BIOMIMETIC THERAPEUTICS, INC. (Form: S-1, Received: 12/13/2006 09:19:48)

(State or other jurisdiction of
incorporation or organization)

(Primary Standard Industrial
Classification Code Number)

(I.R.S. Employer
Identification No.)

As filed with the Securities and Exchange Commission on December 12, 2006

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

BioMimetic Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

389-A Nichol Mill Lane
Franklin, Tennessee 37067
(615) 844-1280

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Samuel E. Lynch, D.M.D., D.M.Sc.
Chief Executive Officer
BioMimetic Therapeutics, Inc.
389-A Nichol Mill Lane
Franklin, Tennessee 37067
(615) 844-1280

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

James R. Tanenbaum, Esq.
Anna T. Pinedo, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
(212) 468-8000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:

If this Form is filed to registered additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Share ⁽¹⁾	Proposed Maximum Aggregate Offering Price ⁽¹⁾	Amount of Registration Fee
Common Stock, $.001 par value	2,000,000	$11.35	$22,700,000	$2,429


(1)	Estimated solely for the purpose of computing the amount of the registration fee, based on the average of the high and low sales prices of the common stock as reported on the Nasdaq Global Market on December 11, 2006 in accordance with Rule 457 under the Securities Act of 1933, as amended.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. You may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell the securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, Dated December 12, 2006

2,000,000 Shares
Common Stock

BioMimetic Therapeutics, Inc. is offering 2,000,000 shares of its common stock. Our common stock is listed on the Nasdaq Global Market under the symbol ‘‘BMTI.’’ On December 11, 2006, the last reported sale price of our common stock on the Nasdaq Global Market was $ 11.50 per share.

The common stock to be sold under this prospectus may be sold to or through agents, underwriters or dealers. See ‘‘Plan of Distribution.’’ If any agents, underwriters or dealers are involved in the sale of any shares, at the time of sale we will disclose their names and any applicable fees, commissions or discounts in an amendment.

Investing in our common stock involves risk. See ‘‘Risk Factors’’ beginning on page 10.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is , 2006 .

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PROSPECTUS SUMMARY

This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire prospectus, including ‘‘Risk Factors’’ and the consolidated financial statements, before making an investment decision.

BioMimetic Therapeutics, Inc.

We develop and commercialize biologically active drug-device combination products for the healing of injuries and diseases to the skeleton and associated tissues, including periodontal, orthopedic, spine and sports injury applications. We received US marketing approval of our first product for bone regeneration in periodontal defects following completion of human clinical trials, which demonstrated the efficacy of our platform technology in periodontal indications and suggest its potential safety and efficacy in orthopedic, spine and sports injury indications. Our product and product candidates all combine a protein growth factor that actively stimulates tissue healing and regeneration with a scaffold that provides structure and support for tissue regeneration at the wound site. We believe our regenerative therapies will improve the treatment options and quality of life for millions of patients with injuries or deterioration of the bones, cartilage, tendons and ligaments.

Product Overview

Our first drug-device combination product, GEM 21S ^® Growth-factor Enhanced Matrix, received US Food and Drug Administration, or FDA, approval in November 2005 for the treatment of periodontal bone defects and gum tissue recession associated with periodontal disease. GEM 21S combines recombinant human Platelet-Derived Growth Factor (rhPDGF-BB) with a clinically proven synthetic bone matrix, beta-tricalcium phosphate (β-TCP). GEM 21S is the first totally synthetic product, combining a growth factor which stimulates bone and periodontal regeneration with a synthetic bone matrix, approved for human application by the FDA. Pivotal (Phase III) clinical trials demonstrated that GEM 21S stimulated significant bone regeneration at the treatment site.

Our product and product candidates use rhPDGF, one of the principal wound healing stimulators in the body. We believe that rhPDGF is well suited for various applications due to its stimulation of a broad spectrum of cellular events critical for the initiation and progression of periodontal and orthopedic tissue healing. rhPDGF acts like a magnet to attract cells necessary for tissue healing through a process known as chemotaxis, while also stimulating an increase in the number of healing cells through a process known as mitogenesis, thereby expanding the number of cells available for the repair process. In addition, published animal and in vitro studies demonstrate that rhPDGF may enhance processes important in new blood vessel formation at the wound site, a process critical for wound healing.

Building upon the successful approval of GEM 21S , we have a pipeline of drug-device combination product candidates called GEM OS that we are developing for a broad range of orthopedic clinical indications. Our GEM OS family of product candidates, which also incorporate rhPDGF in combination with a bone matrix, is targeted to be used in the open (surgical) treatment of fractures and fusions ( GEM OS1 ), the closed (non-surgical) treatment of fractures ( GEM OS2 ), and the stimulation of bone formation at sites of risk for fracture, such as the spine in individuals with osteoporosis ( GEM OS2 ).

Our GEM OS1 product candidate is in pilot clinical trials for fracture repair and bone fusions in the US and the European Union, or EU, and we recently began a registration trial in Canada for the healing of foot and ankle fusions. Interim results have been announced on the

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first 32 patients enrolled in the Canadian foot and ankle fusion clinical study. The results so far with GEM OS1 have been at least comparable to autograft (bone harvested from elsewhere in the patient’s own body and currently considered the standard of care for bone graft) without the pain and morbidity associated with harvesting the autograft material. Further, animal studies have demonstrated that rhPDGF is able to stimulate increased bone growth throughout much of the skeleton, suggesting that it may have broad therapeutic utility in fracture repair. In addition, we have ongoing and planned animal studies evaluating product candidates for the treatment of various sports injuries, including those requiring cartilage, ligament or tendon repair.

Our Alliances

We have licensed patents from ZymoGenetics, Inc., or ZymoGenetics, for the exclusive use of rhPDGF in our fields of interest. In addition, we have exclusively licensed the rights of Harvard College, or Harvard, with respect to certain patents that we co-own with Harvard relating to the use of rhPDGF. We also have an exclusive manufacturing agreement with Chiron Corporation, or Chiron, which was recently acquired by the Novartis Group, for the commercial supply of rhPDGF for the treatment of skeletal applications, including bone, cartilage, tendons and ligaments. We have partnered with Luitpold Pharmaceuticals, Inc., or Luitpold, a US subsidiary of Sankyo Co., Ltd., for the worldwide marketing and distribution of GEM 21S . We expect that milestone payments, royalties on sales and a sole source manufacturing agreement will generate significant near- and long-term payments to us. We have retained all marketing rights to our orthopedic and sports injury product candidates. As of September 30, 2006, we had an accumulated deficit of $34.5 million. We expect to incur losses for at least the next few years as we continue to incur significant expenses for clinical trials.

Market Trends

The musculoskeletal business sector as a whole—including all treatment, services, devices, pharmaceuticals and biologics used to treat the skeleton and associated tissues, including bones, muscles, ligaments, tendons and joints that move the body and maintain its form—represents a market of approximately $350 billion. Our product candidates have the potential to impact a broad range of clinical indications in the musculoskeletal sector, including periodontal defects, the open and closed treatment of fractures, bone fusions, loss of bone density related to osteoporosis, and the repair of injuries to cartilage, tendons and ligaments. Each year, approximately 23 million fractures are treated by physicians in the US. Osteoporosis is identified as a contributing factor in an estimated 1.5 million of these fractures and complications resulting from the prolonged rehabilitation often required for osteoporotic fractures is considered a leading cause of injury related deaths among elderly women. In addition, there were an estimated 22 million patients treated for cartilage, ligament and tendon injuries in 2003.

Growth in the orthopedic and sports injury market is being driven by aging baby boomers, the desire for active lifestyles well into retirement and the growth in the incidence of osteoporosis, osteoarthritis, obesity, diabetes and other diseases that cause injury to orthopedic tissues and/or impair the ability of the body to heal injuries. These factors have caused a strong demand for the adoption of biologically active treatments, which seek to stimulate the body’s own capabilities for regeneration of tissue at injury sites. Despite the substantial morbidity risk faced by geriatric women suffering hip fractures, there is no biological therapy approved today to accelerate the healing of these osteoporotic fractures.

According to industry data, the worldwide orthopedic market was estimated at $19 billion in 2004. This includes joint replacement, fracture repair, sports injury and spinal procedures.

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One of the fastest growing segments within the orthopedic market is grafting or osteobiologics products, which stimulate the growth and repair of bone in the area of bone injury. According to securities research analyst reports, US sales of bone grafting products and orthobiologics reached $1.3 billion in 2005, a 27% increase over 2004 sales. Based on currently available therapies alone, that figure is expected to increase to $2.5 billion by 2010.

Periodontal disease is the second most prevalent disease in the US after heart disease. It is estimated that greater than 50 million people are affected with periodontal disease at the moderate to severe level. Of these, only 15 to 20% receive treatment, with an estimated $6 billion spent annually in the US to treat the disease. As a result of findings implicating periodontal disease with multiple significant healthcare problems, the US Surgeon General issued a report in 2000 highlighting periodontal disease as a major healthcare issue.

Strategy

Our product development strategy is to combine proprietary and potent tissue growth factors with medical devices, such as synthetic and natural tissue matrices or scaffolds, to generate drug-device combination products that provide results superior to existing therapies. Development of ‘‘convergent devices’’ has revolutionized the way that cardiovascular disease is treated and has proven to be both a clinical and commercial success. We believe the orthopedic industry will undergo a similar transformation from the use of traditional, passive, highly invasive metallic devices to more advanced, bio-active devices. With GEM 21S approved for marketing and several product candidates in the research and development pipeline, we believe that we are well positioned to capitalize on this transformation.

We believe that our management’s experience in the development of drug-device combination products, combined with our intellectual property rights, the well characterized biology and history of safe use of rhPDGF and the clinically proven efficacy of our first GEM technology all position us to become a leader in the development and commercialization of biologically-active devices that will capitalize on the growing market for these products in orthopedics and sports injury applications.

We cannot be sure that we will be successful in developing, obtaining regulatory approval for, or commercializing, our product candidates or that we will do so in a timely fashion. We initially filed an application in the US for an investigational device exemption, an IDE, for GEM OS1 in June 2005. The FDA initially did not approve our application and requested additional information from us. We received FDA approval to initiate a feasibility study under our IDE in January 2006 and we completed patient enrollment in July 2006. We are continuing to follow these patients. We have also initiated a 60 patient clinical trial in Canada using GEM OS1 in foot and ankle fusions. In October 2006, the independent Data Monitoring Committee recommended continuing unmodified the Canadian registration and US feasibility clinical studies with GEM OS1 for foot and ankle fusions and the expansion of the US program into pivotal clinical trials. We anticipate initiation of US pivotal trials in the first half of 2007.

Risks Associated with Our Business

Our business is subject to numerous risks, as more fully described in the section entitled ‘‘Risk Factors’’ immediately following this prospectus summary. We have a limited operating history and have incurred substantial losses since inception. We expect to continue to incur substantial losses for the foreseeable future and are unable to predict the extent of future losses or when we will become profitable, if at all. GEM 21S is the only approved product that we have for commercial sale, and it presently generates limited revenues. All of our product candidates are in various stages of development, have not yet received regulatory approval, and failure of pre-clinical product candidates is common and can occur at any stage of development. Our ability to generate product revenue in the future will depend heavily on the

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successful development and commercialization of our product candidates. Even if we succeed in developing and commercializing one or more of our product candidates, we may never generate sufficient sales revenue to achieve and sustain profitability. GEM 21S and our product candidates are all based on the same protein, PDGF. If PDGF is found to be unsafe or ineffectual, the development path for all of our product candidates could be impacted. We may be unable to maintain and protect our intellectual property, which could have a substantial impact on our ability to generate revenue. Our product and product candidates are subject to regulation by governmental authorities in the US and in other countries. Failure to comply with such regulations or to receive the necessary approvals or clearances for our product and product candidates may have a material adverse effect on our business.

Corporate Information

We were incorporated under the laws of the State of Tennessee in April 1999. In May 2001, we reincorporated in the State of Delaware under the name BioMimetic Merger Corp., and we thereafter changed our name to BioMimetic Pharmaceuticals, Inc. In August 2005, we subsequently changed our name to BioMimetic Therapeutics, Inc. Our principal executive offices are located at 389-A Nichol Mill Lane, Franklin, Tennessee 37067, and our telephone number is (615) 844-1280. Our website address is www.biomimetics.com . The information on our website is not a part of this prospectus. GEM 21S ^® , GEM 21A ™, GEM OS ™, GEM ™, GEM C ™, GEM LT ™, RecombiStat™ and OsteoMimetic™ are our trademarks. GEM 21S has been registered by the United States Patent and Trademark Office and the other trademarks are covered by pending applications for registration in the US. In addition, applications for registration of our trademarks are pending in various countries around the world. Each other trademark, tradename or service mark appearing in this prospectus belongs to its respective holder. Unless the context requires otherwise, the words ‘‘BioMimetic,’’ ‘‘we,’’ ‘‘Company,’’ ‘‘us,’’ and ‘‘our’’ refer to BioMimetic Therapeutics, Inc., our subsidiary formed in the United Kingdom in October 2005, BioMimetic Therapeutics Limited, and our subsidiary formed in Australia in October 2006, BioMimetic Therapeutics Pty Ltd.

Summary Financial Data

The following tables provide our summary financial information. The summary consolidated statement of operations data for each of the three years in the period ended December 31, 2005 and the summary consolidated balance sheet data as of December 31, 2005 have been derived from the audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statement of operations data for the year ended December 31, 2002 and for the period from inception (April 14, 1999) through December 31, 2001 have been derived from our audited consolidated financial statements which are not included in this prospectus.

The summary condensed consolidated statement of operations data for the nine months ended September 30, 2006 and 2005 and the summary condensed consolidated balance sheet data as of September 30, 2006 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and notes thereto, which include, in the opinion of our management, all adjustments (consisting of normal recurring adjustments), necessary for a fair presentation of the information for the unaudited interim period. Our historical results for any prior or interim period are not necessarily indicative of results to be expected for a full fiscal year or for any future period.

As noted above, the following tables include summary consolidated statement of operations data for the period from inception (April 14, 1999) through December 31, 2001

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rather than the stand alone year ended December 31, 2001. We believe this cumulative information from inception through December 31, 2001 provides useful information regarding our results of operations since our inception. Our operations during 1999 and 2000 were minimal and consisted of start-up activities involving our founders. We did not have any significant operations until we received our initial funding through the Series A redeemable, convertible preferred stock issuance in March 2001. Substantially all of our loss from operations during the period from inception (April 14, 1999) through December 31, 2001 occurred during the year ended December 31, 2001.

Prior to January 1, 2006, we primarily had been engaged in researching and developing our principal product and were a development stage enterprise. Effective January 1, 2006, we no longer consider ourselves to be a development stage enterprise as we believe that we have achieved our planned principal operations and are generating revenue from the sale of our principal product.

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You should read the below information together with our consolidated financial statements and related notes and the information under ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ included elsewhere in this prospectus.


	Nine months ended September 30,								Year ended December 31,																Period from Inception (April 14, 1999) through December 31, 2001
	2006				2005				2005				2004				2003				2002
	(unaudited)
Statement of Operations Information:	(in thousands, except share and per share information)
Revenues:
Collaborative research and development		$	215			$	3,893			$	4,335			$	5,601			$	461			$	—			$	61
Sublicense fee			531				—				84				—				—				—				—
Product Sales			1,230				—				60				—				—				—				—
Royalty income			236				—				31				—				—				—				—
Grants and other			23				—				7				—				162				157				40
Total revenues			2,235				3,893				4,517				5,601				623				157				101
Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)			1,093				—				70				—				—				—				—
Research and development			7,790				4,611				12,587				3,935				3,320				2,558				1,131
General and administrative			4,488				1,957				3,402				2,434				1,157				971				888
Depreciation and capital lease amortization			584				205				399				74				28				16				2
Patent license fee amortization			1,581				316				652				397				87				50				21
			15,536				7,089				17,110				6,840				4,592				3,595				2,042
Loss from operations			(13,301	)			(3,196	)			(12,593	)			(1,239	)			(3,969	)			(3,438	)			(1,941	)
Interest income, net			1,529				651				921				196				47				70				71
Loss on disposal of equipment			(1	)			(2	)			(4	)			—				—				—				—
Loss before income taxes			(11,773	)			(2,547	)			(11,676	)			(1,043	)			(3,922	)			(3,368	)			(1,870	)
Income taxes			—				—				—				—				77				—				—
Net loss			(11,773	)			(2,547	)			(11,676	)			(1,043	)			(3,999	)			(3,368	)			(1,870	)
Preferred stock accretion			(132	)			(263	)			(367	)			(111	)			(63	)			(52	)			(31	)
Net loss attributable to common stockholders		$	(11,905	)		$	(2,810	)		$	(12,043	)		$	(1,154	)		$	(4,062	)		$	(3,420	)		$	(1,901	)
Basic and diluted net loss per share attributable to common stockholders		$	(1.34	)		$	(1.78	)		$	(7.59	)		$	(0.73	)		$	(2.57	)		$	(2.17	)		$	(4.29	)
Weighted average shares used to compute basic and diluted net loss per share attributable to common stockholders			8,885,262				1,579,732				1,587,219				1,579,155				1,579,155				1,579,155				442,992
Pro forma basic and diluted net loss per share applicable to common stockholders			[ ]								[ ]
Pro forma weighted average shares used to compute pro forma basic and diluted net loss per share ⁽¹⁾			[ ]								[ ]

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	As of September 30, 2006				As of December 31,
	As of September 30, 2006				2005				2004				2003				2002				2001
	(unaudited)				(in thousands)
Balance Sheet Information:
Cash and cash equivalents		$	53,765			$	33,428			$	29,685			$	11,805			$	3,047			$	2,731
Total assets			71,795				52,642				34,305				15,611				4,257				3,052
Long-term capital lease obligations			31				—				—				2				5				4
Total liabilities			21,878				23,281				5,226				10,318				491				245
Redeemable, convertible preferred stock			—				50,746				38,707				13,818				8,300				4,075
Accumulated deficit			(34,485	)			(22,580	)			(10,538	)			(9,383	)			(5,321	)			(1,901	)
Total stockholders’ equity (deficit)			49,917				(21,385	)			(9,628	)			(8,525	)			(4,534	)			(1,269	)


(1)	The pro forma weighted average shares used gives effect to the conversion of all of the outstanding redeemable, convertible preferred stock into shares of common stock for the period each share of preferred stock was outstanding.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this prospectus, including the consolidated financial statements and the related notes appearing at the end of this prospectus, before purchasing our common stock. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations. In any such event, the market price of our common stock could decline and you could lose all or part of your investment.

Risks Relating to Our Business

We have a history of losses and we expect to continue to incur losses and may not achieve or maintain profitability.

We have invested and will invest a significant portion of our time and resources in developing and testing GEM 21S and our GEM product candidates. As a result of our significant research and development, clinical development, regulatory compliance and general and administrative expenses, we expect to incur losses for at least the next few years as we continue to incur significant expenses for clinical trials. As of September 30, 2006, we had an accumulated deficit of $34.5 million. We received FDA marketing approval for GEM 21S in November 2005 and began commercializing GEM 21S in December 2005. In May 2006, we received marketing approval from Health Canada and began commercializing GEM 21S in Canada in September 2006. Although we are now commercializing GEM 21S , and even if we succeed in developing and commercializing one or more of our product candidates, we may not be able to generate sufficient revenue and we may never achieve or maintain profitability.

Our product and product candidates are in various stages of development and may not be developed or commercialized successfully.

GEM 21S and our product candidates are based on technologies that often times have not been used previously in the manner and combination we propose and must compete with more established treatments currently accepted as the standards of care. Market acceptance of our products will largely depend on our ability to demonstrate their relative safety, efficacy, cost-effectiveness and ease of use.

We are subject to the risk that:


	•	the FDA or a foreign regulatory authority finds some or all of our product candidates ineffective or unsafe;


	•	we do not receive necessary regulatory approvals;


	•	we are unable to get some or all of our product candidates to market in a timely manner;


	•	we are not able to produce our product or product candidates in commercial quantities at reasonable costs;


	•	our products undergo post-market evaluations resulting in marketing restrictions or withdrawal of regulatory approval of our products; and


	•	the patient and physician community does not accept our products.

In addition, our product development programs may be curtailed, redirected, eliminated or delayed at any time for many reasons, including:


	•	adverse or ambiguous results;


	•	undesirable side effects that delay or extend the trials;


	•	inability to locate, recruit, qualify and retain a sufficient number of clinical investigators or patients for our trials;

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	•	regulatory delays or other regulatory actions;


	•	difficulties in obtaining sufficient quantities of the particular product candidate or any other components needed for our pre-clinical testing or clinical trials;


	•	difficulties in obtaining the necessary regulatory support from our raw materials suppliers to enable us to obtain or maintain regulatory approval to market our product or product candidates; or


	•	re-evaluation of our clinical development strategy.

We cannot predict whether the commercialization of GEM 21S will be successful or whether we will develop and commercialize successfully any of our product candidates. If we fail to do so, we will not be able to generate substantial revenue.

GEM 21S and our current product candidates are all based on the same protein, rhPDGF. If one of them reveals safety or fundamental efficacy issues in clinical trials, it may impact the development path for all our other current product candidates.

The development of GEM 21S and each of our GEM product candidates is based on our understanding of how the protein rhPDGF contributes to the repair of bone and soft tissue. Soft tissue includes muscles, tendons and ligaments that connect, support or surround the bones and organs of the body. While there are important differences in each product and product candidate in terms of its purpose, each product and product candidate focuses on accelerating the repair of musculoskeletal tissue and relies on the ability of rhPDGF to stimulate the body’s natural healing processes.

Since we are developing the GEM OS product candidates in parallel, we expect that the results of the individual product trials will assist us in the development of all of the GEM OS product candidates. If one product candidate has negative clinical trial results or is shown to be ineffective, it may impact the development path or future development of the other product candidates. For example, the components in GEM 21S that stimulate bone growth in periodontal indications may not stimulate bone growth in broad orthopedic applications. If we find that one product candidate is unsafe, it may impact the development of our other product candidates in clinical trials.

If we fail to meet our obligations under our existing license agreements or fail to enter into new license agreements, our business may be materially adversely impacted.

Our rights to the development, use and marketing of GEM 21S and all of our GEM product candidates are governed by a series of licensing agreements, including those with Harvard and ZymoGenetics. These license agreements provide us with rights to certain intellectual property created by the licensor, which allow us to develop and commercialize our product and product candidates.

As part of these agreements, we are required to make payments to the licensors and comply with other obligations as we progress through product development and commercialization. If we fail to make these payments or satisfy other obligations for any reason, these licenses could be terminated by the licensors, thereby limiting our ability to market our product or limiting our ability to maintain exclusivity with respect to our product or product candidates. Furthermore, if a dispute arises regarding our obligations under these agreements, our business may be materially adversely impacted.

Our licensors or others may dispute the scope of our rights under any of these licenses. Additionally, the licensors under these licenses might breach the terms of their respective agreements or fail to prevent infringement of the licensed patents by third parties. Loss of any of these licenses for any reason could materially harm our financial condition and operating results.

We may need additional licenses to intellectual property owned by third parties in order to commercialize new products. If we cannot obtain these additional licenses, we may not be able to develop or commercialize these future products.

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Our rights to use technologies licensed to us by third parties are not entirely within our control, and we may not be able to produce our product and product candidates without these technologies.

We depend upon a limited number of specialty suppliers of raw materials.

Our ability to manufacture GEM 21S and our GEM product candidates depends on a limited number of specialty suppliers of raw materials. In particular, we depend upon Chiron, which is now known as Novartis Vaccines and Diagnostics, or Novartis, to supply us with sufficient quantities of rhPDGF for clinical development activities and for commercial sale. We are obligated to purchase minimum specified quantities of rhPDGF beginning in 2006 and increasing as of 2007.

We are required to purchase all of our requirements for β-TCP for use in GEM 21S for the treatment of bone and soft tissue defects of the jaw and maxillofacial region, or jaw and face, from Orthovita, Inc., or Orthovita. We are evaluating β-TCP products and other matrices from potential suppliers for use in orthopedic applications. There is a risk that we will not be able to secure adequate sources of rhPDGF to meet our clinical needs for our periodontal or orthopedic applications or β-TCP to meet our clinical needs for our periodontal applications. Each of our agreements with Novartis and Orthovita are cancelable under certain circumstances.

The failure of a supplier to continue to provide us with these materials at a price or quality acceptable to us, or at all, would impede our ability to manufacture our product and product candidates. Moreover, our failure to maintain strategic reserve supplies of each significant single-sourced material used to manufacture products and product candidates that we develop may negatively impact our development and commercialization activities. If our specialty suppliers cannot perform as agreed, we may not be able to replace them in a timely manner or on terms that are acceptable to us and the production of our product and product candidates would be interrupted, resulting in delays in clinical trials and additional costs. We will be required to obtain regulatory clearance from the FDA or foreign regulatory authorities before we can use different suppliers or components. If we have to switch to replacement suppliers, we may face additional regulatory delays and the manufacture and delivery of GEM 21S and our GEM product candidates could be interrupted for an extended period of time, which may delay completion of our clinical trials, regulatory approval of our product candidates or commercialization of any approved products.

We and our suppliers are subject to numerous federal, state and local laws relating to matters, including safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. In addition, advertising and promotional materials relating to medical devices are subject to regulation by the Federal Trade Commission in specific instances. We and our suppliers may be required to incur significant costs to comply with these laws and regulations in the future. Unanticipated changes in existing regulatory requirements, our failure or the failure of our manufacturers to comply with these requirements, or the adoption of new requirements could delay the development of our product candidates or regulatory approval of our product candidates or successful commercialization of any approved products, resulting in additional losses to us.

We may be unable to establish or enter into the necessary partnerships and agreements with other companies who provide a component critical to the development and commercialization of our product candidates, including intellectual property, raw materials, manufacturing assistance, regulatory assistance and other assistance necessary to develop and market our product candidates successfully.

Our product development programs and potential commercialization of our product candidates will require substantial additional cash to fund expenses. We rely heavily upon arrangements with third-parties for the raw materials and intellectual property used in the development of our product candidates. These third parties also provide us with assistance in

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manufacturing our product candidates and seeking regulatory approvals. Our strategy includes continuing to partner with other biotechnology companies to assist us in potentially commercializing our product candidates. We face significant competition in seeking appropriate partners and these partnerships and other agreements into which we may enter are complex and time-consuming to negotiate, document and implement. We may not be able to enter into any such partnerships or agreements on terms that are acceptable to us, or at all. If that were to happen, we may have to curtail the development or delay the commercialization of our product candidates.

Chiron was recently acquired by the Novartis Group, and Chiron’s rhPDGF manufacturing business is currently being integrated into the Novartis organization. This integration may affect our ability to obtain rhPDGF in a timely manner, or at all. In addition, this integration may affect the timeliness or the extent to which Novartis assists us with our necessary regulatory filings for GEM 21S or our product candidates. The integration may delay or restrict our ability to obtain regulatory approval for our product candidates around the world and for GEM 21S outside the US and Canada.

At this point in time, we do not have an alternative source of rhPDGF. If we are not able to obtain rhPDGF from Novartis, we will not be able to manufacture GEM 21S after our current inventory is depleted. In view of the FDA’s removal of the restriction on our use of rhPDGF lots manufactured by Novartis after September 2002, we have modified our purchasing plans for rhPDGF. Based on our current forecasts for GEM 21S , our planned clinical study programs for GEM OS1 and other product candidates and our anticipated pre-clinical studies, the rhPDGF in our inventory should meet our needs for at least the next year. Under the terms of our supply agreement, Novartis is required to support our efforts to establish our production of rhPDGF should it terminate the agreement; however, establishing a manufacturing process to replace Novartis’ will take multiple years and a significant financial investment to complete, if at all, and there is no assurance we would be successful in that effort. We also may not be able to manufacture any other product candidates that contain rhPDGF, including GEM OS1 , after our current inventory is depleted.

We have limited manufacturing capabilities and manufacturing personnel, and if our manufacturing facilities are unable to provide an adequate supply of products, our growth could be limited and our business could be harmed.

We are evaluating bringing the later stages of the manufacture of GEM 21S and our GEM product candidates into our facility in Franklin, Tennessee, including final formulation, filling the syringes and cups that will be packaged in the finished kits and assembling the kits. Currently we are utilizing four contract facilities to complete the manufacturing, packaging and final product testing for our GEM 21S kits and our GEM OS1 clinical study kits. If there were a disruption to our manufacturing facility or those of our contract manufacturers, we would have no other means of manufacturing our product or product candidates until we were able to restore the manufacturing capability at our facility or develop alternative manufacturing facilities. If we were unable to produce sufficient quantities of our product candidates for use in our current and planned clinical trials, or if our manufacturing process yields substandard products, our development and commercialization efforts could be delayed.

We have limited resources, facilities and experience to commercially manufacture our product and product candidates. In order to produce our product and product candidates in the quantities that we anticipate will be required to meet future market demand, we will need to increase, or ‘‘scale up,’’ the production process by a significant factor over the current level of production. There are technical challenges to scaling-up manufacturing capacity, and developing commercial-scale manufacturing facilities under our control would require the investment of substantial additional funds as well as hiring and retaining additional management and technical personnel who have the necessary manufacturing experience. We may not successfully complete any required scale-up in a timely manner or at all. This growth could strain our existing managerial, operational, financial and other resources. Furthermore, if

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we fail to manage our growth effectively we may not be able to produce our product in sufficient quantities to meet the future requirements for the product. If we are unable to manufacture a sufficient supply of GEM 21S or any product candidate, our revenues, business and financial prospects would be adversely affected. In addition, if the scaled-up production process is not efficient or produces products that do not meet quality and other standards, our future gross margins may decline.

If we are unable to establish adequate sales and marketing capabilities, we may not be able to generate significant revenue and may not become profitable.

We do not have a dedicated sales force and have limited experience in the sales, marketing and distribution of drug-device combination products. In December 2003, we entered into an exclusive worldwide sublicense, research and development, marketing and distribution partnership with Luitpold for GEM 21S . In order to commercialize any other product candidates that we develop, we must develop our sales, marketing and distribution capabilities or make arrangements with a third party to perform these functions. If we are unable to establish adequate sales, marketing and distribution capabilities, independently or with others, we may not be able to generate significant revenue and may not become profitable.

Under the agreements with Luitpold, Luitpold is responsible for post-approval development, as well as worldwide sales and distribution, of GEM 21S for periodontal and maxillofacial applications. As a result of our agreements with Luitpold or any other arrangements we may enter into with third parties to perform sales, marketing and distribution services, our product revenues could be lower than if we directly marketed and sold GEM 21S or any other product candidate that we may develop. Furthermore, as a result of our agreements with Luitpold or other marketing and sales arrangements we may enter into with other companies, any revenues received will depend on the skills and efforts of others, and we do not know whether these efforts will be successful. Some of our existing or future distributors may have products or product candidates that compete with ours, and they may have an incentive not to devote sufficient efforts to marketing our products. Luitpold and its affiliates produce three products that compete with GEM 21S , Bio-Oss ^® , Bio-Gide ^® and Bio-Oss Collagen ^® . If our relationships with Luitpold or future distributors do not progress as anticipated, or if their sales and marketing strategies fail to generate sales of our products in the future, our business, financial condition and results of operations would be harmed.

The drug-device combination product industry is highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are safer and more effective than any products that we may develop, our commercial opportunity will be reduced or eliminated.

Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and products in the biological device field. We face competition from established pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions in the US and abroad. Many of our principal competitors have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with, or mergers with or acquisitions by, large and established companies or through the development of novel products and technologies.

Our competitors may:


	•	develop and patent processes or products earlier than us;


	•	obtain regulatory approvals for competing products more rapidly than us; or


	•	develop more effective or less expensive products or technologies that render our technology or product and product candidates obsolete or non-competitive.

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The industry in which we operate has undergone, and we expect it to continue to undergo, rapid and significant technological change, and we expect competition to intensify as technological advances are made. Our competitors may develop and commercialize medical devices, drug-device combination products or pharmaceutical products that are safer or more effective, have fewer side effects or are less expensive than any products that we may develop. For example, we are aware of companies that are developing various other technologies for treating periodontal and orthopedic injuries and disease, which could make our GEM 21S and any of our product candidates obsolete. We also compete with our competitors in recruiting and retaining qualified scientific and management personnel, in establishing clinical trial sites and patient registration for clinical trials, and in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

If our product and product candidates do not gain market acceptance among physicians, patients and the medical community, we may be unable to generate significant revenue, if any.

Even if we obtain regulatory approval for our product candidates, they may not, and GEM 21S may not, gain market acceptance among physicians, healthcare payers, patients and the medical community. Market acceptance will depend on our ability to demonstrate the benefits of our approved products in terms of safety, efficacy, convenience, ease of administration and cost effectiveness. In addition, we believe market acceptance depends on the effectiveness of our marketing strategy, the pricing of our approved products and the reimbursement policies of government and third party payers. Physicians may not prescribe our approved products for a variety of reasons and patients may determine for any reason that our product is not useful to them. If any of our approved products fails to achieve market acceptance, our ability to generate revenue will be limited.

The loss of our key management and scientific personnel may hinder our ability to execute our business plan.

As a small company with 56 full-time employees for the pay period ended November 24, 2006, our success depends on the continuing contributions of our management team and scientific personnel and on maintaining relationships with the network of medical and academic centers in the US that conduct our clinical trials. We depend on the services of our key scientific employees and the principal members of our management staff, including Samuel Lynch, Larry Bullock, Charles Hart and Steven Hirsch. Our success depends in large part upon our ability to attract and retain highly qualified personnel. We face intense competition in our hiring efforts from other pharmaceutical and biotechnology companies, as well as from universities and nonprofit research organizations, and we may have to pay higher salaries to attract and retain qualified personnel. The loss of one or more of these individuals, or our inability to attract additional qualified personnel, could substantially impair our ability to implement our business plan.

We face an inherent risk of liability in the event that the use or misuse of our product or product candidates results in personal injury or death.

The use of our product candidates in clinical trials and the sale of any approved products may expose us to product liability claims which could result in financial losses. Our clinical and commercial product liability insurance coverage may not be sufficient to cover claims that may be made against us. In addition, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts or scope to protect us against losses. Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources and adversely impact or eliminate the prospects for commercialization of the product candidate, or sale of the product, which is the subject of any such claim. Off-label use of our product may occur. While we do not promote any off-label

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use, off-label uses of products are common and the FDA does not regulate a physician’s choice of treatment. Off-label use or misuse of our product may subject us to additional liability.

If we are sued in a product liability action, we could be forced to pay substantial damages and the attention of our management team may be diverted from operating our business.

We currently manufacture commercial and investigational drug-device combination products and product candidates that are implanted in patients during surgery, and we are developing additional similar products for additional surgical indications. As a result, we may be subject to a product liability lawsuit. In particular, the market for spine products has a history of product liability litigation. Under agreements with our distributors and sales agencies and certain suppliers, we indemnify these parties from product liability claims. Any product liability claim brought against us, with or without merit, could result in the increase of our product liability insurance rates or the inability to secure coverage in the future. In addition, we would have to pay any amount awarded by a court in excess of policy limits. We maintain product liability insurance in the annual aggregate amount of up to $20 million, although our insurance policies have various exclusions. Thus, we may be subject to a product liability claim for which we have no insurance coverage, in which case we may have to pay the entire amount of any award. Even in the absence of a claim, our insurance rates may rise in the future to a point where we may decide not to carry this insurance. A meritless or unsuccessful product liability claim would be time-consuming and expensive to defend and could result in the diversion of management’s attention from our core business. A successful product liability claim or series of claims brought against us in excess of our coverage could have a material adverse effect on our business, financial condition and results of operations.

Our ability to use our net operating loss carryforwards could be limited.

Our ability to use our net operating loss carryforwards could be limited. At September 30, 2006, we had net operating loss carryforwards totaling approximately $16.9 million available to reduce our future federal income tax liabilities. Our ability to use these net operating loss carryforwards to reduce our future federal income tax liabilities is subject to annual limitations. In connection with any offering, we may realize a ‘‘more than fifty percent change in ownership’’ which could further limit our ability to use our net operating loss and tax credit carryforwards accumulated to date to reduce future taxable income and tax liabilities. Additionally, because US tax laws limit the time during which net operating loss and tax credit carryforwards may be applied against future taxable income and tax liabilities, we may not be able to take advantage of our net operating loss and tax credits for federal income tax purposes.

Risks Relating to Intellectual Property

If we cannot protect our intellectual property, our ability to market GEM 21S and our ability to develop and commercialize our product candidates may be severely limited.

Our success will depend in part on our ability and on the ability of Harvard and ZymoGenetics to maintain and enforce patent protection for the therapeutic uses of rhPDGF. Without patent protection, other companies could offer substantially identical products for sale without incurring the sizable discovery, development and licensing costs that we have incurred. Our ability to recover these expenditures and realize profits upon the sale of approved products would then be diminished.

We have relied on the intellectual property of ZymoGenetics and the intellectual property co-owned by us and Harvard to provide freedom to operate and to exclude others from developing rhPDGF for the treatment of general bone defects and bone defects associated with advanced periodontal disease, fractures and other indications. One of our licensed issued

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US patents covering our GEM 21S product may have expired in July 2006. We have two additional US patents covering other unique aspects of GEM 21S and our product candidates. We do not believe that the expiration of this patent would significantly affect our intellectual property position. The license agreement with Harvard provides exclusivity to the designated patents, which we co-own with Harvard. However, if any patent or other rights of ZymoGenetics or any patent or other rights co-owned by us and Harvard are challenged, a court may determine that the patents are invalid or unenforceable. Even if the validity or enforceability of a patent is upheld by a court, a court may not prevent alleged infringement on the grounds that the activity is not covered by the patent claims. Any litigation, whether to enforce our rights to use our or our licensors’ patents or to defend against allegations that we infringe third-party rights, would be costly and time consuming, and may distract management from other important tasks.

Neither we nor our licensors may be able to obtain additional issued patents relating to our technology. Even if issued, patents may be challenged, narrowed, invalidated, or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. In addition, our patent applications, patents and our licensors’ patents may not afford us protection against competitors with similar technology. Because patent applications in the US and many foreign jurisdictions typically are not published until 18 months after filing, or in some cases ever, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications.

We also rely on trade secrets, know-how and other proprietary information. We seek to protect this information, in part, through the use of non-disclosure and confidentiality agreements with employees, consultants, advisors and others. These agreements may be breached and we may not have adequate remedies for a breach. In addition, we cannot ensure that these agreements will provide adequate protection for our trade secrets, know-how or other proprietary information and prevent their unauthorized use or disclosure. To the extent that consultants, key employees or other third parties apply technological information independently developed by them or by others to our proposed products, disputes may arise as to the proprietary rights to the information, which may not be resolved in our favor. The risk that other parties may breach confidentiality agreements, or that our trade secrets become known or independently discovered by competitors, could adversely affect us by enabling our competitors, who may have greater experience and financial resources, to copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies.

Our success also depends on our ability to operate and commercialize our product and product candidates without infringing the patents or proprietary rights of others.

Third parties may claim that we or our licensors or suppliers are infringing their patents or are misappropriating their proprietary information. In the event of a successful claim against us or our licensors or suppliers for infringement of the patents or proprietary rights of others, we may be required to, among other things:


	•	pay substantial damages;


	•	stop using our technologies;


	•	stop certain research and development efforts;


	•	develop non-infringing products or methods; or


	•	obtain one or more licenses from third parties.

A license required under any such patents or proprietary rights may not be available to us, or may not be available on acceptable terms. If we or our licensors or suppliers are sued for

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infringement, we could encounter substantial delays in, or be prohibited from, developing, manufacturing and commercializing GEM 21S or our product candidates.

We employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. To the extent our employees are involved in research areas that are similar to those areas in which they were involved at their former employers, we may be subject to claims that these employees may have used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against these claims, which could result in substantial costs and be a distraction to management and may have a material adverse effect on us, even if we are successful in defending these claims.

Delays encountered during the FDA approval process could shorten the patent protection period during which we have the exclusive right to commercialize technologies or could allow others to come to market with similar technologies before us.

Regulatory Risks

We are subject to extensive governmental regulation including the requirement of FDA approval or clearance before our product and product candidates may be marketed.

Both before and after approval or clearance of our product and product candidates, we, our product and product candidates, and our suppliers, contract manufacturers, and contract testing laboratories are subject to extensive regulation by governmental authorities in the US and other countries. Failure to comply with applicable requirements could result in, among other things, any of the following actions:


	•	warning letters;


	•	fines and other civil penalties;


	•	unanticipated expenditures;


	•	delays in the FDA’s approving or clearing or the FDA’s refusing to approve or clear a product candidate;


	•	product recall or seizure;


	•	interruption of manufacturing or clinical trials;


	•	operating restrictions;


	•	injunctions; and


	•	criminal prosecutions.

Our product candidates require FDA authorization by means of an approval or clearance prior to marketing. Some of our product candidates, including GEM OS1 , are regulated as combination products. For a combination product, the FDA must determine which center or centers within the FDA will review the product candidate and under what legal authority the product candidate will be reviewed. GEM OS1 is being reviewed by medical device authorities at the Center for Devices and Radiological Health, with participation by the Center for Drug Evaluation and Research. GEM OS1 requires an approved pre-market application, or PMA, before it can be marketed. The process of obtaining FDA approval of a PMA is lengthy, expensive, and uncertain, and we cannot be sure that our drug-device combination product candidates regulated by the FDA as medical devices, or any other product candidates, will be approved in a timely fashion, or at all. If the FDA does not approve or clear our product candidates in a timely fashion, or at all, our business and financial condition may be adversely affected. We cannot be sure that the FDA will not select a different center and/or different legal authority for our other product candidates, in which case the path to regulatory approval would be different and could be more lengthy and costly. The review of combination products

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is often more complex and more time consuming than the review of a product candidate under the jurisdiction of only one center within the FDA.

In addition to the approval and clearance requirements, other numerous and pervasive regulatory requirements apply, both before and after approval or clearance, to us, our product and product candidates, and our suppliers, contract manufacturers, and contract laboratories. These include requirements related to:


	•	testing;


	•	manufacturing;


	•	quality control;


	•	labeling;


	•	advertising;


	•	promotion;


	•	distribution;


	•	export;


	•	reporting to the FDA certain adverse experiences associated with use of the product; and


	•	obtaining additional approvals or clearances for certain modifications to the products or their labeling or claims.

The FDA approval for GEM 21S was granted with three post-approval requirements relating to (1) establishing an rhPDGF identity test, (2) evaluating quality testing of our first 30 lots of product and (3) prohibiting our use of lots of rhPDGF that were fermented by Novartis after September 2002 until supplemental approval was received from the FDA to include Novartis’ rhPDGF fermentation site. Regarding the first post-approval requirement, the FDA approved our PMA supplement in July 2006 to implement a new Enzyme-Linked ImmunoSorbent Assay, or ELISA, rhPDGF identity test, thus satisfying the first post-approval requirement. Regarding the second requirement, we submitted all quality testing data that was available to us in August 2006. We will submit the data on the remaining lots of product as soon as it is available. Regarding the third requirement, the FDA granted us approval in September 2006 to include Novartis’ rhPDGF fermentation site in our GEM 21S PMA and removed the restriction on our use of rhPDGF lots manufactured after September 2002, thereby satisfying the third post-approval requirement.

We also are subject to inspection by the FDA to determine our compliance with regulatory requirements, as are our suppliers, contract manufacturers, and contract testing laboratories.

The FDA’s requirements may change and additional government regulations may be promulgated that could affect us, our product and product candidates, and our suppliers, contract manufacturers, and contract laboratories. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action. There can be no assurance that we will not be required to incur significant costs to comply with such laws and regulations in the future or that such laws or regulations will not have a material adverse effect upon our business.

Failure to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products abroad.

International sales of our product and any of our product candidates that we commercialize are subject to the regulatory requirements of each country in which the products are sold. Accordingly, the introduction of our product and product candidates in markets outside the US will be subject to regulatory clearances in those jurisdictions. The regulatory review process varies from country to country. Many countries also impose product standards, packaging and labeling requirements and import restrictions on medical devices. In

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addition, each country has its own tariff regulations, duties and tax requirements. The approval by foreign government authorities is unpredictable and uncertain and can be expensive. Our ability to market our approved products could be substantially limited due to delays in receipt of, or failure to receive, the necessary approvals or clearances.

Prior to marketing our products in any country outside of the US, we must obtain marketing approval in that country. Approval and other regulatory requirements vary by jurisdiction and differ from the US requirements. We may be required to perform additional pre-clinical or clinical studies even if FDA approval has been obtained.

Under EU regulatory systems, our products will be medicinal products. Marketing authorization for medicinal products can be submitted under the centralized European Agency for the Evaluation of Medicinal Products, or EMEA, or the decentralized mutual recognition process. The centralized procedure is mandatory for biotechnology derived products. If a product is approved under the centralized procedure, it receives a single marketing authorization that is valid in all EU member states. The decentralized process provides for mutual recognition of national approved decisions which allows the holder of an approval from one EU member state to submit an application in other member states requesting that they recognize the approval already granted.

In order to market our approved products in Japan, approval must be obtained from the Japanese Ministry of Health, Labor and Welfare. We will need to conduct clinical trials in Japan to obtain approval there for our products. Accordingly, we will need to enter into a third party strategic alliance to conduct such clinical trials, obtain the necessary regulatory approvals and market in Japan. We may not succeed in achieving such an alliance and we ultimately may not obtain the approvals necessary to market GEM 21S or our product candidates in Japan.

In Canada, the manufacture, distribution and consumption of medical products, drugs and equipment is regulated by a variety of industry-specific statutes and regulations. Drugs sold in Canada are regulated by the Food and Drugs Act (Canada). Even though a drug, medical product or device may be approved for use in another jurisdiction, it may not be sold in Canada until approved by the national regulatory agency, Health Canada. Although in May 2006 we received marketing approval from Health Canada to market GEM 21S in Canada and began marketing GEM 21S in Canada in September 2006, we may need to conduct clinical trials in Canada to obtain approval for our other product candidates. We ultimately may not obtain the approvals necessary to market our product candidates in Canada.

The results of our clinical trials may be insufficient to obtain regulatory approval for our product candidates.

We will only receive regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the FDA or the applicable foreign regulatory agency, in well designed and conducted clinical trials, that the product candidate is safe and effective. If we are unable to demonstrate that a product candidate will be safe and effective in advanced clinical trials involving larger numbers of patients, we will be unable to submit the PMA or other application necessary to receive regulatory approval to commercialize the product candidate. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA. We face risks that:


	•	the product candidate may not prove to be safe or effective;


	•	the product candidate’s benefits may not outweigh its risks;


	•	the results from more advanced clinical trials may not confirm the positive results from pre-clinical studies and early clinical trials;


	•	the FDA or comparable foreign regulatory authorities may interpret data from pre-clinical and clinical testing in different ways than we interpret them; and


	•	the FDA or other regulatory agencies may require additional or expanded trials.

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We have only limited experience in regulatory affairs, and some of our products may be based on new technologies. These factors may affect our ability or the time we require to obtain necessary regulatory approvals.

We have only limited experience in filing and prosecuting the applications necessary to gain regulatory approvals. Moreover, some of the products that are likely to result from our product development, licensing and acquisition programs may be based on new technologies that have not been extensively tested in humans. The regulatory requirements governing these types of product candidates may be less well defined or more rigorous than for conventional products. As a result, we may experience a longer regulatory process in connection with obtaining regulatory approvals of any products that we develop, license or acquire.

If we fail to obtain an adequate level of reimbursement for our approved products by third party payers, there may be no commercially viable markets for our approved products or the markets may be much smaller than expected.

The availability and levels of reimbursement by governmental and other third party payers affect the market for our approved products. The efficacy, safety, performance and cost-effectiveness of our product and product candidates and of any competing products will determine the availability and level of reimbursement. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government sponsored healthcare and private insurance. To obtain reimbursement or pricing approval in some countries, we may be required to produce clinical data, which may involve one or more clinical trials, that compares the cost-effectiveness of our approved products to other available therapies. We may not obtain international reimbursement or pricing approvals in a timely manner, if at all. Our failure to receive international reimbursement or pricing approvals would negatively impact market acceptance of our approved products in the international markets in which those approvals are sought.

We believe that future reimbursement may be subject to increased restrictions both in the US and in international markets. Future legislation, regulation or reimbursement policies of third party payers may adversely affect the demand for our future approved products currently under development and limit our ability to sell our approved products on a profitable basis. In addition, third party payers continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for healthcare products and services. If reimbursement for our approved products is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels, market acceptance of our approved products would be impaired and our future revenues, if any, would be adversely affected.

If we fail to comply with the US Federal Anti-Kickback Statute and similar state laws, we could be subject to criminal and civil penalties and exclusion from the Medicare and Medicaid programs, which could have a material adverse effect on our business and results of operations.

A provision of the Social Security Act, commonly referred to as the Federal Anti-Kickback Statute, prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of items or services payable by Medicare, Medicaid or any other federal health care program. The Federal Anti-Kickback Statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, most of the states in which our approved products may be sold have adopted laws similar to the Federal Anti-Kickback Statute, and some of these laws are even broader than the Federal Anti-Kickback Statute in that their prohibitions are not limited to items or services paid for by Federal health care program but, instead, apply regardless of the source of payment. Violations of the Federal Anti-Kickback Statute may result in substantial civil or criminal penalties and exclusion from participation in federal health care programs.

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All of our financial relationships with health care providers and others who provide products or services to federal health care program beneficiaries are potentially governed by the Federal Anti-Kickback Statute and similar state laws. We believe our operations are in compliance with the Federal Anti-Kickback Statute and similar state laws. However, we cannot assure you that we will not be subject to investigations or litigation alleging violations of these laws, which could be time-consuming and costly to us and could divert management’s attention from operating our business, which in turn could have a material adverse effect on our business. In addition, if our arrangements were found to violate the Federal Anti-Kickback Statute or similar state laws, it could have a material adverse effect on our business and results of operations.

Patients may discontinue their participation in our clinical studies, which may negatively impact the results of these studies and extend the timeline for completion of our development programs.

Clinical trials for our product candidates require sufficient patient enrollment. We may not be able to enroll a sufficient number of patients in a timely or cost-effective manner. Patients enrolled in our clinical studies may discontinue their participation at any time during the study as a result of a number of factors, including withdrawing their consent or experiencing adverse clinical events, which may or may not be judged related to our product candidates under evaluation. If a large number of patients in any one of our studies discontinue their participation in the study, the results from that study may not be positive or may not support a filing for regulatory approval of our product candidates.

In addition, the time required to complete clinical trials is dependent upon, among other factors, the rate of patient enrollment. Patient enrollment is a function of many factors, including:


	•	the size of the patient population;


	•	the nature of the clinical protocol requirements;


	•	the availability of other treatments or marketed therapies (whether approved or experimental);


	•	our ability to recruit and manage clinical centers and associated trials;


	•	the proximity of patients to clinical sites; and


	•	the patient eligibility criteria for the study.

The use of hazardous materials in our operations may subject us to environmental claims or liability.

We intend to conduct research and development and some future manufacturing operations in our Franklin, Tennessee facility. Our research and development processes will involve the controlled use of hazardous materials, chemicals and radioactive compounds. We will conduct experiments that are common in the biotechnology industry, in which we may use small quantities of chemical hazards, including those that are corrosive, toxic and flammable, and trace amounts of radioactive materials. The risk of accidental injury or contamination from these materials cannot be eliminated. We do not maintain a separate insurance policy for these types of risks. In the event of an accident or environmental discharge or contamination, we may be held liable for any resulting damages, and any liability could exceed our resources. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with these laws and regulations could be significant.

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Risks Relating to Our Financial Results and Need for Financing

We will need to raise additional capital in the future. If we are unable to raise additional capital in the future, our product development could be limited and our long term viability may be threatened; however, if we raise additional capital, your percentage ownership as a stockholder could decrease and constraints could be placed on the operation of our business.

We have experienced negative operating cash flows since our inception and have funded our operations primarily from proceeds received from sales of our stock. We believe our existing cash and cash equivalents will be sufficient to meet our currently estimated operating and investing requirements through early 2008. While we have no immediate plans to do so, we may seek to obtain additional funds at any time in the future through equity or debt financings, or strategic alliances with third parties, either alone or in combination with equity financings. These financings could result in substantial dilution to the holders of our common stock or require contractual or other restrictions on our operations or on alternatives that may be available to us in considering strategic transactions, dividends or liquidation preferences, debt service and/or revenue sharing arrangements. If we raise additional funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock, and the terms of the debt securities issued could impose significant restrictions on our operations. Any such required financing may not be available in amounts or on terms acceptable to us and the failure to procure such required financing could have a material adverse effect on our business, financial condition and results of operations.

A variety of factors could impact our need to raise additional capital, the timing of any required financings and the amount of such financings.

Factors that may cause our future capital requirements to be greater than anticipated or could accelerate our need for funds include, without limitation:


	•	unforeseen developments during our pre-clinical activities and clinical trials;


	•	delays in the timing of receipt of required regulatory approvals;


	•	unanticipated expenditures in research and development or manufacturing activities;


	•	delayed market acceptance of our approved product;


	•	unanticipated expenditures in the acquisition and defense of intellectual property rights;


	•	the failure to develop strategic alliances for the marketing of some of our product candidates;


	•	additional inventory builds to adequately support the launch of new products;


	•	unforeseen changes in healthcare reimbursement for procedures using our approved product;


	•	inability to train a sufficient number of surgeons to create demand for our approved product;


	•	lack of financial resources to adequately support our operations;


	•	difficulties in maintaining commercial scale manufacturing capacity and capability;


	•	unforeseen problems with our third-party manufacturers and service providers or with our specialty suppliers of certain raw materials;


	•	unanticipated difficulties in operating in international markets;


	•	unanticipated financial resources needed to respond to technological changes and increased competition;


	•	unforeseen problems in attracting and retaining qualified personnel to market our approved product;

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	•	enactment of new legislation or administrative regulations;


	•	the application to our business of new court decisions and regulatory interpretations;


	•	claims that might be brought in excess of our insurance coverage; and


	•	the failure to comply with regulatory guidelines.

In addition, although we have no present commitments or understandings to do so, we may seek to expand our operations and product line through acquisitions or joint ventures. Any acquisition or joint venture would likely increase our capital requirements.

If adequate financing is not available, we may be required to delay, scale back or eliminate our operations. Consequently, our long-term viability would be threatened.

Risks Relating to The Ownership of Our Common Stock

We expect that the price of our common stock will be highly volatile.

Prior to our initial public offering, or IPO, in May 2006, there was no public market for our common stock. An active and liquid trading market for our common stock may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. Moreover, we cannot assure you that any securities analysts will initiate or maintain research coverage of our company and our common stock. Further, in the event that shares in this offering are purchased by any of our principal stockholders, the subsequent offering of such shares initially would be restricted, which would reduce the number of shares freely traded by the public.

The trading prices of the securities of medical technology companies have been highly volatile. Accordingly, the trading price of our common stock is likely to be subject to wide fluctuations. Factors that could affect the trading price of our common stock include, among other things:


	•	whether we successfully commercialize GEM 21S or any other approved product in the future;


	•	whether we receive FDA approval to market any of our product candidates in the US or similar regulatory approval in foreign jurisdictions;


	•	developments relating to patents, proprietary rights and potential infringement;


	•	announcements by us or our competitors of technological innovations or new commercial products;


	•	reimbursement policies of various governmental and third party payers;


	•	public concern over the safety and efficacy of GEM 21S or any of our product candidates;


	•	changes in estimates of our revenue and operating results;


	•	variances in our revenue or operating results from forecasts or projections;


	•	recommendations of securities analysts regarding investment in our stock; and


	•	market conditions in our industry and the economy as a whole.

If our future quarterly or annual operating results are below the expectations of securities analysts or investors, the price of our common stock will likely decline. In addition, share price fluctuations may be exaggerated if the trading volume of our common stock is low.

From time to time, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals or milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the

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submission of regulatory filings. From time to time, we expect that we will publicly announce the anticipated timing of some of these milestones. All of these milestones are based on a variety of assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control. If we do not meet these milestones as publicly announced, our stock price may decline and the commercialization of our product and product candidates may be delayed.

If we fail to maintain effective internal controls over financial reporting, our business, operating results and stock price could be materially adversely affected.

Beginning with our annual report for our fiscal year ending 2007, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include a report by our management on our internal controls over financial reporting. This report must contain an assessment by management of the effectiveness of our internal controls over financial reporting as of the end of our fiscal year and a statement as to whether or not our internal controls are effective. The report must also contain a statement that our independent auditors have issued attestation reports on management’s assessment of such internal controls and on the effectiveness of internal controls.

In order to achieve timely compliance with Section 404, we have begun a process to document and evaluate our internal controls over financial reporting. Our efforts to comply with Section 404 have resulted in, and are likely to continue to result in, significant costs, the commitment of time and operational resources and the diversion of management’s attention. If our management identifies one or more material weaknesses in our internal controls over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal controls over financial reporting are effective, or if our independent auditors are unable to attest that our management’s report is fairly stated or they are unable to express an opinion on our management’s evaluation or on the effectiveness of our internal controls, market perception of our financial condition and the trading price of our stock may be adversely affected and customer perception of our business may suffer.

Future sales of our common stock by existing stockholders could cause our stock price to decline.

The market price of our common stock could drop significantly if our existing stockholders sell a large number of shares of our common stock or are perceived by the market as intending to sell them. All of the shares sold in our IPO were freely tradable without restriction or further registration under the federal securities laws, unless purchased by our ‘‘affiliates’’ as that term is defined in Rule 144 under the Securities Act. We expect that we also will be required to register any securities sold in future private financings. In addition, based on the number of shares outstanding as of May 5, 2006, 1,223,097 shares qualified for resale under Rule 144(k) on November 23, 2006, following the expiration of 180-day lock up agreements entered into in connection with our IPO. The initial term of the lock up agreement was extended to November 23, 2006 as a result of our announcement of certain financial and clinical results in early November 2006. On November 9, 2006, unless held by our affiliates, approximately 9,221,340 shares of common stock became eligible for resale under Rule 144(k). Furthermore, as of November 23, 2006, holders of approximately 9,330,495 shares of common stock had piggyback registration rights with respect to their shares in connection with future offerings, including this offering. Sales by stockholders of substantial amounts of our shares, or the perception that these sales may occur in the future, could affect materially and adversely the market price of our common stock.

At September 30, 2006, there were options outstanding to purchase 1,503,902 shares of our common stock with a weighted average exercise price of $3.33. We have 516,148 shares reserved for issuance of options under our stock plans.

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Our executive officers, directors and major stockholders maintain the ability to control all matters submitted to stockholders for approval.

As of December 8, 2006, our executive officers, directors and their affiliates beneficially own shares representing approximately 30.2% of our capital stock. Accordingly, our current executive officers, directors and their affiliates have substantial control over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transactions, as well as management and affairs. The concentration of ownership may delay or prevent a change of control of us at a premium price if these stockholders oppose it, even if it would benefit our other stockholders.

Provisions in our charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us.

Provisions of our corporate charter and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:


	•	a classified board of directors;


	•	limitations on the removal of directors;


	•	advance notice requirements for stockholder proposals and nominations;


	•	the inability of stockholders to act by written consent or to call special meetings; and


	•	the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval.

In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of our company.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections titled ‘‘Prospectus Summary,’’ ‘‘Risk Factors,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and ‘‘Business,’’ contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act. Statements in this prospectus that are not historical facts are hereby identified as ‘‘forward-looking statements’’ for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act. Forward-looking statements convey our current expectations or forecasts of future events. All statements contained in this prospectus other than statements of historical fact are forward-looking statements. Forward-looking statements include statements regarding our future financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words ‘‘may,’’ ‘‘continue,’’ ‘‘ estimate,’’ ‘‘intend,’’ ‘‘plan,’’ ‘‘will,’’ ‘‘believe,’’ ‘‘project,’’ ‘‘expect,’’ ‘‘anticipate’’ and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements include, among other things, statements about:


	•	market acceptance of and demand for GEM 21S and our product candidates;


	•	regulatory actions that could adversely affect the price of or demand for our approved products;


	•	our intellectual property portfolio and licensing strategy;


	•	timing of clinical studies and eventual FDA approval of our product candidates or other new product introductions;


	•	our marketing and manufacturing capacity and strategy;


	•	estimates regarding our capital requirements, and anticipated timing of the need for additional funds;


	•	product liability claims;


	•	economic conditions that could adversely affect the level of demand for our products;


	•	financial markets; and


	•	the competitive environment.

Any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They may be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including the risks, uncertainties and assumptions described in ‘‘Risk Factors.’’ In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur as contemplated, and actual results could differ materially from those anticipated or implied by the forward-looking statements.

You should read this prospectus and the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this prospectus. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See ‘‘Where You Can Find More Information.’’

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USE OF PROCEEDS

Currently, we intend to use the net proceeds from the sale of our common stock for working capital and general corporate purposes.

As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds from this offering. The amounts and timing of our actual expenditures may vary significantly from our expectations depending upon numerous factors, including the progress of our clinical trials, and our operating costs and capital expenditures. Accordingly, we will retain the discretion to allocate the net proceeds of this offering among the identified uses described below, and we reserve the right to change the allocation of the net proceeds among the uses described below as a result of contingencies such as the progress and results of our clinical trials and our development activities, the results of our commercialization efforts and competitive developments.

We presently estimate that we will use the net proceeds of this offering as follows:


	•	approximately 65% to fund our research and development activities;


	•	approximately 20% for general corporate purposes, including working capital needs and to hire additional employees;


	•	approximately 10% to commercialize our lead product, GEM 21S , including building our manufacturing capabilities; and


	•	approximately 5% to license additional molecules and matrix materials.

We also may use a portion of the net proceeds for the potential acquisition of, or investment in, technologies, products or companies that complement our business, although we have no current understandings, commitments or arrangements to do so.

Pending the uses described above, we intend to invest the net proceeds of this offering in short- to medium-term, investment-grade securities.

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PRICE RANGE OF COMMON STOCK

Shares of our common stock have traded on the Nasdaq Global Market under the symbol ‘‘BMTI’’. The following table sets forth the range of the high and low sales prices as reported by the Nasdaq Global Market for shares of our common stock since inception of trading on May 15, 2006.


	Price range
	High			Low
Year ending December 31, 2006
May 15, 2006 through June 30, 2006		$	9.03		$	6.23
July 1, 2006 through September 30, 2006		$	8.71		$	6.20
October 1, 2006 through December 7, 2006		$	15.40		$	7.44

As of December 7, 2006, there were 37 registered holders of record of shares of our common stock.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings to finance the growth and development of our business and therefore do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capital requirements, covenants in our debt instruments (if any), and such other factors as our board of directors deems relevant.

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CAPITALIZATION

The following table sets forth our cash, cash equivalents and marketable securities and capitalization as of September 30, 2006. You should read this table together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ section of this prospectus.


	As of September 30, 2006
	(in thousands, except share and per share information)
Stockholders’ equity (deficit):
Common stock, $0.001 par value; 37,500,000 shares authorized; 15,633,111 shares issued and outstanding actual		$	16
Additional paid-in capital			84,386
Accumulated deficit			(34,485	)
Total stockholders’ equity (deficit)			49,917
Total capitalization		$	49,917

The above share data excludes the following:


	•	1,503,902 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2006 at a weighted average exercise price of $3.33 per share; and


	•	2,020,050 shares of common stock that will be reserved for future issuance under our stock plans as of September 30, 2006.

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SELECTED FINANCIAL DATA

The following table sets forth selected financial data that is qualified in its entirety by and should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our audited consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated balance sheet data as of December 31, 2005 and 2004 and the selected consolidated statements of operations data for each of the three years in the period ended December 31, 2005 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected balance sheet data as of December 31, 2003, 2002 and 2001 and the selected consolidated statement of operations data for the year ended December 31, 2002 and for the period from inception (April 14, 1999) through December 31, 2001 have been derived from our audited consolidated financial statements which are not included in this prospectus.

The selected condensed consolidated statement of operations data for the nine months ended September 30, 2006 and 2005 and the selected condensed consolidated balance sheet data as of September 30, 2006 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and notes thereto, which include, in the opinion of our management, all adjustments (consisting of normal recurring adjustments), necessary for a fair presentation of the information for the unaudited interim period. Our historical results for any prior or interim period are not necessarily indicative of results to be expected for a full fiscal year or for any future period.

As noted above, the following tables include selected statement of operations data for the period from inception (April 14, 1999) through December 31, 2001 rather than the stand alone year ended December 31, 2001. We believe this cumulative information from inception through December 31, 2001 provides useful information regarding our results of operations since our inception. Our operations during 1999 and 2000 were minimal and consisted of start-up activities involving our founders. We did not have any significant operations until we received our initial funding through the Series A redeemable, convertible preferred stock issuance in March 2001. Substantially all of our loss from operations during the period from inception (April 14, 1999) through December 31, 2001 occurred during the year ended December 31, 2001.

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	Nine months ended September 30,								Year ended December 31,																Period from Inception (April 14, 1999) through December 31, 2001
	2006				2005				2005				2004				2003				2002
	(unaudited)
					(in thousands, except share and per share information)
Statement of Operations Information:
Revenues:
Collaborative research and development		$	215			$	3,893			$	4,335			$	5,601			$	461			$	—			$	61
Sublicense fee			531				—				84				—				—				—				—
Sales			1,230				—				60				—				—				—				—
Royalty income			236				—				31				—				—				—				—
Grants and other			23				—				7				—				162				157				40
Total revenues			2,235				3,893				4,517				5,601				623				157				101
Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)			1,093				—				70				—				—				—				—
Research and development			7,790				4,611				12,587				3,935				3,320				2,558				1,131
General and administrative			4,488				1,957				3,402				2,434				1,157				971				888
Depreciation and capital lease amortization			584				205				399				74				28				16				2
Patent license fee amortization			1,581				316				652				397				87				50				21
			15,536				7,089				17,110				6,840				4,592				3,595				2,042
Loss from operations			(13,301	)			(3,196	)			(12,593	)			(1,239	)			(3,969	)			(3,438	)			(1,941	)
Interest income, net			1,529				651				921				196				47				70				71
Loss on disposal of equipment			(1	)			(2	)			(4	)			—				—				—				—
Loss before income taxes			(11,773	)			(2,547	)			(11,676	)			(1,043	)			(3,922	)			(3,368	)			(1,870	)
Income taxes			—				—				—				—				77				—				—
Net loss