posted
kind of a battle here with a quirky biotech...fell 37% mid-March on news of an FDA approval letter for new osteoporosis drug in their pipeline. They're sorta betting the farm, as they've got only one other product that produces revenue at all. Market didn't like that FDA wants some clarification on delivery (injection device) and reports of hypercalcemia (high calcium).
NPS PHARMACEUTICALS INC filed this 8-K on 03/10/2006. Outline Printer Friendly
Next Page » UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 March 10, 2006 Date of Report (Date of earliest event reported) NPS PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter)
Delaware
0-23272
87-0439579 (State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification Number) 383 Colorow Drive Salt Lake City, Utah 84108 (Address of principal executive offices) (801) 583-4939 (Registrant’s telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 8.01 Other Events. On March 10, 2006, NPS Pharmaceuticals issued a press release announcing its receipt of an approvable letter from the United States Food and Drug Administration, or FDA, for PREOS® (parathyroid hormone [rDNA origin] for injection). A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits. (c) Exhibits
99.1
Press Release issued by NPS Pharmaceuticals, Inc. on March 10, 2006.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: March 10, 2006
NPS PHARMACEUTICALS, INC.
By:
/s/ Kevin J. Ontiveros
Kevin J. Ontiveros
Associate General Counsel and Assistant Corporate Secretary
EXHIBIT INDEX
Exhibit Number
Description 99.1
Press Release issued by NPS Pharmaceuticals, Inc. on March 10, 2006. Exhibit 99.1
For Immediate Release
Contact:
Brandi Simpson
Sr. Director, Investor Relations
NPS Pharmaceuticals, Inc.
(801) 583-4939 NPS RECEIVES APPROVABLE LETTER FOR PREOS NDA Salt Lake City, UT – March 10, 2006 – NPS Pharmaceuticals, Inc. (Nasdaq: NPSP) announced today that the U.S. Food and Drug Administration (FDA) has determined that the company’s new drug application (NDA) for PREOS® (parathyroid hormone [rDNA origin] for injection) is approvable. The FDA indicated that the company’s pivotal study with PREOS demonstrated significant fracture risk reductions in postmenopausal women with osteoporosis, but noted the higher incidence of hypercalcemia with PREOS compared to placebo. The agency expressed concern regarding hypercalcemia associated with the proposed daily dose of PREOS and has requested additional clinical information. The agency also requested additional information regarding the reliability and use of the injection device for delivery of the drug. NPS has requested a meeting with the FDA to address these issues and to determine whether existing data are sufficient to respond to the agency’s concerns or whether additional studies will be required. Subsequent to these discussions, NPS will be better able to project the timing for approval and launch of PREOS. About PREOS PREOS is recombinant human parathyroid hormone (PTH). NPS has studied PREOS in a number of clinical settings to document its safety and effects on bone. The pivotal Phase 3 study, known as TOP (Treatment of Osteoporosis with PTH), was a multi-center, randomized, double-blind and placebo-controlled clinical trial designed to evaluate the potential of PTH to reduce the risk of first and subsequent vertebral fractures in post-menopausal women.
In the TOP study, PREOS demonstrated a statistically significant reduction in the risk of new vertebral fractures in women with and without pre-existing osteoporosis-related fractures. Results from the TOP study have been the foundation of both the E.U. and the U.S. marketing authorization applications. About NPS Pharmaceuticals NPS discovers, develops and commercializes small molecules and recombinant proteins as drugs, primarily for the treatment of metabolic, bone and mineral, and central nervous system disorders. The company has one FDA-approved product, one product candidate undergoing regulatory review for approval to market in the U.S. and Europe, as well as other drug candidates in various stages of clinical development backed by a strong discovery research effort. Additional information is available on the company’s website, www.npsp.com. Safe Harbor Statement Note: Statements made in this press release, which are not historical in nature, constitute forward-looking statements for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include: we may be required to conduct additional clinical studies with PREOS® which could delay approval of the drug by the FDA; if we are required to conduct additional clinical studies with PREOS® data collected from the studies may not support FDA approval of the drug; the FDA may not approve the injection device for use with PREOS®; our product candidates may not prove to be safe or efficacious; and, we may not have or be able to secure sufficient capital to fund development and commercialization of our product candidates. All information in this press release is as of March 10, 2006, and we undertake no duty to update this information. A more complete description of these risks can be found in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2005.
Hypercalcemia: A higher-than-normal level of calcium in the blood. This can cause a number of nonspecific symptoms, including loss of appetite, nausea, thirst, fatigue, muscle weakness, restlessness, and confusion. Excessive intake of calcium may cause muscle weakness and constipation, affect the conduction of electrical impulses in the heart (heart block) lead to calcium stones (nephrocalcinosis), in the urinary tract, impair kidney function, and interfere with the absorption of iron predisposing to iron deficiency. According to the National Academy of Sciences, adequate intake of calcium is 1 gram daily for both men and women. The upper limit for calcium intake is 2.5 grams daily.
investor relations > business risk factors business risk factors Before you make an investment decision with respect to any of our securities, you should be aware of various risks, including those described below. You should carefully consider the following risk factors, together with all of the other information included here, before you make an investment decision regarding any of our securities. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our securities could fall, and you may lose all or part of the money you paid to buy our securities. 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. With the exception of 1996, we have not been profitable since our inception in 1986. We reported net losses of $169.7 million, $168.3 million and $170.4 million for the years ended 2005, 2004 and 2003, respectively. As of December 31, 2005, we had an accumulated deficit of approximately $756.2 million. To date, our sole revenue from product sales has been in the form of royalty payments from Amgen on sales of cinacalcet HCl. We have assigned the right to receive future royalties from Amgen for sales of cinacalcet HCl to a wholly owned subsidiary. The subsidiary has pledged the right to such royalties as security for the repayment of certain notes. Until such notes, with a carrying value of $175.0 million at December 31, 2005, are paid in full, all royalties from Amgen will go to repay the loan and related interest and not to us. If the Amgen royalties are not sufficient to repay the notes on a timely basis, or at all, then we may never receive additional cash flows from future royalty payments from Amgen on sales of cinacalcet HCl. We have not generated any other revenue from product sales to date, and it is possible that we will never have sufficient product sales revenue to achieve profitability. We expect to continue to incur losses for at least the next several years as we and our collaborators and licensees pursue clinical trials and research and development efforts. To become profitable, we, either alone or with our collaborators and licensees, must successfully develop, manufacture and market our current product candidates, particularly PREOS® and cinacalcet HCl, as well as continue to identify, develop, manufacture and market new product candidates. It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates. We may require additional funds. Currently, we are not a self-sustaining business and certain economic, operational and strategic factors may require us to secure additional funds. If we lack sufficient funding at any time in the future, we may not be able to develop or commercialize our products, take advantage of business opportunities or respond to competitive pressures. Our current and anticipated operations, particularly our product development and commercialization programs for PREOS® and teduglutide, require substantial capital. We expect that our existing cash and cash equivalents will sufficiently fund our current and planned operations through the next 12 months. However, our future capital needs will depend on many factors, including the extent to which we enter into collaboration agreements with respect to any of our proprietary product candidates, receive royalty and milestone payments from our collaborators and make progress in our internally funded research, development and commercialization activities. Our capital requirements will also depend on the magnitude and scope of these activities, our ability to maintain existing and establish new collaborations, the terms of those collaborations, the success of our collaborators in developing and marketing products under their respective collaborations with us, the success of our contract manufacturers in producing clinical and commercial supplies of our product candidates on a timely basis and in sufficient quantities to meet our requirements, competing technological and market developments, the time and cost of obtaining regulatory approvals, the extent to which we choose to commercialize our future products through our own sales and marketing capabilities, the cost of preparing, filing, prosecuting, maintaining and enforcing patent and other rights and our success in acquiring and integrating complimentary products, technologies or companies. We do not have committed external sources of funding, and we cannot assure you that we will be able to obtain additional funds on acceptable terms, if at all. If adequate funds are not available, we may be required to: ? engage in equity financings that would be dilutive to current stockholders; ? delay, reduce the scope of or eliminate one or more of our development programs; ? obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; or ? license rights to technologies, product candidates or products on terms that are less favorable to us than might otherwise be available. If we do not receive regulatory approval to market PREOS® in the United States in a timely manner, or at all, or if we obtain regulatory approval to market PREOS® but the approved label is not competitive with then existing competitive products, our business will be materially harmed and our stock price may be adversely affected. In May 2005, we filed an NDA for PREOS® with the FDA seeking approval to market PREOS® in the U.S. On March 9, 2006, we received notification from the FDA that the PREOS® NDA is approvable. In the approvable letter, the FDA indicated that our pivotal Phase III study with PREOS® demonstrated significant fracture risk reductions in post menopausal women with osteoporosis, but noted the higher incidence of hypercalcemia with PREOS® compared to placebo. The FDA expressed concern regarding hypercalcemia associated with the proposed daily dose of PREOS® and requested additional clinical information. The FDA also requested additional information regarding the reliability and use of the injection device for delivery of PREOS®. We intend to submit a complete response to the issues raised by the FDA in the approvable letter. The process of preparing and submitting this response involves significant communication between us and the FDA and the submission of data and other information by us to the FDA. This process may be time-consuming, uncertain and subject to unanticipated delay. When we submit our response to the approvable letter, there is no assurance that the FDA will consider our response a complete response. While we believe that our response to the approvable letter should qualify as a Class 1 resubmission, which under the Prescription Drug User Fee Act would be considered a minor re-analysis and clarification of existing data and would commit the FDA to a two-month review period upon receipt of the completed resubmission, the FDA may require us to provide a Class 2 resubmission. A Class 2 resubmission would require significant new data, a new clinical trial, substantial expenditure by us and would further delay the regulatory approval process for us. If we are required to conduct a new clinical trial with PREOS®, data collected from the trial may not support FDA approval of the drug. Additionally, if the FDA does not ultimately approve the injection device for PREOS® we would be forced to develop an alternative delivery process for PREOS®, which would also require additional clinical trials and delay the regulatory approval process for us. Biotechnology stock prices, including our stock price, have declined significantly in certain instances where companies have failed to meet expectations with respect to FDA approval or the timing for FDA approval. If the FDA’s response to our resubmission is delayed or not favorable, our stock price could decline significantly. Additionally, if PREOS® ultimately receives regulatory approval, the FDA approved indication, side effect and adverse events profile, and product distribution requirements may not be competitive with other products and may impede our ability to effectively promote and commercialize PREOS®. Consequently, if we are unable to obtain regulatory approval for PREOS® in a timely manner, or at all, or if we receive regulatory approval to market PREOS® in the United States but the label is not competitive with existing competitive products, our business will be materially harmed and our stock price may be adversely affected. We are entirely dependent on the efforts of Nycomed to develop and market PREOS® in Europe. If Nycomed does not obtain regulatory approval of PREOS in Europe or devote adequate resources to the development and marketing of PREOS® in Europe or if Nycomed is not successful in its efforts, European sales of PREOS® will be reduced, our profitability will be delayed and our stock price adversely affected. We have licensed to Nycomed the exclusive right to develop and market PREOS® in Europe. Nycomed has also assumed responsibility to obtain regulatory approval to market PREOS® in Europe. In March 2005, Nycomed filed a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMEA, seeking approval to market PREOS® in Europe. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market PREOS® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. We are entirely dependent on Nycomed in this area. If Nycomed is not able to obtain regulatory approval to market PREOS® in Europe in a timely manner or at all, or if it does not devote adequate resources to the development and marketing of PREOS® in Europe then European sales of PREOS® will be negatively impacted which will adversely affect our profitability and stock price. We may never develop any more commercial drugs or other products that generate revenues. Cinacalcet HCl is our only drug, to date, that is generating revenues. Our remaining product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment before they can be commercialized. Our product development efforts may not lead to commercial drugs for a number of reasons, including the failure of our product candidates to be safe and effective in clinical trials or because we have inadequate financial or other resources to pursue the programs through the clinical trial process. Even if we are able to commercialize one or more of our product candidates, we cannot assure you that such product candidates will find acceptance in the medical community. 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. We do not have internal manufacturing capabilities to produce supplies of PREOS®, teduglutide or any of our other product candidates to support clinical trials or commercial launch of these products, if they are approved. We are dependent on third parties for manufacturing, supply, and storage of our product candidates. If we are unable to contract for a sufficient supply of our product candidates on acceptable terms, or if we encounter delays or difficulties in the manufacturing or supply process or our relationships with our manufacturers, we may not have sufficient product to conduct or complete our clinical trials or support preparations for the commercial launch of our product candidates, if approved. We have entered into agreements with contract manufacturers to manufacture clinical and commercial supplies of PREOS® and the injection pen device used to administer PREOS®. These contract manufacturers are our only source for the production of PREOS® and the pen. We depend on a number of contract manufacturers to supply key components of PREOS®. For instance, we have entered into agreements with SynCo Bio Partners B.V., or SynCo, and Boehringer Ingelheim Austria GmbH, or BI, to produce bulk supplies of the active pharmaceutical ingredient of PREOS®. Historically, SynCo has supplied the bulk drug product for our clinical requirements. Some of the bulk drug product manufactured by SynCo will be used in the commercial launch of PREOS® if approved. BI will supply the bulk drug product for our commercial requirements, which include the commercial launch of PREOS®, when and if approved. The technology utilized by SynCo to produce the active pharmaceutical ingredient of PREOS® has been transferred to BI and our agreement with SynCo has expired. In connection with the technology transfer, we are required to establish for regulatory purposes comparability between the finished drug product supplied by SynCo in the conduct of our clinical trials and the commercial supplies of the finished drug product supplied by BI. We believe that we established the required comparability in our NDA filing. BI has successfully completed initial manufacturing runs of the commercial bulk drug product and we expect BI to be able to produce sufficient bulk supplies of PREOS® on a timely basis. Nevertheless, manufacturing biological products is complex and no assurances can be provided that BI will be able to produce commercial quantities of bulk drug product in a timely manner or at all. We also depend on Vetter Pharma-Fertigung GmbH, or Vetter, for the production of finished supplies of PREOS®. Because the “fill and finish” aspect of the manufacturing process for PREOS® requires the use of Vetter’s proprietary technology, Vetter is our sole source for finished supplies of PREOS®. Absent the development of an alternative method of delivery of PREOS®, we will remain dependent on the availability of Vetter’s proprietary technology. Vetter has only produced small quantities of finished supplies of PREOS® to date, but has commenced manufacturing commercial quantities of finished supplies of PREOS®. We expect Vetter to be able to meet our commercial supply needs for PREOS®. Nevertheless, the fill and finish aspect of the manufacturing process for PREOS® is complex and no assurances can be provided that Vetter will be able to produce commercial quantities of finished supplies of PREOS® in a timely manner or at all. We rely on Ypsomed AG, or Ypsomed, to manufacture the pen used for the administration of PREOS®. Ypsomed is our sole source for the pen and, absent the development of an alternative method of delivery of PREOS®, we will remain dependent on Ypsomed’s technology to produce the pen. The pen has been specifically designed and developed for delivery of PREOS®. This will be the first time that Ypsomed will have produced commercial quantities of the pen. To date, Ypsomed has not produced commercial quantities of the pen, but has commenced commercial production of the pen. We expect Ypsomed to be able to produce sufficient supplies of the pen on a timely basis to support the commercial launch of PREOS®, when and if approved by the FDA. Nevertheless, manufacturing drug delivery devices such as the pen is complex and no assurances can be provided that Ypsomed will be able to produce commercial quantities of the pen in a timely manner or at all. We are subject to various risks when relying on our contract manufacturers for the supply of PREOS® and the pen. If, for example, Vetter is unable to produce finished supplies of PREOS® in required quantities or in accordance with our required specifications, in a timely manner or at all, or if Ypsomed is unable to produce the pen in required quantities and in accordance with our required specifications, in a timely manner or at all, the commercial launch of PREOS® would be delayed and we could be forced to ultimately develop an alternative delivery process for PREOS®, which would require additional clinical trials and regulatory approvals. We have experienced certain instances where our contract manufacturers have produced product that has not met our required specifications and could not be used in clinical trials or for commercial launch. Any extended disruption or termination of our relationship with any of our contract manufacturers for PREOS® would materially harm our business and financial condition and could adversely impact our stock price. We also have arrangements with contract manufacturers for clinical supplies of teduglutide. If clinical supplies of teduglutide are disrupted, exhausted, or fail to arrive when needed, we will have to substantially curtail or postpone initiation of planned clinical trials with those product candidates. Dependence on contract manufacturers for commercial production involves a number of additional risks, many of which are outside our control. These additional risks include: ? there may be delays in scale-up to quantities needed for clinical trials and commercial launch or failure to manufacture such quantities to our specifications, or to deliver such quantities on the dates we require; ? our current and future manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and international regulatory authorities for compliance with strictly enforced cGMP regulations and similar foreign standards, and we do not have control over our contract manufacturers’ compliance with these regulations and standards; ? our current and future manufacturers may not be able to comply with applicable regulatory requirements, which would prohibit them from manufacturing products for us; ? if we need to change to other commercial manufacturing contractors, the FDA and comparable foreign regulators must approve these contractors prior to our use, which would require new testing and compliance inspections, and the new manufacturers would have to be educated in, or themselves develop substantially equivalent processes necessary for, the production of our products; ? our manufacturers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand; and ? we may not have intellectual property rights, or may have to share intellectual property rights, to any improvements in the manufacturing processes or new manufacturing processes for our products. Any of these factors could cause us to delay or suspend clinical trials, regulatory submission, required approvals or commercialization of our products under development, entail higher costs and result in our being unable to effectively commercialize our products. We do not currently intend to manufacture any of our product candidates, although we may choose to do so in the future. If we decide to manufacture our products, we would be subject to the regulatory risks and requirements described above. We would also be subject to similar risks regarding delays or difficulties encountered in manufacturing our pharmaceutical products and we would require additional facilities and substantial additional capital. We cannot assure you that we would be able to manufacture any of our products successfully in accordance with regulatory requirements and in a cost-effective manner. 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. Before we receive regulatory approval for the commercial sale of our product candidates, our product candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy. Clinical trials are long, expensive and uncertain processes. Clinical trials may not be commenced or completed on schedule, and the FDA may not ultimately approve our product candidates for commercial sale. Further, even if the results of our preclinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer-term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase I or Phase II clinical trials may not be repeated in larger Phase II or Phase III clinical trials. All of our potential drug candidates are prone to the risks of failure inherent in drug development. The clinical trials of any of our drug candidates, including teduglutide, could be unsuccessful, which would prevent us from commercializing the drug. Our failure to develop safe, commercially viable drugs would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business 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. Our strategy for developing, manufacturing and commercializing our products includes entering into various relationships with other pharmaceutical companies to advance many of our programs. We have granted exclusive development, commercialization and marketing rights to a number of our collaborators for some of our key product development programs, including cinacalcet HCl, PREOS®, calcilytics, mGluRs and glycine reuptake inhibitors. Except in the case of our collaboration with AstraZeneca for research involving mGluRs, our collaborators have full control over those efforts in their territories and the resources they commit to the programs. Accordingly, the success of the development and commercialization of product candidates in those programs depends on their efforts and is beyond our control. For us to receive any significant milestone or royalty payments from our collaborators, they must advance drugs through clinical trials, establish the safety and efficacy of our drug candidates, obtain regulatory approvals and achieve market acceptance of those products. As a result, if a collaborator elects to terminate its agreement with us with respect to a research program, our ability to advance the program may be significantly impaired or we may elect to discontinue funding the program altogether. Under our agreement with AstraZeneca, we are required to co-direct the research and to pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel through March 2009. This commitment of personnel and capital may limit or restrict our ability to initiate or pursue other research efforts. As part of our product development and commercialization strategy, we evaluate whether to seek collaborators for our product candidates. If we elect to collaborate, we may not be able to negotiate collaborative arrangements for our product candidates on acceptable terms, if at all. If we are unable to establish collaborative arrangements, we will either need to increase our expenditures and undertake the development and commercialization activities at our own expense or delay further development of the affected product candidate. Collaborative agreements, including our existing collaborative agreements, pose the following risks: ? our contracts with collaborators may be terminated and we may not be able to replace our collaborators; ? the terms of our contracts with our collaborators may not be favorable to us in the future; ? our collaborators may not pursue further development and commercialization of compounds resulting from their collaborations with us; ? a collaborator with marketing and distribution rights to one or more of our product candidates may not commit enough resources to the marketing and distribution of such candidates; ? disputes with our collaborators may arise, leading to delays in or termination of the research, development or commercialization of our product candidates, or resulting in significant litigation or arbitration; ? contracts with our collaborators may fail to provide significant protection if one or more of them fail to perform; ? in some circumstances, if a collaborator terminates an agreement, or if we are found to be in breach of our obligations, we may be unable to secure all of the necessary intellectual property rights and regulatory approval to continue developing the same compound or product; ? our collaborators could independently develop, or develop with third parties, drugs that compete with our products; and ? we may be unable to meet our financial or other obligations under our collaborative agreements. We cannot assure you of the success of our current collaborative efforts nor can we assure you of the success of any of our future collaborative efforts. If our collaborative efforts fail, our business and financial condition would be materially harmed. 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. We have entered into an agreement with Allergan to promote Allergan’s FDA approved drug Restasis®. Allergan may terminate the agreement on our breach or on the occurrence of other events. If we are unsuccessful in promoting Restasis® or if the agreement is terminated prior to the expiration of its initial term our expected revenues from our promotional efforts will be reduced and we may have to bear the cost of our sales force with no corresponding revenue. Additionally, we expect that our efforts to promote Restasis® will assist in the further development of a sales force to launch PREOS®, if approved. Should any of these events occur prior to the approval of PREOS®, our sales force would not have any product to promote which would make it difficult to maintain the current size of our sales force, the development of our sales force may be adversely impacted and as a result our profitability may be delayed and our stock price adversely affected. Because we have never marketed, sold or distributed a product, we may be unable to successfully market and sell our products and generate revenues. We have recruited and continue to recruit sales, marketing, market research and product planning personnel. However, we still require additional sales, marketing and distribution capabilities. In order to commercialize any product candidates for which we receive FDA approval, we must rely on our sales and marketing force or rely on third parties to perform these functions. To market products directly, our marketing and sales force must have technical expertise and supporting distribution capability. Our inability to continue to develop expertise and attract skilled marketing and sales personnel to our sales and distribution capabilities may limit our ability to gain market acceptance for our products and generate revenues. We have entered into an agreement with Ventiv Pharma Services, or Ventiv, to assist in the development of a sales force to promote Restasis® under our agreement with Allergan. We believe that our promotional efforts with Restasis® and our relationship with Ventiv have accelerated our creation of a sales force to promote PREOS®. We cannot assure you that our sales force will be successful in generating PREOS sales revenue in a highly competitive market. Further, if we establish relationships with one or more companies with existing distribution systems and direct sales forces to market any or all of our product candidates, we cannot assure you that we will be able to enter into or maintain agreements with these companies on acceptable terms, if at all. In addition, we have incurred significant expenses in developing sales, marketing and distribution capabilities in connection with determining potential commercialization strategies with respect to PREOS®, if approved. Our commercialization strategy with respect to PREOS® and other product candidates will depend on a number of factors, including: ? the extent to which we are successful in securing collaborative partners to offset some or all of the funding obligations with respect to other product candidates; ? whether we are able to establish agreements with third party collaborators with respect to any of our product candidates on terms that are acceptable to us; ? the extent to which our agreement with our collaborators permits us to exercise marketing or promotion rights with respect to the product candidate; and ? how our product candidates compare to competitive products with respect to labeling, pricing, therapeutic effect and method of delivery. A number of these factors are outside of our control and will be difficult to determine. Therefore, we may change commercialization strategies by entering into agreements with our collaborators or third parties after we have incurred significant expenses in developing internal sales, marketing and distribution capabilities. A change of this nature could result in increased expenses or delays in commercialization and therefore could delay revenues and adversely affect our future operating results. Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures, we may be unable to sell our products profitably. The availability of reimbursement by governmental and other third-party payors affects the market for any pharmaceutical product. These third-party payors continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare system and further proposals are likely. Medicare’s policies may decrease the market for our products that are designed to treat patients with age-related disorders, such as osteoporosis and hyperparathyroidism. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare products. In addition, third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. We might not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope, particularly for product candidates addressing small patient populations, such as teduglutide for the treatment of short bowel syndrome. The passage of the Medicare Prescription Drug and Modernization Act of 2003, or the MMA, imposes new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries which may affect the marketing of our products. The MMA also introduced a new reimbursement methodology, part of which went into effect in 2004. At this point, it is not clear what effect the MMA will have on prices paid for currently approved drugs and the pricing options for new drugs approved after January 1, 2006. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors. In addition, in some foreign countries, the proposed pricing for a drug must be approves before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability. 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. The pharmaceutical and biotechnology industries are intensely competitive. We have competitors both in the U.S. and internationally including major multi-national pharmaceutical companies, chemical companies, biotech companies, universities and other research organizations. Many of our competitors have drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields. For example, Forteo®, a fragment of the full-length parathyroid hormone for the treatment of osteoporosis, is currently being marketed in the United States and Europe by Eli Lilly, Inc., or Lilly, as a treatment for patients with osteoporosis who are at high risk of bone fracture. If PREOS® is approved by the FDA, it will compete directly with Forteo® and other approved therapies, including supplementing dietary calcium and vitamin D, estrogen replacement therapies, calcitonin, bisphosphonate and selective estrogen modulators therapies. Many of our competitors have substantially greater financial and management resources, superior intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience. In addition, many of our competitors have significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals. Consequently, our competitors may obtain FDA and other regulatory approvals for product candidates sooner and may be more successful in manufacturing and marketing their products than we or our collaborators, which could render our product candidates obsolete and non-competitive. Existing and future products, therapies and technological approaches will compete directly with the products we seek to develop. Current and prospective competing products may provide greater therapeutic benefits for a specific problem, may offer easier delivery or may offer comparable performance at a lower cost. Any product candidate that we develop and that obtains regulatory approval must then compete for market acceptance and market share. Our product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Further, any products we develop may become obsolete before we recover any expenses we incurred in connection with the development of these products. As a result, we may never 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. The patent positions of pharmaceutical and biotechnology firms are uncertain and involve complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the U.S. and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. In addition, the scope of the claims in a patent application can be significantly modified during prosecution before the patent is issued. Consequently, we cannot know whether our pending applications will result in the issuance of patents or, if any patents are issued, whether they will provide us with significant proprietary protection or will be circumvented, invalidated, or found to be unenforceable. Until recently, patent applications in the United States were maintained in secrecy until the patents issued, and publication of discoveries in scientific or patent literature often lags behind actual discoveries. Patent applications filed in the United States after November 2000 generally will be published 18 months after the filing date unless the applicant certifies that the invention will not be the subject of a foreign patent application. We cannot assure you that, even if published, we will be aware of all such literature. Accordingly, we cannot be certain that the named inventors of our products and processes were the first to invent that product or process or that we were the first to pursue patent coverage for our inventions. Our commercial success depends in part on our ability to maintain and enforce our proprietary rights. If third parties engage in activities that infringe our proprietary rights, our management’s focus will be diverted and we may incur significant costs in asserting our rights. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holding that the third party is not infringing, either of which would harm our competitive position. In addition, we cannot assure you that others will not design around our patented technology. Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or other analogous proceedings in other parts of the world to determine priority of invention and the validity of patent rights granted or applied for, which could result in substantial cost and delay, even if the eventual outcome is favorable to us. We cannot assure you that our pending patent applications, if issued, would be held valid or enforceable. Additionally, many of our foreign patent applications have been published as part of the patent prosecution process in such countries. Protection of the rights revealed in published patent applications can be complex, costly and uncertain. In order to protect goodwill associated with our company and product names, we rely on trademark protection for our marks. We registered the “PREOS” trademark with the United States Patent and Trademark Office. A third party may assert a claim that the PREOS® mark is confusingly similar to its mark, and such claims or the failure to timely register the PREOS mark or objections by the FDA could force us to select a new name for PREOS®, which could cause us to incur additional expense or delay its introduction to market. We also rely on trade secrets, know-how and confidentiality provisions in our agreements with our collaborators, employees and consultants to protect our intellectual property. However, these and other parties may not comply with the terms of their agreements with us, and we might be unable to adequately enforce our rights against these people or obtain adequate compensation for the damages caused by their unauthorized disclosure or use. Our trade secrets or those of our collaborators may become known or may be independently discovered by others. Our products and product candidates may infringe the intellectual property rights of others, which could increase our costs and negatively affect our profitability. Our success also depends on avoiding infringement of the proprietary technologies of others. In particular, there may be certain issued patents and patent applications claiming subject matter which we or our collaborators may be required to license in order to research, develop or commercialize at least some of our product candidates, including PREOS® and teduglutide. In addition, third parties may assert infringement or other intellectual property claims against us based on our patents or other intellectual property rights. An adverse outcome in these proceedings could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease or modify our use of the technology. If we are required to license such technology, we cannot assure you that a license under such patents and patent applications will be available on acceptable terms or at all. Further, we may incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another’s proprietary technology. We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market. Our research and development activities and the clinical investigation, manufacture, distribution and marketing of drug products are subject to extensive regulation by governmental authorities in the United States and other countries. Prior to marketing in the United States, a drug must undergo rigorous testing and an extensive regulatory approval process implemented by the FDA under federal law, including the Federal Food, Drug and Cosmetic Act. To receive approval, we or our collaborators must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both safe and effective for each indication where approval is sought. Depending upon the type, complexity and novelty of the product and the nature of the disease or disorder to be treated, that approval process can take several years and require substantial expenditures. Data obtained from testing are susceptible to varying interpretations that could delay, limit or prevent regulatory approvals of our products. Drug testing is subject to complex FDA rules and regulations, including the requirement to conduct human testing on a large number of test subjects. We, our collaborators or the FDA may suspend human trials at any time if a party believes that the test subjects are exposed to unacceptable health risks. We cannot assure you that any of our product candidates will be safe for human use. Other countries also have extensive requirements regarding clinical trials, market authorization and pricing. These regulatory requirements vary widely from country to country, but, in general, are subject to all of the risks associated with United States approvals. If any of our products receive regulatory approval, the approval will be limited to those disease states and conditions for which the product is safe and effective, as demonstrated through clinical trials. In addition, results of pre-clinical studies and clinical trials with respect to our products could subject us to adverse product labeling requirements which could harm the sale of such products. Even if regulatory approval is obtained, later discovery of previously unknown problems may result in restrictions of the product, including withdrawal of the product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. Even if we obtain governmental approval, a marketed product, its respective manufacturer and its manufacturing facilities are subject to unannounced inspections by the FDA and must comply with the FDA’s cGMP and other regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If a manufacturer fails to comply with any of the manufacturing regulations, it may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution. Other countries also impose similar manufacturing requirements. Our promotional materials and sales activities are governed by FDA regulation. The FDA may require us to withdraw promotional material, to issue corrected material, or to cease promotion resulting in loss of credibility with our customers, reduced sales revenue or increased costs. If we fail to attract and retain key employees, the development and commercialization of our products may be adversely affected. We depend heavily on the principal members of our scientific and management staff. To the extent that we lose key personnel, our ability to develop products and become profitable may suffer. The risk of being unable to retain key personnel may be increased by the fact that we have not executed long-term employment contracts with our employees. Our future success will also depend in large part on our ability to attract and retain other highly qualified scientific and management personnel. We face competition for personnel from other companies, academic institutions, government entities and other organizations. We have operations in Salt Lake City, Utah, Parsippany, New Jersey, Mississauga, Ontario and Toronto, Ontario. We also have executive officers at each of these locations. Our future success will depend in part on how well we are able to integrate each of their efforts with the operations of the Company and how successful we are in managing personnel who are working on the same program but are spread out at various geographic locations. 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. Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends in large part upon our ability to attract and retain highly qualified managerial personnel. We have historically been highly dependent on Dr. Hunter Jackson, the founder of our company and our only Chairman, Chief Executive Officer and President. Dr. Jackson has held these offices since the founding of NPS to November 2005. In November 2005, Dr. N. Anthony Coles joined NPS as President and Chief Operating Officer and continues to hold these offices. Dr. Jackson continues to serve as our Chairman and Chief Executive Officer and will hold these offices until May 11, 2006, at which time he will retire. On May 11, 2006, Dr. Coles will become our Chief Executive Officer. Drs. Jackson and Coles are working together closely to ensure an effective transition. Dr. Coles will continue after May 11, 2006 to work with our management team to accomplish, among other things, a successful transition of leadership. In addition to Dr. Coles, we have hired other key members of our management team over the past few years. Our future success depends on a successful management transition and will also depend on our continuing to attract, retain and motivate highly skilled management team members. 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. The clinical testing and commercial use of pharmaceutical products involves significant exposure to product liability claims. We have obtained limited product liability insurance coverage for our clinical trial on humans, however, our insurance coverage may be insufficient to protect us against all product liability damages. Further, liability insurance coverage is becoming increasingly expensive and we might not be able to obtain or maintain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us against product liability damages. Regardless of merit or eventual outcome, liability claims may result in decreased demand for a future product, injury to reputation, withdrawal of clinical trial volunteers, loss of revenue, costs of litigation, distraction of management and substantial monetary awards to plaintiffs. Additionally, if we are required to pay a product liability claim, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and our business and results of operations will be adversely affected. Our operations involve hazardous materials and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business. Our research and development activities involve the controlled use of hazardous materials, radioactive compounds and other potentially dangerous chemicals and biological agents. Although we believe our safety procedures for these materials comply with governmental standards, we cannot entirely eliminate the risk of accidental contamination or injury from these materials. We currently have insurance, in amounts and on terms typical for companies in businesses that are similarly situated, that could cover all or a portion of a damage claim arising from our use of hazardous and other materials. However, if an accident or environmental discharge occurs, and we are held liable for any resulting damages, the associated liability could exceed our insurance coverage and our financial resources. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure, new SEC regulations and Nasdaq National Market rules are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and management time related to compliance activities. In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed and we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such action could adversely affect our financial results and the market price of our common stock. 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. You should consider an investment in our common stock as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. We receive only limited attention by securities analysts and frequently experience an imbalance between supply and demand for our common stock. The market price of our common stock has been highly volatile and is likely to continue to be volatile. Factors affecting our common stock price include: ? fluctuations in our operating results; ? announcements of technological innovations or new commercial products by us, our collaborators or our competitors; ? published reports by securities analysts; ? the progress of our and our collaborators’ clinical trials, including our and our collaborators’ ability to produce clinical supplies of our product candidates on a timely basis and in sufficient quantities to meet our clinical trial requirements; ? governmental regulation and changes in medical and pharmaceutical product reimbursement policies; ? developments in patent or other intellectual property rights; ? publicity concerning the discovery and development activities by our licensees; ? public concern as to the safety and efficacy of drugs that we and our competitors develop; and ? general market conditions. Antitakeover provisions in our Certificate of Incorporation, Bylaws, stockholder rights plan and under Delaware law may discourage or prevent a change of control. Provisions of our Certificate of Incorporation and Bylaws and Section 203 of the Delaware General Corporation Law could delay or prevent a change of control of us. For example, our Board of Directors, without further stockholder approval, may issue preferred stock that could delay or prevent a change of control as well as reduce the voting power of the holders of common stock, even to the extent of losing control to others. In addition, our Board of Directors has adopted a stockholder rights plan, commonly known as a “poison pill,” that may delay 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. Additional equity financings or other share issuances by us could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market and the sale of shares issued in connection with strategic alliances, or the perception that such additional sales could occur, could cause the market price of our common stock to drop. 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. Our ability to make interest payments on and to repay at maturity or refinance our 3% Convertible Notes due 2008 will depend on our ability to generate sufficient cash. We have never generated positive annual cash flow from our operating activities, and we may not generate or sustain positive cash flows from operations in the future. Our ability to generate sufficient cash flow will depend on our ability, or the ability of our strategic partners, to successfully develop and obtain regulatory approval for new products and to successfully market these products, as well as the results of our research and development efforts and other factors, including general economic, financial, competitive, legislative and regulatory conditions, many of which are outside of our control. Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes. The conversion of some or all of the notes will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants. 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. In December 2004, we completed a private placement of $175.0 million in secured 8.0% Notes due March 30, 2017, or Secured Notes. The Secured Notes are non-recourse to us and are secured by certain royalty and related rights of the company under our agreement with Amgen. Additionally, the principal sources for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen. If the revenues received from Amgen are insufficient to cover the interest and other payments due under the secured Notes we would have to either make the payments out of available cash resources or forfeit our rights to royalties and other rights under the Amgen agreement. If we elect to make the payments our cash resources would be significantly reduced and we may not have sufficient cash resources to fund our programs and operations. If we do not make the payments due under the Secured Notes then we risk losing the future revenue stream from Amgen for sales of cinacalcet HCl which could adversely effect future cash resources and we would lose rights to the technology licensed to Amgen under the Amgen agreement.
PREOS® is a registered trademark owned by NPS Pharmaceuticals, Inc.
investor relations > business risk factors business risk factors Before you make an investment decision with respect to any of our securities, you should be aware of various risks, including those described below. You should carefully consider the following risk factors, together with all of the other information included here, before you make an investment decision regarding any of our securities. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our securities could fall, and you may lose all or part of the money you paid to buy our securities. 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. With the exception of 1996, we have not been profitable since our inception in 1986. We reported net losses of $169.7 million, $168.3 million and $170.4 million for the years ended 2005, 2004 and 2003, respectively. As of December 31, 2005, we had an accumulated deficit of approximately $756.2 million. To date, our sole revenue from product sales has been in the form of royalty payments from Amgen on sales of cinacalcet HCl. We have assigned the right to receive future royalties from Amgen for sales of cinacalcet HCl to a wholly owned subsidiary. The subsidiary has pledged the right to such royalties as security for the repayment of certain notes. Until such notes, with a carrying value of $175.0 million at December 31, 2005, are paid in full, all royalties from Amgen will go to repay the loan and related interest and not to us. If the Amgen royalties are not sufficient to repay the notes on a timely basis, or at all, then we may never receive additional cash flows from future royalty payments from Amgen on sales of cinacalcet HCl. We have not generated any other revenue from product sales to date, and it is possible that we will never have sufficient product sales revenue to achieve profitability. We expect to continue to incur losses for at least the next several years as we and our collaborators and licensees pursue clinical trials and research and development efforts. To become profitable, we, either alone or with our collaborators and licensees, must successfully develop, manufacture and market our current product candidates, particularly PREOS® and cinacalcet HCl, as well as continue to identify, develop, manufacture and market new product candidates. It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates. We may require additional funds. Currently, we are not a self-sustaining business and certain economic, operational and strategic factors may require us to secure additional funds. If we lack sufficient funding at any time in the future, we may not be able to develop or commercialize our products, take advantage of business opportunities or respond to competitive pressures. Our current and anticipated operations, particularly our product development and commercialization programs for PREOS® and teduglutide, require substantial capital. We expect that our existing cash and cash equivalents will sufficiently fund our current and planned operations through the next 12 months. However, our future capital needs will depend on many factors, including the extent to which we enter into collaboration agreements with respect to any of our proprietary product candidates, receive royalty and milestone payments from our collaborators and make progress in our internally funded research, development and commercialization activities. Our capital requirements will also depend on the magnitude and scope of these activities, our ability to maintain existing and establish new collaborations, the terms of those collaborations, the success of our collaborators in developing and marketing products under their respective collaborations with us, the success of our contract manufacturers in producing clinical and commercial supplies of our product candidates on a timely basis and in sufficient quantities to meet our requirements, competing technological and market developments, the time and cost of obtaining regulatory approvals, the extent to which we choose to commercialize our future products through our own sales and marketing capabilities, the cost of preparing, filing, prosecuting, maintaining and enforcing patent and other rights and our success in acquiring and integrating complimentary products, technologies or companies. We do not have committed external sources of funding, and we cannot assure you that we will be able to obtain additional funds on acceptable terms, if at all. If adequate funds are not available, we may be required to: ? engage in equity financings that would be dilutive to current stockholders; ? delay, reduce the scope of or eliminate one or more of our development programs; ? obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; or ? license rights to technologies, product candidates or products on terms that are less favorable to us than might otherwise be available. If we do not receive regulatory approval to market PREOS® in the United States in a timely manner, or at all, or if we obtain regulatory approval to market PREOS® but the approved label is not competitive with then existing competitive products, our business will be materially harmed and our stock price may be adversely affected. In May 2005, we filed an NDA for PREOS® with the FDA seeking approval to market PREOS® in the U.S. On March 9, 2006, we received notification from the FDA that the PREOS® NDA is approvable. In the approvable letter, the FDA indicated that our pivotal Phase III study with PREOS® demonstrated significant fracture risk reductions in post menopausal women with osteoporosis, but noted the higher incidence of hypercalcemia with PREOS® compared to placebo. The FDA expressed concern regarding hypercalcemia associated with the proposed daily dose of PREOS® and requested additional clinical information. The FDA also requested additional information regarding the reliability and use of the injection device for delivery of PREOS®. We intend to submit a complete response to the issues raised by the FDA in the approvable letter. The process of preparing and submitting this response involves significant communication between us and the FDA and the submission of data and other information by us to the FDA. This process may be time-consuming, uncertain and subject to unanticipated delay. When we submit our response to the approvable letter, there is no assurance that the FDA will consider our response a complete response. While we believe that our response to the approvable letter should qualify as a Class 1 resubmission, which under the Prescription Drug User Fee Act would be considered a minor re-analysis and clarification of existing data and would commit the FDA to a two-month review period upon receipt of the completed resubmission, the FDA may require us to provide a Class 2 resubmission. A Class 2 resubmission would require significant new data, a new clinical trial, substantial expenditure by us and would further delay the regulatory approval process for us. If we are required to conduct a new clinical trial with PREOS®, data collected from the trial may not support FDA approval of the drug. Additionally, if the FDA does not ultimately approve the injection device for PREOS® we would be forced to develop an alternative delivery process for PREOS®, which would also require additional clinical trials and delay the regulatory approval process for us. Biotechnology stock prices, including our stock price, have declined significantly in certain instances where companies have failed to meet expectations with respect to FDA approval or the timing for FDA approval. If the FDA’s response to our resubmission is delayed or not favorable, our stock price could decline significantly. Additionally, if PREOS® ultimately receives regulatory approval, the FDA approved indication, side effect and adverse events profile, and product distribution requirements may not be competitive with other products and may impede our ability to effectively promote and commercialize PREOS®. Consequently, if we are unable to obtain regulatory approval for PREOS® in a timely manner, or at all, or if we receive regulatory approval to market PREOS® in the United States but the label is not competitive with existing competitive products, our business will be materially harmed and our stock price may be adversely affected. We are entirely dependent on the efforts of Nycomed to develop and market PREOS® in Europe. If Nycomed does not obtain regulatory approval of PREOS in Europe or devote adequate resources to the development and marketing of PREOS® in Europe or if Nycomed is not successful in its efforts, European sales of PREOS® will be reduced, our profitability will be delayed and our stock price adversely affected. We have licensed to Nycomed the exclusive right to develop and market PREOS® in Europe. Nycomed has also assumed responsibility to obtain regulatory approval to market PREOS® in Europe. In March 2005, Nycomed filed a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMEA, seeking approval to market PREOS® in Europe. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market PREOS® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. We are entirely dependent on Nycomed in this area. If Nycomed is not able to obtain regulatory approval to market PREOS® in Europe in a timely manner or at all, or if it does not devote adequate resources to the development and marketing of PREOS® in Europe then European sales of PREOS® will be negatively impacted which will adversely affect our profitability and stock price. We may never develop any more commercial drugs or other products that generate revenues. Cinacalcet HCl is our only drug, to date, that is generating revenues. Our remaining product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment before they can be commercialized. Our product development efforts may not lead to commercial drugs for a number of reasons, including the failure of our product candidates to be safe and effective in clinical trials or because we have inadequate financial or other resources to pursue the programs through the clinical trial process. Even if we are able to commercialize one or more of our product candidates, we cannot assure you that such product candidates will find acceptance in the medical community. 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. We do not have internal manufacturing capabilities to produce supplies of PREOS®, teduglutide or any of our other product candidates to support clinical trials or commercial launch of these products, if they are approved. We are dependent on third parties for manufacturing, supply, and storage of our product candidates. If we are unable to contract for a sufficient supply of our product candidates on acceptable terms, or if we encounter delays or difficulties in the manufacturing or supply process or our relationships with our manufacturers, we may not have sufficient product to conduct or complete our clinical trials or support preparations for the commercial launch of our product candidates, if approved. We have entered into agreements with contract manufacturers to manufacture clinical and commercial supplies of PREOS® and the injection pen device used to administer PREOS®. These contract manufacturers are our only source for the production of PREOS® and the pen. We depend on a number of contract manufacturers to supply key components of PREOS®. For instance, we have entered into agreements with SynCo Bio Partners B.V., or SynCo, and Boehringer Ingelheim Austria GmbH, or BI, to produce bulk supplies of the active pharmaceutical ingredient of PREOS®. Historically, SynCo has supplied the bulk drug product for our clinical requirements. Some of the bulk drug product manufactured by SynCo will be used in the commercial launch of PREOS® if approved. BI will supply the bulk drug product for our commercial requirements, which include the commercial launch of PREOS®, when and if approved. The technology utilized by SynCo to produce the active pharmaceutical ingredient of PREOS® has been transferred to BI and our agreement with SynCo has expired. In connection with the technology transfer, we are required to establish for regulatory purposes comparability between the finished drug product supplied by SynCo in the conduct of our clinical trials and the commercial supplies of the finished drug product supplied by BI. We believe that we established the required comparability in our NDA filing. BI has successfully completed initial manufacturing runs of the commercial bulk drug product and we expect BI to be able to produce sufficient bulk supplies of PREOS® on a timely basis. Nevertheless, manufacturing biological products is complex and no assurances can be provided that BI will be able to produce commercial quantities of bulk drug product in a timely manner or at all. We also depend on Vetter Pharma-Fertigung GmbH, or Vetter, for the production of finished supplies of PREOS®. Because the “fill and finish” aspect of the manufacturing process for PREOS® requires the use of Vetter’s proprietary technology, Vetter is our sole source for finished supplies of PREOS®. Absent the development of an alternative method of delivery of PREOS®, we will remain dependent on the availability of Vetter’s proprietary technology. Vetter has only produced small quantities of finished supplies of PREOS® to date, but has commenced manufacturing commercial quantities of finished supplies of PREOS®. We expect Vetter to be able to meet our commercial supply needs for PREOS®. Nevertheless, the fill and finish aspect of the manufacturing process for PREOS® is complex and no assurances can be provided that Vetter will be able to produce commercial quantities of finished supplies of PREOS® in a timely manner or at all. We rely on Ypsomed AG, or Ypsomed, to manufacture the pen used for the administration of PREOS®. Ypsomed is our sole source for the pen and, absent the development of an alternative method of delivery of PREOS®, we will remain dependent on Ypsomed’s technology to produce the pen. The pen has been specifically designed and developed for delivery of PREOS®. This will be the first time that Ypsomed will have produced commercial quantities of the pen. To date, Ypsomed has not produced commercial quantities of the pen, but has commenced commercial production of the pen. We expect Ypsomed to be able to produce sufficient supplies of the pen on a timely basis to support the commercial launch of PREOS®, when and if approved by the FDA. Nevertheless, manufacturing drug delivery devices such as the pen is complex and no assurances can be provided that Ypsomed will be able to produce commercial quantities of the pen in a timely manner or at all. We are subject to various risks when relying on our contract manufacturers for the supply of PREOS® and the pen. If, for example, Vetter is unable to produce finished supplies of PREOS® in required quantities or in accordance with our required specifications, in a timely manner or at all, or if Ypsomed is unable to produce the pen in required quantities and in accordance with our required specifications, in a timely manner or at all, the commercial launch of PREOS® would be delayed and we could be forced to ultimately develop an alternative delivery process for PREOS®, which would require additional clinical trials and regulatory approvals. We have experienced certain instances where our contract manufacturers have produced product that has not met our required specifications and could not be used in clinical trials or for commercial launch. Any extended disruption or termination of our relationship with any of our contract manufacturers for PREOS® would materially harm our business and financial condition and could adversely impact our stock price. We also have arrangements with contract manufacturers for clinical supplies of teduglutide. If clinical supplies of teduglutide are disrupted, exhausted, or fail to arrive when needed, we will have to substantially curtail or postpone initiation of planned clinical trials with those product candidates. Dependence on contract manufacturers for commercial production involves a number of additional risks, many of which are outside our control. These additional risks include: ? there may be delays in scale-up to quantities needed for clinical trials and commercial launch or failure to manufacture such quantities to our specifications, or to deliver such quantities on the dates we require; ? our current and future manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and international regulatory authorities for compliance with strictly enforced cGMP regulations and similar foreign standards, and we do not have control over our contract manufacturers’ compliance with these regulations and standards; ? our current and future manufacturers may not be able to comply with applicable regulatory requirements, which would prohibit them from manufacturing products for us; ? if we need to change to other commercial manufacturing contractors, the FDA and comparable foreign regulators must approve these contractors prior to our use, which would require new testing and compliance inspections, and the new manufacturers would have to be educated in, or themselves develop substantially equivalent processes necessary for, the production of our products; ? our manufacturers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand; and ? we may not have intellectual property rights, or may have to share intellectual property rights, to any improvements in the manufacturing processes or new manufacturing processes for our products. Any of these factors could cause us to delay or suspend clinical trials, regulatory submission, required approvals or commercialization of our products under development, entail higher costs and result in our being unable to effectively commercialize our products. We do not currently intend to manufacture any of our product candidates, although we may choose to do so in the future. If we decide to manufacture our products, we would be subject to the regulatory risks and requirements described above. We would also be subject to similar risks regarding delays or difficulties encountered in manufacturing our pharmaceutical products and we would require additional facilities and substantial additional capital. We cannot assure you that we would be able to manufacture any of our products successfully in accordance with regulatory requirements and in a cost-effective manner. 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. Before we receive regulatory approval for the commercial sale of our product candidates, our product candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy. Clinical trials are long, expensive and uncertain processes. Clinical trials may not be commenced or completed on schedule, and the FDA may not ultimately approve our product candidates for commercial sale. Further, even if the results of our preclinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer-term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase I or Phase II clinical trials may not be repeated in larger Phase II or Phase III clinical trials. All of our potential drug candidates are prone to the risks of failure inherent in drug development. The clinical trials of any of our drug candidates, including teduglutide, could be unsuccessful, which would prevent us from commercializing the drug. Our failure to develop safe, commercially viable drugs would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business 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. Our strategy for developing, manufacturing and commercializing our products includes entering into various relationships with other pharmaceutical companies to advance many of our programs. We have granted exclusive development, commercialization and marketing rights to a number of our collaborators for some of our key product development programs, including cinacalcet HCl, PREOS®, calcilytics, mGluRs and glycine reuptake inhibitors. Except in the case of our collaboration with AstraZeneca for research involving mGluRs, our collaborators have full control over those efforts in their territories and the resources they commit to the programs. Accordingly, the success of the development and commercialization of product candidates in those programs depends on their efforts and is beyond our control. For us to receive any significant milestone or royalty payments from our collaborators, they must advance drugs through clinical trials, establish the safety and efficacy of our drug candidates, obtain regulatory approvals and achieve market acceptance of those products. As a result, if a collaborator elects to terminate its agreement with us with respect to a research program, our ability to advance the program may be significantly impaired or we may elect to discontinue funding the program altogether. Under our agreement with AstraZeneca, we are required to co-direct the research and to pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel through March 2009. This commitment of personnel and capital may limit or restrict our ability to initiate or pursue other research efforts. As part of our product development and commercialization strategy, we evaluate whether to seek collaborators for our product candidates. If we elect to collaborate, we may not be able to negotiate collaborative arrangements for our product candidates on acceptable terms, if at all. If we are unable to establish collaborative arrangements, we will either need to increase our expenditures and undertake the development and commercialization activities at our own expense or delay further development of the affected product candidate. Collaborative agreements, including our existing collaborative agreements, pose the following risks: ? our contracts with collaborators may be terminated and we may not be able to replace our collaborators; ? the terms of our contracts with our collaborators may not be favorable to us in the future; ? our collaborators may not pursue further development and commercialization of compounds resulting from their collaborations with us; ? a collaborator with marketing and distribution rights to one or more of our product candidates may not commit enough resources to the marketing and distribution of such candidates; ? disputes with our collaborators may arise, leading to delays in or termination of the research, development or commercialization of our product candidates, or resulting in significant litigation or arbitration; ? contracts with our collaborators may fail to provide significant protection if one or more of them fail to perform; ? in some circumstances, if a collaborator terminates an agreement, or if we are found to be in breach of our obligations, we may be unable to secure all of the necessary intellectual property rights and regulatory approval to continue developing the same compound or product; ? our collaborators could independently develop, or develop with third parties, drugs that compete with our products; and ? we may be unable to meet our financial or other obligations under our collaborative agreements. We cannot assure you of the success of our current collaborative efforts nor can we assure you of the success of any of our future collaborative efforts. If our collaborative efforts fail, our business and financial condition would be materially harmed. 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. We have entered into an agreement with Allergan to promote Allergan’s FDA approved drug Restasis®. Allergan may terminate the agreement on our breach or on the occurrence of other events. If we are unsuccessful in promoting Restasis® or if the agreement is terminated prior to the expiration of its initial term our expected revenues from our promotional efforts will be reduced and we may have to bear the cost of our sales force with no corresponding revenue. Additionally, we expect that our efforts to promote Restasis® will assist in the further development of a sales force to launch PREOS®, if approved. Should any of these events occur prior to the approval of PREOS®, our sales force would not have any product to promote which would make it difficult to maintain the current size of our sales force, the development of our sales force may be adversely impacted and as a result our profitability may be delayed and our stock price adversely affected. Because we have never marketed, sold or distributed a product, we may be unable to successfully market and sell our products and generate revenues. We have recruited and continue to recruit sales, marketing, market research and product planning personnel. However, we still require additional sales, marketing and distribution capabilities. In order to commercialize any product candidates for which we receive FDA approval, we must rely on our sales and marketing force or rely on third parties to perform these functions. To market products directly, our marketing and sales force must have technical expertise and supporting distribution capability. Our inability to continue to develop expertise and attract skilled marketing and sales personnel to our sales and distribution capabilities may limit our ability to gain market acceptance for our products and generate revenues. We have entered into an agreement with Ventiv Pharma Services, or Ventiv, to assist in the development of a sales force to promote Restasis® under our agreement with Allergan. We believe that our promotional efforts with Restasis® and our relationship with Ventiv have accelerated our creation of a sales force to promote PREOS®. We cannot assure you that our sales force will be successful in generating PREOS sales revenue in a highly competitive market. Further, if we establish relationships with one or more companies with existing distribution systems and direct sales forces to market any or all of our product candidates, we cannot assure you that we will be able to enter into or maintain agreements with these companies on acceptable terms, if at all. In addition, we have incurred significant expenses in developing sales, marketing and distribution capabilities in connection with determining potential commercialization strategies with respect to PREOS®, if approved. Our commercialization strategy with respect to PREOS® and other product candidates will depend on a number of factors, including: ? the extent to which we are successful in securing collaborative partners to offset some or all of the funding obligations with respect to other product candidates; ? whether we are able to establish agreements with third party collaborators with respect to any of our product candidates on terms that are acceptable to us; ? the extent to which our agreement with our collaborators permits us to exercise marketing or promotion rights with respect to the product candidate; and ? how our product candidates compare to competitive products with respect to labeling, pricing, therapeutic effect and method of delivery. A number of these factors are outside of our control and will be difficult to determine. Therefore, we may change commercialization strategies by entering into agreements with our collaborators or third parties after we have incurred significant expenses in developing internal sales, marketing and distribution capabilities. A change of this nature could result in increased expenses or delays in commercialization and therefore could delay revenues and adversely affect our future operating results. Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures, we may be unable to sell our products profitably. The availability of reimbursement by governmental and other third-party payors affects the market for any pharmaceutical product. These third-party payors continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare system and further proposals are likely. Medicare’s policies may decrease the market for our products that are designed to treat patients with age-related disorders, such as osteoporosis and hyperparathyroidism. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare products. In addition, third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. We might not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope, particularly for product candidates addressing small patient populations, such as teduglutide for the treatment of short bowel syndrome. The passage of the Medicare Prescription Drug and Modernization Act of 2003, or the MMA, imposes new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries which may affect the marketing of our products. The MMA also introduced a new reimbursement methodology, part of which went into effect in 2004. At this point, it is not clear what effect the MMA will have on prices paid for currently approved drugs and the pricing options for new drugs approved after January 1, 2006. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors. In addition, in some foreign countries, the proposed pricing for a drug must be approves before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability. 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. The pharmaceutical and biotechnology industries are intensely competitive. We have competitors both in the U.S. and internationally including major multi-national pharmaceutical companies, chemical companies, biotech companies, universities and other research organizations. Many of our competitors have drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields. For example, Forteo®, a fragment of the full-length parathyroid hormone for the treatment of osteoporosis, is currently being marketed in the United States and Europe by Eli Lilly, Inc., or Lilly, as a treatment for patients with osteoporosis who are at high risk of bone fracture. If PREOS® is approved by the FDA, it will compete directly with Forteo® and other approved therapies, including supplementing dietary calcium and vitamin D, estrogen replacement therapies, calcitonin, bisphosphonate and selective estrogen modulators therapies. Many of our competitors have substantially greater financial and management resources, superior intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience. In addition, many of our competitors have significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals. Consequently, our competitors may obtain FDA and other regulatory approvals for product candidates sooner and may be more successful in manufacturing and marketing their products than we or our collaborators, which could render our product candidates obsolete and non-competitive. Existing and future products, therapies and technological approaches will compete directly with the products we seek to develop. Current and prospective competing products may provide greater therapeutic benefits for a specific problem, may offer easier delivery or may offer comparable performance at a lower cost. Any product candidate that we develop and that obtains regulatory approval must then compete for market acceptance and market share. Our product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Further, any products we develop may become obsolete before we recover any expenses we incurred in connection with the development of these products. As a result, we may never 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. The patent positions of pharmaceutical and biotechnology firms are uncertain and involve complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the U.S. and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. In addition, the scope of the claims in a patent application can be significantly modified during prosecution before the patent is issued. Consequently, we cannot know whether our pending applications will result in the issuance of patents or, if any patents are issued, whether they will provide us with significant proprietary protection or will be circumvented, invalidated, or found to be unenforceable. Until recently, patent applications in the United States were maintained in secrecy until the patents issued, and publication of discoveries in scientific or patent literature often lags behind actual discoveries. Patent applications filed in the United States after November 2000 generally will be published 18 months after the filing date unless the applicant certifies that the invention will not be the subject of a foreign patent application. We cannot assure you that, even if published, we will be aware of all such literature. Accordingly, we cannot be certain that the named inventors of our products and processes were the first to invent that product or process or that we were the first to pursue patent coverage for our inventions. Our commercial success depends in part on our ability to maintain and enforce our proprietary rights. If third parties engage in activities that infringe our proprietary rights, our management’s focus will be diverted and we may incur significant costs in asserting our rights. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holding that the third party is not infringing, either of which would harm our competitive position. In addition, we cannot assure you that others will not design around our patented technology. Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or other analogous proceedings in other parts of the world to determine priority of invention and the validity of patent rights granted or applied for, which could result in substantial cost and delay, even if the eventual outcome is favorable to us. We cannot assure you that our pending patent applications, if issued, would be held valid or enforceable. Additionally, many of our foreign patent applications have been published as part of the patent prosecution process in such countries. Protection of the rights revealed in published patent applications can be complex, costly and uncertain. In order to protect goodwill associated with our company and product names, we rely on trademark protection for our marks. We registered the “PREOS” trademark with the United States Patent and Trademark Office. A third party may assert a claim that the PREOS® mark is confusingly similar to its mark, and such claims or the failure to timely register the PREOS mark or objections by the FDA could force us to select a new name for PREOS®, which could cause us to incur additional expense or delay its introduction to market. We also rely on trade secrets, know-how and confidentiality provisions in our agreements with our collaborators, employees and consultants to protect our intellectual property. However, these and other parties may not comply with the terms of their agreements with us, and we might be unable to adequately enforce our rights against these people or obtain adequate compensation for the damages caused by their unauthorized disclosure or use. Our trade secrets or those of our collaborators may become known or may be independently discovered by others. Our products and product candidates may infringe the intellectual property rights of others, which could increase our costs and negatively affect our profitability. Our success also depends on avoiding infringement of the proprietary technologies of others. In particular, there may be certain issued patents and patent applications claiming subject matter which we or our collaborators may be required to license in order to research, develop or commercialize at least some of our product candidates, including PREOS® and teduglutide. In addition, third parties may assert infringement or other intellectual property claims against us based on our patents or other intellectual property rights. An adverse outcome in these proceedings could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease or modify our use of the technology. If we are required to license such technology, we cannot assure you that a license under such patents and patent applications will be available on acceptable terms or at all. Further, we may incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another’s proprietary technology. We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market. Our research and development activities and the clinical investigation, manufacture, distribution and marketing of drug products are subject to extensive regulation by governmental authorities in the United States and other countries. Prior to marketing in the United States, a drug must undergo rigorous testing and an extensive regulatory approval process implemented by the FDA under federal law, including the Federal Food, Drug and Cosmetic Act. To receive approval, we or our collaborators must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both safe and effective for each indication where approval is sought. Depending upon the type, complexity and novelty of the product and the nature of the disease or disorder to be treated, that approval process can take several years and require substantial expenditures. Data obtained from testing are susceptible to varying interpretations that could delay, limit or prevent regulatory approvals of our products. Drug testing is subject to complex FDA rules and regulations, including the requirement to conduct human testing on a large number of test subjects. We, our collaborators or the FDA may suspend human trials at any time if a party believes that the test subjects are exposed to unacceptable health risks. We cannot assure you that any of our product candidates will be safe for human use. Other countries also have extensive requirements regarding clinical trials, market authorization and pricing. These regulatory requirements vary widely from country to country, but, in general, are subject to all of the risks associated with United States approvals. If any of our products receive regulatory approval, the approval will be limited to those disease states and conditions for which the product is safe and effective, as demonstrated through clinical trials. In addition, results of pre-clinical studies and clinical trials with respect to our products could subject us to adverse product labeling requirements which could harm the sale of such products. Even if regulatory approval is obtained, later discovery of previously unknown problems may result in restrictions of the product, including withdrawal of the product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. Even if we obtain governmental approval, a marketed product, its respective manufacturer and its manufacturing facilities are subject to unannounced inspections by the FDA and must comply with the FDA’s cGMP and other regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If a manufacturer fails to comply with any of the manufacturing regulations, it may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution. Other countries also impose similar manufacturing requirements. Our promotional materials and sales activities are governed by FDA regulation. The FDA may require us to withdraw promotional material, to issue corrected material, or to cease promotion resulting in loss of credibility with our customers, reduced sales revenue or increased costs. If we fail to attract and retain key employees, the development and commercialization of our products may be adversely affected. We depend heavily on the principal members of our scientific and management staff. To the extent that we lose key personnel, our ability to develop products and become profitable may suffer. The risk of being unable to retain key personnel may be increased by the fact that we have not executed long-term employment contracts with our employees. Our future success will also depend in large part on our ability to attract and retain other highly qualified scientific and management personnel. We face competition for personnel from other companies, academic institutions, government entities and other organizations. We have operations in Salt Lake City, Utah, Parsippany, New Jersey, Mississauga, Ontario and Toronto, Ontario. We also have executive officers at each of these locations. Our future success will depend in part on how well we are able to integrate each of their efforts with the operations of the Company and how successful we are in managing personnel who are working on the same program but are spread out at various geographic locations. 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. Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends in large part upon our ability to attract and retain highly qualified managerial personnel. We have historically been highly dependent on Dr. Hunter Jackson, the founder of our company and our only Chairman, Chief Executive Officer and President. Dr. Jackson has held these offices since the founding of NPS to November 2005. In November 2005, Dr. N. Anthony Coles joined NPS as President and Chief Operating Officer and continues to hold these offices. Dr. Jackson continues to serve as our Chairman and Chief Executive Officer and will hold these offices until May 11, 2006, at which time he will retire. On May 11, 2006, Dr. Coles will become our Chief Executive Officer. Drs. Jackson and Coles are working together closely to ensure an effective transition. Dr. Coles will continue after May 11, 2006 to work with our management team to accomplish, among other things, a successful transition of leadership. In addition to Dr. Coles, we have hired other key members of our management team over the past few years. Our future success depends on a successful management transition and will also depend on our continuing to attract, retain and motivate highly skilled management team members. 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. The clinical testing and commercial use of pharmaceutical products involves significant exposure to product liability claims. We have obtained limited product liability insurance coverage for our clinical trial on humans, however, our insurance coverage may be insufficient to protect us against all product liability damages. Further, liability insurance coverage is becoming increasingly expensive and we might not be able to obtain or maintain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us against product liability damages. Regardless of merit or eventual outcome, liability claims may result in decreased demand for a future product, injury to reputation, withdrawal of clinical trial volunteers, loss of revenue, costs of litigation, distraction of management and substantial monetary awards to plaintiffs. Additionally, if we are required to pay a product liability claim, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and our business and results of operations will be adversely affected. Our operations involve hazardous materials and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business. Our research and development activities involve the controlled use of hazardous materials, radioactive compounds and other potentially dangerous chemicals and biological agents. Although we believe our safety procedures for these materials comply with governmental standards, we cannot entirely eliminate the risk of accidental contamination or injury from these materials. We currently have insurance, in amounts and on terms typical for companies in businesses that are similarly situated, that could cover all or a portion of a damage claim arising from our use of hazardous and other materials. However, if an accident or environmental discharge occurs, and we are held liable for any resulting damages, the associated liability could exceed our insurance coverage and our financial resources. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure, new SEC regulations and Nasdaq National Market rules are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and management time related to compliance activities. In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed and we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such action could adversely affect our financial results and the market price of our common stock. 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. You should consider an investment in our common stock as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. We receive only limited attention by securities analysts and frequently experience an imbalance between supply and demand for our common stock. The market price of our common stock has been highly volatile and is likely to continue to be volatile. Factors affecting our common stock price include: ? fluctuations in our operating results; ? announcements of technological innovations or new commercial products by us, our collaborators or our competitors; ? published reports by securities analysts; ? the progress of our and our collaborators’ clinical trials, including our and our collaborators’ ability to produce clinical supplies of our product candidates on a timely basis and in sufficient quantities to meet our clinical trial requirements; ? governmental regulation and changes in medical and pharmaceutical product reimbursement policies; ? developments in patent or other intellectual property rights; ? publicity concerning the discovery and development activities by our licensees; ? public concern as to the safety and efficacy of drugs that we and our competitors develop; and ? general market conditions. Antitakeover provisions in our Certificate of Incorporation, Bylaws, stockholder rights plan and under Delaware law may discourage or prevent a change of control. Provisions of our Certificate of Incorporation and Bylaws and Section 203 of the Delaware General Corporation Law could delay or prevent a change of control of us. For example, our Board of Directors, without further stockholder approval, may issue preferred stock that could delay or prevent a change of control as well as reduce the voting power of the holders of common stock, even to the extent of losing control to others. In addition, our Board of Directors has adopted a stockholder rights plan, commonly known as a “poison pill,” that may delay 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. Additional equity financings or other share issuances by us could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market and the sale of shares issued in connection with strategic alliances, or the perception that such additional sales could occur, could cause the market price of our common stock to drop. 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. Our ability to make interest payments on and to repay at maturity or refinance our 3% Convertible Notes due 2008 will depend on our ability to generate sufficient cash. We have never generated positive annual cash flow from our operating activities, and we may not generate or sustain positive cash flows from operations in the future. Our ability to generate sufficient cash flow will depend on our ability, or the ability of our strategic partners, to successfully develop and obtain regulatory approval for new products and to successfully market these products, as well as the results of our research and development efforts and other factors, including general economic, financial, competitive, legislative and regulatory conditions, many of which are outside of our control. Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes. The conversion of some or all of the notes will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants. 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. In December 2004, we completed a private placement of $175.0 million in secured 8.0% Notes due March 30, 2017, or Secured Notes. The Secured Notes are non-recourse to us and are secured by certain royalty and related rights of the company under our agreement with Amgen. Additionally, the principal sources for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen. If the revenues received from Amgen are insufficient to cover the interest and other payments due under the secured Notes we would have to either make the payments out of available cash resources or forfeit our rights to royalties and other rights under the Amgen agreement. If we elect to make the payments our cash resources would be significantly reduced and we may not have sufficient cash resources to fund our programs and operations. If we do not make the payments due under the Secured Notes then we risk losing the future revenue stream from Amgen for sales of cinacalcet HCl which could adversely effect future cash resources and we would lose rights to the technology licensed to Amgen under the Amgen agreement.
PREOS® is a registered trademark owned by NPS Pharmaceuticals, Inc.
investor relations > business risk factors business risk factors Before you make an investment decision with respect to any of our securities, you should be aware of various risks, including those described below. You should carefully consider the following risk factors, together with all of the other information included here, before you make an investment decision regarding any of our securities. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our securities could fall, and you may lose all or part of the money you paid to buy our securities. 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. With the exception of 1996, we have not been profitable since our inception in 1986. We reported net losses of $169.7 million, $168.3 million and $170.4 million for the years ended 2005, 2004 and 2003, respectively. As of December 31, 2005, we had an accumulated deficit of approximately $756.2 million. To date, our sole revenue from product sales has been in the form of royalty payments from Amgen on sales of cinacalcet HCl. We have assigned the right to receive future royalties from Amgen for sales of cinacalcet HCl to a wholly owned subsidiary. The subsidiary has pledged the right to such royalties as security for the repayment of certain notes. Until such notes, with a carrying value of $175.0 million at December 31, 2005, are paid in full, all royalties from Amgen will go to repay the loan and related interest and not to us. If the Amgen royalties are not sufficient to repay the notes on a timely basis, or at all, then we may never receive additional cash flows from future royalty payments from Amgen on sales of cinacalcet HCl. We have not generated any other revenue from product sales to date, and it is possible that we will never have sufficient product sales revenue to achieve profitability. We expect to continue to incur losses for at least the next several years as we and our collaborators and licensees pursue clinical trials and research and development efforts. To become profitable, we, either alone or with our collaborators and licensees, must successfully develop, manufacture and market our current product candidates, particularly PREOS® and cinacalcet HCl, as well as continue to identify, develop, manufacture and market new product candidates. It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates. We may require additional funds. Currently, we are not a self-sustaining business and certain economic, operational and strategic factors may require us to secure additional funds. If we lack sufficient funding at any time in the future, we may not be able to develop or commercialize our products, take advantage of business opportunities or respond to competitive pressures. Our current and anticipated operations, particularly our product development and commercialization programs for PREOS® and teduglutide, require substantial capital. We expect that our existing cash and cash equivalents will sufficiently fund our current and planned operations through the next 12 months. However, our future capital needs will depend on many factors, including the extent to which we enter into collaboration agreements with respect to any of our proprietary product candidates, receive royalty and milestone payments from our collaborators and make progress in our internally funded research, development and commercialization activities. Our capital requirements will also depend on the magnitude and scope of these activities, our ability to maintain existing and establish new collaborations, the terms of those collaborations, the success of our collaborators in developing and marketing products under their respective collaborations with us, the success of our contract manufacturers in producing clinical and commercial supplies of our product candidates on a timely basis and in sufficient quantities to meet our requirements, competing technological and market developments, the time and cost of obtaining regulatory approvals, the extent to which we choose to commercialize our future products through our own sales and marketing capabilities, the cost of preparing, filing, prosecuting, maintaining and enforcing patent and other rights and our success in acquiring and integrating complimentary products, technologies or companies. We do not have committed external sources of funding, and we cannot assure you that we will be able to obtain additional funds on acceptable terms, if at all. If adequate funds are not available, we may be required to: ? engage in equity financings that would be dilutive to current stockholders; ? delay, reduce the scope of or eliminate one or more of our development programs; ? obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; or ? license rights to technologies, product candidates or products on terms that are less favorable to us than might otherwise be available. If we do not receive regulatory approval to market PREOS® in the United States in a timely manner, or at all, or if we obtain regulatory approval to market PREOS® but the approved label is not competitive with then existing competitive products, our business will be materially harmed and our stock price may be adversely affected. In May 2005, we filed an NDA for PREOS® with the FDA seeking approval to market PREOS® in the U.S. On March 9, 2006, we received notification from the FDA that the PREOS® NDA is approvable. In the approvable letter, the FDA indicated that our pivotal Phase III study with PREOS® demonstrated significant fracture risk reductions in post menopausal women with osteoporosis, but noted the higher incidence of hypercalcemia with PREOS® compared to placebo. The FDA expressed concern regarding hypercalcemia associated with the proposed daily dose of PREOS® and requested additional clinical information. The FDA also requested additional information regarding the reliability and use of the injection device for delivery of PREOS®. We intend to submit a complete response to the issues raised by the FDA in the approvable letter. The process of preparing and submitting this response involves significant communication between us and the FDA and the submission of data and other information by us to the FDA. This process may be time-consuming, uncertain and subject to unanticipated delay. When we submit our response to the approvable letter, there is no assurance that the FDA will consider our response a complete response. While we believe that our response to the approvable letter should qualify as a Class 1 resubmission, which under the Prescription Drug User Fee Act would be considered a minor re-analysis and clarification of existing data and would commit the FDA to a two-month review period upon receipt of the completed resubmission, the FDA may require us to provide a Class 2 resubmission. A Class 2 resubmission would require significant new data, a new clinical trial, substantial expenditure by us and would further delay the regulatory approval process for us. If we are required to conduct a new clinical trial with PREOS®, data collected from the trial may not support FDA approval of the drug. Additionally, if the FDA does not ultimately approve the injection device for PREOS® we would be forced to develop an alternative delivery process for PREOS®, which would also require additional clinical trials and delay the regulatory approval process for us. Biotechnology stock prices, including our stock price, have declined significantly in certain instances where companies have failed to meet expectations with respect to FDA approval or the timing for FDA approval. If the FDA’s response to our resubmission is delayed or not favorable, our stock price could decline significantly. Additionally, if PREOS® ultimately receives regulatory approval, the FDA approved indication, side effect and adverse events profile, and product distribution requirements may not be competitive with other products and may impede our ability to effectively promote and commercialize PREOS®. Consequently, if we are unable to obtain regulatory approval for PREOS® in a timely manner, or at all, or if we receive regulatory approval to market PREOS® in the United States but the label is not competitive with existing competitive products, our business will be materially harmed and our stock price may be adversely affected. We are entirely dependent on the efforts of Nycomed to develop and market PREOS® in Europe. If Nycomed does not obtain regulatory approval of PREOS in Europe or devote adequate resources to the development and marketing of PREOS® in Europe or if Nycomed is not successful in its efforts, European sales of PREOS® will be reduced, our profitability will be delayed and our stock price adversely affected. We have licensed to Nycomed the exclusive right to develop and market PREOS® in Europe. Nycomed has also assumed responsibility to obtain regulatory approval to market PREOS® in Europe. In March 2005, Nycomed filed a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMEA, seeking approval to market PREOS® in Europe. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market PREOS® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. We are entirely dependent on Nycomed in this area. If Nycomed is not able to obtain regulatory approval to market PREOS® in Europe in a timely manner or at all, or if it does not devote adequate resources to the development and marketing of PREOS® in Europe then European sales of PREOS® will be negatively impacted which will adversely affect our profitability and stock price. We may never develop any more commercial drugs or other products that generate revenues. Cinacalcet HCl is our only drug, to date, that is generating revenues. Our remaining product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment before they can be commercialized. Our product development efforts may not lead to commercial drugs for a number of reasons, including the failure of our product candidates to be safe and effective in clinical trials or because we have inadequate financial or other resources to pursue the programs through the clinical trial process. Even if we are able to commercialize one or more of our product candidates, we cannot assure you that such product candidates will find acceptance in the medical community. 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. We do not have internal manufacturing capabilities to produce supplies of PREOS®, teduglutide or any of our other product candidates to support clinical trials or commercial launch of these products, if they are approved. We are dependent on third parties for manufacturing, supply, and storage of our product candidates. If we are unable to contract for a sufficient supply of our product candidates on acceptable terms, or if we encounter delays or difficulties in the manufacturing or supply process or our relationships with our manufacturers, we may not have sufficient product to conduct or complete our clinical trials or support preparations for the commercial launch of our product candidates, if approved. We have entered into agreements with contract manufacturers to manufacture clinical and commercial supplies of PREOS® and the injection pen device used to administer PREOS®. These contract manufacturers are our only source for the production of PREOS® and the pen. We depend on a number of contract manufacturers to supply key components of PREOS®. For instance, we have entered into agreements with SynCo Bio Partners B.V., or SynCo, and Boehringer Ingelheim Austria GmbH, or BI, to produce bulk supplies of the active pharmaceutical ingredient of PREOS®. Historically, SynCo has supplied the bulk drug product for our clinical requirements. Some of the bulk drug product manufactured by SynCo will be used in the commercial launch of PREOS® if approved. BI will supply the bulk drug product for our commercial requirements, which include the commercial launch of PREOS®, when and if approved. The technology utilized by SynCo to produce the active pharmaceutical ingredient of PREOS® has been transferred to BI and our agreement with SynCo has expired. In connection with the technology transfer, we are required to establish for regulatory purposes comparability between the finished drug product supplied by SynCo in the conduct of our clinical trials and the commercial supplies of the finished drug product supplied by BI. We believe that we established the required comparability in our NDA filing. BI has successfully completed initial manufacturing runs of the commercial bulk drug product and we expect BI to be able to produce sufficient bulk supplies of PREOS® on a timely basis. Nevertheless, manufacturing biological products is complex and no assurances can be provided that BI will be able to produce commercial quantities of bulk drug product in a timely manner or at all. We also depend on Vetter Pharma-Fertigung GmbH, or Vetter, for the production of finished supplies of PREOS®. Because the “fill and finish” aspect of the manufacturing process for PREOS® requires the use of Vetter’s proprietary technology, Vetter is our sole source for finished supplies of PREOS®. Absent the development of an alternative method of delivery of PREOS®, we will remain dependent on the availability of Vetter’s proprietary technology. Vetter has only produced small quantities of finished supplies of PREOS® to date, but has commenced manufacturing commercial quantities of finished supplies of PREOS®. We expect Vetter to be able to meet our commercial supply needs for PREOS®. Nevertheless, the fill and finish aspect of the manufacturing process for PREOS® is complex and no assurances can be provided that Vetter will be able to produce commercial quantities of finished supplies of PREOS® in a timely manner or at all. We rely on Ypsomed AG, or Ypsomed, to manufacture the pen used for the administration of PREOS®. Ypsomed is our sole source for the pen and, absent the development of an alternative method of delivery of PREOS®, we will remain dependent on Ypsomed’s technology to produce the pen. The pen has been specifically designed and developed for delivery of PREOS®. This will be the first time that Ypsomed will have produced commercial quantities of the pen. To date, Ypsomed has not produced commercial quantities of the pen, but has commenced commercial production of the pen. We expect Ypsomed to be able to produce sufficient supplies of the pen on a timely basis to support the commercial launch of PREOS®, when and if approved by the FDA. Nevertheless, manufacturing drug delivery devices such as the pen is complex and no assurances can be provided that Ypsomed will be able to produce commercial quantities of the pen in a timely manner or at all. We are subject to various risks when relying on our contract manufacturers for the supply of PREOS® and the pen. If, for example, Vetter is unable to produce finished supplies of PREOS® in required quantities or in accordance with our required specifications, in a timely manner or at all, or if Ypsomed is unable to produce the pen in required quantities and in accordance with our required specifications, in a timely manner or at all, the commercial launch of PREOS® would be delayed and we could be forced to ultimately develop an alternative delivery process for PREOS®, which would require additional clinical trials and regulatory approvals. We have experienced certain instances where our contract manufacturers have produced product that has not met our required specifications and could not be used in clinical trials or for commercial launch. Any extended disruption or termination of our relationship with any of our contract manufacturers for PREOS® would materially harm our business and financial condition and could adversely impact our stock price. We also have arrangements with contract manufacturers for clinical supplies of teduglutide. If clinical supplies of teduglutide are disrupted, exhausted, or fail to arrive when needed, we will have to substantially curtail or postpone initiation of planned clinical trials with those product candidates. Dependence on contract manufacturers for commercial production involves a number of additional risks, many of which are outside our control. These additional risks include: ? there may be delays in scale-up to quantities needed for clinical trials and commercial launch or failure to manufacture such quantities to our specifications, or to deliver such quantities on the dates we require; ? our current and future manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and international regulatory authorities for compliance with strictly enforced cGMP regulations and similar foreign standards, and we do not have control over our contract manufacturers’ compliance with these regulations and standards; ? our current and future manufacturers may not be able to comply with applicable regulatory requirements, which would prohibit them from manufacturing products for us; ? if we need to change to other commercial manufacturing contractors, the FDA and comparable foreign regulators must approve these contractors prior to our use, which would require new testing and compliance inspections, and the new manufacturers would have to be educated in, or themselves develop substantially equivalent processes necessary for, the production of our products; ? our manufacturers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand; and ? we may not have intellectual property rights, or may have to share intellectual property rights, to any improvements in the manufacturing processes or new manufacturing processes for our products. Any of these factors could cause us to delay or suspend clinical trials, regulatory submission, required approvals or commercialization of our products under development, entail higher costs and result in our being unable to effectively commercialize our products. We do not currently intend to manufacture any of our product candidates, although we may choose to do so in the future. If we decide to manufacture our products, we would be subject to the regulatory risks and requirements described above. We would also be subject to similar risks regarding delays or difficulties encountered in manufacturing our pharmaceutical products and we would require additional facilities and substantial additional capital. We cannot assure you that we would be able to manufacture any of our products successfully in accordance with regulatory requirements and in a cost-effective manner. 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. Before we receive regulatory approval for the commercial sale of our product candidates, our product candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy. Clinical trials are long, expensive and uncertain processes. Clinical trials may not be commenced or completed on schedule, and the FDA may not ultimately approve our product candidates for commercial sale. Further, even if the results of our preclinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer-term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase I or Phase II clinical trials may not be repeated in larger Phase II or Phase III clinical trials. All of our potential drug candidates are prone to the risks of failure inherent in drug development. The clinical trials of any of our drug candidates, including teduglutide, could be unsuccessful, which would prevent us from commercializing the drug. Our failure to develop safe, commercially viable drugs would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business 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. Our strategy for developing, manufacturing and commercializing our products includes entering into various relationships with other pharmaceutical companies to advance many of our programs. We have granted exclusive development, commercialization and marketing rights to a number of our collaborators for some of our key product development programs, including cinacalcet HCl, PREOS®, calcilytics, mGluRs and glycine reuptake inhibitors. Except in the case of our collaboration with AstraZeneca for research involving mGluRs, our collaborators have full control over those efforts in their territories and the resources they commit to the programs. Accordingly, the success of the development and commercialization of product candidates in those programs depends on their efforts and is beyond our control. For us to receive any significant milestone or royalty payments from our collaborators, they must advance drugs through clinical trials, establish the safety and efficacy of our drug candidates, obtain regulatory approvals and achieve market acceptance of those products. As a result, if a collaborator elects to terminate its agreement with us with respect to a research program, our ability to advance the program may be significantly impaired or we may elect to discontinue funding the program altogether. Under our agreement with AstraZeneca, we are required to co-direct the research and to pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel through March 2009. This commitment of personnel and capital may limit or restrict our ability to initiate or pursue other research efforts. As part of our product development and commercialization strategy, we evaluate whether to seek collaborators for our product candidates. If we elect to collaborate, we may not be able to negotiate collaborative arrangements for our product candidates on acceptable terms, if at all. If we are unable to establish collaborative arrangements, we will either need to increase our expenditures and undertake the development and commercialization activities at our own expense or delay further development of the affected product candidate. Collaborative agreements, including our existing collaborative agreements, pose the following risks: ? our contracts with collaborators may be terminated and we may not be able to replace our collaborators; ? the terms of our contracts with our collaborators may not be favorable to us in the future; ? our collaborators may not pursue further development and commercialization of compounds resulting from their collaborations with us; ? a collaborator with marketing and distribution rights to one or more of our product candidates may not commit enough resources to the marketing and distribution of such candidates; ? disputes with our collaborators may arise, leading to delays in or termination of the research, development or commercialization of our product candidates, or resulting in significant litigation or arbitration; ? contracts with our collaborators may fail to provide significant protection if one or more of them fail to perform; ? in some circumstances, if a collaborator terminates an agreement, or if we are found to be in breach of our obligations, we may be unable to secure all of the necessary intellectual property rights and regulatory approval to continue developing the same compound or product; ? our collaborators could independently develop, or develop with third parties, drugs that compete with our products; and ? we may be unable to meet our financial or other obligations under our collaborative agreements. We cannot assure you of the success of our current collaborative efforts nor can we assure you of the success of any of our future collaborative efforts. If our collaborative efforts fail, our business and financial condition would be materially harmed. 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. We have entered into an agreement with Allergan to promote Allergan’s FDA approved drug Restasis®. Allergan may terminate the agreement on our breach or on the occurrence of other events. If we are unsuccessful in promoting Restasis® or if the agreement is terminated prior to the expiration of its initial term our expected revenues from our promotional efforts will be reduced and we may have to bear the cost of our sales force with no corresponding revenue. Additionally, we expect that our efforts to promote Restasis® will assist in the further development of a sales force to launch PREOS®, if approved. Should any of these events occur prior to the approval of PREOS®, our sales force would not have any product to promote which would make it difficult to maintain the current size of our sales force, the development of our sales force may be adversely impacted and as a result our profitability may be delayed and our stock price adversely affected. Because we have never marketed, sold or distributed a product, we may be unable to successfully market and sell our products and generate revenues. We have recruited and continue to recruit sales, marketing, market research and product planning personnel. However, we still require additional sales, marketing and distribution capabilities. In order to commercialize any product candidates for which we receive FDA approval, we must rely on our sales and marketing force or rely on third parties to perform these functions. To market products directly, our marketing and sales force must have technical expertise and supporting distribution capability. Our inability to continue to develop expertise and attract skilled marketing and sales personnel to our sales and distribution capabilities may limit our ability to gain market acceptance for our products and generate revenues. We have entered into an agreement with Ventiv Pharma Services, or Ventiv, to assist in the development of a sales force to promote Restasis® under our agreement with Allergan. We believe that our promotional efforts with Restasis® and our relationship with Ventiv have accelerated our creation of a sales force to promote PREOS®. We cannot assure you that our sales force will be successful in generating PREOS sales revenue in a highly competitive market. Further, if we establish relationships with one or more companies with existing distribution systems and direct sales forces to market any or all of our product candidates, we cannot assure you that we will be able to enter into or maintain agreements with these companies on acceptable terms, if at all. In addition, we have incurred significant expenses in developing sales, marketing and distribution capabilities in connection with determining potential commercialization strategies with respect to PREOS®, if approved. Our commercialization strategy with respect to PREOS® and other product candidates will depend on a number of factors, including: ? the extent to which we are successful in securing collaborative partners to offset some or all of the funding obligations with respect to other product candidates; ? whether we are able to establish agreements with third party collaborators with respect to any of our product candidates on terms that are acceptable to us; ? the extent to which our agreement with our collaborators permits us to exercise marketing or promotion rights with respect to the product candidate; and ? how our product candidates compare to competitive products with respect to labeling, pricing, therapeutic effect and method of delivery. A number of these factors are outside of our control and will be difficult to determine. Therefore, we may change commercialization strategies by entering into agreements with our collaborators or third parties after we have incurred significant expenses in developing internal sales, marketing and distribution capabilities. A change of this nature could result in increased expenses or delays in commercialization and therefore could delay revenues and adversely affect our future operating results. Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures, we may be unable to sell our products profitably. The availability of reimbursement by governmental and other third-party payors affects the market for any pharmaceutical product. These third-party payors continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare system and further proposals are likely. Medicare’s policies may decrease the market for our products that are designed to treat patients with age-related disorders, such as osteoporosis and hyperparathyroidism. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare products. In addition, third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. We might not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope, particularly for product candidates addressing small patient populations, such as teduglutide for the treatment of short bowel syndrome. The passage of the Medicare Prescription Drug and Modernization Act of 2003, or the MMA, imposes new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries which may affect the marketing of our products. The MMA also introduced a new reimbursement methodology, part of which went into effect in 2004. At this point, it is not clear what effect the MMA will have on prices paid for currently approved drugs and the pricing options for new drugs approved after January 1, 2006. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors. In addition, in some foreign countries, the proposed pricing for a drug must be approves before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability. 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. The pharmaceutical and biotechnology industries are intensely competitive. We have competitors both in the U.S. and internationally including major multi-national pharmaceutical companies, chemical companies, biotech companies, universities and other research organizations. Many of our competitors have drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields. For example, Forteo®, a fragment of the full-length parathyroid hormone for the treatment of osteoporosis, is currently being marketed in the United States and Europe by Eli Lilly, Inc., or Lilly, as a treatment for patients with osteoporosis who are at high risk of bone fracture. If PREOS® is approved by the FDA, it will compete directly with Forteo® and other approved therapies, including supplementing dietary calcium and vitamin D, estrogen replacement therapies, calcitonin, bisphosphonate and selective estrogen modulators therapies. Many of our competitors have substantially greater financial and management resources, superior intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience. In addition, many of our competitors have significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals. Consequently, our competitors may obtain FDA and other regulatory approvals for product candidates sooner and may be more successful in manufacturing and marketing their products than we or our collaborators, which could render our product candidates obsolete and non-competitive. Existing and future products, therapies and technological approaches will compete directly with the products we seek to develop. Current and prospective competing products may provide greater therapeutic benefits for a specific problem, may offer easier delivery or may offer comparable performance at a lower cost. Any product candidate that we develop and that obtains regulatory approval must then compete for market acceptance and market share. Our product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Further, any products we develop may become obsolete before we recover any expenses we incurred in connection with the development of these products. As a result, we may never 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. The patent positions of pharmaceutical and biotechnology firms are uncertain and involve complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the U.S. and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. In addition, the scope of the claims in a patent application can be significantly modified during prosecution before the patent is issued. Consequently, we cannot know whether our pending applications will result in the issuance of patents or, if any patents are issued, whether they will provide us with significant proprietary protection or will be circumvented, invalidated, or found to be unenforceable. Until recently, patent applications in the United States were maintained in secrecy until the patents issued, and publication of discoveries in scientific or patent literature often lags behind actual discoveries. Patent applications filed in the United States after November 2000 generally will be published 18 months after the filing date unless the applicant certifies that the invention will not be the subject of a foreign patent application. We cannot assure you that, even if published, we will be aware of all such literature. Accordingly, we cannot be certain that the named inventors of our products and processes were the first to invent that product or process or that we were the first to pursue patent coverage for our inventions. Our commercial success depends in part on our ability to maintain and enforce our proprietary rights. If third parties engage in activities that infringe our proprietary rights, our management’s focus will be diverted and we may incur significant costs in asserting our rights. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holding that the third party is not infringing, either of which would harm our competitive position. In addition, we cannot assure you that others will not design around our patented technology. Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or other analogous proceedings in other parts of the world to determine priority of invention and the validity of patent rights granted or applied for, which could result in substantial cost and delay, even if the eventual outcome is favorable to us. We cannot assure you that our pending patent applications, if issued, would be held valid or enforceable. Additionally, many of our foreign patent applications have been published as part of the patent prosecution process in such countries. Protection of the rights revealed in published patent applications can be complex, costly and uncertain. In order to protect goodwill associated with our company and product names, we rely on trademark protection for our marks. We registered the “PREOS” trademark with the United States Patent and Trademark Office. A third party may assert a claim that the PREOS® mark is confusingly similar to its mark, and such claims or the failure to timely register the PREOS mark or objections by the FDA could force us to select a new name for PREOS®, which could cause us to incur additional expense or delay its introduction to market. We also rely on trade secrets, know-how and confidentiality provisions in our agreements with our collaborators, employees and consultants to protect our intellectual property. However, these and other parties may not comply with the terms of their agreements with us, and we might be unable to adequately enforce our rights against these people or obtain adequate compensation for the damages caused by their unauthorized disclosure or use. Our trade secrets or those of our collaborators may become known or may be independently discovered by others. Our products and product candidates may infringe the intellectual property rights of others, which could increase our costs and negatively affect our profitability. Our success also depends on avoiding infringement of the proprietary technologies of others. In particular, there may be certain issued patents and patent applications claiming subject matter which we or our collaborators may be required to license in order to research, develop or commercialize at least some of our product candidates, including PREOS® and teduglutide. In addition, third parties may assert infringement or other intellectual property claims against us based on our patents or other intellectual property rights. An adverse outcome in these proceedings could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease or modify our use of the technology. If we are required to license such technology, we cannot assure you that a license under such patents and patent applications will be available on acceptable terms or at all. Further, we may incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another’s proprietary technology. We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market. Our research and development activities and the clinical investigation, manufacture, distribution and marketing of drug products are subject to extensive regulation by governmental authorities in the United States and other countries. Prior to marketing in the United States, a drug must undergo rigorous testing and an extensive regulatory approval process implemented by the FDA under federal law, including the Federal Food, Drug and Cosmetic Act. To receive approval, we or our collaborators must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both safe and effective for each indication where approval is sought. Depending upon the type, complexity and novelty of the product and the nature of the disease or disorder to be treated, that approval process can take several years and require substantial expenditures. Data obtained from testing are susceptible to varying interpretations that could delay, limit or prevent regulatory approvals of our products. Drug testing is subject to complex FDA rules and regulations, including the requirement to conduct human testing on a large number of test subjects. We, our collaborators or the FDA may suspend human trials at any time if a party believes that the test subjects are exposed to unacceptable health risks. We cannot assure you that any of our product candidates will be safe for human use. Other countries also have extensive requirements regarding clinical trials, market authorization and pricing. These regulatory requirements vary widely from country to country, but, in general, are subject to all of the risks associated with United States approvals. If any of our products receive regulatory approval, the approval will be limited to those disease states and conditions for which the product is safe and effective, as demonstrated through clinical trials. In addition, results of pre-clinical studies and clinical trials with respect to our products could subject us to adverse product labeling requirements which could harm the sale of such products. Even if regulatory approval is obtained, later discovery of previously unknown problems may result in restrictions of the product, including withdrawal of the product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. Even if we obtain governmental approval, a marketed product, its respective manufacturer and its manufacturing facilities are subject to unannounced inspections by the FDA and must comply with the FDA’s cGMP and other regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If a manufacturer fails to comply with any of the manufacturing regulations, it may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution. Other countries also impose similar manufacturing requirements. Our promotional materials and sales activities are governed by FDA regulation. The FDA may require us to withdraw promotional material, to issue corrected material, or to cease promotion resulting in loss of credibility with our customers, reduced sales revenue or increased costs. If we fail to attract and retain key employees, the development and commercialization of our products may be adversely affected. We depend heavily on the principal members of our scientific and management staff. To the extent that we lose key personnel, our ability to develop products and become profitable may suffer. The risk of being unable to retain key personnel may be increased by the fact that we have not executed long-term employment contracts with our employees. Our future success will also depend in large part on our ability to attract and retain other highly qualified scientific and management personnel. We face competition for personnel from other companies, academic institutions, government entities and other organizations. We have operations in Salt Lake City, Utah, Parsippany, New Jersey, Mississauga, Ontario and Toronto, Ontario. We also have executive officers at each of these locations. Our future success will depend in part on how well we are able to integrate each of their efforts with the operations of the Company and how successful we are in managing personnel who are working on the same program but are spread out at various geographic locations. 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. Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends in large part upon our ability to attract and retain highly qualified managerial personnel. We have historically been highly dependent on Dr. Hunter Jackson, the founder of our company and our only Chairman, Chief Executive Officer and President. Dr. Jackson has held these offices since the founding of NPS to November 2005. In November 2005, Dr. N. Anthony Coles joined NPS as President and Chief Operating Officer and continues to hold these offices. Dr. Jackson continues to serve as our Chairman and Chief Executive Officer and will hold these offices until May 11, 2006, at which time he will retire. On May 11, 2006, Dr. Coles will become our Chief Executive Officer. Drs. Jackson and Coles are working together closely to ensure an effective transition. Dr. Coles will continue after May 11, 2006 to work with our management team to accomplish, among other things, a successful transition of leadership. In addition to Dr. Coles, we have hired other key members of our management team over the past few years. Our future success depends on a successful management transition and will also depend on our continuing to attract, retain and motivate highly skilled management team members. 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. The clinical testing and commercial use of pharmaceutical products involves significant exposure to product liability claims. We have obtained limited product liability insurance coverage for our clinical trial on humans, however, our insurance coverage may be insufficient to protect us against all product liability damages. Further, liability insurance coverage is becoming increasingly expensive and we might not be able to obtain or maintain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us against product liability damages. Regardless of merit or eventual outcome, liability claims may result in decreased demand for a future product, injury to reputation, withdrawal of clinical trial volunteers, loss of revenue, costs of litigation, distraction of management and substantial monetary awards to plaintiffs. Additionally, if we are required to pay a product liability claim, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and our business and results of operations will be adversely affected. Our operations involve hazardous materials and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business. Our research and development activities involve the controlled use of hazardous materials, radioactive compounds and other potentially dangerous chemicals and biological agents. Although we believe our safety procedures for these materials comply with governmental standards, we cannot entirely eliminate the risk of accidental contamination or injury from these materials. We currently have insurance, in amounts and on terms typical for companies in businesses that are similarly situated, that could cover all or a portion of a damage claim arising from our use of hazardous and other materials. However, if an accident or environmental discharge occurs, and we are held liable for any resulting damages, the associated liability could exceed our insurance coverage and our financial resources. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure, new SEC regulations and Nasdaq National Market rules are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and management time related to compliance activities. In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed and we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such action could adversely affect our financial results and the market price of our common stock. 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. You should consider an investment in our common stock as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. We receive only limited attention by securities analysts and frequently experience an imbalance between supply and demand for our common stock. The market price of our common stock has been highly volatile and is likely to continue to be volatile. Factors affecting our common stock price include: ? fluctuations in our operating results; ? announcements of technological innovations or new commercial products by us, our collaborators or our competitors; ? published reports by securities analysts; ? the progress of our and our collaborators’ clinical trials, including our and our collaborators’ ability to produce clinical supplies of our product candidates on a timely basis and in sufficient quantities to meet our clinical trial requirements; ? governmental regulation and changes in medical and pharmaceutical product reimbursement policies; ? developments in patent or other intellectual property rights; ? publicity concerning the discovery and development activities by our licensees; ? public concern as to the safety and efficacy of drugs that we and our competitors develop; and ? general market conditions. Antitakeover provisions in our Certificate of Incorporation, Bylaws, stockholder rights plan and under Delaware law may discourage or prevent a change of control. Provisions of our Certificate of Incorporation and Bylaws and Section 203 of the Delaware General Corporation Law could delay or prevent a change of control of us. For example, our Board of Directors, without further stockholder approval, may issue preferred stock that could delay or prevent a change of control as well as reduce the voting power of the holders of common stock, even to the extent of losing control to others. In addition, our Board of Directors has adopted a stockholder rights plan, commonly known as a “poison pill,” that may delay 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. Additional equity financings or other share issuances by us could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market and the sale of shares issued in connection with strategic alliances, or the perception that such additional sales could occur, could cause the market price of our common stock to drop. 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. Our ability to make interest payments on and to repay at maturity or refinance our 3% Convertible Notes due 2008 will depend on our ability to generate sufficient cash. We have never generated positive annual cash flow from our operating activities, and we may not generate or sustain positive cash flows from operations in the future. Our ability to generate sufficient cash flow will depend on our ability, or the ability of our strategic partners, to successfully develop and obtain regulatory approval for new products and to successfully market these products, as well as the results of our research and development efforts and other factors, including general economic, financial, competitive, legislative and regulatory conditions, many of which are outside of our control. Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes. The conversion of some or all of the notes will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants. 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. In December 2004, we completed a private placement of $175.0 million in secured 8.0% Notes due March 30, 2017, or Secured Notes. The Secured Notes are non-recourse to us and are secured by certain royalty and related rights of the company under our agreement with Amgen. Additionally, the principal sources for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen. If the revenues received from Amgen are insufficient to cover the interest and other payments due under the secured Notes we would have to either make the payments out of available cash resources or forfeit our rights to royalties and other rights under the Amgen agreement. If we elect to make the payments our cash resources would be significantly reduced and we may not have sufficient cash resources to fund our programs and operations. If we do not make the payments due under the Secured Notes then we risk losing the future revenue stream from Amgen for sales of cinacalcet HCl which could adversely effect future cash resources and we would lose rights to the technology licensed to Amgen under the Amgen agreement.
PREOS® is a registered trademark owned by NPS Pharmaceuticals, Inc.
investor relations > business risk factors business risk factors Before you make an investment decision with respect to any of our securities, you should be aware of various risks, including those described below. You should carefully consider the following risk factors, together with all of the other information included here, before you make an investment decision regarding any of our securities. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our securities could fall, and you may lose all or part of the money you paid to buy our securities. 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. With the exception of 1996, we have not been profitable since our inception in 1986. We reported net losses of $169.7 million, $168.3 million and $170.4 million for the years ended 2005, 2004 and 2003, respectively. As of December 31, 2005, we had an accumulated deficit of approximately $756.2 million. To date, our sole revenue from product sales has been in the form of royalty payments from Amgen on sales of cinacalcet HCl. We have assigned the right to receive future royalties from Amgen for sales of cinacalcet HCl to a wholly owned subsidiary. The subsidiary has pledged the right to such royalties as security for the repayment of certain notes. Until such notes, with a carrying value of $175.0 million at December 31, 2005, are paid in full, all royalties from Amgen will go to repay the loan and related interest and not to us. If the Amgen royalties are not sufficient to repay the notes on a timely basis, or at all, then we may never receive additional cash flows from future royalty payments from Amgen on sales of cinacalcet HCl. We have not generated any other revenue from product sales to date, and it is possible that we will never have sufficient product sales revenue to achieve profitability. We expect to continue to incur losses for at least the next several years as we and our collaborators and licensees pursue clinical trials and research and development efforts. To become profitable, we, either alone or with our collaborators and licensees, must successfully develop, manufacture and market our current product candidates, particularly PREOS® and cinacalcet HCl, as well as continue to identify, develop, manufacture and market new product candidates. It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates. We may require additional funds. Currently, we are not a self-sustaining business and certain economic, operational and strategic factors may require us to secure additional funds. If we lack sufficient funding at any time in the future, we may not be able to develop or commercialize our products, take advantage of business opportunities or respond to competitive pressures. Our current and anticipated operations, particularly our product development and commercialization programs for PREOS® and teduglutide, require substantial capital. We expect that our existing cash and cash equivalents will sufficiently fund our current and planned operations through the next 12 months. However, our future capital needs will depend on many factors, including the extent to which we enter into collaboration agreements with respect to any of our proprietary product candidates, receive royalty and milestone payments from our collaborators and make progress in our internally funded research, development and commercialization activities. Our capital requirements will also depend on the magnitude and scope of these activities, our ability to maintain existing and establish new collaborations, the terms of those collaborations, the success of our collaborators in developing and marketing products under their respective collaborations with us, the success of our contract manufacturers in producing clinical and commercial supplies of our product candidates on a timely basis and in sufficient quantities to meet our requirements, competing technological and market developments, the time and cost of obtaining regulatory approvals, the extent to which we choose to commercialize our future products through our own sales and marketing capabilities, the cost of preparing, filing, prosecuting, maintaining and enforcing patent and other rights and our success in acquiring and integrating complimentary products, technologies or companies. We do not have committed external sources of funding, and we cannot assure you that we will be able to obtain additional funds on acceptable terms, if at all. If adequate funds are not available, we may be required to: ? engage in equity financings that would be dilutive to current stockholders; ? delay, reduce the scope of or eliminate one or more of our development programs; ? obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; or ? license rights to technologies, product candidates or products on terms that are less favorable to us than might otherwise be available. If we do not receive regulatory approval to market PREOS® in the United States in a timely manner, or at all, or if we obtain regulatory approval to market PREOS® but the approved label is not competitive with then existing competitive products, our business will be materially harmed and our stock price may be adversely affected. In May 2005, we filed an NDA for PREOS® with the FDA seeking approval to market PREOS® in the U.S. On March 9, 2006, we received notification from the FDA that the PREOS® NDA is approvable. In the approvable letter, the FDA indicated that our pivotal Phase III study with PREOS® demonstrated significant fracture risk reductions in post menopausal women with osteoporosis, but noted the higher incidence of hypercalcemia with PREOS® compared to placebo. The FDA expressed concern regarding hypercalcemia associated with the proposed daily dose of PREOS® and requested additional clinical information. The FDA also requested additional information regarding the reliability and use of the injection device for delivery of PREOS®. We intend to submit a complete response to the issues raised by the FDA in the approvable letter. The process of preparing and submitting this response involves significant communication between us and the FDA and the submission of data and other information by us to the FDA. This process may be time-consuming, uncertain and subject to unanticipated delay. When we submit our response to the approvable letter, there is no assurance that the FDA will consider our response a complete response. While we believe that our response to the approvable letter should qualify as a Class 1 resubmission, which under the Prescription Drug User Fee Act would be considered a minor re-analysis and clarification of existing data and would commit the FDA to a two-month review period upon receipt of the completed resubmission, the FDA may require us to provide a Class 2 resubmission. A Class 2 resubmission would require significant new data, a new clinical trial, substantial expenditure by us and would further delay the regulatory approval process for us. If we are required to conduct a new clinical trial with PREOS®, data collected from the trial may not support FDA approval of the drug. Additionally, if the FDA does not ultimately approve the injection device for PREOS® we would be forced to develop an alternative delivery process for PREOS®, which would also require additional clinical trials and delay the regulatory approval process for us. Biotechnology stock prices, including our stock price, have declined significantly in certain instances where companies have failed to meet expectations with respect to FDA approval or the timing for FDA approval. If the FDA’s response to our resubmission is delayed or not favorable, our stock price could decline significantly. Additionally, if PREOS® ultimately receives regulatory approval, the FDA approved indication, side effect and adverse events profile, and product distribution requirements may not be competitive with other products and may impede our ability to effectively promote and commercialize PREOS®. Consequently, if we are unable to obtain regulatory approval for PREOS® in a timely manner, or at all, or if we receive regulatory approval to market PREOS® in the United States but the label is not competitive with existing competitive products, our business will be materially harmed and our stock price may be adversely affected. We are entirely dependent on the efforts of Nycomed to develop and market PREOS® in Europe. If Nycomed does not obtain regulatory approval of PREOS in Europe or devote adequate resources to the development and marketing of PREOS® in Europe or if Nycomed is not successful in its efforts, European sales of PREOS® will be reduced, our profitability will be delayed and our stock price adversely affected. We have licensed to Nycomed the exclusive right to develop and market PREOS® in Europe. Nycomed has also assumed responsibility to obtain regulatory approval to market PREOS® in Europe. In March 2005, Nycomed filed a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMEA, seeking approval to market PREOS® in Europe. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market PREOS® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. We are entirely dependent on Nycomed in this area. If Nycomed is not able to obtain regulatory approval to market PREOS® in Europe in a timely manner or at all, or if it does not devote adequate resources to the development and marketing of PREOS® in Europe then European sales of PREOS® will be negatively impacted which will adversely affect our profitability and stock price. We may never develop any more commercial drugs or other products that generate revenues. Cinacalcet HCl is our only drug, to date, that is generating revenues. Our remaining product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment before they can be commercialized. Our product development efforts may not lead to commercial drugs for a number of reasons, including the failure of our product candidates to be safe and effective in clinical trials or because we have inadequate financial or other resources to pursue the programs through the clinical trial process. Even if we are able to commercialize one or more of our product candidates, we cannot assure you that such product candidates will find acceptance in the medical community. 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. We do not have internal manufacturing capabilities to produce supplies of PREOS®, teduglutide or any of our other product candidates to support clinical trials or commercial launch of these products, if they are approved. We are dependent on third parties for manufacturing, supply, and storage of our product candidates. If we are unable to contract for a sufficient supply of our product candidates on acceptable terms, or if we encounter delays or difficulties in the manufacturing or supply process or our relationships with our manufacturers, we may not have sufficient product to conduct or complete our clinical trials or support preparations for the commercial launch of our product candidates, if approved. We have entered into agreements with contract manufacturers to manufacture clinical and commercial supplies of PREOS® and the injection pen device used to administer PREOS®. These contract manufacturers are our only source for the production of PREOS® and the pen. We depend on a number of contract manufacturers to supply key components of PREOS®. For instance, we have entered into agreements with SynCo Bio Partners B.V., or SynCo, and Boehringer Ingelheim Austria GmbH, or BI, to produce bulk supplies of the active pharmaceutical ingredient of PREOS®. Historically, SynCo has supplied the bulk drug product for our clinical requirements. Some of the bulk drug product manufactured by SynCo will be used in the commercial launch of PREOS® if approved. BI will supply the bulk drug product for our commercial requirements, which include the commercial launch of PREOS®, when and if approved. The technology utilized by SynCo to produce the active pharmaceutical ingredient of PREOS® has been transferred to BI and our agreement with SynCo has expired. In connection with the technology transfer, we are required to establish for regulatory purposes comparability between the finished drug product supplied by SynCo in the conduct of our clinical trials and the commercial supplies of the finished drug product supplied by BI. We believe that we established the required comparability in our NDA filing. BI has successfully completed initial manufacturing runs of the commercial bulk drug product and we expect BI to be able to produce sufficient bulk supplies of PREOS® on a timely basis. Nevertheless, manufacturing biological products is complex and no assurances can be provided that BI will be able to produce commercial quantities of bulk drug product in a timely manner or at all. We also depend on Vetter Pharma-Fertigung GmbH, or Vetter, for the production of finished supplies of PREOS®. Because the “fill and finish” aspect of the manufacturing process for PREOS® requires the use of Vetter’s proprietary technology, Vetter is our sole source for finished supplies of PREOS®. Absent the development of an alternative method of delivery of PREOS®, we will remain dependent on the availability of Vetter’s proprietary technology. Vetter has only produced small quantities of finished supplies of PREOS® to date, but has commenced manufacturing commercial quantities of finished supplies of PREOS®. We expect Vetter to be able to meet our commercial supply needs for PREOS®. Nevertheless, the fill and finish aspect of the manufacturing process for PREOS® is complex and no assurances can be provided that Vetter will be able to produce commercial quantities of finished supplies of PREOS® in a timely manner or at all. We rely on Ypsomed AG, or Ypsomed, to manufacture the pen used for the administration of PREOS®. Ypsomed is our sole source for the pen and, absent the development of an alternative method of delivery of PREOS®, we will remain dependent on Ypsomed’s technology to produce the pen. The pen has been specifically designed and developed for delivery of PREOS®. This will be the first time that Ypsomed will have produced commercial quantities of the pen. To date, Ypsomed has not produced commercial quantities of the pen, but has commenced commercial production of the pen. We expect Ypsomed to be able to produce sufficient supplies of the pen on a timely basis to support the commercial launch of PREOS®, when and if approved by the FDA. Nevertheless, manufacturing drug delivery devices such as the pen is complex and no assurances can be provided that Ypsomed will be able to produce commercial quantities of the pen in a timely manner or at all. We are subject to various risks when relying on our contract manufacturers for the supply of PREOS® and the pen. If, for example, Vetter is unable to produce finished supplies of PREOS® in required quantities or in accordance with our required specifications, in a timely manner or at all, or if Ypsomed is unable to produce the pen in required quantities and in accordance with our required specifications, in a timely manner or at all, the commercial launch of PREOS® would be delayed and we could be forced to ultimately develop an alternative delivery process for PREOS®, which would require additional clinical trials and regulatory approvals. We have experienced certain instances where our contract manufacturers have produced product that has not met our required specifications and could not be used in clinical trials or for commercial launch. Any extended disruption or termination of our relationship with any of our contract manufacturers for PREOS® would materially harm our business and financial condition and could adversely impact our stock price. We also have arrangements with contract manufacturers for clinical supplies of teduglutide. If clinical supplies of teduglutide are disrupted, exhausted, or fail to arrive when needed, we will have to substantially curtail or postpone initiation of planned clinical trials with those product candidates. Dependence on contract manufacturers for commercial production involves a number of additional risks, many of which are outside our control. These additional risks include: ? there may be delays in scale-up to quantities needed for clinical trials and commercial launch or failure to manufacture such quantities to our specifications, or to deliver such quantities on the dates we require; ? our current and future manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and international regulatory authorities for compliance with strictly enforced cGMP regulations and similar foreign standards, and we do not have control over our contract manufacturers’ compliance with these regulations and standards; ? our current and future manufacturers may not be able to comply with applicable regulatory requirements, which would prohibit them from manufacturing products for us; ? if we need to change to other commercial manufacturing contractors, the FDA and comparable foreign regulators must approve these contractors prior to our use, which would require new testing and compliance inspections, and the new manufacturers would have to be educated in, or themselves develop substantially equivalent processes necessary for, the production of our products; ? our manufacturers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand; and ? we may not have intellectual property rights, or may have to share intellectual property rights, to any improvements in the manufacturing processes or new manufacturing processes for our products. Any of these factors could cause us to delay or suspend clinical trials, regulatory submission, required approvals or commercialization of our products under development, entail higher costs and result in our being unable to effectively commercialize our products. We do not currently intend to manufacture any of our product candidates, although we may choose to do so in the future. If we decide to manufacture our products, we would be subject to the regulatory risks and requirements described above. We would also be subject to similar risks regarding delays or difficulties encountered in manufacturing our pharmaceutical products and we would require additional facilities and substantial additional capital. We cannot assure you that we would be able to manufacture any of our products successfully in accordance with regulatory requirements and in a cost-effective manner. 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. Before we receive regulatory approval for the commercial sale of our product candidates, our product candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy. Clinical trials are long, expensive and uncertain processes. Clinical trials may not be commenced or completed on schedule, and the FDA may not ultimately approve our product candidates for commercial sale. Further, even if the results of our preclinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer-term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase I or Phase II clinical trials may not be repeated in larger Phase II or Phase III clinical trials. All of our potential drug candidates are prone to the risks of failure inherent in drug development. The clinical trials of any of our drug candidates, including teduglutide, could be unsuccessful, which would prevent us from commercializing the drug. Our failure to develop safe, commercially viable drugs would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business 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. Our strategy for developing, manufacturing and commercializing our products includes entering into various relationships with other pharmaceutical companies to advance many of our programs. We have granted exclusive development, commercialization and marketing rights to a number of our collaborators for some of our key product development programs, including cinacalcet HCl, PREOS®, calcilytics, mGluRs and glycine reuptake inhibitors. Except in the case of our collaboration with AstraZeneca for research involving mGluRs, our collaborators have full control over those efforts in their territories and the resources they commit to the programs. Accordingly, the success of the development and commercialization of product candidates in those programs depends on their efforts and is beyond our control. For us to receive any significant milestone or royalty payments from our collaborators, they must advance drugs through clinical trials, establish the safety and efficacy of our drug candidates, obtain regulatory approvals and achieve market acceptance of those products. As a result, if a collaborator elects to terminate its agreement with us with respect to a research program, our ability to advance the program may be significantly impaired or we may elect to discontinue funding the program altogether. Under our agreement with AstraZeneca, we are required to co-direct the research and to pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel through March 2009. This commitment of personnel and capital may limit or restrict our ability to initiate or pursue other research efforts. As part of our product development and commercialization strategy, we evaluate whether to seek collaborators for our product candidates. If we elect to collaborate, we may not be able to negotiate collaborative arrangements for our product candidates on acceptable terms, if at all. If we are unable to establish collaborative arrangements, we will either need to increase our expenditures and undertake the development and commercialization activities at our own expense or delay further development of the affected product candidate. Collaborative agreements, including our existing collaborative agreements, pose the following risks: ? our contracts with collaborators may be terminated and we may not be able to replace our collaborators; ? the terms of our contracts with our collaborators may not be favorable to us in the future; ? our collaborators may not pursue further development and commercialization of compounds resulting from their collaborations with us; ? a collaborator with marketing and distribution rights to one or more of our product candidates may not commit enough resources to the marketing and distribution of such candidates; ? disputes with our collaborators may arise, leading to delays in or termination of the research, development or commercialization of our product candidates, or resulting in significant litigation or arbitration; ? contracts with our collaborators may fail to provide significant protection if one or more of them fail to perform; ? in some circumstances, if a collaborator terminates an agreement, or if we are found to be in breach of our obligations, we may be unable to secure all of the necessary intellectual property rights and regulatory approval to continue developing the same compound or product; ? our collaborators could independently develop, or develop with third parties, drugs that compete with our products; and ? we may be unable to meet our financial or other obligations under our collaborative agreements. We cannot assure you of the success of our current collaborative efforts nor can we assure you of the success of any of our future collaborative efforts. If our collaborative efforts fail, our business and financial condition would be materially harmed. 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. We have entered into an agreement with Allergan to promote Allergan’s FDA approved drug Restasis®. Allergan may terminate the agreement on our breach or on the occurrence of other events. If we are unsuccessful in promoting Restasis® or if the agreement is terminated prior to the expiration of its initial term our expected revenues from our promotional efforts will be reduced and we may have to bear the cost of our sales force with no corresponding revenue. Additionally, we expect that our efforts to promote Restasis® will assist in the further development of a sales force to launch PREOS®, if approved. Should any of these events occur prior to the approval of PREOS®, our sales force would not have any product to promote which would make it difficult to maintain the current size of our sales force, the development of our sales force may be adversely impacted and as a result our profitability may be delayed and our stock price adversely affected. Because we have never marketed, sold or distributed a product, we may be unable to successfully market and sell our products and generate revenues. We have recruited and continue to recruit sales, marketing, market research and product planning personnel. However, we still require additional sales, marketing and distribution capabilities. In order to commercialize any product candidates for which we receive FDA approval, we must rely on our sales and marketing force or rely on third parties to perform these functions. To market products directly, our marketing and sales force must have technical expertise and supporting distribution capability. Our inability to continue to develop expertise and attract skilled marketing and sales personnel to our sales and distribution capabilities may limit our ability to gain market acceptance for our products and generate revenues. We have entered into an agreement with Ventiv Pharma Services, or Ventiv, to assist in the development of a sales force to promote Restasis® under our agreement with Allergan. We believe that our promotional efforts with Restasis® and our relationship with Ventiv have accelerated our creation of a sales force to promote PREOS®. We cannot assure you that our sales force will be successful in generating PREOS sales revenue in a highly competitive market. Further, if we establish relationships with one or more companies with existing distribution systems and direct sales forces to market any or all of our product candidates, we cannot assure you that we will be able to enter into or maintain agreements with these companies on acceptable terms, if at all. In addition, we have incurred significant expenses in developing sales, marketing and distribution capabilities in connection with determining potential commercialization strategies with respect to PREOS®, if approved. Our commercialization strategy with respect to PREOS® and other product candidates will depend on a number of factors, including: ? the extent to which we are successful in securing collaborative partners to offset some or all of the funding obligations with respect to other product candidates; ? whether we are able to establish agreements with third party collaborators with respect to any of our product candidates on terms that are acceptable to us; ? the extent to which our agreement with our collaborators permits us to exercise marketing or promotion rights with respect to the product candidate; and ? how our product candidates compare to competitive products with respect to labeling, pricing, therapeutic effect and method of delivery. A number of these factors are outside of our control and will be difficult to determine. Therefore, we may change commercialization strategies by entering into agreements with our collaborators or third parties after we have incurred significant expenses in developing internal sales, marketing and distribution capabilities. A change of this nature could result in increased expenses or delays in commercialization and therefore could delay revenues and adversely affect our future operating results. Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures, we may be unable to sell our products profitably. The availability of reimbursement by governmental and other third-party payors affects the market for any pharmaceutical product. These third-party payors continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare system and further proposals are likely. Medicare’s policies may decrease the market for our products that are designed to treat patients with age-related disorders, such as osteoporosis and hyperparathyroidism. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare products. In addition, third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. We might not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope, particularly for product candidates addressing small patient populations, such as teduglutide for the treatment of short bowel syndrome. The passage of the Medicare Prescription Drug and Modernization Act of 2003, or the MMA, imposes new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries which may affect the marketing of our products. The MMA also introduced a new reimbursement methodology, part of which went into effect in 2004. At this point, it is not clear what effect the MMA will have on prices paid for currently approved drugs and the pricing options for new drugs approved after January 1, 2006. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors. In addition, in some foreign countries, the proposed pricing for a drug must be approves before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability. 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. The pharmaceutical and biotechnology industries are intensely competitive. We have competitors both in the U.S. and internationally including major multi-national pharmaceutical companies, chemical companies, biotech companies, universities and other research organizations. Many of our competitors have drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields. For example, Forteo®, a fragment of the full-length parathyroid hormone for the treatment of osteoporosis, is currently being marketed in the United States and Europe by Eli Lilly, Inc., or Lilly, as a treatment for patients with osteoporosis who are at high risk of bone fracture. If PREOS® is approved by the FDA, it will compete directly with Forteo® and other approved therapies, including supplementing dietary calcium and vitamin D, estrogen replacement therapies, calcitonin, bisphosphonate and selective estrogen modulators therapies. Many of our competitors have substantially greater financial and management resources, superior intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience. In addition, many of our competitors have significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals. Consequently, our competitors may obtain FDA and other regulatory approvals for product candidates sooner and may be more successful in manufacturing and marketing their products than we or our collaborators, which could render our product candidates obsolete and non-competitive. Existing and future products, therapies and technological approaches will compete directly with the products we seek to develop. Current and prospective competing products may provide greater therapeutic benefits for a specific problem, may offer easier delivery or may offer comparable performance at a lower cost. Any product candidate that we develop and that obtains regulatory approval must then compete for market acceptance and market share. Our product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Further, any products we develop may become obsolete before we recover any expenses we incurred in connection with the development of these products. As a result, we may never 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. The patent positions of pharmaceutical and biotechnology firms are uncertain and involve complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the U.S. and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. In addition, the scope of the claims in a patent application can be significantly modified during prosecution before the patent is issued. Consequently, we cannot know whether our pending applications will result in the issuance of patents or, if any patents are issued, whether they will provide us with significant proprietary protection or will be circumvented, invalidated, or found to be unenforceable. Until recently, patent applications in the United States were maintained in secrecy until the patents issued, and publication of discoveries in scientific or patent literature often lags behind actual discoveries. Patent applications filed in the United States after November 2000 generally will be published 18 months after the filing date unless the applicant certifies that the invention will not be the subject of a foreign patent application. We cannot assure you that, even if published, we will be aware of all such literature. Accordingly, we cannot be certain that the named inventors of our products and processes were the first to invent that product or process or that we were the first to pursue patent coverage for our inventions. Our commercial success depends in part on our ability to maintain and enforce our proprietary rights. If third parties engage in activities that infringe our proprietary rights, our management’s focus will be diverted and we may incur significant costs in asserting our rights. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holding that the third party is not infringing, either of which would harm our competitive position. In addition, we cannot assure you that others will not design around our patented technology. Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or other analogous proceedings in other parts of the world to determine priority of invention and the validity of patent rights granted or applied for, which could result in substantial cost and delay, even if the eventual outcome is favorable to us. We cannot assure you that our pending patent applications, if issued, would be held valid or enforceable. Additionally, many of our foreign patent applications have been published as part of the patent prosecution process in such countries. Protection of the rights revealed in published patent applications can be complex, costly and uncertain. In order to protect goodwill associated with our company and product names, we rely on trademark protection for our marks. We registered the “PREOS” trademark with the United States Patent and Trademark Office. A third party may assert a claim that the PREOS® mark is confusingly similar to its mark, and such claims or the failure to timely register the PREOS mark or objections by the FDA could force us to select a new name for PREOS®, which could cause us to incur additional expense or delay its introduction to market. We also rely on trade secrets, know-how and confidentiality provisions in our agreements with our collaborators, employees and consultants to protect our intellectual property. However, these and other parties may not comply with the terms of their agreements with us, and we might be unable to adequately enforce our rights against these people or obtain adequate compensation for the damages caused by their unauthorized disclosure or use. Our trade secrets or those of our collaborators may become known or may be independently discovered by others. Our products and product candidates may infringe the intellectual property rights of others, which could increase our costs and negatively affect our profitability. Our success also depends on avoiding infringement of the proprietary technologies of others. In particular, there may be certain issued patents and patent applications claiming subject matter which we or our collaborators may be required to license in order to research, develop or commercialize at least some of our product candidates, including PREOS® and teduglutide. In addition, third parties may assert infringement or other intellectual property claims against us based on our patents or other intellectual property rights. An adverse outcome in these proceedings could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease or modify our use of the technology. If we are required to license such technology, we cannot assure you that a license under such patents and patent applications will be available on acceptable terms or at all. Further, we may incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another’s proprietary technology. We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market. Our research and development activities and the clinical investigation, manufacture, distribution and marketing of drug products are subject to extensive regulation by governmental authorities in the United States and other countries. Prior to marketing in the United States, a drug must undergo rigorous testing and an extensive regulatory approval process implemented by the FDA under federal law, including the Federal Food, Drug and Cosmetic Act. To receive approval, we or our collaborators must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both safe and effective for each indication where approval is sought. Depending upon the type, complexity and novelty of the product and the nature of the disease or disorder to be treated, that approval process can take several years and require substantial expenditures. Data obtained from testing are susceptible to varying interpretations that could delay, limit or prevent regulatory approvals of our products. Drug testing is subject to complex FDA rules and regulations, including the requirement to conduct human testing on a large number of test subjects. We, our collaborators or the FDA may suspend human trials at any time if a party believes that the test subjects are exposed to unacceptable health risks. We cannot assure you that any of our product candidates will be safe for human use. Other countries also have extensive requirements regarding clinical trials, market authorization and pricing. These regulatory requirements vary widely from country to country, but, in general, are subject to all of the risks associated with United States approvals. If any of our products receive regulatory approval, the approval will be limited to those disease states and conditions for which the product is safe and effective, as demonstrated through clinical trials. In addition, results of pre-clinical studies and clinical trials with respect to our products could subject us to adverse product labeling requirements which could harm the sale of such products. Even if regulatory approval is obtained, later discovery of previously unknown problems may result in restrictions of the product, including withdrawal of the product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. Even if we obtain governmental approval, a marketed product, its respective manufacturer and its manufacturing facilities are subject to unannounced inspections by the FDA and must comply with the FDA’s cGMP and other regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If a manufacturer fails to comply with any of the manufacturing regulations, it may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution. Other countries also impose similar manufacturing requirements. Our promotional materials and sales activities are governed by FDA regulation. The FDA may require us to withdraw promotional material, to issue corrected material, or to cease promotion resulting in loss of credibility with our customers, reduced sales revenue or increased costs. If we fail to attract and retain key employees, the development and commercialization of our products may be adversely affected. We depend heavily on the principal members of our scientific and management staff. To the extent that we lose key personnel, our ability to develop products and become profitable may suffer. The risk of being unable to retain key personnel may be increased by the fact that we have not executed long-term employment contracts with our employees. Our future success will also depend in large part on our ability to attract and retain other highly qualified scientific and management personnel. We face competition for personnel from other companies, academic institutions, government entities and other organizations. We have operations in Salt Lake City, Utah, Parsippany, New Jersey, Mississauga, Ontario and Toronto, Ontario. We also have executive officers at each of these locations. Our future success will depend in part on how well we are able to integrate each of their efforts with the operations of the Company and how successful we are in managing personnel who are working on the same program but are spread out at various geographic locations. 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. Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends in large part upon our ability to attract and retain highly qualified managerial personnel. We have historically been highly dependent on Dr. Hunter Jackson, the founder of our company and our only Chairman, Chief Executive Officer and President. Dr. Jackson has held these offices since the founding of NPS to November 2005. In November 2005, Dr. N. Anthony Coles joined NPS as President and Chief Operating Officer and continues to hold these offices. Dr. Jackson continues to serve as our Chairman and Chief Executive Officer and will hold these offices until May 11, 2006, at which time he will retire. On May 11, 2006, Dr. Coles will become our Chief Executive Officer. Drs. Jackson and Coles are working together closely to ensure an effective transition. Dr. Coles will continue after May 11, 2006 to work with our management team to accomplish, among other things, a successful transition of leadership. In addition to Dr. Coles, we have hired other key members of our management team over the past few years. Our future success depends on a successful management transition and will also depend on our continuing to attract, retain and motivate highly skilled management team members. 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. The clinical testing and commercial use of pharmaceutical products involves significant exposure to product liability claims. We have obtained limited product liability insurance coverage for our clinical trial on humans, however, our insurance coverage may be insufficient to protect us against all product liability damages. Further, liability insurance coverage is becoming increasingly expensive and we might not be able to obtain or maintain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us against product liability damages. Regardless of merit or eventual outcome, liability claims may result in decreased demand for a future product, injury to reputation, withdrawal of clinical trial volunteers, loss of revenue, costs of litigation, distraction of management and substantial monetary awards to plaintiffs. Additionally, if we are required to pay a product liability claim, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and our business and results of operations will be adversely affected. Our operations involve hazardous materials and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business. Our research and development activities involve the controlled use of hazardous materials, radioactive compounds and other potentially dangerous chemicals and biological agents. Although we believe our safety procedures for these materials comply with governmental standards, we cannot entirely eliminate the risk of accidental contamination or injury from these materials. We currently have insurance, in amounts and on terms typical for companies in businesses that are similarly situated, that could cover all or a portion of a damage claim arising from our use of hazardous and other materials. However, if an accident or environmental discharge occurs, and we are held liable for any resulting damages, the associated liability could exceed our insurance coverage and our financial resources. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure, new SEC regulations and Nasdaq National Market rules are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and management time related to compliance activities. In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed and we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such action could adversely affect our financial results and the market price of our common stock. 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. You should consider an investment in our common stock as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. We receive only limited attention by securities analysts and frequently experience an imbalance between supply and demand for our common stock. The market price of our common stock has been highly volatile and is likely to continue to be volatile. Factors affecting our common stock price include: ? fluctuations in our operating results; ? announcements of technological innovations or new commercial products by us, our collaborators or our competitors; ? published reports by securities analysts; ? the progress of our and our collaborators’ clinical trials, including our and our collaborators’ ability to produce clinical supplies of our product candidates on a timely basis and in sufficient quantities to meet our clinical trial requirements; ? governmental regulation and changes in medical and pharmaceutical product reimbursement policies; ? developments in patent or other intellectual property rights; ? publicity concerning the discovery and development activities by our licensees; ? public concern as to the safety and efficacy of drugs that we and our competitors develop; and ? general market conditions. Antitakeover provisions in our Certificate of Incorporation, Bylaws, stockholder rights plan and under Delaware law may discourage or prevent a change of control. Provisions of our Certificate of Incorporation and Bylaws and Section 203 of the Delaware General Corporation Law could delay or prevent a change of control of us. For example, our Board of Directors, without further stockholder approval, may issue preferred stock that could delay or prevent a change of control as well as reduce the voting power of the holders of common stock, even to the extent of losing control to others. In addition, our Board of Directors has adopted a stockholder rights plan, commonly known as a “poison pill,” that may delay 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. Additional equity financings or other share issuances by us could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market and the sale of shares issued in connection with strategic alliances, or the perception that such additional sales could occur, could cause the market price of our common stock to drop. 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. Our ability to make interest payments on and to repay at maturity or refinance our 3% Convertible Notes due 2008 will depend on our ability to generate sufficient cash. We have never generated positive annual cash flow from our operating activities, and we may not generate or sustain positive cash flows from operations in the future. Our ability to generate sufficient cash flow will depend on our ability, or the ability of our strategic partners, to successfully develop and obtain regulatory approval for new products and to successfully market these products, as well as the results of our research and development efforts and other factors, including general economic, financial, competitive, legislative and regulatory conditions, many of which are outside of our control. Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes. The conversion of some or all of the notes will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants. 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. In December 2004, we completed a private placement of $175.0 million in secured 8.0% Notes due March 30, 2017, or Secured Notes. The Secured Notes are non-recourse to us and are secured by certain royalty and related rights of the company under our agreement with Amgen. Additionally, the principal sources for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen. If the revenues received from Amgen are insufficient to cover the interest and other payments due under the secured Notes we would have to either make the payments out of available cash resources or forfeit our rights to royalties and other rights under the Amgen agreement. If we elect to make the payments our cash resources would be significantly reduced and we may not have sufficient cash resources to fund our programs and operations. If we do not make the payments due under the Secured Notes then we risk losing the future revenue stream from Amgen for sales of cinacalcet HCl which could adversely effect future cash resources and we would lose rights to the technology licensed to Amgen under the Amgen agreement.
PREOS® is a registered trademark owned by NPS Pharmaceuticals, Inc.
I like this too!! by: landrytrader (53/M/Johnstown, PA) Long-Term Sentiment: Strong Buy 03/10/06 05:02 pm Msg: 6760 of 7857
09-Mar-06 13:18 ET Trader In Play NPS Pharma: Preview of PDUFA date (NPSP) 13.97 -0.28: NPS Pharma's PDUFA date for their osteoporosis treatment Preos is scheduled for March 10. What are the analysts saying? Susquehanna believes there is a 60% probability of outright approval, with stock then increasing to approx $17.50; 30% probability of an approvable letter, with stock then decreasing to approx $12.50; and a 10% probability of outright rejection, with stock then decreasing to approx $7... Merrill Lynch noting that although The Committee for Medicinal Products (CHMP) of the European Medicines Agency (EMEA) recommended approval of the drug, they continue to believe there is risk that Preos will receive an Approvable letter by FDA in the US and that approval will be delayed. However, at the current price, the firm believes the stock is already pricing in the risk that Preos approval will be delayed. Maintains Buy... Citigroup believes the PDUFA date represents a trading oppty and further expects that Preos is an FDA-approvable product. Based on historical trading patterns they have observed, the firm believes a non-approvable FDA letter would cause significant downside on the stock in the range of 40%-50% while a full approval could generate 35%-40% upside on the stock based on historical trading patterns they've observed. Firm believes the stock reaction to an "approvable" letter will depend on what the FDA is requesting as contingencies for a final approval. If there remains only relatively minor tasks to be completed such as final label negotiations, they believe the potential upside on the stock may be more muted, but still with potential upside of 20%-25%. Maintains Buy and $20 target.
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Tex, not trying to heckle and not trying to discourage and vector vest isn't always accurate just trying to shed a little different light.
VectorVest Stock Analysis of N P S Pharm as of 4/13/2006
This report has five major sections. Capital Appreciation Analysis Dividend Analysis Price-Volume Data Sales / Market Capitalization Information Summary
The ticker symbol for N P S Pharm is NPSP. NPSP is traded on the NASDAQ - (xO) and options are available for this stock
Business: NPS PHARMACEUTICALS INC, (NPSP) discovers, develops and intends to commercialize small molecule drugs and recombinant proteins, primarily for bone, mineral and central nervous system disorders. The company's two most advanced product candidates focus on bone and mineral disorders. Business Sector: NPSP has been assigned to the Drug Business Sector. VectorVest classifies stocks into over 200 Industry Groups and 40 Business Sectors. Industry Group: NPSP has been assigned to the Drug (Biomedical\Genetic) Industry Group. VectorVest classifies stocks into over 200 Industry Groups and 40 Business Sectors.
Capital Appreciation Analysis Back to top
Value: Value is a measure of a stock's current worth. NPSP has a current Value of $1.49 per share. Therefore, it is overvalued compared to its Price of $9.13 per share. Value is computed from forecasted earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Value increases when earnings, earnings growth rate and profitability increase, and when interest and inflation rates decrease. VectorVest advocates the purchase of undervalued stocks. At some point in time, a stock's Price and Value always will converge.
RV (Relative Value): RV is an indicator of long-term price appreciation potential. NPSP has an RV of 0.45, which is very poor on a scale of 0.00 to 2.00. This indicator is far superior to a simple comparison of Price and Value because it is computed from an analysis of projected price appreciation three years out, AAA Corporate Bond Rates, and risk. RV solves the riddle of whether it is preferable to buy High growth, High P/E stocks, or Low growth, Low P/E stocks. VectorVest favors the purchase of stocks with RV ratings above 1.00.
RS (Relative Safety): RS is an indicator of risk. NPSP has an RS rating of 0.52, which is poor on a scale of 0.00 to 2.00. RS is computed from an analysis of the consistency and predictability of a company's financial performance, debt to equity ratio, sales volume, business longevity, price volatility and other factors. A stock with an RS rating greater than 1.00 is safer and more predictable than the average stock in the VectorVest database. VectorVest favors the purchase of stocks of companies with consistent, predictable financial performance.
RT (Relative Timing): RT is a fast, smart, accurate indicator of a stock's price trend. NPSP has a Relative Timing rating of 0.49, which is very poor on a scale of 0.00 to 2.00. RT is computed from an analysis of the direction, magnitude, and dynamics of a stock's price movements over one day, one week, one quarter and one year time periods. Once a stock's price has established a strong trend, it is expected to continue in that trend for the short-term. If a trend dissipates, RT will gravitate toward 1.00. RT will explode from bottoms, dive from tops, and reflect changes in price momentum. VectorVest favors the purchase of stocks with RT ratings above 1.00.
VST (VST-Vector): VST is the master indicator for ranking every stock in the VectorVest database. NPSP has a VST rating of 0.49, which is very poor on a scale of 0.00 to 2.00. VST is computed from the square root of a weighted sum of the squares of RV, RS, and RT. Stocks with the highest VST ratings have the best combinations of Value, Safety and Timing. These are the stocks to own for above average, long-term capital appreciation. VectorVest advocates the purchase of safe, undervalued stocks rising in price.
Recommendation (REC): VectorVest gives a Buy, Sell, Hold recommendation on every stock, every day. NPSP has a Sell recommendation. REC reflects the cumulative effect of all the VectorVest parameters working together. These parameters are designed to help investors buy safe, undervalued stocks rising in price. They also help investors avoid or sell risky, overvalued stocks falling in price. VectorVest recommends that investors buy high VST-Vector, Buy-rated stocks in rising markets.
Stop (Stop-Price): Stop is an indicator of when to sell a long position or cover a short position. NPSP has a Stop of $10.14 per share. This is $1.01 above NPSP's current closing Price. A stock's Stop is computed from a 13 week moving average of its closing prices, and is fine-tuned according to the stock's fundamentals. High RV, high RS stocks have lower Stops, and low RV, low RS stocks have higher Stops. In the VectorVest system, a stock gets a 'B' or 'H' recommendation if its Price is above its Stop and an 'S' recommendation if its Price is below its Stop.
GRT (Earnings Growth Rate): GRT reflects a company's one to three year forecasted earnings growth rate in percent per year. NPSP has a forecasted Earnings Growth Rate of 27.00%, which VectorVest considers to be excellent. GRT is computed from historical, current and forecasted earnings data. It is updated each week for every stock in the VectorVest database. GRT often foretells a stock's future price trend. If a stock's GRT trend is upward, the stock's price will likely rise. If GRT is trending downward, the stock's Price will probably fall. VectorVest favors the purchase of stocks whose GRT is rising and is greater than the sum of current inflation and interest rates, (9.74%).
EPS (Earnings per Share): EPS stands for leading 12 months Earnings Per Share. NPSP has a forecasted EPS of $-1.64 per share. VectorVest determines this forecast from a combination of recent earnings performance and traditional fiscal and/or calendar year earnings forecasts.
P/E (Price to Earnings Ratio): P/E is a popular measure of stock valuation which shows the dollars required to buy one dollar of earnings. NPSP has a P/E of -5.57. This ratio may be deemed to be high or low depending upon your frame of reference. The average P/E of all the stocks in the VectorVest database is 28.63. P/E is computed daily using the formula: P/E = Price/EPS.
EY (Earnings Yield): EY reflects earnings per share as a percent of Price. EY is related to P/E via the formula, EY = 100 / (P/E), and may be used in place of P/E as a measure of valuation. EY has the advantages that it is always determinate and can reflect negative earnings. NPSP has an EY of -17.93 percent. This is below the current average of 3.50% for all the stocks in the VectorVest database. EY equals 100 x (EPS/Price).
GPE (Growth to P/E Ratio): GPE is another popular measure of stock valuation. It compares earnings growth rate to P/E ratio. NPSP has a GPE rating of -4.84. High growth stocks are believed to be able to justify high P/E ratios. A stock is commonly considered to be undervalued when GPE is greater than 1.00 and overvalued when GPE is below 1.00. Unfortunately, this rule of thumb does not take into account the effect of interest rates on P/E ratios. The operative GPE ratio of 1.00 is valid when and only when interest rates equal 10%. With long-term interest rates currently at 6.14%, the operative GPE ratio is 0.38. Therefore, NPSP may be considered to be overvalued.
Dividend Analysis Back to top
DIV (Dividend): VectorVest reports annual, regular, cash dividends as indicated by the most recent payments. Special distributions, one-time payments, stock dividends, etc., are not generally included in DIV. NPSP does not pay a dividend.
DY (Dividend Yield): DY reflects dividend per share as a percent of Price. NPSP does not pay a dividend, so it does not have a Dividend Yield rating. . DY equals 100 x (DIV/Price). It is useful to compare DY with EY. If DY is not significantly lower than EY, the dividend payment may be in jeopardy.
DS (Dividend Safety): DS is an indicator of the assurance that regular cash dividends will be declared and paid at current or at higher rates for the foreseeable future. NPSP does not pay a dividend, so it does not have a Dividend Safety rating . Stocks with DS values above 75 typically have RS values well above 1.00 and EY levels that are much higher than DY.
DG (Dividend Growth Rate): Dividend Growth is a subtle yet important indicator of a company's financial performance. It also provides some insight into the board's outlook on the company's ability to increase earnings. NPSP does not pay a dividend, so it does not have a Dividend Growth rating .
YSG (YSG-Vector): YSG is an indicator which combines DIV, DY and DG into a single value, and allows direct comparison of all dividend-paying stocks in the database. NPSP does not pay a dividend, so it does not have a YSG rating . Stocks with the highest YSG values have the best combinations of Dividend Yield, Safety and Growth. These are the stocks to buy for above average current income and long-term growth.
Price-Volume Data Back to top
Price: NPSP closed on 4/13/2006 at $9.13 per share
Open: NPSP opened trading at a price of $8.92 per share on 4/13/2006.
High: NPSP traded at a High price of $9.28 per share on 4/13/2006.
Low: NPSP traded at a Low price of $8.74 per share on 4/13/2006
Close: NPSP closed trading at price $9.13 per share on 4/13/2006. (Close is also called Price in the VectorVest system)
Range: Range reflects the difference between the High and Low prices for the day. NPSP traded with a range of $0.54 per share on 4/13/2006.
$Change: NPSP closed up 0.15 from the prior day's closing Price.
%PRC: NPSP's Price changed 1.67% from the prior day's closing price.
Volume: NPSP traded 574,160 shares on 4/13/2006.
AvgVol: AvgVol is the 50 day moving average of daily volume as computed by VectorVest. NPSP has an AvgVol of 1,153,300 shares traded per day.
%Vol: %Vol reflects the percent change in today's trading volume as compared to the AvgVol. %Vol equals ((Volume - AvgVol) / AvgVol ) * 100. NPSP had a %Vol of -50.22% on 4/13/2006
CI (Comfort Index): CI is an indicator which reflects a stock's ability to resist severe and/or lengthy price declines. NPSP has a CI rating of 0.37, which is very poor on a scale of 0.00 to 2.00. CI is quite different from RS in that it is based solely upon a stock's long-term price history. VectorVest advocates the purchase of high CI stocks.
Sales / Market Capitalization Information Back to top
Sales: NPSP has annual sales of $12,000,000.00
Sales Growth: Sales Growth is the Sales Growth Rate in percent over the last 12 months. NPSP has a Sales Growth of 301.00% per year. This is excellent. Sales Growth is updated each week for every stock. It is often useful to compare Sales Growth to Earnings Growth to gain an insight into a company's operations.
Sales Per Share (SPS): NPSP has annual sales of $0.28 per share. SPS can be used as a measure of valuation when comparing stocks within an Industry Group.
Price to Sales Ratio (P/S): NPSP has a P/S of 32.74. This ratio is also used as a measure of valuation. Here, too, it is useful when comparing stocks within an Industry Group.
Shares: NPSP has 46,000,000.00 shares of stock outstanding.
Market Capitalization: NPSP has a Market Capitalization of $420,000,000.00. Market Capitalization is calculated by multiplying price times shares outstanding.
Summary Back to top
NPSP is overvalued compared to its Price of $9.13 per share, has below average safety, and is currently rated a Sell.
The basic strategy of VectorVest is to buy Low risk, High reward stocks. We suggest that Prudent investors buy enough High Relative Value, High Relative Safety stocks to keep the overall RV and RS ratings of their portfolios above 1.00. As you do this, you'll find that your risk will go down and your investment performance will improve.
-------------------- Damn, if he wasn't right. Posts: 391 | From: Tallinn, Estonia | Registered: Aug 2004
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