1285701--3/28/2007--FAVRILLE

related topics

{product, candidate, development}

{property, intellectual, protect}

{product, liability, claim}

{stock, price, share}

{regulation, change, law}

{acquisition, growth, future}

{control, financial, internal}

{stock, price, operating}

{cost, regulation, environmental}

{personnel, key, retain}

{cost, operation, labor}

{tax, income, asset}

{provision, law, control}

Risks Related to the Development of Our Product Candidates Failure to obtain product approvals by the FDA could harm our business. We are dependent on the success of our lead product candidate, FavId, and we cannot be certain that it will be commercialized. Before we can seek regulatory approval of any of our product candidates, we must successfully complete clinical trials, which are uncertain. Failure to enroll patients in our clinical trials may cause delays in developing FavId or any other product candidate. The development of FavId requires the continued availability of two FDA-approved drugs: GM-CSF and Rituxan. Risks Related to Our Financial Results and Need for Financing We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial losses and negative cash flow from operations for the foreseeable future. We currently have no source of revenue and may never become profitable. We will need substantial additional funds to continue operations, which we may not be able to raise on favorable terms, or at all. Our committed equity financing facility with Kingsbridge may not be available to us if we elect to make a draw down, may require us to make additional blackout or other payments to Kingsbridge and may result in dilution to our stockholders. Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected revenue or expense fluctuations and affect our reported results of operations. Other Risks Related to Our Business and Industry We currently depend on single source suppliers for critical raw materials for manufacturing. The loss of these suppliers could delay our clinical trials or prevent or delay commercialization of FavId. We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed or may not be able to obtain regulatory approval for or commercialize FavId or any other product candidates that we may develop. Even if we obtain regulatory approval, we will continue to be subject to extensive government regulation that may cause us to delay the introduction of our products or withdraw our products from the market. Before we can obtain marketing approval for or commercially distribute FavId, we must have a commercial-scale facility for the manufacture of FavId. In addition, the FDA and the California Department of Health Services must find our manufacturing facility and process satisfactory. We may experience difficulties in manufacturing FavId or any other product candidates that we may develop, which could prevent us from completing our ongoing clinical trials and commercializing these product candidates. If our manufacturing facility is damaged or destroyed, our ability to manufacture products will be significantly affected, which could delay or prevent completion of our clinical trials and commercialization of FavId or any other product candidates that we may develop. If we do not develop a sufficient sales and marketing force or enter into agreements with third parties to sell and market FavId, we may not be able to successfully commercialize our products, which would limit our ability to earn product revenues. If physicians and patients do not use any of our products that may be approved, our ability to generate revenue in the future will be limited. If we are unable to obtain acceptable prices or adequate coverage and reimbursement from third-party payors for FavId, or any other product candidates that we may develop, our revenues and prospects for profitability will suffer. If we are unable to establish or manage strategic collaborations in the future, our revenue and product development may be limited. Our efforts to discover, develop and commercialize new product candidates beyond FavId are at an early stage and are subject to a high risk of failure. If our competitors develop and market products that are more effective than our existing product candidates or others we may develop, or obtain marketing approval before we do, our commercial opportunity may be reduced or eliminated. We are subject to new legislation, regulatory proposals and managed care initiatives that may increase our costs of compliance and adversely affect our ability to market our products, obtain collaborators and raise capital. We depend on attracting and retaining key scientific and management personnel to advance our technology, and the loss of these personnel could impair the development of our products. We will need to increase the size of our organization, and we may experience difficulties in managing growth. If we use biological and hazardous materials in a manner that causes injury or violates laws, we may be liable for damages. We face a risk of product liability claims and may not be able to obtain adequate insurance. We could be negatively impacted by future interpretation or implementation of federal and state fraud and abuse laws, including anti-kickback laws and other federal and state anti-referral laws. Risks Related to Our Intellectual Property and Potential Litigation If we are unable to obtain and maintain protection for our intellectual property, the value of our technology and products may be adversely affected. We are not able to prevent others, including potential competitors, from using certain types of patient-specific idiotype protein-KLH conjugates, like those we use in our lead product candidate, FavId, for the treatment of indolent B-cell NHL. We may have to engage in costly litigation to enforce our proprietary rights or to defend challenges to our intellectual property by our competitors, which may harm our business, results of operations, financial condition and cash flow. Our ability to market our products may be impaired by the intellectual property rights of third parties. If we are not able to protect and control unpatented trade secrets, know-how and other technological innovation, we may suffer competitive harm. Risks Related to the Securities Markets and Ownership of Our Common Stock Until our initial public offering in February 2005, there was no public market for our common stock, and the price of our common stock may be volatile and could decline significantly. Concentration of ownership among our existing officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate decisions and depress our stock price. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and applicable Delaware law may prevent or discourage third parties or our stockholders from attempting to replace our management or influencing significant decisions. Because we do not intend to pay any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless they sell them. We may incur increased costs as a result of recently enacted and proposed changes in laws and regulations.

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1285701--3/28/2007--FAVRILLE_INC