OHAQ Oracle Healthcare Acquisition Corp (CE)

Item 1A.    Risk Factors

Risks Associated with our Business

If we are unable to complete the business combination with PTI, we will not have enough time to negotiate and consummate another business combination and will be required to liquidate.

        We must complete our business combination by March 8, 2008. Accordingly, if we are unable to complete the business combination with PTI, it is unlikely that we will have enough time to negotiate and consummate another business combination. We will therefore be forced to liquidate our assets. If we are unable to complete a business combination and are forced to liquidate our assets, the per-share liquidation distribution could be less than the purchase price per share that purchasers paid for our securities because of the expenses of the initial public offering and our general and administrative expenses. Furthermore, there will be no distribution with respect to our outstanding warrants and, accordingly, the warrants will expire worthless if we liquidate before the completion of a business combination.

You will not be entitled to protections normally afforded to investors of blank check companies under federal securities laws.

        Since at the time of our initial public offering we intended to use the net proceeds of our initial public offering to complete a business combination with an operating business that had not been identified, we may be deemed to be a blank check company under federal securities laws. However, since we have net tangible assets in excess of $5,000,000 upon the successful consummation of our initial public offering and have an audited balance sheet demonstrating this fact, we believe that we are exempt from the rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules.

Under Delaware law, the requirements and restrictions relating to our initial public offering contained in our amended and restated certificate of incorporation may be amended, which could reduce or eliminate the protection afforded to our stockholders by such requirements and restrictions.

        Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to our initial public offering that will apply to us until the consummation of a business combination. Specifically, our amended and restated certificate of incorporation provides, among other things, that:

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upon consummation of our initial public offering, $113,500,000 of the offering proceeds was to be placed into the trust account, which proceeds may not be disbursed from the trust account except in connection with, or following, a business combination, upon our liquidation or as otherwise permitted in the amended and restated certificate of incorporation;



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prior to the consummation of a business combination, we will submit such business combination to our stockholders for approval even if stockholder approval is not required under the circumstances;



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we may consummate the business combination only if approved by a majority of our stockholders and public stockholders owning less than 20% of the shares sold in our initial public offering exercise their conversion rights;



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if a business combination is approved and consummated, public stockholders who voted against the business combination and exercised their conversion rights will receive their pro rata share of the trust account;

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if a business combination is not consummated or a letter of intent, an agreement in principle or a definitive agreement is not signed within the time periods specified below, then we will be dissolved and distribute to all of our public stockholders their pro rata share of the trust account and any remaining net assets; and



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we may not consummate any other merger, acquisition, stock purchase, asset purchase or similar transaction other than a business combination that meets the conditions specified in our prospectus dated March 2, 2006, including the requirement that the business combination be with an operating business in the healthcare industry whose fair market value is equal to at least 80% of our net assets at the time of such business combination.

        Under Delaware law, the foregoing provisions may be amended if our board of directors adopts a resolution declaring the advisability of an amendment and calls a shareholders meeting, at which the holders of a majority of our outstanding stock vote in favor of such amendment. Any such amendment could reduce or eliminate the protection afforded to our stockholders by such requirements and restrictions. However, we view these provisions as obligations to our stockholders, and neither we nor our board of directors will propose, or seek shareholder approval of, any amendment of these provisions.

If our stockholders fail to vote or abstain from voting on the adoption of the proposed merger with PTI, they will not be able to exercise their conversion rights.

        Pursuant to our Amended and Restated Certificate of Incorporation, a holder of shares of our common stock issued in our initial public offering may, if the stockholder votes against the proposed merger with PTI, demand that we convert such shares into cash in the event that the merger is completed. This demand must be made on the proxy card or by telephone or through the Internet website specified on the proxy card at the same time that the stockholder votes against the merger proposal. Any stockholder who fails to vote or who abstains from voting on the merger proposal may not exercise his, her or its conversion rights. In addition, any converting stockholder who fails to comply with the conversion procedures before 12:00 noon, Eastern time on the business day prior to the date of the special meeting will also forfeit his, her or its conversion rights.

        More information on the conversion rights can be found in our Registration Statement on Form S-4, filed on February 6, 2008, the Proxy Statement/Prospectus and the Supplement, all of which can be obtained on the SEC's website, www.sec.gov., free of charge. We encourage you to read the Registration Statement on Form S-4, the Proxy Statement/Prospectus and the Supplement.

If we do not complete the merger and are therefore required to dissolve and liquidate, payments from the trust account to our public stockholders may be delayed and may be reduced by claims of third parties.

        We currently believe that our dissolution and any plan of distribution in the event the merger with PTI is not completed would proceed in approximately the following manner:

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Our board of directors will convene and adopt a specific plan of distribution, which it will then vote to recommend to our stockholders, and at such time it will also cause to be prepared a preliminary proxy statement setting out the plan of distribution as well as the board of director's recommendation of our dissolution and the plan of distribution;



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As promptly as possible after March 8, 2008, we would file a preliminary proxy statement with the SEC;



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If the SEC does not review the preliminary proxy statement, then we expect that 10 days after the filing of the preliminary proxy statement, we would mail the proxy statement to our stockholders, and as promptly as practicable after the mailing, we would convene a meeting of

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our stockholders, at which they will either approve or reject our dissolution and plan of distribution; and

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If the SEC does review the preliminary proxy statement, we currently estimate that it would receive comments within approximately 30 days following the filing of the preliminary proxy statement. We mail the proxy statement to our stockholders following the conclusion of the comment and review process (the length of which we cannot predict with any certainty, and which may be substantial) and would convene a meeting of our stockholders at which they will either approve or reject the dissolution and plan of distribution.

        These procedures, or a vote to reject the dissolution and any plan of distribution by our stockholders, may result in substantial delays in the liquidation of the trust account to our public stockholders as part of our dissolution and plan of distribution. Furthermore, creditors may seek to interfere with the distribution of the trust account pursuant to federal or state creditor and bankruptcy laws, which could delay the actual distribution of such funds or reduce the amount ultimately available for distribution to our public stockholders. If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the funds held in the trust account will be subject to applicable bankruptcy law and may be included in our bankruptcy estate and senior to claims of our public stockholders. To the extent bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public stockholders the liquidation amounts due to them. Accordingly, the actual per-share amount distributed from the trust account to our public stockholders could be significantly less than approximately $8.03 per share as of January 31, 2008 due to taxes payable in respect of interest earned on the funds held in the trust account and claims of creditors. Any claims by creditors could cause additional delays in the distribution of trust funds to the public stockholders beyond the time periods required to comply with procedures under the Delaware General Corporation Law, or DGCL, and federal securities laws and regulations.

Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them.

        If the proposed merger with PTI is not completed, we will be required to dissolve and liquidate pursuant to Section 275 of the DGCL. Under Sections 280 through 282 of the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. Pursuant to Section 280, if a corporation complies with certain procedures intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder's pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. Although we expect to seek stockholder approval to liquidate the trust account to our public stockholders as part of a plan of dissolution and liquidation, we will seek to conclude this process as soon as possible and as a result do not intend to comply with those procedures. If the merger is not completed and we are therefore required to dissolve and liquidate, Larry N. Feinberg and Joel D. Liffmann have each agreed on a joint and several basis to be personally liable to ensure that the proceeds from our initial public offering held in the trust account are not reduced by the claims of (i) the various vendors or other entities for services rendered or products sold to us or (ii) any prospective target business that we did not pay, or reimburse, for the fees and expenses of third party service providers to such target which we agreed in writing to be liable for, in each case only to the extent the payment of such debts and obligations actually reduces the amount of funds in the trust account (or, in the event that such claim arises after the distribution of the trust account, to the extent necessary to ensure that our former stockholders

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other than Messrs. Feinberg and Liffmann are not liable for any amount of such loss, liability, claim, damage or expense). There can be no assurance that these agreements will be sufficient to protect our stockholders from liability for such claims. As a result, our stockholders could potentially be liable for any claims to the extent of distributions received by them in a dissolution and any liability of our stockholders will likely extend beyond the third anniversary of such dissolution. Accordingly, we cannot assure you that third parties will not seek to recover from our public stockholders amounts owed to them by us.

        Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders in our dissolution could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a "preferential transfer" or a "fraudulent conveyance." As a result, a bankruptcy court could seek to recover all amounts received by our stockholders in its dissolution.

Risks Related to the Proposed Merger with PTI

        If we successfully consummate a business combination with PTI, about which no assurances can be given, the combined business would be subject to numerous risks, including the following:

The combined company's inability to raise additional capital on acceptable terms in the future may limit its ability to develop and commercialize new tests and technologies.

        PTI expects capital outlays and operating expenditures to increase over the next several years as it expands its infrastructure, commercial operations and research and development activities. PTI currently believes that its cash and cash equivalents, together with the cash balances expected to be available from us if the merger is completed, interest income on these balances, $2.6 million of funding from the U.S. Department of Defense for a prospective study of ChemoFx in breast cancer and anticipated future cash from operations, will be sufficient to meet the merged company's anticipated cash requirements for at least the next 18 to 24 months. PTI does not expect that its existing capital resources following the completion of the proposed merger will be sufficient to meet all of the combined company's future capital requirements, and, as a result, it expects that it may need to raise additional capital in the future. Specifically, the combined company may need to raise additional capital to, among other things:

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sustain commercialization of ChemoFx or enhancements to it;



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increase its selling and marketing efforts to drive market adoption and address competitive developments;



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expand its clinical laboratory operations;



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expand its technologies into new classes of therapies and other areas of cancer;



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expand its research and development activities, including the funding of its clinical validation studies;



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potentially acquire complementary businesses or technologies;



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acquire or license technologies; and



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finance capital expenditures and its general and administrative expenses.

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        Present and future funding requirements will depend on many factors, including:

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the merged company's rate of progress in establishing coverage and reimbursement with third-party payors;



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the rate of adoption of ChemoFx in the marketplace;



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the cost and delays in product development as a result of any changes in regulatory policies or laws applicable to PTI's operations, including FDA regulation;



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the cost of expanding PTI's commercial and laboratory operations, including its selling and marketing efforts;



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the rate of progress and cost of product development activities associated with expansion of ChemoFx for additional cancers, drugs and classes of cancer therapies;



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the cost of conducting clinical studies to support and expand the validation of ChemoFx;



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the cost of filing, prosecuting, and maintaining patents and other intellectual property rights, as well as costs of litigating any intellectual property disputes;



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the effect of competing technological and market developments;



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the economic and other terms and timing of any collaborations, licensing or other arrangements into which the combined company may enter; and



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the cost associated with any acquisitions of complementary technology or businesses that the combined company may undertake.

        Until PTI can generate a sufficient amount of product revenues to finance its cash requirements, which it may never do, the combined company may seek to finance future cash needs through public or private equity offerings, debt financings, borrowings or strategic collaborations. There can be no assurance that additional capital will be available when needed on acceptable terms, or at all. The issuance of equity securities may result in dilution to stockholders. If the merged company raises additional funds through the issuance of debt securities, these securities would have rights, preferences and privileges senior to those of the combined company's common stock and the terms of the debt securities could impose significant restrictions on the company's operations. If the combined company raises additional funds through collaborations and licensing arrangements, it might be required to relinquish significant rights to its technologies or products, or grant licenses on terms that are not favorable to it. In addition, it may have to work with a partner on one or more of its product development programs or market development programs, which could lower the economic value of those programs to the combined company. If adequate funds are not available, the merged company may have to scale back its operations or limit its research and development activities, which would have a material adverse impact on its business prospects and results of operations.

We may not be able to qualify for, or might fail to maintain, a listing for its common stock on The NASDAQ Stock Market making it more difficult for stockholders to dispose of or to obtain accurate quotations as to the value of their shares of our common stock.

        Our common stock, warrants and units are presently quoted on the OTC Bulletin Board. We intend to apply for listing of our common stock and warrants on The NASDAQ Global Market upon the completion of the merger. If we fail to qualify for or maintain a listing on NASDAQ, our stock would likely continue to be quoted on the OTC Bulletin Board. As a result, there may be no or only a limited public market for Oracle common stock, and you would likely find it more difficult to dispose of or to obtain accurate quotations as to the market value of your Oracle common stock. In addition,

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the "penny stock" regulations of the SEC might apply to transactions in the common stock. A "penny stock" generally includes any over-the-counter equity security that has a market price of less than $5.00 per share. The SEC regulations require the delivery, prior to any transaction in a penny stock, of a disclosure schedule prescribed by the SEC relating to the penny stock. A broker-dealer effecting transactions in penny stocks must make disclosures, including disclosure of commissions, and provide monthly statements to the customer with information on the limited market in penny stocks. These requirements may discourage broker-dealers from effecting transactions in penny stocks. If the penny stock regulations were to become applicable to transactions in shares of Oracle common stock, they could adversely affect your ability to sell or otherwise dispose of your shares.

The combined company's working capital could be reduced, and our stockholders could own less than 45.8% of the combined company's outstanding common stock, if our stockholders exercise their right to convert their shares into cash.

        Pursuant to our Amended and Restated Certificate of Incorporation, holders of shares issued in our initial public offering may vote against the merger and demand that we convert their shares into a pro rata share of the amount held in the trust account (including the amount held in the trust account representing the deferred portion of the underwriters' fee), inclusive of any interest earned on such pro rata share (net of taxes payable). Oracle and PTI will not complete the merger if holders of 20% or more of the shares of common stock issued in our initial public offering exercise these conversion rights. To the extent the merger is completed and holders of less than 20% of the shares of our common stock issued in its initial public offering have properly demanded to convert their shares, there will be a corresponding reduction in the amount of funds available to the combined company following the merger and a reduction in the aggregate percentage of the combined company that is owned after the merger by our stockholders immediately prior to the merger. As of February 22, 2008, assuming the merger proposal is approved, the maximum amount of funds that could be disbursed to our stockholders upon the exercise of the conversion rights (excluding deductions for tax payments) without implicating the ability to complete the merger will be approximately $24.0 million, or approximately 19.99% of the funds currently held in trust. If the maximum amount of funds were disbursed, the percentage of the combined company's outstanding common stock that would be owned by our existing stockholders who did not exercise their conversion right would be approximately 45.8%, based on the relative numbers of shares outstanding of our common stock and PTI common stock as of February 22, 2008 and the assumed exchange ratio in the merger of 0.3441.

The combined company's operating results may fluctuate, which could cause its stock price to be volatile, and the value of your investment could decline significantly.

        Market prices of securities of companies in life sciences industries experience significant price and volume fluctuations. The following factors, in addition to other risks described in this Form 10-K, may have a significant effect on the combined company's common stock market price:

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actual or expected fluctuations in the combined company's operating results, including as a result of fluctuating demand by physicians and patients for ChemoFx, PTI's single commercial product;



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changes in the market price for ChemoFx;



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coverage and reimbursement decisions by third-party payors and announcements of those decisions;



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clinical study results and publication of results in peer-reviewed journals or the presentation of results at medical conferences;



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the inclusion or exclusion of the combined company's products in large clinical studies conducted by others;

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new or less expensive products and services or new technology introduced or offered by the combined company's competitors or the combined company;



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the level of the combined company's development activity conducted for new products that it may develop and its success in commercializing these developments;



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the level of the combined company's spending on ChemoFx, licensing and acquisition initiatives, clinical studies and internal research and development;



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changes in the regulatory environment applicable to the combined company and ChemoFx or any future products that the combined company may develop, including any announcement from the FDA regarding regulation of its development or sales and marketing activities;



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disputes or other developments relating to intellectual property and proprietary rights, including patents, litigation matters and the combined company's ability to obtain patent protection for its ChemoFx test or any future product that it may develop;



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the combined company's ability or inability to raise additional capital and the terms on which it raises it;



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actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding the combined company's common stock, other comparable companies or its industry generally, or lack of analyst coverage;



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failure to meet analyst expectations regarding operating results;



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conditions or trends in the life sciences industry, the financial markets or the economy in general;



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actual or expected changes in the combined company's growth rates or its competitors' growth rates;



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additions or departures of key personnel and the ability to attract and retain qualified scientists and technicians in the future;



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changes in the market valuation of similar companies;



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the trading volume of the combined company's common stock; and



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sales of the combined company's common stock, or expectations regarding such sales, by the combined company or its stockholders.

        Variations in the timing of the combined company's future revenues and expenses could also cause significant fluctuations in its operating results from period to period and may result in unanticipated earning shortfalls or losses. In addition, the stock market in general and the market for life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of the combined company's common stock, regardless of its operating performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against the combined company, could result in substantial costs and diversion of management's attention and resources, which could materially and adversely affect its business, financial condition, results of operations and growth prospects.

        Our common stock after the merger may trade at prices lower than what you originally paid for your corresponding shares of our common stock prior to the merger. In addition, the market price of

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our common stock is currently based in part on the funds in the trust account. As a result, it may not serve as an accurate indication of the market price of our common stock after the merger. Once the trust account is liquidated, it will cease to provide support for the market price of our common stock and the market price may decline.

Pursuant to the terms of the Merger Agreement, a substantial number of shares will be issued upon, and will be potentially issuable after, the consummation of the merger, which will result in significant dilution to the holders of our outstanding common stock immediately prior to the proposed merger.

        As of February 22, 2008, 18,750,000 shares of our common stock were outstanding. Concurrently with the closing of the merger, we have agreed with our initial stockholders to redeem 1,875,000 shares of common stock held by such initial stockholders. Upon the consummation of the merger, based upon the assumed exchange ratio as of February 22, 2008, we will issue approximately 16.5 million shares, and reserve for issuance approximately 3.7 million additional shares, of our common stock at the closing. Assuming that, prior to the consummation of the merger, no additional shares of our common stock are issued and none of our stockholders exercise their conversion rights and that none of our or PTI's outstanding options or warrants are exercised, upon such consummation, our stockholders are expected to own approximately 50.6% of the then outstanding shares of our common stock; however, if 19.99% of our stockholders exercise their conversion rights, we expect our stockholders to hold approximately 45.8% of the shares of our common stock outstanding immediately following the closing of the merger.

        Under the Merger Agreement, the former holders of PTI common stock, options or warrants receiving shares (or the right to receive shares) of our common stock as a result of the merger will also have the right to receive their pro-rata portion of an earn-out payment of up to an additional 4,250,000 shares of our common stock if the combined company achieves certain revenue milestones described in the Merger Agreement on or before June 30, 2010. In the event that a milestone is not achieved by June 30, 2010 but is achieved by the calculation period ending December 31, 2010, the former holders of PTI common stock, options or warrants will have the right to receive a pro-rata portion of such earn-out payment equal to 75% of the 4,250,000 shares of our common stock, or 3,187,500 shares of our common stock. Assuming that we issue all 4,250,000 shares potentially issuable under the merger agreement as earn-out consideration and that, prior to such issuance of the earn-out shares, no shares of our common stock are issued other than those issued upon the closing of the merger and none of our stockholders exercise their conversion rights and that none of our or PTI's outstanding options or warrants are exercised, expired or forfeited, upon such issuance, our stockholders would own approximately 44.9% of the then outstanding shares of our common stock, and, if 19.99% of our stockholders exercise their conversion rights, our stockholders would hold approximately 40.1% of the shares of our common stock outstanding immediately following such issuance of earn-out shares.

A substantial number of our shares will become eligible for future resale in the public market after the proposed merger which could result in dilution and have an adverse effect on the market price of those shares.

        If the merger is completed, warrants to purchase 15,000,000 shares of common stock issued in connection with our initial public offering and warrants to purchase 833,334 shares of our common stock issued in a private placement to certain of our founding stockholders immediately prior to our initial public offering will become exercisable on the date the merger is completed. Additionally, if the merger is completed, it is currently estimated that approximately 20.2 million shares of our common stock will be issued, or reserved for issuance, to the holders of PTI capital stock, options and warrants at the closing of the merger. In addition, on the date that is 180 days following the closing of the merger, if the average closing sales price per share of our common stock for the preceding seven trading days is less than $7.78 per share, so long as certain material adverse events with respect to Oracle have not occurred since the closing of the merger, then we will issue, or reserve for issuance as applicable, additional shares of our common stock, or make a payment in cash (or a combination of

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cash and additional shares) to the former holders of PTI capital stock, options and warrants, such that the aggregate market value of the cash and/or our common stock issued or reserved for issuance (aggregating the shares issued upon the completion of the merger and at such subsequent date) will be valued at $7.78 per share as of such date. However, the maximum number of additional shares that we are required to issue or reserve for issuance pursuant to the preceding sentence will be 6,666,667 shares, as reduced to the extent any such amounts owed are paid in cash.

        Substantially all of these shares will be eligible for resale upon issuance, subject to potential volume and other limitations under applicable securities laws. Additionally, it is expected that former significant stockholders of PTI will have the right, in certain circumstances and subject to certain conditions, to require us to file a registration statement covering the resale of the shares that they receive in the merger, which would permit these shares to be resold without restriction. In addition, each of our founding stockholders who purchased shares of common stock from us prior to its initial public offering have the right, in certain circumstances and subject to certain conditions, to require us to file a registration statement covering the resale of such shares of common stock and, as applicable in certain circumstances, the founding director warrants and the common stock underlying such warrants held by such persons. Consequently, at various times after completion of the merger, a substantial number of additional shares of our common stock will be eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of such shares and of the warrants. Notwithstanding the foregoing, the shares of our common stock held by our founding stockholders (other than the shares of our common stock issuable upon exercise of the founding director warrants or shares of our common stock purchased following the announcement of the merger) are subject to escrow agreements and will not be released from escrow until the earliest of (i) March 2, 2009, (ii) our liquidation (in which case they will have no value) and (iii) the consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to our initial business combination, if any, with a target business. Additionally, the SEC has taken the position that promoters or affiliates of a blank check company and their transferees, both before and after a business combination, would act as an "underwriter" under the Securities Act of 1933, as amended, when reselling the securities of a blank check company. Accordingly, the SEC believes that those securities can be resold only through a registered offering or in accordance with the requirements of Rule 144 under the Securities Act.

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Our directors and executive officers have interests in the merger that are different from yours because if the merger is not approved then the shares held by them may become worthless.

        In considering the recommendation of our board of directors to vote for the proposal to approve the merger agreement, you should be aware that a number of our executives and members of our board have interests in the merger that are different from, or in addition to, your interests as a stockholder. These interests include, among other things:

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If the merger is not approved and we are therefore required to dissolve and liquidate, the shares of common stock purchased prior to its initial public offering and held by our executives and directors will be worthless because our directors and officers are not entitled to receive in respect of such shares any of the net proceeds of our initial public offering that may be distributed from our trust account upon liquidation. If the merger is not approved and we are therefore required to dissolve and liquidate, such executive officers and directors will, however, be entitled to receive their share of the net proceeds of our initial public offering that may be distributed from our trust account with respect to any shares of our common stock purchased in or following our initial public offering. In addition, the warrants held by such persons for which they paid an aggregate of $1 million, which will be exercisable at the completion of the merger for 833,334 shares of our common stock, will expire without value in the event that we are required to liquidate.



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Larry N. Feinberg, our chairman, and Joel D. Liffmann, our president and chief operating officer and a director of Oracle, have entered into promissory notes in which they each agreed to lend to us an amount up to $100,000 upon our request. Amounts loaned to us under this arrangement bear interest at a rate per annum of 5.1%, compounded annually. As of February 28, 2008, $62,500 was outstanding under each promissory note for a total outstanding of $125,000. If we do not complete the merger by March 8, 2008, we will be forced to liquidate, and Messrs. Feinberg and Liffmann will have no right to repayment of their loans from the proceeds of the trust account, in which case the loans would be unsecured claims against us.



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If the merger is not approved and we are therefore required to dissolve and liquidate, Messrs. Feinberg and Liffmann have each agreed on a joint and several basis to be personally liable to ensure that the proceeds from our initial public offering held in the trust account are not reduced by the claims of (i) various vendors or other entities for services rendered or products sold to us or (ii) any prospective target business that we did not pay, or reimburse, for the fees and expenses of third party service providers to such target which we agreed in writing to be liable for, in each case only to the extent the payment of such debts and obligations actually reduces the amount of funds in the trust account (or, in the event that such claim arises after the distribution of the trust account, to the extent necessary to ensure that our former stockholders other than Messrs. Feinberg and Liffmann are not liable for any amount of such loss, liability, claim, damage or expense). If the merger is completed, these indemnification obligations will terminate.



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If the merger is completed, we will be required to pay the underwriters in our initial public offering the deferred underwriters' fee in the amount of $2.4 million, which amount is subject to reduction by $0.16 per each share that is converted into a pro rata portion of the trust account. George Bickerstaff III, one of our current directors prior to the completion of the merger and currently a Managing Director of CRT Capital LLC, will indirectly benefit from this transaction as a result of his interest in CRT Capital LLC, which will receive 87.5% of this fee, which will equal $2.1 million assuming no shares of our common stock are converted.



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If the merger is completed, and to the extent not inconsistent with the guidelines of FINRA and the rules and regulations of the SEC, we have agreed to pay to CRT Capital Group LLC, as its non-exclusive agent for the solicitation of the exercise of our warrants, a commission equal to

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2% of the exercise price for each warrant exercise solicited by CRT Capital Group LLC. In addition, CRT Capital Group LLC has a right of first refusal to perform all investment banking services for us through the later of (i) one year from the closing of our initial business combination and (ii) March 8, 2008, and thus if the merger is completed, this arrangement will be extended to the first anniversary of the completion date. As a Managing Director of CRT Capital LLC, Mr. Bickerstaff will indirectly benefit from these arrangements as a result of his interest in CRT Capital LLC.

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After the completion of the merger, Messrs. Liffmann and Feinberg, as well as Per G. H. Lofberg, who is currently a director of Oracle, and Kevin C. Johnson, who is currently a director of both Oracle and PTI, will continue as directors of Oracle. As such, they will be entitled to receive compensation under the combined company's non-employee director compensation policies.

The amount of stock held by executive officers, directors and other affiliates following the merger may limit your ability to influence the outcome of director elections and other matters requiring stockholder approval.

        Upon consummation of the merger, executive officers, directors and affiliates of the combined company will beneficially own approximately 40% of the combined company's common stock. These stockholders can have a substantial influence on all matters requiring approval by stockholders, including the election of directors and the approval of mergers or other business combination transactions. This concentration of ownership could have the effect of delaying or preventing a change in control or discouraging a potential acquirer from attempting to obtain control of the combined company, which in turn could have a material adverse effect on the market price of the common stock or prevent stockholders from realizing a premium over the market price for their shares of common stock.

The lack of diversification in the business of the combined company following the merger affects the combined company's ability to mitigate the risks that it may face or to offset possible losses that it may incur as a result of competing in the life sciences industry.

        The prospects for the combined company's success will be entirely dependent upon the future performance of a single business. The combined company may not have the resources to diversify its operations or benefit from the possible spreading of risks or offsetting of losses. By consummating a business combination with only a single entity, the combined company's lack of diversification may subject it to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which the combined company operates subsequent to the business combination, and result in the combined company's dependency upon the development or market acceptance of a single or limited number of products or services.

The combined company may acquire other businesses or form joint ventures that could harm its operating results, dilute your ownership of the combined company, increase its debt or cause it to incur significant expense.

        As part of the combined company's business strategy, it may pursue acquisitions of complementary businesses and assets, as well as technology licensing arrangements. The combined company also may pursue strategic alliances that leverage its core technology and industry experience to expand its product offerings or distribution. PTI has no experience with respect to acquiring other companies and limited experience with respect to the formation of collaborations, strategic alliances and joint ventures. If it makes any acquisitions, the combined company may not be able to integrate these acquisitions successfully into its existing business, and it could assume unknown or contingent liabilities. Any future acquisitions by the combined company also could result in significant write-offs or the incurrence of debt and contingent liabilities, any of which could harm operating results. Integration of an acquired company also may divert management resources that otherwise would be available for ongoing

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development of PTI's existing business. The combined company may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and it may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture.

        To finance any acquisitions, the combined company may choose to issue shares of its common stock or securities convertible into its common stock as consideration, which would dilute your interest in the combined company. If the price of the combined company's common stock is low or volatile, it may not be able to acquire other companies for stock. Alternatively, it may be necessary for the combined company to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to the combined company, or at all, and to the extent such funds are available, such financing may include restrictive covenants that could hinder the ability of the combined company to obtain additional financing, if necessary.

The combined company will incur significant increased costs, and its financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm the combined company's stock price and listing on the NASDAQ Global Market.

        As a public company, the combined company will incur significant legal, accounting and other expenses. PTI has not incurred these expenses as a private company, and we have incurred these expenses only to a limited extent, resulting from the lack of an operating business. In addition, the Sarbanes-Oxley Act of 2002, and rules of the SEC, and the NASDAQ Global Market have imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. The combined company's management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase the combined company's legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these rules and regulations may make it more difficult and more expensive for the combined company to obtain and maintain director and officer liability insurance, and the combined company may be required to incur substantial costs to maintain the same or similar coverage.

        The Sarbanes-Oxley Act of 2002 requires, among other things, that the combined company maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, the combined company must perform system and process evaluation and testing of its internal control over financial reporting to allow management and its independent registered public accounting firm to report on the effectiveness of its internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, beginning with the annual report on Form 10-K for the fiscal year ending December 31, 2008. The combined company's compliance with Section 404 of the Sarbanes-Oxley Act will require that it incur substantial accounting expense and expend significant management efforts.

        The effectiveness of the combined company's controls and procedures may in the future be limited by a variety of factors, including:

•

faulty human judgment and simple errors, omissions or mistakes;



•

fraudulent action of an individual or collusion of two or more people;



•

inappropriate management override of procedures; and



•

the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial information.

        If the combined company is not able to comply with the requirements of Section 404 in a timely manner, or if the combined company or its independent registered public accounting firm identify deficiencies in its internal control over financial reporting that are deemed to be material weaknesses,

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the combined company may be subject to delisting from any exchange on which its securities are then traded, SEC investigation and civil or criminal sanctions.

        The combined company's ability to successfully implement its business plan and comply with Section 404 requires it to be able to prepare timely and accurate financial statements. We expect that the combined company will need to continue to improve existing, and implement new operational and financial and accounting systems, procedures and controls to manage its business effectively.

        In recognition of the increased complexity of the requirements of PTI's financial reporting function upon becoming a public company, PTI's auditors identified a significant deficiency relating to the adequacy of its accounting function during their audit of PTI's 2006 financial statements. PTI has only recently hired a chief financial officer, who is expected to become the chief financial officer of the combined company, but neither PTI nor Oracle currently has an internal audit group or employees experienced in SEC reporting, and the combined company will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

        Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls may cause the combined company's operations to suffer, and it may be unable to conclude that its internal control over financial reporting is effective and to obtain an unqualified report on internal controls from its auditors as required under Section 404 of the Sarbanes-Oxley Act. If the combined company is unable to complete the required Section 404 assessment as to the adequacy of its internal control over financial reporting, if it fails to maintain or implement adequate controls, or if its independent registered public accounting firm is unable to provide it with an unqualified report as to the effectiveness of its internal control over financial reporting as of the date of its first Form 10-K for which compliance is required, its ability to obtain additional financing could be impaired. In addition, investors could lose confidence in the reliability of the combined company's internal control over financial reporting and in the accuracy of its periodic reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act. A lack of investor confidence in the reliability and accuracy of the combined company's public reporting could cause its stock price to decline.

The combined company's management will have broad discretion to use our available cash following the merger, and the combined company's investment of these resources may not yield a favorable return. We may invest the available cash in ways you disagree with.

        The combined company's management has broad discretion as to how to spend and invest the cash that will be available to us upon completion of the merger and distribution from the trust fund, and the combined company may spend or invest these capital resources in a way with which its stockholders may disagree. Because the combined company is not required to allocate cash to any specific investment or transaction, you cannot determine at this time the value or propriety of its application of these resources. Accordingly, you will need to rely on the combined company's management's judgment with respect to the use of this cash. Moreover, you will not have the opportunity to evaluate the economic, financial or other information on which the combined company bases its decisions on how to use this cash. The combined company's management may use this capital for corporate purposes that do not immediately enhance the combined company's prospects for the future or increase the value of your investment. As a result, you and other stockholders may not agree with the combined company's decisions. Pending full use in its business, the combined company plans to invest the available cash in short-term, investment-grade, interest bearing securities. These investments may not yield a favorable return to stockholders.

Some provisions of the combined company's charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of the combined company by others, even if an acquisition would

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be beneficial to stockholders, and may prevent attempts by stockholders to replace or remove the combined company's management.

        If approved by our stockholders at the special meeting related to the proposed merger with PTI, provisions in the combined company's proposed Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire the combined company, or for a change in the composition of its board of directors or management to occur, even if doing so would benefit its stockholders. These provisions include:

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authorizing the issuance of "blank check" preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;



•

dividing the board of directors into three classes;



•

limiting the removal of directors by the stockholders;



•

eliminating cumulative voting rights and therefore allowing the holders of a majority of the shares of Oracle's common stock to elect all of the directors standing for election, if they should so choose;



•

prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of stockholders;



•

eliminating the ability of stockholders to call a special meeting of stockholders; and



•

establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

        In addition, the combined company is subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by the combined company's board of directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to the combined company's stockholders.

Neither PTI nor Oracle has ever declared or paid dividends on its capital stock, and we do not anticipate paying dividends in the foreseeable future. As a result, you must rely on stock appreciation for any return on your investment.

        The combined company's business will require significant funding, and the combined company will initially invest more in sales and marketing and research and development than it expects to earn from sales of ChemoFx. The combined company currently plans to invest all available funds and future earnings in the development and growth of its business. Therefore, we do not anticipate paying any cash dividends on the combined company's common stock in the foreseeable future. Any payment of cash dividends will also depend on the combined company's financial condition, results of operations, capital requirements and other factors and will be at the discretion of the combined company's board of directors. As a result, capital appreciation, if any, of the common stock will be your sole source of potential gain for the foreseeable future. Furthermore, we may in the future become subject to contractual restrictions on, or prohibitions against, the payment of dividends, including pursuant to the terms of debt agreements.

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The combined company's ability to utilize PTI's historical federal and state net operating loss carryforwards may currently be limited or may become limited.

        As of December 31, 2006, PTI had net operating loss carryforwards for federal and state income tax purposes of $48.5 million and $47.6 million, respectively. If not utilized, these carryforwards will expire between 2008 and 2026. Generally, utilization of a company's net operating loss carryforwards may be subject to substantial annual limitations due to rules contained in the Internal Revenue Code (and similar state provisions) that are applicable if the company experiences an "ownership change." Generally, a change of more than 50% in the ownership of a company's stock, by value, over a three-year period constitutes an ownership change for United States federal income tax purposes. PTI believes that there have been prior ownership changes for this purpose and that there will be substantial limitations on the future utilization of its federal and state net operating loss carryforwards. Additionally, even if there were no ownership changes previously, it is possible that the merger, when considered together with past transactions and potential future transactions, could trigger an ownership change for this purpose. As a result, the combined company's ability to use its net operating loss carryforwards may be or become subject to substantial limitations, which could potentially result in increased future tax liability for the combined company and in the expiration of PTI's net operating loss carryforwards before they can be used.

Risks Concerning PTI's Business

        If the proposed business combination with PTI is consummated, which cannot be assured, risks applicable to PTI would also be applicable to the combined business, including the following:

PTI's financial results depend on sales of one test, ChemoFx, and it will need to generate sufficient revenues from this and other tests to run its business.

        To date, PTI has a single commercial product offering, ChemoFx. As a result, for the foreseeable future, it expects to derive substantially all of its revenues from sales of ChemoFx. PTI has sold ChemoFx commercially since 1997, but it has only been selling the currently-marketed enhanced version of this test since July 2006. PTI is in the early stages of research and development for other products that it may offer, as well as enhancements to ChemoFx. PTI is not currently able to estimate when it may be able to commercialize any additional products or enhancements to ChemoFx or whether it will be successful in doing so. If PTI is unable to increase sales of ChemoFx or successfully develop and commercialize other products, its revenues and its ability to achieve profitability would be impaired.

If third-party payors, including managed care organizations and Medicare, do not provide adequate coverage and reimbursement for ChemoFx, its commercial success and PTI's revenue stream could be harmed.

        ChemoFx has a current list price of $450 per drug or drug combination tested. The average order is typically for six to eight drugs, and the average invoiced price has been approximately $3,300 per test billed. PTI's average net revenue per test billed is less than the average invoiced price because many payors currently do not provide coverage or reimburse PTI for ChemoFx. Those payors that cover and reimburse for ChemoFx generally pay amounts approximating billed charges, but in some cases PTI may receive substantially less. Physicians and patients may decide not to order ChemoFx unless third-party payors, such as managed care organizations and government payors, including Medicare, pay a substantial portion of the test's price. There is significant uncertainty concerning third-party coverage and reimbursement of any test incorporating new technology, including ChemoFx. PTI does not know the extent or type of coverage for other predictive tests offered by its competitors. However, one of these competitors, Oncotech, has been specifically identified in some non-coverage decisions by third-party payors. Some major insurance carriers, including Aetna, Cigna, and United Healthcare, have non-coverage policies in place for the category of chemosensitivity and chemoresistance assays. While ChemoFx is not specifically named in these policies, and PTI has had individual claims for ChemoFx

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paid by these insurers on a case-by-case review, PTI could be identified specifically in these non-coverage decisions in the future, which would adversely affect its ability to receive reimbursement for ChemoFx. Coverage and reimbursement by a third-party payor may depend on a number of factors, including a payor's determination that ChemoFx is:

•

not experimental or investigational;



•

medically necessary;



•

appropriate for the specific patient;



•

cost-effective; and



•

supported by peer-reviewed publications.

        Since each payor makes its own decision as to whether to establish a policy to cover and reimburse for PTI's test, seeking these approvals is a time-consuming and costly process. To date, PTI has secured prospective coverage and payment for its test in gynecologic cancers from Highmark Medicare Services, PTI's Medicare Part B carrier, which governs all Medicare claims with respect to ChemoFx, regardless of the location of the patient or physician. As a result of this coverage and payment decision, PTI receives reimbursement from Medicare upon its initial claim submission for the ChemoFx test in gynecologic cancers, rather than on a case-by-case basis. However, Highmark retains the ability to change its coverage and reimbursement policies at any time. Additionally, PTI has secured payment for the test from over 425 commercial payors on a case-by-case basis. Because it does not have coverage policies in place with commercial payors, in the event that PTI is not paid upon initial claims submission it must pursue an appeal with a commercial payor in order to be reimbursed for ChemoFx. The number and levels of appeal are unique to each insurance company, but it often takes an extended period of time for claims to be fully resolved. For example, of PTI's gross billings to commercial payors for the year ended December 31, 2005, 57% of such gross billings remained under appeal as of September 30, 2007, and PTI may not ultimately receive reimbursement for many of these gross billings. Of the gross billings to commercial payors for the year ended December 31, 2005 for which the appeals process and any efforts to collect remaining balances from the patient have ended, PTI was reimbursed for 71% of such gross billings. While PTI is working towards obtaining coverage policies from commercial payors that currently do not provide coverage for ChemoFx or otherwise reimburse only on a case-by-case basis, it cannot be certain that coverage or reimbursement for ChemoFx will be provided in the future by any commercial payors.

        Several entities conduct technology assessments of new medical tests and devices and provide the results of their assessments for informational purposes to other parties. These assessments review and evaluate evidence on the benefits and effectiveness of new technologies, among other things, and may be used by third-party payors and healthcare providers, such as Blue Cross and Blue Shield plans, which collectively provide healthcare coverage for nearly one-third of all Americans, as grounds to deny coverage for a test or procedure. While ChemoFx has not specifically been evaluated by these organizations, negative technology assessments have been issued regarding the category of chemotherapy sensitivity and resistance assays, or CSRAs. For example, in September 2004, two technology assessments, one conducted by the Blue Cross and Blue Shield Association's Technology Evaluation Center, and one conducted by a working group from the American Society of Clinical Oncology, or ASCO, concluded that current clinical data related to CSRAs did not support the routine use of these assays. There can be no assurance that PTI will be able to obtain favorable technology assessments for ChemoFx that would help it to obtain favorable coverage policies from health plans. Even if PTI obtains such policies from third-party payors, insurers may withdraw their policies, cancel their contracts with PTI at any time or stop covering and reimbursing PTI for its test, which would reduce its revenue.

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        Since 2004, Highmark Medicare Services has instructed PTI to use a non-specific pathology billing code for ChemoFx because there is no specific billing code for the test. Highmark also has established a payment rate for the test in accordance with a fee schedule. If the test is classified under a specific billing code in the future, the Medicare payment rate for ChemoFx would likely be established at a national level by the Centers for Medicare and Medicaid Services, or CMS, the agency responsible for implementing the Medicare program. PTI cannot predict the full payment impact of a classification of the test under a specific billing code.

        In 2006, CMS considered whether a provider may bill its Medicare contractor for claims for chemosensitivity tests performed on Medicare beneficiaries who were hospital inpatients at the time the tumor tissue samples were obtained or whether such claims must be incorporated in the payment that the hospital receives for its services related to the patient's inpatient stay. Effective January 1, 2007, CMS issued a final rule clarifying that the date of service for chemosensitivity tests performed on Medicare beneficiaries who were hospital inpatients at the time the tumor tissue samples were obtained may be the date on which the test was performed, but only if the patient's physician orders the chemotherapeutic agents to be tested at least 14 days following the date of the patient's discharge from the hospital and if other specified conditions are met. To the extent the agents to be tested are ordered prior to the end of this 14-day period, the date of service should be considered to be the tissue collection date, which may result in the test being considered a part of the inpatient stay, and therefore any payment would be included in the overall payment amount that the hospital receives. Hospitals associated with existing customers were notified of this policy in the first quarter of 2007, and hospitals associated with new customers are notified as part of PTI's general in-service policies. During the nine months ended September 30, 2007, the number of patients whose physician order date for the specific chemotherapeutic agents to be tested was within 14 days of the patient's discharge date was approximately 5% of PTI's total testing population, including both Medicare and non-Medicare patients. Since January 1, 2007, PTI has billed the Medicare contractor for all of the tests on Medicare beneficiaries, of which 15% may ultimately be considered billable to hospitals.

        If CMS or its contractor determines that overpayments were made for processed claims that were previously paid, a refund may be sought from PTI. Although PTI does not anticipate the government conducting a postpayment review to recoup payments or otherwise impose penalties for pre-2007 claims involving its tests performed on specimens collected during a hospital stay and for which it billed Highmark, there can be no assurance that such events would not occur. If overpayments are assessed or penalties are imposed, this could have a material adverse impact on PTI's business and financial condition.

        Third-party payors have increased their efforts to control the cost, utilization and delivery of healthcare services. In addition, from time to time, Congress has considered and implemented changes in the Medicare fee schedules in conjunction with budgetary legislation, and further reductions in reimbursement for Medicare services may be implemented. For example, the Medicare Prescription Drug, Improvement and Modernization Act of 2003, or MMA, authorized a demonstration project to apply competitive bidding to certain clinical laboratory tests. A competitive bidding demonstration has not yet been established, although the preliminary steps to develop the demonstration have begun. PTI's tests have not been identified for the demonstration. It is not clear whether competitive bidding will be applied more broadly to all clinical laboratory services under Medicare in the future and, if so, whether this would impact payment for ChemoFx.

        Reductions in the reimbursement rates of other third-party payors have also occurred and may occur in the future. These measures have resulted in reduced prices, added costs and decreased test utilization for the clinical laboratory industry. Although PTI may seek payment for ChemoFx from patients when a claim has been denied, it is subject to an increased risk of nonpayment if payors do not reimburse PTI for the test. If PTI is unable to obtain coverage and reimbursement, or if the payment amount is inadequate, its ability to generate revenues from ChemoFx would be limited.

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PTI has a history of losses, and it expects to incur net losses for the foreseeable future.

        PTI has incurred substantial net losses since its inception. For the years ended December 31, 2004, 2005 and 2006 and the nine months ended September 30, 2007, PTI had a net loss of $5.8 million, $4.7 million, $8.6 million and $10.0 million, respectively. From its inception in April 1995 through September 30, 2007, PTI had an accumulated deficit of approximately $63.1 million. PTI has financed its operations primarily through private placements of its equity securities. To date, it has generated only minimal revenues, and it may never achieve revenues sufficient to offset expenses. PTI expects to devote substantially all of its resources to continue commercializing ChemoFx and to develop enhancements to ChemoFx and additional products, if any.

        In recent years, PTI has incurred significant costs in connection with the development of ChemoFx. For the years ended December 31, 2004, 2005 and 2006 and the nine months ended September 30, 2007, PTI's research and development expenses were $3.0 million, $2.8 million, $4.7 million and $3.6 million, respectively. It expects its research and development expense levels to continue to increase for the foreseeable future as it seeks to enhance its existing product and develop new products. As a result, PTI will need to generate significant revenues in order to achieve profitability. Its failure to achieve profitability in the future could cause the market price of the combined company's common stock to decline.

        PTI expects to incur additional losses this year and in future years, and it may never achieve profitability. In addition, it does not expect to become profitable through sales of ChemoFx or any future products that it may develop, if any, for a number of years. Even if PTI achieves profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis.

The ability of ChemoFx to predict tumor responsiveness to selected types of chemotherapy has not yet been demonstrated in clinical outcome studies in cancer types other than ovarian cancer and may, therefore, prove to be less accurate than PTI currently believes.

        While PTI receives tumor samples from, and performs testing on, many cancer types, it currently lacks multiple published clinical studies in a variety of cancer types supporting the accuracy and reliability of ChemoFx in predicting tumor responsiveness to a range of chemotherapies in numerous indications. All of PTI's completed clinical outcome studies have been in patients with ovarian cancer. PTI is currently participating in clinical studies of patients with breast cancer, but these studies have not been completed, nor has PTI conducted any clinical studies in patients with other cancers. In addition, consistent with industry practice, all of PTI's clinical studies to date have been at least in part company-sponsored, with doctors or institutions participating in the study generally receiving a customary and nominal payment from PTI. For these reasons, among others, physicians may be slow to adopt ChemoFx.

        Any long-term clinical data that PTI generates may not be consistent with its existing data and may demonstrate diminished usefulness. PTI may also determine that certain patient characteristics, such as drug metabolism rates, could affect actual in vivo tumor response rates to particular chemotherapies, which could lead to misleading or contradictory data on the usefulness of ChemoFx. Moreover, there can be no assurance that cultivated tumor cells will react in the same manner as in vivo tumor cells. These possibilities could reduce demand for ChemoFx, significantly reduce PTI's ability to achieve expected revenues and prevent it from becoming profitable. If the results of its research and clinical studies, including the results of its ongoing clinical studies, do not convince leading oncologists, guidelines organizations, such as the National Comprehensive Cancer Network, or NCCN, commercial payors or patients that ChemoFx is accurate and reliable, or such studies do not show that its test adds enough value to affect prevailing clinical practice, demand for, and successful commercialization of, ChemoFx and any future products that PTI may develop would be impaired.

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PTI may experience limits on its revenues or future sales growth if only a small number of physicians and patients decide to use its test, which is not currently recommended for use as a standard of care by existing clinical guideline organizations.

        If a sufficient number of medical practitioners do not order ChemoFx or any future tests developed by PTI, PTI will likely not be able to create sufficient demand for its products for it to become profitable. To generate demand, PTI will need to continue to educate oncologists, surgeons and pathologists about the potential clinical benefits of ChemoFx and any future products that it may develop. PTI believes that physicians will not use its test unless they determine, based on published, peer-reviewed journal articles, presentations at scientific conferences and one-on-one education by its sales force, that its test provides accurate, reliable and cost-effective information that is useful in choosing among chemotherapy treatment regimens. In addition, PTI will need to demonstrate its ability to obtain adequate coverage and reimbursement from third-party payors. In order for ChemoFx sales to grow, PTI must continue to market to, and educate, oncologists that have used its test, and it must continue to encourage other gynecologic oncologists and oncologists treating other cancers to incorporate its test into their standard clinical practice. If these physicians do not adopt its test, PTI's business and financial results will suffer.

        Existing clinical practice guidelines of ASCO and NCCN for the treatment of patients with ovarian, breast, lung, colon and other cancers do not currently address the use of CSRAs such as ChemoFx. PTI is aware of one company, Genomic Health, whose genomic-based diagnostic test for certain breast cancers was recently included in ASCO's updated clinical practice guidelines on the use of breast cancer tumor markers to evaluate whether a patient should receive chemotherapy. Until CSRAs are included in similar but separate clinical guidelines which would determine which chemotherapy agent may be optimal, physicians may be reluctant to order ChemoFx. As PTI completes its ongoing clinical studies and expands its sales and marketing efforts, it will seek to establish relationships with key opinion leaders, such as physicians who are affiliated with these guideline organizations, in order to have ChemoFx evaluated as a potential addition to clinical practice guidelines, although this process may take several years and PTI may not ultimately be successful. Moreover, because PTI's test provides information not currently provided by pathologists, and it is performed at its facility rather than by the pathologist in a local laboratory, pathologists may be reluctant to support the test, which support is generally necessary in order for PTI to receive samples of a patient's tumor for testing. With an average invoice price of $3,300 per test billed, PTI's test may be seen by some patients as expensive. In addition, since the price of its test is based upon the number of therapeutic agents or combinations of therapeutic agents that PTI is requested to test by the ordering physician, as the number of available therapeutic agents increases, the average cost of its test may also increase. Some patients may not agree with their practitioner's recommendation to order PTI's test due to its high price, part or all of which may be payable directly by the patient, particularly if the applicable third-party payor denies reimbursement in full or in part. Even if medical practitioners recommend that their patients use PTI's test, patients may still decide not to use ChemoFx for a number of reasons, including a desire to pursue a particular course of therapy regardless of test results. If only a small portion of PTI's target patient population uses its test, PTI will experience limits on its revenues and its ability to achieve profitability.

If PTI fails to attract and retain highly skilled scientists, clinicians, salespeople and members of management, or to retain its current executive management team, it may be unable to manage its growth or successfully develop or further commercialize its products and technologies.

        PTI's success depends largely on the skills, experience and performance of key members of its executive management team, its continued ability to attract, retain and motivate highly qualified personnel and its ability to develop and maintain relationships with leading academic institutions, clinicians and scientists. PTI is particularly dependent on the efforts of Sean McDonald, its president and chief executive officer, David Heilman, its chief financial officer, Sharon Kim, its vice president of

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corporate development, Michael Gabrin, its chief technology officer, and Matt Marshall, its vice president of sales and marketing. The efforts of PTI's management team will be critical as it continues to develop its technologies and testing processes. PTI expects to enter into employment agreements with its executive officers in anticipation of the closing of the proposed merger with PTI, and under these agreements its officers may elect to terminate their employment with PTI at any time. If PTI loses one or more of these key employees, it may experience difficulties in competing effectively, developing its technologies and implementing its business strategies. All of PTI's employees are at-will, which means that either PTI or the employee may terminate employment at any time with little or no notice. In the case of PTI's executive officers, however, the employment agreements provide for the payment of post-termination compensation in the event of termination without cause and provide for additional post-termination compensation and acceleration of stock option vesting in the event of termination without cause or resignation for good reason following a change of control. PTI currently maintains key-person life insurance only on Sean McDonald, its president and chief executive officer. PTI may discontinue this insurance in the future, it may not continue to be available on commercially reasonable terms or, if continued, it may prove inadequate to compensate PTI for any loss of Mr. McDonald's services.

        PTI is a small company with a payroll of 80 employees as of September 30, 2007, over one-third of whom joined PTI in the last 12 months. To continue its commercialization and product development activities, PTI will need to expand its employee base for managerial, operations, development, regulatory, sales, marketing, financial and other functions. Future growth will impose significant added responsibilities on management. The failure to fill one or more of these positions could adversely impact PTI's business.

        PTI's research and development programs and commercial laboratory operations depend on its ability to attract and retain highly skilled scientists and technicians, including biostatisticians, licensed laboratory technicians, pharmacologists and software engineers. PTI competes with life sciences companies to attract and retain qualified scientists and technicians in the future. PTI also faces competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific personnel. If it is not able to attract and retain the necessary personnel as needed to accomplish its business objectives, PTI may experience constraints that will adversely affect its growth plans and its ability to support its research, product development and sales programs.

        PTI's success also depends on its ability to attract and retain salespeople with extensive experience in oncology and close relationships with medical oncologists, surgeons, pathologists and other hospital personnel. As of September 30, 2007, PTI's sales force consisted of 23 individuals focused on direct sales and other marketing functions and 8 individuals focused on customer service and support in the clinical market. A majority of these employees have been hired in the last 12 months. To meet the projected growth of its business, PTI will need to significantly increase the size of its sales force, and it may not be able to recruit, hire and train a sufficient number of sales personnel in a short time frame, which could cause a delay or decline in the rate of adoption of PTI's test. PTI may also market ChemoFx and any future products it develops, if any, through collaborations and distribution agreements with diagnostic, biopharmaceutical and other life science companies. There can be no assurance that PTI will be able to establish and maintain a successful sales force or establish collaboration or distribution arrangements to market ChemoFx and any future products that PTI may develop. If PTI is unable to implement an effective marketing and sales strategy, it will be unable to grow its revenues and execute its business plan, which would have an adverse effect on its business, financial condition and results of operations.

If PTI is unable to support demand for its products, its business may suffer.

        PTI only began the expanded commercialization of the enhanced version of ChemoFx in July 2006, and it has limited experience in performing the enhanced version of the test and even more limited

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experience in processing large volumes of tests. There can be no assurance that PTI will be able to perform tests on a timely basis at a level consistent with demand. If PTI encounters difficulty meeting market demand for ChemoFx, its reputation could be harmed and its future prospects and its business could suffer.

        In order to meet future projected demand for its test and fully utilize its current clinical laboratory or additional contemplated facilities, PTI will have to increase the volume of patient samples that it is able to process. PTI may need to expand laboratory capacity by opening a new facility, and it will need to hire and train additional personnel, continue to develop and implement additional automated systems to perform its tests and continue to streamline its billing and customer service functions. PTI has installed laboratory information systems over the past few years to assist in the workflow of its test, analyze the data generated by its test and report the results. If these systems do not work effectively as PTI scales up its processing of patient samples, PTI may experience processing or quality control problems and may experience delays or failures in its operations. These problems, delays or failures could adversely impact the promptness and accuracy of PTI's transaction processing, which could impair its ability to grow its business, generate revenue and achieve and sustain profitability.

        PTI may also experience periods during which processing of its test results is delayed. While PTI attempts to minimize the likelihood of any future delays, processing problems and backlog may nevertheless occur, resulting in the loss of customers and/or revenue and an adverse effect on PTI's results of operations.

Clinical studies using ChemoFx may not be completed successfully, in a timely manner, or at all.

        PTI has limited clinical data concerning the benefits of ChemoFx. Clinical studies are expensive, typically take many years to complete and have uncertain outcomes. PTI is currently conducting or participating in five company-sponsored clinical studies. These studies are currently expected to be completed over the next several years, although some of the studies are controlled by third parties and the expected timing of completion and publication of the results of these studies may be revised by such parties. The completion of these clinical studies or the commencement of future studies may be prevented, delayed or halted, or the studies may have uncertain outcomes, for numerous reasons, including, but not limited to, the following:

•

patients do not enroll in, or enroll at the expected rate, or complete a clinical study;



•

patients do not comply with study protocols;



•

patients do not return for post-treatment follow-up at the expected rate;



•

sites participating in an ongoing clinical study may withdraw, requiring PTI to engage new sites;



•

PTI experiences difficulties or delays associated with bringing clinical sites on-line;



•

third-party clinical investigators decline to participate in PTI's clinical studies, do not perform the clinical studies on the anticipated schedule or consistent with the investigator agreement, clinical study protocol, good clinical practices, and other institutional review board, or IRB, requirements;



•

third-party organizations do not perform data collection and analysis in a timely or accurate manner;



•

regulatory inspections of PTI's clinical studies require it to undertake corrective action or suspend or terminate its clinical studies;



•

PTI's business becomes subject to changes in U.S. federal, state, or foreign governmental regulations or policies;

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•

interim results are inconclusive or unfavorable as to immediate and long-term accuracy or reliability;



•

the study design is inadequate to demonstrate accuracy and reliability; or



•

IRBs or regulatory authorities do not approve a clinical study protocol, force PTI to modify a previously approved protocol or place a clinical study on hold.

        Clinical failure can occur at any stage of a study. PTI's clinical studies may produce negative or inconclusive results, and PTI may decide, or regulators may require it, to conduct clinical or non-clinical testing in addition to studies PTI may have planned. PTI's failure to adequately demonstrate the accuracy and reliability of ChemoFx or any future products that it may develop would limit its ability to sell the test, which would have a negative impact on its results of operations.

        PTI has current agreements with two contract research organizations, or CROs, to perform data collection and analysis and other aspects of its clinical studies, which may increase the cost and complexity of its studies. PTI also currently has agreements with approximately 40 clinical investigators at medical institutions that are or will be serving as sites for its ongoing studies. PTI depends on these investigators and institutions, as well as any additional CROs that it may engage, to perform the studies properly. If these parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, or if the quality, completeness or accuracy of the clinical data they obtain is compromised due to the failure to adhere to PTI's clinical protocols or for other reasons, its clinical studies may have to be repeated, extended, delayed or terminated. Many of these factors are beyond PTI's control. While it does not believe that it is substantially dependent on any one of these third- party relationships for the success of its clinical studies, PTI may not be able to enter into replacement arrangements without undue delays or considerable expenditures. If there are delays in clinical studies as a result of the failure to perform by third parties, PTI's research and development costs would increase, and it may not be able to complete its clinical studies without excessive delay. To the extent that clinical studies are necessary to continue to commercialize ChemoFx, each of these outcomes could harm PTI's ability to effectively market ChemoFx or to become profitable.

        PTI has also entered into clinical study collaborations with highly regarded organizations in the cancer field, including the National Surgical Adjuvant Breast and Bowel Project, or NSABP, and US Oncology Research, a national healthcare services network dedicated exclusively to cancer treatment and research. PTI's success in the future depends in part on its ability to enter into agreements with other leading cancer organizations. This can be difficult due to internal and external constraints placed on these organizations. Some organizations may limit the number of collaborations they have with any one company so as to not be perceived as biased or conflicted. Organizations may also have insufficient administrative and related infrastructure to enable collaborations with many companies at once, which can extend the time it takes to develop, negotiate and implement a collaboration. Additionally, organizations often insist on publishing the primary endpoints of the study prior to any collaborator-initiated publications of the clinical data resulting from the study. While the publication of clinical data in peer-reviewed journals is a crucial step in commercializing and obtaining coverage and reimbursement for a test such as ChemoFx, PTI's inability to control when results are published may delay or limit its ability to derive sufficient revenues from ChemoFx or any future tests or products that it may develop, if any.

If PTI is unable to compete successfully, it may be unable to increase or sustain its revenues or achieve profitability.

        PTI currently competes directly with providers of chemoresistance tests, including companies such as Oncotech and Genzyme. These companies may have significantly greater resources than PTI. Chemoresistance tests may be sold at a lower price than ChemoFx. Physicians and patients may not attribute any added benefit to ChemoFx and may elect to order competitive chemoresistance tests

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instead of ChemoFx. Moreover, Oncotech recently announced that it had entered into a binding letter of intent to be acquired by Exiqon, a Danish supplier of gene expression analysis products. PTI can not yet predict what impact, if any, the acquisition will have on Oncotech and PTI's competitive position, although the combination could provide Oncotech with significantly greater resources and distribution channels, enabling it to compete more effectively with PTI. PTI is also aware of a number of smaller companies and laboratories that are performing chemoresistance tests, chemosensitivity tests, or both.

        The current ChemoFx test requires live tumor tissue. Competition exists and may continue to arise from tests analyzing genetic material that can be performed on fixed or archived tissue. Although PTI is exploring the possibility of developing genomic-based tests, a number of pharmaceutical and diagnostics companies already have genomic-based predictive tests in development. These potential competitors have widespread brand recognition and substantially greater financial and technical resources, development, production and marketing capabilities than PTI does. These genomic-based tests may be lower-priced, less complex tests that could be viewed by physicians and third-party payors as functionally equivalent to cell-based tests such as ChemoFx, which could force PTI to lower the list price of ChemoFx and which would negatively impact its operating margins and its ability to achieve profitability. If PTI is unable to compete successfully against current or future competitors, whether providers of cell-based or gene-based diagnostic tests, it may be unable to gain or increase market acceptance for and sales of ChemoFx, which could negatively affect its revenues or prevent PTI from achieving or sustaining profitability.

New product development involves a lengthy and complex process, and PTI may be unable to commercialize any of the tests it is currently developing or introduce new products in a timely manner, which could cause its test to become obsolete and its revenues to decline.

        The life sciences industry is characterized by rapid and significant technological changes, frequent new product and service introductions and enhancements and evolving industry standards. PTI's future success depends on its ability to continually improve its current test and services, develop and introduce, on a timely and cost-effective basis, new products and services that address the evolving needs of its customers and pursue new market opportunities that develop as a result of technological and scientific advances in the life sciences industry. In particular, PTI believes that it is important that it add additional cancer therapies to its test as well as new therapies as they are approved and used in the treatment of cancer. Some of these new opportunities, including some biologics and anti-angiogenesis agents, may be outside the scope of PTI's existing test and expertise or in areas that have unproven market demand. Additionally, the utility and value of any new products and services PTI develops may not be accepted in the markets served by the new products. The inability to gain market acceptance of new products and services could harm PTI's future operating results. Unanticipated difficulties or delays in enhancing its existing test and related services with enhanced or new products and services in sufficient quantities to meet customer demand could diminish future demand for ChemoFx and adversely affect PTI's future operating results.

        To date, PTI has focused substantially all of its research and development efforts on the response of solid tumors to standard chemotherapy agents. PTI is developing enhancements to ChemoFx, and it has devoted considerable resources to research and development. For example, PTI is currently conducting research on the extension of its testing platform to biologics and anti-angiogenesis agents, as well as developing tests that incorporate genomic information. To do so, PTI may need to overcome technological challenges and build experience with genomics. There can be no assurance that PTI's technologies will be capable of reliably indicating the response of certain cancers to these agents in a manner necessary to be clinically and commercially useful in physicians' decision-making process for selecting patient treatments, or that PTI will be able to successfully incorporate genomic information into its testing process. PTI may never realize any commercial benefit from its research and development activities in these areas.

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        At any point, PTI may abandon development of a test or test enhancement, or it may be required to expend considerable resources repeating clinical studies, which could delay commercialization and market acceptance of those tests. In addition, as it attempts to develop new tests, PTI will have to make significant investments in research and development and marketing and selling resources. If a clinical validation study fails to demonstrate the benefits of a given test, PTI would likely abandon the development of that test, which could harm its business.

        Even if PTI successfully develops new products or enhancements or new generations of its existing test, they may be quickly rendered obsolete by changing customer preferences or the introduction by competitors of products embodying new technologies or features. Additionally, innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice, the potential need for regulatory clearance and uncertainty over third-party coverage and reimbursement. In the event that new products do not gain market acceptance or PTI's existing test loses market share, its revenues and profitability would be adversely affected.

PTI's research and development efforts will be hindered if it is not able to obtain access to tissue samples.

        PTI's development efforts rely on its ability to secure access to live tumor cells from tissue samples, and, to some extent, on information pertaining to their associated clinical outcomes. The process of negotiating access to tissue samples is lengthy since it can involve numerous parties and approval levels to resolve complex issues such as usage rights, institutional review board approval, privacy rights and informed consent of patients, publication rights, intellectual property ownership and research parameters. If PTI is not able to gain access to live tumor tissue samples with hospitals and collaborators, or if other laboratories or competitors secure access to these samples before PTI, its ability to enhance ChemoFx and develop any future products will be limited or delayed. Moreover, if the clinical data associated with the samples that PTI obtains is incorrect or incomplete, then its ability to develop additional products may be significantly impaired. Finally, government regulation in the United States and foreign countries could result in restricted access to, or use of, human tissue samples or other biological materials. If tighter restrictions are imposed on the use of related clinical information or other information generated from tissue or other biological materials, PTI's research and development programs and its business could be harmed.

If PTI's research collaborators or scientific advisors terminate their relationships with PTI or develop relationships with a competitor, its ability to develop and to commercialize ChemoFx or any future products could be adversely affected.

        PTI currently has relationships with approximately 20 research collaborators and scientific advisors at academic and other institutions who conduct research at its request, and PTI expects to increase these numbers as it expands its clinical studies program. These research collaborators are not employees of PTI. As a result, PTI has limited control over their activities and, except as otherwise required by its collaboration or advisory agreements, can expect only limited amounts of their time to be dedicated to PTI's activities. Although PTI does not believe that its current research efforts are substantially dependent on any one of its existing collaborations or advisory relationships, its ability to expand its current test or develop future tests will depend in part on the establishment and continuation of these collaborations. In particular, PTI may need to rely significantly on third parties in connection with its efforts to integrate genomics into its current testing platform. PTI may be unable to establish necessary collaborations on acceptable terms, or at all, and its existing collaborations may be terminated or be unsuccessful. If PTI is unable to enter and successfully complete any required collaborations, its ability to develop and commercialize its tests could be adversely affected.

        PTI's research collaborators and scientific advisors may have relationships with other commercial entities, some of which could compete with PTI. While PTI's research collaborators and scientific advisors sign agreements that provide for the confidentiality of its proprietary information and the results of studies conducted at its request, PTI may not be able to maintain the confidentiality of its

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technology and other confidential information in connection with every collaboration. The dissemination of PTI's confidential information could have a material adverse effect on its business.

PTI relies on single suppliers for some of its laboratory instruments and materials and may not be able to find replacements in the event the supplier no longer supplies that equipment.

        PTI relies on Dynamic Devices to supply some of the laboratory equipment with which it performs the ChemoFx test. PTI also relies on HyClone, a subsidiary of Thermo Fisher Scientific Inc., for the provision of fetal bovine serum, a reagent used in the cell culture process. PTI does not have supply agreements with these vendors, but it periodically forecasts its needs and enters into standard purchase orders with these vendors based on these forecasts. PTI believes that there are relatively few additional suppliers of these products that are currently capable of supplying the equipment and materials necessary at the specifications it demands. Even if it were to identify other suppliers of these products, there can be no assurance that PTI will be able to enter into agreements with these suppliers on a timely basis on acceptable terms, or at all. If PTI encounters delays or difficulties in securing supply of either of these products from the vendor, it may need to reconfigure its test process, which would result in an increase in costs or an interruption in sales. If any of these events occur, PTI's business and operating results would be harmed.

If PTI's sole laboratory facility becomes inoperable, it will be unable to perform its ChemoFx test, and its business will be harmed.

        PTI relies on a single clinical laboratory facility in Pittsburgh, Pennsylvania to process patient samples for ChemoFx, and it has no alternative facilities. The facility may be harmed or rendered inoperable by natural or man-made disasters, including flooding and power outages, which may render it difficult or impossible for us to perform tests for some period of time. Although PTI has insurance coverage for flooding due to drainage overflows, it does not maintain flood insurance. PTI's facility and the equipment it uses to perform its tests would be costly and could require substantial lead time to repair or replace. Moreover, destruction or damage to automated equipment and computers used in the testing process caused by extreme environmental conditions, such as heat or electrical power surges beyond the capacity or due to the failure of equipment in place to prevent such conditions, could result in the interruption of laboratory operations, the loss of information and the inability to conduct PTI's business.

        Because PTI's business requires manipulating and analyzing large amounts of data, the loss or corruption of source code, financial, clinical, scientific or experimental information due to system failure, physical destruction of storage media, failure of internal or third party applications, or malicious actions of an employee or outside person, may result in significant lost opportunity, cost and financial liability. In addition, other uncontrollable events, including loss of utilities, HVAC failure and forced evacuation by governing authorities, may temporarily inhibit PTI's ability to conduct business or process specimens. PTI's property and business interruption insurance may not be sufficient to cover all of its potential losses and may not continue to be available to it on acceptable terms, or at all. The inability to perform its ChemoFx test may result in the loss of customers or harm PTI's reputation, and it may be unable to regain those customers in the future.

        In order to establish a redundant laboratory facility, if necessary, PTI would be required to spend considerable time and money securing adequate space, constructing the facility, recruiting and training employees and establishing the additional operational and administrative infrastructure necessary to support a second facility. Additionally, any new clinical laboratory facility would be subject to certification under CLIA and licensed by several states, which can take a significant amount of time and result in delays in PTI's ability to begin commercial operations at that site.

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If PTI uses chemical, biological or other hazardous materials in a manner that causes injury, it could be liable for damages.

        PTI's business currently requires the controlled use of potentially harmful chemical and biological materials. PTI cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling or disposal of these materials. In the event of contamination or injury, PTI could be held liable for any resulting damages, and any liability could exceed its resources or any applicable insurance coverage it may have. PTI currently has product liability coverage up to $1 million per occurrence, and up to $5 million in the aggregate, which includes coverage for claims relating to hazardous materials subject to certain exceptions and exclusions as set forth in the insurance policy. Additionally, PTI is subject on an ongoing basis 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 might be significant and could negatively affect PTI's operating results.

If PTI is sued for product liability, it could face substantial liabilities that exceed its resources.

        The marketing, sale and use of ChemoFx could lead to the filing of product liability claims if someone alleges that the test failed to perform as it was intended. PTI may also be subject to liability for errors in the information it provides to physicians or for a misunderstanding of, or inappropriate reliance upon, the information it provides. A product liability claim could result in substantial damages and be costly and time consuming for PTI to defend. There can be no assurance that PTI's insurance would fully protect it from the financial impact of defending against product liability claims. As described above, PTI currently has product liability insurance, but any product liability claim brought against PTI, with or without merit, could increase its insurance rates or prevent it from securing insurance coverage in the future. Additionally, any product liability lawsuit could cause injury to PTI's reputation, result in the withdrawal of its test from the market or cause current collaborators to terminate existing agreements and potential collaborators to seek other partners, any of which could impact PTI's results of operations.

Risks Concerning the Regulation of PTI's Business

        If the proposed business combination with PTI is consummated, which cannot be assured, certain regulatory risks applicable to PTI would also be applicable to the combined business, including the following:

Complying with numerous regulations pertaining to PTI's business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties or loss of PTI's ability to conduct its business.

        PTI is subject to the Clinical Laboratory Improvement Amendments of 1988, or CLIA, a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease. CLIA, which is administered by CMS, is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The failure to comply with CLIA requirements can result in enforcement action, including the revocation, suspension or limitation of PTI's CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties. PTI must maintain CLIA compliance and certification to be eligible to bill for services provided to Medicare beneficiaries, and PTI will be required to achieve CLIA certification for any new laboratory facility in which it may conduct testing. If PTI is found out of compliance with CLIA program requirements and subjected to sanction, its business could be harmed.

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        PTI has a current certificate of accreditation under CLIA to perform testing. To renew this certificate, PTI is subject to survey and inspection every two years, and it expects that it will be inspected within the next 12 months. Moreover, CLIA inspectors may make random inspections of PTI's laboratory. Currently, CLIA regulations do not include specific standards for a live cell or chemoresponse specialty. If a new sub-specialty is created under CLIA that is applicable to ChemoFx, PTI may be required to comply with new standards in order to maintain a certificate of accreditation to perform testing.

        PTI is also required to maintain a license to conduct testing in Pennsylvania. Pennsylvania laws establish standards for day-to-day operation of its clinical laboratory, including the training and skills required of personnel and quality control. Several states, including Florida, New York, Rhode Island, Maryland and California, require that PTI hold licenses to test specimens from patients residing in those states, and it currently holds licenses in all these states. Other states have similar requirements or may adopt similar requirements in the future. Finally, PTI may be subject to regulation in foreign jurisdictions if it seeks to expand international distribution of its test.

        If PTI were to lose its CLIA certification, whether as a result of a revocation, suspension or limitation, it would no longer be able to conduct its test, which would curtail its revenues and materially harm its business. If PTI were to lose its license in states where it is required to hold licenses, it would not be able to test specimens from those states, which could materially harm its business.

        The clinical laboratory testing industry is highly regulated, and there can be no assurance that the regulatory environment in which PTI operates will not change significantly and adversely in the future. In addition to CLIA regulation, PTI is subject to other areas of regulation by both the federal and state governments that may affect its ability to conduct business, including, without limitation:

•

federal and state laws and regulations relating to billing and claims payment applicable to clinical laboratories and regulatory agencies enforcing those laws and regulations;



•

coverage and reimbursement levels by Medicare, Medicaid and other governmental payors and private insurers;



•

the federal Anti-kickback Law, which prohibits persons from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which the payment may be made under governmental healthcare programs such as Medicare and Medicaid, and comparable state anti-kickback prohibitions;



•

the federal physician self-referral law, commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services reimbursed by Medicare or Medicaid if the physician (or a member of the physician's family) has a financial relationship with the entity, and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral, and the state equivalents;



•

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which creates federal criminal laws that prohibit executing a scheme to defraud any health care benefit program or making false statements relating to health care matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information, and the state laws governing the privacy of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA;

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•

state laws regarding prohibitions on fee-splitting;



•

the Medicare civil money penalty and exclusion requirements; and



•

the federal civil and criminal False Claims Act, which prohibits individuals or entities from knowingly presenting, or causing to be presented to the federal government, claims for payment that are false or fraudulent, and the state law equivalents.

        The risk of PTI's possibly being in violation of these laws and regulations is increased by the fact that many of them conceivably cover a very broad range of conduct. Furthermore, the boundary between permitted and unpermitted conduct has in many instances not been clearly delineated by the regulatory authorities or the courts. These statutes and regulations are very complicated and therefore subject to varying interpretations. Any action brought against PTI for a violation of these laws or regulations, even if PTI were to successfully defend against it, could cause PTI to incur significant legal expenses and to divert PTI's management's attention from the operation of its business. If PTI's operations are found to be in violation of any of these laws and regulations, it may be subject to any applicable penalty associated with the violation, including substantial civil and criminal penalties, damages, fines or administrative penalties, including exclusion from federal healthcare programs such as Medicare and Medicaid. PTI could also be required to refund payments received, and it could be required to curtail or cease its operations. Any of the foregoing consequences could seriously harm its business and its financial results.

        PTI expects that there will continue to be new healthcare legislation, regulations and other policies at the federal, state and local levels. PTI has developed its commercialization strategy for ChemoFx based on currently applicable laws and existing healthcare policies. Changes in laws and healthcare policies, such as the creation of broad limits for diagnostic products in general or requirements that Medicare patients pay for portions of its tests or services received, could substantially impact the sales of ChemoFx, increase its costs or divert management's attention. PTI cannot predict what changes, if any, will be proposed or adopted or the effect that such proposals or adoption may have on its business, financial condition and results of operations.

If the FDA subjects PTI's laboratory-developed tests to regulation as medical devices, PTI could incur substantial costs for ChemoFx to meet requirements for premarket clearance or approval and experience significant delays in commercializing ChemoFx and any future products that it may develop.

        Clinical laboratory tests that are developed and validated by a laboratory for its own use are called laboratory-developed tests, or LDTs, also known as "homebrew" tests. LDTs are regulated under CLIA as well as by applicable state laws. Instruments, test kits, reagents and other devices used to perform diagnostic testing by clinical laboratories that are sold and distributed as products through interstate commerce are regulated as medical devices by the FDA under the Federal Food, Drug, and Cosmetic Act, or FFDCA, and its implementing regulations. Medical devices are subject to extensive regulation by the FDA and other federal, state and local authorities. These regulations are wide ranging and govern, among other things, the design, development, testing, manufacture, premarket clearance and approval, labeling, sale, promotion and distribution of medical device products. Achieving and maintaining compliance with FDA requirements is costly and burdensome, and failure to comply with applicable regulations, if required, can result in fines, suspension or operational shutdown, recalls or seizure of products, and other civil and criminal penalties.

        The FDA maintains that it has the authority to regulate LDTs as diagnostic medical devices, but it has stated that it would exercise enforcement discretion to refrain from regulating most LDTs. The FDA has instead regulated LDTs through its authority to regulate the primary components of most LDTs and also relied upon the CLIA certification process, which provides assurance that high complexity laboratories have the expertise to develop and use LDTs that are accurate and reliable. PTI

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has commercially launched ChemoFx and offers it as an LDT. Accordingly, PTI believes that ChemoFx is not subject to regulation as a medical device under current FDA policies.

        The FDA's regulation of LDTs is in flux. Therefore, there can be no assurance that ChemoFx will not be subjected to FDA regulation. For example, the FDA is in the process of extending medical device regulation to tests that the agency calls "In Vitro Diagnostic Multivariate Index Assays," or IVDMIAs. The FDA has issued draft guidance stating the FDA's intention to regulate IVDMIAs even if they are LDTs. No final guidance has been issued by the FDA. PTI does not know which tests may be covered by the final guidance when issued, when such guidance may be issued or what form of approval process, quality control and other medical device regulation may be required. There can be no assurance that the FDA will agree with PTI's view that ChemoFx is not subject to FDA regulation as an IVDMIA or otherwise, or that it will not become subject to FDA regulation either through new enforcement policies adopted by the FDA or new legislation enacted by Congress.

        If ChemoFx, or PTI's tests under development, become subject to regulation as medical devices, PTI may be required to obtain premarket clearance or approval from the FDA in order to market such tests, and the time and expense needed to obtain clearance or approval of its tests under development could be significant. PTI does not have experience obtaining FDA approval for ChemoFx, or its tests under development, and if premarket clearance or approval were required, it might be forced to stop marketing ChemoFx until it could be obtained. There can be no assurance that any such premarket clearance or approval could ever be obtained.

If PTI is required to conduct clinical studies to obtain FDA clearance or approval of its test, those studies could lead to delays or failure to obtain such approvals and harm its ability to become profitable.

        Any premarket notification or premarket approval that PTI would submit to the FDA would need to be supported by clinical data. There can be no assurance that the FDA would deem the clinical studies PTI has conducted and are now conducting sufficient to support premarket clearance or approval, and PTI could be required to conduct new clinical studies. Delays in the commencement or completion of such clinical testing could significantly increase its product development costs and delay product commercialization. The successful completion of clinical studies is subject to a number of risks, including those described under " Risk Factors—Clinical studies using ChemoFx may not be completed successfully, in a timely manner, or at all ." If clinical studies required by the FDA are delayed as a result of these factors, or the data from the studies do not demonstrate the safety and efficacy of ChemoFx, PTI's ability to obtain FDA clearance or approval would be impaired.

The FDA could regulate PTI as a device manufacturer, and its non-compliance with regulatory requirements could result in an adverse FDA enforcement action against it.

        If PTI were to be regulated as a device manufacturer, it would need to comply with other FDA requirements in addition to obtaining premarket clearance or approval. For example, device manufacturers need to register their facility with the FDA and list their devices with the FDA. In addition, device manufacturers must comply with applicable provisions of the Quality System Regulation. This regulation requires device companies to, among other things, maintain certain types of records, develop design controls, establish manufacturing procedures and processes, evaluate complaints, initiate corrective and preventative actions, and implement controls over vendors. Device manufacturers must also comply with the Medical Device Reporting regulation, which requires that reports be filed with the FDA if a device causes or contributes to a death or serious injury, or if a malfunction of the device occurs and a recurrence of the malfunction could cause or contribute to a death or serious injury. Device companies may also need to submit reports to the FDA if they initiate corrections or removals of marketed devices. The FDA regulates and restricts the advertising and promotion of marketed devices. It could be costly for PTI to comply with any such regulations.

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        The failure to comply with the FDA's requirements for device manufacturers could result in enforcement action. These enforcement actions may include inspection of the facility, issuance of a warning letter, imposition of civil penalties, withdrawal of marketing clearance or approval, product recalls, seizure of product, injunction, disgorgement or restitution and criminal prosecution. Any such action would have a material adverse effect on PTI's business.

Congress could create additional regulatory burdens for PTI's test, which could cause it to incur additional costs or experience delays in the commercialization of ChemoFx.

        Certain members of Congress have introduced legislation regarding laboratory testing, which may apply to ChemoFx or PTI's future products under development. For example, on March 1, 2007, Senator Edward Kennedy introduced the Laboratory Test Improvement Act which, if enacted as introduced, would deem all LDTs to be medical devices subject to labeling and registration requirements as set forth in the bill. On March 23, 2007, Senator Barack Obama introduced the Genomics and Personalized Medicine Act of 2007, which, if enacted as introduced, would call for an Institute of Medicine, or IOM, study to make recommendations to improve federal oversight and regulation of genetic tests and would also require the Secretary of the U.S. Department of Health and Human Services, or HHS, to implement a decision matrix, taking into consideration the recommendations of the IOM report, to improve the oversight and regulation of genetic tests. In addition, on September 27, 2007, President George W. Bush signed into law the Food and Drug Administration Amendments Act of 2007, which included an amendment, introduced by Senator Obama, calling for the IOM to conduct a study to assess the overall safety and quality of genetic tests and prepare a report that includes recommendations to improve federal oversight and regulation of genetic tests, if a report on genetics and genomics is not completed by the Secretary's Advisory Committee on Genetics, Health and Society, or SACGHS, by July 2008. The SACGHS issued its draft report on November 5, 2007. It is possible that the findings of the SACGHS or IOM report may result in increased regulatory burdens for PTI to continue to offer ChemoFx.

PTI could face significant monetary damages and penalties and/or exclusion from the Medicare and Medicaid programs if it violates health care anti-fraud and abuse laws.

        PTI's failure to meet governmental requirements under laws and regulations relating to billing practices and relationships with physicians and hospitals could lead to civil and criminal penalties, exclusion from participation in Medicare and Medicaid and possible prohibitions or restrictions on the use of its laboratories. While PTI believes that it conducts its operations and relationships with care in an effort to meet all statutory and regulatory requirements, there is a risk that government authorities might take a contrary position. Such occurrences, regardless of their outcome, could damage PTI's reputation and adversely affect important business relationships it has with third parties.

Compliance with the HIPAA security regulations and privacy regulations may increase PTI's costs.

        Under HIPAA, HHS has issued regulations to protect the privacy and security of protected health information used or disclosed by health care providers, such as PTI. The HIPAA privacy and security regulations, which became fully effective in April 2003 and April 2005, respectively, establish comprehensive federal standards with respect to the uses and disclosures of protected health information by health plans, healthcare providers and healthcare clearinghouses, in addition to setting standards to protect the confidentiality, integrity and availability of protected health information. The regulations establish a complex regulatory framework on a variety of subjects, including:

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the circumstances under which uses and disclosures of protected health information are permitted or required without a specific authorization by the patient, including but not limited to treatment purposes, activities to obtain payments for PTI's services and healthcare operations activities;

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a patient's rights to access, amend and receive an accounting of certain disclosures of protected health information;



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the content of notices of privacy practices for protected health information; and



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administrative, technical and physical safeguards required of entities that use or receive protected health information.

        PTI has implemented policies and procedures related to compliance with the HIPAA privacy and security regulations, as required by law. The privacy regulations establish a "floor" and do not supersede state laws that are more stringent. Therefore, PTI is required to comply with both federal privacy regulations and varying state privacy laws. In addition, for healthcare data transfers from other countries relating to citizens of those countries, PTI must comply with the laws of those other countries. The federal privacy regulations restrict PTI's ability to use or disclose patient identifiable laboratory data, without patient authorization, for purposes other than payment, treatment or healthcare operations (as defined by HIPAA), except for disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations. The privacy and security regulations provide for significant fines and other penalties for wrongful use or disclosure of protected health information, including potential civil and criminal fines and penalties.

        In addition to the HIPAA provisions described above, there are a number of state laws regarding the confidentiality of medical information, some of which apply to clinical laboratories. These laws vary widely, and new laws in this area are pending, but they most commonly restrict the use and disclosure of medical information without patient consent. Penalties for violation of these laws include sanctions against a laboratory's state licensure, as well as civil and/or criminal penalties. Moreover, although the HIPAA statute and regulations do not expressly provide for a private right of damages, PTI also could incur damages under state laws to private parties for the wrongful use or disclosure of confidential health information or other private personal information. Compliance with such rules could require PTI to spend substantial sums, which could negatively impact its profitability.

        Finally, the HIPAA transaction standards also are subject to differences in interpretation by payors. For instance, some payors may interpret the standards to require PTI to provide certain types of information, including demographic information not usually provided to PTI by physicians. As a result of inconsistent application of transaction standards by payors or its inability to obtain certain billing information not usually provided to it by physicians, PTI could face increased costs and complexity, a temporary disruption in receipts and ongoing reductions in reimbursements and net revenues. In addition, new requirements for additional standard transactions, such as claims attachments or use of a national provider identifier, could prove technically difficult, time-consuming or expensive to implement.

Risks Related to PTI's Intellectual Property

        If the proposed business combination with PTI is consummated, which cannot be assured, certain intellectual property risks applicable to PTI would also be applicable to the combined business, including the following:

PTI's competitive position depends on maintaining intellectual property protection, which is difficult and costly, and it may not be able to ensure the protection of proprietary rights.

        In order to remain competitive, PTI must develop and maintain protection on the key aspects of its technology. PTI relies on a combination of patents, copyrights and trademarks, confidentiality and material data transfer agreements, licenses and invention assignment agreements to protect its intellectual property rights. PTI also relies upon unpatented trade secrets and improvements,

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unpatented know-how and continuing technological innovation to develop and maintain its competitive position. PTI believes that it protects this information with reasonable security measures.

        PTI's patents and patent applications generally relate to cell culturing techniques, as well as assays for evaluating the in vitro response of cultured tumor cells to drug treatment, and assays for characterizing the cultured cells on a genotypic and phenotypic level. PTI intends to file additional patent applications in the United States and abroad to strengthen its intellectual property rights. Patent applications that PTI files may not result in issued patents, and there can be no assurance that any patents that might issue will protect its technology. PTI's issued patents as well as patents issued to PTI in the future may be challenged by third parties as being invalid or unenforceable. Further, third parties may independently develop similar or competing technologies that are not covered by PTI's patents. PTI cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly in foreign countries where the laws may not protect its proprietary rights to the same or similar extent as the laws in the United States.

        The patent position of life science companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of PTI's intellectual property. Even if PTI is able to obtain patents covering its products or methodologies, any patent may be challenged, invalidated, held unenforceable or circumvented. The existence of a patent will not necessarily prevent other companies from developing similar or scientifically equivalent products that compete with PTI's products. Further, its patent portfolio may not protect it from claims of third parties that its products infringe their issued patents, which may require licensing and the payment of significant fees or royalties, and there can be no assurance that such licenses would be available on commercially reasonable terms, or at all. Competitors may successfully challenge PTI's patents, produce similar products that do not infringe its patents, or manufacture products in countries where PTI has not applied for patent protection or that do not respect its patents. Accordingly, PTI cannot predict the breadth of claims that may be allowed or enforced in its patents, its licensed patents or in third party patents.

        PTI also relies on trade secrets and other unpatented proprietary information to protect its technology, especially where it does not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. PTI believes that it uses reasonable efforts to protect its trade secrets and other unpatented proprietary information. PTI requires all employees and technical consultants working for it to execute confidentiality agreements, which provide that all confidential information developed or made known to them during the course of the employment, consulting or business relationship shall be kept confidential except in specified circumstances. There can be no assurance that these agreements will provide meaningful protection for PTI's trade secrets, know how or other proprietary information. Despite these confidentiality agreements and other measures taken to protect PTI's trade secrets and other unpatented intellectual property, unauthorized parties might copy aspects of its technology or obtain and use information that PTI regards as proprietary. Additionally, PTI's employees, consultants, advisors and partners may unintentionally or willfully disclose its proprietary information to competitors, and PTI may not have adequate remedies for such disclosures. Enforcing a claim that a third party illegally obtained and is using any of PTI's inventions or trade secrets would be expensive and time consuming, and the outcome would be unpredictable. In addition, courts outside of the United States are sometimes less willing to protect trade secrets. Moreover, PTI's competitors may independently develop equivalent or similar knowledge, methods and know-how. If PTI is unable to protect and maintain the proprietary nature of its technologies, its business operating results and financial condition could be materially adversely affected.

        PTI's agreements with employees and consultants generally provide that all inventions conceived by the individual while providing services to PTI are assigned to it. There can be no assurance that employees and consultants will abide by the confidentiality or assignment terms of these agreements. In

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addition, if PTI's employees, consultants, advisors and partners develop inventions or processes independently or jointly with PTI that may be applicable to its products under development, disputes may arise about ownership or proprietary rights to those inventions and processes.

PTI may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, and it may be unable to protect its rights to, or commercialize, its products.

        If PTI chooses to go to court to stop someone else from making, using or selling the inventions claimed in patents it owns or licenses from others, that individual or company has the right to ask the court to rule that these patents are invalid or unenforceable. These lawsuits are expensive and would consume time and other resources even if PTI were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and that PTI does not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that the other party's activities do not infringe these patents or that it is in the public interest to permit the infringing activity.

        In addition, from time to time, PTI may receive notices from third parties of claims for infringement, misappropriation or misuse of such other parties' proprietary rights. Some of these claims may lead to litigation or other action, and there can be no assurance that PTI will prevail in these actions, or that such actions will not adversely affect its business, financial condition, or operation. An adverse determination in litigation or patent interference proceeding could subject PTI to significant financial liabilities to third parties or require it to seek licenses from third parties, which could include ongoing royalty obligations. If PTI is found to willfully infringe one or more third party patents, it could, in addition to other penalties, be required to pay treble damages. PTI may be unable to obtain necessary licenses, or unable to obtain necessary licenses on satisfactory or commercially feasible terms. If it does not have necessary licenses, PTI may be forced to redesign ChemoFx, or other aspects of its business, to avoid infringement. In such circumstances, PTI may be unable to successfully redesign the test, or such redesign may take considerable time, which could force it to reassess its business plans. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent PTI from performing the test, which would have a significant adverse impact on its business.

        The life sciences industry has produced a proliferation of patents, and it is not always clear to industry participants, including PTI, which patents cover various types of products or methods. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If PTI is sued for patent infringement, it would need to demonstrate that its products or methods do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid or unenforceable, and PTI may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents in the United States.

        Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, and because publications in the scientific literature often lag behind actual discoveries, PTI cannot be certain that others have not filed patent applications for inventions covered by its licensors' or its issued patents or pending applications, or that it or its licensors were the first inventors. PTI's competitors may have filed, and may in the future file, patent applications covering subject matter similar to that of PTI. Any such patent application may have priority over PTI's or its licensors' patents or applications and could further require PTI to obtain rights to issued patents covering such subject matter. If another party has filed a U.S. patent application on inventions similar to those of PTI, it may have to participate in an interference proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the

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United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of PTI's U.S. patent position with respect to such inventions.

        Some of PTI's competitors may be able to sustain the costs of complex patent litigation more readily than it can because they have substantially greater resources. In addition, intellectual property litigation, regardless of outcome, is generally expensive and time-consuming, could divert management's attention from its business and could therefore have a material negative effect on PTI's business, operating results or financial condition.

        In addition, PTI relies on its trademarks, trade names and brand names to distinguish its products from the products of its competitors, and it has registered or applied to register many of these trademarks. There can be no assurance that PTI's trademark applications will be approved. Third parties may also oppose PTI's trademark applications, or otherwise challenge its use of the trademarks. In the event that PTI's trademarks are successfully challenged, it could be forced to rebrand its products, which could result in loss of brand recognition, and could require PTI to devote resources to advertising and marketing new brands. Further, there can be no assurance that competitors will not infringe PTI's trademarks, or that it will have adequate resources to enforce its trademarks.

        Although it relies on copyright laws to protect the works of authorship, including software, that it creates, PTI does not register the copyrights in most of its copyrightable works. Copyrights of U.S. origin must be registered before the copyright owner may bring an infringement suit in the United States. Furthermore, if a copyright of U.S. origin is not registered within three months of publication of the underlying work, the copyright owner is precluded from seeking statutory damages or attorneys fees in any U.S. enforcement action, and is limited to seeking actual damages and lost profits. Accordingly, if one of PTI's unregistered copyrights of U.S. origin is infringed by a third party, it will need to register the copyright before it can file an infringement suit in the United States, and its remedies in any such infringement suit may be limited.