Exhibit 99.1

 

**REGULATORYRISKS**

 

***We May Not Be Able To Obtain Marketing Approval In TheFuture.***

 

Wewill not be able to market any of our products in Europe, the United States orin any other jurisdiction without marketing approval from the EMEA, FDA or equivalentforeign regulatory agency. The regulatory approval process to obtain marketapproval for a new drug or biologic takes many years and requires theexpenditure of substantial resources. We have had only limited experience inpreparing applications and obtaining regulatory approvals.

 

InEurope, the European Commission has approved our MAA for Replagal, and the EMEAhas accepted for review the MAA submitted by Aventis for Dynepo but has not yetscheduled a CPMP meeting. In the United States, the FDA issued a completereview letter with respect to our BLA for Replagal, stating that our BLA wasnot adequate for final approval action at the time of such letter, and did notaccept for filing Aventis' BLA for Dynepo, requesting additional manufacturingdata. There can be no assurance as to whether or when any of these applicationsfor marketing authorization relating to Replagal and Dynepo, or additionalapplications for marketing authorization that we may make in the future as tothese or other products, will be approved by the relevant regulatoryauthorities.

 

***If We Fail To Comply Wit The Extensive RegulatoryRequirements To Which Our Products Are Subject, We Could Be Subject To AdverseConsequences And Penalties.***

 

Thetesting, manufacturing, labeling, advertising, promotion, export, andmarketing, among other things, of our products are subject to extensiveregulation by governmental authorities in Europe, the United States, andelsewhere throughout the world.

 

Ingeneral, there can be no assurance that submission of materials requestingpermission to conduct clinical trials will result in authorization by the EMEA,the FDA or equivalent foreign regulatory agency to commence clinical trials, orthat once clinical trials have begun, testing will be completed successfullywithin any specific time period, if at all, with respect to any of ourproducts. Once trials are complete and an application has been submitted, theEMEA or the FDA may deny a MAA or a BLA if applicable regulatory criteria arenot satisfied or may require additional testing or information.

 

Ifregulatory approval of a product is granted, such approval may be subject tolimitations on the indicated uses for which the product may be marketed orcontain requirements for costly post-marketing testing and surveillance tomonitor the safety or efficacy of the product. As to any product for which weobtain marketing approval, the product, the facilities at which the product ismanufactured, any post-approval clinical data and our promotional activities willbe subject to continual review and periodic inspections by the EMEA, the FDAand other regulatory authorities.

 

Bothbefore and after approval is obtained, violations of regulatory requirementsmay result in various adverse consequences, including the EMEA's or FDA's delayin approving or refusal to approve a product, suspension or withdrawal of anapproved product from the market, operating restrictions, or the imposition ofcivil or criminal penalties.

 

Wewill also be subject to a variety of regulations outside the United States andEurope governing clinical trials and the sale of our products. Whether or notwe have obtained EMEA or FDA approval, the comparable regulatory authorities ofsuch foreign countries must also approve a product prior to the commencement ofmarketing of the product in those countries. The approval process varies fromcountry to country, and the time may be longer or shorter than that requiredfor EMEA or FDA approval.

 

***We May Not Be Able To Obtain Orphan Drug Exclusivity For OurNiche Protein Products. If Our Competitors Are Able To Obtain Orphan DrugExclusivity Before Us, We May Be Precluded From Marketing Our Niche ProteinProducts.***

 

Somejurisdictions, including Europe and the United States, may designate drugs forrelatively small patient populations as "orphan drugs". Generally, ifa product which has an orphan drug designation subsequently receives the firstmarketing approval for the indication for which it has such designation, theproduct is entitled to orphan drug exclusivity. Orphan drug exclusivity meansthat applications to market the same product for the same use may not beapproved, except in very limited circumstances, for a period of up to 10 yearsin Europe and for a period of seven years in the United States. Obtainingorphan drug designations and orphan drug exclusivity for our Niche Proteinproducts may be critical to our success in this area. We have received orphandrug designation in Europe and the United States for Replagal, ouralpha-galactosidase A product for the treatment of Fabry disease. However, wemay not be able to obtain or maintain orphan drug exclusivity for Replagal. Wealso may not be able to obtain orphan drug designation or exclusivity for anyof our other potential products or be able to maintain such designation orexclusivity for any of these products. For example, if a competitive product isshown to be clinically superior to our product, any orphan drug exclusivity wehave obtained will not apply to such competitive product.

 

Ourcompetitors may also seek and obtain orphan drug exclusivity for productscompetitive with our products before we obtain marketing approval. Genzyme isseeking marketing authorization in both Europe and the United States for analpha-galactosidase A product for the treatment of Fabry disease for which ithas orphan drug designations. Concurrently with the approval of Replagal by theEuropean Commission, the European Commission approved Genzyme's Fabry diseaseproduct and both drugs received co-orphan drug exclusivity in the EuropeanUnion for a period of up to 10 years. Depending on whether Replagal orGenzyme's Fabry product receives marketing approval in the United States first,we or Genzyme could prevent the other from obtaining marketing approval of theother's Fabry product through the orphan drug exclusivity.

 

***Because Gene Therapy Is A Relatively New Technology And GeneTherapy Products Have Not Been Extensively Tested In Humans, We May Face DelaysAnd Incur Increased Costs In The Regulatory Process Related To Our Gene TherapyProducts.***

 

Weare developing gene therapy products. Because gene therapy is a relatively newtechnology and products for gene therapy have not been extensively tested inhumans, the regulatory requirements governing gene therapy products may be moreuncertain than for other types of products. This uncertainty may cause delaysin the regulatory process relating to our gene therapy products, includingdelays in our initiating clinical trials of these products. This uncertaintymay also increase the cost of obtaining regulatory approvals of our genetherapy products.

 

***If Our Clinical Trials Are Not Successful, We May Not BeAble To Develop And Commercialize Our Products.***

 

Inorder to obtain regulatory approvals for the commercial sale of our potentialproducts, we and our collaborators will be required to complete extensiveclinical trials in humans to demonstrate the safety and efficacy of ourproducts. We may not be able to obtain authority from the EMEA, the FDA orother regulatory agencies to commence or complete these clinical trials.

 

Theresults from preclinical testing of a product that is under development may notbe predictive of results that will be obtained in human clinical trials. Inaddition, the results of early human clinical trials may not be predictive ofresults that will be obtained in larger scale, advanced stage clinical trials.Furthermore, we, one of our collaborators, or the EMEA or FDA, may suspendclinical trials at any time if the subjects or patients participating in suchtrials are being exposed to unacceptable health risks, or for other reasons.

 

Therate of completion of clinical trials is dependent in part upon the rate ofenrollment of patients. Patient accrual is a function of many factors,including the size of the patient population, the proximity of patients toclinical sites, the eligibility criteria for the study, the existence ofcompetitive clinical trials, and the availability of alternative treatments. Inparticular, the patient populations for some of our Niche Protein products issmall. Delays in planned patient enrollment may result in increased costs andprolonged clinical development.

 

Weand our collaborators may not be able to successfully complete any clinicaltrial of a potential product within any specified time period. In some cases,we may not be able to complete the trial at all. Moreover, clinical trials maynot show our potential product to be both safe and efficacious. Thus, the EMEA,the FDA and other regulatory authorities may not approve any of our potentialproducts for any indication.

 

**PATENTLITIGATION AND INTELLECTUAL PROPERTY RISKS**

 

***We Are Party To Litigation With Amgen And Kirin-AmgenInvolving Dynepo Which Could Preclude Us From Manufacturing Or Selling Dynepo.***

 

Weand Aventis are involved in patent litigation relating to Dynepo with Amgen inthe United States and with Kirin-Amgen, an affiliate of Amgen, in the UnitedKingdom. In January 2001, the U.S. District Court for the District ofMassachusetts concluded that Dynepo infringed eight of the 18 claims ofpatents  asserted by Amgen. In April2001, the English High Court of Justice ruled that Dynepo infringed one of fourclaims of a patent asserted by Kirin-Amgen. We and Aventis have filed appealsof both decisions. We can provide no assurance as to the outcome of eitherlitigation. If we and Aventis are not successful in connection with the appealsof these court decisions, we and Aventis may be precluded from manufacturing orselling Dynepo. In addition, this litigation is costly, and we are required toreimburse Aventis, which is paying the litigation expenses, for our share ofthe expenses from future royalties and in certain other circumstances.

 

***We Are a Party To Litigation With Genzyme And Mount SinaiInvolving Replagal Which Could Preclude Us From Manufacturing Or SellingReplagal.***

 

InJuly 2000, Genzyme and Mount Sinai filed a patent infringement suit against usin the U.S. District Court for the District of Delaware, alleging that themanufacture, use, intended sale, and/or intended offer for sale of our Replagalproduct infringes one or more claims of a U.S. patent held by Genzyme and MountSinai. Genzyme and Mount Sinai seek injunctive relief and an accounting fordamages. The court has currently scheduled a jury trial in this action to beginin March 2002. If we are not successful in this litigation, we may be precludedfrom manufacturing or selling Replagal. We can provide no assurance as to theoutcome of this litigation.

 

***We Are Involved And May Become Involved In Further ExpensivePatent Litigation Or Other Intellectual Property Proceedings Related To OurTranskaryotic Therapy(TM) Technology Which Could Result In Liability ForDamages Or Stop Our Development And Commercialization Efforts.***

 

Weare a party to a proceeding before the U.S. Patent and Trademark Office todetermine the patentability of our gene therapy technology, known asTranskaryotic Therapy. The participants in the interference are TKT, GeneticTherapy, Inc., which is a wholly-owned subsidiary of Novartis AG, Syntex(U.S.A.), which is a wholly-owned subsidiary of Roche Holdings, Inc., and CellGenesys, Inc. This proceeding will determine which of the parties firstdeveloped this technology. If the technology is patentable, the party thatfirst developed the technology will be awarded the U.S. patent rights.

 

Theprocess to resolve an interference can take many years. We may not prevail inthis interference. Even if we do prevail, the decision in this proceeding maynot enable us meaningfully to protect our proprietary position in the field ofex vivo non-viral gene therapy.

 

Ifwe do not prevail in this proceeding, a consent order issued by the FederalTrade Commission in March 1997 may be relevant to us. The Federal TradeCommission entered this consent order to resolve anti-competitive concernsraised by the merger of Ciba-Geigy Limited and Sandoz Limited into Novartis AG.As part of the consent order, the constituent entities of Novartis are requiredto provide all gene therapy researchers and developers with nonexclusive,royalty-bearing licenses to the Novartis patent which is involved in theinterference proceeding described above. In addition, we have entered into anagreement with Cell Genesys under which we would be permitted to market ournon-viral gene therapy products pursuant to a royalty-free license agreement ifCell Genesys wins the interference.

 

***We May Become Involved In Additional And Expensive PatentLitigation Or Other Proceedings.***

 

Thebiotechnology industry has been characterized by significant litigation andinterference and other proceedings regarding patents, patent applications, andother intellectual property rights. We may become a party to additional patentlitigation and other proceedings with respect to our Niche Protein products,Gene-Activated proteins or Gene Therapy technology. Such litigation couldresult in liability for damages, stop our development and commercializationefforts, or divert management's attention and resources.

 

Anadverse outcome in any patent litigation or other proceeding involving patentscould subject us to significant liabilities to third parties and require us tocease using the technology or product that is at issue or to license thetechnology or product from third parties. We may not be able to obtain anyrequired licenses on commercially acceptable terms or at all.

 

Thecost to us of any patent litigation or other proceeding, even if resolved inour favor, could be substantial. Some of our competitors may be able to sustainthese costs more effectively than we can because of their substantially greaterfinancial resources. Uncertainties resulting from the initiation andcontinuation of patent litigation or other proceedings could have a materialadverse effect on our ability to compete in the marketplace.

 

***If We Are Unable To Obtain Patent Protection For OurDiscoveries, The Value Of Our Technology And Products May Be AdverselyAffected.***

 

Oursuccess will depend in large part on our ability to obtain patent protectionfor our processes and products in the United States and other countries. Thepatent situation in the field of biotechnology generally is highly uncertainand involves complex legal and scientific questions. We may not be issuedpatents relating to our technology. Even if issued, patents may be challenged,invalidated, or circumvented. Our patents also may not afford us protectionagainst competitors with similar technology. Because patent applications in theUnited States are maintained in secrecy until patents issue, third parties may havefiled or maintained patent applications for technology used by us or covered byour pending patent applications without our being aware of these applications.

 

Wemay not hold proprietary rights to certain product patents, process patents,and use patents related to our products or their methods of manufacture. Insome cases, these patents may be owned or controlled by third parties. As aresult, we may be required to obtain licenses under third party patents tomarket certain of our potential products. If licenses are not available to uson acceptable terms, we may not be able to market these products.

 

***If  We Are Unable ToProtect The Confidentiality Of Our Proprietary Information And Know-How, TheValue Of Our Technology And Products Will Be Adversely Affected.***

 

Werely upon unpatented proprietary technology, processes, and know-how. We seekto protect this information in part by confidentiality agreements with ouremployees, consultants, and other third party contractors. These agreements maybe breached, and we may not have adequate remedies for any such breach. Inaddition, our trade secrets may otherwise become known or be independentlydeveloped by competitors.

 

***If We Fail To Comply With Any Of Our Obligations Under AnyOf The Agreements Under Which We License Commercialization Rights To ProductsOr Technology From Third Parties, We Could Lose License Rights That AreImportant To Our Business.***

 

Weare a party to a number of patent licenses that are important to our businessand expect to enter into additional patent licenses in the future. Theselicenses impose various commercialization, sublicensing, royalty, insurance,and other obligations on us. If we fail to comply with these obligations, thelicensor may have the right to terminate the license and we may not be able tomarket products that were covered by the license.

 

**OURINDUSTRY AND BUSINESS RISKS**

 

***The Market May Not Be Receptive To Our Products Upon TheirIntroducation.***

 

Thecommercial success of any of our products for which we obtain marketingapproval from the EMEA, the FDA, and other regulatory authorities will dependupon their acceptance by the medical community and third party payors asclinically useful, cost-effective, and safe. It may be difficult for us toachieve market acceptance of our products.

 

Otherfactors that we believe will materially affect market acceptance of ourproducts include:

 

•     thetiming of the receipt of marketing approvals;

 

•     thecountries in which such approvals are obtained; and

 

•     thesafety, efficacy, convenience, and cost-effectiveness of the product ascompared to competitive products.

 

***We Have Limited Experience And Resources In ManufacturingAnd Will Incur Significant Costs To Develop This Experience Or Rely On ThirdParties To Manufacture Our Products On Our Behalf.***

 

Wehave limited manufacturing experience and in order to continue to developproducts, apply for regulatory approvals, and commercialize our products, wewill need to develop, contract for, or otherwise arrange for the necessarymanufacturing capabilities.

 

Weexpect to manufacture certain of our products in our own manufacturingfacilities. We will require substantial additional funds and need to recruitqualified personnel in order to build or lease and operate any manufacturingfacilities.

 

Wealso rely upon third parties for the production of certain of our products andwe expect to continue to do so in the future. To the extent that we enter intomanufacturing arrangements with third parties, we will be dependent upon thesethird parties to perform their obligations in a timely manner and in accordancewith applicable government regulations. There are a limited number of suchthird party manufacturers capable of manufacturing our protein products with alimited amount of production capacity. As a result, we may experiencedifficulty in obtaining adequate manufacturing capacity for our needs. If weare unable to obtain or maintain contract manufacturing of these products, orto do so on commercially reasonable terms, we may not be able to completedevelopment of these products or market them.

 

***If We Fail To Obtain An Adequate Level Of Reimbursement ByThird Party Payors For Our Products, We May Not Have Commercially ViableMarkets For Our Products.***

 

Incertain countries, particularly the countries of the European Union, thepricing of prescription pharmaceuticals is subject to governmental control. Inthe United States, the availability of reimbursement by governmental and otherthird party payors affects the market for any pharmaceutical product. Thesethird party payors continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for medical products and services.

 

TheHealth Care Financing Administration of the U.S. Department of Health and HumanServices has considered proposals from time to time to reduce the reimbursementrate with respect to erythropoietin. Adoption by the Health Care FinancingAdministration of any such proposal might have an adverse effect on the pricingof Dynepo.

 

Ifwe or our collaborators obtain marketing approvals for our products, we mayexperience pricing pressure due to the trend toward managed health care, theincreasing influence of health maintenance organizations, and additionallegislative proposals. We may not be able to sell our products profitably ifreimbursement is unavailable or limited in scope or amount.

 

***We Face Significant Competition, Which May Result In OthersDiscovering, Developing or Commercializing Products Before Or More SuccessfullyThan We Do.***

 

Thebiotechnology industry is highly competitive and characterized by rapid andsignificant technological change. Our competitors include pharmaceuticalcompanies, biotechnology firms, universities, and other research institutions.Many of these competitors have substantially greater financial and otherresources than we do and are conducting extensive research and developmentactivities on technologies and products similar to or competitive with ours.

 

Wemay be unable to develop technologies and products that are more clinicallyefficacious or cost-effective than products developed by our competitors. Evenif we obtain marketing approval for our product candidates, many of ourcompetitors have more extensive and established sales, marketing, and distributioncapabilities than we do. Litigation with third parties, including ourlitigation with Amgen and Genzyme, could delay our time to market or precludeus from reaching the market for certain products and enable our competitors tomore quickly and effectively penetrate certain markets.

 

NicheProteins.  We believe that the primarycompetition with respect to our Niche Protein product program is frombiotechnology and smaller pharmaceutical companies. Our competitors withrespect to our Niche Protein product program include BioMarin PharmaceuticalInc., Genzyme, Novazyme Pharmaceuticals, Inc., Orphan Medical, Inc., OxfordGlycoSciences Plc, Pharming Group, N.V., and Synpac Pharmaceuticals, Ltd. Themarkets for some of our potential Niche Protein products are quite small. As aresult, if competitive products exist, we may not be able to successfullycommercialize our products.

 

Gene-ActivatedProteins.  Under our Gene-Activatedprotein program, some of the products we are developing are fully human versionsof proteins that are currently marketed by third parties. For instance, in thecase of Dynepo, erythropoietin is marketed by Amgen and Johnson & Johnsonin the U.S.; Amgen, F. Hoffmann-La Roche Ltd. (Boehringer Mannheim GmbH) andJohnson & Johnson (Janssen-Cilag) in Europe; and Sankyo Company Ltd.,Chugai Pharmaceutical Co., Ltd., and Kirin in Japan.

 

Manyof the protein products against which our Gene-Activated proteins would competehave well-known brand names, have been promoted extensively, and have achievedmarket acceptance by third party payors, hospitals, physicians, and patients.Many of the companies that produce these protein products have patents coveringthe techniques used to produce these products, which have served as effectivebarriers to entry in the protein therapeutics market. As with Amgen and itserythropoietin product, these companies may seek to block our entry into themarket by asserting that our Gene-Activated proteins infringe their patents.Many of these companies are also seeking to develop and commercialize new orpotentially improved versions of their proteins.

 

GeneTherapy.  Our gene therapy system willhave to compete with other gene therapy systems, as well as with conventionalmethods of treating targeted diseases and conditions. In addition, new non-genetherapy treatments may be developed in the future. A number of companies,including major biotechnology and pharmaceutical companies, as well asdevelopment stage companies, are actively involved in this field.

 

***Competition For Technical, Commercial And AdministrativePersonnel Is Intense In Our Industry And We May Not Be Able To Sustain OurOperations or Grow If We Are Unable to Attract and Retain Key Personnel.***

 

Oursuccess is highly dependent on the retention of principal members of ourtechnical, commercial, and administrative staff. Furthermore, our future growthwill require hiring a significant number of qualified technical, commercial andadministrative personnel. Accordingly, recruiting and retaining such personnelin the future will be critical to our success. There is intense competitionfrom other companies and research and academic institutions for qualifiedpersonnel in the areas of our activities. If we are not able to continue toattract and retain, on acceptable terms, the qualified personnel necessary forthe continued development of our business, we may not be able to sustain ouroperations or grow.

 

***We Have Limited Sales And Marketing Experience AndCapabilities And Will Need To Develop This Expertise Or Depend On Third PartiesTo Successfully Sell And Market Our Products On Our Behalf.***

 

Wehave limited sales and marketing experience and capabilities. In order tomarket our products, including Replagal, we will need to develop thisexperience and these capabilities or rely upon third parties, such as ourcollaborators, to perform these functions. If we rely on third parties to sell,market, or distribute our products, our success will be dependent upon theefforts of these third parties in performing these functions. In manyinstances, we may have little or no control over the activities of these thirdparties in selling, marketing, and distributing our products. If we choose toconduct these activities directly, as we plan to do with respect to some of ourpotential products, we may not be able to recruit and maintain an effectivesales force.

 

***We Depend On Our Collaborators To Develop, Conduct ClinicalTrials, Obtain Regulatory Approvals For, And Manufacture, Market And Sell OurPrincipal Products On Our Behalf And None Of Their Efforts May BeScientifically Or Commercially Successful.***

 

Weare parties to collaborative agreements with third parties relating to certainof our principal products. We are relying on Aventis to develop, conductclinical trials, obtain regulatory approvals for, and manufacture, market, andsell Dynepo; Sumitomo Pharmaceuticals Co., Ltd. to develop and commercializeReplagal for Fabry disease in Japan and other Asian countries; and GeneticsInstitute, Inc. to co-develop and commercialize Factor VIII gene therapy forhemophilia A in Europe. Our collaborators may not devote the resourcesnecessary or may otherwise be unable to complete development andcommercialization of these potential products. Our existing collaborations are subjectto termination without cause on short notice under specified circumstances.

 

Ourexisting collaborations and any future collaborative arrangements with thirdparties may not be scientifically or commercially successful. Factors that mayaffect the success of our collaborations include the following:

 

•     ourcollaborators may be pursuing alternative technologies or developingalternative products, either on their own or in collaboration with others, thatmay be competitive with the product as to which they are collaborating with usor which could affect our collaborative partners' commitment to thecollaboration with us;

 

•     reductionsin marketing or sales efforts or a discontinuation of marketing or sales of ourproducts by our collaborators would reduce our revenues, which will be based ona percentage of net sales by the collaborator;

 

•     ourcollaborators may terminate their collaborations with us, which could make itdifficult for us to attract new collaborators or adversely affect the perceptionof us in the business and financial communities; and

 

•     ourcollaborators may pursue higher priority programs or change the focus of theirdevelopment programs, which could affect the collaborator's commitment to us.

 

***Some Gene Therapy Clinical Trials Have Been Suspended AndEthical And Social Issues Relating To Genetic Testing May Cause RegulatoryAuthorities To Increase The Regulation Of Gene Therapy Clinical Trials.***

 

Dueto recent adverse events that have occurred during gene therapy clinical trialsconducted by other biotechnology and pharmaceutical companies and institutions,the Federal government, the EMEA, the FDA, industry organizations, andinstitutions conducting gene therapy clinical trials have grown increasinglyconcerned about the safety of these clinical trials. An increased concern overgene therapy trials generally may lead the EMEA, the FDA or other regulatoryagencies to impose further regulation on gene therapy clinical trials. Iffurther regulations are imposed on gene therapy research generally, the delaysand costs involved in complying with such regulations may impair our ability tocomplete clinical trials already in progress and to conduct gene therapyclinical trials in the future.

 

***We May Be Exposed To Product Liability Claims And May Not BeAble To Obtain Adequate Product Liability Insurance.***

 

Ourbusiness exposes us to the risk of product liability claims that is inherent inthe manufacturing, testing, and marketing of human therapeutic products. Ourclinical trial liability insurance is subject to deductibles and coveragelimitations. We do not currently have any product liability insurance. We maynot be able to obtain or maintain insurance on acceptable terms or at all.Moreover, any insurance that we do obtain may not provide adequate protectionagainst potential liabilities. If we are unable to obtain insurance atacceptable cost or otherwise protect against potential product liabilityclaims, we will be exposed to significant liabilities, which may materially andadversely affect our business and financial position. These liabilities couldprevent or interfere with our product commercialization efforts.