1129425--2/29/2008--ZYMOGENETICS

related topics

{product, candidate, development}

{product, liability, claim}

{property, intellectual, protect}

{stock, price, operating}

{personnel, key, retain}

{customer, product, revenue}

{acquisition, growth, future}

{provision, law, control}

{operation, natural, condition}

{cost, regulation, environmental}

{cost, operation, labor}

{operation, international, foreign}

{control, financial, internal}

Risks Related to Our Business Our near-term success is highly dependent on the commercialization of RECOTHROM recombinant thrombin. We may be unable to successfully commercialize RECOTHROM in the face of substantial competition. RECOTHROM may not achieve market acceptance or generate significant revenues. The approved product labeling and FDA restrictions on promotional communications may adversely affect market acceptance of RECOTHROM. A lack of familiarity with RECOTHROM and our company may adversely affect market acceptance of RECOTHROM. If Bayer HealthCare, upon whom we rely to co-promote RECOTHROM and provide additional medical science liaisons, fails to perform, our business may be adversely affected. If we or others identify unknown side effects of RECOTHROM or if known side effects become a greater concern or product manufacturing problems occur, our business would be adversely affected and could lead the FDA to withdraw marketing approval or a significant decrease in sales of RECOTHROM could occur. Distribution of RECOTHROM will be highly concentrated among a small group of wholesale drug distributors and we rely on these wholesale drug distributors for certain crucial functions. Guidelines, recommendations and other literature published by various organizations may affect the use of RECOTHROM. RECOTHROM has not been approved for sale outside of the United States, and may never receive foreign marketing approval. We will be dependent on the efforts of Bayer Schering to market and promote RECOTHROM in countries outside the United States where RECOTHROM may receive approval, and we may otherwise be limited due to our relationship with Bayer. We have limited composition of matter patent protection for RECOTHROM. Certain third parties hold patents relating to thrombin. We rely on third parties to supply RECOTHROM and our other product candidates, therefore, we may not be able to effectively control production or obtain adequate supplies, which could cause delays in product manufacturing, subject us to product shortages or reduce product sales. There are limited numbers of potential manufacturers and other vendors on whom we could rely to supply RECOTHROM and our other product candidates. Failure to effectively manage the RECOTHROM supply chain could result in inventory shortages or other supply interruptions. As we progress from a primarily research and development company to a company increasingly involved in commercialization of products, we may encounter difficulties in managing our growth and expanding our operations. We have rapidly expanded our field force operations, including sales personnel and medical science liaisons, and any difficulties managing these functions or the related growth could disrupt our operations. We have limited experience in developing or commercializing products and may not be successful in commercializing RECOTHROM or developing or commercializing any other products. We may be unable to satisfy the rigorous government regulations relating to the development and marketing approval of our other product candidates. Clinical trials may fail to demonstrate the safety and effectiveness of our product candidates, which could prevent or significantly delay their regulatory approval. We may be subject to product liability claims, which our limited product liability insurance may not adequately cover. Our use of collaborations to leverage our capabilities may not be successful. We may not be able to generate any revenue from product candidates developed by collaborators or licensees if they do not successfully develop those candidates. Merck Serono has substantial rights to license proteins we discover, which may limit our ability to pursue other collaboration or licensing arrangements or maximize the benefit from our discoveries. If we decide to build or acquire our own commercial manufacturing capacity, the process will be expensive, lengthy and would require compliance with extensive manufacturing regulations, which could not be assured. Because we will depend on third parties to conduct certain laboratory tests and clinical trials, we may encounter delays in or lose some control over our efforts to develop product candidates. We have shifted our discovery efforts to therapeutic antibodies with which we have limited experience and face competition. We may be unable to commercialize antibody products. If our research and development programs fail to result in additional product candidates, our potential to generate revenue will be substantially limited. The failure to attract or retain key management or other personnel could decrease our ability to discover, develop and commercialize potential products. We may expand our business through the acquisition of companies or businesses or in-licensing product candidates that could disrupt our business and harm our financial condition. Our patents and patent applications may not result in meaningful protection against competitors, provide us with any competitive advantage, or provide adequate protection or rights for new discoveries, and our competitors may commercialize the discoveries we patent or attempt to patent. Third parties may challenge the validity or enforceability of our patents. Third parties may infringe our patents. We may be subject to patent infringement claims, which could result in substantial costs and liability and prevent us from commercializing our products and product candidates. Patent protection for protein-based therapeutic products and other biotechnology inventions is subject to a great deal of uncertainty, and if patent laws or the interpretation of patent laws change, our competitors may be able to develop and commercialize products based on our discoveries. We expect to incur significant expenses in applying for patent protection and prosecuting our patent applications. We may be unable to protect our unpatented proprietary technology and information. Environmental and health and safety laws may result in liabilities, expenses and restrictions on our operations. Natural or man-made disasters may impair our ability to conduct our business. We anticipate incurring additional losses and may not achieve profitability. If we do not obtain substantial additional funding on acceptable terms, we may not be able to continue to grow our business or generate enough revenue to recover our investment in research and development. Our operating results are subject to fluctuations that may cause our stock price to decline. We are exposed to risks related to foreign currency exchange rates. Risks Related to Our Industry Many of our competitors have substantially greater capabilities and resources than we do and may be able to develop and commercialize products before we do or more effectively than we do. Our products and product candidates, even if approved by the FDA or foreign regulatory agencies, may not achieve market acceptance among hospitals, insurers or patients. If the healthcare system, reimbursement policies or any other healthcare related regulations change, the prices of our products and product candidates may fall or our potential sales may decline. Negative public opinion and increased regulatory scrutiny of genetic and clinical research may limit our ability to conduct our business. The marketing and sale of pharmaceutical products and biologics is subject to extensive regulation and aggressive government enforcement, and our corporate compliance program cannot guarantee that we are in compliance with all relevant laws and regulations. We may be required to defend lawsuits and pay damages in connection with alleged or actual harm caused by our products and product candidates. Risks Related to Ownership of Our Stock Our stock price is volatile. We are at risk of securities class action litigation due to our expected stock price volatility. Certain of our shareholders have significant control of our management and affairs, which they could exercise against other shareholders best interests. Provisions in Washington law, our charter documents and executive employment agreements we have entered into may prevent, discourage or delay a change of control.

Full 10-K form ▸

1129425--2/29/2008--ZYMOGENETICS_INC