##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from _________ to _________.
 Commission File Number 0-51110
 VIACELL, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware(State or Other Jurisdiction of
Incorporation or 
Organization)
    
    04-3244816(I.R.S. Employer Identification No.)
 245 First Street, Cambridge, MA(Address of Principal Executive Offices)
    
    02142(Zip Code)
 (617) 914-3400  (Registrants telephone number, including area code)
 
 þ o
  o o þ
 Yes
o No
þ




---



##### Table of Contents



ViaCell, Inc.
Quarterly Report on Form 10-Q
For the Fiscal Quarter Ended March 31, 2006
 NOTE ABOUT REFERENCES TO VIACELL
  NOTE ABOUT TRADEMARKS
 ® ® sm
 NOTE ABOUT FORWARD-LOOKING STATEMENTS
  2




---



##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited)Condensed Consolidated Balance Sheets  March 31, 2006 and December 31, 2005
    
    
    4Condensed Consolidated Statements of Operations  Three months ended March 31, 2006 and March 31, 2005
    
    
    5Condensed Consolidated Statements of Comprehensive Loss  Three months ended March 31, 2006 and March 31, 2005
    
    
    6Condensed Consolidated Statements of Cash Flows  Three months ended March 31, 2006 and March 31, 2005
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3.
    
    Defaults upon Senior Securities
    
    
    46Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    46Item 5.
    
    Other Information
    
    
    46Item 6.
    
    Exhibits
    
    
    46Signatures
    
    
    
    
    47EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
  3




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1  Financial Statements
 ViaCell, Inc.
 
 Condensed Consolidated Balance Sheets
(amounts in thousands)(unaudited)
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    31,429
    
    
    $
    33,138Short-term investments
    
    
    26,573
    
    
    
    27,406Accounts receivable, less allowances of $1,227 and $1,111 at March 31,
2006 and December 31, 2005, respectively
    
    
    12,727
    
    
    
    13,736Prepaid expenses and other current assets
    
    
    3,590
    
    
    
    2,679Restricted cash
    
    
    162
    
    
    
    162Total current assets
    
    
    74,481
    
    
    
    77,121Property and equipment, net
    
    
    8,593
    
    
    
    8,702Goodwill
    
    
    3,621
    
    
    
    3,621Intangible assets, net
    
    
    2,773
    
    
    
    2,823Restricted cash
    
    
    1,935
    
    
    
    1,932Other assets
    
    
    31
    
    
    
    31Total assets
    
    $
    91,434
    
    
    $
    94,230LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt obligations
    
    $
    1,108
    
    
    $
    1,543Accounts payable
    
    
    1,110
    
    
    
    1,141Accrued expenses
    
    
    9,080
    
    
    
    7,706Deferred revenue
    
    
    6,148
    
    
    
    5,785Total current liabilities
    
    
    17,446
    
    
    
    16,175Deferred revenue
    
    
    10,858
    
    
    
    9,930Deferred rent
    
    
    3,548
    
    
    
    3,876Contingent purchase price
    
    
    8,155
    
    
    
    8,155Long-term debt obligations, net of current portion
    
    
    69
    
    
    
    84Total liabilities
    
    
    40,076
    
    
    
    38,220Commitments and contingencies (Note 4)Stockholders equity:Preferred stock, $0.01 par value; authorized 5,000 shares at March 31, 2006
and December 31, 2005, none outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value; authorized 100,000 shares at March 31, 2006
and December 31, 2005; issued and outstanding 38,361 and 38,118 shares at
March 31, 2006 and December 31, 2005, respectively
    
    
    384
    
    
    
    381Additional paid-in capital
    
    
    229,314
    
    
    
    229,955Deferred compensation
    
    
    
    
    
    
    (1,087
    )Accumulated deficit
    
    
    (178,554
    )
    
    
    (173,443
    )Accumulated other comprehensive income
    
    
    214
    
    
    
    204Total stockholders equity
    
    
    51,358
    
    
    
    56,010Total liabilities and stockholders equity
    
    $
    91,434
    
    
    $
    94,230
  4




---



##### Table of Contents



ViaCell, Inc.
 
 Condensed Consolidated Statements of Operations
(amounts in thousands except per share data)
(unaudited)
 Three Months
    
    
    Three MonthsEnded March 31,
    
    
    Ended March 31,2006
    
    
    2005Processing and storage revenues
    
    $
    11,937
    
    
    $
    9,975Grant revenues
    
    
    144
    
    
    
    165Total revenues
    
    
    12,081
    
    
    
    10,140Operating expenses:Cost of processing and storage revenues
    
    
    2,328
    
    
    
    1,953Research and development
    
    
    3,466
    
    
    
    3,646Sales and marketing
    
    
    7,922
    
    
    
    5,569General and administrative
    
    
    4,638
    
    
    
    3,047Restructuring
    
    
    (181
    )
    
    
    121Total operating expenses
    
    
    18,173
    
    
    
    14,336Loss from operations
    
    
    (6,092
    )
    
    
    (4,196
    )Interest income (expense):Interest income
    
    
    724
    
    
    
    315Interest expense
    
    
    (26
    )
    
    
    (155
    )Total interest income, net
    
    
    698
    
    
    
    160Loss from operations before cumulative effect of
change in accounting
principle
    
    
    (5,394
    )
    
    
    (4,036
    )Cumulative effect of change in accounting principle
    
    
    283
    
    
    
    Net loss
    
    
    (5,111
    )
    
    
    (4,036
    )Accretion on redeemable convertible preferred stock
    
    
    
    
    
    
    987Net loss attributable to common stockholders
    
    $
    (5,111
    )
    
    $
    (5,023
    )Net loss per share:Net loss per common share, basic and diluted
    
    $
    (0.13
    )
    
    $
    (0.17
    )Weighted average shares used in basic and diluted
net loss per share computation
    
    
    38,295
    
    
    
    29,719
  5




---



##### Table of Contents



ViaCell, Inc.
 
 Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 Three Months
    
    
    Three MonthsEnded March 31,
    
    
    Ended March 31,2006
    
    
    2005Net loss
    
    $
    (5,111
    )
    
    $
    (4,036
    )Foreign currency translation adjustment
    
    
    10
    
    
    
    (42
    )Comprehensive loss
    
    $
    (5,101
    )
    
    $
    (4,078
    )
  6




---



##### Table of Contents



ViaCell, Inc.
 
 Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three Months Ended
    
    
    Three MonthsMarch 31,
    
    
    Ended March 31,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (5,111
    )
    
    $
    (4,036
    )Adjustments
to reconcile net loss to net cash (used
in) provided by operating activities:Depreciation and amortization
    
    
    559
    
    
    
    514Cumulative effect of change in accounting principle
    
    
    (283
    )
    
    
    Stock-based compensation
    
    
    711
    
    
    
    436Reserve for bad debt
    
    
    266
    
    
    
    58Non-cash interest expense on related party notes
    
    
    
    
    
    
    87Tenant improvement allowance
    
    
    60
    
    
    
    Other
    
    
    2
    
    
    
    22Changes in assets and liabilities:Accounts receivable
    
    
    747
    
    
    
    (1,156
    )Prepaid expenses and other current assets
    
    
    (906
    )
    
    
    1,198Accounts payable
    
    
    (51
    )
    
    
    623Accrued expenses
    
    
    1,209
    
    
    
    741Deferred revenue
    
    
    1,292
    
    
    
    2,343Deferred rent
    
    
    (235
    )
    
    
    1,222Net cash (used in) provided by operating activities
    
    
    (1,740
    )
    
    
    2,052Cash flows from investing activities:Purchases of property and equipment
    
    
    (400
    )
    
    
    (1,035
    )Proceeds from maturities of investments
    
    
    8,887
    
    
    
    4,477Purchase of investments
    
    
    (8,055
    )
    
    
    (9,579
    )Net cash provided by (used in) investing activities
    
    
    432
    
    
    
    (6,137
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    22
    
    
    
    622Net proceeds from sale of common stock in initial
public offering, net of offering costs
    
    
    
    
    
    
    53,291Repayments on credit facilities
    
    
    (437
    )
    
    
    (431
    )Repayment of notes payable to related party,
including accrued interest
    
    
    
    
    
    
    (15,510
    )Payments on capital lease principal
    
    
    (16
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (431
    )
    
    
    37,972Effect of change in exchange rates on cash
    
    
    30
    
    
    
    (105
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1,709
    )
    
    
    33,782Cash and cash equivalents, beginning of period
    
    
    33,138
    
    
    
    6,746Cash and cash equivalents, end of period
    
    $
    31,429
    
    
    $
    40,528
  7




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Organization and Nature of Business
 sm
     2. Summary of Significant Accounting Policies
 Basis of Presentation
  8




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed
Consolidated Financial Statements
(unaudited)
  Use of Estimates
  Stock-Based Compensation
   Three Months
    
    
    Three MonthsEnded March 31,
    
    
    Ended March 31,2006
    
    
    2005(pro
forma)Cost of processing and storage revenues
    
    $
    15
    
    
    $
    11Research and development
    
    
    104
    
    
    
    172Sales and marketing
    
    
    57
    
    
    
    194General and administrative
    
    
    535
    
    
    
    701Total stock-based compensation expense
    
    $
    711
    
    
    $
    1,078
 9




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
   Three Months ended(in thousands except per share data)
    
    March 31, 2005Net loss attributable to common stockholders as reported
    
    $
    (5,023
    )Add: employee stock-based compensation expense included in
reported net loss
    
    
    434Deduct: total employee stock-based compensation expense
determined under fair value based method for all awards
    
    
    (1,078
    )Pro forma net loss attributable to common stockholders
    
    $
    (5,667
    )Basic and diluted net loss per share as reported
    
    $
    (0.17
    )Pro forma basic and diluted net loss per share
    
    $
    (0.19
    )
     Three Months
    
    Three Months EndedEnded March 31, 2006
    
    March 31, 2005Option life
    
    4.57 years
    
    5.00 yearsRisk-free interest rate
    
    
    4.61
    %
    
    
    4.17
    %Stock volatility
    
    
    65
    %
    
    
    100
    %Dividend rate
    
    
    0
    %
    
    
    0
    %
  10




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 
 WeightedNumber of
    
    
    AverageOptions
    
    
    ExerciseOutstanding
    
    
    PriceOutstanding,
December 31, 2005
    
    
    3,930,694
    
    
    $
    2.77Granted
    
    
    240,625
    
    
    
    5.21Exercised
    
    
    (35,051
    )
    
    
    0.65Canceled
    
    
    (17,072
    )
    
    
    6.17Outstanding,
March 31, 2006
    
    
    4,119,196
    
    
    $
    2.91Exercisable,
March 31, 2006
    
    
    2,178,044Weighted average fair value of
options granted
    
    
    
    
    
    $
    2.93
 Options Exercisable atOptions Outstanding at March 31, 2006
    
    
    March 31, 2006WeightedAverage
    
    
    WeightedRemaining
    
    
    AverageNumber of
    
    
    Contractual
    
    
    Exercise
    
    
    Number of
    
    
    Weighted AverageExercise Price
    
    
    Shares
    
    
    Life
    
    
    Price
    
    
    Shares
    
    
    Exercise Price$
    0.30
    
    
    
    1,380,043
    
    
    
    4.13
    
    
    $
    0.30
    
    
    
    1,080,043
    
    
    $
    0.300.75
    
    
    
    34,700
    
    
    
    4.84
    
    
    
    0.75
    
    
    
    34,700
    
    
    
    0.750.95
    
    
    
    125,986
    
    
    
    5.12
    
    
    
    0.95
    
    
    
    125,986
    
    
    
    0.952.00
    
    
    
    728,925
    
    
    
    5.72
    
    
    
    2.00
    
    
    
    202,925
    
    
    
    2.004.00
    
    
    
    51,775
    
    
    
    6.02
    
    
    
    4.00
    
    
    
    46,400
    
    
    
    4.005.00
    
    
    
    1,230,174
    
    
    
    7.65
    
    
    
    5.00
    
    
    
    598,769
    
    
    
    5.005.21
    
    
    
    240,375
    
    
    
    9.92
    
    
    
    5.21
    
    
    
    779
    
    
    
    5.215.31
    
    
    
    138,281
    
    
    
    9.48
    
    
    
    5.31
    
    
    
    17,304
    
    
    
    5.315.62
    
    
    
    9,781
    
    
    
    9.69
    
    
    
    5.62
    
    
    
    857
    
    
    
    5.627.25
    
    
    
    25,000
    
    
    
    9.07
    
    
    
    7.25
    
    
    
    6,250
    
    
    
    7.258.17
    
    
    
    97,781
    
    
    
    8.78
    
    
    
    8.17
    
    
    
    50,848
    
    
    
    8.179.00
    
    
    
    7,125
    
    
    
    8.86
    
    
    
    9.00
    
    
    
    1,875
    
    
    
    9.0010.89
    
    
    
    40,000
    
    
    
    9.28
    
    
    
    10.89
    
    
    
    10,000
    
    
    
    10.8911.10
    
    
    
    9,250
    
    
    
    9.28
    
    
    
    11.10
    
    
    
    1,308
    
    
    
    11.104,119,196
    
    
    
    6.26
    
    
    $
    2.91
    
    
    
    2,178,044
    
    
    $
    2.18Weighted-average
remaining
contractual term (Years)

    6.26
    
    
    
    
    
    
    
    
    
    
    
    5.56
  11




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 Net Loss Per Common Share
   Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2006
    
    
    2005Basic and diluted net loss per shareNet loss attributable to common stockholders
    
    $
    (5,111
    )
    
    $
    (5,023
    )Weighted average number of common shares outstanding
    
    
    38,295
    
    
    
    29,719Basic and diluted net loss per share
    
    $
    (0.13
    )
    
    $
    (0.17
    )
  Three Months
    
    Three MonthsEnded
    
    EndedMarch 31,
    
    March 31,2006
    
    2005Options
    
    
    4,119,196
    
    
    
    4,085,046Warrants
    
    
    1,430,833
    
    
    
    1,420,833
 3. Accrued Expenses
  March 31,
    
    
    December 31,2006
    
    
    2005Payroll and payroll related
    
    $
    1,313
    
    
    $
    1,541Management incentive
    
    
    324
    
    
    
    881Professional fees
    
    
    1,887
    
    
    
    1,206Accrued marketing
    
    
    1,798
    
    
    
    1,260Accrued restructuring (Note 5)
    
    
    632
    
    
    
    632Deferred rent, current
    
    
    786
    
    
    
    619Accrued taxes
    
    
    475
    
    
    
    537Other
    
    
    1,865
    
    
    
    1,030Accrued expenses
    
    $
    9,080
    
    
    $
    7,706
 12




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 4. Commitments and Contingencies
 Agreements
     13




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 Litigation
       14




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
     15




---



##### Table of Contents



ViaCell, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 5. Restructuring
     16




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
 sm
  Revenues
   17




---



##### Table of Contents



Operating Expenses
    18




---



##### Table of Contents



19




---



##### Table of Contents





Results of Operations


Three Months Ended March 31, 2006 and 2005 (table amounts in thousands)
 Three Months
    
    
    Three MonthsEnded March 31,
    
    
    Ended March 31,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeProcessing revenues
    
    $
    9,610
    
    
    $
    8,319
    
    
    $
    1,291
    
    
    
    16
    %Storage revenues
    
    
    2,327
    
    
    
    1,656
    
    
    
    671
    
    
    
    41
    %Total processing and
storage revenues
    
    
    11,937
    
    
    
    9,975
    
    
    
    1,962
    
    
    
    20
    %Grant revenues
    
    
    144
    
    
    
    165
    
    
    
    (21
    )
    
    
    (13
    )%Total revenues
    
    $
    12,081
    
    
    $
    10,140
    
    
    $
    1,941
    
    
    
    19
    %
   Three
    
    
    ThreeMonths
    
    
    MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeCost of processing and storage revenues
    
    $
    2,328
    
    
    $
    1,953
    
    
    $
    375
    
    
    
    19
    %
  Three
    
    
    ThreeMonths
    
    
    MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,
    
    
    $ Change
    
    
    % Change2006
    
    
    2005
    
    
    2005 to 2006
    
    
    2005 to 2006Research and development
    
    $
    3,466
    
    
    $
    3,646
    
    
    $
    (180
    )
    
    
    (5
    %)
  20




---



##### Table of Contents



Three
    
    ThreeMonths
    
    MonthsEnded
    
    EndedMarch 31,
    
    March 31,2006
    
    2005
    
    $ Change
    

% ChangeSales and marketing
    
    $
    7,922
    
    
    $
    5,569
    
    
    $
    2,353
    
    
    
    42
    %
  Three
    
    ThreeMonths
    
    MonthsEnded
    
    EndedMarch 31,
    
    March 31,2006
    
    2005
    
    $ Change
    

% ChangeGeneral and administrative
    
    $
    4,638
    
    
    $
    3,047
    
    
    $
    1,591
    
    
    
    52
    %
  Three
    
    ThreeMonths
    
    MonthsEnded
    
    EndedMarch 31,
    
    March 31,2006
    
    2005
    
    $ Change
    

% ChangeRestructuring
    
    $
    (181
    )
    
    $
    121
    
    
    $
    (302
    )
    
    
    (250
    )%
   21




---



##### Table of Contents



Three Months
    
    
    Three MonthsEnded March
    
    
    Ended31,
    
    
    March 31,2006
    
    
    2005
    
    
    $ Change
    
    

% ChangeInterest income
    
    $
    724
    
    
    $
    315
    
    
    $
    409
    
    
    
    130
    %Interest expense
    
    
    (26
    )
    
    
    (155
    )
    
    
    (129
    )
    
    
    (83
    )Total interest
income,
net
    
    $
    698
    
    
    $
    160
    
    
    $
    538
    
    
    
    336
    %
  Liquidity and Capital Resources
  22




---



##### Table of Contents



Three Months
    
    Three Months EndedEnded March 31,
    
    March 31,2006
    
    2005
    
    $ ChangeNet cash provided by (used in)
operating activities
    
    $
    (1.7
    )
    
    $
    2.1
    
    
    $
    (3.8
    )Net cash provided by (used in)
investing activities
    
    
    0.4
    
    
    
    (6.1
    )
    
    
    6.5Net cash provided by (used in)
financing activities
    
    
    (0.4
    )
    
    
    38.0
    
    
    
    (38.4
    )Cash and cash equivalents, end of period
    
    $
    31.4
    
    
    $
    40.5
    
    
    $
    (9.1
    )
     23




---



##### Table of Contents



Commitments and Contingencies
 Legal Proceedings
     24




---



##### Table of Contents



25




---



##### Table of Contents



Critical Accounting Estimates
  Accounting for Stock-Based Compensation
   26




---



##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Investment Risk
  Foreign Exchange Risk
  Interest Rate Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
   27




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 NOTE ABOUT FORWARD-LOOKING STATEMENTS
  We expect to continue to incur operating losses and may never become profitable.
  We may not be able to sustain our current level of revenues or our recent growth rates.
  28




---



##### Table of Contents



If we do not prevail in the PharmaStem litigation, we may be prevented from selling our ViaCord
product offering, or may have to incur significant expenses.
     29




---



##### Table of Contents



If we are not able to successfully develop and commercialize new products, we may not generate
sufficient revenues to continue our business operations.
   
    
    properly engraft into the recipients body in the desired manner;
    
    provide the intended therapeutic benefits; or
 30




---



##### Table of Contents




    
    achieve benefits or a safety profile that is acceptable and better or equal to existing therapies.
    31




---



##### Table of Contents



We may not be able to successfully develop our ViaCyte oocyte cryopreservation product candidate.
 in vitro
 32




---



##### Table of Contents



We may not be able to raise additional funds necessary to fund our operations.
   
    
    the level of cash flows from sales of our ViaCord product
offering;
    
    the scope and results of our research and development programs;
    
    the clinical pathway for each of our product candidates, including the number, size,
scope and cost of clinical trials required to establish safety and efficacy;
    
    the results of litigation;
    
    the timing of and the costs involved in obtaining regulatory approvals for our product
candidates, which could be more lengthy or complex than obtaining approval for a new
conventional drug given the FDAs relatively little experience with cellular-based
therapeutics;
    
    the costs of research and development work focused on developing clinical and
commercial scale processes for manufacturing cellular products and the costs of building
and operating our manufacturing facilities, both in the near-term to support our clinical
activities, and also in anticipation of growing our commercialization activities;
    
    funds spent in connection with acquisitions of related technologies or businesses,
including contingent payments that may be made in connection with our acquisition of
Kourion Therapeutics;
    
    the costs associated with expanding our portfolio of product candidates through
licensing, collaborations or acquisitions;
    
    the costs of maintaining, expanding and protecting our intellectual property portfolio,
including litigation costs and liabilities; and
    
    our ability to establish and maintain collaborative arrangements and obtain milestones,
royalties and other payments from collaborators.
 33




---



##### Table of Contents



We depend on patents and other proprietary rights that may fail to protect our business.
   34




---



##### Table of Contents



Third parties may own or control patents or patent applications that are infringed by our
technologies or product candidates.
  35




---



##### Table of Contents



36




---



##### Table of Contents



Our success will depend in part on establishing and maintaining effective strategic partnerships
and collaborations.
  Our cell preservation activities are subject to regulations that may impose significant costs
and restrictions on us.
 Cord blood preservation.
   Oocyte cryopreservation.
 37




---



##### Table of Contents



We have only limited experience manufacturing cell therapy product candidates, and we may not be
able to manufacture our product candidates in quantities sufficient for clinical studies or for
commercial scale.
  We are dependent on our existing suppliers and establishing relationships with certain other
suppliers for certain components of our product candidates. The loss of such suppliers or our
inability to establish such relationships may delay development or limit our ability to manufacture
our stem cell therapy products.
   38




---



##### Table of Contents



If our cord blood processing and storage facility or our clinical manufacturing facilities
are damaged or destroyed or we are no longer able to use our leased clinical manufacturing
facilities, our business, programs and prospects could be negatively affected.
   39




---



##### Table of Contents



Our competitors may have greater resources or capabilities or better technologies than we
have, or may succeed in developing better products or develop products more quickly than we do, and
we may not be successful in competing with them.
   40




---



##### Table of Contents



)
  Due to the nature of our cell preservation activities, harm to our reputation could have a
significant negative impact on our financial condition, and damage to or loss of our customers
property held in our custody could potentially result in significant legal liability.
   41




---



##### Table of Contents



The manufacture and sale of products may expose us to product liability claims for which we could
have substantial liability.
  If we are not able to recruit and retain qualified management and other personnel, we may fail in
developing our technologies and product candidates.
   We may face difficulties in managing and maintaining the growth of our business.
   42




---



##### Table of Contents



If we acquire other businesses or technologies the transactions may be dilutive and we may be
unable to integrate them successfully with our business, our financial performance could suffer.
  The successful commercialization of our other potential cell therapy products will depend on
obtaining reimbursement for use of this product candidate from third party payers.
    43




---



##### Table of Contents



We face potential liability related to the privacy of health information we obtain from research
collaborators or from providers who enroll patients and collect cord blood or human oocytes.
   Ethical and other concerns surrounding the use of stem cell therapy may negatively affect
regulatory approval or public perception of our products and product candidates, thereby reducing
demand for our products and product candidates.
  Our business involves the use of hazardous materials that could expose us to environmental and
other liability.
  44




---



##### Table of Contents



Volatility of Our Stock Price
  
    
    material public announcements;
    
    the data, positive or negative, generated from the development of our product candidates;
    
    setbacks or delays in any of our development programs;
    
    the outcome of material litigation;
    
    the financial results achieved by our cord blood preservation business;
    
    the impact of competition;
    
    unusual or unexpectedly high expenses;
    
    developments related to patents and other proprietary rights;
    
    market trends affecting stock prices in our industry; and
    
    economic or other external factors.
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Sales of Unregistered Securities
  Use of Proceeds from Registered Securities
  45




---



##### Table of Contents



ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM
5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  46




---



##### Table of Contents



SIGNATURES
  VIACELL, INC.May 15, 2006/s/ Marc D. Beer
Marc D. BeerChief Executive Officer(Principal Executive Officer)May 15, 2006
    
    /s/ Stephen G. Dance
Stephen G. DanceChief Financial Officer(Principal Financial Officer)
 47




---



##### Table of Contents



EXHIBIT INDEX
 No.
    
    Item10.1
(1)
    
    First Amendment dated February 14,
2006 to Lease Agreement dated December 22, 2003 between ViaCell,
Inc. and MA-Riverview/245 First Street, LLC31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to our
annual report on Form 10-K (No. 0-51110) filed with the SEC on March
31, 2006.


48