Registration Statement for Securities Offered Pursuant to a Transaction — Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3 Registration Statement for Securities Offered 72 428K
Pursuant to a Transaction
2: EX-3.1 Restated Cert. of Incorporation of the Company 8 36K
3: EX-3.3 Certificate of Designations of Preferred Stock 8 26K
4: EX-5.1 Legal Opinion of Brown, Rudnick, Freed & Gesmer 3 17K
5: EX-23.1 Consent of Arthur Andersen 1 5K
6: EX-99.2 Stock Purchase Agreement: Abiomed/Genzyme Corp. 26 112K
7: EX-99.3 Stock Purchase Agreement:Abiomed/Certain Directors 56 211K
S-3 — Registration Statement for Securities Offered Pursuant to a Transaction
Document Table of Contents
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ABIOMED, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2743260
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYERIDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
33 CHERRY HILL DRIVE
DANVERS, MASSACHUSETTS 01923
(978) 777-5410
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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DR. DAVID M. LEDERMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ABIOMED, INC.
33 CHERRY HILL DRIVE
DANVERS, MASSACHUSETTS 01923
(978) 777-5410
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
PHILIP J. FLINK, ESQUIRE STEVEN C. BROWNE, ESQUIRE
BROWN, RUDNICK, FREED & GESMER TESTA, HURWITZ & THIBEAULT, LLP
ONE FINANCIAL CENTER 125 HIGH STREET
BOSTON, MASSACHUSETTS 02111 BOSTON, MASSACHUSETTS 02110
(617) 856-8200 (617) 248-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE REGISTRATION FEE
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Common Stock, $.01 par $17.125 $47,265,000 $14,322.73
value................. 2,760,000 shares
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Preferred Share Purchase
Rights(3)............. -- -- -- --
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(1) Includes up to 360,000 shares of Common Stock which may be purchased by
the Underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. Based upon the
average of the high and low price of the Common Stock as reported on the
Nasdaq National Market on September 24, 1997.
(3) Pursuant to a Rights Distribution made in August 1997, one right (each a
"Right") is deemed to be delivered with each share of Common Stock issued
by the Company. The Rights currently are not separately transferable apart
from the Common Stock, nor are they exercisable until the occurrence of
certain events. Accordingly, no independent value has been attributed to
the Rights.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1997
[ABIOMED LOGO APPEARS HERE]
2,400,000 SHARES
COMMON STOCK
Of the 2,400,000 shares of Common Stock offered hereby, 2,250,000 shares are
being offered by ABIOMED, Inc. ("ABIOMED" or the "Company") and 150,000 shares
are being offered by the Selling Stockholders. See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. On September 26, 1997, the last reported
sale price of the Company's Common Stock, as reported on the Nasdaq National
Market, was $17.125 per share. See "Price Range of Common Stock." The Company's
Common Stock is traded on the Nasdaq National Market under the symbol "ABMD."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
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Per Share..............
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Total (2)..............
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(1) Before deducting expenses payable by the Company, estimated at $400,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 360,000 shares of Common Stock solely to cover over-
allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be , and , respectively.
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The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens
& Company"), San Francisco, California, on or about , 1997.
ROBERTSON, STEPHENS & COMPANY UBS SECURITIES
The date of this Prospectus is , 1997
BVS-5000(R) BI-VENTRICULAR ASSIST SYSTEM
THE BVS-5000 PNEUMATIC
[PHOTOGRAPH OF THE ITEMS DESCRIBED CONSOLE WITH TWO SINGLE-USE
IN THE CAPTION] BVS BLOOD PUMPS MOUNTED ON A
BEDSIDE STAND. THE BVS-5000
PROVIDES A PATIENT'S FAILING
HEART WITH FULL CIRCULATORY
ASSISTANCE WHILE ALLOWING
THE HEART TO REST, HEAL AND
RECOVER ITS FUNCTION.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND
THE IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS
IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103
OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
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PAGE
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Summary............................................................... 4
Risk Factors.......................................................... 6
Use of Proceeds....................................................... 17
Dividend Policy....................................................... 17
Price Range of Common Stock........................................... 17
Capitalization........................................................ 18
Selected Consolidated Financial Data.................................. 19
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 20
Business.............................................................. 24
Management............................................................ 38
Certain Transactions.................................................. 41
Principal and Selling Stockholders.................................... 42
Description of Capital Stock.......................................... 43
Underwriting.......................................................... 46
Legal Matters......................................................... 48
Experts............................................................... 48
Available Information................................................. 48
Incorporation of Certain Documents by Reference....................... 49
Index to Consolidated Financial Statements............................ F-1
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ABIOMED(R), ABIODENT(R) and the ABIOMED logo are registered service marks of
the Company. BVS(R), BVS-5000(R) and PerioTemp(R) are registered trademarks of
the Company. Angioflex(TM) and Heart Booster(TM) are trademarks of the
Company. Halimeter(R) is a registered trademark of Interscan Corporation. This
Prospectus also includes trademarks of companies other than the Company.
As used herein, the term "ABIOMED" or the "Company" includes the Company and
its consolidated subsidiaries.
References to "Common Stock" include "Rights" issuable pursuant to that
certain Rights Agreement entered into in August 1997 providing for the
delivery of a Right along with each share of Common Stock issued by the
Company. See "Description of Capital Stock."
3
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
The following summary is qualified in its entirety by, and should be read in
conjunction with, the detailed information and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.
THE COMPANY
ABIOMED, Inc. ("ABIOMED" or the "Company") is a leader in the research and
development of cardiac assist and heart replacement technology. The Company
developed, manufactures and sells the BVS-5000 ("BVS"), a temporary cardiac
assist device designed to provide a patient's failing heart with full
circulatory assistance while allowing the heart to rest, heal and recover its
function. The BVS is most frequently used in patients whose hearts fail to
immediately recover function following heart surgery. The BVS is the only
device that can provide full circulatory assistance approved by the United
States Food and Drug Administration ("FDA") as a bridge-to-recovery device for
the treatment of patients with reversible heart failure.
The Company is developing a battery-powered totally implantable artificial
heart ("TAH") intended as a permanent replacement device to assume the full
pumping function of both the left and right ventricles of the heart. The TAH is
designed for use by patients with irreparably damaged hearts and at risk of
death due to acute myocardial infarction ("AMI"), chronic ischemic disease or
some form of end-stage congestive heart failure, but whose vital organs
otherwise remain viable. Among these combined groups, the Company believes that
approximately 60,000 patients per year could benefit from a heart replacement
device. The Company is devoting significant resources to accelerate the
development of the TAH with the goal to initiate clinical trials of the TAH by
the end of the year 2000. There can be no assurance that the Company will be
able to successfully complete pre-clinical testing of the TAH and receive FDA
approval to begin clinical trials of the TAH in a timely manner, if at all, or
that any market will develop for the TAH.
The Company sells the BVS in the United States through direct sales and
clinical support teams. Its sales force focuses on sales to new customers,
while its clinical support group focuses on training and educating existing
customers in order to improve clinical outcomes and increase BVS blood pump
usage. The BVS is intended for use in any hospital performing open-chest
cardiac surgery, of which there are more than 900 in the United States. As of
September 29, 1997, the BVS had been purchased by over 275 medical centers in
the United States including many of the largest centers. The Company believes
that its installed base of customers provides an opportunity for reorders of
the single-use BVS blood pumps as well as a reference base to assist in selling
to new accounts.
The Company's goal is to be a leader in the development, manufacture and
marketing of mechanical cardiac assist and heart replacement devices that
address the varying needs of a wide range of patients. The Company is pursuing
a variety of strategies to pursue this objective, including accelerating the
development of the TAH, increasing market penetration of the BVS, maintaining
and enhancing its technological leadership and pursuing strategic relationships
to support its research and commercialization efforts.
Since the Company's inception, United States government agencies,
particularly the National Heart, Lung and Blood Institute ("NHLBI"), have
provided significant support to the Company's product development efforts. The
Company seeks funding from third parties to support its research and
development programs and generally limits the use of its own funds until the
scientific risk is reduced. In addition, the Company intends to pursue
collaborative relationships to develop and commercialize the Company's non-
cardiac assist technologies.
The Company is a Delaware corporation. The Company's principal offices are
located at 33 Cherry Hill Drive, Danvers, Massachusetts 01923. The Company's
telephone number is (978) 777-5410 and its fax number is (978) 777-8411.
4
THE OFFERING
[Download Table]
Common Stock Offered by the Company........... 2,250,000 shares
Common Stock Offered by the Selling 150,000 shares
Stockholders.................................
Common Stock Outstanding after the Offering... 10,513,007 shares (1)
Use of Proceeds............................... For research and development,
expansion of manufacturing
capabilities and other general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market Symbol................. ABMD
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
[Download Table]
THREE MONTHS
YEAR ENDED MARCH 31, ENDED JUNE 30,
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1993 1994 1995 1996 1997 1996 1997
------- ------- ------ ------ ------- ------- -------
STATEMENT OF OPERATIONS
DATA:
Revenues:
Products.............. $ 1,709 $ 4,648 $6,893 $9,725 $12,311 $ 2,868 $ 4,207
Contracts............. 1,736 2,027 2,337 3,118 4,151 817 1,829
------- ------- ------ ------ ------- ------- -------
Total revenues...... 3,445 6,675 9,230 12,843 16,462 3,685 6,036
Costs and expenses:
Cost of products...... 2,042 2,211 3,289 3,921 5,361 1,049 1,529
Research and
development (2)...... 2,097 2,431 2,464 3,218 3,833 864 1,643
Selling, general and
administrative....... 3,803 4,553 4,278 5,741 7,068 1,519 2,117
------- ------- ------ ------ ------- ------- -------
Total costs and
expenses........... 7,942 9,195 10,031 12,880 16,262 3,432 5,289
------- ------- ------ ------ ------- ------- -------
Income (loss) from
operations............. (4,497) (2,520) (801) (37) 200 253 747
Interest and other
income................. 604 537 449 528 535 130 124
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Net income (loss)....... $(3,893) $(1,983) $ (352) $ 491 $ 735 $ 383 $ 871
======= ======= ====== ====== ======= ======= =======
Net income (loss) per
share.................. $ (0.60) $ (0.31) $(0.05) $ 0.07 $ 0.10 $ 0.05 $ 0.12
======= ======= ====== ====== ======= ======= =======
Weighted average number
of shares outstanding.. 6,441 6,461 6,512 6,995 7,162 7,206 7,567
[Download Table]
JUNE 30, 1997
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PRO FORMA AS
ACTUAL PRO FORMA (3) ADJUSTED (3) (4)
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BALANCE SHEET DATA:
Cash, cash equivalents and short-term
marketable securities.................. $8,766 $24,904 $60,935
Working capital......................... 13,291 29,301 65,332
Total assets............................ 19,715 35,852 71,884
Total stockholders' investment.......... 16,162 32,172 68,203
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(1) Based on the number of shares outstanding as of September 26, 1997.
Excludes 964,410 shares of Common Stock reserved for issuance upon the
exercise of stock options outstanding as of September 26, 1997 at a
weighted average exercise price of $10.81 per share. See Note 6 to
Consolidated Financial Statements.
(2) Research and development expenses include certain contract costs. See Note
1(e) to Consolidated Financial Statements.
(3) Gives effect to the receipt of net proceeds of approximately $16.0 million
from the sale of 1,242,710 shares of Common Stock by the Company in July
1997. See "Certain Transactions" and Note 10 to Consolidated Financial
Statements.
(4) Adjusted to reflect the sale of 2,250,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $17.125 per
share and the application of the net proceeds therefrom after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by the Company. See "Use of Proceeds" and "Capitalization."
Except as otherwise indicated, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option.
5
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus.
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby.
DEPENDENCE ON BVS PRODUCT LINE; EARLY STAGE OF BVS MARKET DEVELOPMENT
In the three months ended June 30, 1997 and the fiscal year ended March 31,
1997, sales of the BVS and related products and services represented more than
ninety percent of the Company's product revenues. The Company believes that
its dependence on the BVS product line is likely to continue for at least the
next several years, unless and until the Company successfully develops,
obtains regulatory approvals for and sells new products.
The market for the BVS continues to be in the early stage of development.
The Company has initially focused its marketing efforts on larger medical
centers and hospitals. The commercial success of the BVS will be dependent
upon both the Company's ability to sell the BVS to smaller hospitals and
medical centers, which generally have more limited financial resources, and
the increase of the use of the BVS at those medical centers and hospitals
which have purchased the systems. There can be no assurance that the Company
will be successful in marketing the BVS. Advances in medical technology,
biotechnology and pharmaceuticals may reduce the size of the potential markets
for the Company's products or render those products obsolete. Failure of the
Company to expand the market for and use of the BVS would have a material
adverse effect on its business, financial condition and results of operations.
See "Business--Marketing and Sales."
UNCERTAINTY OF PRODUCT DEVELOPMENT AND CLINICAL TRIALS
The Company has developed and markets a limited number of products and
believes that its future success will in large part be dependent upon its
ability to develop and market innovative new products, such as the TAH. The
successful development of these products presents enormous challenges. The
Company must demonstrate that the TAH, which is being designed to assume the
full pumping function of both the left and right ventricles of the heart, can
operate effectively and reliably within a patient over an extended period. For
many years, the Company and others have been attempting to develop products
that meet these criteria and have not yet been successful. Before obtaining
regulatory approvals for the commercial sale of any of its products under
development, the Company must demonstrate through pre-clinical studies and
clinical trials that the product is safe and effective. Initial pre-clinical
testing of the TAH and other products being developed by the Company will be
conducted in simulated environments and animal models to demonstrate safety
and effectiveness over an extended period of time before they are permitted to
be clinically tested in humans. There can be no assurance that the Company
will be able to successfully complete pre-clinical testing of the TAH or other
products being developed by the Company and receive FDA approval to initiate
clinical trials of such products in a timely manner, if at all. Moreover, pre-
clinical trials may not be predictive of results that will be obtained in
clinical trials. Any significant delays in, or termination of, pre-clinical
trials of the Company's products under development would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Clinical trials for the Company's cardiac assist and heart replacement
products will be conducted with patients who are critically ill. During the
course of treatment, these patients may die or suffer other adverse medical
effects for reasons that may not be related to the product being tested but
which can nevertheless affect clinical trial results. A number of companies in
the medical device industry have suffered significant
6
setbacks in advanced clinical trials, even after promising results in earlier
trials. Clinical trials of the Company's TAH and other products under
development may be delayed or terminated as a result of many factors, and
there can be no assurance that such delays or terminations will not occur. One
such factor is the rate of enrollment of patients, which generally varies
throughout the course of a clinical trial and which depends on the size of the
potential patient population, the number of clinical trial sites, the
proximity of the patients to clinical trial sites, the eligibility criteria
for the trial and the existence of competitive clinical trials. The Company
cannot control the rate at which patients present themselves for enrollment,
and there can be no assurance that the rate of patient enrollment will be
consistent with the Company's expectations or be sufficient to enable clinical
trials of the Company's products under development to be completed in a timely
manner, if at all. Any significant delays in, or termination of, clinical
trials of the Company's products under development would have a material
adverse effect on the Company's business, financial condition and results of
operations.
In addition, the Company's product development will be subject to numerous
other risks associated with new product development, including unanticipated
delays, expenses, technical problems or other difficulties that could result
in the abandonment or substantial change in the design, development and
commercialization of these new products. Given the uncertainties inherent with
product development and introduction, there can be no assurance that any of
the Company's products under development will demonstrate sufficient safety
and efficacy to obtain the requisite regulatory approvals, on a timely basis
and within budget, if at all, or that any of these products will be
commercially successful if such approvals are obtained. See "Business--ABIOMED
Products and Products under Development."
ANTICIPATED FUTURE LOSSES
The Company plans to use its own resources to fund the further development
of the TAH in amounts significantly in excess of the funding provided under
the Company's development contract for the TAH with the NHLBI ("TAH
Contract"). The Company estimates that the development of the TAH, including
conducting pre-clinical and clinical studies and obtaining regulatory
approvals, will require substantial funds. As a result, the Company believes
that it may again incur losses. The amount and duration of these losses will
depend upon a number of factors, including the Company's ability to increase
sales and profitability of its present products, to develop and obtain
regulatory approvals for new products and product enhancements, and to
successfully manufacture and market these new products and enhancements, as
well as the timing and extent of the Company's spending related to product
development and the timing of government appropriations related to the
Company's NHLBI contracts. The Company anticipates that its spending under the
TAH Contract will, beginning in the quarter ending September 30, 1997, exceed
the amount which the government has currently appropriated for that contract.
There can be no assurance that the government will appropriate any additional
amounts under the TAH Contract or any of the Company's other government
contracts on a timely basis, if at all. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPLEX MANUFACTURING; HIGH-QUALITY REQUIREMENTS
The nature of the Company's products requires high-quality manufacturing.
The Company's manufacturing and quality testing processes and procedures are
highly dependent on the diligence and experience of the Company's personnel.
To the extent that the Company's manufacturing volumes expand or the Company
begins the manufacture of new products, this dependence on personnel will
likely increase. In addition, the manufacture of the blood contacting surfaces
of the Company's products requires a high degree of precision. These surfaces
are manufactured from polyurethane-based materials. The quality and
composition of polyurethane-based products can vary significantly based on
numerous factors including humidity, temperature, material content and air
flow during the manufacturing process. The Company's products also incorporate
plastic components for non-blood contacting surfaces. The Company relies on
third-party vendors to provide these components to the Company's
specifications. The Company is not able to fully inspect the quality of all
vendor supplied components and, therefore, relies on its vendors with respect
to the
7
quality of these components. Once the plastic-based components of the
Company's products have been assembled, accessibility for inspection is
limited. If a defect is detected in as few as one of the Company's products,
or in one component of a Company product, it can result in the recall or
restriction on sale of products. Once assembled, in most cases, the Company's
blood contacting components cannot be reworked for human use. The
manufacturing lead times for parts and assemblies, particularly the
polyurethane-based components, can take many weeks from the date that all
materials and components are received by the Company. In addition, vendor lead
times for materials and components of the Company's products vary
significantly, with lead times for certain materials and components exceeding
six months.
The Company is planning to expand its manufacturing facility for the BVS
during the next twelve months. There can be no assurance that the products
manufactured in the expanded facility will be manufactured at the same cost
and quality as the BVS is currently being manufactured. In addition, to the
extent that the Company's products under development have been manufactured,
they have been manufactured as prototypes with, at most, pilot-scale
production. The Company's products under development are likely to involve
additional manufacturing complexities and high quality requirements. There can
be no assurance that the Company will be able to increase production of the
BVS or manufacture future products, if developed and approved, in commercial
quantities on a consistent and timely basis, with acceptable cost and quality.
The inability to manufacture current and future products in sufficient
quantities in a timely manner, and with acceptable cost and quality, would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--Manufacturing."
RISK OF MARKET WITHDRAWAL OR PRODUCT RECALL
Complex medical devices, such as the BVS and other of the Company's products
under development, can experience performance problems that require review and
possible corrective action by the manufacturer. Similar to many other medical
device manufacturers, the Company periodically received reports from users of
its products relating to performance difficulties they have encountered. The
Company expects that it will continue to receive customer reports regarding
the performance and use of the BVS. There can be no assurance that component
failures, manufacturing errors or design defects that could result in an
unsafe condition or injury to the patient will not occur. Certain of these
failures or defects have been deemed sufficiently serious by the Company to
result in recalls of products associated with certain manufacturing lots or
containing certain components, including a recall of certain BVS blood pumps
initiated in late 1996. Not all of the products subject to this recall have
been returned to the Company. Any product problems could result in market
withdrawals or recalls of products, voluntarily or required, which could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, there can be no assurance that a product
recall will result in the recovery of all defective products or prevent
customers from using these products. The use of a defective product could
result in injury to a patient and significant liability to the Company which
could have a material adverse effect on its business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
FLUCTUATIONS AND UNPREDICTABILITY OF OPERATING RESULTS
The Company's annual and quarterly operating results have fluctuated and the
Company expects these fluctuations to continue. Significant annual and
quarterly fluctuations in the Company's results of operations may be caused
by, among other factors, the overall state of health care and cost containment
efforts, economic conditions in the Company's markets, the expense and timing
of the Company's development efforts for a particular product or product
enhancement, the timing of regulatory actions, the potential need to recall or
rework products from time to time, timing of government appropriations related
to the Company's research contracts and grants, the timing of or changes in
third-party reimbursement policies for the Company's products, the timing of
expenditures in anticipation of future sales, variations in the Company's
product mix and component costs, the availability of components, the timing of
customer orders, adjustments of delivery schedules to accommodate customers,
inventory levels of products at customers (including inventory at
8
distributors), changes in the government's funding policies under the
Company's existing contracts, pricing and other competitive conditions, and
the timing of the announcement, introduction and delivery of new products and
product enhancements by the Company and its competitors. Customers may also
cancel or reschedule shipments, and production difficulties could delay
shipments. The price for the BVS console is significantly higher than for the
single-use blood pumps. As a result, variations in the number and timing of
consoles sold have a disproportionate effect on the Company's revenues and
results of operations. The Company also believes that BVS sales may be
somewhat seasonal, with reduced sales in the summer months, reflecting
hospital personnel and physician vacation schedules. Beginning in fiscal 1998,
the Company anticipates potentially significant annual and quarterly
fluctuations in contract revenues and research and development costs
associated with the development of the TAH due to the need for additional
government appropriations under the TAH Contract and to increased levels of
Company spending. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
MARKETS FOR PRODUCTS UNDER DEVELOPMENT UNPROVEN
Most of the Company's products under development, including the TAH, are
targeting new and unproven markets. There can be no assurance that the TAH or
other products under development by the Company will gain any degree of market
acceptance among physicians, medical centers and third party payors, including
managed care organizations, even if necessary regulatory approvals and
reimbursement are obtained. As a result, it is likely that the Company's
evaluation of the potential markets for these products will materially vary
with time. In addition, the effective use of these products will likely
require development of new surgical techniques by well-trained physicians,
which will initially limit the market for the Company's products. Physicians,
patients and society as a whole may have ethical concerns or be reluctant to
accept medical devices designed to replace the heart. The timing and amount of
reimbursement, if any, by third-party payors for the use of these products, if
developed, will also have a significant impact on the market for these
products. Other companies may also introduce products or technologies which
will compete with these products, reduce the market for these products, or
render these products obsolete. There can be no assurance that the Company
will be able to market successfully any of its products under development, if
and when these products are developed. Failure to do so would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Marketing and Sales."
DEPENDENCE ON KEY PERSONNEL; RISKS ASSOCIATED WITH GROWING NUMBER OF EMPLOYEES
The Company is highly dependent on the principal members of its scientific,
sales, and management staff, the loss of whose services could have a material
adverse effect on the Company's business, financial condition and results of
operations. Competition among medical device companies for highly skilled
scientific, sales and management personnel is intense. There can be no
assurance that the Company will be able to attract and retain all personnel
necessary for the development of its business. Failure to do so could have a
material adverse effect on its business, financial condition and results of
operations.
The Company has recently experienced a significant increase in the number of
its full-time employees, from 79 at April 1, 1996 to 166 at September 29,
1997. Moreover, the Company intends to continue to add a significant
additional number of employees to support its development and expanding
manufacturing, marketing and sales efforts. The expansion of the Company's
personnel has placed additional demands upon, and may significantly strain,
the Company's management, financial systems and other resources. There can be
no assurance that the Company will be able to successfully manage its growing
number of employees. Failure to do so would have a material adverse effect on
the Company's business, financial condition and results of operations.
COMPETITION AND TECHNOLOGICAL CHANGE
Competition in the cardiac assist market is intense and subject to rapid
technological change and evolving industry requirements and standards. Many of
the companies developing or marketing cardiac assist products
9
have substantially greater financial, product development, sales and marketing
resources and experience than the Company. These competitors may develop
superior products or products of similar quality at the same or lower prices.
Moreover, there can be no assurance that improvements in current or new
technologies will not make them technically equivalent or superior to the
Company's products in addition to providing cost or other advantages. Other
advances in medical technology, biotechnology and pharmaceuticals may reduce
the size of the potential markets for the Company's products or render those
products obsolete.
The BVS is the only device that can provide full circulatory assistance
approved by the FDA as a bridge-to-recovery device for the treatment of
patients with reversible heart failure. However, the Company is aware of at
least one other company, Thoratec Laboratories Corporation, seeking approval
of a temporary cardiac assist device to address this market. Approval by the
FDA of products that compete directly with the BVS would increase competitive
pricing and other pressures and could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company is aware of other artificial heart development efforts in the
United States, Canada, Europe and Japan. A team comprised of Pennsylvania
State University and 3M Corporation, Inc. has been developing a heart
replacement device for many years with significant NHLBI support. There are a
number of companies, including Thermo Cardiosystems, Inc. and Novacor, a
division of Baxter International, Inc., which are developing permanent cardiac
assist products, including implantable left ventricular assist devices
("LVADs") and miniaturized rotary ventricular assist devices, that may address
markets that overlap with those targeted by the Company's TAH.
The Company's customers frequently have limited budgets. As a result, the
Company's products compete against the broad range of medical devices for
these limited funds. The Company's success will depend in large part upon its
ability to enhance its existing products and to develop new products to meet
regulatory and customer requirements and to achieve market acceptance. The
Company believes that important competitive factors with respect to the
development and commercialization of its products include the relative speed
with which it can develop products, establish clinical utility, complete
clinical testing and regulatory approval processes, obtain reimbursement and
supply commercial quantities of the product to the market. There can be no
assurance that the Company will be able to compete successfully or that
competition will not have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Competition."
GOVERNMENT REGULATION
Clinical testing, manufacture and sale of the Company's products and
products under development, including the BVS and the TAH, are or will be
subject to regulation by the FDA and corresponding state and foreign
regulatory agencies. Noncompliance with applicable requirements can result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the government
to grant pre-market clearance or pre-market approval for devices, withdrawal
of marketing approvals and criminal prosecution. The FDA also has the
authority to request repair, replacement or refund of the cost of any device
manufactured or distributed by the Company.
Any devices, including the BVS, that are manufactured or distributed by the
Company pursuant to FDA clearances or approvals are subject to pervasive and
continuing regulation by the FDA and certain state agencies. Manufacturers of
medical devices for marketing in the United States are required to adhere to
the FDA's Quality System Regulation and must also comply with Medical Devices
Reporting requirements that a firm report to the FDA any incident in which its
product may have caused or contributed to a death or serious injury, or in
which its product malfunctioned and, if the malfunction were to recur, it
would be likely to cause or contribute to a death or serious injury. Labeling
and promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission. Current FDA enforcement policy
prohibits the marketing of approved medical devices for unapproved uses. The
Company is subject to routine inspection by the FDA and certain state agencies
for compliance with the Quality System Regulation and Medical Device Reporting
requirements, as well as other applicable regulations.
10
In addition, the FDA requires that manufacturers of certain devices,
including the BVS, conduct postmarket surveillance studies after receiving
approval of a Pre-Market Approval ("PMA") application. The primary purpose of
required postmarket surveillance is to provide an early warning system to
alert the health care community to any potential problems with a device within
a reasonable time of the initial marketing of the device. Postmarket
surveillance provides clinical monitoring of the early experiences with the
device once it is distributed in the general population under actual
conditions of use.
The Company is also subject to regulation in each of the foreign countries
in which it sells its products. Many of the regulations applicable to the
Company's products in these counties are similar to those of the FDA. The
Company believes that foreign regulations relating to the manufacture and sale
of medical devices are becoming more stringent. The European Union has adopted
regulations requiring that medical devices comply with the Medical Device
Directive by June 15, 1998, which includes ISO-9001 and CE certification. The
Company's BVS currently has German MedGV approval but is not yet certified for
ISO-9001 compliance. The Company is working to obtain ISO-9001 and independent
CE certification for its BVS facility. There can be no assurance that the
Company will obtain such certification in a timely manner, if at all. Unless
ISO and CE certification are obtained, the Company's sale of the BVS into the
European Union may be restricted. Many manufacturers of medical devices,
including the Company, have often relied on foreign markets for the initial
commercial introduction of their products. The more stringent foreign
regulatory environment could make it more difficult, costly and time consuming
for the Company to pursue this strategy for new products.
Any FDA, foreign or state regulatory approvals or clearances, once obtained,
can be withdrawn or modified. Delay in the Company obtaining, or inability of
the Company to obtain and maintain, any necessary United States or foreign
clearances or approvals for new or existing products or product enhancements,
or cost overruns resulting from these regulatory requirements, would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Government Regulation."
RELIANCE ON GOVERNMENT CONTRACTS
The Company generally relies on external funding for its basic research and
development, primarily through government research contracts and grants. Such
funding has been obtained for the initial development of most of the Company's
current products and products under development. In particular, in September
1996, the Company was awarded by the NHLBI a four-year $8.5 million extension
to its TAH Contract, and in September 1995 the Company was awarded a five-year
$4.3 million contract from the NHLBI for the development of the Company's
Heart Booster. As of June 30, 1997, the Company's total backlog of government
contracts and grants was $8.9 million. Such contracts and grants are not
expected to be sufficient to commercialize the underlying products, and for
certain products, including the TAH, the cost of product development in excess
of the contract value is expected to be significant. The Company's strategy is
to continue to seek government contracts and grants to support development
efforts. Funding for the Company's government research and development
contracts is subject to government appropriation, and all of these contracts
contain provisions which make them terminable at the convenience of the
government. There can be no assurance that the government will not terminate
or reduce or delay the funding for any of the Company's contracts. In
addition, there can be no assurance that the Company will be successful in
obtaining any new government contracts or further extensions to existing
contracts. A significant delay or reduction of funding under the Company's
government contracts could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
"Business--ABIOMED Products and Products under Development" and "--Strategic
Relationships."
11
DEPENDENCE ON LIMITED SOURCES OF SUPPLY
The Company relies on outside vendors to supply certain components used in
the BVS and in its products under development. Certain of the components of
the BVS are supplied by sole source vendors or are custom made for the
Company. From time to time, suppliers of certain components of the BVS have
indicated that they intend to discontinue, or have discontinued, making such
components. In addition, certain of these components are supplied from single
sources due to quality considerations, costs or constraints imposed by
regulatory authorities. There are relatively few additional sources of supply
for such components and establishing additional or replacement suppliers for
such components cannot be accomplished quickly and may require FDA approval.
In the past, certain suppliers have announced that, due to government
regulation or in an effort to reduce potential product liability exposure,
they intend to limit or terminate sales of certain products to the medical
industry. There can be no assurance that, if such an interruption were to
occur, the Company would be able to find suitable alternative supplies at
reasonable prices or would be able to obtain requisite regulatory approvals in
a timely manner, if at all. Similarly, when and if the Company reaches the
clinical testing stage of its products under development, it may find that
certain components become more difficult to source from outside vendors due to
the product liability risk perceived by those vendors. The Company's inability
to obtain acceptable components in a timely manner or to find suitable
replacements at an acceptable cost would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Manufacturing."
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company is working on the research and development of several long-term
projects and is placing increased emphasis on development of the TAH, which
will result in significantly increased internally funded research and
development expenditures. These costs include costs of pre-clinical trials and
regulatory approvals. The Company estimates that the cost of developing the
TAH and other products will be significant. These costs may include costs
related to pre-clinical and clinical trials and regulatory approvals. The
Company estimates that it will require significant additional funds in order
to complete the development and achieve regulatory approvals of the TAH and
other products under development. Generally, estimates of long-term project
costs are extremely imprecise and cost overruns are common. As a result, there
can be no assurance that the Company will not require significantly more
resources to complete the development of the TAH and its other products. The
Company plans to fund this effort through a combination of the TAH Contract,
proceeds from the offering, existing resources, the possible sales of
additional securities and cash flow from sales of its existing products. Even
if the Company does not experience cost overruns, there can be no assurance
that the Company will be able to obtain sufficient funds to complete the
development of the TAH and other products. Moreover, the Company may require
additional funds to commence the manufacture and marketing of the TAH or any
of the Company's other products under development in commercial quantities, if
and when approved or cleared by the regulatory authorities. Failure of the
Company to obtain any required additional funding could delay product
development and otherwise materially and adversely affect the business of the
Company. There can be no assurance that the Company will be able to obtain
additional funding on favorable terms, if at all. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT
The Company's BVS product is, and most of its products under development are
intended to be, sold to medical institutions. Medical institutions and their
physicians typically seek reimbursement for the use of these products from
third-party payors, including Medicare, Medicaid, private health insurers and
managed care organizations. As a result, market acceptance of the Company's
current and proposed products may depend in large part on the extent to which
reimbursement is available to medical institutions and their physicians for
use of the Company's products.
The level of reimbursement provided by United States and foreign third-party
payors varies according to a number of factors, including the medical
procedure category, payor, location, outcome and cost. In the
12
United States, many private health care insurance carriers follow the
recommendations of the Health Care Finance Administration ("HCFA"), which
establishes guidelines for the reimbursement of health care providers treating
Medicare and Medicaid patients. Internationally, medical reimbursement systems
vary significantly. In certain countries, medical center budgets are fixed
regardless of levels of patient treatment. In other countries, such as Japan,
reimbursement from government or third party payors must be applied for and
approved. As of the date of this Prospectus, under HCFA guidelines, Medicare
reimburses medical institutions for Medicare patients based on the category of
surgical procedures in which the BVS is used and incrementally reimburses
physicians for the use of the BVS. Medicare does not, however, currently
reimburse medical institutions for the incremental cost of using the BVS above
the amount allowed for the reimbursement category of the surgical procedure.
Certain private health insurers and managed care providers provide incremental
reimbursement to both the medical institutions and their physicians. The
Company is currently petitioning HCFA to assign a higher paying reimbursement
category whenever the BVS is used. In October 1995, HCFA established a special
"ICD-9" code for the BVS in an effort to more clearly track and evaluate
hospital and physician costs associated specifically with the BVS compared to
current reimbursement levels, so that HCFA can determine the appropriate
category and level of reimbursement. There can be no assurance that HCFA will
reassign the BVS to a higher paying category in a timely manner, if at all.
No reimbursement levels have been established for the Company's products
under development, including the TAH. Prior to approving coverage for new
medical devices, most third-party payors require evidence that the product has
received FDA approval or clearance for marketing, is safe and effective and
not
experimental or investigational, and is medically necessary and appropriate
for the specific patient for whom the product is being used. Increasing
numbers of third-party payors require evidence that the procedures in which
the products are used, as well as the products themselves are cost-effective.
There can be no assurance that the Company's products under development will
meet these criteria, that third-party payors will reimburse physicians and
medical institutions for the use of the products or that the level of
reimbursement will be sufficient to support the widespread use of the
products. Furthermore, there can be no assurance that third-party payors will
continue to provide reimbursement for the use of BVS or that such payors will
not reduce the current level of reimbursement for the product. Failure to
achieve adequate reimbursement for its current or proposed products would have
a material adverse effect on the Company's business, financial condition and
results of operations.
POTENTIAL INADEQUACY OF PRODUCT LIABILITY INSURANCE
The Company's business involves the risk of product liability claims
inherent in the manufacture and marketing of life support systems. There are
many factors beyond the control of the Company that could result in the
failure of the BVS to sustain the life of a patient, the most important of
which is the condition of the patient prior to the use of the product. As a
result, many of the patients using the BVS do not survive. In addition, the
effectiveness of the Company's products could be adversely affected by the
reliability of the physicians, nurses and technicians using and monitoring the
use of the product, and the maintenance of the product by the Company's
customers. The failure of the BVS or any other life support system under
development by the Company to save a life could give rise to product liability
claims and result in negative publicity that could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company currently maintains product liability insurance,
subject to certain deductibles and exclusions. There can be no assurance that
this insurance will be sufficient to protect the Company from product
liability claims, or that product liability insurance will continue to be
available to the Company at a reasonable cost, if at all.
The risk of product liability claims against the Company may increase as the
Company introduces new products under development, particularly products such
as the TAH intended for permanent life support. The TAH will have a finite
life and could cause unintended complications to other organs. The eventual
failure of the TAH could give rise to product liability claims, regardless of
whether the TAH has extended or improved the quality of the patient's life
beyond that expected without the use of the TAH. As a result of the additional
13
product liability risks that will be associated with the TAH and other
products under development by the Company, there can be no assurance that the
Company will be able to secure product liability insurance for these products,
when and if developed, or that such insurance will be sufficient to protect
the Company at an acceptable cost. The failure of the Company to be able to
obtain adequate product liability insurance, if any, for these products could
have a material adverse effect on its business, financial condition and
results of operations.
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS
The Company's business depends significantly upon its proprietary
technology. The Company relies on a combination of trade secret laws, patents,
copyrights, trademarks and confidentiality agreements and other contractual
provisions to establish, maintain and protect its proprietary rights, all of
which afford only limited protection. There can be no assurance that others
will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or disclose such technology or that the Company can meaningfully
protect its trade secrets.
The Company has been issued or allowed 22 patents and has pending three
patent applications in the United States. The Company has obtained or applied
for corresponding patents for certain of these patents and patent applications
in a limited number of foreign countries. These patents relate to the BVS and
certain of its products under development including the TAH. The Company's
United States patents expire at various times from 2003 to 2016. There can be
no assurance that the Company's pending patent applications or any future
applications will be approved, that any patents will provide the Company with
competitive advantages or will not be challenged by third parties, or that the
patents of others will not render the Company's patents obsolete or otherwise
have an adverse effect on the Company's ability to conduct business. Because
foreign patents may afford less protection under foreign law than is available
under United States patent law, there can be no assurance that any such
patents issued to the Company will adequately protect the Company's
proprietary information. Others may have filed and may file patent
applications in the future that are similar or identical to those of the
Company. To determine the priority of inventions, the Company may have to
participate in interference proceedings declared by the United States Patent
and Trademark Office or opposition proceedings before a foreign patent office
that could result in substantial cost to the Company. No assurance can be
given that any such interfering patent or patent application will not have
priority over patent applications filed on behalf of the Company or that the
Company will prevail in any opposition proceeding.
The medical device industry is characterized by a large number of patents
and by frequent and substantial intellectual property litigation. There can be
no assurance that the Company's products and technologies do not infringe any
patents or proprietary rights of third parties. The Company may in the future
be notified that it may be infringing intellectual property rights possessed
by others. Any intellectual property litigation would be costly and could
divert the efforts and attention of the Company's management and technical
personnel, which could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that infringement claims will not be asserted in the future or such
assertions, if proven to be true, will not prevent the Company from selling
its products or materially and adversely affect the Company's business,
financial condition and results of operations. If any such claims are asserted
against the Company's intellectual property rights, it may seek to enter into
a royalty or licensing arrangement. There can be no assurance, however, that a
license will be available on reasonable terms, or at all. The Company could
decide, in the alternative, to resort to litigation to challenge such claims
or to design around the patented technology. Such actions could be costly and
would divert the efforts and attention of the Company's management and
technical personnel, which would materially and adversely affect the Company's
business, financial condition and results of operations. See "Business--
Patents and Proprietary Rights."
CONTROL BY MANAGEMENT
Upon completion of this offering, the Company's directors, officers and
their affiliates will beneficially own approximately 27.2% of the outstanding
Common Stock of the Company (as determined in accordance with the rules of the
Securities and Exchange Commission). As a result, these stockholders will be
able to
14
exert substantial influence over actions requiring stockholder approval,
including the election of directors, amendments to the Company's Restated
Certificate of Incorporation, mergers, sales of assets or other business
acquisitions or dispositions. See "Principal and Selling Stockholders."
ANTI-TAKEOVER PROVISIONS; RIGHTS AGREEMENT; ISSUANCE OF PREFERRED STOCK
The Company's Restated Certificate of Incorporation ("Certificate of
Incorporation") and Amended and Restated By-laws ("By-laws") contain certain
provisions that could have the effect of deterring certain mergers, tender
offers, proxy contests or other future takeover attempts which holders of some
or even a majority of the outstanding stock believe to be in their best
interest, and may make removal of management more difficult even if such
removal would be deemed to be beneficial to stockholders generally. These
provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock. In addition, the
Company has adopted a Rights Agreement, pursuant to which the Company has
distributed to its stockholders rights to purchase shares of junior
participating preferred stock ("Rights Agreement"). Upon certain triggering
events, such rights become exercisable to purchase the Company's Common Stock
at a price substantially discounted from the then applicable market price of
the Company's Common Stock. The Rights Agreement could generally discourage a
merger or tender offer involving the securities of the Company that is not
approved by the Company's Board of Directors by increasing the cost of
effecting any such transaction and, accordingly, could have an adverse impact
on stockholders who might want to vote in favor of such merger or participate
in such tender offer. In addition, shares of the Company's Class B Preferred
Stock ("Preferred Stock") may be issued in the future without further
stockholder approval and upon such terms and conditions, and having such
rights, privileges and preferences, as the Board of Directors may determine.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of any holders of Preferred Stock that may
be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock. The Certificate of
Incorporation and By-laws impose various procedural and other requirements
that could make it more difficult for stockholders to effect certain corporate
actions. See "Description of Capital Stock--Anti-takeover Effect of Provisions
of the Certificate of Incorporation and By-laws, Rights Distribution and
Delaware Law."
POSSIBLE VOLATILITY OF SHARE PRICE
There has been a history of significant volatility in the market price for
shares of the Common Stock and shares of other companies in the medical
products and biomedical technology fields. Factors such as the announcement of
new products and the achievement of developmental and regulatory milestones by
the Company or its competitors have caused and could cause the price of the
Common Stock to fluctuate significantly. Moreover, although there has been a
public trading market for the Common Stock since 1987, there have been periods
of limited trading activity resulting in further volatility of the stock
price. Additionally, the spread between the ask and bid prices for the Common
Stock on the Nasdaq National Market System has been relatively wide,
potentially discouraging investor trades in the Common Stock. Further, in the
event that in some future fiscal quarter the Company's revenues were below the
expectations of public market analysts and investors, the price of the Common
Stock could be materially adversely affected. In addition, stock markets have
experienced extreme price and volume trading volatility in recent years. This
volatility has had a substantial effect on market prices of securities of many
medical technology companies for reasons frequently unrelated or
disproportionate to the operating performance of the specific companies. These
broad market fluctuations may adversely affect the market price of the Common
Stock. See "Price Range of Common Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following this offering (pursuant to Rule 144 or otherwise), as well as sales
of shares issued upon exercise of employee stock options, could adversely
affect the prevailing market price of the Common Stock and impair the
Company's ability to
15
raise additional capital through the sale of equity securities. Of the
approximately 8,263,007 shares of Common Stock outstanding at September 26,
1997, approximately 5,390,253 shares are eligible for resale in the public
market without restriction and approximately 1,474,198 shares are eligible for
resale subject to the provisions of Rule 144. The remaining 1,398,556 shares
of Common Stock are "restricted securities" within the meaning of Rule 144, of
which 2,000 shares and 1,396,556 shares will not be eligible for resale until
January and July 1998, respectively, the expiration of the one-year holding
period under Rule 144, and then only in accordance therewith. In addition,
there are 964,410 shares subject to outstanding options, which shares have
been registered on Form S-8 and will therefore be subject to resale in the
public market either without restriction or subject to the provisions of Rule
144. The holders of 1,396,556 shares of Common Stock have certain registration
rights, commencing on July 14, 1998. The Company's executive officers,
directors, Genzyme Corporation ("Genzyme") and each of the Selling
Stockholders who, in the aggregate hold approximately 2,872,754 shares of
Common Stock (2,722,754 shares of Common Stock after the sale of shares of
Common Stock by the Selling Stockholders in the offering) have agreed that,
for a period of 90 days from the date of this Prospectus, subject to certain
limited exceptions, they will not, directly or indirectly, without the prior
written consent of Robertson, Stephens & Company LLC, sell, offer, contract to
sell, pledge, grant any option to purchase or otherwise dispose of any shares
of Common Stock or any securities convertible into or exchangeable for, or any
rights to purchase or acquire, Common Stock held by them, thereafter acquired
by them or which may be deemed to be beneficially owned by them. See "Certain
Transactions" and "Underwriting."
16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,250,000 shares of
Common Stock offered by the Company hereby are estimated to be $36.0 million
($41.9 million if the Underwriters' over-allotment option is exercised in
full), assuming an offering price of $17.125 per share and after deducting
estimated underwriting discounts and commissions and offering expenses payable
by the Company. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Stockholders.
The Company expects to use the net proceeds from this offering for research
and development, expansion of its manufacturing capabilities and other general
corporate purposes. In particular, the Company expects that a substantial
portion of the net proceeds will be used to support the TAH and other
development efforts, although there can be no assurance that the net proceeds
will be so used. The Company may also use a portion of the net proceeds for
strategic acquisitions of businesses, products or technologies complementary
to the Company's business. The Company does not have any commitments to make
any such acquisitions and has not allocated a specific amount of the net
proceeds for this purpose. Pending such uses, the Company plans to invest the
net proceeds of the offering in short-term, interest-bearing investment-grade
securities.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock
and does not plan to pay any cash dividends in the foreseeable future. The
Company's current policy is to retain all of its earnings to finance future
growth.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "ABMD." The following table sets forth, for the periods indicated, the
high and low sales prices per share of Common Stock, as reported by the Nasdaq
National Market.
[Download Table]
HIGH LOW
------- -------
FISCAL YEAR ENDED MARCH 31, 1996
First Quarter................................................... $ 9 $ 6
Second Quarter.................................................. 13 1/4 6 7/8
Third Quarter................................................... 16 8 3/4
Fourth Quarter.................................................. 15 1/4 11 1/2
FISCAL YEAR ENDED MARCH 31, 1997
First Quarter................................................... 18 12 1/2
Second Quarter.................................................. 18 1/4 10 1/8
Third Quarter................................................... 18 1/4 11 1/2
Fourth Quarter.................................................. 13 1/4 9 1/2
FISCAL YEAR ENDING MARCH 31, 1998
First Quarter................................................... 16 9 1/2
Second Quarter (through September 26, 1997)..................... 19 13 1/2
The last reported sale price of the Common Stock on the Nasdaq National
Market on September 26, 1997 was $17.125 per share. As of September 26, 1997,
there were approximately 340 holders of record of the Company's Common Stock,
including multiple beneficial holders at depositories, banks and brokers
listed as a single holder in the street name of each respective depository,
bank or broker.
17
CAPITALIZATION
The following table sets forth as of June 30, 1997 (i) the unaudited actual
capitalization of the Company, (ii) the pro forma capitalization of the
Company, giving effect to the receipt of net proceeds of approximately $16.0
million from the sale of 1,242,710 shares of Common Stock by the Company in
July 1997 and (iii) such pro forma capitalization as adjusted to reflect the
receipt of the estimated net proceeds from the sale of 2,250,000 shares of
Common Stock being offered by the Company hereby at an assumed offering price
of $17.125 per share and after deducting estimated underwriting discounts and
commissions and offering expenses payable by the Company.
[Download Table]
JUNE 30, 1997
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(in thousands)
Long-term debt................................. $ -- $ -- $ --
-------- -------- -------
Stockholders' investment (1):
Class B Preferred Stock, $0.01 par value,
1,000,000 shares authorized; no shares
issued and outstanding; no shares issued and
outstanding pro forma; no shares issued and
outstanding pro forma as adjusted........... -- -- --
Common Stock, $.01 par value, 25,000,000
shares authorized; 7,017,872 shares issued
and outstanding; 8,260,582 shares issued and
outstanding pro forma and 10,513,007 shares
issued and outstanding pro forma as
adjusted.................................... 70 83 105
Additional paid-in capital................... 37,236 53,233 89,242
Accumulated deficit.......................... (21,144) (21,144) (21,144)
-------- -------- -------
Total stockholders' investment............. 16,162 32,172 68,203
-------- -------- -------
Total capitalization..................... $ 16,162 $ 32,172 $68,203
======== ======== =======
--------
(1) Based on the number of shares outstanding as of June 30, 1997. Excludes
919,185 shares of Common Stock reserved for issuance upon the exercise of
stock options outstanding as of June 30, 1997 at a weighted average
exercise price of $10.56 per share. See Note 6 to Consolidated Financial
Statements.
18
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data of
the Company and is qualified in its entirety by the more detailed Consolidated
Financial Statements included elsewhere in this Prospectus. The consolidated
statements of operations data for the fiscal years ended March 31, 1995, 1996
and 1997, and the consolidated balance sheet data as of March 31, 1996 and
1997, have been derived from the Consolidated Financial Statements, which
statements have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this Prospectus. The consolidated
statement of operations data for the fiscal years ended March 31, 1993 and
1994, and the consolidated balance sheet data as of March 31, 1993, 1994 and
1995 have been derived from the Company's consolidated financial statements,
which statements have been audited by Arthur Andersen LLP and are not included
in this Prospectus. The consolidated statement of operations data for the three
months ended June 30, 1996 and 1997, and the consolidated balance sheet data as
of June 30, 1997 have been derived from unaudited Consolidated Financial
Statements included elsewhere in this Prospectus. These unaudited financial
statements have been prepared on the same basis as the audited financial
statements and, in the opinion of management, include all adjustments and
reclassifications (consisting only of normal recurring adjustments and
reclassifications) necessary to present fairly the financial condition and
results of operations for the periods presented. The results for the quarter
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the full year. This data should be read in conjunction with the
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere herein.
[Download Table]
THREE MONTHS
YEAR ENDED MARCH 31, ENDED JUNE 30,
------------------------------------------- ---------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
(in thousands, except per share data)
STATEMENT OF OPERATIONS
DATA:
Revenues:
Products.............. $ 1,709 $ 4,648 $ 6,893 $ 9,725 $12,311 $2,868 $4,207
Contracts............. 1,736 2,027 2,337 3,118 4,151 817 1,829
------- ------- ------- ------- ------- ------- -------
Total revenues...... 3,445 6,675 9,230 12,843 16,462 3,685 6,036
Costs and expenses:
Cost of products...... 2,042 2,211 3,289 3,921 5,361 1,049 1,529
Research and
development (1)...... 2,097 2,431 2,464 3,218 3,833 864 1,643
Selling, general and
administrative....... 3,803 4,553 4,278 5,741 7,068 1,519 2,117
------- ------- ------- ------- ------- ------- -------
Total costs and
expenses........... 7,942 9,195 10,031 12,880 16,262 3,432 5,289
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (4,497) (2,520) (801) (37) 200 253 747
Interest and other
income................. 604 537 449 528 535 130 124
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(3,893) $(1,983) $ (352) $ 491 $ 735 $ 383 $ 871
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
common and common
equivalent share....... $ (0.60) $ (0.31) $ (0.05) $ 0.07 $ 0.10 $ 0.05 $ 0.12
======= ======= ======= ======= ======= ======= =======
Weighted average number
of common and common
equivalent shares
outstanding............ 6,441 6,461 6,512 6,995 7,162 7,206 7,567
[Enlarge/Download Table]
MARCH 31, JUNE 30, 1997
--------------------------------------- ---------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA (2)
------- ------- ------- ------- ------- ------- -------------
(in thousands)
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term
marketable securities.. $ 9,486 $ 3,067 $ 4,491 $10,647 $ 9,361 $ 8,766 $24,904
Working capital......... 10,727 6,043 6,304 12,735 12,850 13,291 29,301
Long-term investments... 4,307 7,219 6,533 -- -- -- --
Total assets............ 17,504 15,426 14,730 16,209 18,547 19,715 35,852
Long-term debt.......... 3,820 3,773 -- -- -- -- --
Total stockholders'
investment (3)......... 12,460 10,589 13,305 13,945 15,225 16,162 32,172
-------
(1) Research and development expenses include certain contract costs. See Note
1(e) to Consolidated Financial Statements.
(2) Gives effect to the receipt of net proceeds of approximately $16.0 million
from the sale of 1,242,710 shares of Common Stock by the Company in July
1997. See "Certain Transactions" and Note 10 to Consolidated Financial
Statements.
(3) No dividends on Common Stock were declared or paid during any of the
periods presented.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus.
OVERVIEW
The Company is a leader in the research and development of cardiac assist
and heart replacement technology. The Company developed, manufactures and
sells the BVS, a temporary cardiac assist device, and is developing a totally
implantable artificial heart. The Company's operating results reflect the dual
activities of commercial operations and investments in the research and
development of new technologies.
The BVS is a temporary cardiac assist device designed to provide a patient's
failing heart with full circulatory assistance while allowing the heart to
rest, heal and recover its function. The BVS is the only device that can
provide full circulatory assistance approved by the FDA as a bridge-to-
recovery device for the treatment of patients with reversible heart failure.
Since fiscal 1994, the first full year of marketing the BVS in the United
States, increasing new orders and reorders of the BVS have made product
revenues the largest contributor to the Company's revenues. The Company has
focused its initial selling efforts of the BVS on the approximately 300
medical centers that perform the most heart surgery procedures, teaching
centers and transplant centers. As of September 29, 1997, the BVS had been
purchased by over 275 medical centers in the United States, many of which are
within the group of medical centers initially targeted. The BVS is comprised
of a pneumatic drive and control console, single-use external blood pumps and
cannulae. During the three months ended June 30, 1997 and fiscal 1997,
revenues from BVS sales represented greater than 90% of the Company's total
product revenues with no single customer representing more than 5% of product
revenues.
Research and development is a significant portion of the Company's
operations. The Company's research and development efforts are focused on the
development of new products, primarily related to cardiac assist and heart
replacement, and the continued enhancement of the BVS and related
technologies. The Company's research and development expenses have been
primarily attributable to research and development under the Company's
government contracts and grants. Revenues from contract research and
development and total research and development costs have increased in each of
the past three years. The Company's government-sponsored research and
development contracts generally provide for payment on a cost-plus-fixed-fee
basis. The Company accounts for revenue under these contracts and grants as
work is performed, provided that the government has appropriated sufficient
funds for the work. There can be no assurance that the government will not
terminate, reduce or delay the funding for any of the Company's contracts. In
addition, there can be no assurance that the Company will be successful in
obtaining any new government contracts or further extensions to existing
contracts.
The Company plans to use its own resources to fund the further development
of the TAH in amounts significantly in excess of the funding provided under
the Company's TAH Contract. The Company estimates that the development of the
TAH, including conducting pre-clinical and clinical studies and obtaining
regulatory approvals, will require substantial funds. There can be no
assurance that the Company will be able to develop the TAH, or receive the
required regulatory approvals to commence clinical trials on a timely basis or
within budget, if at all.
The Company has significant net tax operating loss carryforwards and tax
credit carryforwards. As a result, income tax expense incurred during the
periods presented have not been material. See Note 4 to Consolidated Financial
Statements.
20
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statements of operations
data for the periods indicated as a percentage of total revenues:
[Download Table]
THREE MONTHS
ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------- --------------
1995 1996 1997 1996 1997
------ ------ ------ ------ ------
Revenues:
Products.................. 74.7% 75.7% 74.8% 77.8% 69.7%
Contracts................. 25.3 24.3 25.2 22.2 30.3
------ ------ ------ ------ ------
Total revenues.......... 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of products.......... 35.6 30.5 32.6 28.5 25.3
Research and development.. 26.7 25.1 23.3 23.4 27.2
Selling, general and
administrative........... 46.4 44.7 42.9 41.2 35.1
------ ------ ------ ------ ------
Total costs and
expenses............... 108.7 100.3 98.8 93.1 87.6
------ ------ ------ ------ ------
Income (loss) from
operations................. (8.7) (0.3) 1.2 6.9 12.4
Interest and other income... 4.9 4.1 3.2 3.5 2.0
------ ------ ------ ------ ------
Net income (loss)........... (3.8)% 3.8% 4.4% 10.4% 14.4%
====== ====== ====== ====== ======
Three Months Ended June 30, 1997 and 1996
Revenues. Total revenues, excluding interest income, increased by 64% in the
three months ended June 30, 1997 to $6.0 million compared to $3.7 million in
the three months ended June 30, 1996. This increase was attributable to an
increase in both product and contract revenues.
Product revenues increased by 47% in the three months ended June 30, 1997 to
$4.2 million compared to product revenues of $2.9 million in the three months
ended June 30, 1996. This increase was primarily attributable to increased
unit sales of BVS blood pumps and consoles.
Contract revenues increased by 124% in the three months ended June 30, 1997
to $1.8 million from $820,000 in the three months ended June 30, 1996. This
increase primarily reflects increased activity under the Company's TAH
Contract. The Company accounts for revenue under its government contracts and
grants as work is performed, provided that the government has appropriated
sufficient funds for the work. Through June 30, 1997, the government has
appropriated $4.9 million of the $8.5 million of its Phase II TAH Contract
amount. The original government appropriation schedule calls for no further
appropriations for the TAH Contract until October 1998. This schedule is
subject to change at the discretion of the government. During the three months
ended June 30, 1997, the Company recognized $1.7 million of revenue under its
TAH Contract, reflecting the highest quarterly spending by the Company on the
TAH. As a result of this increased activity through June 30, 1997, the Company
has recognized $3.4 million of the $4.9 million appropriated as revenue. The
Company anticipates that its rate of spending on TAH development will further
increase and that this spending will exceed the remaining currently
appropriated balance before September 30, 1997, at which time the Company
intends to fund TAH development without offsetting contract revenue or
reimbursement from the government. The Company believes that certain of these
excess costs may be reimbursable under the TAH Contract, if and when
additional appropriation under the TAH Contract is made. Due to its
accelerated TAH development activity and the timing of government
appropriations, the Company believes that it will experience significant
quarterly fluctuations in contract revenues. The Company also believes that
the Company's total expenses to complete the development of the TAH will
significantly exceed the remaining TAH Contract amount.
21
Cost of Products. Cost of products sold as a percentage of product sales
decreased to 36.3% in the three months ended June 30, 1997 as compared to
36.6% in the three months ended June 30, 1996. This decrease primarily
reflects increased operational efficiencies.
Research and Development Expenses. Research and development expenses
increased by 90% to $1.6 million, 27.2% of total revenues, in the three months
ended June 30, 1997 from $860,000, 23.4% of total revenues, in the three
months ended June 30, 1996. This increase primarily reflected a higher level
of activity under the Company's research and development contracts and grants,
particularly the TAH Contract. The Company anticipates that research and
development expenses will increase significantly as a result of its plans to
increase its internally funded research and development efforts for the TAH.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 39% to $2.1 million, 35.1% of total
revenues, in the three months ended June 30, 1997 from $1.5 million, 41.2% of
total revenues, for the three months ended June 30, 1996. This increase
primarily reflected increased sales and marketing expenses, particularly
increased personnel and sales commissions, related to the increase in product
revenues. The decrease in selling, general and administrative expenses as a
percentage of total revenues reflects the Company's higher revenue base to
support these increased costs.
Interest and Other Income. Interest and other income consists primarily of
interest income on the Company's investment balances, net of interest and
other expenses. In each of the three month periods ended June 30, 1997 and
June 30, 1996, interest and other income remained virtually unchanged at
approximately $120,000.
Fiscal Years Ended March 31, 1997, 1996 and 1995
Revenues. Total revenues, excluding interest income, for fiscal 1997
increased to $16.5 million as compared to $12.8 million in fiscal 1996 and
$9.2 million in fiscal 1995, representing increases of 28% and 39% in fiscal
1997 and 1996, respectively.
Product revenues increased to $12.3 million in fiscal 1997 from $9.7 million
in fiscal 1996, and $6.9 million in fiscal 1995, representing increases of 27%
and 41% in fiscal 1997 and fiscal 1996, respectively. These increases were
primarily attributable to growing United States unit sales of the BVS consoles
and single-use products, including increased blood pump reorders, and to
increased average selling prices of BVS consoles and single-use products. The
majority of the Company's product revenues in the last three years have been
to United States customers. International revenues represented 7%, 9% and 13%
of total product revenues in fiscal 1997, 1996 and 1995 respectively. The
Company's product revenues from its dental business, ABIODENT, increased in
fiscal 1997 but were less than 10% of total product revenues.
Contract revenues increased to $4.2 million in fiscal 1997 from $3.1 million
in fiscal 1996 and $2.3 million in fiscal 1995, representing increases of 33%
in both fiscal 1997 and 1996. These increases are reflective of the increased
level of the Company's research and development activities under its
government cost reimbursement contracts in each year. The majority of the
Company's contract revenues, approximately 59% in fiscal 1997, were recognized
in connection with the research and development under the TAH Contract,
including amounts paid under Phase I of that contract.
Cost of Products. Cost of products represented approximately 44%, 40% and
48% of product revenues for fiscal 1997, 1996 and 1995, respectively. The
decrease in gross product margins experienced in fiscal 1997 as compared to
fiscal 1996 is primarily attributable to the mix of products sold. The Company
generally receives higher margins on the sale of single-use blood pumps than
on the sale of consoles. A higher proportion of the Company's revenues was
derived from the sale of BVS consoles in fiscal 1997 as compared to fiscal
1996. In addition, the Company's margins in fiscal 1997 were affected by
increased costs of production of the single-use blood pumps, including
approximately $200,000 in costs related to the Company's voluntary recall
during the third quarter of fiscal 1997 of certain production lots of single-
use BVS blood pumps. During
22
that quarter, the Company became aware of certain isolated cases where
components of its BVS blood pumps exhibited certain abnormalities. In
response, the Company issued a product recall for and removed from inventory
all blood pumps from the affected production lots.
Research and Development Expenses. Cost of research and development
increased to approximately $3.8 million, 23.3% of total revenues, in fiscal
1997 compared to $3.2 million, 25.1% of total revenues, and $2.5 million,
26.7% of total revenues, in fiscal 1996 and 1995, respectively. These
increases reflect increased activity under research and development contracts
and grants, which are billed on a cost-plus-fixed-fee basis. Costs of internal
research and development primarily relate to continued engineering support and
improvement of existing products as well as regulatory support for all
products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $7.1 million, 42.9% of total revenues, in
fiscal 1997 from $5.7 million, 44.7% of total revenues, and $4.3 million,
46.4% of total revenues, in fiscal 1996 and fiscal 1995, respectively. These
increases primarily reflect increased costs associated with higher product
revenues, including the expansion of the United States based sales team and
clinical post-sales support personnel. The decreases in selling, general and
administrative expenses as a percentage of total revenues in fiscal 1996 and
1997 primarily reflect the Company's higher revenue base to support these
increased costs.
Interest and Other Income. Interest and other income totaled $540,000,
$530,000, and $450,000, for fiscal 1997, 1996 and 1995, respectively. This
income primarily represents income earned on short-term investments.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had $8.8 million of cash and short-term
marketable securities, a decrease of $600,000 from March 31, 1997. On a pro
forma basis, after giving effect to the receipt of net proceeds of $16.0
million from the sale of 1,242,000 shares of Common Stock by the Company in
July 1997, the Company had $24.9 million of cash and short-term marketable
securities. The Company also has a $3,000,000 line of credit from a bank which
expires in September 1998, and which was entirely available at June 30, 1997.
In the three months ended June 30, 1997, operating activities used net cash
of $10,000. Net sources of cash provided by operating activities during the
three months ended June 30, 1997 reflected net income of approximately
$870,000, including depreciation and amortization expenses of $150,000, and an
increase in accrued expenses of approximately $300,000. These sources of cash
were offset by an increase in accounts receivable of approximately $1.0
million, a decrease in accounts payable of approximately $70,000 and increases
in prepaid expenses and inventory of $30,000 and $190,000 respectively.
During the three months ended June 30, 1997, investing activities used
$60,000 of cash. Net cash used in investing activities included approximately
$650,000 of purchases and improvements of property and equipment, primarily
related to the purchase of equipment to support its TAH development and to
support its increase in personnel. This use of cash was partially offset by
cash received as a result of approximately $580,000 of net maturities of
short-term marketable securities. Although the Company does not currently have
significant capital commitments, the Company believes that it will continue to
make significant investments over the next several years to support the
development and commercialization of its products and the expansion of its
manufacturing facility.
The Company believes that its revenues and existing resources, together with
the proceeds from the offering, will be sufficient to fund its planned
operations, including the planned increase in its internally funded TAH
development efforts, for at least through the next twelve months.
23
BUSINESS
The Company is a leader in the research and development of cardiac assist
and heart replacement technology. The Company developed, manufactures and
sells the BVS, a temporary cardiac assist device designed to provide a
patient's failing heart with full circulatory assistance while allowing the
heart to rest, heal and recover its function. The BVS is most frequently used
in patients whose hearts fail to immediately recover function following heart
surgery. The BVS is the only device that can provide full circulatory
assistance approved by the FDA as a bridge-to-recovery device for the
treatment of patients with reversible heart failure.
The Company is developing a battery-powered totally implantable artificial
heart intended as a permanent replacement device to assume the full pumping
function of both the left and right ventricles of the heart. The TAH is
designed for use by patients with irreparably damaged hearts and at risk of
death due to acute myocardial infarction ("AMI"), chronic ischemic disease or
some form of end-stage congestive heart failure, but whose vital organs
otherwise remain viable.
HEART DISEASE
Overview
The human heart consists of four chambers, including a left and right
ventricle. The left ventricle pumps oxygen rich blood throughout the body. The
right ventricle pumps oxygen depleted blood which has been circulated through
the body to the lungs where it is re-oxygenated. The heart muscles of the
ventricles require an uninterrupted supply of oxygenated blood, which is
provided through coronary arteries.
Insufficient blood flow to the muscles of the heart, known as ischemia,
results in oxygen deprivation and leads to various complications. These
complications include reduced cell function and, in more severe cases,
permanent damage to the heart muscle, such as AMI. Diseases to the coronary
arteries which affect blood flow to the heart are generally classified as
coronary heart disease.
Congestive heart failure is a condition manifested clinically by an enlarged
heart. Congestive heart failure develops over time primarily due to excess
demand on the heart muscle caused by a variety of factors, including chronic
hypertension (high blood pressure), incompetent valves, coronary heart
disease, infections of the heart muscle or the valves and congenital heart
problems.
Abnormalities in the electrical conduction system regulating the pumping
function of the heart, known as rhythm disorders, can also lead to
complications. These complications range from ventricular fibrillation
(unsynchronized contractions) and arrhythmia (irregular heartbeats) to cardiac
arrest. Most cardiac arrests result in sudden death.
Prevalence and Mortality
In 1994, there were an estimated 13.7 million people with coronary heart
disease, 4.8 million people with congestive heart failure, 4.0 million people
with rhythm disorders, and 1.4 million people with valvular diseases in the
United States. These diseases and conditions resulted in approximately 750,000
deaths in 1995, of which approximately half were sudden deaths. Of the deaths
that did not occur suddenly, approximately 110,000, 131,000, and 59,000 were
associated with AMI, chronic ischemic disease and congestive heart failure,
respectively.
Circulatory Support Therapies
In general, there are four modalities for the treatment or support of
failing ventricles: pharmaceutical therapies, cardiological interventions,
surgical corrections, and mechanical cardiac interventions. Pharmaceutical
therapies, including diuretics, ACE inhibitors, beta blockers and calcium
channel blockers, are commonly the first treatment option. Cardiological
interventions, including angioplasty and the use of stents, are minimally
invasive procedures that primarily address certain forms of coronary heart
disease. Surgical corrections, including coronary bypass surgery and valve
replacement, while effective, are a viable alternative only for those patients
with enough functional heart muscle to sustain life. Mechanical cardiac
24
interventions involve the use of devices for those patients whose heart
muscles are unable to sustain life without cardiac assistance.
Mechanical Cardiac Interventions
Mechanical cardiac interventions can be divided into three groups of
devices: temporary cardiac assist, permanent cardiac assist and heart
replacement.
Temporary Cardiac Assist. Patients who are candidates for temporary cardiac
assist consist of those with severely but reversibly failing hearts and those
who need ventricular support to remain alive while they await transplantation.
Temporary cardiac devices which are designed to support the recovery of
patients with reversibly failing hearts are referred to as "bridge-to-
recovery" devices, and those which can support patients awaiting
transplantation are referred to as "bridge-to-transplant" devices.
Approximately 12,000 patients with potentially recoverable hearts die every
year in the United States following heart surgery. Bridge-to-recovery devices
can save the lives of many of these patients by temporarily assuming the
pumping function of the heart, while allowing the heart to rest, heal and
recover its normal function. These devices can also be used for bridge-to-
recovery for nonsurgical patients who would otherwise die as a result of
certain transient viral infections that attack the heart muscle. Bridge-to-
transplant devices are ventricular assist devices ("VADs") used to support a
portion of the patients awaiting heart transplants. There are approximately
2,300 heart transplants performed in the United States annually.
Permanent Cardiac Assist. Patients with life-impairing or life-threatening
heart failure due to permanent muscle damage may require support to either the
left or both ventricles. Depending upon the severity of the damage and the
nature of the heart's condition, these patients may be helped with permanent
assist devices. Permanent assist devices under development can be grouped into
two types, those that pump blood directly, such as VADs, and those that wrap
around and help contract the heart without direct blood contact. Both types
potentially may be used to treat end-stage congestive heart failure patients
as well as those patients who are not at imminent risk of death but whose
daily activities are generally restricted due to their weakened hearts. In
1995, there were approximately 59,000 deaths in the United States attributable
to congestive heart failure.
Heart Replacement. Patients with irreparably damaged hearts and at risk of
death due to AMI, chronic ischemic disease or some form of end-stage
congestive heart failure but whose vital organs otherwise remain viable are
candidates for heart replacement. Included among these patients are those with
massive heart damage or infection, severe rhythm disorders, prosthetic valves,
clots or thrombi in the ventricles, high pulmonary resistance, chronic right
ventricle failure and heart transplant rejection. Among these combined groups,
the Company believes that approximately 60,000 patients per year could benefit
from a heart replacement device. No life-supporting treatment is currently
available for these patients except for the approximately 2,300 who receive
heart transplants annually in the United States. Currently, available donor
hearts are primarily reserved for transplantation of select end-stage
congestive heart failure patients because many of these patients are able to
survive for the long waiting periods required before a suitably matched donor
heart can be found. The Company believes that the development of an artificial
heart would increase the number of lives saved by eliminating the scarcity of,
and waiting period for, available hearts.
ABIOMED PRODUCTS AND PRODUCTS UNDER DEVELOPMENT
The Company markets the BVS, which is a temporary cardiac assist device, and
is developing the TAH and the Heart Booster, which are replacement and
permanent cardiac assist devices, respectively.
The BVS-5000 Bi-Ventricular Assist System. The BVS is a temporary cardiac
assist device designed to provide a patient's failing heart with full
circulatory assistance while allowing the heart to rest, heal and recover its
function. The BVS is most frequently used in patients whose hearts fail to
immediately recover function following heart surgery. In November 1992, the
Company received PMA approval from the FDA for
25
the BVS for this post-surgery therapy. In 1996 and 1997, the FDA approved the
use of the BVS for additional indications, expanding its use for the treatment
of all patients with reversible heart failure as a bridge-to-recovery device.
The BVS is the only device that can provide full circulatory assistance
approved by the FDA for the treatment of these patients.
The BVS system is comprised of a microprocessor-based pneumatic drive and
control console, single-use external blood pumps and cannulae. The BVS console
incorporates a closed-loop control system that automatically adjusts the
pumping rate, similar to the natural heart. The dual-chamber blood pumps
provide complete or partial pumping of blood for the left, right or both sides
of a patient's heart and are designed to mimic the function of the natural
heart. The BVS blood pumps reduce the risk of damaging blood cells by filling
the ventricles passively and continuously by gravity rather than by suction.
The cannulae are specially designed tubes used to connect the blood pumps to
the heart. The integration of the cannulae, blood pumps and console creates a
system with the ability to reduce the load on the heart, provide pulsatile
blood flow to vital organs and allow the heart muscles time to rest and
recover. Stabilization of patients who recover under BVS support typically
occurs in a period of less than one week. The BVS is designed to be simple and
easy to use and does not require a specially trained technician to constantly
monitor or adjust the pumping parameters, which can reduce hospital operating
costs.
The following diagram illustrates the BVS.
[SCHEMATIC OF PATIENT LYING ON BED IN BVS SUPPORT. COMPONENTS OF THE BVS ARE
IDENTIFIED WITH CAPTIONS.]
26
The BVS is intended for use in any hospital performing open-chest cardiac
surgery, of which there are more than 900 in the United States. As of
September 29, 1997, the BVS had been purchased by over 275 medical centers in
the United States including many of the largest centers. Typically, medical
centers initially purchase the BVS console, two to four BVS single-use blood
pumps, cannulae, training and related accessories. The BVS is capable of
supporting the left, right or both ventricles of the heart. In the Company's
clinical experience, approximately half of the patients required support to
both ventricles of the heart, and therefore the use of two single-use BVS
blood pumps. The Company's United States list price for a BVS console, and a
blood pump and cannulae set are $59,500 and $6,950, respectively.
The Totally Implantable Artificial Heart (TAH). The Company is developing a
battery-powered totally implantable artificial heart intended as a permanent
replacement device to assume the full pumping function of both the left and
right ventricles of the heart. The TAH is designed for use by patients with
irreparably damaged hearts and at risk of death due to AMI, chronic ischemic
disease or some form of end-stage congestive heart failure but whose vital
organs otherwise remain viable. Included among these patients are those with
massive heart damage or infection, severe rhythm disorders, prosthetic valves,
clots or thrombi in the ventricles, high pulmonary resistance, chronic right
ventricle failure and heart transplant rejection.
The core technology for the TAH has been under development by the Company
since the Company's inception. The Company has completed its feasibility
studies of the TAH system and substantially finalized the design of the TAH.
The system and individual components have been tested through a variety of
laboratory and animal tests. The Company is currently accelerating the
development of the TAH and is devoting significant resources towards improving
the manufacturing process in order to reach consistency and reliability levels
necessary to conduct advanced pre-clinical and clinical trials. The Company's
goal is to initiate clinical trials of the TAH by the end of the year 2000.
There can be no assurance that the Company will be able to successfully
complete pre-clinical testing of the TAH and receive FDA approval to begin
clinical trials of the TAH in a timely manner, if at all. Moreover, pre-
clinical trials may not be predictive of results that will be obtained in
clinical trials. The Company is consulting with regulatory authorities,
leading medical centers and physicians to define protocols and patient
populations for future clinical trials. The Company has built a new
development and pilot-scale manufacturing facility, and has significantly
increased the personnel focused on the manufacturability and testing of the
TAH.
The TAH system is comprised of a thoracic unit, or "replacement heart," a
rechargeable battery, a miniaturized electronics package, a transcutaneous
energy transmission system, and an external belt-worn battery pack. The
thoracic unit includes two artificial ventricles with their associated valves
and a hydraulic pumping system. The unit provides complete pumping of the
blood to the lungs and throughout the body. The ventricles and their
associated valves are being designed and manufactured with seamless surfaces
which reduce the risk of damaging blood cells, or creating clots or thrombi.
The electronics package automatically adjusts the rate and amount of blood
flow to the patient's needs, similar to the natural heart. The implantable
rechargeable battery and the transcutaneous energy transmission system
eliminate the need for wires penetrating the patient's skin and associated
risks of infection. The entire TAH system is being designed to be highly
reliable with minimal maintenance and patient involvement.
27
The following diagram illustrates the TAH.
[SCHEMATIC OF UPPER TORSO OF PATIENT WITH A TAH IMPLANTED. COMPONENTS OF THE TAH
ARE IDENTIFIED WITH CAPTIONS.]
Much of the development of the TAH has been funded by the NHLBI. Prior to
receiving its most recent $8.5 million TAH Contract extension, the Company
demonstrated to the NHLBI that the basic design of the system functioned in
laboratory and animal models without significant complications. The Company
retains the right to market the resulting TAH without royalty to NHLBI. The
Company is responsible for the complete research and development program and
has collaborated over the past nine years with the Texas Heart Institute for
pre-clinical product testing and evaluation.
The Heart Booster. The Company is developing the Heart Booster as a
permanent cardiac assist device designed to wrap around and help contract the
heart without direct blood contact. The Heart Booster is being designed for
use in patients with congestive heart failure who are not at imminent risk of
death, but whose daily activities are generally restricted due to their
weakened hearts. This device, unlike most devices being developed to pump
blood directly, avoids the potential risks of damage to blood cells and
formation of clots and thrombi. The Heart Booster consists of a pliant and
thin artificial plastic "muscle" that can be wrapped around the heart. This
artificial muscle is being developed to mimic the contraction-relaxation
characteristics of the heart muscle and provide sufficient contractility. The
design goal of the Heart Booster is to restore an acceptable and active
quality of life to the patient. The Heart Booster is in an earlier stage of
research and development than the TAH and is being developed under a five
year, $4.3 million contract from the NHLBI. Columbia Presbyterian Medical
Center is collaborating with the Company on this project for pre-clinical
testing and evaluation. There can be no assurance that the Company will be
successful in developing the Heart Booster.
28
ABIOMED STRATEGY
The Company's goal is to be a leader in the development, manufacture and
marketing of mechanical cardiac assist and replacement devices that address
the varying needs of a wide range of patients.The Company is pursuing the
following strategies to achieve this objective.
Accelerate Development of the TAH. The Company is devoting significant
resources with the goal to be the first to clinically introduce a totally
implantable artificial heart. The Company is consulting with regulatory
authorities, leading medical centers and physicians to define protocols and
patient populations for future clinical trials. The Company has built a new
development and pilot-scale manufacturing facility, and has significantly
increased the personnel focused on the manufacturability and testing of the
TAH.
Increase Market Penetration of BVS. The Company has recently increased the
size of both its domestic sales force and its clinical support group. Its
sales force focuses on BVS sales to new customers, while its clinical support
group focuses on training and educating existing customers in order to improve
clinical outcomes and increase BVS blood pump usage. As of September 29, 1997,
the BVS had been purchased by over 275 medical centers in the United States,
including many of the largest centers. The Company believes that its
relationships with its customers will facilitate the adoption of the BVS by
other medical centers.
Maintain and Enhance Technological Leadership. The Company is a leader in
the research and development of mechanical cardiac assist and replacement
devices. The Company has accumulated substantial proprietary knowledge and has
been granted a number of patents relating to the technologies incorporated in
these devices. The Company intends to continue to enhance and expand upon its
core technical expertise to maintain its leadership and to further develop
advanced mechanical cardiac assist and replacement devices.
Pursue Strategic Relationships to Support Research and Commercialization
Efforts. Many of the Company's products under development, including the TAH,
have been funded using government contracts and grants. The Company seeks
funding from third parties to support its research and development programs
and generally limits the use of its own funds until the scientific risk is
reduced. In addition, the Company intends to pursue collaborative
relationships to develop and commercialize the Company's non-cardiac assist
technologies.
MARKETING AND SALES
Approximately 900 medical centers in the United States perform heart
surgery. The Company has focused its initial BVS selling efforts on teaching
and transplant centers as well as the medical centers that perform the most
heart surgery procedures. As of September 29, 1997, the BVS had been purchased
by over 275 medical centers in the United States, many of which are within the
group of medical centers initially targeted. The Company believes that its
installed base of customers provides an opportunity for reorders of the
single-use BVS blood pumps as well as a reference base to assist in selling to
new accounts.
The Company sells the BVS in the United States through direct sales and
clinical support teams. As of September 29, 1997, the Company's BVS sales,
clinical support, marketing and field service teams included 35 full-time
employees. Its sales force focuses on BVS sales to new customers. Its clinical
support group focuses on training and educating existing customers in order to
improve clinical outcomes and increase BVS blood pump usage. The Company
believes the efforts of its clinical support group contribute significantly to
increasing the number of lives saved by the BVS and increasing usage and
reorders of BVS blood pumps. The Company also believes that its sales and
support teams will be key assets for the introduction of potential future
products such as the TAH. Building on its experience in the United States, the
Company also is working to expand its international sales efforts both through
distributors, including a recent collaborative arrangement for distribution in
Japan, and by selling directly in select European markets. The Company
believes that sales of its BVS may be somewhat seasonal, with reduced sales in
the summer months, reflecting hospital personnel and physician vacation
schedules.
29
MANUFACTURING
The Company manufactures the BVS console, BVS blood pumps and related
accessories. The manufacture of BVS consoles consists primarily of assembly,
testing and quality control. The Company purchases the majority of the
materials, parts and peripheral components used in the BVS consoles. The
Company manufactures certain blood contacting components for the BVS blood
pumps, including valves and bladders, from its proprietary Angioflex polymer.
The nature of the Company's products requires high quality manufacturing.
The Company's manufacturing and quality testing processes and procedures are
highly dependent on the diligence and experience of the Company's personnel.
To the extent that the Company's manufacturing volumes expand or the Company
begins the manufacture of new products, this dependence on personnel will
likely increase. In addition, the manufacture of blood contacting surfaces of
the Company's products requires a high degree of precision. These surfaces are
manufactured from polyurethane-based materials. The quality and composition of
polyurethane-based products can vary significantly based on numerous factors
including humidity, temperature, material content and air flow during the
manufacturing process. The Company's products also incorporate plastic
components for non-blood contacting surfaces. The Company relies on third-
party vendors to provide these components to the Company's specifications. The
Company is not able to fully inspect the quality of all vendor supplied
components and, therefore, relies on its vendors with respect to the quality
of these components. Once the plastic-based components of the Company's
products have been assembled, accessibility for inspection is limited. If a
defect is detected in as few as one of the Company's products, or in one
component of a Company product, it can result in the recall or restriction on
sale of products. Once assembled, in most cases, the Company's blood
contacting components cannot be reworked for human use. The manufacturing lead
times for parts and assemblies, particularly the polyurethane-based
components, can take many weeks from the date that all materials and
components are received by the Company. In addition, vendor lead times for
materials and components of the Company's products vary significantly, with
lead times for certain materials and components exceeding six months.
The Company is planning to expand its manufacturing facility for the BVS
during the next twelve months. There can be no assurance that the products
manufactured in the expanded facility will be manufactured at the same cost
and quality as the BVS is currently being manufactured. In addition, to the
extent that the Company's products under development have been manufactured,
they have been manufactured as prototypes with, at most, pilot-scale
production. The Company's products under development are likely to involve
additional manufacturing complexities and high quality requirements. There can
be no assurance that the Company will be able to increase production of the
BVS or manufacture future products, if developed and approved, in commercial
quantities on a consistent and timely basis, with acceptable cost and quality.
The inability to manufacture current and future products in sufficient
quantities in a timely manner, and with acceptable cost and quality, would
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company relies on outside vendors to supply certain components used in
the BVS and in its products under development. Certain of the components of
the BVS are supplied by sole source vendors or are custom made for the
Company. From time to time, suppliers of certain components of the BVS have
indicated that they intend to discontinue, or have discontinued, making such
components. In addition, certain of these components are supplied from single
sources due to quality considerations, costs or constraints imposed by
regulatory authorities. There are relatively few additional sources of supply
for such components and establishing additional or replacement suppliers for
such components cannot be accomplished quickly and may require FDA approval.
In the past, certain suppliers have announced that, due to government
regulation or in an effort to reduce potential product liability exposure,
they intend to limit or terminate sales of certain products to the medical
industry. There can be no assurance that, if such an interruption were to
occur, the Company would be able to find suitable alternative supplies at
reasonable prices or would be able to obtain requisite regulatory approvals in
a timely manner, if at all. Similarly, when and if the Company reaches the
clinical testing stage of its products under development, it may find that
certain components become more
30
difficult to source from outside vendors due to the product liability risk
perceived by those vendors. The Company's inability to obtain acceptable
components in a timely manner or to find suitable replacements at an
acceptable cost would have a material adverse effect on the Company's
business, financial condition and results of operations.
RESEARCH AND PRODUCT DEVELOPMENT
The Company has substantial expertise in electro-mechanical systems, cardiac
physiology and experimental surgery, blood-material interactions, fluid
mechanics and hemodynamics, internal and external electronic hardware,
software, plastics processing, lasers and optical physics. The Company's
research and development efforts are focused on the development of new
products, primarily related to mechanical cardiac assist and heart
replacement, and the continued enhancement of the BVS and related
technologies. The Company's research and development personnel also are
involved in establishing protocols, monitoring and submitting test data to the
FDA and corresponding foreign regulatory agencies to obtain the necessary
clearances and approvals for its products. Sophisticated tools, such as 3-
dimensional CAD/CAM, and procedures are used in an effort to ensure smooth
transition of new products from research to product development to
manufacturing.
Cardiac assist products currently under development by the Company include
the TAH, the Heart Booster, and a variety of specialized pumps, such as a
miniaturized rotary blood pump and a magnetically-suspended centrifugal pump.
The Company is also developing devices in the area of minimally invasive
surgery applications, such as tissue welding and vascular welding for the
repair of small arteries.
During the three months ended June 30, 1997 and the fiscal years ended March
31, 1997, 1996 and 1995, the Company expended $1.6 million, $3.8 million, $3.2
million and $2.5 million, respectively, on research and development. A
substantial portion of these expenses were funded by government contracts and
grants. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Strategic Relationships."
STRATEGIC RELATIONSHIPS
Genzyme
In July 1997, the Company sold 1,153,846 shares of Common Stock to Genzyme
Corporation ("Genzyme"). In connection with this sale, the Company and Genzyme
agreed to discuss collaborative arrangements that would allow them to jointly
develop and commercialize products which combine biotechnology and biomedical
engineering, primarily for the surgical market. A potential target for
collaboration is minimally invasive cardiac surgery, an emerging field in
which surgeons use new products and techniques to reduce the trauma, recovery
period, and expense of heart surgery. The Company and Genzyme are engaged in
ongoing discussions regarding this potential collaboration. The Chief
Executive Officer of Genzyme is a member of the Company's board of directors.
There can be no assurance that the Company and Genzyme will agree to jointly
collaborate on any project, that any such project would result in the
development of any product, or that any such product, if developed, would be
commercially successful. See "Certain Transactions."
National Heart, Lung and Blood Institute
Since the Company's inception, United States government agencies,
particularly the NHLBI, have provided significant support to the Company's
product development efforts. The most significant current funding from the
NHLBI supports the Company's development of the TAH and Heart Booster. In
September 1996, the Company received an $8.5 million extension to its TAH
Contract from the NHLBI. In September 1995, the Company received a $4.3
million contract from the NHLBI to develop the Heart Booster. During the three
months ended June 30, 1997 and the fiscal years ended March 31, 1997, 1996 and
1995, the
31
Company recognized revenues of $1.8 million, $4.2 million, $3.1 million and
$2.3 million, respectively, under United States government contracts and
grants. All of the Company's government contracts and grants contain provisions
making them terminable at the convenience of the government and are subject to
government appropriations. There can be no assurance that the government will
not terminate, reduce or delay the funding for any of the Company's contracts.
In addition, there can be no assurance that the Company will be successful in
obtaining any new government contracts or further extensions to existing
contracts.
COMPETITION
Competition in the cardiac assist market is intense and subject to rapid
technological change and evolving industry requirements and standards. Many of
the companies developing or marketing cardiac assist products have
substantially greater financial, product development, sales and marketing
resources and experience than the Company. These competitors may develop
superior products or products of similar quality at the same or lower prices.
Moreover, there can be no assurance that improvements in current or new
technologies will not make them technically equivalent or superior to the
Company's products in addition to providing cost or other advantages. Other
advances in medical technology, biotechnology and pharmaceuticals may reduce
the size of the potential markets for the Company's products or render those
products obsolete.
The BVS is the only device that can provide full circulatory assistance
approved by the FDA as a bridge-to-recovery device for the treatment of
patients with reversible heart failure. However, the Company is aware of at
least one other company, Thoratec Laboratories Corporation, seeking approval of
a temporary cardiac assist device to address this market. Approval by the FDA
of products that compete directly with the BVS would increase competitive
pricing and other pressures and could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
believes that it would compete with any such product on the basis of cost,
clinical outcome and customer relations. There can be no assurance that the
Company would be able to compete effectively with respect to these factors.
The Company is aware of other artificial heart development efforts in the
United States, Canada, Europe and Japan. A team comprised of Pennsylvania State
University and 3M Corporation, Inc. has been developing a heart replacement
device for many years with significant NHLBI support. There are a number of
companies, including Thermo Cardiosystems, Inc. and Novacor, a division of
Baxter International, Inc., which are developing permanent cardiac assist
products, including implantable left ventricular assist devices and
miniaturized rotary ventricular assist devices, that may address markets that
overlap with certain segments of the markets targeted by the Company's TAH. The
Company's TAH may compete with those VADs for some patient groups, notably
patients with severe congestive heart failure due to predominant left ventricle
dysfunction. An implantable VAD supplements the pumping ability of a failing
ventricle. In contrast, the TAH is being designed to replace failing
ventricles. The Company believes that Thermo Cardiosystems, Inc. has commenced
clinical testing for PMA approval of LVADs for permanent cardiac assist. The
Company believes that the TAH, LVADs and other VADs, if developed, will
generally be used to address the needs of different patient populations, with
an overlap for certain segments of the heart failure population. There can be
no assurance that the Company will develop and receive FDA approval to market
its TAH on a timely basis, if at all, or that once developed, the TAH will be
commercially successful.
The Company's customers frequently have limited budgets. As a result, the
Company's products compete against the broad range of medical devices for these
limited funds. The Company's success will depend in large part upon its ability
to enhance its existing products and to develop new products to meet regulatory
and customer requirements and to achieve market acceptance. The Company
believes that important competitive factors with respect to the development and
commercialization of its products include the relative speed with which it can
develop products, establish clinical utility, complete clinical testing and
regulatory approval processes, obtain reimbursement and supply commercial
quantities of the product to the market. There can be no assurance that the
Company will be able to compete successfully or that competition will not have
a material adverse effect on the Company's business, financial condition and
results of operations.
32
THIRD-PARTY REIMBURSEMENT
The Company's BVS product is, and most of its products under development are
intended to be, sold to medical institutions. Medical institutions and their
physicians typically seek reimbursement for the use of these products from
third-party payors, including Medicare, Medicaid, private health insurers and
managed care organizations. As a result, market acceptance of the Company's
current and proposed products may depend in large part on the extent to which
reimbursement is available to medical institutions and their physicians for
use of the Company's products.
The level of reimbursement provided by United States and foreign third-party
payors varies according to a number of factors, including the medical
procedure category, payor, location, outcome and cost. In the United States,
many private health care insurance carriers follow the recommendations of
HCFA, which establishes guidelines for the reimbursement of health care
providers treating Medicare and Medicaid patients. Internationally, healthcare
reimbursement systems vary significantly. In certain countries, medical center
budgets are fixed regardless of levels of patient treatment. In other
countries, such as Japan, reimbursement from government or third party payors
must be applied for and approved. As of the date of this Prospectus, under
HCFA guidelines, Medicare reimburses medical institutions for Medicare
patients based on the category of surgical procedures in which the BVS is used
and incrementally reimburses physicians for the use of the BVS. Medicare does
not, however, currently reimburse medical institutions for the incremental
cost of using the BVS above the amount allowed for the reimbursement category
of the surgical procedure. Certain private health insurers and managed care
providers provide incremental reimbursement to both the medical institutions
and their physicians. The Company is currently petitioning HCFA to assign a
higher paying reimbursement category whenever the BVS is used. In October
1995, HCFA established a special "ICD-9" code for the BVS in an effort to more
clearly track and evaluate hospital and physician costs associated
specifically with the BVS compared to current reimbursement levels, so that
HCFA can determine the appropriate category and level of reimbursement. There
can be no assurance that HCFA will reassign the BVS to a higher paying
category in a timely manner, if at all.
No reimbursement levels have been established for the Company's products
under development, including the TAH. Prior to approving coverage for new
medical devices, most third-party payors require evidence that the product has
received FDA approval or clearance for marketing, is safe and effective and
not experimental or investigational, and is medically necessary and
appropriate for the specific patient for whom the product is being used.
Increasing numbers of third-party payors require evidence that the procedures
in which the products are used, as well as the products themselves, are cost-
effective. There can be no assurance that the Company's products under
development will meet these criteria, that third-party payors will reimburse
physicians and medical institutions for the use of the products or that the
level of reimbursement will be sufficient to support the widespread use of the
products. Furthermore, there can be no assurance that third-party payors will
continue to provide reimbursement for the use of BVS or that such payors will
not reduce the current level of reimbursement for the product. Failure to
achieve adequate reimbursement for its current or proposed products would have
a material adverse effect on the Company's business, financial condition and
results of operations.
ABIODENT SUBSIDIARY
ABIODENT, Inc. ("ABIODENT"), a wholly owned subsidiary of the Company,
manufactures and markets the PerioTemp periodontal screening system
("PerioTemp") and markets the Halimeter for early detection and assessment of
risk of periodontal disease and other sources of halitosis. ABIODENT is
operated independently from the Company's cardiac assist activities. As of
September 29, 1997, ABIODENT employed eight full-time employees.
The PerioTemp is a tool for use by dentists, periodontists and other dental
specialists to instantly detect sites of gum inflammation. The PerioTemp
patented technology, developed in part through funding from the National
Institute of Dental Research, consists of a book-sized console, containing a
microprocessor that is
33
connected to a probe, shaped much like a dentist's probe, with a heat-sensing
tip. The device is used in a manner which is consistent with traditional
probing but includes an instantaneous display and record of temperature
deviations from normal inside the pockets between teeth and the surrounding
gum. According to published sources, gum temperature has been shown to be a
reliable indicator of the presence of inflammation, a precursor of periodontal
disease. The PerioTemp also allows the clinician to record gum pocket depth and
bleeding point information.
ABIODENT markets the PerioTemp in conjunction with the Halimeter, to provide
differential evaluation of the sources of halitosis. ABIODENT purchases the
Halimeter from Interscan, Inc. under a distribution arrangement which is
exclusive to ABIODENT if it meets certain defined sales volume levels.
ABIODENT markets its dental products with complementary products of others
used in preventive and cosmetic dental programs. Revenues from this subsidiary
have represented less than ten percent of the Company's total revenues in all
periods presented in this Prospectus. The Company believes that it cannot alone
adequately support the investment that the continued growth of its dental
business requires and is looking for alternative ways to support its dental
business.
PATENTS AND PROPRIETARY RIGHTS
The Company's business depends significantly upon its proprietary technology.
The Company relies on a combination of trade secret laws, patents, copyrights,
trademarks and confidentiality agreements and other contractual provisions to
establish, maintain and protect its proprietary rights, all of which afford
only limited protection. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets or disclose
such technology or that the Company can meaningfully protect its trade secrets.
The Company has been issued or allowed 22 patents and has pending three
patent applications in the United States. The Company has obtained or applied
for corresponding patents and patent applications for certain of these patents
and patent applications in a limited number of foreign countries. These patents
relate to the BVS and certain of its products under development including the
TAH. The Company's United States patents expire at various times from 2003 to
2016. There can be no assurance that the Company's pending patent applications
or any future applications will be approved, that any patents will provide the
Company with competitive advantages or will not be challenged by third parties,
or that the patents of others will not render the Company's patents obsolete or
otherwise have an adverse effect on the Company's ability to conduct business.
Because foreign patents may afford less protection under foreign law than is
available under United States patent law, there can be no assurance that any
such patents issued to the Company will adequately protect the Company's
proprietary information. Others may have filed and may file patent applications
in the future that are similar or identical to those of the Company. To
determine the priority of inventions, the Company may have to participate in
interference proceedings declared by the United States Patent and Trademark
Office or opposition proceedings before a foreign patent office that could
result in substantial cost to the Company. No assurance can be given that any
such interfering patent or patent application will not have priority over
patent applications filed on behalf of the Company or that the Company will
prevail in any opposition proceeding.
The medical device industry is characterized by a large number of patents and
by frequent and substantial intellectual property litigation. There can be no
assurance that the Company's products and technologies do not infringe any
patents or proprietary rights of third parties. The Company may in the future
be notified that it may be infringing intellectual property rights possessed by
others. Any intellectual property litigation would be costly and could divert
the efforts and attention of the Company's management and technical personnel,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that
infringement claims will not be asserted in the future or such assertions, if
proven to be true, will not prevent the Company from selling its products or
materially and adversely affect the Company's business, financial condition and
results of operations. If any such claims
34
are asserted against the Company's intellectual property rights, it may seek to
enter into a royalty or licensing arrangement. There can be no assurance,
however, that a license will be available on reasonable terms, or at all. The
Company could decide, in the alternative, to resort to litigation to challenge
such claims or to design around the patented technology. Such actions could be
costly and would divert the efforts and attention of the Company's management
and technical personnel, which would materially and adversely affect the
Company's business, financial condition and results of operations.
Certain of the Company's products have been developed in part under
government contracts pursuant to which the Company may be required to
manufacture a substantial portion of the product in the United States and the
government may obtain certain rights to use or disclose technical data
developed under those contracts. The Company retains the right to obtain
patents on any inventions developed under those contracts (subject to a non-
exclusive, non-transferable, royalty-free license to the government), provided
it follows certain prescribed procedures.
The Company purchased certain of its technology, including technology
incorporated in the BVS, from the Abiomed Limited Partnership (the
"Partnership"), in which the Company has a 61.7% interest. As a result of this
purchase, the Company is required to pay the Partnership a royalty through
August 3, 2000. See Note 7 to the Consolidated Financial Statements.
GOVERNMENT REGULATION
Clinical testing, manufacture and sale of the Company's products and products
under development, including the BVS, TAH and Heart Booster and the Company's
dental devices, are or will be subject to regulation by the FDA and
corresponding state and foreign regulatory agencies. Noncompliance with
applicable requirements can result in, among other things, fines, injunctions,
civil penalties, recall or seizure of products, total or partial suspension of
production, failure of the government to grant pre-market clearance or pre-
market approval for devices, withdrawal of marketing approvals and criminal
prosecution. The FDA also has the authority to request repair, replacement or
refund of the cost of any device manufactured or distributed by the Company.
In the United States, medical devices are classified into one of three
classes (i.e., Class I, II or III) on the basis of the controls deemed
necessary by the FDA to reasonably ensure their safety and effectiveness. Class
I devices are subject to general controls, such as labeling, pre-market
notification and adherence to the FDA's Current Good Manufacturing Practices
requirements set forth in the Quality System Regulation ("QSR"), which include
testing, control and documentation requirements. Class II devices are subject
to general and special controls, such as performance standards, post-market
surveillance, patient registries and QSR compliance. Class III devices,,which
are typically life-sustaining, life-supporting and implantable devices, or new
devices that have been found not to be substantially equivalent to legally
marketed devices, are subject to the requirements applicable to Class I and
Class II devices and must generally also receive pre-market approval by the FDA
to ensure their safety and effectiveness.
Before introducing a new device into the market, the Company must generally
obtain FDA clearance or approval through either clearance of a 510(k)
notification or receipt of a Pre-Market Approval ("PMA"). A 510(k) clearance
will be granted if the submitted information establishes that the proposed
device is "substantially equivalent" to a legally marketed Class I or Class II
medical device or a Class III medical device for which the FDA has not required
PMAs. The Company has received FDA market clearance under Section 510(k) for
the PerioTemp.
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed Class I or Class II device, or if it is a
Class III device for which the FDA has required PMAs. A PMA application must be
supported by valid scientific evidence, which typically includes extensive
information including relevant bench tests, laboratory and animal studies and
clinical trial data to demonstrate the safety and effectiveness of the device.
The PMA application also must contain a complete description of the device
35
and its components, a detailed description of the methods, facilities and
controls used to manufacture the device, and the proposed labeling advertising
literature and training materials. By regulation, the FDA has 180 days to
review the PMA application, and during that time an advisory committee may
evaluate the application and provide recommendations to the FDA. Advisory
Committee reviews often occur over a significantly protracted period, and a
number of devices for which FDA approval has been sought have never been
cleared for marketing. In addition, modifications to a device that is the
subject of an approved PMA, or to its labeling or manufacturing process, may
require approval by the FDA, including the submission of PMA supplements or new
PMAs.
If clinical trials of a device are required in order to obtain FDA approval
and the device presents a "significant risk," the sponsor of the trial will
have to file an Investigational Device Exemption ("IDE") application prior to
commencing clinical trials. The IDE application must be supported by data,
which typically includes the results of animal and laboratory testing. If the
IDE application is approved by the FDA and all of the appropriate Institutional
Review Boards ("IRBs"), clinical trials may begin at a specific number of
investigational sites with a specific number of patients, as approved by the
FDA. If the device presents a "nonsignificant risk" to the patient, a sponsor
may begin the clinical trial after obtaining approval for the study by one or
more appropriate IRBs without the need for FDA approval. Sponsors of clinical
trials are permitted to charge for investigational devices distributed in the
course of the study provided that compensation does not exceed recovery of the
costs of manufacture, research, development and handling. An IDE supplement
must be submitted to and approved by the FDA before a sponsor or investigator
may make a change to the investigational plan that may affect its scientific
soundness or the rights, safety or welfare of human subjects.
In November 1992, the Company received PMA approval from the FDA for the BVS.
In 1996 and 1997, the FDA approved the use of the BVS for additional
indications, expanding its use to the treatment of all patients with reversible
heart failure. The TAH and the Heart Booster will be Class III devices and
therefore will be subject to the IDE and PMA processes and the QSR.
Any devices, including the BVS, that are manufactured or distributed by the
Company pursuant to FDA clearances or approvals are subject to pervasive and
continuing regulation by the FDA and certain state agencies. Manufacturers of
medical devices for marketing in the United States are required to adhere to
the QSR and must also comply with Medical Devices Reporting ("MDR")
requirements that a firm report to the FDA any incident in which its product
may have caused or contributed to a death or serious injury, or in which its
product malfunctioned and, if the malfunction were to recur, it would be likely
to cause or contribute to a death or serious injury. Labeling and promotional
activities are subject to scrutiny by the FDA and, in certain circumstances, by
the Federal Trade Commission. Current FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses. The Company is
subject to routine inspection by the FDA and certain state agencies for
compliance with the QSR and MDR requirements, as well as other applicable
regulations.
In addition, the FDA requires that manufacturers of certain devices,
including the BVS, conduct postmarket surveillance studies after receiving
approval of a PMA application. The primary purpose of required postmarket
surveillance is to provide an early warning system to alert the health care
community to any potential problems with a device within a reasonable time of
the initial marketing of the device. Postmarket surveillance provides clinical
monitoring of the early experiences with the device once it is distributed in
the general population under actual conditions of use.
The Company is also subject to regulation in each of the foreign countries in
which it sells its products. Many of the regulations applicable to the
Company's products in these counties are similar to those of the FDA. The
Company has obtained the requisite foreign regulatory approvals for sale of the
BVS in many foreign countries, including most of Western Europe, and has
recently commenced the regulatory approval process in Japan. The Company
believes that foreign regulations relating to the manufacture and sale of
medical devices are becoming more stringent. The European Union has adopted
regulations requiring that medical devices comply with the Medical Device
Directive by June 15, 1998, which includes ISO-9001 and
36
CE certification. The Company's BVS currently has German MedGV approval but is
not yet certified for ISO-9001 compliance. The Company is working to obtain
ISO-9001 and independent CE certification for its BVS facility. There can be no
assurance that the Company will obtain such certification in a timely manner,
if at all. Unless ISO and CE certification are obtained, the Company's sale of
the BVS into the European Union may be restricted. Many manufacturers of
medical devices, including the Company, have often relied on foreign markets
for the initial commercial introduction of their products. The more stringent
foreign regulatory environment could make it more difficult, costly and time
consuming for the Company to pursue this strategy for new products.
Any FDA, foreign or state regulatory approvals or clearances, once obtained,
can be withdrawn or modified. Delay in the Company obtaining, or inability of
the Company to obtain and maintain, any necessary United States or foreign
clearances or approvals for new or existing products or product enhancements,
or cost overruns resulting from these regulatory requirements, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
EMPLOYEES
As of September 29, 1997, the Company had 166 full-time employees. The
Company has entered into contractual agreements with all of its employees which
include strict confidentiality and non-compete commitments by each employee.
None of the Company's employees is represented by a union. The Company
considers its employee relations to be good.
PROPERTIES
The Company leases its headquarters and research and development and
production facilities in three separate buildings in an industrial office park
covering approximately 55,000 square feet. The addresses of these leased spaces
are 33 Cherry Hill Drive and 24 Cherry Hill Drive in Danvers, Massachusetts and
66 Cherry Hill Drive in Beverly, Massachusetts. All facilities are located
approximately 22 miles north of Boston. The leases at the primary facilities,
representing 23,000 square feet and 22,000 square feet, respectively, expire in
April 2000 and June 2001, respectively. All leases have options to extend at
market rates.
The Company's facilities include fabrication areas for medical and dental
device manufacturing, and development facilities for laboratory and durability
testing of plastics and electronics. The Company has begun improving
approximately 18,000 square feet of this space to better accommodate its BVS
growth and to allow for expanded engineering, production and testing relating
to the TAH. The Company believes that these facilities are adequate for its
current needs.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
37
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The Company's executive officers, key employees and directors are as
follows:
[Download Table]
NAME AGE TITLE
------------------------------------- --- ------------------------------------
David M. Lederman, Ph.D*............. 53 Chairman of the Board of Directors,
President, Chief Executive Officer
and Assistant Treasurer
Robert T.V. Kung, Ph.D*.............. 53 Senior Vice President--Research and
Development, Assistant Secretary
Eugene D. Rabe*...................... 41 Vice President--Global Sales,
Marketing and Clinical Programs
John F. Thero*....................... 37 Vice President--Finance, Chief
Financial Officer, Treasurer and
Assistant Secretary
Anthony W. Bailey.................... 41 Vice President--Engineering
William J. Bolt...................... 45 Vice President (in charge of
ABIODENT)
David Nikka.......................... 42 Vice President--Resources and
Administration
Janice Piasecki...................... 43 Vice President--Regulatory Affairs
Edward G. Taylor, Ph.D............... 46 Vice President--Program Director,
Implantable Artificial Heart
W. Gerald Austen, M.D................ 67 Director
Paul Fireman......................... 53 Director
John F. O'Brien...................... 54 Director
Desmond H. O'Connell, Jr. ........... 61 Director
Henri A. Termeer..................... 51 Director
--------
*Executive Officer
Dr. David M. Lederman founded the Company in 1981, has served as Chairman of
the Board and Chief Executive Officer since that time, and as President for
the majority of that time. Prior to founding ABIOMED, he was Chairman of the
Medical Research Group at the Everett Subsidiary of Avco Corporation. He
originated the design and development of ABIOMED's artificial heart blood
pumps and their valves, has authored over 40 medical publications, is a member
of numerous medical and scientific professional organizations and has been a
frequent speaker in forums on cardiac support systems and on the financing and
commercialization of advanced medical technology. Dr. Lederman received a
Ph.D. degree in Aerospace Engineering from Cornell University.
Dr. Robert T.V. Kung has served as Vice President of Research and
Development of the Company since 1987. From 1982 to 1987, he served as Chief
Scientist of the Company. Since 1995, Dr. Kung has served as the Senior Vice
President of the Company. Prior to joining ABIOMED, he was a Principal
Research Scientist at Schafer Associates and at the Avco Everett Research
Laboratory. He developed non-linear optical techniques for laser applications
and investigated physical and chemical phenomena in re-entry physics. Dr. Kung
has been Principal Investigator for the Company's TAH and Heart Booster
programs and has conceived of and directed the development of the Company's
laser-based minimally invasive technologies, as well as the PerioTemp. Dr.
Kung received a Ph.D. degree in Physical Chemistry from Cornell University.
Mr. Eugene D. Rabe joined the Company in 1993, as its Vice-President for
Sales. In 1996, he assumed responsibility for all domestic sales, clinical and
field support. Recently he was promoted to Vice-President Global Sales,
Marketing and Clinical Programs. Prior to joining ABIOMED, he was Vice-
President, Sales and
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Marketing for Endosonics Corporation before which he was a Sales Manager for
St. Jude Medical, Inc. He has been involved in the sales and marketing of
cardiovascular/cardiological devices for over ten years. Mr. Rabe received a
Bachelor's degree from St. Cloud State University and his MBA from the
University of California.
Mr. John F. Thero joined the Company in 1994 as Vice President, Finance and
Administration and Chief Financial Officer. Prior to joining ABIOMED, during
the period 1992 to 1995, Mr. Thero was Chief Financial Officer and acting
President for the restructuring of two venture-backed companies. From 1987 to
1992, Mr. Thero was employed, in various capacities including Chief Financial
Officer, by Aries Technology, Inc. From 1983 to 1987, Mr. Thero was employed
by the commercial audit division of Arthur Andersen & Co. during which time he
became a Certified Public Accountant. Mr. Thero received a B.A. in
Economics/Accounting from The College of the Holy Cross.
Mr. Anthony W. Bailey joined the Company in 1997 to lead the Electronics
System Development of the Implantable Artificial Heart Program and is
currently Vice President--Engineering. Prior to joining ABIOMED, during 1987
to 1997, Mr. Bailey was Vice President and General Manager for Pace Medical,
Inc., a manufacturer of external pacemakers, rhythm management analyzers and
accessories. From 1982 to 1987, he was Manager of Design and Development at
Shiley Infusaid, Inc., a manufacturer of implantable drug pumps and infusion
ports. Prior to that, Mr. Bailey served in various engineering functions with
manufacturers of implantable pacemakers, data acquisition and control systems
and medical monitoring equipment. Mr. Bailey received his Bachelor's degree
from University of Lowell.
Mr. William J. Bolt joined the Company in 1982. Since that time, he has
served in various roles, from Director of Operations to Vice President of
Engineering, and was the engineer in-charge when the BVS and PerioTemp systems
were developed. He is presently responsible for the business operations of
ABIODENT, including dental product sales, marketing, manufacturing and
engineering support. Mr. Bolt received a Bachelor's degree in Electrical
Engineering and a Masters degree in Business Administration from Northeastern
University.
Mr. David Nikka joined the Company in 1997 as its Vice President--Resources
and Administration. Prior to joining ABIOMED, he was Vice President, Human
Resources from 1991 to 1997 for Genzyme Genetics, Director of Human Resources
from 1989 to 1991 for Genzyme Corporation and Director of Human Resources for
Integrated Genetics from 1986 to 1989. Mr. Nikka received his Bachelor Degree
from Boston University. Mr. Nikka is past Chairperson of both the BIO and the
Massachusetts Biotechnology Council Human Resource Committees.
Ms. Janice Piasecki joined the Company in 1991 as Manager of Clinical
Research and Regulatory Affairs. In this role she has worked extensively on
PMA submissions for the BVS which led to FDA approvals. She was promoted to
Vice-President, Regulatory Affairs in 1994. Prior to joining ABIOMED, she held
position of Investigator for the United States Food and Drug Administration
and Manager of Regulatory Affairs for C.R. Bard. Ms. Piasecki received her
B.S. degree in Biology and Chemistry from Boston College.
Dr. Edward G. Taylor joined the Company at the end of 1996 as Vice President
and Director of the Artificial Heart Program. Prior to joining ABIOMED, Dr.
Taylor worked in the United States Air Force from 1972 to 1996 where he
attained the rank of Colonel and was most recently the Program Director for
the Airborne Warning and Control System (AWACS) in the United States, Europe
and Japan. Previously he had directed high technology research and development
of nationally significant defense programs, including self-protection avionics
for Air Force One. He was also involved in the launch and operation of
reconnaissance and communication satellites. Dr. Taylor holds a Bachelor's
degree from the Illinois Institute of Technology, a Master's degree from the
Air Force Institute of Technology and a Ph.D. degree in Estimation and Control
from the Massachusetts Institute of Technology.
39
Dr. W. Gerald Austen has served as a director of the Company since 1985.
From 1969 to the present, Dr. Austen has been Chief of the Surgical Services
at Massachusetts General Hospital, and from 1974 to the present, has been the
Edward D. Churchill Professor of Surgery at Harvard Medical School. He became
President of the Massachusetts General Physicians Organization in 1994. Dr.
Austen is the former President of the American College of Surgeons, the
American Association for Thoracic Surgery, the American Surgical Association
and the Massachusetts and American Heart Associations. Dr. Austen is a member
of the Institute of Medicine of the National Academy of Sciences, a Fellow of
the American Academy of Arts and Sciences and a life member of the corporation
of the Massachusetts Institute of Technology.
Mr. Paul Fireman has served as a director of the Company since 1987. He is
the founder of Reebok International Ltd., a leading worldwide designer,
marketer and distributor of sports, fitness and casual footwear, apparel and
equipment. Mr. Fireman has served as Chief Executive Officer and a director of
that company since 1979, as Chairman of the Board of Directors since 1985 and
President from 1979 to 1987 and since 1989. Mr. Fireman has also served as the
chairman of the Entrepreneurial Advisory Board of Babson College since 1995.
Mr. John F. O'Brien has served as a director since 1989. Since August 1989
he has been the President and Chief Executive Officer and a director of First
Allmerica Financial Life Insurance Company (formerly State Mutual Life
Assurance Company of America). Since January 1995 he has been President, Chief
Executive Officer and a Director of Allmerica Financial Corporation, a
financial services holding company. Mr. O'Brien is also President, Chief
Executive Officer and a director of Allmerica Property & Casualty Companies,
Inc.; Chairman of the Board, President and Chief Executive Officer of Citizens
Corporation; and a trustee and Chairman of the Board of Allmerica Securities
Trust, Allmerica Investment Trust and Allmerica Funds. From 1972 until 1989,
Mr. O'Brien was employed by Fidelity Investments in various capacities,
including as Group Managing Director of FMR Corp. Mr. O'Brien is also a
director of Cabot Corporation and TJX Companies, Inc. and a Trustee of the
Worcester Art Museum.
Mr. Desmond H. O'Connell, Jr. has served as a director of the Company since
1995. He has been an independent management consultant since September 1990
and has served as a director of Chryslais International Corporation, an
international contract research organization, since 1991. From December 1992
until December 1993, he served as the Chairman, Management Committee, of
Pharmakon Research International, Inc., a provider of pre-clinical testing
services to pharmaceutical biotechnology companies. During 1991, he briefly
served as Chairman of the Board and Chief Executive Officer of Osteotech,
Inc., a medical products company. Mr. O'Connell was with the BOC Group, PLC,
an industrial gas and health care company, in senior management positions from
1980 to 1990 and was a member of the Board of Directors of BOC Group, PLC from
1983 to 1990. From April 1990 until September 1990, Mr. O'Connell was
President and Chief Executive Officer of BOC Health Care. From 1986 to April
1990, he was Group Managing Director of BOC Group, PLC. Prior to joining BOC,
Mr. O'Connell held various positions at Baxter Laboratories, Inc. including
chief executive of the Therapeutic and Diagnostic Division and Vice President,
Corporate Development.
Mr. Henri A. Termeer has served as a director of the Company since 1987. Mr.
Termeer has served as President and a director of Genzyme, a biotechnology
company engaged in the production and marketing of human health care products,
since 1983, as its Chief Executive Officer since 1985, and as its Chairman of
the Board since 1988. Mr. Termeer is also Chairman of the Board of Genzyme
Transgenics Corporation. He is also a director of AutoImmune, Inc., GelTex
Pharmaceuticals, Inc. and Diacrin, Inc. and serves as a trustee of Hambrecht &
Quist Healthcare Investors and Hambrecht & Quist Life Sciences Investors.
40
CERTAIN TRANSACTIONS
In July 1997, the Company sold a total of 1,242,710 shares of Common Stock
to Genzyme and certain of the Company's directors for a purchase price of
$13.00 per share, for a total purchase price of $16.2 million. The Chief
Executive Officer of Genzyme, Henri A. Termeer, is a director of the Company.
Of the shares sold, 1,153,846 shares were sold to Genzyme, 23,480 shares were
sold to Paul Fireman, 7,692 shares were sold to Desmond H. O'Connell, Jr. and
57,692 shares were sold to John F. O'Brien. In addition, simultaneously with
this transaction, David M. Lederman, the President and Chief Executive Officer
of the Company sold 153,846 shares of Common Stock to Paul Fireman, a director
of the Company. In connection with these transactions, the Company granted
Genzyme certain registration rights with respect to the shares of Common Stock
purchased by Genzyme. Commencing in July 1998, Genzyme may on up to three
occasions require the Company to register not less than 25% of Genzyme's
shares of Common Stock. Genzyme has also been granted certain piggyback
registration rights to participate in underwritten public offerings by the
Company, subject to certain limitations, commencing in July 1998. In addition,
the other purchasers received similar piggyback registration rights commencing
in July 1998, with respect to the 242,710 shares of Common Stock purchased by
them. In connection with its purchase of the Common Stock, Genzyme agreed,
subject to certain limited exceptions, not to acquire additional voting
securities of the Company for a period of five years following the
consummation of the transaction without the consent of the Company, and,
during that five year period, to vote its shares in the same proportion as
votes cast by other stockholders of the Company or, in Genzyme's discretion,
in accordance with the recommendations of the Company's Board of Directors.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 26, 1997, and as
adjusted to reflect the sale of the Common Stock offered hereby, (i) by each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) by each executive officer and
director of the Company, (iii) by all executive officers and directors of the
Company as a group and (iv) by each of the Selling Stockholders. This
information is based upon information received from or on behalf of the named
individuals. All Selling Stockholders are executive officers of the Company.
[Download Table]
BENEFICIAL OWNERSHIP NUMBER BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) OF AFTER OFFERING(1)
----------------------- SHARES -----------------------
NUMBER OF PERCENTAGE OF BEING NUMBER OF PERCENTAGE OF
SHARES OWNERSHIP OFFERED SHARES OWNERSHIP
--------- ------------- ------- --------- -------------
David M. Lederman,
Ph.D(2)................ 1,322,554 16.0% 115,000 1,207,554 11.5%
Genzyme Corporation..... 1,153,846 14.0% -- 1,153,846 11.0%
Robert T.V. Kung,
Ph.D(3)(4)............. 173,188 2.1% 35,000 138,188 1.3%
Eugene D. Rabe(4)....... 18,750 * -- 18,750 *
John F. Thero(4)........ 7,644 * -- 7,644 *
W. Gerald Austen,
M.D.(4)................ 25,400 * -- 25,400 *
Paul Fireman(4)......... 225,226 2.7% -- 225,226 2.1%
John F. O'Brien(4)...... 85,092 1.0% -- 85,092 *
Desmond H. O'Connell,
Jr.(4)................. 18,092 * -- 18,092 *
Henri A. Termeer(4)(5).. 1,179,246 14.2% -- 1,179,246 11.2%
All executive officers
and directors as a
group(2)(3)(4)(5) (9
persons)............... 3,055,192 36.2% 150,000 2,905,192 27.2%
--------
*Represents beneficial ownership of less than 1% of the outstanding shares of
Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Beneficial ownership also
includes shares of stock subject to options currently exercisable or
exercisable within 60 days of September 26, 1997. Percentage of beneficial
ownership is based on 8,263,007 shares of Common Stock outstanding on
September 26, 1997 and 10,513,007 shares of Common Stock outstanding upon
completion of this offering. Unless otherwise noted, each person
identified possesses sole voting and investment power with respect to the
shares listed.
(2) Includes 725,923 shares held by Dr. Lederman's wife, as to which Dr.
Lederman disclaims beneficial ownership.
(3) Includes 60,000 shares held by Dr. Kung's wife and 12,000 shares held in
trust for the benefit of certain relatives of Dr. Kung, as to which Dr.
Kung disclaims beneficial ownership.
(4) Includes the following shares subject to options which are exercisable
within 60 days after September 26, 1997: Dr. Kung--51,188; Mr. Rabe--
18,750; Mr. Thero--7,500; Dr. Austen--25,000; Mr. Fireman--25,000; Mr.
O'Brien--25,000; Mr. O"Connell--5,000; Mr. Termeer--25,000.
(5) Includes 1,153,846 shares held by Genzyme Corporation as to which Mr.
Termeer disclaims beneficial ownership. Mr. Termeer is the Chief Executive
Officer of Genzyme.
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, $.01 par value, and 1,000,000 shares of Class B Preferred Stock,
$.01 par value ("Preferred Stock").
COMMON STOCK
As of September 26, 1997, there were 8,263,007 shares of Common Stock
outstanding. These shares were held of record by approximately 340
stockholders, including multiple beneficial holders at depositories, banks and
brokers listed as a single holder in the street name of each respective
depository, bank or broker. There will be 10,513,007 shares of Common Stock
outstanding after giving effect to the sale of the shares of Common Stock
offered hereby by the Company.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders and are entitled to receive dividends,
if any, as may be declared from time to time by the Board of Directors from
funds legally available therefore. Upon liquidation or dissolution of the
Company, the holders of Common Stock are entitled to receive all assets
available for distribution to the stockholders, subject to any preferential or
other rights of the holders of Preferred Stock. The Common Stock has no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares. The holders
of Common Stock do not have cumulative voting rights in the election of
directors. All of the shares of Common Stock are, and the shares to be sold in
the offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Company has no Preferred Stock outstanding. The Board of Directors has
the authority to issue the Preferred Stock in one or more series and to fix
the dividend rights, dividend rate, conversion rights, voting rights, rights
and terms of redemption, liquidation preferences, sinking fund terms and other
rights, preferences, privileges and restrictions of any series of Preferred
Stock, the number of shares constituting any such series and the designation
thereof, without further vote or action by the stockholders. The Board of
Directors may, without stockholder approval, issue Preferred Stock with rights
and privileges which could, among other things, have the effect of delaying,
deferring or preventing a change in control of the Company. The issuance of
Preferred Stock with voting and conversion rights may adversely affect the
voting power and other rights of the holders of Common Stock, including the
loss of voting control to others. The Company currently has no plans to issue
any of the Preferred Stock. The Board of Directors has designated 25,000
shares of the Preferred Stock as the "Series A Junior Participating Preferred
Stock" in connection with the Rights described below.
ANTI-TAKEOVER EFFECT OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-
LAWS, RIGHTS DISTRIBUTION AND DELAWARE LAW
Certificate of Incorporation and By-laws
The Certificate of Incorporation includes several provisions in addition to
the Preferred Stock, which may render more difficult an unfriendly tender
offer, proxy contest, merger or other change in control of the Company. These
provisions are intended to enhance the likelihood of continuity and stability
in the composition of the Board of Directors and in the policies formulated by
the Board of Directors and to discourage certain types of transactions that
may involve an actual or threatened change of control of the Company. These
provisions are also designed to reduce the vulnerability of the Company to
unsolicited acquisition proposals and to discourage certain tactics that may
be used in proxy fights. However, such provisions could have the effect of
discouraging others from making tender offers for the shares of Common Stock
and, as a consequence, they also may inhibit fluctuations in the market price
of the shares of Common Stock which could result from actual or rumored
takeover attempts. Such factors also may have the effect of preventing changes
in the management of the Company.
43
The Certificate of Incorporation (i) provides for the classification of the
Company's Board of Directors into three classes, (ii) eliminates the ability
of stockholders to enlarge the Board of Directors, (iii) provides that
vacancies in the office of a director shall be in the first instance filled by
the remaining directors, except in the case of the directors elected by the
Common Stock voting as a separate class, in which case it shall be filled by
the holders of that class voting as a separate class, (iv) provides that
directors may only be removed "for cause" and only by the class or classes of
stock which elected them, and (v) requires an 80% affirmative vote of all
votes entitled to be cast to amend the preceding provisions. The
classification of directors has the effect of making it more difficult to
change the composition of the Board of Directors. At least two stockholder
meetings, instead of one, are required to effect a change in the control of
the Board.
The By-laws provide that advance written notice of any stockholder
nomination for director must be provided not less than 45 nor more than 60
days prior to the anticipated date of the annual meeting for election of
directors.
The Certificate of Incorporation explicitly directs the Board of Directors
to take into account all relevant factors in exercising its business judgment
in determining what is in the best interests of the Company and its
stockholders in evaluating certain tender offers and business combination
proposals. Relevant factors include, without limitation, the Board's estimate
of the future value of the Company, the resources and future prospects of the
other party, and the possible social, legal, environmental and economic
effects on the Company and on the employees, customers, suppliers and
creditors of the Company and on the communities in which the Company's
facilities are located.
The Certificate of Incorporation and the By-laws also provide that all
stockholder action must be effected at a duly called meeting and not by
written consent.
The authority of the Board of Directors to issue authorized but unissued
shares of Common Stock might be considered as having the effect of
discouraging an attempt by another person or entity to effect a takeover or
otherwise gain control of the Company since the issuance of additional shares
of Common Stock would dilute the voting power of the Common Stock then
outstanding.
Rights Distribution
On August 13, 1997, the Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of
Common Stock on August 28, 1997 (the "Record Date") to the stockholders of
record on that date. Each Right entitles the registered holder to purchase
from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $0.01 per share (the "Preferred
Shares"), of the Company, at a price of $90.00 per one one-thousandth of a
Preferred Share, subject to adjustment.
Subject to certain limited exceptions until the earlier to occur of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership
of 15% or more of the outstanding shares of Common Stock, or (ii) ten business
days (or such later date as may be determined by action of the Board of
Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by the Common Stock
certificates with a copy of the Summary of Rights attached thereto. As soon as
practicable following the Distribution Date, the rights will become
exercisable, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to stockholders of record on the Distribution
Date and the separate Right Certificates alone will evidence the Rights.
44
The Rights will expire on the earlier of (i) August 13, 2007 or (ii) the date
on which the Rights are redeemed.
In the event that any person becomes an Acquiring Person, proper provision
will be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person and its affiliates and associates (which will
thereafter be void), will thereafter have the right to receive upon exercise,
that number of shares of Common Stock having a market value of two times the
exercise price of the Right. In the event that, at any time after a person
becomes an Acquiring Person, the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have
a market value of two times the exercise price of the Right.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by any person or group of a majority of the outstanding shares of
Common Stock, the Board of Directors may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock per Right, subject to
adjustment. At any time prior to the time any Person becomes an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $0.001 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors without the
consent of the holders of the Rights, except that from and after such time as
any person becomes an Acquiring Person no such amendment may adversely affect
the interests of the holders of the Rights (other than the Acquiring Person
and its affiliates and associates).
Delaware Takeover Statute
Pursuant to Delaware law, Delaware corporations are prohibited from engaging
in a wide range of specified transactions with any "interested stockholder,"
defined to include, among others, any person or entity who in the last three
years obtained 15% or more of any class or series of stock entitled to vote
generally in the election of directors, unless, among other exceptions, the
transaction is approved by (i) the Board of Directors prior to the date the
interested stockholder obtained such status or (ii) the holders of two-thirds
of the outstanding shares of each class or series of stock entitled to vote
generally in the election of directors, not including those shares owned by
the interested stockholder. By virtue of the Company's decision not to opt out
of the provisions of this law, it applies to the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Boston EquiServe
LP.
45
UNDERWRITING
The Underwriters named below, acting through their representatives Robertson,
Stephens & Company LLC and UBS Securities LLC (the "Representatives"), have
severally agreed, subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company and the Selling Stockholders the number
of shares of Common Stock set forth opposite their names below. The
Underwriters are committed to purchase and pay for all such shares, if any are
purchased.
[Download Table]
NUMBER OF
UNDERWRITER SHARES
----------- ---------
Robertson, Stephens & Company LLC..................................
UBS Securities LLC.................................................
---------
Total.......................................................... 2,400,000
=========
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the shares of Common Stock to the
public at the price to the public set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession of not more
than $ per share, of which $ may be reallowed to other dealers. After the
public offering, the public offering price, concession and reallowance to
dealers may be reduced by the Representatives. No such reduction shall change
the amount of proceeds to be received by the Company and Selling Stockholders
as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 360,000
additional shares of Common Stock at the same price per share as the Company
and Selling Stockholders will receive for the 2,400,000 shares that the
Underwriters have agreed to purchase. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage of such additional shares that the
number of shares of Common Stock to be purchased by it shown in the above
table represents as a percentage of the 2,400,000 shares offered hereby. If
purchased, such additional shares will be sold by the Underwriters on the same
terms as those on which the 2,400,000 shares are being sold. The Company will
be obligated, pursuant to the option, to sell shares to the Underwriters to
the extent the option is exercised. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of shares of
Common Stock offered hereby.
46
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.
The Company's executive officers, directors, Genzyme and each of the Selling
Stockholders who, in the aggregate hold approximately 2,872,754 shares of
Common Stock (2,722,754 shares of Common Stock after the sale of shares of
Common Stock by the Selling Stockholders in the offering) have agreed in
writing with the Representatives that, for a period of 90 days from the date
of this Prospectus ("Lock-up Period"), subject to certain limited exceptions,
each will not, directly or indirectly, without the prior written consent of
Robertson, Stephens & Company LLC, sell, offer, contract to sell, pledge,
grant any option to purchase or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable for, or any rights to
purchase or acquire, Common Stock held by them, thereafter acquired by them or
which may be deemed to be beneficially owned by them. However, Robertson,
Stephens & Company LLC may, in its sole discretion at any time or from time to
time, without notice, release all or any portion of the securities subject to
the lock-up agreements. In addition, the Company has agreed that during the
Lock-up Period, it will not, without the prior written consent of Robertson,
Stephens & Company LLC, issue, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any options or warrants to purchase any shares of
Common Stock or any securities convertible into, exercisable for or
exchangeable for shares of Common Stock other than the Company's sale of
shares in this offering, the issuance of Common Stock upon the exercise of
outstanding options and under the Company's existing employee stock purchase
plan, the Company's issuance of options under existing employee and director
stock options plans and under certain other conditions. See "Risk Factors--
Shares Eligible For Future Sale."
The offering price for the Common Stock has been determined by negotiations
among the Company, the Selling Stockholders and the Representatives of the
Underwriters, based largely upon the market price for the Common Stock as
reported on the Nasdaq National Market.
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority in excess of 5% of the number of shares
of Common Stock offered hereby.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level
above that which might otherwise prevail in the open market. A "stabilizing
bid" is a bid for or the purchase of the Common Stock on behalf of the
Underwriters for the purpose of fixing or maintaining the price of the Common
Stock. A "syndicate covering transaction" is the bid for or the purchase of
the Common Stock on behalf of the Underwriters to reduce a short position
incurred by the Underwriters in connection with the offering. A "penalty bid"
is an arrangement permitting the Representatives to reclaim the selling
concession otherwise accruing to an Underwriter or syndicate member in
connection with the offering if the Common Stock originally sold by such
Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed
by such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on the Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.
In connection with this offering, certain Underwriters may engage in passive
market making transactions in the Common Stock on the Nasdaq Stock Market in
accordance with Rule 103 of Regulation M under the Securities Exchange Act of
1934 ("Exchange Act"). Passive market making consists of displaying bids on
the Nasdaq National Market limited by the bid prices of independent market
makers and making purchases limited by such prices and effected in response to
order flow. Net purchases by a passive market maker on each day are limited to
a specific percentage of the passive market maker's average daily trading
volume in the Common Stock during a specific period and must be discontinued
when such limit is reached. Passive market making may stabilize the market
price of the Common Stock at a level above that which might otherwise prevail
and, if commenced, may be discontinued at any time.
47
Since September 1996, an entity affiliated with UBS Securities LLC has
managed certain assets of the Company, primarily in the form of marketable
securities, held by ABD Holding, Inc., a wholly owned subsidiary of the
Company. The Company pays quarterly fees for such services based on a
percentage of the assets managed. UBS Securities LLC also received fees in
connection with its role as the Company's financial advisor in connection with
the implementation of a stockholder rights plan for the holders of the
Company's Common Stock in August 1997 and its opinion as to the fairness from
a financial point of view of the consideration received by the Company
pursuant to a private placement of the Company's Common Stock in July 1997.
See "Certain Transactions."
On June 8, 1997, the parent entities of Robertson, Stephens & Company LLC
agreed to be acquired by BankAmerica Corporation ("Acquisition"). In
connection with the Acquisition, Robertson, Stephens & Company LLC will be
merged with and into BancAmerica Securities, Inc., and the resulting entity
will be named BancAmerica Robertson Stephens.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for the
Company and the Selling Stockholders by Brown, Rudnick, Freed & Gesmer,
Boston, Massachusetts. Certain legal matters in connection with this offering
will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts. A member of Brown, Rudnick, Freed & Gesmer, counsel to
the Company, is the Secretary of the Company.
EXPERTS
The financial statements included or incorporated by reference in this
Prospectus or elsewhere in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included or incorporated by reference
herein upon the authority of said firm as experts in giving said report.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, NW,
Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
Regional Offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New
York 10048, at prescribed rates. In addition, such reports, proxy statements
and information are available through the Commission's Electronic Data
Gathering and Retrieval System at http://www.sec.gov. The Company's Common
Stock is listed on the Nasdaq National Market, and reports, proxy statements
and certain other information concerning the Company can also be inspected at
the offices of the Nasdaq National Market, 1735 K Street NW, Washington, D.C.
20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended, with respect to the Common
Stock being offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
such Registration Statement and the exhibits and schedules thereto to which
reference is hereby made. The statements in this Prospectus as to the contents
of such Registration Statement are qualified in their entirety by such
reference. The Registration Statement, together with its exhibits and
schedules, may be inspected without charge at the Public Reference Section of
the Commission in Washington, D.C. at the address noted above, and copies of
all or any part thereof may be obtained from the Commission upon payment of
the prescribed fees.
48
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997;
(2) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997;
(3) the Company's Current Report on Form 8-K filed with the Commission on
August 25, 1997; and
(4) the description of the Company's Common Stock and the Rights
contained in the Company's Registration Statements on Form 8-A filed with
the Commission on June 11, 1987 and August 25, 1997.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering shall be deemed
to be incorporated by reference in this Prospectus and shall be part hereof
from the date of the filing of such document. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document that also is (or is deemed to be) incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of the Registration Statement or this Prospectus. The Company will provide
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any of the documents referred to above (other than exhibits). Requests for
such documents should be submitted in writing to: Investor Relations, ABIOMED,
Inc., Cherry Hill Drive, Danvers, Massachusetts 01923, or by telephone at
(978) 777-5410.
49
ABIOMED, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
[Download Table]
PAGE
----
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of March 31, 1996 and 1997, June 30, 1997
(unaudited) and Pro Forma June 30, 1997 (unaudited)...................... F-3
Consolidated Statements of Operations for the Fiscal Years Ended March 31,
1995, 1996 and 1997 and for the Three Months Ended June 30, 1996 and 1997
(unaudited).............................................................. F-4
Consolidated Statements of Stockholders' Investment for the Fiscal Years
Ended March 31, 1995, 1996 and 1997 and for the Three Months Ended June
30, 1997 (unaudited) and Pro Forma June 30, 1997 (unaudited)............. F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31,
1995, 1996 and 1997 and for the Three Months Ended June 30, 1996 and 1997
(unaudited).............................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
F-1
ABIOMED, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ABIOMED, Inc.:
We have audited the accompanying consolidated balance sheets of ABIOMED,
Inc. (a Delaware corporation) and subsidiaries as of March 31, 1996 and 1997,
and the related consolidated statements of operations, stockholders'
investment and cash flows for each of the three years in the period ended
March 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ABIOMED, Inc. and
subsidiaries as of March 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
May 8, 1997
F-2
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
[Download Table]
MARCH 31, JUNE 30,
-------------------------- --------------------------
1996 1997 1997 PRO-FORMA
------------ ------------ ------------ ------------
(unaudited) (unaudited)
(Note 10)
ASSETS
Current Assets:
Cash and cash
equivalents (Note
1)................... $ 2,938,332 $ 1,616,696 $ 1,605,276 $ 17,743,006
Short-term marketable
securities (Note 1).. 7,709,110 7,744,664 7,160,563 7,160,563
Accounts receivable,
net of allowance for
doubtful accounts of
$111,000, $229,000
and $223,000 at
March 31, 1996, 1997
and June 30, 1997,
respectively......... 2,606,289 4,816,500 5,860,089 5,860,089
Inventories (Note 1).. 1,653,512 1,820,783 2,013,944 2,013,944
Prepaid expenses and
other current
assets............... 92,280 173,172 203,162 203,162
------------ ------------ ------------ ------------
Total current
assets............. 14,999,523 16,171,815 16,843,034 32,980,764
------------ ------------ ------------ ------------
Property and Equipment,
at cost (Note 1):
Machinery and
equipment............ 2,378,851 3,147,837 3,620,677 3,620,677
Furniture and fixtures
..................... 156,048 241,867 349,791 349,791
Leasehold
improvements......... 378,998 1,118,677 1,186,047 1,186,047
------------ ------------ ------------ ------------
2,913,897 4,508,381 5,156,515 5,156,515
Less -- Accumulated
depreciation and
amortization......... 2,331,145 2,618,603 2,734,487 2,734,487
------------ ------------ ------------ ------------
582,752 1,889,778 2,422,028 2,422,028
Other Assets, net (Note
7): 627,154 485,000 449,462 449,462
------------ ------------ ------------ ------------
$ 16,209,429 $ 18,546,593 $ 19,714,524 $ 35,852,254
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts Payable...... $ 777,943 $ 1,289,024 $ 1,216,225 $ 1,344,064
Accrued expenses
(Notes 8 and 9)...... 1,486,981 2,032,506 2,336,031 2,336,031
------------ ------------ ------------ ------------
Total current
liabilities........ 2,264,924 3,321,530 3,552,256 3,680,095
------------ ------------ ------------ ------------
Commitments (Notes 5 and
7)
Stockholders' Investment
(Notes 2 and 6):
Class B Preferred
Stock, $.01 par
value --
Authorized --
1,000,000 shares
issued and
outstanding-- none... -- -- -- --
Common Stock, $.01 par
value --
Authorized --
25,000,000 shares
issued and
outstanding --
5,518,054, 7,008,282,
7,017,872 and
8,260,582 shares at
March 31, 1996, March
31, 1997, June 30,
1997 and pro forma,
respectively......... 55,180 70,082 70,179 82,606
Class A Common Stock,
$.01 par value --
Authorized --
2,346,000 shares
issued and
outstanding--
1,428,000 shares at
March 31, 1996 and
none at March 31,
1997, June 30, 1997
and pro forma,
respectively......... 14,280 -- -- --
Additional paid-in
capital................ 36,625,221 37,169,893 37,236,040 53,233,504
Accumulated deficit..... (22,750,176) (22,014,912) (21,143,951) (21,143,951)
------------ ------------ ------------ ------------
Total stockholders'
investment............. 13,944,505 15,225,063 16,162,268 32,172,159
------------ ------------ ------------ ------------
$ 16,209,429 $ 18,546,593 $ 19,714,524 $ 35,852,254
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
[Enlarge/Download Table]
THREE MONTHS ENDED
YEARS ENDED MARCH, 31, JUNE 30,
------------------------------------- -----------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
Revenues (Note 1):
Products.............. $ 6,892,931 $ 9,725,332 $12,311,178 $2,868,349 $4,206,743
Contracts............. 2,337,505 3,118,278 4,150,752 816,923 1,829,045
----------- ----------- ----------- ---------- ----------
9,230,436 12,843,610 16,461,930 3,685,272 6,035,788
----------- ----------- ----------- ---------- ----------
Costs and expenses:
Cost of products...... 3,288,833 3,921,319 5,360,449 1,048,699 1,529,278
Research and
development
(Note 1)............. 2,464,519 3,218,211 3,832,918 863,975 1,643,499
Selling, general and
administrative....... 4,278,392 5,740,830 7,068,403 1,519,593 2,116,545
----------- ----------- ----------- ---------- ----------
10,031,744 12,880,360 16,261,770 3,432,267 5,289,322
----------- ----------- ----------- ---------- ----------
Income (loss) from
operations............. (801,308) (36,750) 200,160 253,005 746,466
Interest and other
income............... 449,124 527,874 535,104 130,224 124,495
----------- ----------- ----------- ---------- ----------
Net income (loss)....... $ (352,184) $ 491,124 $ 735,264 $ 383,229 $ 870,961
=========== =========== =========== ========== ==========
Net income (loss) per
common and common
equivalent share (Note
1)..................... $ (0.05) $ 0.07 $ 0.10 $ 0.05 $ 0.12
=========== =========== =========== ========== ==========
Weighted average number
of common and common
equivalent shares
outstanding (Note 1)... 6,511,777 6,995,664 7,162,347 7,206,261 7,567,333
=========== =========== =========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
[Enlarge/Download Table]
CLASS A
COMMON STOCK COMMON STOCK
------------------- --------------------- ADDITIONAL TOTAL
NUMBER $0.01 NUMBER $0.01 PAID-IN ACCUMULATED STOCKHOLDERS'
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT INVESTMENT
--------- --------- ---------- --------- ----------- ------------ -------------
Balance, March 31,
1994................... 4,432,686 $44,327 2,040,000 $20,400 $33,413,242 $(22,889,116) $10,588,853
Stock options
exercised............. 1,100 11 -- -- 6,314 -- 6,325
Stock issued under
employee stock
purchase plan......... 639 7 -- -- 3,873 -- 3,880
Stock issued in
exchange for amount
due to Abiomed Limited
Partnership........... 451,427 4,514 -- -- 3,053,341 -- 3,057,855
Net loss............... -- -- -- -- -- (352,184) (352,184)
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, March 31,
1995................... 4,885,852 48,859 2,040,000 20,400 36,476,770 (23,241,300) 13,304,729
Conversion of Class A
Common Stock to Common
Stock................. 612,000 6,120 (612,000) (6,120) -- -- --
Stock options
exercised............. 19,425 194 -- -- 143,018 -- 143,212
Stock issued under
employee stock
purchase plan......... 777 7 -- -- 5,433 -- 5,440
Net income............. -- -- -- -- -- 491,124 491,124
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, March 31,
1996................... 5,518,054 55,180 1,428,000 14,280 36,625,221 (22,750,176) 13,944,505
Conversion of Class A
Common Stock to Common
Stock................. 1,428,000 14,280 (1,428,000) (14,280) -- -- --
Stock options
exercised............. 59,112 611 -- -- 533,142 -- 533,753
Stock issued to
directors and under
employee stock
purchase plan......... 3,116 11 -- -- 11,530 -- 11,541
Net income............. -- -- -- -- -- 735,264 735,264
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, March 31,
1997................... 7,008,282 70,082 -- -- 37,169,893 (22,014,912) 15,225,063
Stock options
exercised............. 9,590 97 -- -- 66,147 -- 66,244
Net income............. -- -- -- -- -- 870,961 870,961
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, June 30, 1997
(unaudited)............ 7,017,872 70,179 -- -- 37,236,040 (21,143,951) 16,162,268
Pro forma effect of
private placement of
Common Stock ......... 1,242,710 12,427 -- -- 15,997,464 -- 16,009,891
--------- ------- ---------- ------- ----------- ------------ -----------
Pro forma balance,
June 30, 1997
(unaudited)............ 8,260,582 $82,606 -- $ -- $53,233,504 $(21,143,951) $32,172,159
========= ======= ========== ======= =========== ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Enlarge/Download Table]
YEARS ENDED MARCH 31, THREE MONTHS ENDED JUNE 30,
---------------------------------- ----------------------------
1995 1996 1997 1996 1997
--------- ---------- ----------- ------------- -------------
(unaudited) (unaudited)
Cash flows from operating
activities:
Net income (loss)....... $(352,184) $ 491,124 $ 735,264 $ 383,229 $ 870,961
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities --
Depreciation and
amortization.......... 353,293 349,756 429,612 96,084 151,422
Noncash transactions
related to Abiomed
Limited Partnership... (251,883) -- -- -- --
Changes in current
assets and
liabilities --
Accounts receivable... (73,518) (830,555) (2,210,211) 194,412 (1,043,589)
Inventories........... 815,518 (244,232) (167,271) (28,667) (193,161)
Prepaid expenses and
other current
assets............... 58,530 (38,450) (80,892) (87,077) (29,990)
Accounts payable...... (65,894) 579,663 511,081 (169,637) (72,799)
Accrued expenses...... 428,244 259,602 545,525 (230,653) 303,525
--------- ---------- ----------- ------------- -------------
Net cash provided by
(used in) operating
activities......... 912,106 566,908 (236,892) 157,691 (13,631)
--------- ---------- ----------- ------------- -------------
Cash flows from investing
activities:
(Purchases) maturities
of short term
marketable security
investments, net....... (604,618) 2,701,323 (35,554) (1,767,851) 584,101
Purchases of property
and equipment.......... (132,087) (322,642) (1,594,484) (143,735) (648,134)
Purchases of Abiomed
Limited Partnership
units from limited
partners (Note 7)...... -- (770,000) -- -- --
--------- ---------- ----------- ------------- -------------
Net cash provided by
(used in) investing
activities......... (736,705) 1,608,681 (1,630,038) (1,911,586) (64,033)
--------- ---------- ----------- ------------- -------------
Cash flows from financing
activities:
Registration fees and
costs in connection
with exchange of common
stock for amounts due
to Abiomed Limited
Partnership............ (51,573) -- -- -- --
Proceeds from exercise
of stock options and
stock purchase plan.... 10,205 148,652 545,294 197,415 66,244
--------- ---------- ----------- ------------- -------------
Net cash (used in)
provided by
financing
activities......... (41,368) 148,652 545,294 197,415 66,244
--------- ---------- ----------- ------------- -------------
Net increase (decrease)
in cash and cash
equivalents, excluding
investments............. 134,033 2,324,241 (1,321,636) (1,556,480) (11,420)
Cash and cash
equivalents, excluding
investments, at
beginning of period..... 480,058 614,091 2,938,332 2,938,332 1,616,696
--------- ---------- ----------- ------------- -------------
Cash and cash
equivalents, excluding
investments, at end of
period.................. $ 614,091 $2,938,332 $ 1,616,696 $ 1,381,852 $ 1,605,276
========= ========== =========== ============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ABIOMED(R), Inc. and subsidiaries (the Company) is engaged primarily in the
research, development and commercialization of medical devices, with a primary
focus on the development of cardiac support systems. In particular, the
Company markets the BVS-5000(R) system, a bi-ventricular temporary artificial
heart, from which the majority of the Company's product revenues have been
derived. The accompanying consolidated financial statements reflect the
application of certain significant accounting policies described below.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, and beginning in fiscal 1996,
the accounts of its majority-owned subsidiary Abiomed Limited Partnership. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
(b) Uses of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Interim Financial Statements
The accompanying consolidated financial statements include amounts from
interim periods that are unaudited but, in the opinion of management, include
all adjustments (consisting only of normal, recurring adjustments) necessary
for a fair presentation of results for these interim periods. The results of
operations for the three months ended June 30, 1997 are not necessarily
indicative of results to be expected for the fiscal year ending March 31,
1998.
(d) Product Revenues
The Company recognizes product revenues at the time products are shipped to
the customers. Service revenues, which are not material, are recognized over
the periods of the contracts. In fiscal 1995, 1996 and 1997, 13%, 9% and 7%,
respectively, of product revenues were from customers located outside of the
United States. No customer accounted for greater than 10% of product revenues
during fiscal 1995, 1996 or 1997.
(e) Contract Revenues
In fiscal 1995, 1996 and 1997, the majority of the Company's research and
development contract revenues were generated from contracts and grants with
various government agencies. Each of these contracts and grants provide for
revenues on a cost-plus-fixed-fee basis. The Company recognizes revenue under
its government contracts and grants as work is performed, provided that the
government has appropriated sufficient funds for the work. The Company retains
rights to all technological discoveries and products resulting from these
efforts. Costs associated with these contracts and grants are recorded in the
accompanying consolidated financial statements as part of research and
development expenses and totaled approximately $1,718,000, $2,457,000,
$3,232,000, $694,000 and $1,513,000 for fiscal 1995, 1996 and 1997, and for
the three months ended June 30, 1996 and 1997, respectively.
F-7
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
(f) Inventories
Inventories include raw materials, work-in-process and finished goods, are
priced at the lower of cost (first-in, first-out) or market and consist of the
following:
[Download Table]
MARCH 31,
--------------------- JUNE 30,
1996 1997 1997
---------- ---------- -----------
(unaudited)
Raw materials.............................. $ 799,548 $ 896,433 $1,050,941
Work-in-process............................ 428,287 373,383 266,881
Finished goods............................. 425,677 550,967 696,122
---------- ---------- ----------
$1,653,512 $1,820,783 $2,013,944
========== ========== ==========
Finished goods and work-in-process inventories consist of direct material,
labor and overhead.
(g) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations in amounts that allocate the cost of depreciable assets over their
estimated useful lives as follows:
[Download Table]
ESTIMATED
CLASSIFICATION METHOD USEFUL LIFE
-------------- ------ -------------
Machinery and equip-
ment................... Sum-of-the-year's digits/Straight-line 3- 5 Years
Furniture and fixtures.. Sum-of-the-year's digits/Straight-line 5-10 Years
Leasehold improvements.. Straight-line Life of lease
(h) Net Income (Loss) per Common and Common Equivalent Share
Net income per common and common equivalent share is computed by dividing
net income by the weighted average number of common and common equivalent
shares outstanding during the period using the treasury stock method. Net loss
per share is computed by dividing the net loss by the weighted average number
of common shares outstanding during the period excluding the effect of stock
options outstanding.
(i) Cash and Cash Equivalents
The Company classifies any marketable security with an original maturity
date of 90 days or less at the time of purchase as a cash equivalent.
(j) Investments
The Company classifies any security, including marketable securities, with
an original maturity of greater than 90 days as investments and classifies
investments with a maturity of greater than one year from the balance sheet
date as long-term investments.
Under Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
for Certain Investments in Debt and Equity Securities, investments that the
Company has the positive intent and ability to hold to maturity are reported
at amortized cost and classified as held-to-maturity. The Company has
classified all investments at March 31, 1996 and 1997 as held-to-maturity. The
amortized cost and market value of short-term investments were approximately
$7,709,000 and $7,545,000 at March 31, 1996 and $7,745,000 and $7,689,000 at
March 31, 1997, respectively. At March 31, 1997, these short-term investments
consisted of government grade securities.
F-8
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
(k) Disclosures about Fair Value of Financial Instruments
As of March 31, 1996 and 1997 the Company's financial instruments were
comprised of cash and cash equivalents, accounts receivable, accounts payable
and short term investments, the carrying amounts of which approximated fair
market value.
(l) Recent Accounting Pronouncements
For fiscal 1997, under SFAS No. 121 Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to be Disposed of, the Company is
required to review impairment of long-lived assets and certain intangibles
whenever events indicate that the carrying amount of the assets may not be
recoverable. The adoption of this statement did not have a material impact on
the Company's results of operations.
On March 3, 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, Earnings Per Share, superseding Accounting Principles Board
(APB) Opinion No. 15. SFAS No. 128 establishes standards for the computation
and presentation of earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This statement is
effective for fiscal years ending after December 15, 1997 and requires
restatement of all prior-period EPS data presented. The statement is not
expected to have a material impact on the Company's EPS presentation.
(2) CAPITAL STOCK
Each share of Common Stock has a voting right of one vote per share. During
fiscal 1996 and 1997 respectively, 612,000 and 1,428,000 shares of Class A
Common Stock, representing all of the remaining shares of Class A Common
Stock, were converted to Common Stock. As of August 1997, Class A Common Stock
is no longer authorized.
The Company has authorized 1,000,000 shares of Class B Preferred Stock, $.01
par value, of which the designation, rights and privileges can be set by the
Board of Directors. No share of Class B Preferred Stock has been issued or is
outstanding.
On August 13, 1997, the Company declared a dividend of one Preferred Share
Purchase Right (the "Right") for each outstanding share of Common Stock to its
stockholders of record at August 28, 1997. Each right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock with a par value of $0.01 per share, at a
price of $90.00 per one one-thousandth of a share, subject to adjustment.
In accordance with the terms set forth in the Rights Agreement, the Rights
are not exercisable until the occurrence of certain events, as defined. In
addition, the registered holders of the Rights will have no rights as a Common
stockholder of the Company until the Rights are exercised. The terms of the
Rights may be amended by the Board of Directors. The Rights will expire on
August 13, 2007.
(3) LINE OF CREDIT WITH A BANK
The Company has an unsecured demand line of credit under which it can borrow
up to $3,000,000 from a bank at the bank's prime rate. The Company is required
to maintain a compensating balance of $100,000 plus 5% of any amounts
outstanding under the arrangement. There were no borrowings under the
company's line of credit at March 31, 1996 and 1997 and June 30, 1997. The
Company has renewed this line of credit in each of the past three years. The
current line of credit expires in September 1998.
F-9
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
(4) INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. The asset and liability approach
used under SFAS No. 109 requires a recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of other assets and
liabilities.
At March 31, 1997 the Company had available net operating loss carryforwards
of approximately $21,241,000. The Company also had available, at March 31,
1997, approximately $766,000 of tax credits to reduce future federal income
taxes, if any. The net operating loss and tax credit carryforwards expire
through 2010. These carryforwards are subject to review by the Internal
Revenue Service and may be subject to limitation in any given year under
certain conditions.
During 1997, the Company utilized a portion of its net operating loss
carryforward to reduce its current year taxable income. The Company has placed
a valuation allowance of approximately $11,330,000 as of March 31, 1997
against its otherwise recognizable net deferred tax asset due to the
uncertainty surrounding the timing of the realization of the tax benefits.
The deferred tax asset as of March 31, 1996 and 1997 consisted of the
following:
[Download Table]
MARCH 31,
--------------------------
1996 1997
------------ ------------
Purchase of technology (Note 7)................. $ 1,573,000 $ 1,353,000
Net operating loss and tax credit
carryforwards.................................. 9,082,000 9,262,000
Other, net...................................... 549,000 715,000
------------ ------------
11,204,000 11,330,000
Less--Valuation allowance....................... (11,204,000) (11,330,000)
------------ ------------
$ -- $ --
============ ============
(5) COMMITMENTS
(a) The Company leases its facilities and certain equipment under various
operating lease agreements with terms through fiscal 2001. Total rent expense
under these leases, included in the accompanying consolidated statements of
operations, was approximately $262,000, $233,000 and $324,000 for fiscal 1995,
1996 and 1997, respectively.
Future minimum lease payments under these agreements are as follows:
[Download Table]
YEARS ENDED MARCH 31, AMOUNT
--------------------- --------
1998............................................................ $307,000
1999............................................................ 247,000
2000............................................................ 120,000
2001............................................................ 31,000
--------
$705,000
========
F-10
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
(b) The Company maintains various insurance coverages. Most policies renew
on a fiscal year basis while several policies have been secured for a three-
year period. Future insurance obligations under these insurance policies, over
a three-year period, are approximately $540,000.
(6) STOCK OPTIONS PLANS
All stock options granted by the Company under the plans described below
were granted at the fair value of the stock at the date of grant. Outstanding
stock options, if not exercised, expire 10 years from the date of grant.
The 1992 Combination Stock Option Plan (the Combination Plan) as amended,
approved by the Company's stockholders, combined and restated the Company's
then outstanding Incentive Stock Option Plan and Nonqualified Plan. The
options generally become exercisable ratably over five years. All of the
options granted under the Combination Plan during the three years ended March
31, 1997 were to employees.
In addition, the Company has a nonqualified stock option plan for
nonemployee directors (the Directors' Plan). The Directors' Plan, as adopted
in July 1989 and amended, with shareholder approval, granted options to
purchase 12,500 shares of the Company's Common Stock to each of the Company's
then elected outside directors and provides for grants of options to purchase
12,500 shares of the Company's Common Stock to any newly elected eligible
director. Thereafter, each eligible director will be granted a new option to
purchase 12,500 shares of Common Stock on July 1 of each successive fifth
year. These options vest over a five-year period at the rate of 2,500 shares
per year, commencing on June 30 of the year following the date of grant.
F-11
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
The following table summarizes stock option activity under these plans:
[Enlarge/Download Table]
COMBINATION PLAN DIRECTORS' PLAN
--------------------------------- ---------------------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OF PRICE OF PRICE
OPTIONS EXERCISE PRICE PER SHARE OPTIONS EXERCISE PRICE PER SHARE
------- -------------- --------- ------- -------------- ---------
Options outstanding,
March 31, 1994......... 410,830 $ 0.55-$13.50 $ 8.47 95,000 $ 7.00-$13.88 $10.72
Options granted........ 17,000 5.63- 6.50 6.19 -- -- --
Options exercised...... (1,100) 5.75 5.75 -- -- --
Options canceled....... (31,500) 5.75- 13.50 8.48 -- -- --
------- ------------- ------ ------- ------------- ------
Options outstanding,
March 31, 1995......... 395,230 0.55-13.50 8.38 95,000 7.00-13.88 $10.72
Options granted........ 219,000 6.25-11.00 10.23 12,500 11.00 11.00
Options exercised...... (16,925) 5.75- 8.50 7.34 (2,500) 7.00 7.00
Options canceled....... (19,140) 5.75-13.50 9.90 (15,000) 11.00-11.13 11.02
------- ------------- ------ ------- ------------- ------
Options outstanding,
March 31, 1996......... 578,165 0.55-13.50 $ 9.09 90,000 7.00-13.88 10.81
Option granted......... 234,235 11.00-13.50 12.53 -- -- --
Options exercised...... (59,112) 0.55-13.50 8.65 -- -- --
Options canceled....... (55,413) 5.75-13.50 11.45 -- -- --
------- ------------- ------ ------- ------------- ------
Options outstanding,
March 31, 1997......... 697,875 $ 5.63-$13.50 $10.29 90,000 $ 7.00-$13.88 $10.81
Option granted......... 141,500 10.00-12.75 11.09 -- -- --
Options exercised...... (9,590) 5.75- 8.00 6.91 -- -- --
Options canceled....... (600) 8.00 8.00 -- -- --
------- ------------- ------ ------- ------------- ------
Options outstanding,
June 30, 1997.......... 829,185 $ 5.63-$13.50 $10.53 90,000 $ 7.00-$13.88 $10.81
======= =======
Options exercisable:
March 31, 1997......... 179,415 $ 5.63-$13.50 $8.96 70,000 $ 7.00-$13.88 $10.76
======= =======
June 30, 1997.......... 181,225 $ 5.63-$13.50 $9.02 70,000 $ 7.00-$13.88 $10.76
======= =======
Shares available for
Future issuance,
March 31, 1997......... 459,032 107,500
======= =======
June 30, 1997.......... 318,132 107,500
======= =======
The Company has an Employee Stock Purchase Plan (the Purchase Plan), as
amended. Under the Purchase Plan, all employees (including officers and
directors) of the Company who have completed six months of employment are
eligible to purchase the Company's Common Stock at an exercise price equal to
85% of the fair market value of the Common Stock. The Company has reserved
100,000 shares of Common Stock for issuance under the Purchase Plan, of which
90,718 shares are available for future issuance as of March 31, 1997. During
the years ended March 31, 1996 and 1997, 777 shares and 1,116 shares,
respectively, of Common Stock were sold pursuant to the Purchase Plan.
F-12
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
In October 1995, FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 requires the measurement of the fair value of stock
options, including stock purchase plans, or warrants granted to employees to
be included in the statement of operations or disclosed in the notes to
financial statements. The Company has determined that it will continue to
account for stock-based compensation for employees under APB Opinion No. 25
and elect the disclosure-only alternative under SFAS No 123. The Company has
computed the pro forma disclosures required under SFAS No. 123 for options
granted in fiscal 1996 and 1997 using the Black-Scholes option pricing model
prescribed by SFAS No. 123. The weighted average information and assumptions
used for 1996 and 1997 are as follows:
[Download Table]
1996 1997
------- -------
Risk-free interest rate.................................. 6.75% 6.75%
Expected dividend yield.................................. -- --
Expected life............................................ 5 years 5 years
Expected volatility...................................... 30% 33%
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions including expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
The total fair value of the options granted during fiscal 1996 and 1997 was
computed as approximately $431,000 and $598,000, respectively. Of these
amounts approximately $108,000 and $257,000 would be charged to operations for
the years ended March 31, 1996 and 1997 respectively. The remaining amount,
approximately $664,000, would be amortized over the remaining vesting periods.
Similarly, the total fair value of stock sold under this Purchase Plan was
computed as approximately $4,000 and $3,000 during fiscal 1996 and 1997. The
resulting pro forma compensation expense may not be representative of the
amount to be expected in future years as pro forma compensation expense may
vary based upon the number of options granted and shares purchased.
The pro forma net income and pro forma net income per common share presented
below have been computed assuming no tax benefit. The effect of a tax benefit
has not been considered since a substantial portion of the stock options
granted are incentive stock options and the Company does not anticipate a
future deduction associated with the exercise of these stock options.
The pro forma effect of SFAS No. 123 for the years ended March 31, 1996 and
1997 is as follows:
[Download Table]
1996 1997
--------------------- ---------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
Net income..................... $491,124 $379,124 $735,264 $475,264
Pro forma net income per common
and common equivalent share... $ 0 .07 $ 0 .05 $ 0 .10 $ 0 .07
(7) ROYALTY OBLIGATION
Commencing April 1, 1995 and ending August 3, 2000, the Company owes a
royalty to certain third parties equal in aggregate to approximately 2.1% of
certain revenues derived from the BVS 5000 and certain
F-13
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND JUNE 30, 1997 (UNAUDITED)
other technology incorporated in the SupraCor(R). This royalty is subject to
certain maximum revenue amounts and to certain adjustments, as defined, in the
event that the Company sells the underlying technology. For the years ended
March 31, 1996 and 1997, the amount of this royalty, net of certain reimbursed
expenses, was approximately $160,000 and $216,000, respectively. These amounts
are reflected as part of the cost of product sales in the accompanying
consolidated financial statements.
This royalty is paid to the third parties through Abiomed Limited
Partnership which, at present, is inactive except with respect to the
distribution of such royalties. During fiscal 1996, the Company paid $770,000
to reduce its royalty obligation to 2.1%, as described above. This one-time
payment capitalized by the Company, is being amortized on a straight-line
basis over the estimated useful life of the asset (5 years) and, net of
accumulated amortization, is classified as a long-term other asset in the
accompanying consolidated financial statements.
(8) EMPLOYEE DEFERRED COMPENSATION PROFIT-SHARING PLAN AND TRUST
The Company has an Employee Deferred Compensation Profit-sharing Plan and
Trust (the 401(k) Plan) that covers all employees over 20 years of age who
have completed at least six months of service with the Company. Contributions
by the Company are determined by the Company's Board of Directors and totaled
approximately $36,000, $80,000 and $59,000 for the fiscal years ended March
31, 1995, 1996 and 1997, respectively.
(9) ACCRUED EXPENSES
Accrued expenses consist of the following:
[Download Table]
MARCH 31,
--------------------- JUNE 30,
1996 1997 1997
---------- ---------- -----------
(unaudited)
Salaries and benefits..................... $ 703,478 $ 700,570 $ 942,881
Legal and audit........................... 72,436 76,914 60,691
Customer advances......................... 56,067 287,882 357,508
Sales taxes............................... 214,521 172,836 207,493
Warranty.................................. 72,662 227,093 210,354
Other..................................... 367,817 567,211 557,104
---------- ---------- ----------
$1,486,981 $2,032,506 $2,336,031
========== ========== ==========
(10) PRO FORMA INFORMATION (UNAUDITED)
On July 15, 1997, the Company completed a private placement of 1,242,710
shares of its Common Stock. Proceeds to the Company from the private
placement, net of approximately $145,000 in direct transaction related
expenses, totaled approximately $16,010,000. The Company's unaudited pro forma
consolidated balance sheet at June 30, 1997 and pro forma statement of
stockholders' investment for the three months ended June 30, 1997 has been
prepared to give effect to this private placement as if it had occurred on
June 30, 1997, and reflects the increases in common stock, at par value of
$12,427, additional paid-in capital of $15,997,464, cash of approximately
$16,138,000 (net of approximately $17,000 in transaction related expenses) and
accounts payable of approximately $128,000 for the remainder of the
transaction related expenses.
F-14
[DRAWING OF A TAH IMPLANTED THE COMPANY'S TOTAL ARTIFICIAL HEART IS
IN A WOMAN] A CLASS III DEVICE UNDER DEVELOPMENT AND
HAS NOT BEEN APPROVED FOR SALE IN ANY
COUNTRY. THE COMPANY DOES NOT INTEND TO
APPLY FOR REGULATORY APPROVAL TO MARKET
THIS DEVICE FOR SEVERAL YEARS, IF EVER,
AND WILL BE REQUIRED TO SUCCESSFULLY
COMPLETE CLINICAL TRIALS TO DEMONSTRATE
ITS SAFETY AND EFFICACY PRIOR TO FILING
FOR REGULATORY APPROVAL. SEE "RISK
FACTORS."
[ILLUSTRATION OF THE IMPLANTABLE Illustration of the
COMPONENTS] implantable components of the
TAH. The TAH is a battery-
powered totally implantable
artificial heart being
developed as a permanent
replacement device to assume
the full pumping function of
both the left and right
ventricles of the heart.
Developmental model of TAH [PICTURE OF TAH SYSTEM DESCRIBED
thoracic unit shown next to a IN CAPTION]
diseased natural heart.
[ABIOMED LOGO APPEARS HERE]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
[Download Table]
SEC Registration Fee................................................... $14,323
NASD Filing Fee........................................................ 30,500
Nasdaq National Market Listing Fee..................................... 17,500
Transfer Agent and Registrant Fees..................................... 2,500*
Accounting Fees and Expenses........................................... 50,000*
Legal Fees and Expenses................................................ 175,000*
Printing and Engraving ................................................ 60,000*
Miscellaneous.......................................................... 50,177*
-------
TOTAL................................................................ 400,000*
=======
--------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by Delaware law, no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, notwithstanding any other provision of
law. However, a director shall be liable to the extent required by law (i) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Company entered into indemnification agreements with each of its
directors and anticipates that it will enter into similar agreements with any
future director. Generally, these agreements attempt to provide the maximum
protection permitted by Delaware law with respect to indemnification. The
indemnification agreements provide that the Company will pay certain amounts
incurred by a director in connection with any civil or criminal action or
proceeding, specifically including actions by or in the name of the Company
(derivative suits) where the individual's involvement is by reason of the fact
that he is or was a director or officer. For directors, such amounts include,
to the maximum extent permitted by law, attorney's fees, judgments, civil or
criminal fines, settlement amounts and other expenses customarily incurred in
connection with legal proceedings. Under the indemnification agreements, a
director will not receive indemnification if the director is found not to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. The Company has also entered
into similar agreements with certain of the Company's officers and top
management personnel who are not also directors. The indemnification
agreements with officers are slightly more restrictive. Generally, the
indemnification agreements attempt to provide the maximum protection permitted
by Delaware law with respect to indemnification of directors and officers.
The effect of these provisions would be to permit such indemnification by
the Company for liabilities arising under the Securities Act of 1933, as
amended.
Reference is hereby made to Section 8 of the Underwriting Agreement among
the Company, the Selling Stockholders and the Underwriters, filed as Exhibit
1.1 to this Registration Statement, for a description of indemnification
arrangements among the Company, the Selling Stockholders and the Underwriters.
Reference is hereby made to Section 2 of the Selling Stockholder Agreement
among the Company and the Selling Stockholders, filed as Exhibit 99.1 to this
Registration Statement, for a description of indemnification arrangements
among the Company and the Selling Stockholders.
II-1
ITEM 16. EXHIBITS
[Download Table]
EXHIBIT
NUMBER
-------
1.1 Form of Underwriting Agreement***
3.1 Restated Certificate of Incorporation of the Company**
3.2 Restated Bylaws of the Company--Filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1991*
Certificate of Designations of Series A Junior Participating
3.3 Preferred Stock**
4.1 Specimen Certificate of Common Stock--Filed as Exhibit 4.1 to
Registration Statement No. 33-14861 on Form S-1*
4.2 Description of Capital Stock (contained in the Restated
Certificate of Incorporation of the Company filed as Exhibit 3.1
and in the Certificate of Designations of Series A Junior
Participating Preferred Stock filed as Exhibit 3.3)**
4.3 Rights Agreement between the Registrant and BankBoston, N.A., as
Rights Agent dated as of August 13, 1997 (including Form of
Right Certificate attached thereto as Exhibit A)--Filed as
Exhibit 4 to the Registrant's Current Report on Form 8-K, dated
August 13, 1997*
5.1 Legal Opinion of Brown, Rudnick, Freed & Gesmer**
23.1 Consent of Arthur Andersen LLP**
Consent of Brown, Rudnick, Freed & Gesmer (included in Exhibit
23.2 5.1)**
Power of Attorney (included on the signature page of this
24.1 Registration Statement)**
99.1 Selling Stockholder Agreement***
99.2 Common Stock Purchase Agreement between the Company and Genzyme
Corporation**
99.3 Common Stock Purchase Agreements between the Company and certain
directors**
--------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to
the Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Filed herewith.
*** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Registrants By-Laws, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event
II-2
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(b) The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
initial bona fide offering thereof.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF BOSTON, COMMONWEALTH OF MASSACHUSETTS, ON SEPTEMBER
29, 1997.
ABIOMED, Inc.
/s/ Dr. David M. Lederman
By: _________________________________
DR. DAVID M. LEDERMANPRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dr. David M. Lederman and John F. Thero his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, and, in
connection with any registration of additional securities pursuant to Rule
462(b) under the Securities Act of 1933, as amended, to sign any abbreviated
registration statement and any and all amendments thereto, and to file the
same, with all exhibits thereto and other documents in connection therewith,
in each case, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ David M. Lederman Chief Executive September 29,
------------------------------------- Officer, President 1997
DAVID M. LEDERMAN and Director
(Principal
Executive Officer)
/s/ John F. Thero Chief Financial September 29,
------------------------------------- Officer, Vice 1997
JOHN F. THERO President--Finance
and Treasurer
(Principal Financial
and Accounting
Officer)
II-4
SIGNATURE TITLE DATE
/s/ Desmond H. O'Connell, Jr. Director September 29,
------------------------------------- 1997
DESMOND H. O'CONNELL, JR.
Director September ,
------------------------------------- 1997
JOHN F. O'BRIEN
/s/ Henri A. Termeer Director September 29,
------------------------------------- 1997
HENRI A. TERMEER
/s/ W. Gerald Austen Director September 29,
------------------------------------- 1997
W. GERALD AUSTEN
/s/ Paul Fireman Director September 29,
------------------------------------- 1997
PAUL FIREMAN
II-5
EXHIBIT INDEX
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1 Form of Underwriting Agreement***
3.1 Restated Certificate of Incorporation of the Company**
3.2 Restated Bylaws of the Company--Filed as Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1991*
Certificate of Designations of Series A Junior Participating Preferred
3.3 Stock**
4.1 Specimen Certificate of Common Stock--Filed as Exhibit 4.1 to
Registration Statement No. 33-14861 on Form S-1*
4.2 Description of Capital Stock (contained in the Restated Certificate of
Incorporation of the Company filed as Exhibit 3.1 and in the
Certificate of Designations of Series A Junior Participating Preferred
Stock filed as Exhibit 3.3)**
4.3 Rights Agreement between the Registrant and BankBoston, N.A., as
Rights Agent dated as of August 13, 1997 (including Form of Right
Certificate attached thereto as Exhibit A)--Filed as Exhibit 4 to the
Registrant's Current Report on Form 8-K, dated August 13, 1997*
5.1 Legal Opinion of Brown, Rudnick, Freed & Gesmer**
23.1 Consent of Arthur Andersen LLP**
23.2 Consent of Brown, Rudnick, Freed & Gesmer (included in Exhibit 5.1)**
Power of Attorney (included on the signature page of this Registration
24.1 Statement)**
99.1 Selling Stockholder Agreement***
99.2 Common Stock Purchase Agreement between the Company and Genzyme
Corporation**
99.3 Common Stock Purchase Agreements between the Company and certain
directors**
--------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to
the Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Filed herewith.
*** To be filed by amendment.
Dates Referenced Herein and Documents Incorporated by Reference
10 Subsequent Filings that Reference this Filing
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent
11/03/22 ABIOMED, Inc. 10-Q 9/30/22 88:14M Donnelley … Solutions/FA
8/04/22 ABIOMED, Inc. 10-Q 6/30/22 89:12M Donnelley … Solutions/FA
5/20/22 ABIOMED, Inc. 10-K 3/31/22 113:18M Donnelley … Solutions/FA
2/03/22 ABIOMED, Inc. 10-Q 12/31/21 89:13M ActiveDisclosure/FA
10/28/21 ABIOMED, Inc. 10-Q 9/30/21 90:13M ActiveDisclosure/FA
8/05/21 ABIOMED, Inc. 10-Q 6/30/21 92:11M ActiveDisclosure/FA
5/21/21 ABIOMED, Inc. 10-K 3/31/21 112:19M ActiveDisclosure/FA
2/04/21 ABIOMED, Inc. 10-Q 12/31/20 90:14M ActiveDisclosure/FA
11/06/20 ABIOMED, Inc. 10-Q 9/30/20 88:13M ActiveDisclosure/FA
8/06/20 ABIOMED, Inc. 10-Q 6/30/20 87:11M ActiveDisclosure/FA
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