that the Board of Directors determines is not in the best interests
of our company and its stockholders, but in which unaffiliated stockholders may
wish to participate. Under the General Corporation Law of Delaware, the Board of
Directors is permitted to use a depositary receipt mechanism that enables the
Board to issue an unlimited number of fractional interests in each of the
authorized and unissued shares of preferred stock without stockholder approval.
Consequently, the Board of Directors, without further stockholder approval,
could issue authorized shares of preferred stock or fractional interests in
preferred stock with rights that could adversely affect the rights of the
holders of the company's common stock to a stockholder which, when voted
together with other securities held by members of the Board of Directors and the
executive officers and their families, could prevent the majority stockholder
vote required by our certificate of incorporation or Delaware General
Corporation Law to effect certain matters. Furthermore, the existence of
authorized shares of preferred stock might have the effect of discouraging any
attempt by a person, through the acquisition of a substantial number of shares
of common stock to acquire control of our company. Accordingly, the
accomplishment of a tender offer may be more difficult. This may be beneficial
to management in a hostile tender offer, but have an adverse impact on
stockholders who may want to participate in the tender offer.
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