1003929--3/20/2006--CORAUTUS_GENETICS

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{product, candidate, development}

{property, intellectual, protect}

{product, liability, claim}

{stock, price, operating}

{control, financial, internal}

{stock, price, share}

{product, market, service}

{cost, regulation, environmental}

{personnel, key, retain}

Risks Related to Our Business We are a development stage company with a history of insignificant revenues and significant net losses. All of our product candidates are in the developmental stage, and we expect continued net losses for the foreseeable future and we may never become profitable. We will need substantial additional funding to develop our lead VEGF-2 product candidate and other product candidates and for our future operations. Treatment in our lead VEGF-2 product candidate clinical trial has been suspended, is under FDA clinical hold, and it is uncertain when or if such clinical hold will be removed. Our lead VEGF-2 product candidate must still undergo exhaustive clinical testing and may not prove to be safe or effective. If this product candidate is delayed or fails, we may have to curtail our operations. All of our VEGF-2 product candidates require additional research, development, testing and regulatory approvals prior to marketing. If our product candidates are delayed or fail, our financial condition will be negatively affected, and we may have to curtail or cease our operations. No VEGF-2 gene therapy products have been developed or approved. Because we cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates, we cannot predict the timing of any future revenue from these product candidates. We may not successfully establish and maintain collaborative and licensing arrangements, which could adversely affect our ability to develop and commercialize our product candidates. We are also limited by the collaboration and marketing arrangements on which we rely. We rely on third parties to manufacture our VEGF-2 product candidates and the catheters used to deliver the products. There can be no guarantee that we can obtain sufficient and acceptable quantities of our product candidates or the catheters on acceptable terms, which may delay or impair our ability to develop, test and market such product candidates. We depend on clinical trial arrangements with medical institutions to advance our technology, and the loss of these arrangements could impair the development of our product candidates. If we are unable to maintain agreements with third parties to perform sales, marketing and distribution functions, we will be required to develop these capabilities to commercialize our proposed product candidates. If we do not comply with applicable regulatory requirements in the manufacture and distribution of our product candidates, we may incur penalties that may inhibit our ability to commercialize our product candidates and adversely affect our revenue. If we are unable to attract and retain key employees and advisors, our ability to obtain financing, pursue collaborations or develop our product candidates may be adversely affected. We use hazardous and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly. We have entered, and may in the future enter, into agreements allowing third parties to use VEGF-2 for their own clinical trials, which if unsuccessful or subject to adverse effects could damage our ability to successfully conclude our trial and commercialize our own product candidates. We are exposed to potential risks resulting from Section 404 of the Sarbanes-Oxley Act of 2002. Risks Related to Intellectual Property If our right to use the VEGF-2 technology or other intellectual property we license from third parties is terminated or adversely affected, our financial condition, operations or ability to develop and commercialize our proposed product candidates will be materially harmed. If we or our licensors are not able to obtain and maintain adequate patent protection for our product candidates, we may be unable to commercialize our product candidates or to prevent others from using our technology in competitive products. We may not have adequate protection for our unpatented proprietary information, which could adversely affect our competitive position. Risks Related to Our Industry Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates. We are subject to significant government regulation with respect to our product candidates. Compliance with government regulation can be a costly and time-consuming process, with no assurance of ultimate regulatory approval. If these approvals are not obtained, we will not be able to sell our product candidates. We face intense competition and must cope with rapid technological change and the possibility that our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates. We face the risk of product liability claims, which could adversely affect our business and financial condition. Risks Related to Our Common Stock Our stock price has been and may continue to be volatile, and an investment in our common stock could significantly decline in value. You may have difficulty selling your shares of common stock at or above the price paid for such shares or at the time you would like to sell. Our quarterly operating results may fluctuate, causing volatility in our stock price.

Full 10-K form ▸

1003929--3/20/2006--CORAUTUS_GENETICS_INC