1019695--3/9/2006--ARQULE

related topics

{product, candidate, development}

{property, intellectual, protect}

{cost, regulation, environmental}

{acquisition, growth, future}

{product, liability, claim}

{personnel, key, retain}

{competitive, industry, competition}

{control, financial, internal}

{condition, economic, financial}

RISKS RELATING TO OUR BUSINESS STRATEGY AND OPERATIONS Development of our products is at an early stage and is based on scientific platforms that are unproven approaches to therapeutic intervention. We must show the safety and efficacy of our product candidates through expensive, time consuming preclinical and clinical trials, the results of which are uncertain and governed by exacting regulations. Delays in clinical testing could result in increased costs to us and delay our ability to obtain regulatory approval and commercialize our product candidates. We primarily rely on third-parties to provide sufficient quantities of our product candidates to conduct pre-clinical and clinical studies. We have no control over our manufacturers and suppliers compliance with manufacturing regulations, and their failure to comply could result in an interruption in the supply of our product candidates. We rely on third parties to conduct most of our clinical trials, and their failure to perform their obligations in a timely or competent manner may delay development and commercialization of our product candidates. If we choose to acquire complementary businesses, products or technologies instead of developing them ourselves, we may be unable to complete these acquisitions, to integrate such acquisitions in a cost-effective and non-disruptive manner or to complete commercialization of an acquired product. We may not be able to find collaborators or successfully form collaborations to further our drug development efforts. Our success depends on the efforts of our collaborators, whom we do not and cannot control. We may not receive any further milestone, royalty or license payments under our current or any future collaborations. We face fierce competition from competitors with greater resources. Cost containment pressures may affect the commercialization of, and the revenues generated by, our products. We may not be able to recruit and retain the scientists and management we need to compete. We may be exposed to potential liability related to the development, testing or manufacturing of compounds we develop. RISKS RELATED TO OUR FINANCIAL CONDITION We have incurred significant losses since our inception and anticipate that we will incur significant continued losses for the next several years, and our future profitability is uncertain. We may need substantial additional funding and may be unable to raise capital when needed, or on terms favorable to us, which could force us to delay, reduce or eliminate our drug discovery, product development and commercialization activities. RISKS RELATED TO INTELLECTUAL PROPERTY Our patents and other proprietary rights may fail to protect our business. Our success will depend partly on our ability to operate without infringing on or misappropriating the proprietary rights of others. Our collaborators may restrict our use of scientific information. We may not obtain regulatory approval for the sale and manufacture of drug products. We have only limited experience in regulatory affairs, and some of our products may be based on new technologies; these factors may affect our ability or the time we require to obtain necessary regulatory approvals. RISKS RELATING TO HAZARDOUS WASTE If our use of chemical and hazardous materials violates applicable laws or causes personal injury, we may be liable for damages.

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1019695--3/9/2006--ARQULE_INC