| Competition in the Company's markets is intense. The Company competes
with a large number of companies ranging from very small businesses to large
diagnostic, healthcare, pharmaceutical, biomedical and chemical companies, many of which have substantially greater financial, manufacturing, marketing and product research resources than the Company. Academic institutions,
governmental agencies and other public and private research organizations are also conducting research activities and may commercialize products on their own or through joint ventures. The Company intends to compete primarily on the basis of the clinical utility, accuracy, speed, ease of use and other
performance characteristics of its products and, to a lesser degree, on the
price of its products. The Company is aware that other companies are developing influenza diagnostics which may compete with the Company's products. These diagnostic products could compete directly with ZstatFlu and other Company products which utilize the Company's ViraZyme technology. The existence of these and other competing products or procedures that may be developed in the future may adversely affect the marketability of products developed by the Company. Although the Company's existing licensed patent rights cover a broad field of viral diagnostics, the Company is aware of the efforts of others to develop diagnostics for viral disease. Quidel, working with Glaxo Wellcome, and Biostar, working with Biota Holdings, Ltd. ("Biota"), have each publicly announced influenza diagnostic programs. The Company believes that the primary methods being used by these competitors and others to develop such diagnostics are substantially different than the Company's methods and do not offer the anticipated market advantages of the ViraZyme system. There can be no assurance, however, that the Company will be successful in fully developing its products so that such expected marketing advantages will be realized or that the competitive advantages of products of competitors will not exceed those of the Company's products. In addition, the Company is aware of influenza therapeutic programs of other companies; specifically Glaxo Wellcome, whose influenza therapeutic the Company believes is in FDA Phase III clinical trials, and Roche, which has begun Phase I or Phase II clinical trials for its therapeutic for influenza. Programs underway at Glaxo Wellcome and Roche both involve inhibition of enzymes in a manner similar to the Company's approach. The Company recognizes
that these two competitors are further advanced in the development of
therapeutics than is the Company and may come to the market with a therapeutic product earlier than the Company, which could be a barrier to market acceptance of the Company's product, if developed. A therapeutic product developed by Glaxo Wellcome or Roche will be a strong competitor for any therapeutic which the Company may develop, because of the size and resources of such companies. In the event the Company develops a
therapeutic product, it plans to contract with a large pharmaceutical company to increase the Company's ability to compete against large companies such as
Glaxo Wellcome or Roche. There can be no assurance that such a contract can be secured on terms satisfactory to the Company, or at all. The Company's competitive position will also depend on its ability to attract and retain qualified scientific and other personnel, develop effective proprietary products, implement production and marketing plans, obtain patent protection and obtain adequate capital resources. |