Third-Party Reimbursement

Because the Delcath PHP Systemchemosaturation system is characterized by the FDA as an experimental drug/device combination product, it is not currently reimbursable in the United States. After it is approved by the FDA, wethe Company will seek to have third-party payers, such as Medicare, Medicaid and private health insurance plans,payors reimburse the cost of the Delcath PHP Systemchemosaturation system and the associated procedures. In the United States, third-party payors consist of government programs, such as Medicare, Medicaid, private health insurance plans, managed care organizations and other

similar programs. Three factors are key to the reimbursement of any product:

Manufacturing and Quality Assurance

We planThe Company plans to assemble, sterilize and package the Delcath PHP System kitchemosaturation system at our facility in Queensbury, New York. WeDelcath currently utilizeutilizes contract manufacturers to manufacture the components of the Delcath PHP System.chemosaturation system. The Delcath PHP System kitchemosaturation system components must be manufactured and sterilized in accordance with approved manufacturing and pre-determined performance specifications. In addition, certain components will require sterilization prior to sale and Delcath relies on third-party vendors to perform the sterilization process.

The cathetersCompany is committed to providing high quality products to our customers. To honor this commitment, Delcath has implemented updated quality systems and catheter accessories contained withinconcepts throughout our organization. Our quality system starts with the Delcath PHP System kit are being manufactured by AngioDynamics, Inc.initial product specification and continues through the design of the product, component specification process and the OEM division of B. Braun Medical, Inc. Medtronic USA, Inc. manufactures the componentsmanufacturing, sale and servicing of the blood filtration circuit,product. These systems are designed to enable us to satisfy the various international quality system regulations including those of the medical tubing through which a patient’s blood flowsFDA with respect to products sold in the United States and various connectors, as well asthose established by the blood filtration pump accessories. Bipore Medical Devices, Inc. manufacturesInternational Standards Organization with respect to products sold in the filters used with the Delcath PHP System. DelcathEEA. The Company is  working with Bipore and other filter manufacturersrequired to develop other specialized filters for use within the Delcath PHP System. Our suppliers’ manufacturing facilities aremaintain ISO 13485 certifiedcertification for medical devices to be sold in the EEA, which requires, among other items, an implemented quality system that applies to component quality, supplier control, product design and operate undermanufacturing operations. On February 17, 2011, the auspices of FDA. Subsequent to December 31, 2009, we entered into a written supply agreement with B.Braun Medical, Inc. to supply us with double balloon catheters and double balloon catheter accessory packs. We intend to pursue written agreements with other suppliers to manufacture the components of the Delcath PHP SystemCompany announced that it had achieved ISO 13485 certification for commercial sale.our Queensbury manufacturing facility.

Competition

The healthcare industry is characterized by extensive research, rapid technological progress and significant competition from numerous healthcare companies and academic institutions. Competition in the cancer treatment industry is intense. We believeThe Company believes that the primary competitive factors for products addressing cancer include safety, efficacy, ease of use, reliability and price. WeDelcath also believebelieves that physician relationships, especially relationships with leaders in the medical and surgical oncology communities, are important competitive factors. The Company believes the current global economic conditions and potential healthcare reforms could put competitive pressure on us including reduced selling prices and potential reimbursement rates, overall procedure rates, and market sizes.

The Delcath PHP Systemchemosaturation system competes with all forms of liver cancer treatments. Many of our competitors have substantially greater financial, technological, research and development, marketing and personnel resources. In addition, some of our competitors have considerable experience in conducting clinical trials, regulatory, manufacturing, and in regulatory approval procedures.commercialization capabilities. Our competitors may develop more effective or more affordable products or treatment methods, or achieve earlier product development, in which case the likelihood of

our achieving meaningful revenues or profitability will be substantially reduced.

The Delcath PHP Systemchemosaturation system is regulatedsubject to extensive and rigorous government regulation by the FDA, as a combination product consistingother regulatory agencies, and their respective foreign equivalents. The FDA regulates the research, development, pre-clinical and clinical testing, manufacture, safety, effectiveness, record keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import and export of a device and a drug.pharmaceutical products. The manufacture and sale of medical devices and drugs areDelcath system will also be subject to extensive governmental regulation by foreign governments if marketed abroad, whether or not the Company has obtained FDA approval for a given product and its uses.

Government regulation substantially increases the cost of researching, developing, manufacturing and selling medical device and pharmaceutical products. The regulatory review and approval process, which includes pre-clinical testing and clinical trials of our product, is lengthy, expensive and uncertain. The Company must obtain regulatory approval for the Delcath chemosaturation system from each country in which we intend to sell, and all the United Statesmanufacturing facilities used to manufacture components or assemble our system must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and other supporting information for each proposed therapeutic indication in other countries. order to establish the product's safety, efficacy, potency and purity for each intended use. Moreover, approval policies or regulations may change.

The Delcath PHP Systemchemosaturation system is regulated as a drug in the United States by the FDA under the Federal Food, Drug and Cosmetic Act. As such, FDA approval of the Delcath PHP Systemchemosaturation system is required before any commercial distribution may commence.

Orphan Drug Regulation

The Orphan Drug Act provides for a seven-year period of exclusive marketing to the sponsor who obtains marketing approval for that designated orphan drug or biological product. Exclusivity begins on the date that the marketing application is approved by the FDA for the designated orphan drug, and the exclusivity only applies to the indication for which the drug has been approved. An orphan designation does not limit the use of that drug in other applications outside the approved designation in either a commercial or investigational setting. The FDA has granted Delcath four orphan drug designations. In November 2008, the FDA granted Delcath two orphan-drug designations for the drug melphalan for the treatment of patients with cutaneous melanoma as well as patients with ocular melanoma. In May 2009, the FDA granted Delcath an additional orphan-drug designation of the drug melphalan for the treatment of patients with neuroendocrine tumors. In August 2009, the FDA granted Delcath an orphan-drug designation of the drug doxorubicin for the treatment of patients with primary liver cancer.

Foreign Regulation

In order for our products to be marketed and sold in Asia, Europe, or other foreign jurisdictions, wethe Company must obtain the required regulatory approvals or clearances and comply with the extensive regulations regarding safety, manufacturing processes and quality requirements of the respective countries. These regulations, including the requirements for approvals to market, may differ from the FDA regulatory framework. In addition, there may be foreign regulatory barriers other than approval or clearance.

The European Economic Area (EEA)EEA has an agreement between member states of the European Free Trade Association (EFTA), the European Community (EC), and all member states of the European Union (EU) regarding certain certifications for medical devices. The CE marking (also known as CE mark) is a mandatory conformity mark on many products placed on the single market inof the EEA. The CE marking does not certify that a product has met EU consumer safety, health or environmental requirements, but can permit the marketing of a medical device once obtained. We have begunCE Marking is an indication that a medical device complies with the processessential requirements of seekingapplicable medical device directives, and that the device has been subjected to conformity assessment procedures. Receipt of the CE markMark allows a company to market and sell its medical device in countries in the EEA.

In December 2010, the Company submitted a CE Mark Technical File to its European Notified Body for the Delcath PHP Systemchemosaturation system to obtain CE Mark approval for our proprietary chemosaturation system, which Delcath intends to market in the EEA as the Delcath Hepatic ChemoSAT Delivery System. The Company is seeking approval as a Class III medical device with an indication for the percutaneous intra-arterial administration of a chemotherapeutic agent (melphalan hydrochloride) to the liver. The CE Mark review process continues and hope to receivethe Company expects CE Mark approval in the second half of 2010.mid-2011.

Intellectual Property and Other Rights

Our success depends in part on our ability to obtain patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties. Because of the length of time and expense associated with bringing new products through the development and regulatory approval process, the health care industry places considerable emphasis on obtaining patent and trade secret protection for new technologies, products and processes. We holdThe Company holds seven U.S.United States patents, as well as nine correspondingten foreign patents and sevenfour pending patent applications inapplications. When appropriate, the U.S., Canada, EuropeCompany intends to seek protection of our products and Asia that we believe are or may be material to our business.proprietary information by means of U.S. and international patents and trademarks.

Certain of our United States and foreign patents have already expired and other patents relating to the Delcath chemosaturation system will expire in 2012 and 2016. In certain circumstances, U.S.United States patent law allows for the extension of a patent’spatent's duration for a period of up to five years after FDA approval. We intendThe Company intends to seek extension for one of our patents after FDA approval. WeDelcath also relyrelies on trade secrets and proprietary technological experience. We rely,The Company relies, in part, on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and

proprietary technological expertise. TheseThere can be no assurance that these agreements maywill not provide meaningful protection ofbe breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets and proprietary technologies or other intellectual property if unauthorized use or disclosure occurs or if they do not adequately protect against disclosure of material proprietary information.knowledge.

In addition to our proprietary protections, the FDA has granted Delcath four orphan drug designations which provides us a seven-year period of exclusive marketing beginning on the date that our marketing applicationNDA is approved by the FDA for the designated orphan drug. While the exclusivity only applies to the indication for which the drug has been approved, we believethe Company believes that this protectionit will provide us with added protection while we commercialize the Delcath PHP System.chemosaturation system in the United States.

Employees and Facilities

In 2009, we re-focused our management team and appointed a new Chief Executive Officer, Chief Financial Officer and Chief Medical Officer. As of December 31, 2009, we2010, the Company had 1747 full-time employees. None of our employees is represented by a union and we believe relationships with our employees are good.

Available Information

Risks Related to Our Business and Financial Condition

If we arethe Company is not successful in developing and obtaining FDAregulatory approval of the drug/device combination product,Delcath chemosaturation system, or if we arethe Company is unable to market and sell the product, wesystem, Delcath will not generate operating revenue or become profitable.

The Delcath PHP System,chemosaturation system, a platform technology for the isolation of various organs or regions of the body to permit the regional delivery of high doses of drugs, for the treatment of a variety of diseases, is our only product, and ourproduct. Our entire focus has been on developing, commercializing, and obtaining regulatory approvals of this product.product and currently we have only developed this system for the treatment of liver cancer with melphalan. If the Delcath PHP Systemchemosaturation system with melphalan fails as a commercial product, we have no other products to sell.

At December 31, 2010, the Company had $47.1 million in cash, cash equivalents and certificates of deposit. The Company has had no revenue to date, a substantial accumulated deficit, recurring operating losses and negative cash flow. We expectDelcath expects to incur significant and increasing losses while generating minimal revenues over the next few years.year. From our inception on August 5, 1988 through December 31, 2009, we have2010, the Company has incurred cumulative net losses of approximately $67.9$114.6 million. For the years ended December 31, 2010, 2009 and 2008, and 2007 weDelcath incurred net losses of approximately $46.7 million, $22.1 million $6.9 million, and $3.7$6.9 million, respectively. To date, we haveDelcath has funded our operations through a combination of private placements of our securities and through the proceeds of our public offerings in 2000, 2003, 2007, June 2009 and November 2009.offerings. If we continueDelcath continues to incur losses, we may exhaust our capital resources, and as a result may be unable to complete our clinical trials, product development, regulatory approval process and commercialization of the Delcath PHP System.chemosaturation system with melphalan or any other versions of the system.

The FDA has informed us that the Delcath PHP System ischemosaturation system with melphalan will be regulated by the FDA as a combination product.drug. Before wethe Company can obtain approval to sell our product commercially in the United States, we will need approval from the FDA.  WeDelcath will also need approval to market our products in foreign markets.  We doThe Company has submitted a §505 (b)(2) NDA to the FDA and a CE Mark application to our Notified Body in the EU, but currently the Delcath chemosaturation system has not been approved by the FDA or any foreign regulatory authority.  If the Company obtains approval, we may require additional financing to commercialize our product in the United States and foreign markets. The Company does not know if additional financings will be available when needed, or if they are available, that they will be available on acceptable terms. If we areDelcath is unable to obtain additional financing as needed, we may not be able to complete our trials, obtain regulatory approvals or sell the Delcath PHP Systemchemosaturation system commercially.

Our liquidity and capital requirements will depend on numerous factors, including: our research and product development programs, including clinical studies; the timing and costs of our various United States and foreign regulatory filings, obtaining approvals and complying with regulations; the timing of product commercialization activities, including marketing arrangements overseas; the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and the impact of competing technological and market developments. We do not know if additional financing will be available if needed, or if it is available, if it will be available on acceptable terms.

Insufficient funds may require us to curtail or stop our research and development and commercialization activities.

Risks Related to FDA and Foreign Regulatory Approval

Even if the FDA grants approval of the Delcath PHP Systemchemosaturation system for the treatment of melanoma that has metastasizedindications we intend to the liver with melphalan,request, our ability to market the Delcath PHP Systemchemosaturation system would be limited to that use.those uses, and Delcath will be subject to significant ongoing regulatory obligations and oversight.

Even if the FDA grants approval for use of the Delcath PHP Systemchemosaturation system with melphalan in the treatment of ocular and cutaneous melanoma that has metastasized to the liver, with the drug melphalan, our ability to market and promote the Delcath PHP Systemchemosaturation system in the United States would be limited to its indication for use with that drug in treating that disease. If we arethe Company is unable to obtain FDA approval or successfully market the Delcath PHP Systemchemosaturation system for treatment of other diseases, organs and regions and with other drugs, our ability to generate revenue and grow will be limited. FDA approval may otherwise limit our sales practices and our ability to promote, sell and distribute the product, may require that the Company conduct costly post-marketing surveillance and ongoing post-marketing studies. Material changes to an approved product, such as manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may be withdrawn for a number of reasons, including the later discovery of previously unknown problems with the product. If Delcath or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during the regulatory process, such noncompliance could result in:

Delcath relies on third parties to conduct certain of the clinical trials for our chemosaturation system, and if they do not obtain required approvals,perform their obligations to us, we may not be able to exportobtain regulatory approvals for our system.

Delcath designs the clinical trials for the Delcath PHP Systemchemosaturation system, but we rely on academic institutions, corporate partners, contract research organizations and other third parties to assist us in managing, monitoring and otherwise carrying out these trials. Accordingly, Delcath may have less control over the timing and other aspects of these clinical trials than if we conducted them entirely on our own.  Although the Company relies on these third parties to manage the data from these clinical trials, we are responsible for confirming that each of our clinical trials is conducted in accordance with its general investigational plan and protocol. Moreover, FDA and foreign markets, which will limit our sales opportunities.

Third-party reimbursement may not be available to purchasers of the Delcath PHP Systemchemosaturation system or may be inadequate, resulting in lower sales even if FDA or other foreign regulatory approval is granted.

Physicians, hospitals and other health care providers may be reluctant to purchase the Delcath PHP Systemchemosaturation system if they do not receive substantial reimbursement for the cost of using our product from third-party payors, including Medicare, Medicaid, and private health insurance plans.plans, and foreign equivalents.

The Delcath PHP Systemchemosaturation system is currently characterizednot approved by the FDA as an investigational device, and melphalan is an investigational drug at the dosage we are using. As such,FDA.  Medicare, Medicaid and private health insurance plans will not reimburse its use in the United States. WeStates due to the currently unapproved nature of the product.  Delcath will seek reimbursement by third-party payors of the cost of the Delcath PHP Systemsystem after its use is approved by the FDA.  The Company has applied for, but has not yet received CE mark approval for the Delcath chemosaturation system. Without such approval, third-party payors and government health agencies of member states of the EEA will not reimburse its use.   If we obtain CE mark for the Delcath chemosaturation system, Delcath also intends to seek third party or government reimbursement within those countries within the EEA where we expect to market and sell the Delcath chemosaturation system.  There are no assurances that third-party payors in the United States or abroad will agree to cover the cost of procedures using the Delcath PHP System.chemosaturation system at all or at rates that are adequate to cover the actual costs. Further, third-party payors may deny reimbursement if they determine that the Delcath PHP Systemchemosaturation system is not used in accordance with established payor protocols regarding cost effective treatment methods or is used for forms of cancer or with drugs not specifically approved by the FDA.FDA or other foreign regulatory bodies.

Risks Related to Manufacturing, Commercialization and Market Acceptance of the Delcath PHPChemosaturation System

All of the manufacturers of the components for the Delcath chemosaturation system must comply with a number of FDA and foreign regulatory agency requirements and regulations. If weDelcath or one of our suppliers fails to meet such requirements, we may need to change suppliers.  If we arethe Company is unable to successfully change suppliers, the successful completion of some of our clinical trials and/or commercialization of the Delcath PHP Systemchemosaturation system could be jeopardized.

The components of the Delcath PHP System,system, including catheters, filters, introducers and chemotherapy agents, must be manufactured and assembled in accordance with approved manufacturing and predetermined performance specifications of the Delcath PHP Systemchemosaturation system on file with the FDA, certain foreign regulatory agencies and meet cGMP, or current good manufacturing practice, and quality systems requirements. Some states also have similar regulations.  We intend to assemble, sterilize and package the Delcath PHP System at our Queensbury, NY facility.  Many of the components of the Delcath PHP Systemchemosaturation system are manufactured by sole-source suppliers that may have proprietary manufacturing processes. If weDelcath or any of our suppliers fail to meet those regulatory obligations, wethe Company may be forced to suspend or terminate our clinical trials, and once a product is approved for marketing, the manufacture, assembly or distribution thereof. Further, if we needDelcath needs to find a new source of supply, we may face long interruptions in obtaining necessary components for the Delcath PHP System,chemosaturation system, in obtaining FDA or foreign regulatory agency approval of these components and in establishing the manufacturing process, which could jeopardize our ability to supply the Delcath PHP Systemchemosaturation system to the market.

Our ability to conduct timely clinical trials to obtain regulatory approval for and commercialize the Delcath chemosaturation system depends on our ability to manufacture the system, including the chemotherapeutic agents or other compounds, either directly or through third-parties, in accordance with FDA and other regulatory requirements.  Delcath intends to assemble, sterilize and package the Delcath system at our Queensbury, NY facility and will rely on third-party suppliers for a number of components of our system, including melphalan. The Company has a limited manufacturing history and we may not be able to manufacture the system in commercial quantities or in a cost-effective manner.  In addition, Delcath may have difficulty obtaining components for the system from our third-party suppliers in a timely manner or at all which may adversely affect our ability to deliver the system to purchasers.   Further, if theour Queensbury, NY facility fails to obtain or maintain approvals under ISO 13485 and FDA cGMP or current good manufacturing practice,fails to pass facility inspection or audits, our ability to manufacture at the facility could be limited.limited or terminated.

Delcath does not have written contracts with all our suppliers for the manufacture of components for the Delcath chemosaturation system and if we are unable to obtain an adequate supply of the necessary components or negotiate acceptable terms, the commercialization of the Delcath PHP Systemchemosaturation system could be delayed.delayed and we may not be able to manufacture the system in commercial quantities or in a cost-effective manner.  Certain components, however, are available from only a limited number of sources. Components of the Delcath PHP Systemsystem are currently manufactured for us in small quantities for use in our preclinical and clinical studies. WeDelcath will require significantly greater quantities to commercialize the product. WeThe Company may not be able to find alternate sources of comparable components. If we areDelcath is unable to obtain adequate supplies of components from our existing suppliers or need to switch to an alternate supplier and obtain FDA or other regulatory agency approval of that supplier, commercialization of the Delcath PHP Systemchemosaturation system could be delayed.

Delcath has limited experience in marketing products, and as a result, wethe Company may not be successful in marketing and selling the Delcath PHP Systemchemosaturation system even if we receive FDA approval.or other foreign regulatory approvals.

Delcath has not previously sold, marketed or distributed any products. In order to commercialize the Delcath PHP Systemchemosaturation system or any other product successfully, we must acquire or internally develop a sales, marketing and distribution infrastructure and/or enter into strategic alliances to perform these services. We intendThe Company intends to develop our own sales force to market our products in the United States, but we have limited experience in building a sales and marketing organization. The development of sales, marketing and distribution infrastructure is difficult, time consuming and requires substantial financial and other resources. If weDelcath cannot successfully develop the infrastructure to market and commercialize the Delcath PHP System,chemosaturation system, our ability to generate revenues may be harmed, and weDelcath may be required to enter into strategic alliances to have such activities carried out on our behalf, which may not be on favorable terms. Competition for sales and marketing personnel is intense, and we may not be successful in attracting or retaining such personnel. Our inability to attract and retain skilled sales and marketing personnel or to reach an agreement with a third party could adversely affect our business, financial condition and results of operations. Outside the United States the Company intends to market our products primarily through strategic partners and distributors except in a few specific foreign countries within the EEA where the Company intends to market the Delcath chemosaturation system on a direct basis.  If we areDelcath is not able to collaborate with an alliance partner to market our products outside of the United States, our efforts to commercialize the Delcath PHP Systemchemosaturation system or any other product may be less successful.

In addition to a research and distribution agreement the Company entered into with Chi-Fu Trading Co., Ltd., a Taiwanese company, on February 9, 2010, Delcath intends to enter into one or more strategic alliances to further address markets outside the United States and to help fund the development of additional indications or for use with additional chemotherapy agents within the United States. WeThe Company may not be able to enter into any additional alliances on acceptable terms, if at all, and may face competition in our search for alliances. Our collaborative relationships may never result in the successful development or commercialization of the Delcath PHP Systemchemosaturation system or any other product or the generation of revenue.

The success of any collaboration will be dependent upon the commitment of our collaborators and the timely performance of their obligations, both of which are beyond our control. The terms of any such collaborationscollaboration may permit our collaborators to abandon the alliance at any time for any reason or prevent us from terminating arrangements with collaborators who do not perform in accordance with our expectations. In addition, any third parties with which we collaborateDelcath collaborates may have significant control over important aspects of the development and commercialization of our products, including research and development, market identification, marketing methods, pricing, composition of sales force and promotional activities. We cannot assure you that we will beDelcath is not able to control or influence the amount and timing of resources that any collaborator may devote to our research and development programs or the commercialization, marketing or distribution of our products. WeThe Company may not be able to prevent any collaborators from pursuing alternative technologies or products that could result in the development of products that compete with our product candidatesthe Delcath chemosaturation system or the withdrawal of their support for our products. The failure of any such collaborationscollaboration could have a material adverse effect on our business.

Market acceptance of the Delcath PHP Systemchemosaturation system will depend upon a variety of factors including:

Rapid technological developments in treatment methods for liver cancer and competition with other forms of liver cancer treatments could affect our ability to achieve meaningful revenues or profit.

Competition in the cancer treatment industry is intense. The Delcath PHP Systemchemosaturation system competes with all forms of liver cancer treatments that are alternatives to the “gold standard”"gold standard" treatment of surgical resection. Many of our competitors have substantially greater resources and considerable experience in conducting clinical trials and obtaining regulatory approvals. If these competitors develop more effective or more affordable products or treatment methods, or achieve earlier product development, our revenues or profitability will be substantially reduced.

The loss of key personnel could adversely affect our business.

The loss of a member of our senior executive staff could delay our completion of the clinical trials, our obtaining FDA approval, our introducing the Delcath PHP Systemchemosaturation system commercially and our generating revenues and profits. Competition for experienced personnel is intense. If weDelcath cannot retain our current personnel or attract additional experienced personnel, our ability to compete could be adversely affected.

RiskRisks Related to Patents, Trade Secrets and Proprietary Rights

Our success depends in part on our ability to obtain patents, maintain trade secret protection, operate without infringing on the proprietary rights of third parties and commercialize the Delcath  PHP Systemchemosaturation system prior to the expiration of our patent protection.

Due to the uncertainty of the patent prosecution process, there are no guarantees that any of our pending patent applications will result in the issuance of a patent. Even if we areDelcath is successful in obtaining a patent, there is no assurance that it will be upheld if later challenged or will provide significant protection or commercial advantage. Because of the length of time and expense associated with bringing new medical combination productsdrugs and devices to the market, the healthcare industry has traditionally placed considerable emphasis on patent and trade secret protection for significant new technologies. Other parties may challenge patents, patent claims or patent applications licensed or issued to us or may design around technologies we havethe Company has patented, licensed or developed.

Companies in the medical drug/device industry may use intellectual property infringement litigation to gain a competitive advantage.  If this type of litigation is successful,In the United States, patent applications filed in recent years are confidential for 18 months, while older applications are not publicly available until the patent issues. As a third partyresult, avoiding patent infringement may be able to obtain an injunction prohibiting us from offering our product.difficult.  Litigation may be necessary to enforce any patents issued or assigned to us or to determine the scope and validity of third-party proprietary rights. Litigation could be costly and could divert our attention from our business. There are no guarantees that weDelcath will receive a favorable outcome in any such litigation.  If a third party claims that Delcath infringed its patents, any of the following may occur:

If others file patent applications with respect to inventions for which weDelcath already havehas patents issued to us or have patent applications pending, wethe Company may be forced to participate in interference proceedings declared by the U.S.United States Patent and Trademark Office to determine priority of invention, which could also be costly and could divert our attention from our business. If a third party violates our intellectual property rights, weDelcath may be unable to enforce our rights because of our limited resources. Use of our limited funds to enforce or to defend our intellectual property rights or to defend against legal proceedings alleging infringement of third party proprietary rights may also affect our financial condition adversely.

Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before the Delcath PHP Systemchemosaturation system or any other product can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantages of the patent. Certain of our U.S.United States and foreign patents have already expired and other U.S.United States patents relating to the Delcath PHP Systemchemosaturation system will expire beginning in 2012 through 2023.2016.

Similar considerations apply in any other country where we arethe Company is prosecuting patent applications, have been issued patents, or have decided not to pursue patent protection relating to our technology. The laws of foreign countries may not protect our intellectual property rights to the same extent as do laws of the United States.

RiskRisks Related to Products Liability

Clinical trials, manufacturing and product sales may expose us to liability claims from the use of the Delcath PHP System.chemosaturation system. Were such a claim asserted weDelcath would likely incur substantial legal and related expenses even if we prevail on the merits. Claims for damages, whether or not successful, could cause delays in the clinical trials and result in the loss of physician endorsement.endorsement, adverse publicity and/or limit our ability to market and sell the system, resulting in loss of revenue.  In addition, it may be necessary for us to recall products that do not meet approved specifications, which would also result in adverse publicity, as well as resulting in costs connected to the recall and loss of revenue. A successful products liability claim or product recall would have a material adverse effect on our business, financial condition and results of operations. WeDelcath currently carrycarries product liability and clinical trial insurance coverage, but it may be insufficient to cover one or more large claims.

Risks Related to an Investment in Our Securities

Our stock price and trading volume may be volatile, which could result in losses for our stockholders.

The equity markets may experience periods of volatility, which could result in highly variable and unpredictable pricing of equity securities. The market price of our common stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: