1030653--3/14/2006--CURAGEN

related topics

{product, candidate, development}

{debt, indebtedness, cash}

{property, intellectual, protect}

{product, liability, claim}

{product, market, service}

{stock, price, share}

{stock, price, operating}

{personnel, key, retain}

{control, financial, internal}

{operation, international, foreign}

{acquisition, growth, future}

{cost, regulation, environmental}

{loan, real, estate}

{system, service, information}

Risks Related to Our Business We have a history of operating losses and expect to incur losses in the future. All of our drug candidates are still in the early stages of development and remain subject to clinical testing and regulatory approval. If we are unable to successfully develop and test our drug candidates, we will not be successful. If we are unable to obtain U.S. and/or foreign regulatory approval, we will be unable to commercialize our drug candidates. If clinical trials for our drug candidates are prolonged or delayed, we may be unable to commercialize our drug candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any product revenue. Even if we obtain regulatory approvals, our drug candidates will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and applicable foreign regulations, we could lose those approvals, and our business would be seriously harmed. Our business has a substantial risk of product liability claims. If we are unable to obtain appropriate levels of insurance, a product liability claim could adversely affect our business. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our drug candidates, we may not generate product revenue. If physicians, patients and third-party payors do not accept our future drugs, we may be unable to generate significant revenue, if any. If the government and other third-party payors fail to provide coverage and adequate payment rates for our future drugs, our revenue and prospects for profitability will be harmed. We may not be able to execute our business strategy if we are unable to enter into alliances with other companies that can provide capabilities and funds for the development and commercialization of our drug candidates. If we are unsuccessful in forming or maintaining these alliances on favorable terms, our business may not succeed. If a collaborative partner terminates or fails to perform its obligations under agreements with us, the development and commercialization of our drug candidates could be delayed or terminated. We rely on third parties to conduct our clinical trials and provide other services, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such services. We currently depend on third-party manufacturers to produce our preclinical and clinical drug supplies and intend to rely upon third-party manufacturers to produce commercial supplies of any approved drug candidates. If in the future we manufacture any of our drug candidates, we will be required to incur significant costs and devote significant efforts to establish and maintain these capabilities. Because we have limited experience in developing, commercializing and marketing products, we may be unsuccessful in our efforts to do so. Because neither we nor any of our collaborative partners have received marketing approval for any product resulting from our research and development efforts, and may never be able to obtain any such approval, we may not be able to generate any product revenue. We rely significantly on our collaborative partners, and our business could be harmed if we are unable to maintain strategic alliances. We depend on attracting and retaining key employees. We depend on academic collaborators, consultants, and scientific advisors. Competition in our field is intense and likely to increase. If our patent applications do not result in issued patents, then our competitors may obtain rights to commercialize our discoveries. The issuance of patents may not provide us with sufficient protection. We cannot be certain that our security measures will protect our confidential information and proprietary technologies. We depend upon our ability to license technologies. 454 s technology platform is in development and the initial stages of commercialization. 454 is subject to competition from organizations that have developed or are developing technologies and products to service 454 s potential customers. 454 has a limited history of manufacturing instrument systems and consumable products, and its success, in part, depends on its ability to provide commercially successful products to Roche. For the foreseeable future, we will rely on a single distributor, Roche, to generate product revenue. If Roche is unable to sell 454 s products effectively, it could materially and adversely affect the results of our operations. A portion of 454 s sales are to international customers and international sales are subject to risks. Patents may not provide sufficient protection for the 454 technology. 454 could be subject to claims for infringing on patents of other intellectual property rights. It is uncertain whether we will be able to successfully develop and commercialize our new products or to what extent we can increase our revenues or become profitable. If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. Risks Related to Our Financial Results We have a large amount of debt and our debt service obligations may prevent us from taking actions that we would otherwise consider to be in our best interests. We may need to raise additional funding, which may not be available on favorable terms, if at all. Our quarterly operating results have fluctuated greatly and may continue to do so. Our debt investments are impacted by the financial viability of the underlying companies. Risks Related to Our Convertible Debt and Our Common Stock into which Our Debt is Convertible The market price of our common stock is highly volatile. We have significant leverage as a result of the sales of our debt in 2000 and 2004. There are no restrictive covenants in our indentures relating to our ability to incur future indebtedness. Our debt service obligations may adversely affect our cash flow. Our ability to repurchase notes, if required, with cash upon a change in control or fundamental change may be limited. Securities we issue to fund our operations could cause dilution to our shareholders ownership.

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1030653--3/14/2006--CURAGEN_CORP