RISK FACTORS 4 exclusion from government-funded healthcare programs, such as We may be subject to product liability lawsuits. Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement We face an inherent risk of product liability exposure related to or similar agreement to resolve allegations of non-compliance with the testing of our product candidates in clinical trials and may face these laws, contractual damages, reputational harm, diminished an even greater risk if we commercialize any products that we profits and future earnings and the curtailment or restructuring may develop. If we cannot successfully defend ourselves against of our operations, any of which could adversely affect our ability claims that our product candidates caused injuries, we could incur to operate our business and our results of operations. substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: If the physicians or other providers or entities with whom • decreased demand for any product candidates that we may we expect to do business are found not to be in compliance develop; with applicable laws, they may be subject to criminal, civil or • loss of revenue; administrative sanctions, including exclusions from government • substantial monetary awards to trial participants or patients; funded healthcare programs. • significant time and costs to defend the related litigation; Our employees and other third parties we partner with or • withdrawal of clinical trial participants; interact with may engage in misconduct or other improper • the inability to commercialize any product candidates that we activities, including violating applicable regulatory standards may develop; and and requirements or engaging in insider trading, which could significantly harm our business. • injury to our reputation and significant negative media attention. In both the United States and the Europan Union, and elsewhere, If we fail to comply with environmental, health and safety laws and we are exposed to the risk of fraud or other misconduct by our regulations, we could become subject to fines or penalties or incur employees, principal investigators, consultants and commercial costs that could have a material adverse effect on the success of partners. Misconduct by employees, for example, could include our business. intentional failures to comply with legal requirements or the requirements of CMS, the EMA, the FDA and other government We are subject to numerous environmental, health and safety regulators, provide accurate information to applicable laws and regulations, including those governing laboratory government authorities, comply with fraud and abuse and procedures and the generation, handling, use, storage, treatment, other healthcare laws and regulations in the United States and manufacture, transportation and disposal of, and exposure to, abroad, report financial information or data accurately or disclose hazardous materials and wastes, as well as laws and regulations unauthorized activities to us. In particular, sales, marketing and relating to occupational health and safety. Our operations business arrangements in the healthcare industry are subject involve the use of hazardous and flammable materials, including to extensive laws and regulations intended to prevent fraud, chemicals and biologic and radioactive materials. Our operations misconduct, kickbacks, self-dealing and other abusive practices. also produce hazardous waste products. We generally contract These laws and regulations restrict or prohibit a wide range of with third parties for the disposal of these materials and wastes. pricing, discounting, marketing and promotion, sales commission, We cannot eliminate the risk of contamination or injury from customer incentive programs and other business arrangements. these materials. In the event of contamination or injury resulting Employee misconduct could also involve the improper use of, from our use of hazardous materials, we could be held liable including trading on, information obtained in the course of clinical for any resulting damages, and any liability could exceed our trials, which could result in regulatory sanctions and serious harm resources. We also could incur significant costs associated with to our reputation. In connection with our initial public offering on civil or criminal fines and penalties. Euronext Paris, we adopted a Code of Ethics, but it is not always Although we maintain workers’ compensation insurance for certain possible to identify and deter misconduct, and the precautions costs and expenses we may incur due to injuries to our employees we take to detect and prevent this activity may be ineffective in resulting from the use of hazardous materials or other work related controlling unknown or unmanaged risks or losses or in protecting injuries, this insurance may not provide adequate coverage against us from governmental investigations or other actions or lawsuits potential liabilities. We do not maintain insurance for toxic tort stemming from a failure to comply with these laws or regulations. claims that may be asserted against us in connection with our If any such actions are instituted against us, and we are not storage or disposal of biologic, hazardous or radioactive materials. successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including In addition, we may incur substantial costs in order to comply the imposition of significant fines or other sanctions. with current or future environmental, health and safety laws GENSIGHT BIOLOGICS – 2017 Registration Document– 41