890465--3/3/2006--NPS_PHARMACEUTICALS

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Risks Related to Our Business We have a history of operating losses. We expect to incur net losses and we may never achieve or maintain profitability. We may require additional funds. We are substantially dependent on our ability to obtain regulatory approval to market PREOS in the United States and the ability of Nycomed to obtain regulatory approval to market PREOS in Europe. Our business will be materially harmed and our stock price may be adversely affected if these regulatory approvals are not obtained with respect to this product candidate. We are entirely dependent on the efforts of Nycomed to develop and market PREOS in Europe. If Nycomed does not devote adequate resources to the development and marketing of PREOS in Europe or if Nycomed is not successful in its efforts, our sales of PREOS in Europe will be reduced, our profitability will be delayed and our stock price adversely affected. We may never develop any more commercial drugs or other products that generate revenues. We have no internal manufacturing capabilities. We depend on third parties, including a number of sole suppliers, for manufacturing, supply, and storage of our product candidates to be used for commercial launch and in our clinical trials. Product introductions may be delayed or suspended if the manufacture or supply of our products is interrupted or discontinued. Clinical trials are long, expensive and uncertain processes and the FDA may ultimately not approve any of our product candidates. We cannot assure you that data collected from preclinical and clinical trials of our product candidates will be sufficient to support approval by the FDA, the failure of which could delay our profitability and adversely affect our stock price. If we fail to maintain our existing or establish new collaborative relationships, or if our collaborators do not devote adequate resources to the development and commercialization of our licensed drug candidates, we may have to reduce our rate of product development and may not see products brought to market or be able to achieve profitability. If our agreement with Allergan to promote Restasis is unsuccessful or terminated prior to the expiration of its initial term, our profitability under the agreement may be adversely impacted and our efforts to further develop and maintain our sales force prior to the commercial launch of PREOS may be delayed. Because we have never marketed, sold or distributed a product, we may be unable to successfully market and sell our products and generate revenues. Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures, we may be unable to sell our products profitably. As a result of intense competition and technological change in the pharmaceutical industry, the marketplace may not accept our products, and we may not be able to compete successfully against other companies in our industry and achieve profitability. We may be unable to obtain patents to protect our technologies from other companies with competitive products, and patents of other companies could prevent us from manufacturing, developing or marketing our products. Our products and product candidates may infringe the intellectual property rights of others, which could increase our costs and negatively affect our profitability. We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market. If we fail to attract and retain key employees, the development and commercialization of our products may be adversely affected. If we are not successful in our management transition or in attracting and retaining management team members and other highly qualified individuals in our industry, we may not be able to successfully implement our business strategy. If product liability claims are brought against us or we are unable to obtain or maintain product liability insurance, we may incur substantial liabilities that could reduce our financial resources. Our operations involve hazardous materials and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Risks Related to Our Common Stock and Notes Payable Our stock price has been and may continue to be volatile and an investment in our common stock could suffer a decline in value. Antitakeover provisions in our Certificate of Incorporation, Bylaws, stockholder rights plan and under Delaware law may discourage or prevent a change of control. Substantial future sales of our common stock by us or by our existing stockholders could cause our stock price to fall. Our cash flow may not be sufficient to cover interest payments on the 3% Convertible Notes due 2008 or to repay the notes at maturity. Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes. Royalty and milestone revenues received from Amgen on sales of cinacalcet HCl may not be sufficient to cover the interest and principal payments on the Secured 8.0% Notes due March 30, 2017. As a result, we would have to either make such payments out of available cash resources or risk forfeiture of certain royalty rights under the Amgen agreement.

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890465--3/3/2006--NPS_PHARMACEUTICALS_INC