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Additionally, changes in regulatory requirements and guidance may occur and we may need to amend
clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial
protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a
clinical trial. If we experience delays in completion of, or if we terminate, any of our clinical trials, the
commercial prospects for our product candidates may be harmed and our ability to generate product
revenues will be delayed and/or reduced. In addition, many of the factors that cause, or lead to, a delay in
the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory
approval of a product candidate.
Drug candidates that we develop with our collaborators or on our own may not receive regulatory
approval.
The development and commercialization of drug candidates for our collaborators and our own internal
drug discovery efforts are subject to regulation. Pharmaceutical products require lengthy and costly
testing in animals and humans and regulatory approval by governmental agencies prior to
commercialization. It takes several years to complete testing and failure can occur at any stage of the
testing. Results attained in preclinical testing and early clinical trials for any of our drug candidates may
not be indicative of results that are obtained in later studies and significant setbacks in advanced clinical
trials may arise, even after promising results in earlier studies. Clinical trials may not demonstrate
sufficient safety and efficacy to obtain the requisite regulatory approvals or result in marketable products.
Furthermore, data obtained from preclinical and clinical studies are susceptible to varying interpretations
that may delay, limit or prevent regulatory approval. In addition, the administration of any drug candidate
we develop may produce undesirable side effects or safety issues that could result in the interruption,
delay or suspension of clinical trials, or the failure to obtain FDA or other regulatory approval for any or all
targeted indications. Based on results at any stage of testing, we or our collaborators may decide to
repeat or redesign a trial or discontinue development of a drug candidate.
Approval of a drug candidate as safe and effective for use in humans is never certain and regulatory
agencies may delay or deny approval of drug candidates for commercialization. These agencies may also
delay or deny approval based on additional government regulation or administrative action, on changes in
regulatory policy during the period of clinical trials in humans and regulatory review or on the availability of
alternative treatments. Similar delays and denials may be encountered in foreign countries. None of our
collaborators have obtained regulatory approval to manufacture and sell drug candidates owned by us or
identified or developed under an agreement with us. If we or our collaborators cannot obtain this approval,
we will not realize milestone or royalty payments based on commercialization goals for these drug
candidates.
In light of widely publicized events concerning the safety of certain drug products, such as Avandia(R)
(rosiglitazone), regulatory authorities, members of Congress, the Government Accountability Office,
medical professionals and the general public have raised concerns about potential post-marketing drug
safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling
that further limit use of the drug products and establishment of risk evaluations and mitigation strategies,
or REMS, that may, for instance, restrict distribution of drug products and impose burdensome
implementation requirements on the company. Although drug safety concerns have occurred over time,
the increased attention to this issue may result in a more cautious approach by the FDA. As a result, data
from clinical trials may receive greater scrutiny with respect to safety than in years past. Safety concerns
may result in the FDA or other regulatory authorities terminating clinical trials before completion or
requiring longer or additional clinical trials that may result in substantial additional expense and a delay or
failure in obtaining approval or approval for a more limited indication than originally sought.
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Even if our drug candidates obtain regulatory approval, we and our collaborators will be subject
to ongoing government regulation.
Even if regulatory authorities approve any of our drug candidates, the manufacture, labeling, storage,
recordkeeping, distribution, marketing and sale of these drugs will be subject to strict and ongoing
regulation. Compliance with this regulation consumes substantial financial and management resources
and may expose us and our collaborators to the potential for other adverse circumstances. For example,
approval for a drug may be conditioned on costly post-marketing follow-up studies. Based on these
studies, if a regulatory authority does not believe that the drug demonstrates a clinical benefit to patients,
it could limit the indications for which a drug may be sold or revoke the drug's marketing approval. In
addition, identification of certain side effects after a drug is on the market may result in the subsequent
withdrawal of approval, reformulation of a drug, additional preclinical and clinical trials, changes in
labeling or distribution, or we may be required by FDA to develop and implement a REMS to ensure the
safe use of our products. Any of these events could delay or prevent us from generating revenue from the
commercialization of these drugs and cause us to incur significant additional costs.
Given the number of high profile safety events with certain drug products, the FDA may require, as a
condition of approval, a REMS that includes costly risk management programs with components
including safety surveillance, restricted distribution and use, patient education, enhanced labeling,
special packaging or labeling, expedited reporting of certain adverse events, pre-approval of promotional
materials and restrictions on direct-to-consumer advertising. Furthermore, heightened Congressional
scrutiny on the adequacy of the FDA's drug approval process and the agency's efforts to assure the
safety of marketed drugs has resulted in the proposal of new legislation addressing drug safety issues. If
enacted, any new legislation could result in delays or increased costs for manufacturers and drug
sponsors during the period of product development, clinical trials and regulatory review and approval, as
well as increased costs to assure compliance with any new post-approval regulatory requirements.
In addition, the marketing of these drugs by us or our collaborators will be regulated by federal and state
laws pertaining to health care ``fraud and abuse,'' such as the federal anti-kickback law prohibiting bribes,
kickbacks or other remuneration for the order, purchase or recommendation of items or services
reimbursed by federal health care programs. Many states have similar laws applicable to items or
services reimbursed by commercial insurers. Violations of fraud and abuse laws can result in fines and/or
imprisonment or exclusion from participation in federal health care programs.
If our drug candidates do not gain market acceptance, we may be unable to generate significant
revenue.
Even if our drug candidates are approved for sale, they may not be successful in the marketplace. Market
acceptance of any of our drug candidates will depend on a number of factors including:
demonstration of clinical effectiveness and safety;
potential advantages of our drug candidates over alternative treatments;
ability to offer our drug candidates for sale at competitive prices;
availability of adequate third-party reimbursement; and
effectiveness of marketing and distribution methods for the products.
If our drug candidates do not gain market acceptance among physicians, patients and others in the
medical community, our ability to generate meaningful revenues from our drug candidates would be
limited.
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