Exhibit 99
RISK FACTORS
Certain statements in this Quarterly Report on Form 10-Q and certain
statements made by the Company in other published documents (including, without
limitation, press releases) are forward-looking in nature and, as such,
constitute "forward-looking statements" under the Private Securities Litigation
Reform Act of 1995. These forward-looking statements include, but are not
limited to, statements about the Company's plans, objectives, expectations and
intentions and other statements contained in this Quarterly Report on Form 10-Q
or elsewhere that are not historical facts. When used in this Quarterly Report
on Form 10-Q or elsewhere, the words "expects," "anticipates," "intends,"
"plans," "believes," "seeks" and "estimates" and similar expressions are
generally intended to identify forward-looking statements. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements. In other words, our
performance might be quite different from what the forward-looking statements
imply. The following factors, as well as those discussed below in this "Risk
Factors" section, could cause our performance to differ from the implied
results:
* inherent uncertainties accompanying the marketing of CEA-Scan
and LeukoScan.
* inherent uncertainties involving new product development and
marketing.
* inability to obtain capital for continued product development
and commercialization.
* actions of regulatory authorities concerning product approval.
* actions of government and private organizations concerning
reimbursement of medical expenses.
* impact of competitive products and pricing.
* results of clinical trials.
* loss of key employees.
* changes in general economic and business conditions.
* changes in industry trends.
We have no obligation to release publicly the result of any revisions to any of
our "forward-looking statements" to reflect events or circumstances that occur
after the date of this Quarterly Report or to reflect the occurrence of other
unanticipated events.
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We Have a History of Operating Losses and May Never Become Profitable
We have had significant operating losses since our formation in 1982 and have
not earned a profit since our inception. These operating losses and failure to
be profitable have been due mainly to the significant amount of money that we
have had to spend on research and development. As of September 30, 2000, we had
an accumulated deficit of approximately $111.0 million. We expect to continue to
experience operating losses until such time, if at all, that we are able to
generate sufficient revenues from sales of CEA-Scan(R), LeukoScan(R) and/or our
other potential products.
We May Not Be Able to Successfully Develop a Market for Our Approved Products
CEA-Scan and LeukoScan are the only products which we are licensed to market and
sell. To date, we have received only limited revenues from the sale of these
products. We cannot assure investors that these products or any of our proposed
products will achieve market acceptance or generate significant sales.
We May Not Receive Approval to Sell LeukoScan in the United States in a
Timely Manner
We have not yet received approval from the FDA to market and sell LeukoScan in
the United States and cannot assure investors as to when, if ever, that we will
obtain approval. In addition, the FDA could impose conditions on its approval,
which could significantly affect the commercial viability of the product or
could require us to undertake significant additional studies or otherwise expend
additional significant funds. If we do not receive approval to market and sell
LeukoScan in the United States in the near future or if the FDA imposes
significant conditions or restrictions, our business and operations could be
significantly and adversely affected.
We May Not Be Able to Bring to Market the Products We Are Currently Developing
or Sustain their Sales After Approval
Before any of our products that we are currently developing can be marketed and
sold, we must undertake substantial research and development. All new products
face a high degree of uncertainty, including the following:
* We may not receive regulatory approval to perform human clinical trials
for the products we currently have planned or we may be unable to
successfully complete our ongoing clinical trials.
* The results from preclinical studies and clinical trials may not be
indicative of results that will be obtained in later-stage testing.
* We may be unable to timely recruit a sufficient number of patients for
our clinical trials. Delays in planned patient enrollment may result in
increased costs and delays.
* We may be unable to obtain approval from the FDA and comparable foreign
authorities because we are unable to demonstrate that the product is
safe and effective for the intended use, or obtaining regulatory
approval may take significantly more time and cost significantly more
money than we currently anticipate.
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* We may discover that the product has undesirable or unintended side
effects or other characteristics that make it impossible or
impracticable for us to continue development or which may limit the
product's commercial use.
* We do not expect that any new product which is currently in research
and development will be commercially available for at least several
years.
* We may be unable to produce the product in commercial quantities
at reasonable cost.
* We may be unable to successfully market the product or to find an
appropriate corporate partner, if necessary, to assist us in the
marketing of the product.
* The product may not gain satisfactory market acceptance.
* The product may be superseded by another product commercialized for the
same indication or may infringe patents issued to others, which would
prevent us from marketing and selling the product.
* After approval, the product may be recalled or withdrawn at any time as
a result of regulatory issues, including those concerning safety and
efficacy.
If we are unable to continue to develop products that we can successfully
market, our business, financial condition and results of operations will be
significantly and adversely affected.
If We Do Not Obtain Additional Capital, We May Be Required to Curtail Our
Operations
When our needs for cash deplete our existing capital position,, we will be
required to significantly reduce our operating expenses, including the amount of
resources devoted to marketing and sales, product development and clinical
trials, which could have a significant and adverse effect on us. We cannot
assure investors that any additional financing will be available to us at all or
on terms we find acceptable or that the terms of any financing will not cause
substantial dilution to our existing stockholders.
Our Limited Marketing and Sales Experience and Capability Could Impact Our
Ability to Successfully Sell Our Current Products
We are relying, in substantial part, on our own limited sales and marketing
organization to market CEA-Scan and LeukoScan. We cannot assure investors that
we can successfully maintain and continue to build our sales force. If we are
unable to continue to build and maintain our sales force, our financial
condition and operating results may be significantly and adversely affected.
We May Have to Rely on Partners to Help Us Market and Sell Our Products Under
Development
The marketing and sale of our proposed products may be dependent upon our
entering into arrangements with corporate partners. We cannot assure investors
that we will be successful in forming these relationships or that these
relationships, even if formed, will be successful.
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We Could Be Temporarily Unable to Sell Our Products If Our Agreements with our
Distributors Were Terminated
We currently do not have the resources to internally develop and maintain the
operating procedures required by the FDA and comparable foreign regulatory
authorities to oversee distribution of our products. As a result, we have
entered into arrangements with third parties to perform this function for the
foreseeable future. If these agreements are terminated, we will be required to
enter into arrangements with other government approved third parties in order to
be able to distribute our products. We will be unable to continue to distribute
our products until an acceptable alternative is identified. If we were even only
temporarily unable to distribute our products, our business could be
significantly and adversely effected.
We Could Be Temporarily Unable to Sell Our Products If Our Agreement with our
End Stage Manufacturer Was Terminated
We rely on a single third party to perform certain end-stage portions of the
manufacturing process for CEA-Scan and LeukoScan which we are unable or do not
have the resources to perform. If this third party were to become unavailable,
we would be unable to complete the manufacturing process until we entered into
an agreement with another qualified entity. We cannot give assurances that we
will be able to negotiate an agreement with another entity on terms we consider
acceptable, if at all. Even if we were able to do so, any substantial delay in
our ability to manufacture our products could significantly and adversely affect
our operations.
Our Internal Manufacturing Capability May Limit What We Can Sell
If demand for our approved product increases significantly, we cannot assure
investors that we will continue to have the capacity to manufacture commercial
quantities successfully. In addition, if any of our other products are approved
for marketing and sale, we cannot assure investors that we will continue to have
the capacity and expertise to manufacture commercial quantities of multiple
products successfully or with acceptable profit margins. If we were even only
temporarily unable to manufacture sufficient quantities of our products to meet
demand, our business could be significantly and adversely effected.
We May Be Unable to Continue to Use Mouse Fluids for Future Products Which
Could Require Us to Make Expensive and Time Consuming Changes to Our
Products in Development
CEA-Scan and certain of our other imaging agents are derived from ascites fluid
produced in mice. Regulatory authorities, particularly in Europe, have expressed
concerns about the use of mice fluid for the production of monoclonal
antibodies. We cannot assure investors that regulatory authorities will agree
that our quality control procedures will be adequate for future products. While
we are continuing our development efforts to produce certain of our monoclonal
antibodies using cell culture methods, this process constitutes a substantial
production change, which will require additional manufacturing equipment and new
regulatory approval. We cannot assure investors that we will have the resources
to acquire the additional manufacturing equipment and resources or that we will
receive the required regulatory approval on a timely basis, if at all. We also
have contracted with a third party for the development and production of certain
humanized antibodies, but we cannot assure that these efforts will be
successful.
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Our Product Development Is Dependent Upon Our Continued Relationship with The
Center for Molecular Medicine and Immunology
The Center for Molecular Medicine and Immunology, a not-for-profit cancer
research center, performs pilot and pre-clinical trials in product areas of
importance to us. CMMI also conducts basic research and patient evaluations in a
number of areas of potential interest to us. If CMMI were no longer to provide
these services, we would have to make alternative arrangements with third
parties which could significantly delay and increase expenses associated with
pre-clinical testing and initial clinical trials.
On September 19, 2000, the FDA issued a warning letter to CMMI. The warning
letter, relating to an inspection of CMMI that ended on May 25, 2000, cited
several alleged deviations from applicable federal regulations. Among other
things, the warning letter alleged the failure to submit an Investigational New
Drug Application ("IND") with respect to certain investigational products, the
administration of investigational drugs without an IND, the failure to assure
proper monitoring of investigations, the failure to assure that investigations
are conducted in accordance with applicable investigation plans and protocols
and certain data difficulties. The Company understands that CMMI is pursuing
these matters directly with the FDA. The FDA has substantial regulatory
authority over both CMMI and the Company. Any regulatory, judicial or other
actions taken with respect to CMMI by the United States government or others
could materially adversely affect the Company, given the relationship between
the Company and CMMI.
Certain Potential Conflicts of Interest Exist with The Center for Molecular
Medicine and Immunology Which Could Affect Our Operations
Dr. David M. Goldenberg, our Chairman and Chief Executive Officer, is the
founder, President and a member of the Board of Trustees of CMMI. Dr. Goldenberg
devotes more of his time working for CMMI than for us. In addition, other key
personnel currently have responsibilities both to CMMI and us. As a result, the
potential for conflict of interest exists and disputes could arise over the
allocation of research projects and ownership of intellectual property rights.
We May Not Be Able to Obtain Government Regulatory Approval in a Timely Manner
to Market and Sell Our Products
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the manufacture and marketing of our
presently marketed and proposed products as well as our research and development
activities. All of our proposed products will require regulatory approval by
governmental agencies prior to commercialization and our products must undergo
rigorous preclinical and clinical testing and other premarket approval
procedures by the FDA and comparable foreign authorities. In addition, since
certain of our potential products involve the application of new technologies,
regulatory approvals may take longer than for products produced using more
conventional methods. Once we begin clinical trials for a new diagnostic or
therapeutic product, it may take five to ten years or more to receive the
required regulatory approval to commercialize that product and begin to market
it to the public. Various federal and, in some cases, state statutes and
regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of these products. The lengthy process of
seeking these approvals, and the subsequent compliance with applicable statutes
and regulations, will require us to expend substantial resources. If we fail to
obtain or are otherwise substantially delayed in obtaining, regulatory
approvals, our business and operations could be significantly and adversely
affected.
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In responding to a new drug application, or a biologic license application,
government regulators may grant marketing approvals, request additional
information or further research, or deny the application if they determine that
the application does not satisfy its regulatory approval criteria. Approvals may
not be granted on a timely basis, if at all, or if granted may not cover all the
clinical indications for which we are seeking approval or may contain
significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use. Even after approval, we may
be required to recall or withdraw a product as a result of subsequently
discovered safety or efficacy concerns.
Our Business Involves the Use of Hazardous Materials
In addition to laws and regulations enforced by the FDA, we are also subject to
regulation under various other foreign, federal, state or local laws and
regulations. Our research and development involve the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds. The
risk of accidental contamination or injury from these materials cannot be
completely eliminated. If an accident occurs, we could be held liable for any
damages that result and any liability could exceed our resources.
We Must Maintain Our Manufacturing Facilities in Accordance With Government
Regulatory Requirements
Our facilities are subject to inspection by the FDA and comparable foreign
authorities. A separate license is sometimes required for commercial manufacture
of any product. Failure to maintain these licenses or to meet the regulatory
inspection criteria would result in disruption to our manufacturing processes
and could have a significant and adverse effect on our business and operations.
We Have Agreed to Certain Covenants in our 1999 Financing Which Place
Restrictions on the Operation of our Business
In connection with the Company's December 1999 financing, the Company agreed to
certain covenants, including covenants that will apply until such time as the
investors in that offering and their affiliates beneficially own less than 5% of
our common stock. Among other things, the Company agreed that without the prior
consent of the investors, the Company may not sell its business to anyone that
is an affiliate of the Company, unless the sale is for consideration at least
equal to (a) the fair market value in the event of a sale of assets (as
determined in good faith by the Company's board of directors) or (b) the then
current market price in the event of a sale of stock. As of November 10, 2000,
such investors in the aggregate beneficially owned 8.75% of the Company's
outstanding common stock.
Changes to Health Care Reimbursement Could Adversely Affect Our Operations
Our ability to successfully commercialize our products will depend in part on
the extent to which reimbursement for the cost of our products and related
treatment will be available from government health administration authorities,
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private health insurers and other organizations. These third-party payers are
increasingly challenging the price of medical products and services. Several
proposals have been made that may lead to a government-directed national health
care system. Adoption of this type of system could further limit reimbursement
for medical products, and we cannot assure investors that adequate third-party
coverage will be available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product development. In
addition, we also cannot assure investors that the U.S. government or foreign
governments will not implement a system of price controls. Any system might
significantly and adversely affect our ability to market our products
profitably.
The Loss of Key Employees Could Adversely Affect our Operations
As a small biotechnology company, we are heavily dependent upon the talents of
Dr. Goldenberg and certain key scientific personnel. If Dr. Goldenberg or any of
our other key personnel leave our employ, our operations could be significantly
and adversely affected. In addition, from time to time we have a need to expand
our management and scientific personnel. Competition for qualified personnel in
the biotechnology and pharmaceutical industries is intense and we cannot assure
investors that we will be successful in our recruitment efforts. If we are
unable to retain or, when needed, attract additional qualified personnel, our
operations also could be significantly and adversely affected.
We Face Substantial Competition in the Biotechnology Field and May Not Be Able
to Successfully Compete
The biotechnology industry is highly competitive, particularly in the area of
cancer diagnostic and therapeutic products. We are likely to encounter
significant competition with respect to our existing products as well as our
products currently under development. A number of companies, including IDEC
Pharmaceuticals, Genentech, SmithKline Beecham, Nycomed Amersham, and Coulter
Pharmaceutical, are engaged in the biotechnology field, and in particular the
development of cancer diagnostic and therapeutic products. Many of these
companies have significantly greater financial, technical and marketing
resources than us. In addition, many of these companies may have more
established positions in the pharmaceutical industry and may be better equipped
than us to develop, refine and market their products.
We also expect to face increasing competition from universities and other
non-profit research organizations. These institutions carry out a significant
amount of research and development in the field of antibody-based technology.
These institutions are becoming increasingly more aware of the commercial value
of their findings and more active in seeking patent and other proprietary
rights, as well as licensing revenues.
Our Products May Be Rendered Obsolete By Rapid Technological Change
We are pursuing an area of product development in which there is the potential
for extensive technological innovations in relatively short periods of time. We
cannot assure investors that our competitors will not succeed in developing
products that are safer or more effective than our products. Rapid technological
change or developments by others may result in our current products as well as
those in development becoming noncompetitive or obsolete.
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If We Are Unable to Protect Our Intellectual Property Rights, We Could Lose Our
Competitive Advantage
Our commercial success is highly dependent upon patents and other proprietary
rights that we own or license. We cannot assure investors that our key patents
will not be invalidated or will provide us protection that has commercial
significance. Litigation may be necessary to protect our patent positions, which
could be costly and time consuming. If any of our key patents that we own or
license are invalidated, our business may be significantly and adversely
affected. In addition, other companies may independently develop similar trade
secrets or know-how or obtain access to our trade secrets, know-how or
proprietary technology, which could significantly and adversely affect our
business.
Our Products May Infringe Third Party Intellectual Property Rights
Other companies may have filed applications for, or have been issued, patents
and obtained other proprietary rights to technology which may be potentially
useful to us. Since we do not have the resources to maintain a staff whose
primary function is to investigate the level of protection afforded to third
parties on devices and components which we use in our products, it is possible
that a third party could successfully claim that our products infringe on their
intellectual property rights. If this were to occur, we may be subject to
substantial damages, and we may not be able to obtain appropriate licenses at a
cost we could afford and we may not have the ability to timely redesign our
products. If we are required to pay damages or are unable to obtain these
rights, our business could be significantly and adversely affected. Even if we
are successful in defeating any alleged infringement claims, litigation could
result in a substantial diversion of managerial time and resources, which could
be better and more fruitfully utilized on other activities.
Our Operations Could Suffer If We Are Unsuccessful in Our Pending Infringement
Claims Concerning Our CEA Antibodies
We are involved in certain litigation with F. Hoffmann-LaRoche and its
affiliates concerning the validity of our European patents covering the antibody
we use in our CEA-Scan cancer imaging product and our CEA-Cide(TM) cancer
therapy product, as well as the use of highly specific anti-CEA antibodies for a
number of other uses. We have claimed that they have infringed our patent and
they have counterclaimed seeking to nullify the patents that were issued. If we
receive an unfavorable outcome in any of these matters, our business could be
significantly and adversely affected.
Product Liability Claims in Excess of the Amount of Our Insurance Would
Adversely Affect Our Financial Condition
The clinical testing, marketing and manufacturing of our products necessarily
involve the risk of product liability. While we currently have product liability
insurance, we cannot assure that we will be able to obtain insurance in the
future at an acceptable cost, if at all. If we cannot maintain our existing or
comparable liability insurance, our ability to test clinically and market our
products may be significantly impaired. Moreover, the amount and scope of our
insurance coverage or indemnification arrangements with any distributor or other
third party upon which we rely may be inadequate to protect us in the event of a
successful product liability claim. Any claim in excess of the amount of any
insurance we then had could significantly and adversely affect our financial
condition and operating results.
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Our Principal Stockholder Can Influence Most Matters Requiring Approval By Our
Stockholders
As of November 10, 2000, Dr. Goldenberg, our Chairman and Chief Executive
Officer, controlled the right to vote over approximately 22.8% of our common
stock. As a result of this voting power, Dr. Goldenberg may have the ability to
determine the election of all of our directors, direct our policies and control
the outcome of substantially all matters which may be put to a vote of our
stockholders.
Resales of Shares Held By Our Directors and Executive Officers May Lower the
Market Price of Our Common Stock
As of November 10, 2000, we had a total of 49,507,621 shares of common stock
outstanding, 6,984,758 of which were held by our directors and executive
officers. These shares may only be resold in limited quantities and only within
the limitations imposed by Rule 144 under the Securities Act. The mere prospect
that these shares may be publicly resold could lower the market price for our
common stock.
Our Stock Price Has Been Volatile
We believe that a variety of factors have caused the market price of our common
stock to fluctuate substantially, and that it will continue to fluctuate in the
future. These factors include:
* actual or anticipated fluctuations in our operating results;
* the status of our products in development;
* new products or technical innovations by us or by our existing or potential
competitors;
* the formation or termination of our corporate alliances and distribution
arrangements;
* prolonged periods of regulatory review of new products or new uses for
existing products;
* determinations regarding our patent applications and those of others;
* trading strategies occurring in the market place with respect to our common
stock; and
* general market conditions and other factors unrelated to us or outside our
control.
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Potential Loss of Our Nasdaq Listing Could Make it More Difficult to Sell our
Shares and Affect Our Liquidity
If the bid price of our common stock were to fall below $1.00 per share, if we
were to have less than $4,000,000 in net tangible assets (total assets less
total liabilities and goodwill), or if the value of our common stock held by our
stockholders (other than our directors and executive officers) were to be less
than $5,000,000, our common stock could be delisted from The Nasdaq Stock
Market. If our common stock were delisted from Nasdaq, trading if any, would
thereafter be conducted in the over-the-counter market. This would make it more
difficult for an investor to dispose of, or to obtain accurate quotations for,
our common stock. Additionally, it may become more difficult for us to raise
funds through the sale of our securities.
Stockholders Could Be Adversely Affected By Our Anti-Takeover Provisions
Our board of directors has the authority, without any further vote by our
stockholders, to issue up to 10,000,000 shares of preferred stock in one or more
series and to determine the designations, powers, preferences and relative,
participating, optional or other rights thereof, including the dividend rate,
whether dividends are cumulative, conversion rights, voting rights, rights and
terms of redemption, redemption price and liquidation preference. Issuance of
preferred stock could have the effect of delaying, deterring or preventing a
change in control of our company, or could impose various procedural and other
requirements that could make it more difficult for holders of our common stock
to effect certain corporate actions, including the ability to replace incumbent
directors and to accomplish transactions opposed by the incumbent board of
directors. The rights of the holders of our common stock would be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future.
Stockholders Should Not Expect That We Will Pay Dividends
We have never paid any dividends on our common stock. For the foreseeable
future, we expect to retain earnings, if any, to finance the expansion and
development of our business. Any future payment of dividends will be within the
discretion of our Board of Directors and will depend upon a variety of factors,
including our earnings, capital requirements, and operating and financial
condition.
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