PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 25, 2001
1,714,285 SHARES
ALTEON INC.
COMMON STOCK
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We are selling 1,714,285 shares of common stock with this prospectus
supplement and the accompanying prospectus. The last reported sale price of our
common stock on December 19, 2002 was $1.95 per share. Our common stock is
listed for trading on the American Stock Exchange under the symbol "ALT".
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THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE S-3 OF THIS
PROSPECTUS SUPPLEMENT.
Per share Total
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Public Offering Price $1.75 $3,000,000
Proceeds to Alteon Inc. (before expenses) $1.75 $3,000,000
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is December 20, 2002.
TABLE OF CONTENTS
PAGE
About this Prospectus Supplement............................ S-2
Use of Proceeds............................................. S-2
Dilution.................................................... S-2
Plan of Distribution........................................ S-3
Risk Factors................................................ S-3
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You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and the documents incorporated by
reference. We have not authorized anyone to provide you with information
different from that contained in any of these documents. The information
contained in these documents is accurate only as of the date of each document,
as the case may be, regardless of the time of delivery of this prospectus
supplement and accompanying prospectus or of any sale of common stock. Our
business, financial condition, results of operations and prospects may change
after the date set forth in each document in which the information is presented.
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ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our
common stock in two separate documents: (a) the accompanying prospectus, which
provides general information, some of which may not apply to this offering; and
(b) this prospectus supplement, which describes the specific details regarding
this offering. Generally, when we refer to this "prospectus," we are referring
to both documents combined.
If information in this prospectus supplement is inconsistent with the
accompanying prospectus, you should rely on this prospectus supplement.
Statements in this prospectus supplement that are not statements or
descriptions of historical facts are "forward-looking" statements under Section
21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995 and are subject to numerous risks and
uncertainties. These forward-looking statements and other forward-looking
statements made by us or our representatives are based on a number of
assumptions. The words "believe," "expect," "anticipate," "intend," "estimate"
or other expressions, which are predictions of or indicate future events and
trends and which do not relate to historical matters, identify forward-looking
statements. You are cautioned not to place undue reliance on these
forward-looking statements as they involve risks and uncertainties, and actual
results could differ materially from those currently anticipated due to a number
of factors. See "Risk Factors", beginning on Page S-3.
Except for special circumstances in which a duty to update arises when
prior disclosure becomes materially misleading in light of subsequent events, we
do not intend to update any of these forward-looking statements to reflect
events or circumstances after the date of this prospectus supplement or to
reflect the occurrence of unanticipated events.
USE OF PROCEEDS
We expect the net proceeds from this sale of common stock to be
approximately $2,964,500 after deducting estimated expenses. We intend to use
the net proceeds from the sale of the common stock to fund the continued
development of ALT-711 and for general corporate purposes.
DILUTION
Our net tangible book value as of September 30, 2002 was approximately
$14,400,446 or $0.45 per share of common stock. Net tangible book value per
share is determined by dividing our net tangible book value, which consists of
tangible assets less total liabilities, by the number of shares of common stock
outstanding at that date. Without taking into account any other changes in the
net tangible book value after September 30, 2002, other than to give effect to
our receipt of the estimated net proceeds from this sale of 1,714,285 shares of
common stock at an offering price of $1.75 per share, less estimated offering
expenses, our net tangible book value as of September 30, 2002 would have been
approximately $17,363,446 or $0.52 per share. This represents an immediate
increase in the net tangible book value per share of $0.07 per share to existing
stockholders and an immediate dilution of $1.23 per share to new investors. The
following table illustrates this per share dilution:
Offering Price $1.75
Net Tangible Book Value Per Share Before the Offering $0.45
Increase in Net Tangible Book Value Per Share After the Offering $0.07
Net Tangible Book Value Per Share After the Offering $0.52
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Dilution Per Share to New Investors $1.23
This table is based on the number of outstanding shares of common stock as
of September 30, 2002 and does not include the following:
- 5,811,764 shares of common stock issuable upon conversion of our
outstanding Series G Preferred Stock as of September 30, 2002;
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- 17,453,051 shares of common stock issuable upon conversion of our
outstanding Series H Preferred Stock as of September 30, 2002;
- 4,969,041 shares of common stock issuable upon the exercise of
outstanding stock options as of September 30, 2002 at a weighted
average exercise price of $3.1978 per share; and
- 1,133,636 and 60,000 shares of common stock issuable upon exercise of
outstanding warrants as of September 30, 2002 at an exercise price of
$2.25 and $4.025, respectively.
PLAN OF DISTRIBUTION
We have entered into a stock purchase agreement dated as of December
20, 2002 with Merlin BioMed Private Equity Fund, Vertical Ventures Investments,
LLC, DMG Legacy Fund LLC, DMG Legacy Institutional Fund LLC, DMG Legacy
International Ltd., WHI Growth Fund, LP and WHI Select Fund, LP as Purchasers,
with respect to the shares being offered by this prospectus supplement. Subject
to certain conditions, we have agreed to sell to the Purchasers, and the
Purchasers have agreed to purchase from us, the 1,714,285 shares of common stock
offered hereby at $1.75 per share.
The Purchasers or their pledgees, donees, transferees, or other
successors in interest may sell the shares offered hereby from time to time in
one or more transactions (which may include block transactions) on the American
Stock Exchange or such other market on which our common stock may, from time to
time, be traded, in privately negotiated transactions, or otherwise at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. The Purchasers may effect such transactions by
selling the shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Purchasers and/or the purchasers of the shares for whom such broker-dealers
may act as agents or to whom they sell as principals, or both.
The Purchasers and any broker-dealers or agents that participate with
the Purchasers in the distribution of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, and
any commissions received by them and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
We estimate that our share of the total expenses for the offering will
be approximately $35,500. This amount includes approximately $22,500 for
exchange registration fees, $10,000 in legal fees and expenses, and $3,000 in
miscellaneous expenses.
We have agreed to indemnify the Purchasers against some liabilities,
including liabilities under the Securities Act, or to contribute to the payments
the Purchasers may be required to make because of any of those liabilities.
RISK FACTORS
Investment in our common stock involves substantial risks, including
those described below. You should purchase our common stock only if you can
afford to lose your entire investment. You should carefully consider all of the
information included in this prospectus to evaluate us and our business. Your
should make this evaluation before deciding whether to purchase our common
stock. You should understand that additional risks which we cannot predict at
this time may have negative impact on us in the future. You should also
understand that the risks discussed below might affect us more than or in a
different manner than we now predict.
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IF WE DO NOT OBTAIN SUFFICIENT ADDITIONAL FUNDING TO MEET OUR NEEDS, WE MAY HAVE
TO CURTAIL OR DISCONTINUE THE RESEARCH, PRODUCT DEVELOPMENT, PRE-CLINICAL
TESTING AND CLINICAL TRIALS OF SOME OR ALL OF OUR PRODUCT CANDIDATES.
We anticipate that at our current spending level, our existing
available cash and cash equivalents and short-term investments will be adequate
to satisfy our working capital requirements for our current operations through
the second quarter of 2003. If it becomes necessary, we have the ability to
reduce the cash burn rate, as we have limited fixed commitments. If we are
unable to obtain additional funding prior to the completion of the DIAMOND,
SAPPHIRE and SILVER trials, we expect to devote all of our resources to these
trials. This will require us to significantly curtail our other research and
product development activities. Following completion of the trials, we will
require substantial new funding to pursue development of ALT-711 and continue
our operations.
Our future capital requirements will depend on many factors, including
continued scientific progress in our discovery research, the size and complexity
of these programs, progress with pre-clinical 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. We may not be
able to obtain sufficient funding to satisfy our longer-term capital and
operating requirements.
IF WE DO NOT SUCCESSFULLY DEVELOP ANY PRODUCTS, WE MAY NOT DERIVE ANY REVENUES.
We have not yet requested or received regulatory approval for any
product from the FDA or any other regulatory body. All of our product candidates
are still in research or clinical development. We may not succeed in the
development and marketing of any therapeutic or diagnostic product. To achieve
profitable operations, we must, alone or with others, successfully identify,
develop, introduce and market proprietary products. Such products will require
significant additional investment, development and pre-clinical and clinical
testing prior to potential regulatory approval and commercialization.
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 ineffective or cause harmful side
effects during pre-clinical testing or clinical trials, fail to receive
necessary regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. We may not be able to
undertake additional clinical trials. In addition, our product development
efforts may not be successfully completed, we may not obtain regulatory
approvals, and our products, if introduced, may not be successfully marketed or
achieve customer acceptance. We do not expect any of our products, including
ALT-711 and pimagedine, to be commercially available for a number of years, if
at all.
CLINICAL TRIALS REQUIRED FOR OUR PRODUCT CANDIDATES ARE EXPENSIVE AND
TIME-CONSUMING, AND THEIR OUTCOME IS UNCERTAIN.
Before obtaining regulatory approvals for the commercial sale of any of
our products under development, we must demonstrate through pre-clinical studies
and clinical trials that the product is safe and effective for use in each
target indication. The length of time necessary to complete clinical trials
varies significantly and may be difficult to predict. Factors which can cause
delay or termination of our clinical trials include: (i) slower than expected
patient enrollment due to the nature of the protocol, the proximity of patients
to clinical sites, the eligibility criteria for the study, competition with
clinical trials for other drug candidates or other factors; (ii) lower than
expected retention rates of patients in a clinical trial; (iii) inadequately
trained or insufficient personnel at the study site to assist in overseeing and
monitoring clinical trials; (iv) delays in approvals from a study site's review
board; (v) longer treatment time required to demonstrate effectiveness or
determine the appropriate product dose; (vi) lack of sufficient supplies of the
product candidate; (vii) adverse medical events or side effects in treated
patients; (viii) lack of effectiveness of the product candidate being tested;
and (ix) regulatory changes.
Even if we obtain positive results from pre-clinical or clinical trials
for a particular product, we may not achieve the same success in future trials
of that product. In addition, some or all of the clinical trials we undertake
may not demonstrate sufficient safety and efficacy to obtain the requisite
regulatory approvals, which could prevent
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the creation of marketable products. Our product development costs will increase
if we have delays in testing or approvals, if we need to perform more or larger
clinical trials than planned or if our trials are not successful. Delays in our
clinical trials may harm our financial results and the commercial prospects for
our products.
IF WE ARE UNABLE TO DERIVE REVENUES FROM PRODUCT SALES, WE MAY NEVER BE
PROFITABLE.
All of our revenues to date have been generated from collaborative
research agreements and financing activities, or interest income earned on these
funds. We have not received any revenues from product sales. We may not realize
product revenues on a timely basis, if at all.
At September 30, 2002, we had an accumulated deficit of $165,386,000.
We anticipate that we will incur substantial, potentially greater, losses in the
future. Our products under development may not be successfully developed and our
products, if successfully developed, may not generate revenues sufficient to
enable us to earn a profit. We expect to incur substantial additional operating
expenses over the next several years as our research, development and clinical
trial activities increase. We do not expect to generate revenues from the sale
of products, if any, for a number of years. Our ability to achieve profitability
depends, in part, on our ability to enter into agreements for product
development, obtain regulatory approval for our products and develop the
capacity, or enter into agreements, for the manufacture, marketing and sale of
any products. We may not obtain required regulatory approvals, or successfully
develop, manufacture, commercialize and market product candidates, and we may
never achieve product revenues or profitability.
PRIOR STOCK OPTION REPRICING MAY HAVE AN ADVERSE EFFECT ON OUR FUTURE FINANCIAL
PERFORMANCE.
Based on the performance of our stock, we repriced certain employee
stock options on February 2, 1999, in order to bolster employee retention. As a
result of this repricing, options to purchase 1.06 million shares of stock were
repriced and certain vesting periods related to these options were modified or
extended. This repricing may have a material adverse impact on future financial
performance based on Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation, An Interpretation of APB Opinion No. 25." This
interpretation requires us to record compensation expense or benefit, which is
adjusted every quarter, for increases or decreases in the fair value of the
repriced options based on changes in our stock price from the value at July 1,
2000, until the repriced options are exercised, forfeited or expire.
IF WE ARE NOT ABLE TO FORM AND MAINTAIN THE COLLABORATIVE RELATIONSHIPS THAT OUR
BUSINESS STRATEGY REQUIRES, THEN OUR PROGRAMS WILL SUFFER AND WE MAY NOT BE ABLE
TO DEVELOP PRODUCTS.
Our strategy for developing and deriving revenues from our products
depends, in large part, upon entering into arrangements with research
collaborators, corporate partners and others. We are seeking to establish these
relationships to provide the funding necessary for continuation of our product
development, but such efforts may not be successful. If we are unable to enter
into or manage additional collaborations, our programs may suffer and we may be
unable to develop products.
IF WE ARE UNABLE TO MAINTAIN OUR COLLABORATIVE RELATIONSHIPS, OUR PRODUCT
DEVELOPMENT MAY BE DELAYED AND DISPUTES OVER RIGHTS TO TECHNOLOGY MAY RESULT.
We will, in some cases, be dependent upon outside partners to conduct
pre-clinical testing and clinical trials and to provide adequate funding for our
development programs. Our corporate partners may have all or a significant
portion of the development and regulatory approval responsibilities. Failure of
the corporate partners to develop marketable products or to gain the appropriate
regulatory approvals on a timely basis, if at all, would have a material adverse
effect on our business, financial condition and results of operations.
In most cases, we will not be able to control the amount and timing of
resources that our corporate partners devote to our programs or potential
products. If any of our corporate partners breached or terminated its agreements
with us or otherwise failed to conduct its collaborative activities in a timely
manner, the pre-clinical or clinical development or commercialization of product
candidates or research programs could be delayed, and we would be required to
devote additional resources to product development and commercialization or
terminate certain development programs.
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Disputes may arise in the future with respect to the ownership of
rights to any technology we develop with third parties. These and other possible
disagreements between us and collaborators could lead to delays in the
collaborative research, development or commercialization of 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 our
business, financial condition and results of operations.
Any corporate partners we have may develop, either alone or with
others, products that compete with the development and marketing of our
products. Competing products, either developed by the corporate partners or to
which the corporate partners have rights, may result in their withdrawal of
support with respect to all or a portion of our technology, which would have a
material adverse effect on our business, financial condition and results of
operations.
IF WE CANNOT SUCCESSFULLY DEVELOP A MARKETING AND SALES FORCE OR MAINTAIN
SUITABLE ARRANGEMENTS WITH THIRD PARTIES TO MARKET AND SELL OUR PRODUCTS, OUR
ABILITY TO DELIVER PRODUCTS MAY BE IMPAIRED.
For certain of our products, we have licensed exclusive marketing
rights to our corporate partners or formed collaborative marketing arrangements
within specified territories in return for royalties to be received on sales, a
share of profits or beneficial transfer pricing. These agreements are terminable
at the discretion of our partners upon as little as 90 days' prior written
notice. If the licensee or marketing partner terminates an agreement or fails to
market a product successfully, our business, financial condition and results of
operations may be adversely affected.
We currently have no experience in marketing or selling pharmaceutical
products. In order to achieve commercial success for any approved product, we
must either develop a marketing and sales force or, where appropriate or
permissible, enter into arrangements with third parties to market and sell our
products. We might not be successful in developing marketing and sales
capabilities. Further, we may not be able to enter into marketing and sales
agreements with others on acceptable terms, and any such arrangements, if
entered into, may be terminated. If we develop our own marketing and sales
capability, it will compete with other companies that currently have
experienced, well funded and larger marketing and sales operations. To the
extent that we enter into co-promotion or other sales and marketing arrangements
with other companies, revenues will depend on the efforts of others, which may
not be successful.
IF WE CANNOT SUCCESSFULLY FORM AND MAINTAIN SUITABLE ARRANGEMENTS WITH THIRD
PARTIES FOR THE MANUFACTURING OF THE PRODUCTS WE MAY DEVELOP, OUR ABILITY TO
DEVELOP OR DELIVER PRODUCTS MAY BE IMPAIRED.
We have no experience in manufacturing products for commercial purposes
and do not have manufacturing facilities. Consequently, we are dependent on
contract manufacturers for the production of products for development and
commercial purposes. The manufacture of our products for clinical trials and
commercial purposes is subject to cGMP regulations promulgated by the FDA. In
the event that we are unable to obtain or retain third-party manufacturing for
our products, we will not be able to commercialize such products as planned. We
may not be able to enter into agreements for the manufacture of future products
with manufacturers whose facilities and procedures comply with cGMP and other
regulatory requirements. Our current dependence upon others for the manufacture
of our products may adversely affect our profit margin, if any, on the sale of
future products and our ability to develop and deliver such products on a timely
and competitive basis.
IF WE ARE NOT ABLE TO PROTECT THE PROPRIETARY RIGHTS THAT ARE CRITICAL TO OUR
SUCCESS, THE DEVELOPMENT AND ANY POSSIBLE SALES OF OUR PRODUCT CANDIDATES COULD
SUFFER AND COMPETITORS COULD FORCE OUR PRODUCTS COMPLETELY OUT OF THE MARKET.
Our success will depend on our ability to obtain patent protection for
our products, preserve our trade secrets, prevent third parties from infringing
upon our proprietary rights and operate without infringing upon the proprietary
rights of others, both in the U.S. and abroad.
The degree of patent protection afforded to pharmaceutical inventions
is uncertain and our potential products are subject to this uncertainty.
Competitors may develop competitive products outside the protection that may be
afforded by the claims of our patents. We are aware that other parties have been
issued patents and have
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filed patent applications in the U.S. and foreign countries with respect to
other agents that have an effect on A.G.E.s. or the formation of A.G.E.
crosslinks. In addition, although we have several patent applications pending to
protect proprietary technology and potential products, these patents may not be
issued, and the claims of any patents, which do issue, may not provide
significant protection of our technology or products. In addition, we may not
enjoy any patent protection beyond the expiration dates of our currently issued
patents.
We also rely upon unpatented trade secrets and improvements, unpatented
know-how and continuing technological innovation to maintain, develop and expand
our competitive position, which we seek to protect, in part, by confidentiality
agreements with our corporate partners, collaborators, employees and
consultants. We also have invention or patent assignment agreements with our
employees and certain, but not all, corporate partners and consultants. Relevant
inventions may be developed by a person not bound by an invention assignment
agreement. Binding agreements may be breached, and we may not have adequate
remedies for such breach. In addition, our trade secrets may become known to or
be independently discovered by competitors.
IF WE FAIL TO OBTAIN REGULATORY APPROVALS FOR OUR PRODUCTS, THE COMMERCIAL USE
OF OUR PRODUCTS WILL BE LIMITED.
Our research, pre-clinical testing and clinical trials of our product
candidates are, and the manufacturing and marketing of our products will be,
subject to extensive and rigorous regulation by numerous governmental
authorities in the U.S. and in other countries where we intend to test and
market our product candidates.
Prior to marketing, any product we develop must undergo an extensive
regulatory approval process. This regulatory process, which includes
pre-clinical testing and clinical trials and may include post-marketing
surveillance of each compound to establish its safety and efficacy, can take
many years and can require the expenditure of substantial resources. Data
obtained from pre-clinical and clinical activities is susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. In
addition, we may encounter delays or rejections based upon changes in FDA policy
for drug approval during the period of product development and FDA regulatory
review of each submitted NDA. We may encounter similar delays in foreign
countries. We may not obtain regulatory approval for the drugs we develop.
Moreover, regulatory approval may entail limitations on the indicated uses of
the drug. Further, even if we obtain regulatory approval, a marketed drug and
its manufacturer are subject to continuing review and discovery of previously
unknown problems with a product or manufacturer which may have adverse effects
on our business, financial condition and results of operations, including
withdrawal of the product from the market. Violations of regulatory requirements
at any stage, including pre-clinical testing and clinical trials, the approval
process or post-approval, may result in various adverse consequences including
the FDA's delay in approving, or its refusal to approve, a product withdrawal of
an approved product from the market and the imposition of criminal penalties
against the manufacturer and NDA holder. None of our products has been approved
for commercialization in the U.S. or elsewhere. We may not be able to obtain FDA
approval for any products. Failure to obtain requisite governmental approvals or
failure to obtain approvals of the scope requested will delay or preclude our
licensees or marketing partners from marketing our products or limit the
commercial use of such products and will have a material adverse effect on our
business, financial condition and results of operations.
IF WE ARE NOT ABLE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES IN THE
DEVELOPMENT AND MARKETING OF CURES AND THERAPIES FOR CARDIOVASCULAR DISEASES,
DIABETES AND THE OTHER CONDITIONS FOR WHICH WE SEEK TO DEVELOP PRODUCTS, WE MAY
NOT BE ABLE TO CONTINUE OUR OPERATIONS.
We are engaged in pharmaceutical fields characterized by extensive
research efforts and rapid technological progress. Many established
pharmaceutical and biotechnology companies with resources greater than ours are
attempting to develop products that would be competitive with our products.
Other companies may succeed in developing products that are safer, more
efficacious or less costly than any we may develop and may also be more
successful than us in production and marketing. Rapid technological development
by others may result in our products becoming obsolete before we recover a
significant portion of the research, development or commercialization expenses
incurred with respect to those products.
Certain technologies under development by other pharmaceutical
companies could result in better treatments for cardiovascular disease, or
diabetes and its related complications. Several large companies have initiated
or expanded research, development and licensing efforts to build pharmaceutical
franchises focusing on these medical conditions. It is possible that one or more
of these initiatives may reduce or eliminate the market for
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some of our products. In addition, other companies have initiated research in
the inhibition or crosslink breaking of A.G.E.s.
IF GOVERNMENTS AND THIRD-PARTY PAYERS CONTINUE THEIR EFFORTS TO CONTAIN OR
DECREASE THE COSTS OF HEALTH CARE, WE MAY NOT BE ABLE TO COMMERCIALIZE OUR
PRODUCTS SUCCESSFULLY.
In certain foreign markets, pricing and/or profitability of
prescription pharmaceuticals are subject to government control. In the U.S., we
expect that there will continue to be federal and state initiatives to control
and/or reduce pharmaceutical expenditures. In addition, increasing emphasis on
managed care in the U.S. will continue to put pressure on pharmaceutical
pricing. Cost control initiatives could decrease the price that we receive for
any products we may develop and sell in the future and have a material adverse
effect on our business, financial condition and results of operations. Further,
to the extent that cost control initiatives have a material adverse effect on
our corporate partners, our ability to commercialize our products may be
adversely affected.
Our ability to commercialize pharmaceutical products may depend, in
part, on the extent to which reimbursement for the products will be available
from government health administration authorities, private health insurers and
other third-party payers. Significant uncertainty exists as to the reimbursement
status of newly approved health care products, and third-party payers, including
Medicare, are increasingly challenging the prices charged for medical products
and services. Third-party insurance coverage may not be available to patients
for any products developed by us. Government and other third-party payers are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products and by refusing in
some cases to provide coverage for uses of approved products for disease
indications for which the FDA has not granted labeling approval. If adequate
coverage and reimbursement levels are not provided by government and other
third-party payers for our products, the market acceptance of these products
would be adversely affected.
IF THE USERS OF THE PRODUCTS WE DEVELOP CLAIM THAT OUR PRODUCTS HAVE HARMED
THEM, WE MAY BE SUBJECT TO COSTLY AND DAMAGING PRODUCT LIABILITY LITIGATION,
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS.
The use of any of our potential products in clinical trials and the
sale of any approved products, including the testing and commercialization of
ALT-711 or other compounds, exposes us to liability claims resulting from the
use of products or product candidates. A claim, which was subsequently settled,
was made by a participant in one of our clinical trials, and additional claims
might be made directly by other such participants, consumers, pharmaceutical
companies or others. We maintain product liability insurance coverage for claims
arising from the use of our products in clinical trials. However, coverage is
becoming increasingly expensive, and we may not be able to maintain or acquire
insurance at a reasonable cost or in sufficient amounts to protect us against
losses due to liability that could have a material adverse effect on our
business, financial conditions and results of operations. We may not be able to
obtain commercially reasonable product liability insurance for any product
approved for marketing in the future and insurance coverage and our resources
may not be sufficient to satisfy any liability resulting from product liability
claims. A successful product liability claim or series of claims brought against
us could have a material adverse effect on our business, financial condition and
results of operations.
IF WE ARE UNABLE TO ATTRACT AND RETAIN THE KEY PERSONNEL ON WHOM OUR SUCCESS
DEPENDS, OUR PRODUCT DEVELOPMENT, MARKETING AND COMMERCIALIZATION PLANS COULD
SUFFER.
We are highly dependent on the principal members of our management and
scientific staff. The loss of services of any of these personnel could impede
the achievement of our development objectives. Furthermore, recruiting and
retaining qualified scientific personnel to perform research and development
work in the future will also be critical to our success. We may not be able to
attract and retain personnel on acceptable terms given the competition between
pharmaceutical and health care companies, universities and non-profit research
institutions for experienced scientists. In addition, we rely on consultants to
assist us in formulating our research and development strategy. All of our
consultants are employed outside of us and may have commitments to or consulting
or advisory contracts with other entities that may limit their availability to
us.
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OUR OPERATIONS INVOLVE A RISK OF INJURY OR DAMAGE FROM HAZARDOUS MATERIALS, AND
IF AN ACCIDENT WERE TO OCCUR, WE COULD BE SUBJECT TO COSTLY AND DAMAGING
LIABILITY CLAIMS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our research and development activities involve the controlled use of
hazardous materials and chemicals. Although we believe that our safety
procedures for handling and disposing of hazardous materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of an accident, we could be held liable for any damages or fines that
result. Such liability could have a material adverse effect on our business,
financial condition and results of operations.
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