Coverage and reimbursement rates for our product candidates may be subject to increased
restrictions both in the United States and in other countries in the future. Coverage policies and reimbursement rates are subject to change and we
cannot guarantee that current coverage policies and reimbursement rates will be applicable to our product candidates in the future. U.S. federal,
state and foreign agencies and legislatures from time to time may seek to impose restrictions on coverage, pricing, and reimbursement level of drugs,
devices and healthcare services in order to contain healthcare costs.
We do not have a sales and marketing force and related infrastructure and have limited
experience in the sales, marketing and distribution of our product candidates. To achieve commercial success for any approved product, we must either
develop a sales and marketing force or outsource these functions to third parties. Currently, we intend to internally develop a direct sales and
marketing force in both Europe and the United States as we approach commercial approval of our product candidates. In other regions, we intend to seek
to enter into exclusive or non-exclusive distribution arrangements. The development of our own sales and marketing force will result in us incurring
significant costs before the time that we may generate revenues. We may not be able to attract, hire, train and retain qualified sales and marketing
personnel to build a significant or effective marketing and sales force for sales of our product candidates.
A product liability claim, a clinical trial liability claim or other claim with respect to
uninsured liabilities or for amounts in excess of insured liabilities could have a material adverse effect on our business. Our business exposes us to
potential liability risks that may arise from the clinical testing of our product candidates in human clinical trials and the manufacture and sale of
any approved products. Any clinical trial liability or product liability claim or series of claims or class actions brought against us, with or
without merit, could result in:
liabilities that substantially exceed our existing clinical trial liability insurance, or any
clinical trial liability or product liability insurance that we may obtain in the future, which we would then be required to pay from other sources,
an increase in the premiums we pay for our clinical trial liability insurance and any clinical
trial liability or product liability insurance we may obtain in the future or the inability to renew or obtain clinical trial liability or product
liability insurance coverage in the future on acceptable terms, or at all;
damage to our reputation and the reputation of our products, including loss of market share;
regulatory investigations that could require costly recalls or product modifications;
diversion of management’s attention from managing our business.
We do not currently have product liability insurance because none of our product candidates has
yet been approved for commercialization. While we plan to seek product liability insurance coverage if any of our product candidates are sold
commercially, we cannot assure you that we will be able to obtain product liability insurance on commercially acceptable terms, if at all, or that we
will be able to maintain such insurance at a reasonable cost or in sufficient amounts to protect against potential losses.
Claims may be made by consumers, healthcare providers, third party strategic collaborators or
others selling our products if one of our products or product candidates causes, or appears to have caused, an injury. We may be subject to claims
against us even if an alleged injury is due to the actions of others. For example, we rely on the expertise of physicians, nurses and other associated
medical personnel to perform the medical procedures and processes related to our product candidates. If these medical personnel are not properly
trained or are negligent in using our product candidates, the therapeutic effect of our product candidates may be diminished or the patient may suffer
injury, which may subject us to liability. In addition, an injury resulting from the activities of our suppliers may serve as a basis for a claim
We do not intend to promote, or to in any way support or encourage the promotion of, our product
candidates for off-label or otherwise unapproved uses. However, if our product candidates are approved by the FDA or similar foreign regulatory
authorities, we cannot prevent a physician from using them for any off-label applications. If injury to a patient results from such an inappropriate
use, we may become involved in a product liability suit, which will likely be expensive to defend.
These liabilities could prevent or interfere with our clinical efforts, product development
efforts and any subsequent product commercialization efforts, all of which could have a material adverse effect on our business.
Our success will depend in part on establishing and maintaining effective strategic partnerships,
collaborations and licensing agreements.
Our strategy for the development, testing, culturing and commercialization of our product
candidates relies on establishing and maintaining numerous collaborations with various corporate partners, consultants, scientists, researchers,
licensors, licensees and others. While we are continually in discussions with a number of companies, universities, research institutions, consultants,
scientists, researchers, licensors, licensees and others to establish additional relationships and collaborations, which are typically complex and
time consuming to negotiate, document and implement, we may not reach definitive agreements with any of them. Even if we enter into these
arrangements, we may not be able to maintain these relationships or establish new ones in the future on acceptable terms.
Furthermore, any collaboration that we enter into may not be successful. The success of our
collaboration arrangements, if any, will depend heavily on the efforts and activities of our collaborators. Possible future collaborations have risks,
including the following:
our collaboration agreements are likely to be for fixed terms and subject to termination by our
collaborators in the event of a material breach or lack of scientific progress by us;
our collaborators are likely to have the first right to maintain or defend our intellectual
property rights and, although we would likely seek to secure the right to assume the maintenance and defense of our intellectual property rights if
our collaborators do not, our ability to do so may be compromised by our collaborators' acts or omissions;
our collaborators may utilize our intellectual property rights in such a way as to invite
litigation that could jeopardize or invalidate our intellectual property rights or expose us to potential liability;
our collaborators may underfund or not commit sufficient resources to the testing, marketing,
distribution or development of our product candidates; and
our collaborators may develop alternative products either on their own or in collaboration with
others, or encounter conflicts of interest or changes in business strategy or other business issues, which could adversely affect their willingness or
ability to fulfill their obligations to us.
These arrangements also may require us to grant certain rights to third parties, including
exclusive marketing rights to one or more products, or may have other terms that are burdensome to us, and may involve the issuance of our securities.
If any of our partners terminates its relationship with us or fails to perform its obligations
in a timely manner, the development or commercialization of our technology and product candidates may be
substantially delayed. Further, disputes may arise with our collaborators about inventorship and corresponding rights in know-how and inventions
resulting from the joint creation or use of intellectual property by us and our collaborators.
Risks Related to Our Intellectual Property
We hold limited patent and other intellectual property rights, and our success will be dependent in large
part on safeguarding our existing intellectual property rights and obtaining patent and other proprietary protection for our product candidates.
We hold limited patent rights in our product candidates. Our MyoCath product candidate is
protected by a patent, expiring in September 2017, in which we have an irrevocable co-exclusive license. Our MyoCell product candidate is no longer
protected by patents, which means that competitors will be free to sell products that incorporate the same or similar technologies that are used in
MyoCell without infringing our patent rights. As a result, MyoCell, if approved for use, may be vulnerable to competition in the form of products that
use the same or similar technologies. We have previously licensed certain patents and patent applications relating to our MyoCell product candidate.
These licenses have all lapsed as of the date of this report, although we have had discussions with the relevant licensor regarding a potential
reinstatement of our rights in such licenses.
Our commercial success will depend to a significant degree on our ability to:
compel the owners of the
patents licensed to us to defend and enforce such patents, to the extent such patents may be applicable to our products and material to their
obtain new patent and other
proprietary protection for MyoCell and our other product candidates;
obtain and/or maintain
appropriate licenses to patents, patent applications or other proprietary rights held by others with respect to our technology, both in the United
States and other countries;
property rights relating to our product candidates; and
operate without infringing
the patents and proprietary rights of third parties.
Failure to obtain adequate patent protection for our product candidates, or the failure to
protect our existing patent rights, may impair our ability to be competitive. The availability of infringing products in markets where we have patent
protection, or the availability of competing products in markets where we do not have adequate patent protection, could erode the market for our
product candidates, negatively impact the prices we can charge for our product candidates, and harm our reputation if infringing or competing products
are manufactured to inferior standards.
Our most important license agreement with respect to MyoCath is co-exclusive and the co-licensor of the
intellectual property, a division of Abbott Laboratories, may also seek to commercialize MyoCath.
In June 2003, we assigned our exclusive license to the primary patent protecting MyoCath to
ACS, originally a subsidiary of Guidant Corporation and now d/b/a Abbott Vascular, a division of Abbott
Laboratories. In connection with this agreement, ACS granted to us a co-exclusive, irrevocable, fully paid-up license to this patent for the life of
the patent. Because our license is co-exclusive with ACS, ACS may, parallel to our efforts, seek to commercialize MyoCath if MyoCath secures
regulatory approval. Accordingly, even if ACS does nothing to assist us to secure regulatory approval of MyoCath, ACS may become a direct competitor
in the MyoCath manufacturing and supply business. In addition, pursuant to our agreement with ACS, we are prohibited from contracting with third
parties for the distribution of MyoCath.
Our patents may not be valid or enforceable, and may be challenged by third parties.
We cannot assure you that any patents issued or licensed to us would be held valid by a court or
administrative body or that we would be able to successfully enforce our patents against infringers, including our
competitors. The issuance of a patent is not conclusive as to its validity or enforceability, and the validity and
enforceability of a patent is susceptible to challenge on numerous legal grounds. Challenges raised in patent infringement litigation brought by or
against us may result in determinations that patents that have been issued or licensed to us or any patents that may be issued to us or our licensors
in the future are invalid, unenforceable or otherwise subject to limitations. In the event of any such determinations, third parties may be able to
use the discoveries or technologies claimed in these patents without paying licensing fees or royalties to us, which could significantly diminish the
value of our intellectual property and our competitive advantage. Even if our patents are held to be enforceable, others may be able to design around
our patents or develop products similar to our products that are not within the scope of any of our patents.
In addition, enforcing the patents that have been licensed to us and any patents that may be
issued to us in the future against third parties may require significant expenditures regardless of the outcome of such efforts. Our inability to
enforce our patents against infringers and competitors may impair our ability to be competitive and could have a material adverse effect on our
If we are not able to protect and control unpatented trade secrets, know-how and other technological innovation, we may
suffer competitive harm.
We rely to a large extent on unpatented technology, trade secrets, confidential information and
proprietary know-how to protect our technology and maintain our competitive position, especially when we do not believe that patent protection is
appropriate or can be obtained. Trade secrets are difficult to protect. In order to protect proprietary technology and processes, we rely in part on
confidentiality and intellectual property assignment agreements with our employees, consultants and others. These agreements generally provide that
the individual must keep confidential and not disclose to other parties any confidential information developed or learned by the individual during the
course of the individuals relationship with us except in limited circumstances. These agreements generally also provide that we shall own all
inventions conceived by the individual in the course of rendering services to us. These agreements may not effectively prevent
disclosure of confidential information or result in the effective assignment to us of intellectual property, and may not provide an adequate remedy in
the event of unauthorized disclosure of confidential information or other breaches of the agreements. In addition, others may independently discover
trade secrets and proprietary information that have been licensed to us or that we own, and in such case we could not assert any trade secret rights
against such party.
Enforcing a claim that a party illegally obtained and is using trade secrets that have been
licensed to us or that we own is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United
States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the
scope of our proprietary rights, and failure to obtain or maintain trade secret protection could have a material adverse effect on our business.
Moreover, some of our academic institution licensors, collaborators and scientific advisors have rights to publish data and information to which we
have rights. If we cannot maintain the confidentiality of our technologies and other confidential information in connection with our collaborations,
our ability to protect our proprietary information or obtain patent protection in the future may be impaired, which could have a material
adverse effect on our business.
Other Risks Related to Our Business
We depend on attracting and retaining key management and scientific personnel and the loss of these
personnel could impair the development of our products candidates.
Our success depends on our continued ability to attract, retain and motivate highly qualified
management, clinical and scientific personnel and on our ability to develop and maintain important relationships with academic institutions,
clinicians and scientists. We are highly dependent upon our senior scientific staff, many of whom have developed very specialized expertise in their
position. The loss of services of one or more members of our senior scientific staff could significantly delay or prevent the successful completion of
our clinical trials or commercialization of our product candidates. The employment of each of our employees with us is at will, and each
employee can terminate his or her employment with us at any time. We do not have a succession plan in place for any of our officers and key employees.
We do not carry insurance on any of our other key employees and, accordingly, their death or disability may have a material adverse
effect on our business.
The competition for qualified personnel in the life sciences field is intense. We will need to
hire additional personnel, including regulatory and sales personnel, as we continue to expand our development activities. We may not be able to
attract and retain quality personnel on acceptable terms given our geographic location and the competition for such personnel among life sciences,
biotechnology, pharmaceutical and other companies. If we are unable to attract new employees and retain existing employees, we may be unable to
continue our development and commercialization activities and our business may be harmed.
We face intense competition in the biotechnology and healthcare industries.
We face, and will continue to face, intense competition from pharmaceutical, biopharmaceutical,
medical device and biotechnology companies developing heart failure treatments both in the United States and abroad, as well as numerous academic and
research institutions, governmental agencies and private organizations engaged in drug discovery activities or funding both in the United States and
abroad. We also face competition from entities and healthcare providers using more traditional methods, such as surgery and pharmaceutical regimens,
to treat heart failure. We believe there are a substantial number of heart failure products under development by numerous pharmaceutical,
biopharmaceutical, medical device and biotechnology companies, and it is likely that other competitors will emerge. We are also aware of several
competitors developing cell-based therapies for the treatment of heart damage, including Aastrom Bioscience, Inc., Aldagen, Inc., Angioblast Systems, Inc.,
Athersys, Inc., Baxter International, Inc., Cytori Therapeutics, Inc., MG Biotherapeutics, LLC (a joint venture between Genzyme Corporation and
Medtronic, Inc.), Mytogen, Inc. (a wholly-owned subsidiary of Advanced Cell Technology, Inc.), Osiris Therapeutics, Inc., ViaCell, Inc. (a
wholly-owned subsidiary of PerkinElmer, Inc.) and potentially others. We also recognize that there may be competitors and competing technologies, therapies and/or products that we
are not aware of.
These third parties also compete with us in recruiting and retaining qualified personnel,
establishing clinical trial sites and registering patients for clinical trials, as well as acquiring or licensing intellectual property and
Many competitors have more experience than we do in research and development, marketing, cell
culturing, manufacturing, preclinical testing, conducting clinical trials, obtaining FDA and foreign regulatory approvals and marketing approved
products. The competitors, some of which have their own sales and marketing organizations, have greater financial and technical resources than we do
and may be better equipped than we are to sell competing products, obtain patents that block or otherwise inhibit our ability to further develop and
commercialize our product candidates, obtain approvals from the FDA or other regulatory agencies for products more rapidly than we do, or develop
treatments or cures that are safer or more effective than those we propose to develop. In addition, academic institutions, governmental agencies, and
other public and private organizations conducting research in the field of heart damage may seek patent protection with respect to
potentially competitive products or technologies and may establish exclusive collaborative or licensing relationships with our competitors.
MyoCell is a clinical therapy designed to be utilized at least a few months after a patient has
suffered heart damage. Our competitors may discover technologies and techniques for the acute treatment of heart failure, which, if successful in
treating heart failure shortly after its occurrence, may reduce the market size for treatments for chronic heart damage, including MyoCell.
Our industry is subject to rapid technological change.
Our industry is subject to rapid technological change and our cellular-based therapies involve
new and rapidly developing technology. Our competitors may discover and develop new technologies and techniques, or enter into partnerships with
collaborators in order to develop, competing products that are more effective or less costly than the product candidates we hope to secure regulatory
approval for. In light of the industrys limited experience with cell-based therapies and the dedication of significant resources to a better
understanding of this field, we expect these cell-based technologies to undergo significant change in the future. For example, some of our competitors
are exploring whether the use of cells, other than myoblasts, is safer or more effective than MyoCell. If
there is rapid technological development or new product introductions, our current and future product candidates
or methods may become obsolete or noncompetitive before or after we commercialize them.
Risks Related to Our Common Stock
An active, liquid and orderly trading market for our common stock may not develop or continue.
Prior to our initial public offering, there was no public market for our common stock. Following
our initial public offering, our common stock was traded on the NASDAQ Global Market and, subsequently, the NASDAQ Capital Market. On February 25,
2009, we received notification from The NASDAQ Stock Market of its determination to discontinue our NASDAQ listing effective February 27, 2009. We
filed for quotation of our common stock on the Over-The-Counter Bulletin Board and that application was approved by FINRA on May 13, 2009. On February
23, 2011 we received notice of FINRAs determination of our ineligibility for continued quotation of our shares on the OTCBB due to quoting
inactivity under SEC Rule 15c2-11. On March 9, 2011 we again filed for quotation of our common stock on the Over-The-Counter Bulletin Board and that
application was approved by FINRA on March 29, 2011.
We cannot offer any assurance that an active trading market for our common stock will continue
or how liquid that market may be. As a result, relatively small trades may have a disproportionate impact on the price of our common stock, which may
contribute to the price volatility of our common stock and could limit your ability to sell your shares.
The market price of our common stock could also be subject to wide fluctuations in response to
many risk factors described in this section and other matters, including:
publications of clinical
trial results by clinical investigators or others about our products and competitors' products and/or our industry;
changes by securities
analysts in financial estimates of our operating results and the operating results of our competitors;
publications of research
reports by securities analysts about us, our competitors or our industry;
fluctuations in the valuation
of companies perceived by investors to be comparable to us;
actual or anticipated
fluctuations in our quarterly or annual operating results;
retention and departures of
our failure or the failure of
our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;
strategic decisions by us or
our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
the passage of legislation or
other regulatory developments affecting us or our industry;
speculation in the press or
investment community; and
natural disasters, terrorist
acts, acts of war or periods of widespread civil unrest.
Furthermore, the stock markets have experienced extreme price and volume fluctuations that have
affected and continue to affect the market prices of equity securities of many companies, especially life sciences and pharmaceutical companies. These
fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry
fluctuations, as well as general economic, political and market conditions, may negatively affect the market price of our common stock. As a result,
the market price of our common stock is likely to be similarly volatile and investors in our common stock may experience a decrease, which could be
substantial, in the value of their stock. In the past, many companies that have experienced volatility in the market price of their stock have been
subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation
against us could result in substantial costs and divert
our management's attention from other business concerns, which could have a material adverse effect on our
Anti-takeover provisions of Florida law, our articles of incorporation and our bylaws may prevent or delay
an acquisition of us that shareholders may consider favorable or attempts to replace or remove our management that could be beneficial to our
Our articles of incorporation and bylaws contain provisions, such as the right of our directors
to issue preferred stock from time to time with voting, economic and other rights superior to those of our common stock without the consent of our
shareholders, all of which could make it more difficult for a third party to acquire us without the consent of our board of directors. In addition,
our bylaws impose restrictions on the persons who may call special shareholder meetings. Furthermore, the Florida Business Corporation Act contains an
affiliated transaction provision that prohibits a publicly-held Florida corporation from engaging in a broad range of business
combinations or other extraordinary corporate transactions with an interested shareholder unless, among others, (i) the transaction is
approved by a majority of disinterested directors before the person becomes an interested shareholder; (ii) the interested shareholder has
owned at least 80% of the corporation's outstanding voting shares for at least five years; or (iii) the transaction is approved by the holders of
two-thirds of the corporation's voting shares other than those owned by the interested shareholder. An interested shareholder is defined as a person
who together with affiliates and associates beneficially owns more than 10% of the corporation's outstanding voting shares. The Florida Business
Corporation Act also prohibits the voting of shares in a publicly-held Florida corporation that are acquired in a control share
acquisition unless the holders of a majority of the corporation's voting shares (exclusive of shares held by officers of the corporation, inside
directors or the acquiring party) approve the granting of voting rights as to the shares acquired in the control share acquisition or unless the
acquisition is approved by the corporation's Board of Directors. These provisions may have the effect of delaying or preventing a change of control of
company even if this change of control would benefit our shareholders.
We do not intend to pay cash dividends on our common stock in the foreseeable future and, accordingly,
capital appreciation of our common stock, if any, will be a shareholder's sole source of gain from an investment in our common stock.
Our policy is to retain earnings to provide funds for the operation and expansion of our
business and, accordingly, we have never declared or paid any cash dividends on our common stock or other securities and do not currently anticipate
paying any cash dividends in the foreseeable future. Consequently, shareholders will need to sell shares of our common stock to realize a return on
their investments, if any, and this capital appreciation, if any, will be a shareholder's sole source of gain from an investment in the common stock.
The declaration and payment of dividends by us are subject to the discretion of our Board of Directors and the restrictions specified in our articles
of incorporation and by applicable law. In addition, under the terms of the Northstar Loan, we are restricted from paying cash dividends to our
shareholders while this loan is outstanding. Any future determination to pay cash dividends will depend on our results of operations,
financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our Board of Directors.
Our common stock may be considered a penny stock, and thereby be subject to additional sale and
trading regulations that may make it more difficult to sell.
Our common stock is considered to be a penny stock. It does not qualify for one of
the exemptions from the definition of penny stock under Section 3a51-1 of the Exchange
Act. Our common stock is a penny stock because it meets one or more of the following conditions (i) the stock trades at a price less than
$5.00 per share; (ii) it is not traded on a recognized national exchange or (iii) it is not quoted on the NASDAQ Global Market, or has a
price less than $5.00 per share. The principal result or effect of being designated a penny stock is that securities broker-dealers
participating in sales of our common stock are subject to the penny stock regulations set forth in Rules 15-2 through 15g-9 promulgated
under the Securities Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two
business days before effecting any transaction in a penny stock for the investor's account. Moreover, Rule 15g-9 requires broker-dealers in penny
stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires
to (i) obtain from the investor information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that
the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide
the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment
experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock
to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.