RISK FACTORS
An investment in our common stock involves significant risks. You
should carefully consider the following risks described below, and the other
information included in this prospectus, including our financial statements and
related notes, before you decide to buy our common stock. Our business,
operating results and financial condition could be harmed by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you could lose all or part of your investment.
Risks Related to Our Business
Our short operating history makes it difficult to evaluate our business and
prospects
Our ability to generate revenues and income is unproven as a result of
our short operating history. We were formed in January 2001 and focused during
2001 primarily on acquiring our initial products, hiring and training our sales
force and identifying and seeking to acquire additional products. We recorded
net sales of $5.6 million and a net loss of $7.5 million during the period from
our inception through September 30, 2001. We may continue to incur significant
losses if our revenues do not increase to keep pace with our current expenses
and any future increase in our expenses. As a result of this limited operating
history, our brief operating results are not indicative of our future results or
prospects.
We rely on sales from our only two products, Diastat and Mysoline, for all of
our revenues
Since our inception all of our revenues have come from sales of our
only two products, Diastat and Mysoline. We expect that, for the foreseeable
future, we will continue to rely on these products for substantially all of our
revenues. Accordingly, our success depends on our ability to maintain and
increase sales of Diastat and Mysoline. We acquired these products only recently
and our sales force has only limited experience with these products. Our sales
and marketing efforts may not be successful in maintaining and increasing the
prescriptions for our products. Our sales of Diastat and Mysoline are also
subject to the following risks:
the ability of some of our competitors to price products below a
price at which we can competitively sell these products;
physician or public perception that these products are not
safe or effective;
the introduction of new competitive products; and
a suspension or reduction in sales of these products as a
result of an adverse event experienced by a patient.
Furthermore, our success depends on our ability to increase physician
awareness of the benefits of including Diastat as part of the standard treatment
regimen for their epilepsy patients. As a new company, we may have difficulty
raising the awareness necessary to increase physician use of Diastat. If Diastat
fails to gain market share, our business may be harmed.
We rely on single third-party manufacturers and a single third-party distributor
for our products
Diastat and Mysoline are each manufactured by a single third-party
manufacturer. In addition, we rely on a single third party for the distribution
of both of our products. If we were to experience any interruption in the
manufacturing or distribution of our products, we might not be able to locate an
alternative manufacturer or distributor in a timely fashion or on commercially
reasonable terms. In addition, in the event of any interruption of the
manufacturing or distribution of our products, we likely would experience
reduced sales and increased
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expenses associated with identifying and qualifying alternate manufacturers or
distributors. Any of the following factors could impact the supply of our
products from third-party manufacturers and distributors:
an interruption in the supply of products from a third party as a
result of the lack of required governmental or regulatory
approvals, including as a result of deficiencies in the current
Good Manufacturing Practices, or cGMP, identified by a
governmental or regulatory agency following an inspection of a
manufacturer's or distributor's facilities;
an interruption in the supply of products from a third-party
manufacturer as a result of the unavailability of raw materials
or component parts; or
an interruption in the supply of products from third-party
manufacturers or distributors as a result of the occurrence of a
labor interruption or natural disaster.
The manufacturer of Mysoline has indicated that it does not intend to
renew our current manufacturing agreement upon its expiration in March 2003. As
a result, we will be required to identify a new manufacturer for Mysoline and
negotiate a new manufacturing agreement. We will also be required to work with
the new manufacturer to obtain all government approvals required for the
manufacturer to supply the product. We may not be successful in identifying a
new manufacturer for Mysoline on a timely basis, or at all. Further, even if we
do identify a new manufacturer, we may not be successful in negotiating an
agreement with the manufacturer and any agreement we may negotiate may not be
favorable to us. If we are unsuccessful in identifying a new manufacturer,
negotiating a favorable agreement with the manufacturer and working with the
manufacturer to obtain all required governmental approvals prior to the time
that our inventory of Mysoline is exhausted, we will not be able to fill orders
for Mysoline.
Failure to comply with government regulations could impair our ability to
operate our business
Our business and products are subject to extensive and rigorous
regulation at both the federal and state levels. We and our contract
manufacturers are principally regulated by the Food and Drug Administration, or
the FDA, as well as by various other governmental agencies including, in the
case of Diastat, the Drug Enforcement Agency, or DEA. These regulatory
authorities govern the development, testing, manufacture, safety, effectiveness,
labeling, storage, record keeping, approval, advertising and promotion of our
products.
The FDA has approved Diastat and Mysoline for marketing. Some changes
to an approved product, for example, adding a new indication, require additional
FDA approval before the change can be implemented. Our products are sometimes
used by physicians for indications other than those approved by the FDA, and we
cannot be sure that the FDA will not object to this off-label use. Failure to
obtain any necessary additional approvals or maintain existing approvals may
result in a default under our loan and security agreements with Elan or cause
the FDA to object to the continued marketing of our products.
We and our contract manufacturers and distributors, our products, the
facilities at which the products are manufactured and stored and other aspects
of our business such as our promotional activities, must continue to comply with
the FDA's regulatory requirements, including compliance with cGMP. In addition,
because Diastat is regulated as a controlled substance, our third-party
manufacturer and distributor must have security, control and accounting
mechanisms in order to prevent loss and diversion of controlled substances. The
FDA and the DEA regularly inspect manufacturing and other pharmaceutical
facilities to evaluate compliance with these requirements. Violation of
regulatory requirements may result in various adverse consequences, including
the regulatory agency's delay in approving, or refusing to approve, a product,
suspension or withdrawal of an approved product from the market, recalls,
operating restrictions, seizures, injunctions or criminal prosecution, which
could harm our business.
We cannot predict what impact changes in regulations, enforcement
positions, statutes or legal interpretations, when and if promulgated, adopted
or enacted, may have on our business in the future.
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Our competitive position in our industry may suffer if we are not successful in
growing our business through acquisitions of complementary products
We intend to increase our sales and enhance our competitive position
by acquiring products that we can promote and sell through our existing sales
and marketing organization or that enable us to expand into new focused markets.
We engage in only limited efforts to develop product enhancements for our
products and will rely primarily on acquisitions from other companies to obtain
new products. These product acquisitions may be carried out through the purchase
of assets, joint ventures, licenses or by acquiring other companies. We may not
be able to identify acquisition candidates and, even if we identify appropriate
candidates, we may not be able to complete acquisitions on satisfactory terms.
Other companies, many of which have substantially greater financial,
marketing and sales resources than our own, compete with us for the acquisition
of products or companies. We may not be able to acquire rights to additional
products on acceptable terms, or at all, and we may not be able to obtain future
financing for acquisitions on acceptable terms, or at all. Our inability to
acquire additional products could limit our growth. Furthermore, even if we are
successful in acquiring additional products, we may not be able to generate
sales sufficient to create a profit or otherwise avoid a loss. Future
acquisitions could also result in large and immediate write-offs, incurrence of
debt and contingent liabilities or amortization of expenses related to
intangible assets, any of which could harm our business.
We anticipate that the integration of newly-acquired products or
companies into our business will require significant management attention and
may require expansion of our sales organization. To manage any acquisitions we
complete, we must maintain adequate operational, financial and management
information systems and motivate and manage our employees. Any failure by us to
integrate successfully our acquisitions could harm our business.
We may need to raise additional funds to pursue our growth strategy or continue
our operations
We do not have a sufficient operating history to know with certainty
whether our existing financial resources and the proceeds of the sale of our
common stock in this offering and to Elan will be sufficient to finance our
anticipated growth. Depending on the acquisition opportunities available and our
use of our financial resources to satisfy existing capital and operating needs,
we may need to raise additional funds to finance these transactions or continue
our operations, either through the public or private sale of our debt or equity
securities or by borrowing funds. We may not be able to borrow money on
commercially reasonable terms, or at all, and any sale of our debt or equity
securities may result in dilution to our stockholders. In addition, our loan and
security agreements with Elan limit our ability to incur debt without Elan's
consent in excess of certain limits. Further, the rights, preferences and
privileges of the securities we may sell may be senior to those held by our
current stockholders. If adequate funds are not available on commercially
reasonable terms, our ability to expand our business through the acquisition of
additional products or companies or to respond to competitive pressures would be
significantly limited.
In connection with our purchase of Diastat and Mysoline, we have borrowed $99
million from Elan pursuant to loan and security agreements containing various
operating covenants
In connection with these loans, we have granted to Elan a security
interest in all of the assets we purchased from Elan. Elan is also protected by
various loan covenants and other rights that, if breached by us, even in the
absence of a payment default, will entitle Elan to foreclose on its security
interest and reacquire the products without payment or refund to us. These
covenants include not taking any of the following actions without Elan's
consent:
engaging in a material line of business outside of the
pharmaceutical business;
selling, leasing or disposing of substantially all of our assets
or any of the collateral;
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acquiring all or substantially all of the assets of others;
merging with or consolidating into other parties; and
making certain distributions to our stockholders.
We have also agreed to limit our borrowings from third parties without
Elan's consent. Generally, except for specific exceptions set forth in the loan
and security agreements, including an exception permitting us to incur debt
without Elan's consent in connection with our purchase of additional products,
we cannot have debt outstanding, other than the debt owed to Elan, in excess of
$3 million until we have paid for the Diastat and Mysoline inventory we
purchased from Elan, at which time this amount will be increased to $6.5
million.
We will also be in default if we fail to cure a breach of our
representations, warranties and covenants under the loan and security agreements
within any applicable cure period. In such an event, Elan may exercise its
rights and remedies under the loan and security agreements, including refusing
to make any advances to us under the credit line, accelerating the due date of
all our obligations to Elan and foreclosing on the products and other collateral
without payment or refund to us. Any such foreclosure would severely harm us and
the interests of our stockholders and could result in a complete loss of your
investment.
We may face competition for Diastat once its orphan drug exclusivity expires in
July 2004
Other drug companies may be able to obtain FDA approval to market
generic versions of Diastat after July 2004 if they can design products that do
not infringe our patent for Diastat and that meet the FDA's approval
requirements. Our patent on Diastat, which expires in 2012, is a formulation
patent and does not protect against use of Diastat's active pharmaceutical
ingredient outside of the specific formulation described in our patent. If
competing products are developed and marketed, we may experience downward price
pressure and reduced sales of Diastat. Given that we currently rely on sales of
Diastat for a substantial portion of our revenues, any decline in Diastat sales
or downward price pressure on Diastat as a result of competing drugs could
significantly harm our business.
We compete with generic substitutes for Mysoline
We have no patent protection on Mysoline and we compete with
manufacturers of generic substitutes for Mysoline. Generic substitutes for
Mysoline currently sell at prices that are less than the price of Mysoline. Any
significant decline in the prices for generic substitutes for Mysoline would
result in downward price pressure on Mysoline, particularly if third-party
payors refuse to reimburse patients or reduce the reimbursements patients
receive, for branded products or if physicians begin to prescribe, or
pharmacists begin to substitute, generic products more frequently than the
branded counterparts. We rely on sales of Mysoline for a substantial portion of
our revenues and any decline in Mysoline sales or downward price pressure on
Mysoline could significantly harm our business.
Our revenues and operating results may fluctuate in future periods and we may
fail to meet expectations, which may cause the price of our common stock to
decline
Variations in our quarterly operating results are difficult to predict
and may fluctuate significantly from period to period, particularly because we
are a relatively new company and our sales prospects are uncertain. If our
quarterly sales or operating results fall below the expectations of investors or
securities analysts, the price of our common stock could decline substantially.
In addition to the other factors discussed under these "Risk Factors," specific
factors that may cause fluctuations in our operating results include:
demand and pricing for our products, including wholesaler
purchasing patterns;
physician and patient acceptance of, and prescription rates for,
our products;
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government or private healthcare reimbursement policies; and
the performance of product manufacturers.
As a result of these factors, we believe that period-to-period
comparisons of our operating results are not a good indication of our future
performance.
Impairment of our significant intangible assets may reduce our profitability
The costs of our acquired product rights are recorded as intangible
assets and amortized over the period that we expect to benefit from the assets.
As of September 30, 2001, intangible assets comprised approximately 85% of our
total assets and over two times our stockholders' equity. We periodically
evaluate the recoverability and the amortization period of our intangible
assets. Any impairment of our intangible assets will harm our profitability.
Our product enhancement efforts may result in the expenditure of significant
resources with no return
We intend to develop enhancements to our existing products. We may not
be successful in developing or making enhancements that will benefit patients or
be accepted by physicians. We intend to rely on third parties to help develop,
test and manufacture product enhancements. We may not be able to identify
adequate development partners, and even if identified, we may not be able to
enter into agreements with these entities on commercially reasonable terms, or
at all. Further, the process of obtaining FDA and other regulatory approvals for
product enhancements may be lengthy and expensive. If we select the wrong
product enhancements or fail to develop or obtain regulatory approval for these
product enhancements, our growth may be limited and we may expend significant
resources without any return.
If third-party reimbursement ceases to be available for our products, the market
may no longer accept our products and we may not be able to maintain our current
product price levels
Our ability to sell our products depends in part on the extent to
which reimbursement for the costs of our products is available from government
health administration authorities, private health insurers and others.
Third-party insurance coverage may not be adequate for us to maintain price
levels sufficient to realize an appropriate return on our investment in our
products. Government authorities, private insurers and other third-party payors
are increasingly attempting to contain health care costs by:
generally limiting the coverage and level of reimbursement for
prescription products;
refusing, in some cases, to provide any coverage for uses of
approved products for indications for which the FDA has not
granted marketing approval;
controlling the pharmaceutical products that are on their
formulary lists; and
requiring or encouraging, through more favorable reimbursement
levels or otherwise, the substitution of generic alternatives to
branded products.
In addition, many managed care organizations are considering formulary
contracts primarily with pharmaceutical companies that can offer a full line of
products for a given therapy sector or disease state. Our products may not be
included on the formulary lists of managed care organizations. In this event,
third-party reimbursement for our products would not likely be available and
physicians may not prescribe our products.
The competition between pharmaceutical companies to get their products
approved for reimbursement may also result in downward pricing pressure in the
industry or in the markets where our products compete. We may not be successful
in any efforts we take to mitigate the effect of a decline in average selling
prices for our products. Any decline in our average selling prices would also
reduce our gross margins.
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New legislation or regulatory proposals may harm our ability to raise capital
and increase our revenues
A number of legislative and regulatory proposals aimed at changing the
health care system, including the cost of prescription products and changes in
the levels at which consumers and healthcare providers are reimbursed for
purchases of pharmaceutical products, have been proposed. While we cannot
predict when or whether any of these proposals will be adopted or the effect
these proposals may have on our business, the nature of these pending proposals,
as well as the adoption of any proposal, may harm our ability to raise capital
or exacerbate industry-wide pricing pressures and could harm our ability to
generate revenues.
We depend on protection of our intellectual property rights
Diastat is protected by a U.S. formulation patent until 2012. Other
drug companies may be able to develop generic versions of Diastat prior to 2012
if they can design products that do not infringe our patent. Our patent is a
formulation patent and does not protect the use of Diastat's active
pharmaceutical ingredient outside of the formulation described in our patent.
Mysoline is not covered by a patent. In addition, we have rights to several
trademarks regarding Diastat and a trademark regarding Mysoline. We also have
trade secrets and other proprietary information in connection with the
manufacture of our products.
We may not be able to protect our intellectual property rights against
third party infringement. We may not be successful in securing or maintaining
proprietary or patent protection for our products. The validity of patents and
other intellectual property rights can be subject to expensive litigation, and
our patents and intellectual property rights may be challenged. In addition, our
competitors may develop products similar to ours using methods and technologies
that are beyond the scope of our intellectual property protection, which could
reduce our sales. If we are unsuccessful in defending our intellectual property
rights, third parties may be able to copy our products, which would impair our
ability to meet our sales projections. A third party could claim that our
intellectual property rights infringe its intellectual property rights. If our
intellectual property rights ultimately were determined to infringe a third
party's rights, we could be liable for royalties on past sales, and could be
required to enter into licenses to continue to manufacture and sell our
products. These licenses would require us to pay future royalty payments to the
third party. If we become involved in any dispute regarding our intellectual
property rights, regardless of whether we prevail, we could be required to
engage in costly, distracting and time-consuming litigation that could harm our
business.
We may face liability and indemnity claims that could result in unexpected costs
and damage to our reputation
Our business exposes us to potential liability risks that arise from
the testing, manufacture and sale of our products. Some plaintiffs have received
substantial damage awards in some jurisdictions against pharmaceutical companies
based upon claims for injuries allegedly caused by the use of their products.
Although currently we maintain product liability insurance coverage of $10
million, there is no guarantee that any claims brought against us would be
within our existing or future insurance policy coverage or limits. Any judgment
against us that is in excess of our policy limits would have to be paid from our
cash reserves, which would reduce our capital resources. Further, we may not
have sufficient capital resources to pay a judgment, in which case our creditors
could levy against our assets. Also, it may be necessary for us to recall
products that do not meet approved specifications, which would result in adverse
publicity, potentially significant costs in connection with the recall and a
loss of revenues. Any product liability claim or series of claims brought
against us could significantly harm our business, particularly if such claims
resulted in adverse publicity or damage awards outside or in excess of our
insurance policy limits.
We rely for our success on our ability to hire and retain key personnel
Our success depends on the principal members of our management staff.
If we lose the services of one or more of these individuals, we may not be able
to achieve our business objectives. We do not have employment contracts with any
of our key management personnel. We may not be able to recruit and retain
qualified
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personnel in the future due to intense competition for personnel among
pharmaceutical businesses. Recruiting and retaining experienced sales personnel
is equally difficult but essential to the success of our operations. As of
November 30, 2001, we had 102 employees, of which 87 were in sales and marketing
and 15 were in administration and support services.
We have derived 90% of our revenues from three customers
Since our inception, we have received 42% of our revenues from
McKesson HBOC, Inc., 28% of our revenues from Cardinal Health, Inc. and 20% of
our revenues from AmerisourceBergen Corporation. Our business would be harmed if
we were to lose any of these customers and we were unable to replace the
revenues lost, or if any of these customers were unable or unwilling to pay us
for our products and we were unable to collect the amounts owing to us.
We are recording stock-based compensation expense relating to stock option
grants and the amortization of this compensation expense will result in a charge
to our earnings over the next four years
Stock-based compensation represents an expense associated with the
recognition of the difference between the deemed fair market value of common
stock at the time of an option grant and the option exercise price. Stock-based
compensation is amortized over the vesting period of the options. At September
30, 2001, deferred stock-based compensation related to option grants to our
employees and members of our board of directors totaled approximately $432,000,
which will be amortized to expense on a straight-line basis as the options are
earned, generally over a period of four years. We have incurred an additional
$830,000 of deferred stock-based compensation related to options granted from
October 1, 2001 through November 30, 2001, which will be amortized to expense in
the same manner. Also, we have granted options to consultants which, for
compensation purposes, must be re-measured at each reporting date during the
vesting period. This requires us to record additional non-cash expenses. This
re-measurement and the corresponding effect on the related expense may result in
us incurring net losses or an increase in net losses for a given period.
Some of our charter and other contractual and statutory provisions may prevent a
change of control that could be beneficial to our stockholders
Some provisions of our charter documents and our loan and security
agreements with Elan could make it more difficult for a third party to acquire
us without separate approval of our board of directors and Elan. As a result of
these provisions, we or Elan could delay, deter or prevent a takeover attempt or
third party acquisition that our stockholders consider to be in their best
interests, including a takeover attempt that results in a premium over the
market price for the shares held by our stockholders. These provisions include:
a classified board of directors;
the ability of the board of directors to designate the
terms, and issue new series, of preferred stock;
advance notice requirements for nominations for election to the
board of directors;
special voting requirements for the amendment of our charter and bylaws; and
Elan's right to approve transactions that would constitute a
change of control.
We are also subject to anti-takeover provisions of Delaware law which
could delay or prevent a change of control. Together, these charter, contractual
and statutory provisions may make the removal of management more difficult and
may discourage transactions that otherwise could involve payment of a premium
over prevailing market prices for our common stock.
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Risks Related to this Offering
We have broad discretion to use the offering proceeds, and the manner in which
we invest these proceeds may not yield a favorable return on your investment
The net proceeds of this offering are not allocated for specific uses
other than general corporate purposes, including product acquisitions and
working capital. Our management has broad discretion over how these proceeds are
used and could spend the proceeds in ways with which you may not agree. The
proceeds may not be invested ultimately in a manner that yields a favorable or
any return on your investment.
Our stock price may be volatile and you may not be able to sell your shares at
or above the offering price
Our common stock has not been publicly traded, and an active trading
market may not develop or be sustained after this offering. The market prices
for securities of specialty pharmaceutical companies in general have been highly
volatile and may continue to be highly volatile in the future. You may not be
able to sell your shares at or above the offering price. The price at which our
common stock will trade after this offering may fluctuate substantially as a
result of one or more of the following factors:
actual or anticipated fluctuations in our operating results;
changes in or our failure to meet investors' and securities
analysts' expectations;
announcements of technological innovations or new commercial products;
introduction of new products and services by us or our competitors;
developments concerning proprietary rights, including patents;
regulatory developments and related announcements in the United
States and foreign countries;
litigation; and
general stock market conditions.
We may become involved in securities class action litigation that could divert
management's attention and harm our business
The stock market has from time to time experienced significant price
and volume fluctuations that have affected the market prices for the common
stocks of pharmaceutical companies. These broad market fluctuations may cause
the market price of our common stock to decline. In the past, following periods
of volatility in the market price of a particular company's securities,
securities class action litigation has often been brought against the company.
We may become involved in this type of litigation in the future. Litigation is
often expensive and diverts management's attention and resources, which could
harm our business.
Future sales of our common stock may depress our stock price
Sales of a substantial number of shares of our common stock in the
public market after this offering or after the expiration of contractually or
legally required holding periods could cause the market price of our common
stock to decline. After this offering, we will have approximately
shares of common stock outstanding. All of the shares sold in this
offering will be freely tradable unless they are purchased by our affiliates, as
defined under the Securities Act of 1933. The remaining shares of
common stock outstanding immediately after this offering, including the
shares to be purchased by Elan concurrent with the closing of this
offering, will be subject to the restrictions on transfer contained in the
lock-up agreements described under "Underwriting." Immediately after the
expiration of the 180-day period set forth in the lock-up agreements,
shares, which will be outstanding immediately after this offering,
will become available for sale.
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Our executive officers and directors and their affiliates will exercise control
over stockholder voting matters
After this offering, our executive officers and directors and their
affiliates will together control approximately % of our outstanding
common stock. As a result, these stockholders will collectively be able to
control all matters requiring approval of a majority of our stockholders,
including the election of directors and significant corporate transactions. We
and our principal stockholders have also entered into an agreement under which
we will use our best efforts to have a nominee of Elan elected to our board of
directors. The concentration of ownership may delay, prevent or deter a change
in control of our company, could deprive our stockholders of an opportunity to
receive a premium for their common stock as part of a sale of our company or our
assets and might affect the prevailing market price of our common stock.
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus may contain forward-looking statements. You may find
these forward-looking statements under "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as elsewhere in this prospectus. These statements involve
known and unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially different from any
future results, performances or achievements expressed or implied by any
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
our ability to successfully market and sell our products;
our ability to leverage our existing sales force;
our ability to acquire and assimilate new product acquisitions;
our ability to develop product enhancements;
our estimates regarding reimbursement rates or methods; and
our estimates regarding our capital requirements and our need
for additional financing.
In some cases, you can identify forward-looking statements by the
following terms: intends, may, will, should, could, would, expects, plans,
anticipates, believes, estimates, projects, predicts and potential, as well as
similar expressions intended to identify forward-looking statements. These
statements reflect our views with respect to future events and are based on
assumptions and subject to risks and uncertainties. Given these uncertainties,
you should not place undue reliance on these forward-looking statements. We
discuss many of these risks in this prospectus in greater detail under "Risk
Factors." These forward-looking statements represent our estimates and
assumptions only as of the date of this prospectus.
You should read this prospectus and the documents that we reference in
this prospectus completely and with the understanding that our actual future
results may be materially different from what we expect. We qualify all of our
forward-looking statements by these cautionary statements.
SALE OF SHARES TO ELAN
Concurrent with the closing of this offering, we are selling
shares of our common stock to Elan in a separate private placement
transaction at a price per share equal to the initial public offering price. The
underwriters will not receive any discount or commission on the sale of these
shares.
Elan has agreed not to sell any shares of our common stock, including
the shares being purchased in the private placement, for a period of at least
180 days following the date of this prospectus. As of November 30, 2001, Elan
beneficially owned 3,030,000 shares of our common stock. See "Business-Material
Agreements," "Management," "Related-Party Transactions," "Principal
Stockholders" and "Description of Capital Stock-Registration Rights" for further
discussion of our relationship with Elan.
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