1158223--4/2/2007--AFFYMAX

related topics

{product, candidate, development}

{product, liability, claim}

{stock, price, share}

{property, intellectual, protect}

{cost, regulation, environmental}

{stock, price, operating}

{provision, law, control}

{financial, litigation, operation}

{regulation, change, law}

{cost, operation, labor}

{control, financial, internal}

Risks Related to Our Business We are dependent on the success of Hematide, and we cannot give any assurance that it will receive regulatory approval or be successfully commercialized. We are at an early stage of development as a company and have limited sources of revenue. Our current revenue recognition policy may limit our ability to report any profits, and we may never become profitable. Our commercial success depends upon attaining significant market acceptance of Hematide among physicians, patients, health care payors and, in the renal market, acceptance by the major operators of dialysis clinics. Competition in the pharmaceutical industry is intense. If our competitors are able to develop and market products that are more effective, safer or less costly than any future products that we may develop, our commercial opportunity will be reduced or eliminated. The U.S. market opportunity for Hematide may deteriorate significantly after existing rEPO patents expire in the U.S. in 2015. Any failure or delay in completing clinical trials for our product candidates could severely harm our business. All of our product candidates other than Hematide are in early stage research. If we are unable to develop, test and commercialize our other product candidates, our business will be adversely affected. If we fail to maintain our existing, or enter into new, strategic collaborations, we may have to reduce or delay our product candidate development efforts or increase our expenditures. We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future. Reimbursement may not be available for our product candidates, which could diminish our sales or affect our ability to sell our products profitably. CMS policies are constantly changing and we cannot guarantee that they will not decrease, limit or deny reimbursement of Hematide in the future. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of Hematide and our other product candidates, or to continue our research and development programs. We rely on third parties to conduct preclinical and clinical trials for our product candidates, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our product candidates. Our dependence upon third parties for the manufacture and supply of our products may cause delays in, or prevent us from, successfully developing and commercializing products. The commercial success of our collaborations depends in part on the development and marketing efforts of our collaboration partners, over which we have limited control. If our collaborations are unsuccessful, our ability to develop and commercialize products through our collaborations, and to generate future revenue from the sale of these products, would be significantly reduced. It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection. We expect to incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use, our technology. If we are unable either to create sales, marketing and distribution capabilities or enter into agreements with third parties to perform these functions, we will be unable to commercialize our product candidates successfully. If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates. As we evolve from a company primarily involved in research and development to a company also involved in commercialization, we may encounter difficulties in managing our growth and expanding our operations successfully. Risks Related to Our Industry The regulatory approval process is expensive, time consuming and uncertain and may prevent us or our collaboration partners from obtaining approvals for the commercialization of some or all of our product candidates. Even if we receive regulatory approval for a product candidate, we will be subject to ongoing FDA obligations and continued regulatory review, which may result in significant additional expense and limit our ability to commercialize our future products. Failure to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products abroad. Foreign governments often impose strict price controls, which may adversely affect our future profitability. We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates. Risks Related to the Ownership of Our Common Stock The market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above your purchase price. Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval. We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives. Future sales of our common stock in the public market could cause our stock price to fall. We are at risk of securities class action litigation. Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders.

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1158223--4/2/2007--AFFYMAX_INC