887023--3/17/2008--ENCYSIVE_PHARMACEUTICALS

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The announcement of or performance of the transactions described in the Merger Agreement may have a negative impact on our relationships with our employees. Certain of our directors and executive officers may have interests in the proposed acquisition by Pfizer that may be different from, or in addition to, the interests of our stockholders. Provisions of the Merger Agreement may deter alternative business combinations and could negatively impact the stock price of Encysive or the price of other Encysive securities if the Merger Agreement is terminated in certain circumstances. Patient and physician uncertainties related to the proposed acquisition by Pfizer could adversely affect the business, revenues and gross margins of Encysive. Risks Related to Our Business, Industry and Strategy If we are unable to raise significant additional capital immediately, we will not be able to continue to operate as a going concern. If we are unable to raise additional capital immediately, we will be unable to conduct our operations and develop our potential products. The Restructuring may have an adverse impact on our current employees and on our ability to retain and attract management and other key personnel. We have a history of losses and we may never become profitable. We may experience significant fluctuations in our operating results. We face substantial competition that may result in other companies developing and commercializing products more successfully than we do. We make business decisions based on forecasts of future sales of Thelin that may be inaccurate. Historically, we have been dependent on third parties to fund, market and develop our products. Use of our net operating losses for reducing our income tax expenses may be limited. We may not be able to pay principal or interest on our outstanding Convertible Notes. In certain circumstances, we may lose the potential to receive future royalty payments after the Argatroban Notes are repaid in full or we may be required to pay liquidated damages equal to the then outstanding balance of the Argatroban Notes plus accrued unpaid interest thereon. Risks Relating To Clinical and Regulatory Matters The regulatory approval process is costly and lengthy and we may not be able to successfully obtain all required regulatory approvals. Legislative or regulatory changes could harm our business. We depend on third parties to conduct our clinical trials for our product candidates and any failure of those parties to fulfill their obligations could adversely affect our development plans. Our clinical trials could take longer to complete and cost more than we expect, which may result in our development plans being significantly delayed. Even if we obtain marketing approval, our products will be subject to ongoing regulatory oversight, which may affect the success of our products. Risks Related To Ongoing Operations We may not be able to retain our personnel. We have recently experienced significant turnover in senior management. We may be sued for product liability, which may prevent or interfere with the development or commercialization of our products. Endothelin antagonists as a class may generate liver and fetal abnormalities. Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable regulations. Risks Relating to Product Manufacturing, Distribution and Sales We have limited manufacturing, marketing and sales experience. We cannot assure you that the raw materials necessary for the manufacture of our products will be available in sufficient quantities or at a reasonable cost. Our sublicensee is dependent on a single supplier of Argatroban. We are dependent on a single supplier of Thelin API. We are dependent on a single supplier for tableting of bulk Thelin for Canada. We are dependent on third parties to distribute Thelin in the EU, Australia and Canada. Failure of us or our third party contractors, suppliers or service providers to comply with ongoing operational regulations could subject us to regulatory action. Our products, even if approved by the FDA or foreign regulatory agencies, may not be accepted by health care providers, insurers or patients. Changes in the health care systems of the U.S. and foreign countries could have a material adverse effect on our business. The hazardous material we use in our research and development could result in significant liabilities, which may exceed our insurance coverage. Risks Relating to Intellectual Property We may not be able to protect proprietary information and obtain patent protection. Termination of our license of Argatroban from Mitsubishi would result in the loss of significant rights. If we are unable to keep our trade secrets confidential, our technology and information may be used by others to compete against us. Failure to avoid infringement of others intellectual property rights could impair our ability to manufacture and market our products. Risks Related to Our Common Stock Issuance of shares in connection with financing transactions or under stock plans will dilute current stockholders. The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock. We do not intend to pay cash dividends on our common stock in the foreseeable future.

Full 10-K form ▸

887023--3/17/2008--ENCYSIVE_PHARMACEUTICALS_INC