1130591--2/26/2009--XENOPORT

related topics

{product, candidate, development}

{product, liability, claim}

{stock, price, share}

{stock, price, operating}

{personnel, key, retain}

{property, intellectual, protect}

{control, financial, internal}

{provision, law, control}

{operation, natural, condition}

{loan, real, estate}

{cost, regulation, environmental}

Risks Related to Our Business and Industry We have incurred cumulative operating losses since inception, we expect to continue to incur losses for the foreseeable future and we may never sustain profitability. Our success depends substantially on our most advanced product candidates, which are still under development. If we or our collaborative partners are unable to bring any or all of these product candidates to market, or experience significant delays in doing so, our ability to generate product revenue and our likelihood of success will be harmed. If we or our partners are not able to obtain required regulatory approvals, we or our partners will not be able to commercialize our product candidates, our ability to generate revenue will be materially impaired and our business will not be successful. We depend on collaborations to complete the development and commercialization of some of our product candidates. These collaborations may place the development of our product candidates outside our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us. If we do not establish collaborations for our product candidates other than XP13512 and XP21510, we will have to alter our development and commercialization plans. We will need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts. If our preclinical studies do not produce successful results or our clinical trials do not demonstrate safety and efficacy in humans, we will not be able to commercialize our product candidates. Any failure or delay in commencing or completing clinical trials for our product candidates could severely harm our business. We rely on third parties to conduct our clinical trials. If these third parties do not perform as contractually required or expected, we may not be able to obtain regulatory approval for, or commercialize, our product candidates. If some or all of our patents expire, are invalidated or are unenforceable, or if some or all of our patent applications do not yield issued patents or yield patents with narrow claims, competitors may develop competing products using our intellectual property and our business will suffer. Third-party claims of intellectual property infringement would require us to spend significant time and money and could prevent us from developing or commercializing our products. If third parties do not manufacture our product candidates in sufficient quantities or at an acceptable cost, clinical development and commercialization of our product candidates would be delayed. If we are required to obtain alternate third-party manufacturers, it could delay or prevent the clinical development and commercialization of our product candidates. Use of third-party manufacturers may increase the risk that we or our partners will not have adequate supplies of our product candidates. Safety issues with the parent drugs or other components of our product candidates, or with approved products of third parties that are similar to our product candidates, could give rise to delays in the regulatory approval process, restrictions on labeling or product withdrawal. We may not be successful in our efforts to identify or discover additional Transported Prodrug candidates. Our product candidates will remain subject to ongoing regulatory review, even if they receive marketing approval. If we or our collaborative partners fail to comply with continuing regulations, these approvals could be rescinded and the sale of our products could be suspended. Because we have a number of product candidates and are considering a variety of target indications, we may expend our limited resources to pursue a particular candidate or indication and fail to capitalize on candidates or indications that may be more profitable or for which there is a greater likelihood of success. The commercial success of any products that we or our partners may develop will depend upon the degree of market acceptance among physicians, patients, healthcare payors and the medical community. If we are unable to establish sales and marketing capabilities or enter into additional agreements with third parties to market and sell our product candidates, we may be unable to generate product revenues. Our ability to generate revenue from any products that we may develop will depend on reimbursement and drug pricing policies and regulations. If our competitors are able to develop and market products that are more effective, safer or less costly than any products that we may develop, our commercial opportunity will be reduced or eliminated. Off-label sale or use of generic gabapentin products could decrease sales of XP13512 and could lead to pricing pressure if such products become available at competitive prices and in dosages that are appropriate for the indications for which we or our collaborative partners are developing XP13512. Our investment portfolio may become impaired by further deterioration of the capital markets. If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop or commercialize our product candidates. We will need to hire additional employees in order to commercialize our product candidates. Any inability to manage future growth could harm our ability to commercialize our product candidates, increase our costs and adversely impact our ability to compete effectively. If product liability lawsuits are brought against us, we will incur substantial liabilities and may be required to limit commercialization of any products that we may develop. If we use biological and hazardous materials in a manner that causes contamination or injury or violates laws, we may be liable for damages. Our facility is located near known earthquake fault zones, and the occurrence of an earthquake, extremist attack or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations. Risks Related to Ownership of our Common Stock Our stock price is volatile, and purchasers of our common stock could incur substantial losses. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our stock price. Fluctuations in our operating results could cause our stock price to decline. Because a small number of existing stockholders own a large percentage of our voting stock, they may be able to exercise significant influence over our affairs, acting in their best interests and not necessarily those of other stockholders. Our stockholder rights plan and anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management. If there are large sales of our common stock, the market price of our common stock could drop substantially.

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1130591--2/26/2009--XENOPORT_INC