NOVOSTE CORP /FL/, 424B4, 1997-11-19

NOVOSTE CORP /FL/
424B4, 1997-11-19
MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES

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<PAGE> 1
Filed Pursuant to Rule 422(b)(4)
Registration No. 333-38573

PROSPECTUS
dated November 17, 1997

2,000,000 SHARES

[NOVOSTE, INC. LOGO]

COMMON STOCK

Of the 2,000,000 shares of Common Stock offered hereby, 1,600,000 shares are
being issued and sold by Novoste Corporation ("Novoste" or the "Company") and
400,000 shares are being offered by certain shareholders of the Company (the
"Selling Shareholders"). See "Principal and Selling Shareholders." The Company
will not receive any proceeds from the shares being sold by the Selling
Shareholders.

The Common Stock is traded on The Nasdaq National Market under the symbol
"NOVT." On November 17, 1997, the last sale price of the Common Stock on The
Nasdaq National Market was $20.00 per share. See "Price Range of Common Stock."

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $19.50 $1.17 $18.33 $18.33
- -----------------------------------------------------------------------------------------------------------------
Total(3)..................... $39,000,000 $2,340,000 $29,328,000 $7,332,000
=================================================================================================================
</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including under the Securities Act
of 1933. See "Underwriting."
(2) Before deducting offering expenses payable by the Company estimated at
$350,000.
(3) The Company and two Selling Shareholders have granted the Underwriters a
30-day option to purchase up to an aggregate of 300,000 shares of Common
Stock solely to cover over-allotments, if any, at the Price to Public less
the Underwriting Discount. If the Underwriters exercise this option in full,
the total Price to Public, Underwriting Discount, Proceeds to Company and
Proceeds to Selling Shareholders will be $44,850,000, $2,691,000,
$32,444,100 and $9,714,900, respectively. See "Underwriting."

The shares of Common Stock are offered by the Underwriters subject to prior sale
when, as, and if delivered and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
certificates representing the shares of Common Stock will be made at the offices
of Piper Jaffray Inc. in Minneapolis, Minnesota on or about November 21, 1997.

PIPER JAFFRAY INC.
COWEN & COMPANY
NATIONSBANC MONTGOMERY SECURITIES, INC.
<PAGE> 2

[A/H diagram of Beta-Cath System device with a description of its
anticipated benefits and its component parts. Also includes a rendering of a
human heart with a close-up view of the Beta-Cath System catheter inside a
coronary artery.]

The Company's Beta-Cath System is an investigational device and has not
been approved by the FDA for commercial sale in the United States. The Beta-Cath
System is in the early stage of clinical testing and clinical data obtained to
date are insufficient to demonstrate safety and efficacy. There can be no
assurance that the Beta-Cath System will receive FDA approval if such approval
is sought.
---------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH OTHERWISE MIGHT PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, 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 NATIONAL
MARKET IN ACCORDANCE WITH REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF
1934. SEE "UNDERWRITING."

Novoste(TM), Beta-Cath(TM) and the Novoste(TM) logo are trademarks of the
Company.

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<PAGE> 3

AVAILABLE INFORMATION

The Company is subject to the reporting requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company with the
Commission can be inspected, without charge, and copies may be obtained upon
payment of the fees prescribed by the Commission, from the Public Reference
Section of the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information of registrants that file electronically with the Commission pursuant
to the EDGAR system. The address of the Commission's Web site is
http://www.sec.gov.

The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments thereto) on Form S-3 under the Securities
Act with respect to the Common Stock offered by this Prospectus (the
"Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement and the exhibits thereto.
Statements made in this Prospectus as to the contents of any contract or any
other document are not necessarily complete and, in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Copies of the Registration Statement, including all exhibits
thereto, may be obtained, upon payment of the fees prescribed by the Commission,
from the Public Reference Rooms of the Commission's offices in Washington, D.C.,
Chicago and New York at the addresses set forth above, or may be examined
without charge at those offices of the Commission. The Registration Statement,
including the exhibits and schedules thereto, can also be accessed through the
Commission's Web site at http://www.sec.gov.

---------------------

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, (ii) Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997 and (iii) Definitive Proxy
Statement for the June 20, 1997 Annual Meeting of Shareholders, heretofore filed
with the Commission, are incorporated in this Prospectus by reference. All
reports and proxy statements filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of this Offering shall likewise be
deemed to be incorporated in this Prospectus by reference from the respective
dates of filing of such documents.

Any statements contained herein or 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 which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

Upon oral or written request, the Company will provide without charge a
copy of any document incorporated in this Prospectus, exclusive of exhibits, to
each person to whom this Prospectus is delivered. Requests for such documents
should be directed to Cheryl Johnson, Vice President, Investors Relations and
Business Development at the corporate headquarters of the Company, 4350-C
International Blvd., Norcross, Georgia 30093 (telephone no. 770-717-0904).

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<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and the Financial Statements and
the Notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, all information in the Prospectus assumes no exercise of the
Underwriters' over-allotment option.

THE COMPANY

Novoste Corporation ("Novoste" or the "Company") is developing the
Beta-Cath System, an intraluminal beta radiation catheter delivery system
designed to reduce the frequency of restenosis subsequent to percutaneous
transluminal coronary angioplasty ("PTCA"). The Beta-Cath System applies
localized beta radiation to the site of the vascular injury caused by a PTCA
procedure and is designed to inhibit long-term cell proliferation
("hyperplasia") and vascular remodeling, each primary causes of restenosis.

The Company has conducted feasibility trials at two U.S. medical centers
under an Investigational Device Exemption ("IDE") granted by the U.S. Food and
Drug Administration ("FDA") and at a Canadian and a European site. As of
November 14, 1997, a total of 84 patients had been enrolled in these studies. Of
the 35 patients which, as of September 25, 1997, had received six-month
follow-up and analysis, 11% (four patients) were reported restenotic. This data
suggests a 70% reduction in the rate of restenosis in patients who received
treatment with the Beta-Cath System, when compared to a historical control group
which received PTCA only. Of these 35 patients, treated arteries on average
maintained 100% of the enlargement achieved with PTCA (a late loss index of 0%).
Using data from these feasibility trials, the Company intends to submit by the
end of the first quarter of 1998 an application for a CE mark to commence
marketing of the Beta-Cath System in Europe.

More than 13 million people in the United States currently suffer from
coronary artery disease, the leading cause of death in the United States.
Coronary artery disease is characterized by the progressive accumulation of
plaque, which narrows the coronary artery and reduces blood flow to the heart
muscle. Coronary artery bypass graft surgery ("CABG"), in which blood-vessel
grafts are used to bypass the site of a blocked artery, has been shown to be
highly effective in treating coronary artery disease. However, CABG is a highly
invasive, traumatic and expensive surgical procedure. PTCA, in which a small
balloon catheter is inflated in the narrowed section of a coronary artery,
emerged as a highly effective, less invasive alternative to CABG. In 1996,
approximately 400,000 CABG and approximately 500,000 PTCA procedures were
performed in the United States.

The principal limitation of PTCA is a high rate of restenosis, a
renarrowing of the treated artery often requiring reintervention. Studies have
shown restenosis to affect between 25% to 45% of patients within six months
after a PTCA procedure. The use of coronary stents (expandable, implantable
metal devices) to reduce the rate of restenosis has grown rapidly as an
adjunctive therapy to PTCA. Studies have concluded that the rate of restenosis
in patients who receive coronary stents following PTCA is approximately 30%
lower than in patients treated only by PTCA. Restenosis can occur shortly after
a PTCA procedure due to elastic recoil, or over a longer period of time due to
hyperplasia or vascular remodeling of the arterial segment. Stents appear to be
effective in reducing the frequency of restenosis resulting from elastic recoil,
and appear to limit vascular remodeling, but increase, rather than decrease,
hyperplasia.

4
<PAGE> 5

The Beta-Cath System targets the primary causes of restenosis by attempting
to prevent or inhibit hyperplasia and long-term vascular remodeling by applying
localized beta radiation to the treated site in the coronary artery immediately
following PTCA. Radiation has been used therapeutically in medicine for more
than 50 years and is used extensively for the treatment of proliferative cell
diseases, such as cancer. The Beta-Cath System has been designed to use beta
rather than gamma radiation because the Company believes it is better suited for
intraluminal use following PTCA, where the objective is to treat the wall of an
artery with minimal radiation exposure to adjacent tissue. The Beta-Cath System
is designed to be safe and to fit well with techniques currently employed by
interventional cardiologists in the cardiac catheterization lab. The Company
expects that the Beta-Cath System will provide significant cost savings, to the
extent that it (i) reduces the need for reintervention often required following
PTCA and coronary stenting and (ii) replaces coronary stents as a primary
therapy.

The Company's objective is to become the leader in the commercialization of
intravascular radiation devices for the treatment of restenosis. Key elements of
the Company's strategy include (i) achieving first-to-market position in the
United States for an intracoronary beta radiation device, (ii) establishing beta
radiation therapy as the standard therapy to reduce the frequency of restenosis
following PTCA, (iii) seeking early commercialization in countries with
favorable regulatory and market environments, and (iv) leveraging the Company's
core catheter and radioactive isotope technologies to expand its product
offerings to include peripheral angioplasty and other potential applications.

Novoste, a development stage company with minimal revenues to date, was
incorporated in Florida in January 1987 and was capitalized and commenced
operations in May 1992. The Company's executive offices are located at 4350-C
International Blvd., Norcross, Georgia 30093.

5
<PAGE> 6

THE OFFERING

Common Stock offered by the
Company........................... 1,600,000 shares

Common Stock offered by Selling
Shareholders...................... 400,000 shares

Common Stock to be outstanding after
the Offering...................... 10,131,675 shares (1)

Use of proceeds..................... To fund human clinical trials, to
expand sales and marketing
capabilities, to expand manufacturing
activities, to conduct further research
and development projects and for
general corporate purposes, including
working capital. See "Use of Proceeds."

Nasdaq National Market symbol....... NOVT.

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
NINE MONTHS ENDED (MAY 22, 1992)
SEPTEMBER 30, YEAR ENDED DECEMBER 31, THROUGH
------------------ --------------------------- SEPTEMBER 30,
1997 1996 1996 1995 1994 1997
-------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................. $ 29 $ -- $ -- $ 17 $ 73 $ 320
Costs and expenses:
Research and development................ 8,619 2,799 4,647 2,089 1,404 17,506
General and administrative.............. 1,342 1,092 1,575 466 526 5,430
Marketing............................... 575 341 581 659 292 2,107
-------- ------- ------- ------- ------- --------
Loss from operations...................... (10,507) (4,232) (6,803) (3,197) (2,149) (24,723)
Net interest income (expense)............. 940 472 864 (21) (47) 1,750
-------- ------- ------- ------- ------- --------
Net loss.................................. $ (9,567) $(3,760) $(5,939) $(3,218) $(2,196) $(22,973)
======== ======= ======= ======= ======= ========
Net loss per share(1)..................... $ (1.14) $ (0.60) $ (0.88) $ (0.69) $ (0.54)
======== ======= ======= ======= =======
Shares used to compute net loss per
share(2)................................ 8,376 6,275 6,748 4,671 4,031
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $18,066 $ 47,044
Total assets.............................................. 21,274 50,252
Deficit accumulated during development stage.............. (22,973) (22,973)
Total shareholders' equity................................ 19,493 48,471
</TABLE>

- ---------------

(1) Based on the number of shares of Common Stock outstanding on November 14,
1997. Excludes 1,646,450 shares of Common Stock issuable upon exercise of
outstanding options on such date, which had a weighted average exercise
price of $3.27 per share.

(2) See Note 1 to the Financial Statements for an explanation of the method used
to determine net loss per share.

(3) Gives effect to the sale of the 1,600,000 shares of Common Stock offered by
the Company hereby and the application of the estimated net proceeds
therefrom, after deducting underwriting discounts and commissions and
estimated offering expenses. See "Use of Proceeds" and "Capitalization."

6
<PAGE> 7

SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain qualifying, forward-looking statements. Certain information
included in this Prospectus and other materials filed or to be filed by the
Company with the Securities and Exchange Commission (as well as certain
information included in oral statements or other written statements made or to
be made by the Company) may contain statements that are forward-looking, such as
statements relating to projected financial items and results, safety and
efficacy of the Beta-Cath System, receipt and timing of regulatory approvals and
availability and market acceptance of the Beta-Cath System. Such forward-looking
information involves important risks and uncertainties that could significantly
impact anticipated results in the future and, accordingly, such results may
differ materially from those expressed in any forward-looking statements by or
on behalf of the Company. These risks and uncertainties include, but are not
limited to, those described under "Risk Factors," below.

RISK FACTORS

An investment in the shares of Common Stock being offered hereby involves a
high degree of risk. In addition to the other information in this Prospectus,
the following risk factors should be considered carefully.

DEPENDENCE ON BETA-CATH SYSTEM

The Company, which has not yet commercialized any of its products,
anticipates that for the foreseeable future it will be solely dependent on the
successful development and commercialization of the Beta-Cath System. The
Beta-Cath System will require further development, as well as regulatory
clearance or approval, before it can be marketed in the United States or
internationally. There can be no assurance that the Company's development
efforts will be successful or that the Beta-Cath System will be shown to be safe
or effective, capable of being manufactured in commercial quantities at
acceptable costs, cleared or approved by regulatory authorities or successfully
marketed. In addition, there can be no assurance that demand for the Beta-Cath
System will be sufficient to allow profitable operations. Failure of the
Beta-Cath System to be successfully commercialized would have a materially
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- The Beta-Cath System," " -- Sales and Marketing,"
" -- Manufacturing" and " -- Government Regulation."

ACCUMULATED DEFICIT; EXPECTATION OF FUTURE LOSSES

Novoste has earned minimal revenues and experienced significant losses in
each year since its inception in May 1992. The Company's losses are due
primarily to substantial expenditures related to the development of its
Beta-Cath System. At September 30, 1997, the Company had an accumulated deficit
of approximately $23.0 million since its inception. The Company will incur
significant additional operating losses through at least 1999 as the Company
continues to expand its research and development, clinical trials, and marketing
and sales efforts. The Company's ability to achieve profitable operations is
dependent solely on successfully commercializing its Beta-Cath System. There can
be no assurance that the Company will ever commercialize the Beta-Cath System or
any of its other products or achieve profitability. See "Management's Discussion
and Analysis of Financial Condition and Results of Operation."

EARLY STAGE OF CLINICAL TESTING; NO ASSURANCE OF SAFETY AND EFFICACY

The Beta-Cath System is in an early stage of clinical testing, and there
can be no assurance as to when, if ever, its safety and efficacy in reducing the
frequency of restenosis will be demonstrated. The Company has commenced a
randomized, triple-masked, placebo-controlled, multicenter, human clinical trial
under an Investigational Device Exemption ("IDE") granted by the U.S. Food and
Drug Administration ("FDA") to determine the clinical safety and efficacy of the
Beta-Cath System for use in coronary arteries. As of November 14, 1997, the
Company had commenced enrollment of patients at 13 of the 30 medical sites
expected to participate in the trial. Various factors, including difficulties in
enrolling patients or physicians, and problems in producing the number of
Beta-Cath Systems required to conduct the trial, could delay the

7
<PAGE> 8

start of the trial at the balance of the sites for an indeterminate amount of
time. The multicenter trial will require the treatment of a statistically
significant number of patients, and clinical follow-ups with such patients after
eight months. It is only after completion of these trials that the Company would
apply for the regulatory approvals required to commence marketing of the
Beta-Cath System in the United States. Moreover, even if FDA approval is granted
to market the Beta-Cath System, subsequent experience may uncover unforeseen
problems with the therapy which could require removal of the product from the
market or additional testing. There can be no assurance that the Beta-Cath
System or any of the Company's other products will prove to be safe and
effective in clinical trials or ultimately will be approved for marketing by
United States or foreign regulatory authorities. The Company does not expect to
submit an application for pre-market approval ("PMA") for its Beta-Cath System
for at least one year, and there can be no assurance that the Company will ever
submit a PMA or that, if submitted, such PMA will be approved by the FDA. If the
Beta-Cath System does not prove to be safe and effective in clinical trials, the
Company's business, financial condition and results of operations will be
materially adversely affected and could result in cessation of the Company's
business. In addition, the clinical trials may identify significant technical or
other obstacles to be overcome prior to obtaining necessary regulatory
approvals. Even if such obstacles are identified and overcome, commercialization
of the Beta-Cath System may be delayed. See "Business -- Clinical Status" and
" -- Government Regulation."

NO ASSURANCE OF TIMELY REGULATORY APPROVAL; GOVERNMENT REGULATION

The Company will not be able to commence marketing or commercial sales of
the Beta-Cath System in the United States until it receives approval from the
FDA of a PMA application for the Beta-Cath System. The Company commenced the
multicenter clinical trial necessary to support a PMA application in July 1997.
The Company does not expect to file a PMA application until the end of the first
half of 1999, and does not anticipate receiving approval for at least one year
after a PMA application is accepted for filing, if at all. Even if the Company's
PMA application is accepted for filing, there can be no assurance that the FDA
will approve the PMA application. Accordingly, there can be no assurance as to
when, or if, the Company will complete clinical trials of the Beta-Cath System,
or that data from such trials, if completed, will be adequate to support
approval of a PMA for the Beta-Cath System. Furthermore, there can be no
assurance that the Company will be able to obtain approval of its PMA
application on a timely basis, if at all, and delays in the receipt of or
failure to receive such approvals would have a material adverse effect on the
Company's business, financial condition and results of operations, and could
result in cessation of the Company's business.

Sales of the Beta-Cath System outside the United States will be subject to
regulatory requirements that vary widely from country to country but generally
include pre-marketing governmental approval. The time required to obtain
approval for sale in foreign countries may be longer or shorter than required
for FDA approval, and the requirements for the conduct of clinical trials,
marketing authorization, pricing and reimbursement may differ from the FDA
requirements. In addition, there may be foreign regulatory barriers other than
PMA approval, and the export of medical devices must be in compliance with FDA
regulations. In Europe, commencing in 1998 the Company will be required to
obtain certifications necessary to enable the CE mark to be affixed to the
Beta-Cath System to market devices throughout the European Union. Additionally,
the Company may choose to maintain ISO 9001 and is required to maintain EN 46001
certification, subject to periodic surveillance audits. The foreign regulatory
approval process generally includes all of the risks associated with FDA
approval in the United States. The Company may be required to spend significant
capital and time to respond to requests for additional information by the FDA or
foreign regulatory bodies, or may otherwise be required to spend significant
amounts of capital and time to obtain FDA and foreign regulatory approvals. Any
such events could substantially delay or preclude the Company from marketing the
Beta-Cath System in the United States or foreign countries.

Any devices 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 and foreign regulatory authorities. Foreign
and domestic regulatory approvals, if granted, may include significant
limitations on the indicated uses for which the product may be marketed. FDA
enforcement policy strictly prohibits the promotion and/or marketing of approved
medical devices for unapproved uses. In addition, product approvals

8
<PAGE> 9

could be withdrawn for failure to comply with regulatory standards or the
occurrence of unforeseen problems following the initial marketing. In addition,
the FDA and certain state and foreign regulatory authorities impose numerous
other requirements with which medical device manufacturers must comply. The
Company is also required to adhere to applicable FDA regulations set forth in
current Good Manufacturing Practices ("GMP") requirements, which include
testing, control and documentation requirements. Ongoing compliance with GMP and
other applicable regulatory requirements are monitored through periodic
inspections by state and federal agencies, including the FDA, and by comparable
agencies in other countries. Failure to comply with applicable regulatory
requirements, including marketing products for unapproved uses, could result in,
among other things, warning letters, fines, injunctions, civil penalties, recall
or seizure of products, total or partial suspension of production, refusal of
the government to clear pre-market notification or grant approval of the
Company's PMA application for the Company's products, withdrawal of approvals
and criminal prosecution. Changes in existing regulations or adoption of new
regulations or policies could prevent the Company from obtaining, or affect the
timing of, future regulatory approvals or clearances.

Because the Beta-Cath System utilizes radiation sources, its manufacture,
distribution, transportation, import/export, use and disposal will also be
subject to federal, state and/or local laws and regulations relating to the use
and handling of radioactive materials. Specifically, in addition to PMA
approval, approval by the U.S. Nuclear Regulatory Commission ("NRC"), or an
equivalent state agency, of the Company's radiation sources for certain medical
uses will be required to distribute commercially the radiation sources to
licensed recipients in the United States. Comparable, or perhaps more stringent,
radiation regulatory requirements and/or approvals are required in markets
outside the United States, including approvals prior to marketing the Beta-Cath
System in Europe, or even after affixing the CE mark for marketing the device in
Europe. In addition, the Company and/or its supplier of radiation sources must
obtain a license from the NRC to distribute commercially such radiation sources
as well as to comply with all applicable regulations. The Company and/or its
supplier of radiation sources must also comply with NRC and U.S. Department of
Transportation regulations on the labeling and packaging requirements for
shipment of radiation sources to hospitals or other users of the Beta-Cath
System. In addition, hospitals may be required to obtain or expand their
licenses to use and handle beta radiation prior to receiving radiation sources
for use in the Beta-Cath System. If any of the foregoing approvals are
significantly delayed or not obtained, the Company's business, financial
condition and results of operations could be materially adversely affected. See
"Business -- Government Regulation."

UNCERTAINTY OF MARKET ACCEPTANCE

There can be no assurance that the Beta-Cath System will gain any
significant market acceptance among physicians, patients and health care payors,
even if required regulatory approvals are obtained. The Company believes that
achieving market acceptance will depend heavily on the results of clinical
trials and the Company's ability to demonstrate, through such trials, a
significant reduction in restenosis rates using the Beta-Cath System. There can
be no assurance that the Company's clinical trials will achieve such results.
Market acceptance of the Beta-Cath System may also depend on educating
physicians regarding the use of a new procedure, overcoming physician objections
to the use of radiation in the cardiac catheterization laboratory ("cath lab")
and convincing health care payors and health care providers that the benefits of
using the Beta-Cath System outweigh its cost. There can be no assurance that the
Company will be successful in achieving these goals. See "Business -- Sales and
Marketing, " -- Government Regulation" and " -- Third-Party Reimbursement."

UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY

On November 4, 1997, Novoste was issued United States Patent No. 5,683,345
on the Beta-Cath System. The Company also has filed a related United States
continuation-in-part application (which is jointly owned by Novoste and Emory
University), and has a related United States continuation application and
another United States application pending covering aspects of the Beta-Cath
System. With respect to U.S. Patent No. 5,683,345, Novoste has counterpart
applications pending in the European Patent Office and certain other countries.
With respect to the continuation-in-part and other applications, Novoste has
filed

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<PAGE> 10

counterpart applications under the Patent Cooperation Treaty, preserving the
Company's right to file applications in the European Patent Office and certain
other countries. There can be no assurance that U.S. Patent No. 5,683,345 will
offer any protection to the Company or that it will not be reexamined,
invalidated or circumvented. In addition, there can be no assurance that any
claims under the other pending applications will be allowed, or if allowed, will
offer any protection or that they will not be rejected, challenged, reexamined,
invalidated or circumvented. In addition, there can be no assurance that
competitors will not obtain patents that will prevent, limit or interfere with
the Company's ability to make, use or sell its products in either the United
States or international markets.

The Company received a letter from NeoCardia, L.L.C. ("NeoCardia") dated
July 7, 1995, in which NeoCardia notified the Company that NeoCardia is the
exclusive licensee of U.S. Patent No. 5,199,939 (the "Dake Patent") and
requested that the Company confirm that its products did not infringe the claims
of the Dake Patent. The Company has concluded based upon advice of patent
counsel that the Company's Beta-Cath System would not infringe any valid claim
of the Dake Patent. On August 22, 1995, on behalf of the Company, its patent
counsel responded that the Company did not infringe the Dake Patent.

In June 1997, the United States Patent and Trademark Office ("USPTO")
issued a final Office Action with respect to two consolidated reexamination
requests relating to the Dake Patent. In the final Office Action, the patent
examiner upheld the patentability of some of the original claims and certain new
claims for the Dake Patent but rejected other claims. In August 1997, the holder
of the Dake Patent filed an amendment in response to the final Office Action
seeking, among other things, to add certain additional new claims, which appear
to have been written in an attempt to cover the Beta-Cath System. In October
1997, the USPTO rejected these particular new claims, because they improperly
attempted to broaden the scope of the Dake Patent and were inconsistent with the
original patent claims. Later in October 1997, the holder of the Dake Patent
filed an amendment cancelling those rejected claims and also requesting
reconsideration of the rejection. The holder of the Dake Patent has the right to
appeal any final rejection of any claims presented. The validity of patent
claims which survive a reexamination procedure may be more difficult to
challenge in a later dispute than claims which have never been reexamined to the
extent that the same prior art is relied upon. The Company continues to believe
based upon advice of counsel that the Beta-Cath System would not infringe any
valid claim of the Dake Patent. However, there can be no assurance that the
Company's products will not infringe any original, amended or new claims of the
Dake Patent which survive the reexamination proceeding.

In May 1997, Guidant Corporation ("Guidant") acquired NeoCardia together
with the rights under the Dake Patent. Guidant is a New York Stock
Exchange-listed, medical device company which has significantly greater capital
resources than the Company. There can be no assurance that Guidant will not sue
the Company for patent infringement and obtain damages from the Company and/or
injunctive relief restraining the Company from commercializing the Beta-Cath
System in the U.S., or that the Company will not be required to obtain a license
from Guidant to market the Beta-Cath System in the U.S., any of which could have
a material adverse effect on the Company's business, financial condition and
results of operations, or could result in cessation of the Company's business.

The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and companies in the
medical device industry have employed intellectual property litigation to gain a
competitive advantage. There can be no assurance that the Company will not
become subject to patent infringement claims or litigation or interference
proceedings declared by the USPTO to determine the priority of inventions. The
defense and prosecution of intellectual property suits, USPTO interference
proceedings and related legal and administrative proceedings are both costly and
time-consuming. Litigation may be necessary to enforce patents issued to the
Company, to protect trade secrets or know-how owned by the Company or to
determine the enforceability, scope and validity of the proprietary rights of
others. Any litigation or interference proceedings will result in substantial
expense to the Company and significant diversion of effort by the Company's
technical and management personnel. An adverse determination in litigation or
interference proceedings to which the Company may become a party could subject
the Company to significant liabilities to third parties or require the Company
to seek licenses from third parties or require the Company to redesign its
products or processes to avoid infringement or prevent the Company from

10
<PAGE> 11

selling its products in certain markets, if at all. Although patent and
intellectual property disputes regarding medical devices have often been settled
through licensing or similar arrangements, costs associated with such
arrangements may be substantial and could include ongoing royalties.
Furthermore, there can be no assurance that the necessary licenses would be
available to the Company on satisfactory terms, if at all, or that the Company
could redesign its products or processes to avoid infringement. Any adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent the Company from manufacturing and selling its
products, which would have a material adverse effect on the Company's business,
financial condition and results of operations.

Patent applications in the United States are maintained in secrecy until
patents issue, and patent applications in foreign countries are maintained in
secrecy for a period after filing. Accordingly, there can be no assurance that
current and potential competitors or other third parties have not filed or will
not file applications for, or have not received or will not receive, patents and
will not obtain additional proprietary rights relating to products made, used or
sold or processes used or proposed to be used by the Company.

The Company has developed certain of its patent and proprietary rights
relating to the Beta-Cath System in conjunction with Emory University ("Emory").
To obtain the exclusive rights to commercialize the Beta-Cath System for the
treatment of restenosis, the Company entered into a license agreement with Emory
under which Emory will be entitled to royalty payments based upon net sales of
the Beta-Cath System. If the agreement were terminated by Emory as a result of
the Company's failure to pay such royalties or any other breach of its
obligations under such agreement, the Company's rights to use jointly owned
patents (including any patent issuing from the continuation-in-part application
which has been filed) would become non-exclusive, the Company would have no
rights to practice future patents owned exclusively by Emory and the Company
could be required by Emory to cooperate in licensing the pending U.S. patent
application and its foreign counterparts to third parties so that they would be
able to commercialize and sell the Beta-Cath System.

The Company typically obtains confidentiality and invention assignment
agreements in connection with employment, consulting and advisory relationships.
There can be no assurance, however, that these agreements will not be breached
or that the Company will have adequate remedies for any breach. Furthermore, no
assurance can be given that competitors will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's proprietary technology, or that the Company can
meaningfully protect its rights in unpatented proprietary technology. See
"Business -- Patents and Proprietary Technology."

DEPENDENCE ON A KEY SUPPLIER

To date, the Company has obtained all of its beta isotope requirements
under an agreement, as amended (the "Supply Agreement"), with a single supplier,
Bebig Isotopentechnik und Umweltdiagnostik GmbH, a German corporation (the
"Supplier"). The Supply Agreement has an initial term ending in the year 2000
and renews automatically on a calendar year basis, unless notice of termination
is given six months prior to the end of each calendar year. Under the Supply
Agreement, the Company has agreed not to purchase more than 30% of its annual
requirements for beta isotopes of a type similar to that manufactured by the
supplier for use in restenosis therapy from any third party or parties other
than the Supplier. Although the Supply Agreement permits the Company to use an
alternative source for 30% of its annual beta isotope requirements or during any
period in which the Supplier is unable to provide beta isotopes, the Company
believes that because of the technical expertise and capital investment required
to manufacture the isotopes, it would be extremely difficult to find an
alternate source of supply in the event that the Supplier is unable to perform.
In addition, portions of the process used to manufacture the materials may be
proprietary to the Supplier. The Supplier has no obligation to make any of its
know-how or technology available to any alternate source of supply. Although the
Company has an option to purchase all of the Supplier's assets relating to the
supply of beta isotopes, the exercise of such option and the transfer of the
required technology and expertise to the Company or an alternative source would
be costly, time consuming, and uncertain of success. Any inability of the
Supplier to provide beta isotopes would limit the Company's ability to increase
its business beyond its then existing inventory of beta isotopes. As a result of
these factors, any failure or disruption in the ability of the Supplier to

11
<PAGE> 12

provide beta isotopes could have a material adverse effect on the business,
financial condition and results of operations of the Company. See
"Business -- Manufacturing."

COMPETITION

Competition in the medical device industry, and specifically the markets
for cardiovascular devices and devices to improve the outcome of coronary
revascularization procedures, is intense. Several companies are developing
devices to improve the outcome of coronary revascularization procedures,
including several that have various radiation therapy products under development
to reduce the frequency of restenosis. The radiation therapy devices under
development by Novoste's competitors include intracoronary radiation therapy
delivered through a variety of means including (i) a radioactive tipped
guidewire, (ii) a radioactive stent or (iii) a radioactive fluid-filled balloon.
These other devices (some of which use gamma and others beta radiation) are in
varying stages of development or clinical trials. There can be no assurance that
the Beta-Cath System, if approved by the FDA for marketing, will be the first
device to be marketed in the U.S. as an intracoronary beta or gamma radiation
device. In addition, there can be no assurance that the Beta-Cath System will
prove more cost-effective and efficacious than the devices currently under
development by Novoste's competitors. Many of the Company's competitors and
potential competitors have substantially greater capital resources than does the
Company, and also have greater resources and expertise in the areas of research
and development, obtaining regulatory approvals, manufacturing and marketing.
There can be no assurance that the Company's competitors and potential
competitors will not succeed in developing, marketing and distributing
technologies and products that are more effective than those developed and
marketed by the Company, or that would render the Company's technology and
products obsolete or noncompetitive. Additionally, there is no assurance that
the Company will be able to compete effectively against such competitors and
potential competitors in terms of manufacturing, marketing and sales.

Any product developed by the Company that gains regulatory clearance or
approval will have to compete for market acceptance and market share. An
important factor in such competition may be the timing of market introduction of
competitive products. Accordingly, the relative speed with which the Company can
develop products, gain regulatory approval and reimbursement acceptance and
supply commercial quantities of the product to the market are expected to be
important competitive factors. In addition, the Company believes that the
primary competitive factors for products addressing restenosis include safety,
efficacy, ease of use, reliability, suitability for use in cath labs, service
and price. The Company also believes that physician relationships, especially
relationships with leaders in the interventional cardiology community, are
important competitive factors. There can be no assurance that the Company will
be first to market such a system in the United States or to market such a system
effectively. See "Business -- Competition."

LIMITATIONS ON THIRD-PARTY REIMBURSEMENT

The Beta-Cath System, if approved for commercial sale, will be purchased
primarily by hospitals. Hospitals and physicians bill various third-party
payors, such as government health programs, private health insurance plans,
managed care organizations and other similar programs, for the health care
services provided to their patients. The FDA has classified the Beta-Cath System
as an experimental device and accordingly its use in the human clinical trials
will not be reimbursable under the Medicare program or by private insurers until
after the PMA application is approved, if ever. The classification of the
Beta-Cath System as experimental materially increases the costs of conducting
clinical trials in the United States, and such costs could have a material
adverse effect on the Company's business, financial condition and results of
operations. Even if the Beta-Cath System were to receive approval for marketing
by the FDA, there can be no assurance that third-party payors will cover
procedures using the Beta-Cath System, or, if covered, that third-party payors
will not place certain restrictions on the circumstances in which coverage will
be available. In addition, payors may deny reimbursement if they determine that
a product was not used in accordance with established payor protocol regarding
cost-effective treatment methods, or was used for an unapproved indication.
Third-party payors are also increasingly challenging the prices charged for
medical products and services and, in some instances, have put pressure on
medical device suppliers and health care providers to lower their prices. The
Company is unable to predict what changes will be made in the reimbursement
methods used by third-

12
<PAGE> 13

party health care payors. There can be no assurance that the Beta-Cath System
will be considered cost effective by third-party payors or health care
providers, that reimbursement for the Beta-Cath System will be available or, if
available, that payors' reimbursement levels will not adversely affect the
Company's ability to sell the Beta-Cath System on a profitable basis. In
addition, the cost of health care has risen significantly over the past decade,
and there have been and may continue to be proposals by legislators, regulators,
third-party payors and health care providers to curb these costs. Failure by
hospitals and physicians to obtain reimbursement from third-party payors,
changes in third-party payors' policies toward reimbursement for the Beta-Cath
System or legislative action could have a material adverse effect on the
Company's business, financial condition and results of operations. Reimbursement
systems in international markets vary significantly by country and by region
within some countries, and reimbursement approvals must be obtained on a
country-by-country basis. Many international markets have government managed
health care systems that control reimbursement for new devices and procedures.
In most markets there are private insurance systems as well as government
managed systems. There can be no assurance that reimbursement for the Company's
products will be available in international markets under either government or
private reimbursement systems. See "Business -- Third-Party Reimbursement."

LIMITED SALES AND MARKETING RESOURCES; RELIANCE ON DISTRIBUTORS AND CORPORATE
PARTNERS

At present, the Company has no sales and limited sales and marketing
resources. The Company intends to sell its products in the United States
directly and outside the United States through international distributors and
corporate partners. There can be no assurance that the Company will be able to
recruit and train adequate sales and marketing personnel to commercialize
successfully the Beta-Cath System in the United States. The inability to recruit
or retain suitable international distributors or corporate partners could also
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company also intends to select one or more
established market leaders in the radiation isotope business to inventory and
deliver the radiation sources and provide related training, testing and support
services to hospitals in both the United States and international markets. The
inability to recruit or retain one or more such entities for this purpose could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Sales and Marketing."

LIMITED MANUFACTURING EXPERIENCE; SCALE-UP RISK

To date, the Company has not yet commercialized any of its products, and
its manufacturing activities have consisted of producing small quantities of its
products for use in pre-clinical studies and clinical trials. To achieve
profitability, the Company's products must be manufactured in commercial
quantities in compliance with regulatory requirements and at acceptable costs.
Production in commercial quantities will require the Company to expand its
manufacturing capabilities and to hire and train additional personnel. The
Company has no experience in manufacturing its products in commercial
quantities. Manufacturers often encounter difficulties in scaling up production
of new products, including problems involving production yields, quality control
and assurance, component supply and shortages of qualified personnel.
Difficulties encountered by Novoste in manufacturing scale-up could have a
material adverse effect on its business, financial condition and results of
operations. There can be no assurance that future manufacturing difficulties,
which could have a material adverse effect on the Company's business, financial
condition and results of operations, will not occur. See
"Business -- Manufacturing."

ADDITIONAL CAPITAL REQUIREMENTS

The Company has expended and will continue to expend substantial funds on
research, development and clinical trials of its products, the establishment of
commercial-scale manufacturing facilities and sales and marketing of the
Beta-Cath System in the United States and internationally. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company's future liquidity and capital requirements will depend upon numerous
factors, including the progress and costs of clinical trials, the potential
requirement and the potential costs for product modifications, the timing and
costs of various U.S. and foreign regulatory filings, and the timing or
availability of various U.S. and foreign governmental

13
<PAGE> 14

approvals. If regulatory approvals are received, the Company's future liquidity
and capital requirements will depend upon other factors, including the timing
and extent to which the Company's products gain market acceptance, the timing
and costs of product introduction, and the costs of developing marketing,
servicing and distribution capabilities. The Company may require additional
funds which it would seek to raise through equity or debt financings,
arrangements with corporate partners or from other sources. Issuance of
additional equity securities could result in dilution of ownership and control
to the then existing shareholders of the Company. There can be no assurance that
any such funds will be available to the Company on acceptable terms, if at all.
If adequate funds are not available from operations or additional sources of
financing, the Company's business could be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

EXPOSURE TO PRODUCT LIABILITY CLAIMS; LIMITED INSURANCE COVERAGE

The use of the Company's products entails an inherent risk of adverse
effects which could result in product liability claims against the Company.
There can be no assurance that the Company would have sufficient resources to
satisfy any liability resulting from such claims, that the Company's $4 million
of insurance coverage would be adequate to cover the Company against potential
liabilities, that any such insurance will continue to be available at acceptable
costs, if at all, or that a product liability claim would not materially
adversely affect the business or financial condition of the Company. See
"Business -- Product Liability and Insurance."

DEPENDENCE ON KEY PERSONNEL

The Company's business and future operating results depend in significant
part upon the continued contributions of its key technical personnel and senior
management, many of whom would be difficult to replace. The Company's business
and future operating results also depend in significant part upon its ability to
attract and retain qualified management, manufacturing, technical, marketing and
sales and support personnel for its operations. Competition for such personnel
is intense, and there can be no assurance that the Company will be successful in
attracting or retaining such personnel. The loss of key employees, the failure
of any key employee to perform adequately or the Company's inability to attract
and retain skilled employees, as needed, could materially adversely affect the
Company's business, financial condition and results of operations. See
"Management -- Executive Officers and Directors."

CONCENTRATION OF OWNERSHIP AND CONTROL

Following completion of this offering, the Company's executive officers,
directors and shareholders presently owning more than 5% of the outstanding
shares of Common Stock, collectively, will beneficially own approximately 46% of
the outstanding Common Stock. See "Principal and Selling Shareholders."
Accordingly, such persons, if acting together, would have significant voting
power to influence the outcome of matters (including the election of a majority
of the Board of Directors, and any merger, consolidation or sale of all or
substantially all of the Company's assets) submitted to the shareholders for
approval. As a result of such voting power, certain transactions may not be
possible without the approval of such shareholders. These transactions include
proxy contests, mergers involving the Company, tender offers, open-market
purchase programs or other purchases of Common Stock that could give
shareholders of the Company the opportunity to realize a premium over the then
prevailing market price for their shares of Common Stock. See "Principal and
Selling Shareholders."

EFFECT OF ANTI-TAKEOVER PROVISIONS

Under the Company's Amended and Restated Articles of Incorporation (the
"Amended and Restated Articles of Incorporation"), the Company's Board of
Directors has the authority to issue up to 5,000,000 shares of Preferred Stock
and to determine the price, rights, preferences and privileges of those shares
without any further vote or action by the Company's shareholders. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any shares of Preferred Stock that may be
issued in the future.

14
<PAGE> 15

In October 1996, the Company's Board of Directors authorized 1,000,000
shares of Series A Participating Preferred Stock of the Company in connection
with its adoption of a Shareholder Rights Plan, under which rights to purchase
Series A Preferred Stock were issued to holders of the Common Stock. Upon
certain triggering events, such rights become exercisable to purchase Common
Stock (or, in the discretion of the Company's Board of Directors, Series A
Preferred Stock) at a price substantially discounted from the then current
market price of the Common Stock. The Shareholder Rights Plan 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
shareholders who might want to vote in favor of such merger or participate in
such tender offer.

While the Company has no present intention to authorize any additional
series of Preferred Stock, such issuance, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
also have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company, and may have other
rights, including economic rights senior to the Common Stock, and, as a result,
the issuance thereof could have a material adverse effect on the market value of
the Common Stock.

The Amended and Restated Articles of Incorporation provides for a
classified Board of Directors. Furthermore, the Company is subject to the
anti-takeover provisions of the Florida Business Corporation Act, the
application of which would also have the effect of delaying or preventing a
merger, takeover or other change of control of the Company and therefore could
discourage attempts to acquire the Company.

SUBSTANTIAL DILUTION

Purchasers of the Common Stock offered hereby will incur an immediate and
substantial dilution of approximately $14.70 per share in net tangible book
value from the public offering price. Additional dilution is likely to occur
upon the exercise of outstanding options. See "Dilution."

STOCK PRICE VOLATILITY

There can be no assurance that the market price of the Common Stock will
not decline below the public offering price. The trading price of the Company's
Common Stock could be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, announcements of
technological innovations or new products by the Company or its competitors,
governmental regulatory action, developments with respect to patents or
proprietary rights, general conditions in the medical device or cardiovascular
device industries, changes in earnings estimates by securities analysts, or
other events or factors, many of which are beyond the Company's control. In
addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many medical
device companies and which have often been unrelated to the operating
performance of such companies. The Company's revenue or operating results in
future quarters may be below the expectations of securities analysts and
investors. In such event, the price of the Company's Common Stock would likely
decline, perhaps substantially. These Company-specific factors or broad market
fluctuations may materially adversely affect the market price of the Company's
Common Stock. See "Underwriting."

ABSENCE OF DIVIDENDS

The Company has not paid any cash dividends and does not presently intend
to pay cash dividends. It is not likely that any cash dividends will be paid in
the foreseeable future. See "Dividend Policy."

15
<PAGE> 16

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered by it hereby are estimated to be approximately $28,978,000 ($32,094,100
if the Underwriters' over-allotment option is exercised in full) after deducting
underwriting discount and estimated expenses of this Offering.

The Company intends to use the net proceeds of this Offering to fund human
clinical trials, to expand sales and marketing capabilities, to expand
manufacturing activities and to conduct further research and development
projects. The balance of the net proceeds of this Offering will be added to
working capital. Exact allocation of the proceeds and the timing of such
expenditures will depend on various factors, including the timing of the
Company's regulatory applications and its clinical trials.

A portion of the net proceeds of this Offering may also be used for
investments in or acquisitions of complementary businesses, products or
technologies, although no such transactions are currently under negotiation.
Pending the use of the net proceeds of this Offering, the Company will invest
the funds in short-term, interest-bearing, investment-grade securities.

PRICE RANGE OF THE COMMON STOCK

The Common Stock is quoted on The Nasdaq National Market under the symbol
"NOVT." The following table sets forth the high and low closing sale prices of
the Common Stock, as reported by The Nasdaq National Market, for the calendar
quarters indicated from May 23, 1996, the date of the Company's initial public
offering.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996:
Second Quarter (from May 23)................................ $15 1/2 $ 8 3/4
Third Quarter............................................... $14 3/4 $ 7
Fourth Quarter.............................................. $19 1/4 $11 7/8
1997:
First Quarter............................................... $19 $13
Second Quarter.............................................. $17 1/4 $13 1/4
Third Quarter............................................... $18 1/8 $14 7/8
Fourth Quarter (through November 17)........................ $20 5/8 $16
</TABLE>

For a recent closing sale price for the Common Stock, see the cover page of
this Prospectus.

On October 21, 1997, there were approximately 144 holders of Common Stock,
excluding beneficial owners of shares registered in nominee or street name.

DIVIDEND POLICY

While the Company has made a distribution of the Rights described in Note 6
to the Financial Statements, the Company has never declared or paid any cash
dividends on its capital stock. The Board of Directors currently intends to
retain all future earnings, if any, to fund the growth and development of the
Company's business, and, therefore, does not anticipate paying any cash
dividends in the foreseeable future.

16
<PAGE> 17

DILUTION

The net tangible book value of the Company at September 30, 1997 was
$19,493,000, or $2.29 per share. Net tangible book value per share is equal to
the Company's total tangible assets less its total liabilities, divided by the
number of shares of Common Stock outstanding. After giving effect to the sale by
the Company of the shares of Common Stock offered by the Company hereby and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company at September 30, 1997 would have been approximately
$48,471,000, or $4.80 per share. This represents an immediate increase in net
tangible book value of $2.51 per share to existing shareholders and an immediate
dilution in net tangible book value of $14.70 per share to purchasers of Common
Stock in this Offering. The foregoing assumes no exercise of outstanding stock
options. In the event the 1,679,975 shares subject to options to purchase shares
of Common Stock outstanding as of September 30, 1997 at a weighted average
exercise price of $3.29 per share, were exercised for cash and included in the
foregoing calculations, the net tangible book value per share before the
offering would be $2.46, the pro forma net tangible book value after the
offering would be $4.59 per share, and the dilution to new investors would be
$14.91.

If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value per share of the Common Stock after this Offering
would be $5.02 per share, which would result in dilution to new investors in
this offering of $14.48 per share.

CAPITALIZATION

The following table sets forth the Company's capitalization as of September
30, 1997, and as adjusted after giving effect to the sale of the 1,600,000
shares of Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom after deducting underwriting discounts and
commissions and estimated offering expenses. The information should be read in
conjunction with the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------
ACTUAL AS ADJUSTED(1)
------------ -----------------
<S> <C> <C>
Preferred Stock, $.01 par value; 5,000,000 shares
authorized, no shares issued and outstanding.............. $ -- $ --
Common Stock, $.01 par value; 25,000,000 shares authorized,
8,502,930 shares issued, and 10,102,930 shares issued as
adjusted.................................................. 85,029 101,029
Additional paid-in capital.................................. 42,405,272 71,367,272
Deficit accumulated during the development stage............ (22,973,164) (22,973,164)
------------ ------------
19,517,137 48,495,137
Less treasury stock, 5,780 shares, at cost.................. (23,840) (23,840)
------------ ------------
Total shareholders' equity (deficit)........................ $ 19,493,297 $ 48,471,297
============ ============
</TABLE>

- ---------------

(1) Excludes 1,679,975 shares of Common Stock subject to outstanding stock
options under the Company's Stock Option Plans, as of September 30, 1997,
which had a weighted average exercise price of $3.29 per share.

17
<PAGE> 18

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table sets forth selected financial data of the Company. The
selected financial data in the table as of and for the periods ended December
31, 1992, 1993, 1994, 1995 and 1996 are derived from the financial statements of
the Company, which have been audited by Ernst & Young LLP, independent auditors,
as indicated in their report included elsewhere in this Prospectus.

The selected financial data presented below for the nine-month periods
ended September 30, 1997 and 1996, and the period from inception (May 22, 1992)
to September 30, 1997 and as of September 30, 1997, are derived from the
unaudited condensed financial statements of the Company included elsewhere in
this Prospectus. In the opinion of management, such unaudited condensed
financial statements reflect all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the results of operations for
such periods. Results of interim periods are not necessarily indicative of
results to be expected for the full fiscal year. The data should be read in
conjunction with the Financial Statements and Notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
NINE MONTHS INCEPTION INCEPTION
ENDED (MAY 22, 1992) (MAY 22, 1992)
SEPTEMBER 30, YEAR ENDED DECEMBER 31, THROUGH THROUGH
----------------- ------------------------------------- DECEMBER 31, SEPTEMBER 30,
1997 1996 1996 1995 1994 1993 1992 1997
------- ------- ------- ------- ------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues.............. $ 29 $ -- $ -- $ 17 $ 73 $ -- $ 201 $ 320
Costs and expenses:
Research and
Development....... 8,619 2,799 4,647 2,089 1,404 545 202 17,506
General and
Administrative.... 1,342 1,092 1,575 466 526 785 736 5,430
Marketing........... 575 341 581 659 292 -- -- 2,107
------- ------- ------- ------- ------- ------- ------ --------
Loss from
operations.......... (10,507) (4,232) (6,803) (3,197) (2,149) (1,330) (737) (24,723)
Net interest income
(expense)........... 940 472 864 (21) (47) 5 9 1,750
------- ------- ------- ------- ------- ------- ------ --------
Net loss.............. $(9,567) $(3,760) $(5,939) $(3,218) $(2,196) $(1,325) $ (728) $(22,973)
======= ======= ======= ======= ======= ======= ====== ========
Net loss per
share(1)............ $ (1.14) $ (0.60) $ (0.88) $ (0.69) $ (0.54) $ (0.38) $(0.24)
======= ======= ======= ======= ======= ======= ======
Shares used to compute
net loss per
share(1)............ 8,376 6,275 6,748 4,671 4,031 3,443 3,030
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................. $ 18,066 $26,849 $ (906) $(1,267) $ (149) $ 455
Total assets.................................... 21,274 29,255 2,057 982 1,583 1,157
Total liabilities............................... 1,781 821 1,739 1,396 976 306
Deficit accumulated during the development
stage......................................... (22,973) (13,406) (7,467) (4,249) (2,053) (728)
Total shareholders' equity...................... 19,493 28,434 318 (413) 608 851
</TABLE>

- ---------------

(1) See Note 1 to the Financial Statements for an explanation of the method used
to determine net loss per share.

18
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Novoste commenced operations as a medical device company in May 1992.
Commencing in 1994, the Company has devoted substantially all of its efforts to
developing the Beta-Cath System, an intraluminal beta radiation catheter
delivery system designed to reduce the frequency of restenosis subsequent to
percutaneous transluminal coronary angioplasty ("PTCA").

For the period since its capitalization through September 30, 1997 the
Company has earned minimal non-recurring revenues and experienced significant
losses in each period. At September 30, 1997 the Company had an accumulated
deficit of approximately $23.0 million. Novoste expects to continue to incur
significant operating losses through at least 1999 as the Company continues
research and development projects, conducts its clinical trials in the United
States, Canada and Europe, seeks regulatory approval or clearance for its
products, expands its sales and marketing efforts in contemplation of product
introduction and market development, and increases its administrative activities
to support growth of the Company.

There can be no assurance that the Company's research and development
efforts will be successfully completed. There can be no assurance that clinical
trials will demonstrate the safety and efficacy of the Beta-Cath System.
Additionally, there can be no assurance that the Beta-Cath System will be
approved by the FDA or any domestic or foreign governmental agency, or that the
Beta-Cath System or any other product developed by Novoste will be successfully
introduced or attain any significant level of market acceptance. There can be no
assurance that the Company will ever achieve either significant revenues from
sales of its Beta-Cath System or ever achieve or sustain profitability. See
"Risk Factors -- Early Stage of Clinical Testing; No Assurance of Safety and
Efficacy," "-- No Assurance of Timely Regulatory Approval; Government
Regulation," "-- Uncertainty of Market Acceptance" and "-- Dependence on
Beta-Cath System."

RESULTS OF OPERATIONS

Comparison of Nine Months Ended September 30, 1997 and 1996

Net loss for the nine months ended September 30, 1997 was $9,567,000, or
($1.14) per share, as compared to $3,760,000 or ($0.60) per share for the year
earlier period. The increase in net loss for the nine months ended September 30,
1997, compared to the year earlier period, was due primarily to increased
spending for research and development as well as increased marketing, general
and administrative expenses related to the Company's development of its
Beta-Cath System, offset by increased interest income earned from the investment
of the net proceeds from the initial public offering in May 1996.

Revenues. Miscellaneous revenues were $29,000 for the nine months ended
September 30, 1997. No revenue was earned in the same period in 1996. This
increase was due to the sale of a product line (see Note 5 to the Unaudited
Condensed Financial Statements).

Research and Development Expenses. Research and development expenses
increased 208%, to $8,619,000, for the nine months ended September 30, 1997,
from $2,799,000 for the same period in 1996. These increases were primarily a
result of (a) the cost of manufacturing the Beta-Cath System, (b) a milestone
payment of 617,000 DM ($360,000) in June 1997 to the Company's
radioactive-isotope supplier upon meeting delivery requirements, (c) monthly
reimbursement of 100,000 DM (approximately $65,000), to the same supplier of
costs to increase production capacity, (d) the increased size of the Company's
research and development staff and (e) services provided by outside consultants
in the development of the Beta-Cath System. The Company expects research and
development expenses to continue to increase in the immediate future as the
Company conducts additional clinical trials of its Beta-Cath System in both the
U.S. and selected foreign countries, and it continues the development and design
of the Beta-Cath System and component parts.

General and Administrative Expenses. General and administrative expenses
increased 23% to $1,342,000 for the nine months ended September 30, 1997, from
$1,092,000 for the same period in 1996. This

19
<PAGE> 20

increase for the nine-month period was primarily a result of additional
personnel, higher salaries and increased costs associated with being a public
company such as directors' and officers' liability insurance, legal and
accounting fees. The Company expects general and administrative expenses to
increase in the future, in support of a higher level of operations.

Marketing Expenses. Marketing expenses increased 69% to $575,000 for the
nine months ended September 30, 1997, from $341,000 for the same period in 1996.
These increases were primarily the result of increased trade show costs,
consulting fees and higher salaries. The Company expects marketing expenses to
significantly increase in the future as the Company prepares for marketing of
the Beta-Cath System in the U.S. and other countries.

Interest Income. Net interest income increased 99% to $940,000 for the
nine months ended September 30, 1997, from $472,000 for the same period in 1996.
The increase in interest income was primarily due to larger cash equivalents and
short-term investment balances after the Company's initial public offering in
May 1996.

Comparison of Years Ended December 31, 1996 and 1995

Net loss for the year ended December 31, 1996 was $5,939,000, or ($0.88)
per share, as compared to $3,218,000, or ($0.69) per share, for the year ended
December 31, 1995. The increase in net loss in the year ended December 31, 1996,
compared to the year earlier, was due to increased spending for research and
development and general and administrative expenses related to the Company's
development of its Beta-Cath System, offset by increased interest income earned
from the investment of the net proceeds of the initial public offering in May
1996.

Revenues. No revenues were earned in the year ended December 31, 1996, as
compared to $17,000 of miscellaneous sales in the year ended December 31, 1995.

Research and Development Expense. Research and development expenses
increased 122% to $4,647,000 for the year ended December 31, 1996, from
$2,089,000 for the year ended December 31, 1995. These increases were primarily
a result of continued product development and the Company's Phase I clinical
trials of the Beta-Cath System, which were initiated in 1996.

General and Administrative Expenses. General and administrative expenses
increased 238% to $1,575,000 for the year ended December 31, 1996, from $466,000
for the year ended December 31, 1995. These increases were primarily a result of
increased personnel, higher salaries, accrued severance and increased costs
associated with being a public company, such as directors' and officers'
liability insurance.

Marketing Expenses. Marketing expenses decreased 12% to $581,000 for the
year ended December 31, 1996, from $659,000 for the year ended December 31,
1995, due to a start-up bonus and relocation allowance paid in 1995 to a new
management employee.

Interest Income and Expense. Net interest income was $864,000 for the year
ended December 31, 1996, whereas net interest expense of $21,000 was incurred
during the year ended December 31, 1995. The increase in interest income were
primarily due to investing the proceeds of the Company's initial public offering
in cash equivalents and short-term investments.

Comparison of Years Ended December 31, 1995 and 1994

Net loss for the year ended December 31, 1995 was $3,218,000, or ($0.69)
per share, as compared to $2,196,000, or ($0.54) per share, for the year ended
December 31, 1994. The increase in net loss in the year ended December 31, 1995,
compared to the year earlier, was due to increased spending for research and
development and general and administrative expenses related to the Company's
development of its Beta-Cath System.

Revenues. Revenues decreased to $17,000 in 1995 from $73,000 in 1994 as
the Company did not receive any contract or license fee revenue in 1995.

20
<PAGE> 21

Research and Development Expenses. Research and development expenses
increased 49%, to $2,089,000, for the year ended December 31, 1995 from
$1,404,000 for the year ended December 31, 1994. This increase in expenses was
due to the hiring of additional personnel, an increase in outside consulting and
services attributable to the development of the Beta-Cath System, and the
support of pre-clinical studies.

General and Administrative Expenses. General and administrative expenses
decreased 11%, to $466,000, for the year ended December 31, 1995, from $526,000
for the year ended December 31, 1994. There were no significant changes in any
one expense category.

Marketing Expenses. Marketing expenses increased 126% to $659,000 for the
year ended December 31, 1995 from $292,000 for the year ended December 31, 1994
due to additions to the Company's management to support increased marketing
efforts.

Interest Income and Expense. Net interest expense decreased 55% to $21,000
for the year ended December 31, 1995 from $47,000 for the year ended December
31, 1994. This was due to increased interest income during the year ended
December 31, 1995 from amounts invested in money market accounts and certain
government securities arising from additional equity financing.

LIQUIDITY AND CAPITAL RESOURCES

The Company financed its activities since inception up to May 23, 1996, the
date of the Company's initial public offering, through private placements of its
Common Stock, Class B Common Stock and promissory notes. Since inception through
September 30, 1997, the Company obtained funds aggregating approximately $38.7
million in net proceeds from the issuance of Common Stock and Class B Common
Stock (including approximately $30.6 million in net proceeds from its initial
public offering), and approximately $1.8 million in net proceeds from the
issuance of convertible promissory notes.

During the nine months ended September 30, 1997 and 1996 the Company used
cash to fund operations of $8.0 million and $3.3 million, respectively. Cash
used to fund operations since inception was approximately $18.8 million. The
increase in cash used in operations was due primarily to higher expenses
associated with increased research and development activities and general and
administrative expenses to support increased operations. The Company's
expenditures for equipment and improvements have aggregated $1.9 million since
inception. Future cash needs for operating activities are anticipated to be
higher than historical levels because of the development, manufacturing scale-up
and commercialization of the Beta-Cath System, subject to the factors discussed
in "Risk Factors."

The Company's principal source of liquidity at September 30, 1997 consisted
of cash, cash equivalents and short-term investments of $19.7 million. The
Company did not have any established credit lines or outstanding borrowings at
September 30, 1997.

The Company anticipates that its operating losses will continue through
1999 as it expends substantial resources in funding clinical trials in support
of regulatory approvals, and continues to expand research and development and
marketing activities. Novoste believes that the net proceeds from this Offering,
together with the current cash balances and short-term investments, and the
interest thereon, will be sufficient to meet the Company's operating and capital
requirements through 2000. However, the Company's future liquidity and capital
requirements will depend upon numerous factors, including: the progress of the
Company's clinical research and product-development programs; the receipt of and
the time required to obtain regulatory clearances and approvals; the resources
required to gain approvals; the resources the Company devotes to the
development, manufacture and marketing of its products; the resources required
to hire and develop a direct sales force in the United States, to develop
distributors internationally, and to expand manufacturing capacity; market
acceptance and demand for its products; and other factors. Novoste may in the
future seek to raise additional funds through bank facilities, debt or equity
offerings or other sources of capital. There can be no assurance that additional
financing, if required, will be available on satisfactory terms, or at all.

21
<PAGE> 22

BUSINESS

INDUSTRY OVERVIEW

Coronary Artery Disease. Coronary artery disease is the leading cause of
death in the United States. More than 13 million people in the United States
currently suffer from coronary artery disease, which is generally characterized
by the progressive accumulation of plaque as a result of the deposit of
cholesterol and other fatty materials on the walls of the arteries. The
accumulation of plaque leads to a narrowing of the interior passage, or lumen,
of the arteries, reducing blood flow to the heart muscle. When blood flow to the
heart muscle becomes insufficient, oxygen supply is restricted and a heart
attack and death may result. Each year more than 1 million revascularization
procedures are performed in the United States, and approximately 1.8 million of
such procedures are performed worldwide, to treat coronary artery disease to
increase blood flow to the heart muscle.

Coronary Artery Bypass Graft. Coronary artery bypass graft ("CABG")
surgery was introduced as a treatment for coronary artery disease in the 1950s.
CABG is a highly invasive, open surgical procedure in which blood vessel grafts
are used to bypass the site of a blocked artery, thereby restoring blood flow.
CABG, still considered the most effective and long-lasting treatment for
coronary artery disease, is generally the primary treatment for severe coronary
artery disease involving multiple vessels. In addition, CABG is often a
treatment of last resort for patients who have undergone other less invasive
procedures but require reintervention. However, CABG has significant
limitations, including medical complications such as stroke, multiple organ
dysfunction, inflammatory response, respiratory failure and post-operative
bleeding, each of which may result in death. In addition, CABG is a very
expensive procedure, and requires a long recovery period. In the United States,
the average cost of undergoing CABG is approximately $36,000, the average
postoperative hospital stay following CABG is approximately five to seven days
and the average recuperation period following discharge from the hospital is
approximately six to eight weeks. In 1995, approximately 400,000 CABG procedures
were performed in the United States. Several new minimally invasive surgical

22
<PAGE> 23

techniques have been commercialized which attempt to lessen the cost and trauma
of CABG procedures while maintaining efficacy.

PTCA. Since its introduction in the late 1970s, PTCA has emerged as the
principal less invasive alternative to CABG. PTCA is a procedure performed in a
cath lab by an interventional cardiologist. During PTCA, a guidewire is inserted
into a blood vessel through a puncture in the leg (or arm, in some cases) and
guided through the vasculature to a diseased site in the coronary artery. A
balloon-tipped catheter is then guided over the wire to the deposit of plaque
("lesion") occluding the artery. Once the balloon is positioned across the
lesion inside the vessel, the balloon is inflated and deflated several times.
Frequently, successively larger balloons are inflated at the lesion site,
requiring the use of multiple balloon catheters. The inflation of the balloon
cracks or reshapes the plaque and the arterial wall, thereby expanding the
arterial lumen. Though injury to the arterial wall often occurs under balloon
pressure, PTCA typically results in increased blood flow. In 1996, it is
estimated that more than 500,000 PTCA procedures were performed in the United
States and approximately another 450,000 procedures were performed outside the
United States. The average cost of each PTCA procedure in the United States is
approximately $15,000, or less than one-half of the average cost of CABG, and
the length of stay and recuperation period are substantially less than those
required for CABG.

Though PTCA has grown rapidly as a highly effective, less invasive therapy
to treat coronary artery disease, the principal limitation of PTCA is the high
rate of restenosis, a re-narrowing of a treated artery, which often requires
reintervention. Due to the effects of restenosis, the long-term
cost-effectiveness of PTCA has not proven greater than that of CABG for
multi-vessel diseases. Studies have indicated that, within six months after
PTCA, between 25% and 45% of PTCA patients experience restenosis. In addition,
45% of patients with multi-vessel coronary artery disease who received PTCA have
been shown to require reintervention within three years of treatment. Finally,
although the average cost of PTCA is less than one-half of that of CABG, a study
indicated that three years after the procedure, PTCA has no cost advantage over
CABG due to the need for subsequent interventional treatment.

Pathology of Restenosis. Restenosis is typically defined as a renarrowing
of a coronary artery within six months of a revascularization treatment to less
than 50% of its original size. Restenosis is a vascular response to arterial
injury and occurs frequently after a revascularization procedure, which
stretches coronary arteries or otherwise damages the treated segment of the
artery. Due to multiple mechanisms controlling vascular repair, restenosis may
occur within a short period after a revascularization procedure or may develop
over the course of months or years. Restenosis that occurs shortly after a
revascularization procedure is usually attributed to elastic recoil (acute loss
of lumen diameter) of the artery.

Longer term, restenosis may result from excessive proliferation of cells at
the treatment site ("hyperplasia"), or from a generalized geometric remodeling
of the arterial segment, the causes of which are not well understood.
Hyperplasia is a physiological response to injury, similar to scarring, which
occurs in wound healing. In response to an arterial injury from
revascularization, the body sets off a biochemical response to repair the injury
site and protect it from further harm. This response will include a signal to
adjacent cells of the arterial wall to multiply. Often this cell proliferation
goes unchecked, resulting in a much thicker and inelastic arterial wall and in
reduced blood flow. Hyperplasia and vascular remodeling are responsible for a
large portion of the overall effect of restenosis.

Coronary Stenting and Other Catheter-Based Technologies. Coronary stents
are expandable, implantable metal devices permanently deployed at a lesion site.
Stents maintain increased lumen diameter by mechanically supporting the diseased
site in a coronary artery. Of all the non-surgical treatments which have sought
to improve upon PTCA, stents have demonstrated the best results in reducing the
rate of restenosis. In a typical stent procedure, the artery is pre-dilated at
the lesion site with a balloon catheter and the stent is delivered to the site
of the lesion and deployed with the use of a second balloon catheter, which
expands the stent and firmly positions it in place. This positioning is often
followed by a third dilatation, using a high pressure balloon to fully expand
and secure the stent. Once placed, stents exert radial force against the walls
of the coronary artery to enable the artery to remain open and functional.

23
<PAGE> 24

Studies have concluded that the rate of restenosis in patients who receive
coronary stents following PTCA is approximately 30% lower than in patients
treated only by PTCA. Additional clinical studies with new stent designs may
show a greater reduction in the rate of restenosis than stents which are
currently available. Stents appear to be effective in reducing the frequency of
restenosis resulting from elastic recoil and vascular remodeling, but they
increase hyperplasia.

The use of stents has grown rapidly since commercial introduction in the
United States in 1994, and it is estimated that they were utilized in
approximately 45% of the approximately 950,000 PTCA procedures performed
worldwide in 1996. Despite their rapid adoption, stents have certain drawbacks.
Not only are they permanent implants which may result in unforeseen, long-term
adverse effects, but they cannot be used in cases where the coronary arteries
are too tortuous or too narrow. In addition, the use of stents significantly
increases the cost of a PTCA procedure, especially as is often the case when two
or more stents are used. Further, restenosis may still occur and reintervention
options for stent patients are limited.

A variety of other catheter-based, minimally invasive, interventional
devices for coronary artery disease have been developed in an attempt to reduce
the frequency of restenosis following PTCA. These devices include atherectomy
devices (catheter devices that cut and remove plaque from the arterial wall),
rotational ablation devices (catheter devices which use a rotating burr to
remove plaque), and laser catheter devices (devices that use laser energy to
reduce plaque in arteries). Although these new approaches to coronary artery
disease have been found to be effective in certain lesion types and in certain
locations in the coronary arteries, like PTCA they also exhibit high rates of
restenosis.

THE NOVOSTE SOLUTION

The Company's Beta-Cath System is designed to reduce the frequency of
restenosis following PTCA by applying localized beta radiation to the treatment
site in the coronary artery. The Beta-Cath System is designed to be safe and
cost-effective and to fit well with techniques currently used by interventional
cardiologists in the cardiac catheterization lab. The Beta-Cath System targets
the primary causes of restenosis by attempting to prevent or inhibit hyperplasia
and long-term vascular remodeling. The Beta-Cath System, which delivers
localized beta radiation, can be handled with little risk to the health care
workers or to the patients because the penetration of electrons associated with
beta radiation is quite limited and easily shielded by the device. The Company
expects that the Beta-Cath System will provide significant cost savings, to the
extent that it (i) reduces the need for reintervention often required following
PTCA and coronary stenting and (ii) replaces coronary stents as a primary
therapy.

The Beta-Cath System is founded on the Company's belief, based on recent
clinical and pre-clinical studies, that localized beta radiation is likely to
reduce coronary artery restenosis rates by inhibiting cell proliferation which
occurs in response to PTCA. Radiation has been used therapeutically in medicine
for more than 50 years, and is extensively used for the treatment of
proliferative cell diseases, such as cancer. Cancer therapy has primarily
involved the use of gamma radiation, which is highly penetrating and may be
dangerous unless handled and used with great care. The Company has designed the
Beta-Cath System to use beta radiation, which is much less penetrating and thus
easier to use and control than gamma radiation. Beta radiation has been used
less frequently in medicine (primarily in a topical application to treat certain
skin and eye disorders) because of its more limited depth of penetration, but is
viewed by the Company as well-suited for intraluminal use following PTCA, where
the objective is to treat the small diameter coronary artery with minimal
exposure to adjacent tissues.

CLINICAL TRIAL AND REGULATORY STATUS

The Company has conducted a feasibility trial of the Beta-Cath System at
Emory University Hospital in Atlanta and Rhode Island Hospital in Providence
under an IDE granted by the FDA. A total of 23 patients were enrolled from
January through October 1996, each of whom had a single-vessel de novo
(previously untreated) lesion. The patients were treated with standard PTCA and
immediately thereafter with intracoronary beta radiation using the Beta-Cath
System. To examine the safety of different dosing parameters, patients received
dosage ranging from 12 Gy to 16 Gy for vessels ranging from at least 2.5 to 3.5

24
<PAGE> 25

millimeters. A follow-up review of the patients 30 days after treatment and a
follow-up angiogram six months after the initial treatment were performed to
observe the treated artery. During 1997, the Company also performed two
isolated, demonstration cases at two other medical centers in the U.S. using the
same IDE protocol utilized in the trials at Emory University Hospital and Rhode
Island Hospital.

In February 1997, the Company commenced a similar 30-patient feasibility
study in Canada, enrollment for which was completed in June 1997. In April 1997,
another similar 30-patient feasibility study was initiated in The Netherlands
and as of November 14, 1997, 29 patients had been enrolled in that study.

As of November 14, 1997, a total of 84 patients had been enrolled in the
U.S. and international feasibility studies. Of the 35 patients which, as of
September 25, 1997, had received six-month angiographic follow-up analyzed in a
core lab, 11% (four patients) were reported restenotic. This data suggests a 70%
reduction in the rate of restenosis in patients who received treatment with the
Beta-Cath System, when compared to a historical control group (the Lovastatin
Restenosis Trial) which received PTCA only and had been selected based upon
inclusion and exclusion criteria similar to those utilized by the Company. Of
these 35 patients, treated arteries on average maintained 100% of the
enlargement achieved with PTCA (a "late loss index" of 0%). The following table
compares the Company's data on the 35 patients to the historical control group:

<TABLE>
<CAPTION>
NOVOSTE
FEASIBILITY LOVASTATIN
STUDIES PLACEBO GROUP
----------- -------------
<S> <C> <C>
No. of Treated Patients................................... 35 161
Restenosis Rate........................................... 11% 42%
Late Loss Index........................................... 0% 43%
</TABLE>

Using data from these feasibility trials, the Company intends to submit by the
end of the first quarter of 1998 an application for a CE mark to commence
marketing of the Beta-Cath System in Europe.

On July 30, 1997, the Company initiated a randomized, triple-masked,
placebo-controlled, multicenter human clinical trial under an IDE granted by the
FDA to determine the clinical safety and efficacy of the Beta-Cath System for
use in coronary arteries. The Company expects to enroll approximately 1,100
patients in the trial at 30 medical sites principally located in the United
States. The patients will be divided into two approximately equal subgroups, one
for PTCA alone and one with coronary stenting. Each subgroup of the trial will
be randomized to a placebo control. In both subgroups, patients who receive the
beta radiation will receive dosages of 14Gy for vessels ranging from at least
2.7 to 3.35 millimeters and with 18Gy for vessels ranging from 3.35 to 4.0
millimeters. A follow-up review of patients 30 days after treatment and a
follow-up angiogram eight months after the initial treatment will be performed
to observe the treated artery. The angiograms will be analyzed to determine
whether there has been an incidence of restenosis and to measure the late loss
index (the extent of the loss in the enlargement of lumen achieved with PTCA).
As of November 14, 1997, a total of 58 patients had been enrolled at 13 medical
centers.

The trials are administered by the Company's clinical and regulatory staff
of eight people. The Company uses consultants to monitor the clinical sites and
to assist in training. The Company also has engaged an independent contract
research organization to compile data from the trial and to perform statistical
analysis.

Following completion of the multicenter trial, the Company intends to
submit an application to the FDA for pre-market approval ("PMA") for commercial
sale of its Beta-Cath System in the United States.

25
<PAGE> 26

THE BETA-CATH SYSTEM

The Beta-Cath System depicted below is currently being used in the
multicenter trial. The Company anticipates that the design of the system to be
commercialized in Europe, if and when pre-market approvals are obtained, will be
substantially similar.

[A drawing of the Beta-Cath System with its component parts labeled.]

The primary components of the Beta-Cath System are:

Radiation Source Train. The beta radiation administered by the
Beta-Cath System emanates from a "train" of several miniature cylindrical
sealed sources ("radiation sources") containing Strontium 90
(Strontium/Yttrium), a beta-emitting radioisotope. The use of beta, rather
than gamma, radiation is intended to make the Beta-Cath System safer, less
penetrating and easier to use in the cath lab environment. The activity of
the Company's radiation sources has been validated by the U.S. Department
of Commerce National Institute of Standards and Technology, enabling a
physician to accurately determine appropriate dosing levels. In addition,
due to the long half-life (approximately 28 years) of Strontium 90, and
because the source train will not come into contact with a patient's blood
or tissue, the radiation sources are expected to be reused for numerous
patients. Beta radiation from the Strontium 90 source can be easily
shielded from health care workers by the use of approximately
one-half-inch-thick quartz in the transfer device.

Transfer Device. The transfer device is a multiple-use, hand-held
instrument used to deliver and then store the radiation sources when not in
use. The transfer device (i) transfers the radiation sources to and from
the delivery catheter via a hydraulic delivery system, (ii) contains a
switching device that uses a mechanical gating system to contain and then
release the radiation sources and (iii) completely shields the beta
radiation energy from health care workers when the radiation source train
is housed inside it.

26
<PAGE> 27

Delivery Catheter. The delivery catheter is a single-use, disposable,
multi-lumen catheter that provides a pathway for the radiation sources to
be rapidly delivered and retrieved from the coronary arterial segment to be
treated. The delivery catheter is positioned by advancing it over the same
guidewire used during the immediately preceding PTCA procedure. The
radiation sources are delivered and retrieved through a dual-lumen closed
hydraulic circuit, which uses a standard syringe.

The Beta-Cath System is intended to be used in a cath lab by an
interventional cardiologist immediately after a PTCA procedure. The cardiologist
uses a previously positioned guidewire used in the PTCA procedure to direct the
delivery catheter into the vasculature of the patient until the treatment zone
of the delivery catheter reaches the targeted site. A radiation oncologist then
delivers the radiation sources hydraulically from the transfer device to the
target site, in a matter of seconds, through the radiation source train lumen of
the delivery catheter. The radiation sources remain at the targeted site for
less than five minutes to deliver a predetermined dose of radiation. They are
then returned, through the same lumen, by the use of positive hydraulic pressure
applied through the delivery catheter's fluid lumen. Upon completion of each
procedure, the train of radiation sources is stored safely inside the transfer
device. At the end of the day, the transfer device is delivered to a designated
radiation storage site within the hospital for safekeeping. While the need for a
cardiologist and a radiation oncologist is expected to result in higher
physician fees, the Company believes the Beta-Cath System will be
cost-effective, principally by reducing the need for reinterventional
procedures.

The Company believes the Beta-Cath System, when fully developed and tested,
will have the following advantages:

- Non-implantable, Site-specific Therapy. The Beta-Cath System was
designed to treat only the area required to prevent restenosis, without
leaving a permanent implant in the body.

- Short Procedure Times. The Beta-Cath System was designed to enhance
patient safety and comfort, as well as to promote efficiency in the cath
lab, by delivering the recommended dosage in less than five minutes of
radiation exposure time per lesion.

- Utilization of Existing PTCA Techniques. Although intracoronary
radiation is a new concept in coronary artery disease treatment, the
hand-held Beta-Cath System was designed to be easily adopted and used by
the cardiologist. The delivery catheter is very similar to a balloon
angioplasty catheter, and it is positioned by advancing it over the
guidewire already in place from the previous PTCA procedure.

- Flexibility. The cylinders that make up the Beta-Cath System's radiation
source train, as well as the Beta-Cath System's delivery catheter
material, are designed to be very flexible, giving the Beta-Cath System a
very tight radius of curvature and the capability of navigating tortuous
coronary anatomies.

- Multiple-Use System. The radiation source train can be reused for
numerous patients, due to the long half-life of the isotope and because
the source train does not come into contact with the patient's blood. As a
result, inventory planning will be very straightforward, procedure costs
will be attractive and last minute treatment decisions can be made.

- Ease and Accuracy of Dosing. Because of the long half-life of the
Company's radiation sources, prescribed treatment times will remain stable
over the approved shelf life of the isotope. Intracoronary radiation
systems that utilize short half-life isotopes are likely to require
complex case-by-case dose calculations based on the current decay state of
the isotope.

- Designed for Safety. The Beta-Cath System utilizes localized beta
radiation, which results in total body radiation exposure significantly
less than that received during routine x-ray during PTCA. Other safety
mechanisms include: a closed-source train lumen, special locking
mechanisms to connect the delivery catheter to the transfer device and
sufficient shielding in the transfer device to protect health care workers
from beta radiation exposure.

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THE NOVOSTE BUSINESS STRATEGY

The Company's objective is to become the leader in the commercialization of
intravascular radiation devices for the treatment of restenosis. Elements of the
Company's strategy include:

- Achieve First-to-Market Position in the United States. Novoste intends
to be the first to market in the United States an intracoronary beta
radiation device to treat coronary restenosis.

- Establish Beta Radiation Therapy as the Standard Therapy to Prevent
Restenosis. The Company's strategy is to introduce the Beta-Cath System
into the cath lab as standard therapy to reduce the frequency of
restenosis following PTCA, either on a stand-alone basis or in conjunction
with coronary stenting. The Company seeks to establish interventional
cardiologists as the primary providers of this therapy, and plans to
target top-tier medical institutions and leading cardiologists for sale of
the Beta-Cath System. In addition, the Company intends to conduct
intensive physician-training seminars to familiarize the cardiologists
with the use of the Beta-Cath System.

- International Commercialization. The Company intends to seek regulatory
approval to commence marketing the Beta-Cath System in Europe by
submitting an application for a CE mark by the end of the first quarter of
1998. If such approval is obtained, the Company anticipates marketing the
Beta-Cath System in Europe through international distributors or a
corporate partner.

- Establish Radiation Therapy for Peripheral Vascular
Applications. Restenosis is common following angioplasty of the
peripheral arteries. In addition, a similar phenomena frequently occurs in
veins adjacent to an arterial-venous shunt used for patients undergoing
hemodialysis for end-stage renal disease. The Company intends to leverage
its core catheter and localized radiation technologies to expand its
product offerings to other vascular markets where cell proliferation is of
clinical significance.

- Protect and Enhance Proprietary Technology. The Company believes that
its patent position may offer a competitive advantage. On November 4,
1997, Novoste was issued United States Patent No. 5,683,345 on the
Beta-Cath System. With respect to that patent, the Company has also filed
a counterpart application under the Patent Cooperation Treaty, preserving
the Company's right to file applications in the European Patent Office and
certain other countries. The Company intends to obtain further protection
of its proprietary technology and to defend its intellectual property
rights against infringement.

PRODUCT DEVELOPMENT

Research and development activities are performed by a 25-person
product-development team. The Company has also retained consultants to assist in
many research and development activities, including design of the Beta-Cath
System, conducting and monitoring the clinical trials relating to the Beta-Cath
System and advising on key aspects of radiation health physics and dosimetry. On
June 27, 1996 the Company signed an agreement with a medical engineering,
development and design company to provide products and services to be used in
the Company's product development.

The focus of the Company's current development efforts is the design of
future generation components of the Beta-Cath System. The Company would like to
introduce a delivery catheter with a smaller outer diameter so that arteries
smaller than 2.7 millimeters could be treated, thereby expanding the Company's
market opportunity. Likewise, the transfer device will be modified to have a
more ergonomic design and to incorporate additional features. Additional future
development efforts will focus on modifying the Beta-Cath System for use in
peripheral applications, such as arterial-venous shunts and the femoral
arteries. In addition, the capability of modifying the length of the
radiation-source trains to correspond with varying lesion lengths is potentially
a desired feature of future systems. There can be no assurance that the Company
will be successful in developing these or other products.

Research and development expenses for the years ended December 31, 1996,
1995, and 1994 and for the nine months ended September 30, 1997 were
approximately $4.6 million, $2.1 million, $1.4 million and $8.6 million,
respectively.

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In addition to the resources dedicated to the product-development process,
the Company has an internal regulatory affairs and clinical monitoring staff,
which has responsibility for training clinical personnel, monitoring the
clinical trials and obtaining regulatory approvals for the Beta-Cath System in
the United States and abroad.

MARKETING AND DISTRIBUTION

The Company anticipates marketing the Beta-Cath System through a direct
sales force in the United States and through a combination of international
distributors and corporate marketing partners outside the United States. If
marketing approval is obtained, the Company plans to focus its United States
marketing efforts on a top tier of approximately 200 hospitals, where the
Company believes a vast majority of the PTCA procedures in the United States are
performed, and on leading cardiologists at those institutions. Through this
effort the Company initially aims to identify well-respected clinical supporters
for the Beta-Cath System and to leverage their reputation in the clinical
community to generate wider demand. The Company will also conduct seminars to
educate physicians about the Beta-Cath System. The Company believes that it can
market the Beta-Cath System to these hospitals and cardiologists with a
moderately sized direct-sales organization, initially consisting of the Vice
President of Marketing and Sales and approximately 8 to 10 sales
representatives, augmented by a small number of clinical specialists. The
Company's business and future operating results will depend in significant part
upon its ability to attract and retain skilled sales and marketing personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting or retaining such personnel. The
Company's inability to attract and retain skilled sales and marketing personnel,
as needed, could materially adversely affect the Company's business, financial
condition and results of operations. The Company believes such distribution or
corporate partnering arrangements will be cost-effective, will be implemented
more quickly than a direct sales force established by the Company in such
countries, and will enable the Company to capitalize on local marketing
expertise in such countries.

The Company intends to select one or more established market leaders in the
radiation-isotope business to inventory and deliver the radiation sources and to
provide related training, delivery, testing and disposal services to the
purchasing hospital. Novoste does not intend to inventory or deliver the
radiation sources housed inside the transfer device of the Beta-Cath System.
There can be no assurance that the Company will be able to secure any
arrangements with international distributors, corporate marketing partners or
radiation isotope providers on satisfactory terms or at all.

MANUFACTURING AND MATERIALS

The Company soon will focus its manufacturing resources on the production
of the Beta-Cath System. The Company anticipates that it will manufacture the
delivery-catheter component of the Beta-Cath System directly and manufacture the
transfer device jointly with third parties. The radiation-source trains are
being supplied by a third party. The Company is in the process of purchasing
equipment and validating its manufacturing processes to commence manufacturing
of its catheter in 1998. The Company intends to manufacture its products at its
25,600-square-foot facility in Norcross, Georgia through the end of 1999. The
Company believes that, if marketing approvals of the Beta-Cath System are
obtained, it will be able to utilize its existing facility and the expertise of
its management to manufacture commercial quantities of the catheter-based
components of the Beta-Cath System at a reasonable cost. However, to date, the
Company has not yet commercialized any of its products, and its manufacturing
activities have consisted of building a small number of prototypes of the
Beta-Cath System for use in pre-clinical and clinical trials, and the Company
does not have experience in manufacturing the Beta-Cath System in commercial
quantities.

The Company currently executes all critical assembly operations in
controlled-environment rooms, in which bacterial and airborne particulate levels
are monitored. The Company believes that its current space will be sufficient to
serve its needs through at least 1998. The Company could rely on some outside
sources for catheter components, and from time to time the Company could
experience shortages of certain supplied materials that could significantly
affect its ability to produce enough product to satisfy market demand. As the
Company grows, it will be required to scale up its production and to increase
its manufacturing capacity.

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Any products of the Company, for which FDA clearances or approvals have
been obtained, must be manufactured and designed in accordance with Good
Manufacturing Practices ("GMP") regulations which would impose certain
procedural and documentation requirements upon the Company with respect to
manufacturing and quality assurance activities. The Company will rely on
independent suppliers for certain components of the Beta-Cath System. Such
components are either standard throughout the industry or will be built to the
Company's specifications. All suppliers of such components also must be in
compliance with GMP regulations.

The Company has obtained all of its requirements of radiation source
materials pursuant to an agreement, as amended (the "Supply Agreement"), with a
single supplier, Bebig Isotopentechnik und Umweltdiagnostik GmbH, a German
corporation (the "Supplier"). Under the Supply Agreement, as amended, the
Company agreed to advance the Supplier a monthly investment grant of 100,000 DM
(approximately $65,000) for a period of 15 months from November 1996 through
January 1998, to equip a production site for the exclusive production of
radioactive materials for the Company. As of September 30, 1997, 11 payments
totalling $1.1 million DM (approximately $700,000) have been made. In June 1997
the Company also made a milestone payment of 617,000 DM (approximately $360,000)
to the Supplier upon its meeting certain delivery requirements. The Company is
further obligated to make a payment of 737,000 DM (approximately $415,000) upon
the Supplier meeting certain production volumes by March 1998. The Supplier has
agreed to manufacture radiation source "trains" at an agreed-upon base price.
The Supplier is required to comply with various regulatory requirements with
respect to the supply of radiation sources.

The Supply Agreement has an initial term ending in the year 2000, and
renews automatically on a calendar year basis unless notice of termination is
given six months prior to the end of each calendar year. Under the Supply
Agreement, the Supplier has agreed not to sell, lease, license or otherwise
transfer radioactive sources of a similar isotope to any other party for use in
the treatment of restenosis. The Company, in turn, has agreed not to purchase,
lease, or otherwise acquire directly or indirectly more than 30% of its annual
requirement for radioactive sources of "like" isotope for use in the treatment
of restenosis from any other party unless the Supplier is unable to provide the
radioactive source materials required by the Company.

Although the Supply Agreement permits the Company to use an alternative
source for 30% of its annual isotope requirements, the Company believes that,
because of the technical expertise and capital investment required to
manufacture the radiation source materials, it would be extremely difficult and
expensive to find an alternate source of supply in the event that the Supplier
is unable to provide the materials. In addition, portions of the process used to
manufacture the materials may be proprietary to the Supplier, who has no
obligation to make any of its know-how or technology available to any
potentially alternate source of supply.

The Company holds an option to purchase those tangible and intangible
assets of the Supplier used or useful in producing the radioactive isotopes sold
to the Company by the Supplier in connection with the Beta-Cath System. The
option is exercisable at any time on or prior to August 22, 2002, for
$5,000,000, 50% of which is payable upon exercise and the balance in 12 equal
consecutive monthly installments following such exercise, and provides that the
$90,000 payment made to obtain the option and the aforementioned aggregate
investment grants of 1.5 million Deutsche Marks, to the extent paid at the time
of exercise, will be credited against the purchase price of the assets. Upon the
exercise of the option, the Supplier is obligated, for a period of up to three
months, to assign personnel to assist the Company in facilitating the transfer
of the assets, both for purposes of technical training and operations and for
administrative and regulatory matters relating to licensing and governmental
approvals. Nevertheless, the exercise of such option and the transfer of the
required technology and expertise to the Company or an alternative source would
be costly, time consuming, and uncertain of success.

While the Company anticipates that the radiation source materials it
purchases from the Supplier will be able to be used for numerous patients, the
inability of the Supplier to provide radiation source materials would limit the
Company's ability to increase its business beyond its then existing inventory of
such radiation source material. As a result of the foregoing, any failure or
disruption in the ability of the Supplier to provide the radiation source
materials could have a material adverse effect on the business, financial
condition and results of operation of the Company.

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PATENTS AND PROPRIETARY TECHNOLOGY

The Company's policy is to protect its proprietary position by, among other
methods, filing United States and foreign patent applications. On November 4,
1997 the Company was issued United States Patent No. 5,683,345 on the Beta-Cath
System. The Company also has filed a related United States continuation-in-part
application (which is jointly owned by Novoste and Emory University), and has a
related United States continuation application and another United States
application pending covering aspects of its Beta-Cath System. With respect to
U.S. Patent No. 5,683,345, Novoste has counterpart applications pending in the
European Patent Office and certain other countries. With respect to the
continuation-in-part and other applications, Novoste has filed counterpart
applications under the Patent Cooperation Treaty, preserving the Company's right
to file applications in the European Patent Office and certain other countries.

There can be no assurance that United States Patent No. 5,683,345 will
offer any protection to the Company or that it will not be reexamined,
invalidated or circumvented. In addition, there can be no assurance that any
claims under the other pending applications will be allowed, or if allowed, will
offer any protection or that they will not be rejected, challenged, reexamined,
invalidated or circumvented. In addition, there can be no assurance that
competitors will not obtain patents that will prevent, limit or interfere with
the Company's ability to make, use or sell its products in either the United
States or international markets.

The Company received a letter from NeoCardia, L.L.C. ("NeoCardia"), dated
July 7, 1995, in which NeoCardia notified the Company that NeoCardia is the
exclusive licensee of U.S. Patent No. 5,199,939 (the "Dake Patent") and
requested that the Company confirm that its products did not infringe the claims
of the Dake Patent. The Company has concluded, based upon advice of patent
counsel, that the Company's Beta-Cath System would not infringe any valid claim
of the Dake Patent. On August 22, 1995, on behalf of the Company, its patent
counsel responded that the Company did not infringe the Dake Patent.

In June 1997 the U.S. Patent and Trademark Office ("USPTO") issued a final
Office Action with respect to two consolidated reexamination requests relating
to the Dake Patent. In the final Office Action, the patent examiner upheld the
patentability of some of the original claims and certain new claims for the Dake
Patent but rejected other claims. In August 1997 the holder of the Dake Patent
filed an amendment in response to the final Office Action seeking, among other
things, to add certain additional new claims, which appear to have been written
in an attempt to cover the Beta-Cath System. In October 1997 the USPTO, rejected
these particular new claims, because they improperly attempted to broaden the
scope of the Dake Patent and were inconsistent with the original patent claims.
Later in October 1997, the holder of the Dake Patent filed an amendment
cancelling those rejected claims and also requesting reconsideration of the
rejection. The holder of the Dake Patent has the right to appeal any final
rejection of any claims presented. The validity of patent claims which survive a
reexamination procedure may be more difficult to challenge in a later dispute
than claims which have never been reexamined to the extent that the same prior
art is relied upon. The Company continues to believe, based upon advice of
counsel that the Beta-Cath System would not infringe any valid claim of the Dake
Patent. However, there can be no assurance that the Company's products will not
infringe any original, amended or new claims of the Dake Patent which survive
the reexamination proceeding.

In May 1997 Guidant Corporation ("Guidant") acquired NeoCardia together
with the rights under the Dake Patent. Guidant is a New York Stock
Exchange-listed, medical device company, which is a competitor of Novoste.
Guidant has significantly greater capital resources than the Company. There can
be no assurance that Guidant will not sue the Company for patent infringement
and obtain damages from the Company and/or injunctive relief restraining the
Company from commercializing the Beta-Cath System in the U.S., or that the
Company will not be required to obtain a license from Guidant to market the
Beta-Cath System in the U.S., any of which could have a material adverse effect
on the Company's business, financial condition and results of operations, or
could result in cessation of the Company's business.

The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights and companies in the
medical device industry have employed intellectual property

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litigation to gain a competitive advantage. There can be no assurance that the
Company will not become subject to patent-infringement claims or litigation or
interference proceedings declared by the USPTO to determine the priority of
inventions. The defense and prosecution of intellectual property suits, USPTO
interference proceedings and related legal and administrative proceedings are
both costly and time-consuming. Litigation may be necessary to enforce patents
issued to the Company, to protect trade secrets or know-how owned by the Company
or to determine the enforceability, scope and validity of the proprietary rights
of others. Any litigation or interference proceedings will result in substantial
expense to the Company and significant diversion of effort by the Company's
technical and management personnel. An adverse determination in litigation or
interference proceedings to which the Company may become a party could subject
the Company to significant liabilities to third parties or require the Company
to seek licenses from third parties or require the Company to redesign its
products or processes to avoid infringement or prevent the Company from selling
its products in certain markets, if at all. Although patent and intellectual
property disputes regarding medical devices have often been settled through
licensing or similar arrangements, costs associated with such arrangements may
be substantial and could include ongoing royalties. Furthermore, there can be no
assurance that the necessary licenses would be available to the Company on
satisfactory terms, if at all, or that the Company could redesign its products
or processes to avoid infringement. Any adverse determination in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent
the Company from manufacturing and selling its products, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.

Patent applications in the United States are maintained in secrecy until
patents issue, and patent applications in foreign countries are maintained in
secrecy for a period after filing. Accordingly, there can be no assurance that
current and potential competitors or other third parties have not or will not
file applications for, or have not or will not receive, patents and will not
obtain additional proprietary rights relating to products made, used or sold or
processes used or proposed to be used by the Company.

The Company has developed certain of its patent and proprietary rights
relating to the Beta-Cath System in conjunction with Emory University Hospital,
a leader in the use of intravascular radiation therapy. To obtain the exclusive
rights to commercialize the Beta-Cath System for the treatment of restenosis,
the Company entered into a license agreement with Emory, under which Emory
assigned to the Company all of Emory's rights to one pending U.S. patent
application, as to which Emory made no representation or warranty with respect
to its ownership thereof, and licensed other technology thereunder relating to
the Beta-Cath System, but made only limited representations as to the ownership
of such other technology. Under the agreement Emory will be entitled to royalty
payments based upon net sales of the Beta-Cath System. The term of the agreement
runs through the later of (i) the date the last patent covered by the agreement
expires or (ii) January 2016 (unless earlier terminated as provided in the
agreement). Any inventions developed jointly by personnel of the Company and
Emory during the term of the license agreement are owned jointly by the Company
and Emory. If the agreement were terminated by Emory as a result of the
Company's failure to pay such royalties or any other breach of its obligations
under such agreement, the Company's rights to use jointly owned patents
(including any patent issuing from the continuation-in-part application which
has been filed) would become non-exclusive, it would have no rights to use
future patents owned exclusively by Emory, and the Company could be required by
Emory to cooperate in licensing the pending U.S. patent application and its
foreign counterparts to third parties so that they would be able to
commercialize and sell the Beta-Cath System.

All of the physicians on staff at Emory who were involved in the
development of the Beta-Cath System, including Spencer B. King, III M.D., have
assigned their rights in the technology, if any, to Novoste and/or Emory. In
addition, the Company has entered into a license agreement with Dr. King
pursuant to which Dr. King is entitled to receive a royalty on the net sales of
the Beta-Cath System (excluding consideration paid for the radioactive isotope),
subject to a maximum of $5,000,000 to be paid to Dr. King, in exchange for the
right granted thereunder to the Company to use his name in connection with sales
and marketing of the Beta-Cath System.

The Company employs a full time manager of intellectual property to prepare
invention records and to coordinate the prosecution of new intellectual
property. The Company typically obtains confidentiality and

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invention assignment agreements in connection with employment, consulting and
advisory relationships. These agreements generally provide that all confidential
information developed or made known to the individual by the Company during the
course of the individual's relationship with the Company, is to be kept
confidential and not disclosed to third parties, except in specific
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection or adequate remedies for the Company in the event
of unauthorized use, transfer or disclosure of such information or inventions.
Furthermore, no assurance can be given that competitors will not independently
develop substantially equivalent proprietary information and techniques, or
otherwise gain access to the Company's proprietary technology, or that the
Company can meaningfully protect its rights in unpatented proprietary
technology.

COMPETITION

Most of the companies developing radioactive guidewires, which may use
either gamma or beta radiation, have also developed specialized computerized
equipment to automatically calculate treatment times, control movement of the
guidewire, and to store the guidewire when not in use (an "afterloader"). This
equipment may be large, complex, and expensive. Guidewires with gamma-emitting
radioactive tips have been used for some time in cancer therapy, and some
researchers have used them in clinical trials to deliver intracoronary radiation
to prevent restenosis. Gamma radiation is more penetrating and therefore more
hazardous than beta radiation. As an example, during administration of gamma
radiation, health care workers must leave the cath lab to ensure their safety by
limiting their ongoing exposure to gamma radiation. Some companies are also
investigating the use of beta-emitting wires, which would be more easily
shielded and safer to use, although these are also used in conjunction with
afterloaders. Companies using the guidewire approach include Neocardia, which is
owned by Guidant, Best Medical, Inc., which is currently conducting a
multicenter clinical trial of a gamma-emitting radioactive guidewire, U.S.
Surgical and Pfizer through its Schneider AG subsidiary.

Novoste is also aware of one company, Isostent, Inc., developing a
beta-emitting stent. In theory, such a stent would address both elastic recoil
and vascular remodeling and inhibit longer-term hyperplasia. However, this
method retains the problems inherent in leaving a permanent implant in the
coronary artery. In addition, this approach might not effectively treat areas of
the artery beyond the ends of the stent, areas which have been known to be
restenotic. Finally, because it is a permanent implant, a radioactive stent
would likely require the use of a radiation source with a short half-life. As a
result, a hospital would have difficulty keeping an inventory of stents that
have sufficient radioactivity at the time of implant.

Another method of delivering intraluminal radiation being investigated by a
number of physicians and companies is a radioactive fluid-filled balloon
catheter. This approach would involve injecting a short half-life radioactive
liquid down a catheter to inflate a balloon. The main disadvantages of this
approach are the risk of balloon rupture and disposal of the catheter and fluid
as radioactive waste.

Many of the Company's competitors and potential competitors have
substantially greater capital resources than does the Company and also have
greater resources and expertise in the areas of research and development,
obtaining regulatory approvals, manufacturing and marketing. There can be no
assurance that the Company's competitors and potential competitors will not
succeed in developing, marketing and distributing technologies and products that
are more effective than those developed and marketed by the Company or that
would render the Company's technology and products obsolete or noncompetitive.

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Additionally, there is no assurance that the Company will be able to compete
effectively against such competitors and potential competitors in terms of
manufacturing, marketing and sales.

Any product developed by the Company that gains regulatory clearance or
approval will have to compete for market acceptance and market share. An
important factor in such competition may be the timing of market introduction of
competitive products. Accordingly, the relative speed with which the Company can
develop products, gain regulatory approval and reimbursement acceptance and
supply commercial quantities of the product to the market are expected to be
important competitive factors. In addition, the Company believes that the
primary competitive factors for products addressing restenosis include safety,
efficacy, ease of use, reliability, suitability for use in cath labs, service
and price. The Company also believes that physician relationships, especially
relationships with leaders in the interventional cardiology community, are
important competitive factors. Although the Company believes that it is the
first in the United States to have initiated an FDA-approved human clinical
trial of a radiation system for reducing the frequency of restenosis, there can
be no assurance that the Company will be first to market such a system in the
United States or to market such a system effectively.

GOVERNMENT REGULATION

United States

The Company's Beta-Cath System is regulated in the United States as a
medical device. As such, the Company is subject to extensive regulation by the
FDA and by foreign governments. The FDA regulates the clinical testing,
manufacture, labeling, distribution and promotion of medical devices.
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 premarket
clearance or premarket approval for devices, withdrawal of marketing approvals,
a recommendation by the FDA that the Company not be permitted to enter into
government contracts, 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 (Class I, II or III) on the basis of the controls deemed necessary by
the FDA to reasonably assure their safety and efficacy. Under FDA regulations
Class I devices are subject to general controls (for example, labeling,
premarket notification and adherence to GMPs) and Class II devices are subject
to general and special controls (for example, performance standards, patient
registries, and FDA guidelines). Generally, Class III devices are those that
must receive premarket approval by the FDA after evaluation of their safety and
efficacy (for example, life-sustaining, life-supporting and implantable devices,
or new devices that have not been found substantially equivalent to other Class
II legally marketed devices). The Beta-Cath System is a Class III device, which
will require pre-market approval ("PMA") by the FDA prior to its
commercialization.

A PMA application must be supported by valid scientific evidence, which
typically includes extensive data, including preclinical and human clinical
trial data to demonstrate safety and efficacy of the device. If human clinical
trials of a device are required and the device presents a "significant risk,"
the sponsor of the trial (usually the manufacturer or the distributor of the
device) is required to file an IDE application with the FDA prior to commencing
human clinical trials. The IDE application must be supported by data, typically
including the results of animal and laboratory testing. If the IDE application
is approved by the FDA and one or more appropriate Institutional Review Boards
("IRBs"), human clinical trials may begin at a specific number of
investigational sites with a specific number of patients, as approved by the
FDA.

The PMA application must also contain the results of all relevant bench
tests, laboratory and animal studies, a complete description of the device and
its components, and a detailed description of the methods, facilities and
controls used to manufacture the device. In addition, the submission should
include the proposed labeling, advertising literature and training methods (if
required). Upon receipt of a PMA application, the FDA makes a threshold
determination as to whether the application is sufficiently complete to permit
such substantive review. If the FDA determines that the PMA application is
sufficiently complete to permit a substantive review, the FDA will accept the
application for filing and begin an in-depth review of the PMA

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application. An FDA review of a PMA application generally takes one to two years
from the date the PMA application is accepted for filing, but may take
significantly longer. The review time is often significantly extended by the FDA
asking for more information or clarification of information previously
submitted. During the review period an advisory committee, primarily comprised
of clinicians, will likely be convened to review and evaluate the application
and provide recommendations to the FDA as to whether the device should be
approved. The FDA is not bound by those recommendations. During the review
process of the PMA application, the FDA generally will conduct an inspection of
the manufacturer's facilities to ensure that the facilities are in compliance
with the applicable GMP requirements.

If the FDA's evaluations of the PMA application is favorable, the FDA will
either issue an approval letter or an "approvable letter," containing a number
of conditions which must be satisfied in order to secure the final approval of
the PMA application. When and if those conditions have been fulfilled to the
satisfaction of the FDA, the agency will issue a letter approving a PMA
application authorizing commercial marketing of the device for certain
indications. If the FDA's evaluation of the PMA application or manufacturing
facilities is not favorable, the FDA will deny approval of the PMA application
or issue a "not approvable letter." The FDA may also determine that additional
clinical trials are necessary, in which case approval of the PMA application
could be delayed for several years while additional clinical trials are
conducted and submitted in an amendment to the PMA application. The PMA
application process can be expensive, uncertain and lengthy, and a number of
devices for which FDA approval has been sought by other companies have never
been approved for marketing.

On July 19, 1995, 29 days after submission of the application, the Company
obtained an IDE to conduct clinical feasibility trial to collect data necessary
to gain FDA approval to begin the multi center, randomized, prospective clinical
trial needed to support a PMA application. The trial initially commenced at
Emory University Hospital. On April 18, 1996, 31 days after submission of an
application to broaden that IDE, the Company was granted the authority to begin
enrolling patients also at Rhode Island Hospital. Then, in July 1997, 29 days
after submission of the Company's application for an IDE for a multi center
trial using a modified transfer device, the FDA approved an IDE for the multi
center trial currently in progress. There can be no assurance as to when, or if,
the Company will complete clinical trials of its Beta-Cath System or that data
from such trials, if completed, will be adequate to support approval of a PMA
application. Furthermore, there can be no assurance that the Company will be
able to obtain approval of its PMA application on a timely basis, or at all, and
delays in the receipt of, or failure to receive, such approvals would have a
material adverse effect on the Company's business, financial condition and
results of operations, and could result in cessation of the Company's business.

Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA, including record-keeping requirements and reporting of adverse
experiences with the use of the device. Device manufacturers are required to
register their establishments and list their devices with the FDA and certain
state agencies, and are subject to periodic inspections by the FDA and those
state agencies. The FDA requires devices to be manufactured in accordance with
GMP regulations, which impose certain procedural and documentation requirements
upon the Company with respect to manufacturing and quality-assurance activities.

Because the Beta-Cath System uses radiation sources, its manufacture,
distribution, transportation, import/export, use and disposal will also be
subject to federal, state and/or local laws and regulations relating to the use
and handling of radioactive materials. Specifically, even if approval of a PMA
application is obtained, approval by the U.S. Nuclear Regulatory Commission
("NRC"), or an equivalent state agency, of the Company's radiation sources for
certain medical uses will be required to distribute commercially the radiation
sources to licensed recipients in the United States. In addition, the Company
and/or its supplier of radiation sources must obtain a license from the NRC to
commercially distribute such radiation sources as well as to comply with all
applicable regulations. The Company and/or its supplier of radiation sources
must also comply with NRC and U.S. Department of Transportation regulations on
the labeling and packaging requirements for shipment of radiation sources to
hospitals or other users of the Beta-Cath System. In

35
<PAGE> 36

addition, hospitals may be required to obtain or expand their licenses to use
and handle beta radiation prior to receiving radiation sources for use in the
Beta-Cath System. Comparable, or perhaps more stringent, requirements and/or
approvals regulating radiation are anticipated in markets outside the United
States. If any of the foregoing approvals are significantly delayed or not
obtained, the Company's business, financial condition and results of operations
could be materially adversely affected.

The Company is also subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire-hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations now or in the future, or that such laws or regulations will not have
a material adverse effect upon the Company's ability to do business.

Changes in existing requirements or adoption of new requirements or
policies could adversely affect the ability of the Company to comply with
regulatory requirements. Failure to comply with regulatory requirements could
have a material adverse effect on the Company's business, financial condition or
results of operations. There can be no assurance that the Company will not be
required to incur significant costs to comply with laws and regulations in the
future or that laws and regulations will not have a material adverse effect upon
the Company's business, financial condition or results of operations.

International

Sales of the Beta-Cath System outside the United States are subject to
regulatory requirements that vary from country to country but generally include
pre-marketing governmental approval. The time required to obtain approval for
sale in foreign countries may be longer or shorter than that required for FDA
approval, and the requirements for the conduct of clinical trials, marketing
authorization, pricing and reimbursement may differ from the FDA requirements.
In addition, there may be foreign regulatory barriers other than premarket
approval (including regulations concerning the distribution, use and handling of
the radiation sources), and the export of devices must be in compliance with FDA
regulations. In Europe, commencing in 1998 the Company will be required to
obtain certifications necessary to enable the CE mark to be affixed to the Beta-
Cath System, to market the Beta-Cath System throughout the European Union.
Additionally, to market products in Europe, the Company may choose to maintain
ISO 9001 and is required to maintain EN 46001 certification subject to periodic
surveillance audits. Using data from its feasibility studies, the Company
intends to submit an application by the end of the first quarter of 1998 for a
CE mark to commence marketing of the Beta-Cath System in Europe.

Other countries in which the Company intends to market the Beta-Cath System
may adopt regulations in the future that could prevent the Company from
marketing its Beta-Cath System in those countries. The foreign regulatory
process generally includes all of the risks associated with FDA approval in the
United States. In addition, the Company may be required to spend significant
amounts of capital in order to respond to requests for additional information by
foreign regulatory bodies, or may otherwise be required to spend significant
amounts of capital in order to obtain foreign regulatory approvals. Any such
events could substantially delay or preclude the Company from marketing the
Beta-Cath System in foreign countries.

THIRD-PARTY REIMBURSEMENT

36
<PAGE> 37

restrictions on the circumstances in which coverage will be available. In
addition, payors may deny reimbursement if they determine that a product was not
used in accordance with established payor protocol regarding cost-effective
treatment methods, or was used for an unapproved indication. Third-party payors
are also increasingly challenging the prices charged for medical products and
services and, in some instances, have put pressure on medical device suppliers
to lower their prices. The Company is unable to predict what changes will be
made in the reimbursement methods used by third-party health care payors. There
can be no assurance that the Beta-Cath System will be considered cost effective
by third-party payors or health care providers, that reimbursement for the
Beta-Cath System will be available or, if available, that payors' reimbursement
levels will not adversely affect the Company's ability to sell the Beta-Cath
System on a profitable basis. In addition, the cost of health care has risen
significantly over the past decade, and there have been and may continue to be
proposals by legislators, regulators, third-party payors and health care
providers to curb these costs. Failure by hospitals and physicians to obtain
reimbursement from third-party payors, changes in third-party payors' policies
toward reimbursement for the Beta-Cath System or legislative action could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Reimbursement systems in international markets vary significantly by
country and by region within some countries, and reimbursement approvals must be
obtained on a country-by-country basis. Many international markets have
government managed health care systems that control reimbursement for new
devices and procedures. In most markets there are private insurance systems as
well as government managed systems. There can be no assurance that reimbursement
for the Company's products will be available in international markets under
either government or private reimbursement systems.

PRODUCT LIABILITY AND INSURANCE

The business of the Company entails the risk of product liability claims.
Although the Company has not experienced any product liability claims to date,
there can be no assurance that such claims will not be asserted or that the
Company will have sufficient resources to satisfy any liability resulting from
such claims. The Company maintains product liability insurance with coverage of
an annual aggregate maximum of $4 million. There can be no assurance that
product liability claims will not exceed such insurance coverage limits, that
such insurance will continue to be available on commercially reasonable terms or
at all, or that a product liability claim would not materially adversely affect
the business, financial condition or results of operations of the Company.

FACILITIES

The Company leases approximately 25,600 square feet of space in an office
park in Norcross, Georgia under a five-year lease expiring in 2000. All of the
Company's operations (other than clinical research activities and services of
its consultants) are conducted in that facility. The Company believes that its
facility is adequate to serve its needs through at least 1998, but additional
facilities may be needed thereafter to commercialize the Beta-Cath System.

EMPLOYEES AND CONSULTANTS

As of November 14, 1997 the Company directly employed 42 full-time
individuals. Most of the Company's employees have prior experience with medical
device or pharmaceutical companies. The Company believes it maintains good
relations with its employees. None of the Company's employees is represented by
a union or covered by a collective bargaining agreement. The Company's success
will depend in large part upon its ability to attract and retain qualified
employees. The Company faces competition in this regard from other companies,
research and academic institutions and other organizations.

The Company maintains continuing relationships with a number of independent
consultants that have contributed to the development of the Company's products
and work on specific development projects. These relationships are integral to
the continued success of the Company and the generation of new products from the
research and development departments.

37
<PAGE> 38

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Thomas D. Weldon.......................... 42 President, Chief Executive Officer and
Director
Charles E. Larsen......................... 46 Senior Vice President, Chief Technical
Officer and Director
David N. Gill............................. 42 Chief Operating Officer, Vice President of
Finance and Treasurer
Thomas K. Brooks.......................... 41 Vice President, Sales and Marketing
Joan M. Macdonald, Ph.D................... 39 Vice President, Regulatory and Clinical
Affairs
Cheryl R. Johnson......................... 35 Vice President, Investor Relations and
Business Development and Secretary
Norman R. Weldon, Ph.D.................... 63 Chairman of the Board of Directors
J. Stephen Holmes......................... 54 Director(1)
Richard M. Johnston....................... 62 Director(1)(2)
Pieter J. Schiller........................ 59 Director(2)
Jack R. Kelly, Jr......................... 63 Director(1)
Stephen I. Shapiro........................ 52 Director
William E. Whitmer........................ 64 Director(2)
</TABLE>

- ---------------

(1) Member of Stock Option and Compensation Committee.
(2) Member of Audit Committee.

Thomas D. Weldon. Mr. Weldon co-founded the Company and has served as its
President and Chief Executive Officer and as a Director since its capitalization
in May 1992. Mr. Weldon co-founded and was President, Chief Executive Officer
and a Director of Novoste Puerto Rico Inc. ("Novoste Puerto Rico"), a
manufacturer of disposable cardiovascular medical devices, from 1987 to May
1992, prior to its sale. Previous responsibilities included management positions
at Arthur Young & Company and Key Pharmaceuticals. Mr. Weldon received a B.S. in
Industrial Engineering from Purdue University and an M.B.A. in Operations and
Systems Management from Indiana University.

Charles E. Larsen. Mr. Larsen co-founded the Company and has served as its
Senior Vice President and as a Director since its capitalization in May 1992.
Since February 28, 1997, Mr. Larsen has been Chief Technical Officer of the
Company, having served from May 1992 through February 1997 as its Chief
Operating Officer. Mr. Larsen co-founded and was Vice President and Director of
Novoste Puerto Rico from 1987 to May 1992. From 1983 through 1987, Mr. Larsen
was a manager of manufacturing engineering at Cordis Corporation. Mr. Larsen
received a B.S. in Mechanical Engineering from New Jersey Institute of
Technology.

David N. Gill. Mr. Gill has served as the Company's Vice President of
Finance, Chief Financial Officer and Treasurer since July 1996 and as Chief
Operating Officer since February 28, 1997. From August 1995 to June 1996, Mr.
Gill served as Chief Financial Officer of SPEA Software AG prior to its sale.
From 1992 to 1995, Mr. Gill served as President and Director of Dornier Medical
Systems, Inc., and from 1990 to 1992 as its Vice President of Finance. Mr. Gill
received an M.B.A. from Emory University and a B.S. degree in Accounting from
Wake Forest University.

Thomas K. Brooks. Mr. Brooks has served as the Company's Vice President,
Sales, Marketing and Business Development from January 1995 to July 1996 and as
Vice President, Sales and Marketing since July 1996. From 1986 through December
1994, Mr. Brooks served in various sales, marketing, and business development
positions with Boston Scientific Corporation, a manufacturer of medical devices,
most recently as manager of new business development. From 1983 through 1986,
Mr. Brooks held various sales positions

38
<PAGE> 39

for Ethicon Endo-Surgery Division of Johnson & Johnson. Mr. Brooks received a
B.A. in Business Administration from Monmouth College.

Joan M. Macdonald, Ph.D. Dr. Macdonald joined the Company in January 1994,
as its Director of Regulatory Affairs, and has been its Vice President,
Regulatory and Clinical Affairs since January 1996. From February 1991 through
September 1993, Dr. Macdonald worked for CIBA Vision Corporation, a manufacturer
of ophthalmic products, having served most recently as Director, Worldwide
Regulatory Strategy. Dr. Macdonald received a Ph.D. degree in Physiology from
the Medical College of Wisconsin and M.S. and B.S. degrees in Zoology from the
University of Wisconsin.

Cheryl R. Johnson. Ms. Johnson joined the Company in July 1992 as Director
of Marketing and Business Development and Secretary, served as Director of
Administration and Business Development of the Company from January 1996 until
July 1996 and as Vice President, Investor Relations and Business Development
from July 1996. From August 1989 to June 1992, Ms. Johnson worked in planning
and business development capacities at BOC Health Care, most recently as its
business development manager. Ms. Johnson received an M.B.A. from the Kellogg
School at Northwestern University and a B.S. degree in Chemical Engineering from
the Georgia Institute of Technology.

Norman R. Weldon, Ph.D. Dr. Weldon co-founded the Company and has been
Chairman of the Board since its capitalization in May 1992. Dr. Weldon is
Treasurer and Managing Director of Partisan Management Group, a venture capital
fund he co-founded in 1993. From 1986 until May 1996, Dr. Weldon served as
President and Chief Executive Officer and as a Director of Corvita Corporation,
a medical device company Dr. Weldon co-founded in 1986. In July 1996 Pfizer Inc.
consummated its acquisition of Corvita. From 1979 to 1987, Dr. Weldon served as
President and Chief Executive Officer of Cordis Corporation. From 1964 to 1979,
Dr. Weldon served CTS Corporation in various capacities, including as its
President and Chief Executive Officer beginning in 1976. Dr. Weldon received,
from Purdue University, a Ph.D. in Economics, a M.S. in Industrial Management
and a B.S. in Biochemistry.

J. Stephen Holmes. Mr. Holmes has served as a Director of the Company
since October 1992. Mr. Holmes is currently Executive Manager of Saber
Endoscopy, LLC, a medical device company, and has served as Founder and Manager
since its inception in February 1996. From 1992 through 1995, Mr. Holmes was a
private investor, having founded several start-ups from 1979 through 1991,
including Adler Instrument Company, Inc., SOLOS Ophthalmology, Inc. and SOLOS
Endoscopy, Inc., which he founded in 1982, 1988 and 1990, respectively, and in
which he sold his interests in 1988, 1991 and 1991, respectively. From 1970
through 1979, Mr. Holmes served in various marketing and sales positions with
Baxter/American Hospital Supply. Mr. Holmes received a B.S. in Marketing from
the University of Evansville.

Richard M. Johnston. Mr. Johnston has served as a Director of the Company
since December 1993. Mr. Johnston has been employed by The Hillman Company, an
investment holding company with diversified operations, since 1961 and has been
Vice-President -- Investments since 1970 and a Director since 1993. The Hillman
Company is controlled by a principal shareholder of the Company, the trust for
the benefit of Henry L. Hillman. Since February 1996 Mr. Johnston has served as
Chairman of the Board of Metrocall, Inc. Mr. Johnston has also served as
Chairman of the Board of Western Pennsylvania Healthcare System since 1978. Mr.
Johnston received a M.B.A. from the Wharton School of Finance and Commerce,
University of Pennsylvania and a B.S. in Commerce from Washington & Lee
University.

Pieter J. Schiller. Mr. Schiller has served as a Director of the Company
since March 1996. Mr. Schiller has served as a Director of CollaGenex
Pharmaceuticals, Inc. since September 1995. Since 1987, Mr. Schiller has been a
general partner of a principal shareholder of the Company, ATV, a venture
capital firm located in Boston, Massachusetts, where he specializes in health
care investing. Mr. Schiller served Allied Signal and its predecessor companies
from 1961 through 1986 in various capacities, including Treasurer and
Vice-President, Planning and Development. From 1983 to 1986, he served as
Executive Vice-President of Allied Health and Scientific Products Company, a
multi-national manufacturer of biomedical and analytical instruments and
supplies. Mr. Schiller received his M.B.A. from New York University and a B.A.
in Economics from Middlebury College.

39
<PAGE> 40

Jack R. Kelly, Jr. Mr. Kelly has served as a Director of the Company since
January 1995. Since July 1983, Mr. Kelly has been a member of the general
partner of Noro-Moseley Partners III, L.P., a venture capital fund and a
principal shareholder of the Company. From 1958 through 1983, Mr. Kelly was the
Chief Operating Officer and a Director of Scientific-Atlanta, Inc. Mr. Kelly is
a Director of Syntellect, Inc. Mr. Kelly earned a B.S. in Physics from Georgia
State University.

Stephen I. Shapiro. Mr. Shapiro has served as a Director of the Company
since October 1996. Mr. Shapiro previously served as a Director of the Company
from August 1995 until his resignation in March 1996. Since 1982, he has been a
Managing Principal of The Wilkerson Group (International Business Machines
Corporation), a management consulting group with clients in the health care
industry. From 1970 to 1982, Mr. Shapiro held a variety of technical management
and strategic planning positions with Union Carbide Clinical Diagnostics and
Becton Dickinson and Company. Mr. Shapiro received a B.S. degree in Chemical
Engineering from the Massachusetts Institute of Technology and a M.S. degree in
Chemical Engineering from the University of California at Berkeley.

William E. Whitmer. Mr. Whitmer has served as a Director of the Company
since October 1992. Mr. Whitmer is a certified public accountant and management
consultant. From 1989 until his retirement in 1992, he was a partner of Ernst &
Young, having served as the Associate Managing Director of that firm's southern
U.S. management consulting group. From 1968 through 1989, Mr. Whitmer was a
partner of Arthur Young & Company, having served as the Managing Partner of its
East and Southeast U.S. regions of the management consulting practice from 1975
through 1989. Mr. Whitmer received a B.A. in Economics from Denison University.

Dr. Norman R. Weldon is the father of Mr. Thomas D. Weldon.

The Company's Board of Directors is divided into three classes, each of
which will serve a term of three years, with one class being elected each year.
Each of the Company's directors has been elected to serve until his successor
has been elected and duly qualified. The terms of Richard M. Johnston, Pieter J.
Schiller and Jack R. Kelly, Jr. will expire at the annual meeting of
shareholders in 1998; the terms of Thomas D. Weldon, Charles E. Larsen and
Norman R. Weldon will expire at the annual meeting of shareholders in 1999; and
the terms of J. Stephen Holmes, William E. Whitmer and Stephen I. Shapiro will
expire at the annual meeting of shareholders in 2000.

The Board of Directors has a Stock Option and Compensation Committee,
comprised of Richard M. Johnston, Jack R. Kelly, Jr. and J. Stephen Holmes. The
Stock Option and Compensation Committee establishes compensation policies and
determines compensation for the executive officers of the Corporation, as well
as administering the Company's 1992 Amended and Restated Stock Option Plan. The
Board itself administers the Non-Employee Director Stock Option Plan. The Board
of Directors also has an Audit Committee, comprised of Messrs. William E.
Whitmer, Pieter J. Schiller and Richard M. Johnston. The Audit Committee reviews
the audit and financial procedures of the Company and recommends any changes
with respect thereto to the Board of Directors.

Officers are elected annually and serve at the pleasure of the Board of
Directors.

The Company has obtained key-man life insurance policies on the lives of
Mr. Thomas D. Weldon and Mr. Larsen in the amount of $1,000,000 and $750,000,
respectively, under each of which the Company is the sole beneficiary.

40
<PAGE> 41

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth as of November 14, 1997, information with
respect to the beneficial ownership of the Common Stock by (i) each person known
by the Company to own beneficially five percent or more of such Common Stock,
(ii) each director of the Company, (iii) each person named in the Summary
Compensation Table in the Company's Definitive Proxy Statement for its June 20,
1997 Annual Meeting of Shareholders, (iv) each Selling Shareholder and (v) all
executive officers and directors as a group, together with their respective
percentage ownership of such shares before this Offering and as adjusted to
reflect the sale of the Common Stock offered hereby:

<TABLE>
<CAPTION>
SHARES OWNED BEFORE SHARES OWNED AFTER
THE OFFERING THE OFFERING
------------------------- SHARES ----------------------
NAME AND ADDRESS NUMBER(1) PERCENTAGE BEING SOLD NUMBER(1) PERCENTAGE
- ---------------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Thomas D. Weldon(2)(3)(4)........... 930,402 10.4% 100,000 830,402 7.9%
Charles E. Larsen(4)................ 776,161 8.7% 100,000 676,161 6.4%
Henry L. Hillman, Elsie Hilliard
Hillman and C.G. Grefenstette,
Trustees(5)(6)(12)................ 449,087 5.1% -- 449,087 4.4%
C.G. Grefenstette and Thomas G.
Bigley, Trustees(5)(7)............ 582,112 6.8% -- 582,112 5.7%
Venhill Limited Partnership(8)...... 236,574 2.8% -- 236,574 2.3%
158 Main Street
New Canaan, Connecticut 06840
Advanced Technology Ventures IV,
L.P............................... 794,043 9.3% 100,000(9) 694,043 6.9%
281 Winter Street
Suite 350
Waltham, MA 02154
Noro-Moseley Partners III, L.P...... 537,037 6.3% 100,000(9) 437,037 4.3%
4200 Northside Parkway N.W.
Atlanta, GA 30327(10)
Paul Tudor Jones, II(11)............ 634,700 7.4% -- 634,700 7.4%
Norman R. Weldon, Ph.D.(3)(12)...... 375,883 4.4% -- 375,883 3.7%
Jonathan J. Rosen, Ph.D.(13)........ 10,575(13) * -- 10,575 *
Cheryl R. Johnson................... 118,400 1.4% -- 118,400 1.2%
Thomas K. Brooks.................... 59,850 * -- 59,850 *
Stephen I. Shapiro.................. 13,250 * -- 13,250 *
J. Stephen Holmes................... 22,500 * -- 22,500 *
William E. Whitmer.................. 14,500 * -- 14,500 *
Richard M. Johnston(14)............. 3,000 * -- 3,000 *
Jack R. Kelly, Jr.(15).............. 3,000 * -- 3,000 *
Pieter J. Schiller(16).............. 2,500 -- -- 2,500 --
David N. Gill....................... 16,250 * -- 16,250 *
All executive officers and directors
as a group (13 persons)(17)....... 2,266,675 23.8% 200,000 2,066,675 18.6%

</TABLE>

- ---------------

* Less than 1%.

(1) A person is deemed to be the beneficial owner of Common Stock that can be
acquired within 60 days from November 14, 1997 upon the exercise of
options, and that person's options are assumed to have been exercised (and
the underlying shares of Common Stock outstanding) in determining such
person's percentage ownership. Accordingly, the following shares issuable
upon exercise of options have been included in the shares beneficially
owned by the following persons: Thomas D. Weldon -- 391,875 shares; Charles
E. Larsen -- 391,875 shares; J. Stephen Holmes -- 12,500 shares; William E.
Whitmer -- 12,500 shares; Henry L. Hillman, Elsie Hilliard Hillman and C.G.
Grefenstette, Trustees -- 12,500 shares; Noro-Moseley Partners III,
L.P. -- 7,500 shares; Cheryl R. Johnson -- 118,200 shares;

41
<PAGE> 42

Thomas K. Brooks -- 5,000 shares; Pieter J. Schiller -- 2,500 shares;
Norman R. Weldon -- 2,500 shares; Stephen I. Shapiro -- 2,500 shares and
David N. Gill -- 16,250 shares.
(2) Includes 15,000 shares held in trust for the benefit of Mr. Weldon's
children and 5,000 shares held by Mr. Weldon as custodian for his nephew.
(3) Includes 122,571 shares held by The Weldon Foundation, Inc., a Florida
not-for-profit corporation in which Thomas D. Weldon and Norman R. Weldon
are directors. Mr. Weldon and Dr. Weldon disclaim beneficial ownership of
all shares held by The Weldon Foundation, Inc.
(4) Address is c/o Novoste Corporation, 4350-C International Blvd., Norcross,
GA 30093.
(5) Address is 2000 Grant Building, Pittsburgh, PA 15219.
(6) Consists of 436,587 shares held by a trust for the benefit of Henry L.
Hillman (the "HLH Trust") and 12,500 shares subject to options which were
granted to Richard M. Johnston, an officer of The Hillman Company. Pursuant
to an agreement with The Hillman Company, if Mr. Johnston exercises these
options, he does so on behalf of The Hillman Company or a wholly owned
subsidiary thereof. The Trustees of the HLH Trust are Henry L. Hillman,
Elsie Hilliard Hillman and C.G. Grefenstette (the "HLH Trustees"). The HLH
Trustees share voting and investment power with respect to the shares of
record held by the HLH Trust. Does not include an aggregate of 582,112
shares held by four trusts for the benefit of members of the Hillman family
(see note 7 below) or 236,574 shares owned by Venhill Limited Partnership
(see note 8 below), as to which shares the HLH Trustees (other than Mr.
Grefenstette with respect to the shares described in note 7 below) disclaim
beneficial interest.
(7) Includes 145,528 shares held by each of four irrevocable trusts for the
benefit of members of the Hillman family (the "Hillman Family Trusts"). Mr.
Grefenstette and Thomas G. Bigley are trustees of these four trusts and
share voting and dispositive power over the trusts' assets.
(8) Consists of 236,574 shares held by Venhill Limited Partnership. Howard B.
Hillman is the general partner of Venhill Limited Partnership and is a
step-brother of Henry L. Hillman.
(9) Does not include up to 100,000 shares and 30,000 shares which may be sold
by Advanced Technology Ventures IV, L.P. and Noro-Moseley Partners III,
L.P., respectively, upon exercise of the Underwriters' over-allotment
option.
(10) Includes 7,500 shares subject to options which were granted to Jack R.
Kelly, Jr., a member of the general partner of Noro-Moseley Partners III,
L.P. ("Noro-Moseley"). Pursuant to an agreement with Noro-Moseley, if Mr.
Kelly exercises his options, he does so on behalf of Noro-Moseley.
(11) Pursuant to a Schedule 13D, dated October 22, 1997, which was jointly filed
with the Securities and Exchange Commission by Tudor Investment Corporation
("TIC"), Paul Tudor Jones, II ("Jones"), The Raptor Global Fund Ltd.
("Raptor Ltd."), The Raptor Global Fund L.P. ("Raptor L.P."), Tudor
Arbitrage Partners L.P. ("TAP"), Tudor Global Trading LLC ("TGT"), Tudor
BVI Futures, Ltd. ("Tudor BVI"), The Upper Mill Capital Appreciation Fund
Ltd. ("Upper Mill"), and Tudor Proprietary Trading, L.L.C. ("TPT"). The
address of each of TIC, Jones, Raptor L.P., TAP and TGT is c/o Tudor
Investment Corporation, 600 Steamboat Road, Greenwich, CT 06830. The
business address of each of Raptor Ltd., Tudor BVI and Upper Mill is c/o
Curacao International Trust Company N.V., Kaya Flamboyan 9, Curacao,
Netherlands Antilles. The business address of TPT is The Upper Mill,
Kingston Road, Ewell, Surrey KT17 2AF, England. Jones disclaims beneficial
ownership of the shares beneficially owned by Raptor Ltd. (161,900 shares),
Raptor L.P. (58,300 shares), TAP (34,500 shares), Tudor BVl (206,468
shares), Upper Mill (113,908 shares), TPT (59,624 shares) and TGT as sole
general partner of TAP (34,500 shares).
(12) Includes 14,250 shares held by Dr. Weldon's spouse but excludes all shares
held by Dr. Weldon's adult children, none of whom reside with Dr. Weldon.
(13) Resigned as an executive officer of the Company effective February 28,
1997. His ownership of shares is based upon the Company's records as of
October 23, 1997.
(14) Does not include shares held by the HLH Trust, the Hillman Family Trusts
and Venhill Limited Partnership (collectively, the "Hillman Related
Shareholders"), as to which Mr. Johnston disclaims beneficial ownership.
Mr. Johnston is Vice President -- Investments and a Director of The Hillman
Company, a private firm engaged in diversified investments and operations
which is controlled by the HLH Trust. Also does not include 12,500 shares
subject to options, which were granted to Mr. Johnston

42
<PAGE> 43

but to which he disclaims beneficial ownership. Pursuant to an agreement
with The Hillman Company, if Mr. Johnston exercises these options, he does
so on behalf of The Hillman Company or a wholly owned subsidiary thereof.
See note 6 above.
(15) Does not include shares held by Noro-Moseley, for which Mr. Kelly serves as
a member of the general partner. Mr. Kelly disclaims beneficial ownership
of such shares, except to the extent of his proportionate interest in
Noro-Moseley. Also does not include 7,500 shares subject to options, which
were granted to Mr. Kelly but to which he disclaims beneficial ownership.
Pursuant to an agreement with Noro-Moseley, if Mr. Kelly exercises his
options, he does so on behalf of Noro-Moseley. See Note 10 above.
(16) Does not include shares held by Advanced Technology Ventures IV, L.P.
("ATV"), for which Mr. Schiller serves as a general partner. Mr. Schiller
disclaims beneficial ownership of such shares, except to the extent of his
proportionate interest in ATV.

(17) See notes 1, 2, 3 and 12 above. Also includes options to purchase 53,550
shares held by an executive officer not named in the Summary Compensation
Table under "Executive Compensation" on page of this Prospectus. Does not
include options to purchase 20,000 shares described in notes 14 and 15
above. Also does not include any shares held by Dr. Rosen, who resigned as
an executive officer of the Company effective February 28, 1997.

43
<PAGE> 44

UNDERWRITING

The Company and the Selling Shareholders have entered into a Purchase
Agreement (the "Purchase Agreement") with the underwriters listed in the table
below (the "Underwriters"), for whom Piper Jaffray Inc., Cowen & Company and
NationsBanc Montgomery Securities, Inc. are acting as representatives (the
"Representatives"). Subject to the terms and conditions set forth in the
Purchase Agreement, the Company and the Selling Shareholders have agreed to sell
to the Underwriters, and each of the Underwriters has severally agreed to
purchase from the Company and the Selling Shareholders in relative proportion to
the number of shares of Common Stock offered by them hereby, the following
number of shares of Common Stock set forth opposite each Underwriter's name in
the table below:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---- ---------
<S> <C>
Piper Jaffray Inc. ......................................... 800,000
Cowen & Company............................................. 600,000
NationsBanc Montgomery Securities, Inc. .................... 600,000
---------
Total............................................. 2,000,000
=========
</TABLE>

Subject to the terms and conditions of the Purchase Agreement, the
Underwriters have agreed to purchase all of the Common Stock being sold pursuant
to the Purchase Agreement, if any is purchased (excluding shares covered by the
over-allotment option granted therein). In the event of a default by any
Underwriter, the Purchase Agreement provides that in certain circumstances
purchase commitments of the nondefaulting Underwriters may be increased, or the
Purchase Agreement may be terminated.

The Representatives have advised the Company that the Underwriters propose
to offer Common Stock directly to the public initially at the public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not more than $.65 per share. Additionally, the
Underwriters may allow, and such dealers may reallow a concession not in excess
of $.10 per share to certain other dealers. After the public offering, the
public offering price and other selling terms may be changed by the
Underwriters.

The Company and two of the Selling Shareholders, ATV and Noro-Moseley, have
granted to the Underwriters an option, exercisable by the Representatives within
30 days after the date of the Purchase Agreement, to purchase up to an
additional 300,000 shares of Common Stock at the same price per share to be paid
by the Underwriters for the other shares offered hereby. Of such additional
shares, up to 170,000 shares are being offered by the Company, up to 100,000
shares by ATV and up to 30,000 shares by Noro-Moseley, on a pro rata basis. If
the Underwriters purchase any of such additional shares pursuant to this option,
each Underwriter will be committed to purchase such additional shares in
approximately the same proportion as set forth in the table above. The
Underwriters may exercise the option only for the purpose of covering
over-allotments, if any, made in connection with the distribution of the Common
Stock offered hereby.

The Representatives have informed the Company that neither they, nor any
other member of the National Association of Securities Dealers, Inc. (the
"NASD") participating in the distribution of this Offering, will make sales of
the Common Stock offered hereby to accounts over which they exercise
discretionary authority without the prior specific written approval of the
customer.

The Offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The officers and directors of the Company and certain other shareholders
designated by the Representatives, who will beneficially own in the aggregate
4,465,528 shares of Common Stock after the Offering, have agreed that they will
not sell, offer to sell, issue, distribute or otherwise dispose of any shares of
Common Stock owned by them prior to the date of this Prospectus for a period of
90 days after the date of this Prospectus, without the prior written consent of
Piper Jaffray Inc., except for the shares of Common Stock

44
<PAGE> 45

offered by the Selling Shareholders hereby. The Company has agreed that it will
not, without the Underwriters' prior written consent, offer, sell or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities exchangeable for or convertible into Common Stock
during the 90-day period following the date of this Prospectus, except that the
Company may issue shares upon the exercise of options granted prior to the date
hereof, and may grant additional options under the Stock Option Plans.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
the Underwriters may be required to make in respect thereof.

In connection with this Offering, the Underwriters have advised the Company
that certain Underwriters and dealers, if any, or their respective affiliates
who are qualified registered market-makers on The Nasdaq National Market, may
engage in passive market-making transactions in the Common Stock on The Nasdaq
National Market in accordance with Rule M under the Securities Exchange Act of
1934, as amended (the "Exchange Act") during the two-business-day period before
commencement of offers or sales of the Common Stock offered hereby. The passive
market-making transactions must comply with applicable volume and price limits
and be identified as such. In general, a passive market maker may display its
bid at a price not in excess of the highest independent bid for such security;
if all independent bids are lowered below the passive market-maker's bid,
however, such bid must then be lowered when certain purchase limits are
exceeded.

LEGAL MATTERS

Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company and the Selling
Shareholders by Epstein Becker & Green, P.C., New York, New York. Certain legal
matters will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault,
LLP, Boston, Massachusetts.

EXPERTS

The financial statements of the Company as of December 31, 1995 and 1996,
and for each of the three years in the period ended December 31, 1996, and for
the period from inception (May 22, 1992) through December 31, 1996, appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

45
<PAGE> 46

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

INDEX TO FINANCIAL STATEMENTS

CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements at December 31, 1995 and 1996 and for
the Years Ended December 31, 1994, 1995 and 1996 and the
Period from Inception (May 22, 1992) Through December 31,
1996
Report of Independent Auditors.............................. F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Shareholders' Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
Unaudited Condensed Financial Statements at September 30,
1997 and for the Nine Months Ended September 30, 1996 and
1997
Balance Sheet............................................... F-15
Statements of Operations.................................... F-16
Statements of Cash Flows.................................... F-17
Notes to Unaudited Condensed Financial Statements........... F-18
</TABLE>

F-1
<PAGE> 47

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Novoste Corporation

We have audited the accompanying balance sheets of Novoste Corporation (a
Development Stage Company) (the "Company") as of December 31, 1996 and 1995, and
the related statements of operations, shareholders' equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1996 and for
the period from inception (May 22, 1992) through December 31, 1996. 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 the Company as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 and for the period from
inception (May 22, 1992) through December 31, 1996 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Atlanta, Georgia
February 1, 1997

F-2
<PAGE> 48

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 19,954,827 $ 817,587
Short-term investments.................................... 7,588,693 --
Prepaid expenses.......................................... 126,349 14,628
------------ -----------
Total current assets........................................ 27,669,869 832,215
Property and equipment, net................................. 1,128,031 932,681
License agreements, net..................................... 153,396 166,934
Other assets................................................ 303,642 125,388
------------ -----------
$ 29,254,938 $ 2,057,218
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Fixed rate convertible promissory notes with related
parties................................................ $ -- $ 1,038,450
Accounts payable.......................................... 155,946 217,543
Accrued expenses and taxes withheld....................... 665,175 482,584
------------ -----------
Total current liabilities................................... 821,121 1,738,577
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized at December 31, 1996, no shares issued and
outstanding; none authorized at December 31, 1995
Common stock, $.01 par value, 25,000,000 and 14,000,000
shares authorized at December 31, 1996 and 1995,
respectively; 8,257,967 and 2,482,622 shares issued.... 82,580 24,826
Class B common stock, $.01 par value, none authorized and
outstanding at December 31, 1996 and 6,000,000 shares
authorized, 1,611,269 shares issued and outstanding at
December 31,1995....................................... -- 16,113
Additional paid-in capital.................................. 41,772,791 7,760,175
Deficit accumulated during the development stage............ (13,405,714) (7,466,633)
------------ -----------
28,449,657 334,481
Less treasury stock, 5,280 shares of common stock, at
cost...................................................... (15,840) (15,840)
------------ -----------
Total stockholders' equity.................................. 28,433,817 318,641
------------ -----------
$ 29,254,938 $ 2,057,218
============ ===========
</TABLE>

See accompanying notes.

F-3
<PAGE> 49

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FROM INCEPTION
(MAY 22,
1992)
YEAR ENDED DECEMBER 31, THROUGH
--------------------------------------- DECEMBER 31,
1996 1995 1994 1996
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Revenues:
Miscellaneous sales...................... $ -- $ 16,507 $ 71,777 $ 290,887
Operating expenses:
Research and development................. 4,646,583 2,088,822 1,404,429 8,887,032
General and administrative............... 1,574,678 465,670 525,656 4,087,541
Marketing................................ 581,280 659,361 291,470 1,532,111
----------- ----------- ----------- ------------
6,802,541 3,213,853 2,221,555 14,506,684
----------- ----------- ----------- ------------
Loss from operations....................... (6,802,541) (3,197,346) (2,149,778) (14,215,797)
Interest income............................ 950,791 15,427 768 991,842
Interest expense........................... (87,331) (36,107) (46,679) (181,759)
----------- ----------- ----------- ------------
Net loss................................... $(5,939,081) $(3,218,026) $(2,195,689) $(13,405,714)
=========== =========== =========== ============
Net loss per share......................... $ (0.88) $ (0.69) $ (0.54)
=========== =========== ===========
Weighted average shares outstanding........ 6,748,492 4,671,147 4,031,307
=========== =========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE> 50

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MAY 22, 1992) THROUGH DECEMBER 31, 1996

<TABLE>
<CAPTION>
DEFICIT
CLASS B ACCUMULATED
COMMON STOCK COMMON STOCK ADDITIONAL DURING THE
------------------- --------------------- PAID-IN DEVELOPMENT TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE STOCK TOTAL
--------- ------- ---------- -------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exchange of stock for license
agreement at $.25 per
share....................... 746,894 $ 7,469 -- $ -- $ 179,255 $ -- $ -- $ 186,724
Sale of stock at $1.00 per
share....................... 820,000 8,200 -- -- 811,800 -- -- 820,000
Sale of stock at $3.00 per
share....................... 86,667 867 -- -- 259,133 -- -- 260,000
Exercise of stock options at
$.25 per share.............. 205,000 2,050 -- -- 49,200 -- -- 51,250
Issuance of stock for
consulting services, 117,500
shares at $.25 per share,
88,500 shares at $1.00 per
share and 37,585 shares at
$3.00 per share............. 243,585 2,435 -- -- 228,195 -- -- 230,630
Issuance of stock to employees
for settlement of obligation
for consulting services, at
$3.00 per share............. 10,000 100 -- -- 29,900 -- -- 30,000
Net loss -- -- -- -- -- (727,688) -- (727,688)
--------- ------- ---------- -------- ----------- ------------ -------- -----------
Balance at December 31,
1992........................ 2,112,146 21,121 -- -- 1,557,483 (727,688) -- 850,916
Sale of stock at $3.20 per
share, net of $138,932 of
offering costs.............. 331,250 3,312 -- -- 917,756 -- -- 921,068
Exercise of stock options at
$.25 to $1.00 per share..... 67,875 679 -- -- 23,790 -- -- 24,469
Issuance of stock for
consulting services, at
$3.00 per share............. 50,862 509 -- -- 152,077 -- -- 152,586
Repurchase of stock at $3.00
per share................... (5,280) -- -- -- -- -- (15,840) (15,840)
Net loss...................... -- -- -- -- -- (1,325,230) -- (1,325,230)
--------- ------- ---------- -------- ----------- ------------ -------- -----------
Balance at December 31,
1993........................ 2,556,853 25,621 -- -- 2,651,106 (2,052,918) (15,840) 607,969
Sale of stock at $3.20 per
share....................... 312,500 3,125 -- -- 996,875 -- -- 1,000,000
Exercise of stock options at
$.25 to $1.00 per share..... 35,500 355 -- -- 12,270 -- -- 12,625
Issuance of stock for
consulting services, at
$3.20 per share............. 50,626 506 -- -- 161,494 -- -- 162,000
Net loss...................... -- -- -- -- -- (2,195,689) -- (2,195,689)
--------- ------- ---------- -------- ----------- ------------ -------- -----------
Balance at December 31,
1994........................ 2,955,479 29,607 -- -- 3,821,745 (4,248,607) (15,840) (413,095)
Sale of stock at $3.75 per
share, net of $191,274 of
offering costs.............. -- -- 986,269 9,863 3,497,372 -- -- 3,507,235
Exercise of stock options at
$.25 per share.............. 9,300 93 -- -- 2,232 -- -- 2,325
Issuance of stock for
consulting services, at
$3.20 per share............. 27,813 278 -- -- 88,724 -- -- 89,002
Issuance of stock for
compensation to an employee,
at $3.20 per share.......... 16,000 160 -- -- 51,040 -- -- 51,200
Conversion of debt to
common...................... 93,750 938 -- -- 299,062 -- -- 300,000
Exchange of common for Class B
common...................... (625,000) (6,250) 625,000 6,250 -- -- -- --
Net loss...................... -- -- -- -- -- (3,218,026) -- (3,218,026)
--------- ------- ---------- -------- ----------- ------------ -------- -----------
Balance at December 31,
1995........................ 2,477,342 24,826 1,611,269 16,113 7,760,175 (7,466,633) (15,840) 318,641
Issuance of stock for
consulting services 2,422
shares at $6.00 per share,
33,520 shares at $6.38 per
share, 678 shares at $9.50
per share, and 435 shares at
$9.375 per share............ 37,066 371 -- -- 407,667 -- -- 408,038
Issuance of stock for deferred
compensation to employees at
$3.20 per share............. 102,945 1,029 -- -- 328,395 -- -- 329,424
Conversion of debt to common
stock....................... 497,349 4,974 -- -- 1,860,109 -- -- 1,865,083
Exchange of Class B for common
stock....................... 1,611,269 16,113 (1,611,269) (16,113) -- -- -- --
Exercise of stock warrants at
$4.00 to $4.50 per share.... 62,104 621 -- -- 267,597 -- -- 268,218
Cashless exercise of
warrants.................... 889,912 8,899 -- -- (8,899) -- -- --
Issuance of stock in initial
public offering at $14.00
per share, net of issuance
costs of $2,973,746......... 2,400,000 24,000 -- -- 30,602,254 -- -- 30,626,254
Exercise of stock options at
$3.00 to $3.20 per share.... 174,700 1,747 -- -- 555,493 -- -- 557,240
Net loss...................... -- -- -- -- -- (5,939,081) -- (5,939,081)
--------- ------- ---------- -------- ----------- ------------ -------- -----------
Balance at December 31,
1996........................ 8,252,687 $82,580 -- $ -- $41,772,791 $(13,405,714) $(15,840) $28,433,817
========= ======= ========== ======== =========== ============ ======== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 51

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FROM INCEPTION
(MAY 22,
1992)
YEAR ENDED DECEMBER 31, THROUGH
--------------------------------------- DECEMBER 31,
1996 1995 1994 1996
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................... $(5,939,081) $(3,218,026) $(2,195,689) $(13,405,714)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization............ 316,082 227,373 204,373 877,875
Issuance of stock for services or
compensation.......................... 408,038 140,202 162,000 947,318
Change in assets and liabilities:
Prepaid expenses and other............ (111,721) 34,041 (18,866) (133,808)
Accounts payable...................... (61,597) 95,386 48,249 155,946
Accrued expenses and taxes withheld... 577,098 59,230 33,677 1,059,682
----------- ----------- ----------- ------------
Net cash used by operations...... (4,811,181) (2,661,794) (1,766,256) (10,498,701)
----------- ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase) sale of short-term
investments.............................. (7,588,693) -- 194,280 (7,588,693)
Purchase of property and equipment, net.... (449,730) (484,346) (510,939) (1,752,426)
Other...................................... (226,418) (113,779) -- (356,037)
----------- ----------- ----------- ------------
Net cash used by investing
activities..................... (8,264,841) (598,125) (316,659) (9,697,156)
----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable.... 2,561,700 1,358,450 550,000 4,770,150
Repayment of notes payable................. (1,800,150) (870,000) -- (2,970,150)
Proceeds from issuance of common stock..... 31,183,494 3,509,560 1,012,625 38,082,466
Exercise of warrants....................... 268,218 -- -- 268,218
----------- ----------- ----------- ------------
Net cash provided by financing
activities..................... 32,213,262 3,998,010 1,562,625 40,150,684
----------- ----------- ----------- ------------
Net increase (decrease) in cash
and cash equivalents........... 19,137,240 738,091 (520,290) 19,954,827
Cash and cash equivalents at beginning of
period................................... 817,587 79,496 599,786 --
----------- ----------- ----------- ------------
Cash and cash equivalents at end of
period................................... $19,954,827 $ 817,587 $ 79,496 $ 19,954,827
=========== =========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest..................... $ 101,312 $ 38,741 $ 25,084 $ 165,137
=========== =========== =========== ============
Conversion of fixed rate promissory notes
to related parties and accrued interest
to common stock.......................... $ 1,865,083 $ 1,865,083
=========== ============
Conversion of deferred compensation to
common stock............................. $ 329,424 $ 329,424
=========== ============
</TABLE>

See accompanying notes.

F-6
<PAGE> 52

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

Novoste Corporation (the "Company") was incorporated on January 8, 1987 and
remained dormant until May 22, 1992 (date of inception) at which time it was
capitalized. The Company is a development stage enterprise that is engaged in
developing the Beta-Cath System, an intraluminal beta radiation catheter
delivery system designed to reduce restenosis subsequent to percutaneous
transluminal coronary angioplasty.

The majority of the Company's efforts to date have been in the organization
of the Company, establishing its management team, raising capital and initiating
product development. The Company's initial public offering became effective on
May 23, 1996 and closed on May 29, 1996 with the issuance of 2,400,000 shares of
Common Stock and net proceeds (after underwriting discounts) of $31,248,000
before related expenses of approximately $622,000. All revenues received to date
have been from the sale of certain patent rights, option payments made by a
potential strategic partner to the Company in exchange for the sole right for
the potential partner to enter into future agreements with the Company, and
contract fees. Substantially all of the Company's products are in various stages
of development. To achieve profitable operations, the Company must successfully
complete the development and clinical trials of its products, obtain required
regulatory approvals and achieve market acceptance. There can be no assurance
that these efforts will be successful.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

NET LOSS PER SHARE

The net loss per share is computed based on the weighted average number of
common shares outstanding after giving effect to certain adjustments described
below. Common equivalent shares are not included in the per share calculations
where the effect of their inclusion would be antidilutive, except that, in
accordance with Securities and Exchange Commission requirements, common and
common stock equivalent shares issued during the twelve-month period preceding
the initial public offering in May 1996 have been included in the calculation
through March 31, 1996 as if they were outstanding for all periods, using the
treasury stock method and the actual initial public offering price of $14.00 per
share.

Historical net loss per share information presented in accordance with
generally accepted accounting principles is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net loss per share.................................... $ (0.91) $ (0.87) $ (0.77)
========= ========= =========
Shares used in computing historical net loss per
share............................................... 6,543,129 3,679,361 2,836,896
========= ========= =========
</TABLE>

CASH AND SHORT-TERM INVESTMENTS

Cash equivalents are comprised of certain highly liquid investments with
maturities of less than three months. In addition to cash equivalents, the
Company has investments in commercial paper that are classified as short-term
(mature in more than 90 days but less than one year). Such investments are
classified as held-to-maturity, as the Company has the ability and intent to
hold them until maturity. Investments held-to-maturity are carried at amortized
cost, adjusted for the amortization or accretion of premiums or discounts

F-7
<PAGE> 53

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

without recognition of gains or losses that are deemed to be temporary. Premiums
and discounts are amortized or accreted over the life of the related instruments
as an adjustment to yield using the straight-line method, which approximates the
effective interest method. Interest income is recognized when earned. Fair value
approximates carrying value for all cash equivalents and investments.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated using the
straight-line method based on the estimated useful lives of the related assets
ranging from 5 to 7 years. Leasehold improvements are amortized over the
remaining term of the related lease using the straight-line method. Repairs and
maintenance are expensed as incurred.

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Furniture and fixtures...................................... $ 303,958 $ 232,112
Office equipment............................................ 356,269 220,851
Laboratory equipment........................................ 134,735 98,001
Leasehold improvements...................................... 454,016 334,162
Production equipment........................................ 482,334 412,382
---------- ----------
1,731,312 1,297,508
Less: Accumulated depreciation and amortization............. (603,281) (364,827)
---------- ----------
$1,128,031 $ 932,681
========== ==========
</TABLE>

OTHER ASSETS

License agreements are amortized on a straight-line basis over periods
ranging from fifteen to twenty years. The amortization periods are based on the
lives of the license agreements or the approximate remaining lives of the
related patents, whichever is appropriate. Accumulated amortization on license
agreements at December 31, 1996 and 1995 totaled $65,368 and $43,569,
respectively.

At December 31, 1996 other assets includes $90,000 paid to a German
supplier for an option, exercisable through August 25, 2002, to purchase certain
assets of the vendor for $5,000,000. Other assets also include $130,720 advanced
to the same vendor. For additional discussion of these amounts see Note 3
"Commitments and Concentrations".

RESEARCH AND DEVELOPMENT

All research and development costs are charged to operations as incurred.

PATENT COSTS

Legal fees and other direct costs incurred in obtaining and protecting
patents are expensed as incurred.

STOCK BASED COMPENSATION

The Company grants stock options generally for a fixed number of shares to
employees, directors, consultants and independent contractors with an exercise
price equal to the fair value of the shares at the date of grant. The Company
has elected to follow Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25") and related Interpretations in accounting
for its employee stock options. Under APB 25, no compensation expense is
recognized for stock option grants for which the terms are

F-8
<PAGE> 54

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

fixed. Compensation expense is recognized for increases in the estimated fair
value of common stock for any stock options with variable terms.

In October 1995 the FASB issued Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("Statement 123"), which
changes the accounting for stock based compensation to non-employees and
provides an alternative to APB 25 in accounting for stock-based compensation to
employees. However, the Company elected to continue to account for stock-based
compensation to employees in accordance with APB 25 and to disclose the impact
of the alternative accounting (see Note 6).

RECLASSIFICATION

Certain prior year expense amounts have been reclassified in the Statements
of Operations for 1995 and 1994 and for the period from inception through
December 31, 1996 to conform with current year classifications.

2. CONSULTING AGREEMENTS

The Company has agreements with the members of its Scientific Advisory
Board, various consultants and others with terms ranging from one to five years.
Substantially all of these agreements provide for stock grants on the agreement
dates with such shares valued at the fair market value on the date of grant and
include certain registration rights.

During 1996, 1995 and 1994 approximately $46,000, $21,300, and $50,000,
respectively, were charged to operations as amortization of the deferred
compensation capitalized under these agreements ($187,751 from inception through
December 31, 1996).

3. COMMITMENTS AND CONCENTRATIONS

COMMITMENTS

The Company is committed under operating leases for its facility and
various office equipment. Rent expense was approximately $143,192, $116,400, and
$62,400 for 1996, 1995 and 1994, respectively ($416,392 from inception through
December 31, 1996). The total future minimum rental payments are as follows:

The Company has entered into a license agreement with a physician pursuant
to which he is entitled to receive a royalty on the net sales of the Beta-Cath
System (excluding consideration paid for the radioactive isotope), subject to a
maximum of $5,000,000, to be paid in exchange for the right granted thereunder
to the Company to use his name in connection with sales and marketing of the
Beta-Cath System.

On January 30, 1996 the Company entered into a license agreement whereby
the licensor assigned its claim to certain of the Company's technology back to
the Company for royalties based on net sales (as defined in the agreement) of
products derived from such technology, subject to certain minimum royalties. The
royalty agreement term is consistent with the life of the related patent and
applies to assignments of the patent technology to a third party. The royalty
agreement provides for a reduction of the royalty fees and term of the agreement
if the patent for the technology is not received within three years of execution
of the agreement.

F-9
<PAGE> 55

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On June 27, 1996 the Company signed an agreement with a medical diagnostic
engineering, development, and design company to provide products and services to
be used in the Company's product development. The agreement provides for
aggregate payments of $1.3 million through April 30, 1997 of which $277,000 was
paid in 1996.

On November 15, 1996 an agreement was signed under which the Company agreed
to advance a German supplier a monthly investment grant of 100,000 Deutsche Mark
(approximately $65,000) for a period of 15 months from November 1996 through
January 1998 to build and equip a production site for the exclusive production
of radioactive materials to be supplied to the Company. At December 31, 1996
advances aggregated $131,000 under this agreement. All grant advances, and the
amount paid for the option described in Note 1 are included in other assets and
will be credited toward the purchase price of the assets upon exercise of the
option. Absent the Company's decision to exercise the option, all amounts paid
to the vendor will be amortized over the three year remaining life of the
agreement once production of commercial volumes of radioactive materials
commences.

CONCENTRATIONS OF SUPPLIERS

Significant proportions of key components and processes relating to the
Company's products are purchased from single sources due to technology,
availability, price, quality, and other considerations. Key components and
processes currently obtained from single sources include isotopes, catheters,
protective tubing for catheters, proprietary connectors, and certain plastics
used in the design and manufacture of the transfer device. In the event a supply
of a key single-sourced material or component were delayed or curtailed, the
Company's ability to produce the related product in a timely manner could be
adversely affected. The Company attempts to mitigate these risks by working
closely with key suppliers regarding the Company's product needs and the
maintenance of strategic inventory levels.

4. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the corresponding amounts used for income tax purposes. Significant
components of the Company's deferred tax assets for federal and state income
taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 5,095,822 $ 2,697,752
R&D tax credit carryforwards.............................. 219,840 127,069
Other..................................................... 102,272 140,504
----------- -----------
5,417,934 2,965,325
Valuation allowance......................................... (5,417,934) (2,965,325)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>

At December 31, 1996 and 1995 no deferred tax assets were recorded as their
future benefit is not assured. No income taxes were paid for 1996, 1995 or 1994.

The Company has approximately $13,375,000 of net operating losses for
federal income tax purposes available to offset future taxable income. Such
losses expire $470,000 in 2007, $1,335,000 in 2008, $2,140,000 in 2009,
$3,120,000 in 2010, and $6,310,000 in 2011 and are subject to certain
limitations in the event of a change in ownership. Approximately $574,000 of the
net operating loss carryforwards will result in a credit to

F-10
<PAGE> 56

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

contributed capital when recognized. Additionally, the Company has approximately
$220,000 in research and development tax credits which expire $24,000 in 2008,
$47,000 in 2009, $56,000 in 2010, and $93,000 in 2011 unless utilized earlier.

5. SHORT-TERM DEBT

As of December 31, 1995 the fixed rate convertible promissory notes with
related parties bore interest at the rate of 8% and were payable to certain
shareholders, together with accrued interest, on June 1, 1996. At any time prior
to the payment of these notes, the holders had the option to convert all or any
portion of the outstanding principal balance (plus accrued interest) into Class
B common stock at the rate of $3.75 per share. The conversion price of $3.75 per
share was subject to adjustment in the event the Company issued or sold, or was
deemed to have issued or sold, any of its common stock for consideration of less
than $3.75 per share. In connection with the placement of this indebtedness, the
Company issued to a third party a warrant for the purchase of 9,395 shares of
common stock at $3.75 per share exercisable through December 31, 2000. The
carrying amounts of the promissory notes approximated their fair values at
December 31, 1995. Subsequent to December 31, 1995, the Company issued to
certain other shareholders $761,550 of additional fixed rate convertible
promissory notes with the same terms.

On May 28, 1996 fixed rate convertible promissory notes payable to related
parties in the amount of $1,800,000 plus accrued interest of $65,083 were
converted into 497,349 shares of Common Stock. On May 31, 1996 a portion of the
proceeds from the initial public offering was used to pay in full fixed rate
promissory notes to related parties totaling $1,500,150 and a note payable to a
bank in the amount of $300,000. At December 31, 1996 there are no loans or debt
outstanding.

On June 15, 1995 the Company entered into a line-of-credit arrangement for
short-term debt with a bank under which the Company could borrow up to $300,000
at the prime rate plus one percent. The line-of-credit, which expired on June
15, 1996, was subject to commitment fees of .65% of the unused line-of-credit
and borrowings thereunder were guaranteed up to $100,000 each by three
officer/directors of the Company. No borrowings were outstanding at December 31,
1995 under this line-of credit.

6. SHAREHOLDERS' EQUITY

RECAPITALIZATION

On May 28, 1996 all of the 1,611,269 outstanding shares of Class B Common
Stock were converted on a one-for-one basis into shares of Common Stock and
accrued salaries of $320,624 were converted into 100,195 shares of Common Stock.
In addition, on May 28, 1996 the holders of warrants for 1,261,899 shares made
cashless exercises thereof to purchase an aggregate of 889,912 shares of Common
Stock (after giving effect to the conversion on a one-for-one basis of shares of
Class B Common Stock issued upon exercise of such warrants). Holders of
additional warrants exercised such warrants in full to purchase 62,104 shares of
Common Stock for $268,218 on or prior to May 28, 1996.

On May 28, 1996 the Company filed an amendment to its Articles of
Incorporation whereby the number of authorized shares of Common Stock was
increased from 14,000,000 to 25,000,000, the Class B Common Stock was eliminated
and 5,000,000 shares of Preferred Stock were authorized.

SHAREHOLDER RIGHTS PLAN

On October 25, 1996 the Company's Board of Directors declared a dividend of
one Right for each share of Common Stock held of record at the close of business
on November 25, 1996. The Rights are generally not exercisable until 10 days
after an announcement by the Company that a person has acquired at least 15% of
the Company's Common Stock. Each Right, should it become exercisable, will
entitle the owner to buy

F-11
<PAGE> 57

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1/100th of a share of new Series A participating preferred stock at an exercise
price of $85. The Rights, which do not have any voting rights, may be redeemed
by the Company at a price of $.01 per Right at any time prior to a person's or
group's acquisition of 15% or more of the Company's common stock.

In the event the rights become exercisable as a result of the acquisition
of at least 15% of the Company's Common Stock, each Right will entitle the
owner, other than the acquiring person, to buy at the Rights' then current
exercise price a number of shares of Common Stock with a market value equal to
twice the exercise price. In addition, unless the acquiring person owns more
than 50% of the outstanding shares of Common Stock, the Board of Directors may
elect to exchange all outstanding Rights (other than those owned by such
acquiring person or affiliates thereof) at an exchange ratio of one share of
Common Stock per Right. The Rights expire on November 25, 2006 unless they are
earlier exercised, redeemed, or exchanged. As a result of the adoption of the
Shareholders' Rights Plan, 1,000,000 shares of authorized preferred stock have
been reserved and designated as Series A Participating Preferred Stock.

STOCK OPTION PLAN

The Company's Board of Directors adopted on May 26, 1992 the Novoste
Corporation Stock Option Plan (the "Plan") under which options designated as
either incentive or non-qualified stock options may be issued to employees,
officers, directors, consultants and independent contractors of the Company or
any parent, subsidiary or affiliate of the Company. Options granted under the
Plan are at prices not less than the fair market value on the date of grant and
may be exercised for a period of ten years from the date of grant. Options
granted under the Plan have vesting periods ranging from immediately to four
years. On August 20, 1996 the Plan was amended subject to shareholder approval
to include a provision for options to accelerate and become immediately and
fully exercisable upon a 50% or more change in control as defined in the Amended
and Restated Stock Option Plan. The Company has reserved 2,500,000 shares of
Common Stock for issuance under the Plan. As of December 31, 1996 there are
248,350 shares available for issuance.

On August 20, 1996 the Stock Option and Compensation Committee of the Board
of Directors of the Company adopted a Non-Employee Director Stock Option Plan,
subject to shareholder approval. Concurrently, stock options covering 52,500
shares were granted, which vest over a three year period and exercises thereof
are contingent upon the individuals' continued service as directors. The Company
has reserved 100,000 shares of Common Stock for issuance under the Plan.

F-12
<PAGE> 58

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Activity under the Plans are summarized as follows:

<TABLE>
<CAPTION>
NUMBER OF PRICE PER WEIGHTED-
SHARES SHARE AVERAGE PRICE
--------- ------------- -------------
<S> <C> <C> <C>
Outstanding at January 1, 1994................... 1,330,125 $ .25 - $3.20
Options granted.................................. 166,000 3.00 - 3.20
Options exercised................................ (35,500) .25 - 1.00
Options canceled................................. (16,000) 3.20
---------
Outstanding at December 31, 1994................. 1,444,625 .25 - 3.20
Options granted.................................. 359,750 3.20
Options exercised................................ (9,300) .25
---------
Outstanding at December 31, 1995................. 1,795,075 .25 - 3.20
Options granted.................................. 209,250 8.00 - 14.00 $10.23
Options exercised................................ (174,700) 3.00 - 3.25 3.19
Options forfeited................................ (17,850) 3.25 3.20
---------
Outstanding at December 31, 1996................. 1,811,775 .25 - 14.00 2.29
=========
Exercisable at December 31, 1996................. 1,267,937 .25 - 3.20 0.74
=========
</TABLE>

The following table summarizes information concerning currently outstanding
and exercisable options:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------ ---------------------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ---------------- -------- ----------- --------
<C> <C> <C> <C> <C> <C>
$ .25 - $ 3.20 1,602,525 6.3 $ 1.25 1,267,937 $.74
8.00 - 9.75 143,250 9.6 8.85 -- --
12.25 - 14.00 66,000 9.6 13.22 -- --
---------
1,811,775 6.8 2.29 1,267,937 .74
========= =========
</TABLE>

On May 20, 1996 the Company amended an option to purchase 100,000 shares of
Common Stock at $3.20 per share of which options for 75,000 shares had not yet
become exercisable. As amended, options to purchase such 75,000 shares become
exercisable at the annual rate of 25,000 shares beginning May 20, 1997, subject
to acceleration upon the achievement of three specified milestones at the rate
of 25,000 shares per milestone. The Company is recording total non-cash
compensation expense of $810,000 ratably over the three year period ending May
19, 1999, subject to acceleration if the specified milestones are met at earlier
dates; $168,750 was expensed in 1996 relating to these options.

Pro forma information regarding net loss and net loss per share is required
by Statement 123, which also requires that the information be determined as if
the Company had accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method prescribed by that Statement. The
fair value for options granted prior to the initial public offering was
estimated at the date of grant using the Minimum Value pricing model. The fair
value for options granted subsequent to the initial public offering was
estimated at the date of grant using the Black-Scholes option pricing model. The
following weighted-average assumptions were used in the appropriate models for
1996 and 1995: risk-free interest rates of 6.69% and 6.32%, respectively; no
dividend yields; volatility factor of the expected market price of the Company's
common stock of 0.928 in 1996 (not applicable in 1995); and a weighted-average
expected life of the option of 6 years.

F-13
<PAGE> 59

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, the Black-Scholes option valuation
models require the input of highly subjective assumptions including the 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.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Pro forma net loss.......................................... $(6,175,817) $(3,317,068)
Pro forma net loss per share................................ (0.92) (0.71)
Weighted-average fair value of options granted.............. 1.01 6.97
</TABLE>

Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1999.

7. EMPLOYEE BENEFIT PLAN

Effective January 1, 1997, the Company adopted a Defined Contribution
401(k) Plan in which all employees who are at least 21 years of age are eligible
to participate. Contributions of up to 15% of compensation to the 401(k) Plan
will be made by employees through salary withholdings. Company contributions are
discretionary.

F-14
<PAGE> 60

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 15,737,474
Short-term investments.................................... 3,961,633
Prepaid expenses.......................................... 148,214
------------
Total current assets.............................. 19,847,321
Property and equipment, net................................. 1,068,197
License agreements, net..................................... 143,168
Other assets................................................ 215,664
------------
$ 21,274,350
============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 306,537
Accrued expenses and taxes withheld....................... 1,474,516
------------
Total current liabilities......................... 1,781,053
------------
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding........... --
Common stock, $.01 par value, 25,000,000 shares
authorized; 8,502,930 shares issued.................... 85,029
Additional paid-in capital................................ 42,405,272
Deficit accumulated during the development stage.......... (22,973,164)
------------
19,517,137
Less treasury stock, 5,780 shares of common stock, at
cost................................................... (23,840)
------------
Total shareholders' equity........................ 19,493,297
------------
$ 21,274,350
============
</TABLE>

See accompanying notes.

F-15
<PAGE> 61

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED FROM INCEPTION
SEPTEMBER 30, (MAY 22, 1992)
-------------------------- THROUGH SEPTEMBER 30,
1997 1996 1997
------------ ----------- ---------------------
<S> <C> <C> <C>
Miscellaneous revenues........................... $ 29,313 $ -- $ 320,200
Costs and expenses:
Research and development....................... 8,618,578 2,799,071 17,505,610
General and administrative..................... 1,342,605 1,091,872 5,430,146
Marketing...................................... 575,390 341,168 2,107,501
------------ ----------- ------------
10,536,573 4,232,111 25,043,257
------------ ----------- ------------
Loss from operations............................. (10,507,260) (4,232,111) (24,723,057)
------------ ----------- ------------
Interest income.................................. 939,810 559,642 1,931,652
Interest expense................................. -- (87,331) (181,759)
------------ ----------- ------------
Net loss......................................... $ (9,567,450) $(3,759,800) $(22,973,164)
============ =========== ============
Net loss per share............................... $ (1.14) $ (0.60)
============ ===========
Weighted average shares outstanding.............. 8,375,739 6,275,378
============ ===========
</TABLE>

See accompanying notes.

F-16
<PAGE> 62

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS FROM INCEPTION
ENDED SEPTEMBER 30, (MAY 22, 1992)
------------------------- THROUGH SEPTEMBER 30,
1997 1996 1997
----------- ----------- ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.......................................... $(9,567,450) $(3,759,800) $(22,973,164)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization................... 310,150 223,647 1,188,025
Issuance of stock for services or
compensation................................. 202,500 248,076 1,149,818
Changes in assets and liabilities:
Prepaid expenses............................. (21,865) (187,736) (155,673)
Accounts payable............................. 150,591 59,632 306,537
Accrued expenses and taxes withheld.......... 809,341 152,954 1,869,023
Other........................................ 130,719 -- (225,318)
----------- ----------- ------------
Net cash used by operations....................... (7,986,014) (3,263,227) (18,840,752)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturity (purchase) of short-term investments..... 3,627,060 (2,977,365) (3,961,633)
Purchase of property and equipment, net........... (192,204) (305,234) (1,944,630)
----------- ----------- ------------
Net cash provided by (used by) investing
activities...................................... 3,434,856 (3,282,599) (5,906,263)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable........... -- 2,561,700 4,770,150
Repayment of notes payable........................ -- (1,800,150) (2,970,150)
Proceeds from issuance of common stock............ 333,805 31,023,428 38,684,489
----------- ----------- ------------
Net cash provided by financing activities......... 333,805 31,784,978 40,484,489
----------- ----------- ------------
Net (decrease) increase in cash and cash
equivalents..................................... (4,217,353) 25,239,152 15,737,474
Cash and cash equivalents at beginning of
period.......................................... 19,954,827 817,587 --
----------- ----------- ------------
Cash and cash equivalents at end of period........ $15,737,474 $26,056,739 $ 15,737,474
=========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest............................ -- $ 101,312 $ 165,137
=========== =========== ============
</TABLE>

See accompanying notes.

F-17
<PAGE> 63

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with instructions to Article 10 of
Regulation S-X. Accordingly, such financial statements do not include all of the
information and disclosures required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.

The operating results of the interim periods presented are not necessarily
indicative of the results to be achieved for the year ending December 31, 1997.
The accompanying financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1996 and for the cumulative period from May 22, 1992 (inception) through
December 31, 1996, included elsewhere herein.

Certain prior year expense amounts have been reclassified in the Statements
of Operations for the nine months ended September 30, 1996 and the period from
inception through September 30, 1997 to conform with current year
classifications.

NOTE 2. NET LOSS PER SHARE

The net loss per share is computed based on the weighted average number of
common shares outstanding after giving effect to certain adjustments described
below. Common equivalent shares are not included in the per share calculations
where the effect of their inclusion would be antidilutive, except that, in
accordance with SEC requirements, common and common stock equivalent shares
issued during the twelve-month period prior to the initial filing of the public
offering on April 11, 1996 have been included in the calculations as if they
were outstanding through March 31, 1996 using the treasury stock method. See
Exhibit 11.

Historical net loss per share information presented in accordance with GAAP
for the period affected by the above mentioned SEC requirement is as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996
-----------------
<S> <C>
Net loss per share.......................................... $(0.63)
==========
Shares used in computing net loss per share................. 6,002,227
==========
</TABLE>

In February 1997 the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, "Earnings per Share", which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
and year ending December 31, 1997, and, upon adoption, all prior-period earnings
per share data presented shall be restated to conform with the provisions of the
new pronouncement. Application earlier than the Company's quarter ending
December 31, 1997 is not permitted. The adoption of SFAS No. 128 is not
anticipated to have a material impact on operations.

NOTE 3. CASH EQUIVALENTS AND INVESTMENTS

F-18
<PAGE> 64

NOVOSTE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

as short-term (mature in more than 90 days but less than one year). Such
investments are classified as held-to-maturity, as the Company has the ability
and intent to hold them until maturity. Investments held-to-maturity are carried
at amortized cost, adjusted for the amortization or accretion of premiums or
discounts without recognition of gains or losses that are deemed to be
temporary. Premiums and discounts are amortized or accreted over the life of the
related instrument as an adjustment to yield using the straight-line method,
which approximates the effective interest method. Interest income is recognized
when earned. Fair value approximates carrying value for all cash equivalents and
investments.

NOTE 4. SHAREHOLDERS' EQUITY

On May 20, 1996 the Company amended an option to purchase 100,000 shares of
Common Stock at $3.20 per share of which options for 75,000 shares had not yet
become exercisable. As amended, options to purchase such 75,000 shares become
exercisable at the annual rate of 25,000 shares beginning May 20, 1997, subject
to acceleration upon the achievement of three specified milestones at the rate
of 25,000 shares per milestone. The Company is recording total non-cash
compensation expense of $810,000 ratably over the three year period ending May
19, 1999 subject to acceleration if the specific milestones are met at earlier
dates. The Company expensed $202,500 and $248,000 relating to these options in
the nine months ended September 30, 1997 and 1996, respectively.

NOTE 5. MISCELLANEOUS REVENUE

On May 15, 1997 the Company sold all of the technology, intellectual
property and equipment relating to the "Pulse Plus" blood containment device
product line for $130,000 in cash and a continuing royalty. During each 12-month
period following the date of the first sale of the device (the "Royalty
Period"), the Company shall receive a royalty equal to $.10 per unit on the
initial 500,000 units sold and $.08 per unit on all units sold in excess of
500,000. The purchaser guaranteed minimum royalty payments of $10,000 for the
first Royalty Period, $20,000 for the second Royalty Period and $30,000 in the
third Royalty Period. Royalties shall cease with the expiration of the last
related patent. The net book value of the equipment sold was $101,000 and the
Company recorded a $29,000 gain on the sale as miscellaneous revenue in the nine
months ended September 30, 1997.

F-19
<PAGE> 65

NO DEALER, SALES PERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING SHAREHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 3
Prospectus Summary.................... 4
Safe Harbor Provisions of the Private
Securities Litigation Reform Act.... 7
Risk Factors.......................... 7
Use of Proceeds....................... 16
Price Range of the Common Stock....... 16
Dividend Policy....................... 16
Dilution.............................. 17
Capitalization........................ 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 22
Management............................ 38
Principal and Selling Shareholders.... 41
Underwriting.......................... 44
Legal Matters......................... 45
Experts............................... 45
Index to Financial Statements......... F-1
Report of Independent Auditors........ F-2
</TABLE>

2,000,000 SHARES

NOVOSTE (TM)

COMMON STOCK

---------------------------
PROSPECTUS
---------------------------

PIPER JAFFRAY INC.

COWEN & COMPANY

NATIONSBANC MONTGOMERY
SECURITIES, INC.

NOVEMBER 17, 1997