Miravant Medical Technologies

(Exact name of Registrant as specified in its charter)

Delaware	77-0222872
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

336 Bollay Drive, Santa Barbara, California 93117

(Address of principal executive offices, including zip code)

(805) 685-9880

(Registrant’s telephone number, including area code)

 

 

 

 

 

 

 

	PART I
Item 1.	Business	4
Item 2.	Properties	25
Item 3.	Legal Proceedings	25
Item 4.	Submission of Matters to a Vote of Security-Holders	25
	PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholders Matters	26
Item 6.	Selected Consolidated Financial Data	27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A.	Qualitative and Quantitative Disclosures About Market Risk	65
Item 8.	Financial Statements and Supplementary Data	65
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	94
Item 9A.	Controls and Procedures	94
Item 9B.	Other Information	94
	PART III
Item 10.	Directors and Executive Officers of the Registrant	95
Item 11.	Executive Compensation	95
Item 12.	Security Ownership of Certain Beneficial Owners and Management	95
Item 13.	Certain Relationships and Related Transactions	95
Item 14.	Principal Accountant Fees and Services	95
	PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	96
	Signatures	101

 

 

·

Our primary focus from 2003 through 2004 was the preparation and filing of our NDA for marketing approval of PHOTREX (formerly known as SnET2), a new drug for the treatment of AMD and the related responses to requests by the FDA. In January 2003, we announced our plans to move forward with preparing our first NDA submission of PHOTREX for the treatment of AMD. We submitted the NDA on March 31, 2004, seeking marketing approval based on clinical results in the “per protocol” study population. The per protocol population consists of those patients who received the minimum exposure to the PHOTREX treatment regimen pre-specified in the clinical study protocol, comprising a sub-population of patients in the total study population. The NDA was accepted by the FDA for filing on June 1, 2004 and was given a priority review designation. On September 30, 2004, we announced that the FDA had issued an Approvable Letter for our NDA submission for PHOTREX. The Approvable Letter outlined the conditions for final marketing approval, which included a request for an additional confirmatory clinical trial, as well as certain other requirements. In February 2005, we announced that we would conduct a confirmatory Phase III clinical trial based on a Special Protocol Assessment by the FDA;

·

In March 2005, we entered into a Note and Warrant Purchase Agreement, or the March 2005 Debt Agreement, with the March 2005 Lender. The March 2005 Debt Agreement allows us to borrow up to $1.0 million per month, with any unused monthly borrowings to be carried forward. The maximum aggregate loan amount under the March 2005 Debt Agreement is $15.0 million with the last available borrowing in June 2006. The March 2005 Lender obligation to fund each borrowing request is subject to material conditions described in the March 2005 Debt Agreement. In addition, the March 2005 Lender may terminate its obligations under the March 2005 Debt Agreement at any time if Miravant in the reasonable judgment of the March 2005 Lender, is not meeting its business objectives and is subject to negative covenants and other restrictions. Each Note and accrued interest, if any, will be convertible into shares of our Common Stock at a conversion price of one hundred ten percent (110%) of the average monthly closing price of the month preceding the issuance of each Note. The notes earn interest quarterly at the prime rate plus three percent (3%) and at our option and subject to certain restrictions, we may make interest payments in cash or in shares of Common Stock. The borrowings are secured by our assets to the extent of the amount borrowed. In connection with each borrowing under the March 2005 Debt Agreement, we will issue a warrant to purchase one-quarter (1/4) of a share of Miravant Common Stock for each convertible share of Common Stock issued. The exercise price of each warrant will be equal to one hundred ten percent (110%) of the average monthly closing price of the month preceding the issuance of each Note. Each warrant will terminate on December 31, 2013, unless previously exercised. We have also agreed to provide the March 2005 Lender certain registration rights in connection with this transaction;

·

In July 2004, we entered into a Collaboration Agreement and Securities Purchase Agreement with Advanced Cardiovascular Systems, Inc., a wholly owned subsidiary of Guidant Corporation, pursuant to which we sold 1,112,966 shares of Series A Convertible Preferred Stock, resulting in proceeds to us of $3.0 million. Additionally, we can receive up to $4.0 million in additional convertible preferred stock investments upon the completion of certain milestones related to our cardiovascular program. The $3.0 million of Preferred Stock purchased by Guidant is convertible into our Common Stock at $2.70 per share and includes registration rights for the underlying Common Stock. In addition, we are required to provide additional funding of at least $5.0 million over the period of the collaboration and the funds invested by Guidant must be spent on specified cardiovascular programs. The agreements also contain various covenant and termination provisions as defined by the agreements;

·	In April 2004, we entered into a Securities Purchase Agreement with a group of institutional investors, pursuant to which we sold 4,564,000 shares of Common Stock at $2.25 per share, resulting in proceeds to us of approximately $10.3 million;

·

In February 2004, we entered into an Unsecured Convertible Debenture Purchase Agreement, or the February 2004 Debt Agreement, with certain private accredited investors, or the February 2004 Lenders. Under the February 2004 Debt Agreement we issued $2.0 million worth of convertible debentures, convertible at $2.00 per share. As of March 14, 2005, all $2.0 million of the Notes issued have been converted into 1.0 million shares of Common Stock; and

 

·

In August 2003, we entered into a Convertible Debt and Warrant Purchase Agreement, or the August 2003 Debt Agreement, with certain private accredited investors, or the 2003 Lenders. Under the August 2003 Debt Agreement we borrowed $6.0 million, with interest accruing at 8% per year and due and payable quarterly, with the first interest payment due on October 1, 2003. The principal amount matures on August 28, 2006 and the debentures are convertible into shares of our Common Stock at a rate of one share per dollar of debt, subject to adjustment. At our option and subject to certain restrictions, we may make interest payments in cash or in shares of Common Stock. Upon the occurrence of certain events of default, the holders of the convertible debentures may require that they be repaid prior to maturity. In connection with the August 2003 Debt Agreement, we issued warrants to each 2003 Lender to purchase a total of 4,750,000 shares of our Common Stock, each with an expiration date of August 28, 2008 and an exercise price of $1.00 per share. As of March 14, 2005, $2.6 million of the notes have been converted into 2,600,000 shares of Common Stock and warrants covering 1,425,000 shares of Common Stock have been exercised.

 

PhotoPoint® Drug	Indication	Development Status
PHOTREX™ (rostaporfin; formerly known as SnET2)	Wet age-related macular degeneration, or AMD	FDA Approvable Letter, September 2004; confirmatory Phase III clinical trial to be initiated in 2005
MV0633	Cardiovascular disease: atherosclerosis, vulnerable plaque, restenosis	Advanced preclinical, IND expected to be submitted in 2005
MV9411	Plaque psoriasis	Phase II clinical trial completed, under data analysis and evaluation
MV2101	Vascular access graft disease in hemodialysis patients	Advanced preclinical
MV6401	Solid tumors (treatment of cells and neovasculature, or new blood vessels)	Preclinical

 

 

 

 

·	The May 1996 agreement is terminated;

·	Iridex will be our exclusive provider of the devices developed under the co-development and distribution agreement at costs as set forth in the agreement; and

·	Iridex will have an exclusive, worldwide license to make, distribute and sell all co-developed devices, on which Iridex will pay us royalties.

 

·	To make, use, sell, license or sublicense certain photoselective compounds, including SnET2 covered by certain Toledo patents and patent applications, or not covered by Toledo patents or patent applications but owned or licensed to Toledo and which Toledo has the right to sublicense;

·	To make, use, sell, license or sublicense certain of the compounds for which we have provided Toledo with financial support; and

·	To make, use or sell any invention claimed in Toledo patents or applications and any composition, method or device related to compounds conceived or developed by Toledo under research funded by Miravant.

 

 

·	Hospira remains our exclusive manufacturer and supplier of our worldwide requirements for SnET2 FDF;

·	Hospira will not develop or supply drug formulations or services for use in any photodynamic therapy applications for any other company; and

·	The agreement term is indefinite except that it may be terminated ten years after the first commercial sale of SnET2 FDF.

·	Record owner of forty-one issued United States patents, expiring 2010 through 2021;

·	Record owner of eight issued foreign patents, expiring 2012 through 2019;

·	Exclusive license rights under nineteen issued United States patents, primarily pharmaceutical, expiring 2006 through 2017;

·	Exclusive license rights under seven issued foreign patents, expiring 2006 through 2017;

·	Co-owner of three additional issued patents, expiring 2015 through 2017; and

·	Holder of a number of United States and related foreign patent applications filed and pending, relating to photoselective compounds, light devices and methods.

·	Adequate steps have not been taken to commercialize such inventions;

·	Such action is necessary to meet public health or safety needs; or

·	Such action is necessary to meet requirements for public use under federal regulations.

 

·	Preclinical studies (laboratory and animal tests);

·	The submission to the FDA of an application for an IND exemption, which must become effective before human clinical trials may commence;

·	Adequate and well-conducted clinical trials to establish safety and efficacy of the drug for its intended use;

·	The submission to the FDA of an NDA; and

·	The review and approval of the NDA by the FDA before any commercial sale or shipment of the drug.

 

 

 

 

·	Phase I represents the initial introduction of the drug to a small group of humans to test for safety, identify adverse effects, dosage tolerance, absorption, distribution, metabolism, excretion and clinical pharmacology and, if possible, to gain early evidence of effectiveness;

·	Phase II involves studies in a limited sample of the intended patient population to assess the efficacy of the drug for a specific indication, to determine dose tolerance and optimal dose range and to identify possible adverse effects and safety risks;

·

Once a compound is found to have some efficacy and to have an acceptable safety profile in Phase II evaluations, Phase III clinical trials are initiated for definitive clinical safety and efficacy studies in a broader sample of the patient population at multiple study sites. The results of the preclinical studies and clinical trials are submitted to the FDA in the form of an NDA for marketing approval;

·	Once the NDA is submitted and reviewed by the FDA, the FDA may require additional information or an additional confirmatory Phase III clinical trial prior to approval, if approved at all.

 

 

 

 

 

 

 

Name	Age	Position
Gary S. Kledzik, Ph.D.	55	Chairman of the Board and Chief Executive Officer
David E. Mai	60	President of Miravant Medical Technologies, Miravant Systems, Inc., Miravant Pharmaceuticals, Inc. and Director
John M. Philpott	44	Chief Financial Officer, Treasurer and Assistant Secretary

 

 

 

 

 

 

2004:		High			Low
Fourth quarter		$	1.71		$	0.90
Third quarter			2.87			1.56
Second quarter			3.70			1.61
First quarter			4.10			1.19
2003:
Fourth quarter		$	1.35		$	0.99
Third quarter			1.44			0.90
Second quarter			1.29			0.92
First quarter			1.57			0.71

 

(1)	See Note 10 of Notes to Consolidated Financial Statements for information regarding the gain on sale of investment in affiliate and non-cash losses in investment in affiliate.

(2)	See Note 2 of the Notes to Consolidated Financial Statements for information regarding the gain on retirement of debt.

(3)	See Note 1 of Notes to Consolidated Financial Statements for information concerning the computation of net loss per share.

(4)	See Notes 2 and 3 of Notes to Consolidated Financial Statements for information concerning the changes in cash and marketable securities.

 

 

·	A $15.0 million convertible line-of-credit financing completed in March 2005;

·

A Collaboration Agreement and Securities Purchase Agreement with Guidant Corporation, or Guidant, completed July 1, 2004, providing an equity investment of $3.0 million upon signing and two additional investments of $2.0 million each upon the completion of certain milestones related to our cardiovascular program;

·	A $10.3 million equity financing completed April 23, 2004;

·	A $2.0 million convertible debt financing completed in February 2004;

·	Warrant exercises through March 15, 2005 providing proceeds of $1.4 million; and

·	The sale of our investment in an affiliate, Xillix Technologies Corp., or Xillix, in December 2003, providing net cash proceeds of $1.6 million.

·	Commencement of a confirmatory Phase III clinical trial for AMD based on the Approvable Letter from the FDA;

·	Development activities in preparation for an Investigational New Drug application, or IND, and Phase I clinical trial for our cardiovascular program;

·	Commencement of activities related to drug and device manufacturing in support of the confirmatory Phase III clinical trial for AMD and in preparation of our cardiovascular Phase I clinical trial; and

·	Review and follow-up of our Phase II dermatology clinical trial.

 

Program		Description/Indication		Phase of Development		Estimated date of Phase
Ophthalmology		AMD (PHOTREX)		Commencement of confirmatory Phase III clinical trial		Q2/Q3 2005
		New drug compounds		Research studies		Completed
Dermatology		Psoriasis (MV9411)		Close out of Phase II		Q2 2005
Cardiovascular disease		VP and Restenosis (MV0633 and other compounds)		Continuation of Preclinical studies and IND submission		**
		AV Graft (MV2101)		Continuation of Preclinical studies		**
Oncology		Tumor research		Continuation of Research studies		**
		(MV 6401)

 

Consolidated Revenues		2004			2003			2002
License - contract research and development		$	—		$	—		$	20,000
Bulk active pharmaceutical ingredient sales			—			—			479,000
Total revenues		$	—		$	—		$	499,000

·	Preparation for submission of an NDA for PHOTREX in AMD;

·	Work associated with the development of new devices, delivery systems, drug compounds and formulations for the dermatology and cardiovascular programs; and

Program		2004			2003			2002
Direct costs:
Ophthalmology		$	1,897,000		$	1,522,000		$	239,000
Cardiovascular disease			853,000			294,000			1,136,000
Dermatology			65,000			220,000			503,000
Total direct costs		$	2,615,000		$	2,036,000		$	1,878,000
Indirect costs			4,822,000			5,580,000			7,671,000
Total research and development costs		$	7,637,000		$	7,616,000		$	9,549,000

Payments due by Period		Debt (1)			Building and Equipment Leases (2)			Total
2005		$	—		$	58,000		$	58,000
2006			3,400,000			126,000			3,526,000
2007			—			3,000			3,000
2008			6,300,000			3,000			6,303,000
2009			—			—			—
Total Contractual Obligations		$	9,700,000		$	190,000		$	9,890,000

(1)	The debt represents $3.4 million of borrowings under the August 2003 Agreement, which has a due date of August 28, 2006 and $6.3 million of borrowings under the 2002 Debt Agreement, which has a due date of December 31, 2008.

(2)

The amounts recorded for building and equipment leases consist of a lease on one building and various office equipment. The lease of our primary facility and storage area are month-to-month and are not presented in the table shown above. Should these two facilities be maintained through 2005, the rental costs should approximate an additional $620,000 per year. In addition, we are aware that the lessors can give us a 30-day notice at any time requiring us to vacate.

 

 

 

 

 

 

 

 

·	Our ability to successfully complete the confirmatory Phase III clinical trial for PHOTREX in AMD as outlined by the Approvable Letter from the FDA;

·	Our ability to resubmit our NDA and ultimately obtain regulatory approval for PHOTREX;

·	The cost of performing a confirmatory Phase III clinical trial and pre-commercialization activities;

·	Our ability to establish additional collaborations and/or license PHOTREX or our other new products;

·	Our ability to continue our efforts to conserve our use of cash, while continuing to advance programs;

·	Our ability to continue to borrow under the March 2005 Debt Agreement;

·	Our ability to meet our obligations under the December 2002 Debt Agreement, August 2003 Debt Agreement, the Securities Purchase Agreement and Collaboration Agreement with Guidant and the March 2005 Debt Agreement;

·	Our ability to receive future equity investments from Guidant by meeting the milestones established under our Collaboration Agreement;

·	The viability of PHOTREX for future use;

·	Our ability to raise equity financing or use common stock for employee and consultant compensation;

·	Our ability to regain our listing status on Nasdaq or other national stock market exchanges;

·	Our ability to file and maintain IND’s for new drug and disease indications;

·	The pace of scientific progress and the magnitude of our research and development programs;

·	The scope and results of preclinical studies and clinical trials;

·	The costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims;

·	The costs involved in any potential litigation;

·	Competing technological and market developments; and

·	Our dependence on others for development and commercialization of our potential products.

·	Our ability and the cost to successfully complete the conditions required by the FDA which includes an additional confirmatory Phase III clinical trial;

·	Our ability to resubmit our NDA and ultimately obtain regulatory approval for PHOTREX

·	Our ability to continue to borrow and meet the requirements of the March 2005 Debt Agreement;

·	The potential future use of PHOTREX for ophthalmology or other disease indications;

·	Our ability to raise funds in the near future through public or private equity or debt financings, or establish collaborative arrangements or raise funds from other sources;

·	The potential for equity investments, collaborative arrangements, license agreements or development or other funding programs that are at terms acceptable to us, in exchange for manufacturing, marketing, distribution or other rights to products developed by us;

·	Our ability to meet the milestones and covenants established under our collaboration agreement with Guidant;

·	The future development and results of our Phase II dermatology clinical trial and our ongoing cardiovascular and oncology preclinical studies;

·	The amount of funds received from outstanding warrant and stock option exercises, if any; and

·	Our ability to maintain, renegotiate, or terminate our existing collaborative arrangements.

 

 

 

 

 

 

 

·	Our ability to successfully complete the confirmatory Phase III clinical trial for PHOTREX in AMD as outlined by the Approvable Letter from the FDA;

·	Our ability to resubmit our NDA and ultimately obtain regulatory approval for PHOTREX;

·	The cost of performing a confirmatory Phase III clinical trial and pre-commercialization activities;

·	Our ability to establish additional collaborations and/or license PHOTREX or our other new products;

·	Our ability to continue our efforts to conserve our use of cash, while continuing to advance programs;

·	Our ability to continue to borrow under the March 2005 Debt Agreement;

·	Our ability to meet our obligations under the December 2002 Debt Agreement, August 2003 Debt Agreement, the Securities Purchase Agreement and Collaboration Agreement with Guidant and the March 2005 Debt Agreement;

·	Our ability to receive future equity investments from Guidant by meeting the milestones established under our Collaboration Agreement;

·	The viability of PHOTREX for future use;

·	Our ability to raise equity financing or use common stock for employee and consultant compensation;

·	Our ability to regain our listing status on Nasdaq or other national stock market exchanges;

·	Our ability to file and maintain IND’s for new drug and disease indications;

·	The pace of scientific progress and the magnitude of our research and development programs;

·	The scope and results of preclinical studies and clinical trials;

·	The costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims;

·	The costs involved in any potential litigation;

·	Competing technological and market developments; and

·	Our dependence on others for development and commercialization of our potential products.

 

 

 

·	Our ability to demonstrate to the FDA that our products are safe and efficacious;

·	Our products may not be as efficacious as our competitors’ products;

·	Our ability to successfully complete the testing for any of our compounds within any specified time period, if at all;

·	Clinical outcomes reported may change as a result of the continuing evaluation of patients;

·	Data obtained from preclinical studies and clinical trials are subject to varying interpretations which can delay, limit or prevent approval by the FDA or other regulatory authorities;

·	Problems in research and development, preclinical studies or clinical trials that will cause us to delay, suspend or cancel clinical trials; and

·

As a result of changing economic considerations, competitive or new technological developments, market approvals or changes, clinical or regulatory conditions, or clinical trial results, our focus may shift to other indications, or we may determine not to further pursue one or more of the indications currently being pursued.

 

·	Our ability to negotiate acceptable collaborative arrangements;

·	Future or existing collaborative arrangements may not be successful or may not result in products that are marketed or sold;

·	Collaborative partners are free to pursue alternative technologies or products either on their own or with others, including our competitors, for the diseases targeted by our programs and products;

·	Our partners may fail to fulfill their contractual obligations or terminate the relationships described above, and we may be required to seek other partners, or expend substantial resources to pursue these activities independently; and

·	Our ability to manage, interact and coordinate our timelines and objectives with our strategic partners may not be successful.

·	The patent applications owned by or licensed to us may not result in issued patents;

·	Our issued patents may not provide us with proprietary protection or competitive advantages;

·	Our issued patents may be infringed upon or designed around by others;

·	Our issued patents may be challenged by others and held to be invalid or unenforceable;

·	The patents of others may prohibit us from developing our products as planned; and

·	Significant time and funds may be necessary to defend our patents.

·	We do not have contractual indemnification rights against the licensors of the various drug patents;

·	We may be required to obtain licenses under dominating or conflicting patents or other proprietary rights of others;

·	Such licenses may not be made available on terms acceptable to us, if at all; and

·	If we do not obtain such licenses, we could encounter delays or could find that the development, manufacture or sale of products requiring such licenses is foreclosed.

 

 

·	Successful completion of our research or product development efforts or those of our collaborative partners;

·	Successfully transforming our drugs or devices currently under development into marketable products;

·	Obtaining the required regulatory approvals;

·	Manufacturing our products at an acceptable cost and with appropriate quality;

·	Favorable acceptance of any products marketed; and

·	Successful marketing and sales efforts of our corporate partner(s).

·	Our ability and the cost to successfully complete the conditions required by the FDA which includes an additional confirmatory Phase III clinical trial;

·	Announcements concerning Miravant or our collaborators, competitors or industry;

·	Our ability to successfully establish new collaborations and/or license PHOTREX or our other new products;

·	The impact of dilution from past or future equity or convertible debt financings;

·	Our ability to meet the milestones and covenants established under our collaboration agreement with Guidant;

·	The results of our testing, technological innovations or new commercial products;

·	The results of preclinical studies and clinical trials by us or our competitors;

·	Technological innovations or new therapeutic products;

·	Our ability to regain our listing status on Nasdaq or other national stock market exchanges;

·	Public concern as to the safety, efficacy or marketability of products developed by us or others;

·	Comments by securities analysts;

·	The achievement of or failure to achieve certain milestones;

·	Litigation, such as from stockholder lawsuits or patent infringement; and

·	Governmental regulations, rules and orders, or developments concerning safety of our products.

 

 

·

The establishment and demonstration in the medical community of the safety and clinical efficacy of our products and their potential advantages over existing therapeutic products and diagnostic and/or imaging techniques. For example, if we are able to eventually obtain approval of our drugs and devices to treat cardiovascular restenosis we will have to demonstrate and gain market acceptance of this as a method of treatment over use of drug coated stents and other restenosis treatment options;

·	Pricing and reimbursement policies of government and third-party payors such as insurance companies, health maintenance organizations and other plan administrators; and

·	The possibility that physicians, patients, payors or the medical community in general may be unwilling to accept, utilize or recommend any of our products.

·	We are subject to the inherent risk that a governmental authority or third party may require the recall of one or more of our products;

·	We have not obtained product liability insurance that would cover a claim relating to the clinical or commercial use or recall of our products;

·	In the absence of product liability insurance, claims made against us or a product recall could result in our being exposed to large damages and expenses;

·	If we obtain product liability insurance coverage in the future, this coverage may not be available at a reasonable cost and in amounts sufficient to protect us against claims that could cause us to pay large amounts in damages; and

·	Liability claims relating to our products or a product recall could negatively affect our ability to obtain or maintain regulatory approval for our products.

 

·	The difficulty assimilating the operations, technology and personnel of the combined companies;

·	The disruption of our ongoing business, including loss of management focus on existing businesses and other market developments;

·	Problems retaining key technical and managerial personnel; expenses associated with the amortization of goodwill and other purchased intangible assets;

·	Additional operating losses and expenses of acquired businesses;

·	The impairment of relationships with existing employees, customers and business partners; and

·	Additional losses from any equity investments we might make.

·	Our stockholders can act at a duly called annual or special meeting but they may not act by written consent;

·	Special meetings of stockholders can only be called by our chief executive officer, president, or secretary at the written request of a majority of our Board of Directors; and

·	Stockholders also must give advance notice to the secretary of any nominations for director or other business to be brought by stockholders at any stockholders’ meeting.

·	Decreasing the price we, or any of our partners or licensees, receive for any of our products;

·	Preventing the recovery of development costs, which could be substantial; and

·	Minimizing profit margins.

 

·	Delays in obtaining approval or rejections due to regulatory review of each submitted new drug, device or combination drug/device application or product license application, as well as changes in regulatory policy during the period of product development;

·	If regulatory approval of a product is granted, such approval may entail limitations on the uses for which the product may be marketed;

·	If regulatory approval is obtained, the product, our manufacturer and the manufacturing facilities are subject to continual review and periodic inspections;

·	If regulatory approval is obtained, such approval may be conditional on the satisfaction of the completion of clinical trials or require additional clinical trials;

·	Later discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on such product or manufacturer, including withdrawal of the product from the market and litigation; and

·	Photodynamic therapy products have been categorized by the FDA as combination drug-device products. If current or future photodynamic therapy products do not continue to be categorized for regulatory purposes as combination products, then:

-	The FDA may require separate approval by regulatory authorities.

·	Foreign regulatory requirements governing testing, development, marketing, licensing, pricing and/or distribution of drugs and devices in other countries;

·	Our drug products may not qualify for the centralized review procedure or we may not be able to obtain a national market application that will be accepted by other European Union, or EU, member states;

·

Our devices must also meet the European Medical Device Directive effective in 1998. The Directive requires that our manufacturing quality assurance systems and compliance with technical essential requirements be certified with a CE Mark authorized by a registered notified body of an EU member state prior to free sale in the EU; and

·	Registration and approval of a photodynamic therapy product in other countries, such as Japan, may include additional procedures and requirements, preclinical and clinical studies, and may require the assistance of native corporate partners.

 

·	The ease of administration of our photodynamic therapy;

·	The degree of generalized skin sensitivity to light;

·	The number of required doses;

·	The safety and efficacy profile;

·	The selectivity of our drug for the target lesion or tissue of interest;

·	The type, cost and price of our light systems;

·	The cost and price of our drug; and

·	The amount reimbursed for the drug and device treatment by third-party payors.

 

·	Price reductions;

·	Lower levels of third-party reimbursements;

·	Failure to achieve market acceptance; and

·	Loss of market share.

·	Competitive treatments or diagnostic tools, either existing or those that may arise in the future;

·	Performance of our products and subsequent labeling claims; and

·	Actual patient population at and beyond product launch.

·	Our future capital and operational expenditures related to these matters may increase and become material;

·	We may also be subject to other present and possible future local, state, federal and foreign regulation;

·

Heightened public awareness and concerns regarding the growth in overall health care expenditures in the United States, combined with the continuing efforts of governmental authorities to contain or reduce costs of health care, may result in the enactment of national health care reform or other legislation or regulations that impose limits on the number and type of medical procedures which may be performed or which have the effect of restricting a physician’s ability to select specific products for use in certain procedures;

·

Such new legislation or regulations may materially limit the demand and manufacturing of our products. In the United States, there have been, and we expect that there will continue to be, a number of federal and state legislative proposals and regulations to implement greater governmental control in the health care industry;

·	The announcement of such proposals may hinder our ability to raise capital or to form collaborations; and

·	Legislation or regulations that impose restrictions on the price that may be charged for health care products or medical devices may adversely affect our results of operations.