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PROSPECTUS
Filed Pursuant to Rule 424(b)(1)
Registration Number 333-87969
1,775,000 SHARES
[CHROMAVISION LOGO]
CHROMAVISION MEDICAL SYSTEMS, INC.
COMMON STOCK
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This prospectus relates to the public offering, which is not being
underwritten, of 1,775,000 shares of our common stock by some of our current
stockholders. These stockholders acquired the shares directly from us in a
private placement completed on October 7, 1999. We will not receive any proceeds
from the sale of these shares.
The selling stockholders may sell the shares at prices determined by the
prevailing market price for the shares or in negotiated transactions. The
selling stockholders may also sell the shares to or with the assistance of
broker-dealers, who may receive compensation in excess of their customary
commissions.
Our common stock is traded on the Nasdaq National Market under the symbol
"CVSN." On October 7, 1999, the last reported sale price of our common stock was
$13.625 per share.
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BEFORE BUYING ANY SHARES YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS
OF INVESTING IN OUR COMMON STOCK IN "RISK FACTORS" BEGINNING ON PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 7, 1999.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It is not complete and does not contain all of the information that you should
consider before investing in the shares. You should read the entire prospectus
carefully, and you should consider the information set forth under "Risk
Factors."
Some of the information in this prospectus contains forward-looking
statements, including statements relating to the anticipated operating results,
growth, financial resources, development of new products and markets, obtaining
and maintaining regulatory approval, commercial acceptance of new products,
expectations regarding competition from other companies and our ability to
manufacture and distribute our products. The forward-looking statements are
based on assumptions, including assumptions of future events. It is likely that
some of the assumptions will prove to be incorrect for reasons which include
those set forth under "Risk Factors." The actual results and our financial
position will vary from those projected or implied in the forward-looking
statements, and the variances may be material.
THE COMPANY
We develop, manufacture and market an automated cellular imaging system,
referred to as the ACIS(TM), which is designed to perform a wide variety of
diagnostic tests, including tests for cancer, infectious disease and genetic
screening. We have designed the ACIS technology to serve as a tool to assist,
rather than replace, the pathologist in generating accurate, quantitative and
reproducible results, eliminating the subjectivity associated with current
manual methods. On July 28, 1999, the U.S. Food and Drug Administration granted
clearance for the use of the ACIS to perform tests using a particular staining
method based upon a master validation protocol. The FDA clearance allows us to
introduce tests for the ACIS using that staining method without having to apply
for additional FDA clearance. Our current test menu for the ACIS includes five
tests scheduled to be introduced during the second half of 1999 and additional
tests that are in various stages of development.
The ACIS combines color-based imaging technology with a fully automated,
computer-controlled microscope system and is designed to improve the detection,
diagnosis and treatment of cellular disease. The ChromaVision ACIS uses
internally developed software to detect colored objects, such as stained cells,
dramatically better than the human eye and with greater accuracy and sensitivity
than automated systems that rely on form-, structure-, size- or shape-based
detection. The ACIS detects and counts cells based on color, form and structure.
The majority of slide-based tests currently being performed in laboratories
already use some form of color to assist in the analysis. The color on a
microscope slide is produced by the reaction between common laboratory reagents
and the cells of interest. The ACIS relies upon color as the primary means of
detecting disease and achieves greater sensitivity than existing methods through
its ability to discriminate among up to 256 levels of intensity of any chosen
color. The ACIS provides greater specificity than current alternative diagnostic
methods.
ChromaVision submitted data in its FDA filing showing that pathologists
using manual microscopy identified the existence of cancer cells in only 56% of
the bone marrow samples where early-stage cancer was present. ChromaVision's
ACIS, on the other hand, detected cancer cells in over 90% of these cases. The
ACIS provides greater specificity, which means the ability to find one diseased
cell among other cells, than current alternative diagnostic methods. It is
capable of correctly identifying one tumor cell in one hundred million normal
cells, allowing the ACIS to be used for the detection of rare events, such as
locating early stage cancer cells. The ACIS also is able to produce the same
result at a rate approaching 100% upon repeated examinations of the same slide.
In
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addition, the ACIS provides significant labor savings to its users, allowing
pathologists to be more productive.
We have pursued a novel regulatory strategy for the ACIS. This strategy was
developed with the FDA to use an approval program known as a master validation
protocol that recognizes a class of similar diagnostic tests. The FDA granted
clearance for the ACIS to be marketed for use with a class of cellular
diagnostic tests using the immunohistochemistry staining method. This strategy
eliminates the need to seek clearances for each immunohistochemistry staining
test to be performed on the ACIS, meaning that a large number of tests that use
this staining method can be developed and marketed.
The tests that we have targeted take advantage of particular capabilities
of the ACIS system, address large, attractive markets and are expected to
receive incremental reimbursement beyond the current third party payors
reimbursement for manual testing. We have five tests scheduled to be
commercialized by the end of 1999.
HOW TO CONTACT US
Our principal executive offices are located at 33171 Paseo Cerveza, San
Juan Capistrano, California 92675, and our telephone number is (888) 776-4276.
We were incorporated in 1996 in Delaware.
As used in this prospectus, the terms "we," "us," "our company," and
"ChromaVision" mean ChromaVision Medical Systems, Inc.
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RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following factors in evaluating an investment in the
shares of our common stock.
WE ARE A DEVELOPMENT STAGE ENTERPRISE WITH A HISTORY OF OPERATING LOSSES WHOSE
FUTURE PROFITABILITY IS UNCERTAIN.
We are a development stage enterprise, are only beginning to commercialize
the use of the ACIS and have a limited operating history. We will continue to be
considered a development stage company until we begin to realize significant
revenues. Since our inception in 1993 as a division of XL Vision, Inc., we have
incurred losses totaling approximately $28.4 million through June 30, 1999,
principally associated with the research and development of our ACIS technology,
the conduct of clinical trials, preparation of regulatory clearance filings and
other matters related to the commercialization of our system. We hope to begin
to realize commercial revenues in the second half of 1999, but will continue to
incur losses at least until 2001 or beyond. Delays in completing research and
clinical tests, receiving necessary regulatory clearances, establishing a
scaled-up manufacturing operation and developing marketing capabilities may
significantly limit or prevent our future profitability. We may not be able to
achieve profitable operations at any time in the future.
OUR BUSINESS IS HIGHLY DEPENDENT ON MARKET ACCEPTANCE OF THE ACIS, AND IT IS
UNCERTAIN WHETHER THE ACIS WILL ACHIEVE THAT ACCEPTANCE.
We have focused all of our efforts to date on the development of the ACIS
and specific diagnostic applications for the ACIS. Our business will depend on
the successful development and marketing of these specific applications in order
to establish a commercially viable market. The extent of market acceptance and
penetration the ACIS may achieve will depend on a number of variables including,
but not limited to, the following:
- the ability of the ACIS to perform as expected,
- our ability to develop a significant number of tests performed with the
ACIS,
- acceptance by patients, physicians, third party payors and laboratories
of the ACIS and the tests performed using it, and
- the amount of reimbursement by third party payors for tests performed
using the ACIS.
A viable commercial market for ACIS applications may not develop, the
ChromaVision ACIS may not perform as expected and adequate reimbursement for
tests performed using the ACIS may not be available.
WE WILL REQUIRE ADDITIONAL FINANCING, AND IT IS UNCERTAIN WHETHER THAT FINANCING
WILL BE AVAILABLE.
We currently estimate that our existing capital resources, together with
the net proceeds from the private placement, will enable us to sustain
operations for at least eighteen months. We have expended and will continue to
expend substantial funds for research and development, clinical trials,
manufacturing and marketing of our system. Our need for capital will be
accelerated if we are delayed in bringing applications to market or we fail to
achieve the level of revenues from applications in the time frame contemplated
by our business plan. We expect that we will need to seek additional funds
through equity or debt financings, collaborative arrangements with third parties
and from other sources. Additional financing may not be available on terms
acceptable to us, if at all. Our inability to obtain sufficient funds may
require us to delay, scale back or eliminate some or all of our development
activities, clinical studies and/or regulatory activities or to license to third
parties the
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right to commercialize products or technologies that we would otherwise seek to
commercialize ourselves.
AS A DEVELOPMENT STAGE COMPANY, WE HAVE LIMITED MANUFACTURING EXPERIENCE.
We may encounter significant delays and incur significant unexpected costs
in scaling-up our manufacturing operations. In addition, we may encounter delays
and difficulties in hiring and training the workforce necessary to manufacture
the ACIS in commercial quantities. We may not be able to manufacture the ACIS at
a cost or in quantities necessary to make the product commercially viable. The
failure to scale-up manufacturing operations successfully, in a timely and
cost-effective manner, could have a material adverse effect on our revenues and
income.
FDA REGULATIONS AND THOSE OF OTHER REGULATORY AGENCIES CAN CAUSE SIGNIFICANT
UNCERTAINTY, DELAY AND EXPENSE IN INTRODUCING NEW APPLICATIONS FOR THE ACIS AND
PRESENT A CONTINUING RISK TO OUR ABILITY TO OFFER APPLICATIONS.
Our products, services and manufacturing activities are subject to
extensive and rigorous government regulation in the United States and other
countries. In the United States, the Medical Device Amendments to the Federal
Food, Drug and Cosmetic Act, and other statutes and regulations, including
various state statutes and regulations, govern the testing, manufacture,
labeling, storage, recordkeeping, distribution, sale, marketing, advertising and
promotion of our products. Our products are subject to similar regulation in
other countries. Failure to comply with applicable requirements in the United
States or in foreign countries can result in fines, recall or seizure of
products, total or partial suspension of production, withdrawal of existing
product approvals or clearances, refusal to approve or clear new applications or
notices and criminal prosecution.
- FDA APPROVAL. Prior to commercial distribution in the United States, most
medical devices, including our products, must be approved or cleared by
the FDA. The process of obtaining required regulatory approval or
clearance can be lengthy, expensive and uncertain. Moreover, regulatory
clearance or approval, if granted, may include significant limitations on
the indicated uses for which a product may be marketed.
- MARKETING. The FDA actively enforces regulations prohibiting marketing of
products for other than research or investigational use without
compliance with applicable pre-market clearance provisions. The effect of
governmental regulation may be to delay for a considerable period of time
or to prevent the marketing and full commercialization of our tests and
to impose costly requirements on us. Additional tests to be performed
with the ACIS may not receive clearance by the FDA for manufacture and
distribution in the United States.
- SOFTWARE. The FDA also regulates computer software, such as our software
technology, that performs the functions of a regulated device or that is
closely associated with a given device, such as software for imaging or
other devices. The FDA is in the process of re-evaluating its regulation
of this software, and we cannot predict the extent to which the FDA will
regulate this software in the future. Should the FDA increase its
regulation, our software technology could become subject to more
extensive regulatory processes and clearance requirements. As a result,
we could be required to devote additional time, resources and effort in
the areas of software design, production and quality control to ensure
compliance. Compliance with more extensive regulatory processes may not
be achieved and we may not obtain the necessary clearances for this
software on a timely basis, if at all. Delay or failure to achieve any
required FDA clearance with respect to this software could have a
material adverse effect on our business, income and financial condition.
- MANUFACTURING. Manufacturers of medical diagnostic devices are subject to
strict federal regulations regarding validation and the quality of
manufacturing, including periodic FDA
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inspections of the manufacturing facilities. Our manufacturing
operations, including any expansion of these operations, will continue to
be required to comply with these and all other applicable regulations,
and with applicable regulations imposed by other governments. Our failure
to comply with quality regulation system regulations could result in
civil or criminal penalties or enforcement proceedings being imposed on
us, including the recall of a product or a "cease distribution" order
requiring us to stop placing our products in service or selling our
products, as the case may be. Similar results could occur if we were to
violate foreign regulations. We are required to be in quality regulation
system compliance. We cannot assure you that we will be able to maintain
compliance with quality regulation system requirements. The failure to
comply with the FDA's quality system regulation could have a material
adverse effect on our ability to defend against product liability
lawsuits. Furthermore, failure to attain or maintain compliance with the
applicable manufacturing requirements of various regulatory agencies
would have a material adverse effect on our business, income and
financial condition.
Changes in existing regulations or adoption of new regulations could affect
the timing of, or prevent us from obtaining, future regulatory clearance.
Additional regulations may be adopted or current regulations may be amended in a
manner that will materially adversely affect our profitability.
CONSTANT PRESSURE TO CONTROL HEALTHCARE COSTS COULD RESULT IN THIRD PARTY PAYORS
LIMITING REIMBURSEMENT FOR TESTS PERFORMED WITH THE ACIS, WHICH WOULD RESTRICT
PRICING, PROFITABILITY AND DEMAND FOR THE TESTS.
The continued success of the ACIS depends upon its ability to replace or
augment existing diagnostic procedures, most, if not all of which, are deemed to
be eligible expenses and are covered by the medical insurance industry.
Historically, insurance carriers generally have been slow in adopting new
procedures as eligible expenses and, specifically, have been slow in agreeing to
cover other types of automated microscopy diagnostic procedures. Insurance
carriers may not deem the ChromaVision ACIS related procedures to be
reimbursable expenses at any time in the future.
From time to time, Congress has considered restructuring the delivery and
financing of healthcare services in the United States. We cannot predict what
form of legislation, if any, may be implemented or the effect of this
legislation on our business. It is possible that future legislation will contain
provisions which may adversely affect our business, operating results and
financial condition. It is also possible that future legislation could result in
modifications to the nation's public and private healthcare insurance systems,
which could negatively affect reimbursement policies, or encourage integration
or reorganization of the healthcare delivery system in a manner that could
negatively affect us. We cannot predict what legislation, if any, relating to
its business or to the healthcare industry may be enacted, including legislation
of third party reimbursement, or what effect any of this legislation may have on
our business.
OUR STRATEGY FOR THE DEVELOPMENT AND COMMERCIALIZATION OF THE ACIS PLATFORM
CONTEMPLATES COLLABORATIONS WITH THIRD PARTIES, MAKING US DEPENDENT ON THEIR
SUCCESS.
We have entered into and intend to continue to enter into corporate
collaborations for the development of new applications, clinical collaborations
with respect to tests using the ACIS and strategic alliances for the
distribution of the ACIS and the tests. We may, therefore, depend upon the
success of third parties in performing their responsibilities. We cannot assure
you that we will be able to enter into arrangements that may be necessary in
order to develop and commercialize our products, or that we will realize any of
the contemplated benefits from these arrangements. Furthermore, we cannot assure
you that any revenues or profits will be derived from our collaborative and
other arrangements.
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THE MEDICAL IMAGING TECHNOLOGY MARKET IS CHARACTERIZED BY RAPID TECHNOLOGICAL
CHANGE, FREQUENT NEW PRODUCT INTRODUCTIONS AND EVOLVING INDUSTRY STANDARDS.
The introduction of diagnostic tests embodying new technologies and the
emergence of new industry standards can render existing tests obsolete and
unmarketable in short periods of time. We expect competitors to introduce new
products and services and enhancements to existing products and services. The
life cycles of tests using the ACIS, and of the ACIS itself, are difficult to
estimate. Our future success will depend upon our ability to enhance our current
tests, to develop new tests, and to enhance and continue to develop the hardware
and software included in the ACIS, in a manner that keeps pace with emerging
industry standards. We cannot assure you that we will be successful in achieving
all of these objectives, that we will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of these
tests, or that we will adequately meet the demands of the marketplace and
achieve market acceptance. Our inability to accomplish any of these endeavors
will have a material adverse effect on our business, operating results and
financial condition.
ANY BREAKDOWN IN THE PROTECTION OF OUR PROPRIETARY TECHNOLOGY, OR ANY
DETERMINATION THAT OUR PROPRIETARY TECHNOLOGY INFRINGES ON THE RIGHTS OF OTHERS,
COULD MATERIALLY AFFECT OUR BUSINESS.
Our commercial success will depend in part on our ability to protect and
maintain our proprietary technology and to obtain and enforce patents on our
technology. We rely primarily on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to protect
our proprietary rights. We cannot assure you that our efforts will provide
meaningful protection for our proprietary technology. We have applied for
patents with the U.S. Patent & Trademark Office regarding specific aspects of
the ChromaVision ACIS software technology. We cannot assure you that any patent
applications we file or have filed will result in the issuance of patents or
that any patents issued to us will afford protection against competitors that
develop similar technology.
THE MEDICAL DEVICE INDUSTRY HAS BEEN THE SUBJECT OF EXTENSIVE LITIGATION
REGARDING PATENTS AND OTHER PROPRIETARY RIGHTS.
Any claims of infringement by third parties, with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. These royalty or
licensing agreements, if required, may not be available on terms acceptable to
us, if at all. A determination that we are infringing the proprietary rights of
others could have a material adverse effect on our products, revenues and
income.
WE FACE SUBSTANTIAL EXISTING COMPETITION AND POTENTIAL NEW COMPETITION FROM
OTHERS PURSUING TECHNOLOGIES FOR IMAGING SYSTEMS.
We compete in a highly competitive industry. The current primary source of
competition for the ChromaVision ACIS is manual microscopic analysis. Other
technologies also compete with the ACIS. Our existing and potential competitors
may possess substantially greater resources than us. We cannot assure you that
we will be able to compete effectively with existing or potential competitors.
We are aware of at least six companies that are developing or have developed
similar products for applications that do not directly compete with the current
or intended use of the ACIS. These companies may adapt their systems for other
applications in order to compete directly with the ChromaVision ACIS.
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PRODUCT LIABILITY CLAIMS COULD SUBJECT US TO SIGNIFICANT MONETARY DAMAGE.
The manufacture and sale of the ChromaVision ACIS entails an inherent risk
of product liability arising from an inaccurate, or allegedly inaccurate, test
or diagnosis. Although we maintain product liability insurance and have not
experienced any material losses to date, the ACIS has not been widely used and
we cannot assure you that we will be able to maintain or acquire adequate
product liability insurance in the future. Any product liability claim against
us could have a material adverse effect on our revenues and income.
OUR ABILITY TO MAINTAIN OUR COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO
ATTRACT AND RETAIN HIGHLY QUALIFIED MANAGERIAL, TECHNICAL AND SALES AND
MARKETING PERSONNEL.
We believe that our continued success depends to a significant extent upon
the efforts and abilities of our executive officers. The loss of any of our
executive officers or senior managers could have a material adverse effect on
our business, operating results and financial condition. We have no employment
agreements with these people other than agreements to pay severance benefits
under specific circumstances. Furthermore, our anticipated growth and expansion
will require the addition of highly skilled technical, management, financial,
sales and marketing personnel. Competition for personnel is intense, and our
failure to hire and retain talented personnel or the loss of one or more key
employees could have a material adverse effect on our business.
RAPID GROWTH MAY PLACE SIGNIFICANT DEMANDS ON OUR PERSONNEL.
We currently have limited management and administrative resources. If we
are successful in implementing our strategy, we may experience a period of rapid
growth and expansion which could place significant additional demands on our
management and administrative resources. Our management team's failure to manage
this potential growth effectively could have a material adverse effect on our
business.
SEVERAL AFFILIATED STOCKHOLDERS ARE IN A POSITION TO EXERT SUBSTANTIAL INFLUENCE
OVER THE DIRECTION AND POLICIES OF CHROMAVISION WHICH COULD ADVERSELY AFFECT THE
INTERESTS OF OTHER STOCKHOLDERS.
Safeguard Scientifics, Inc. beneficially owns in the aggregate
approximately 28% and XL Vision, Inc. beneficially owns in the aggregate
approximately 7% of the outstanding shares of our common stock. As a result,
these stockholders may be able to prevent corporate transactions such as
mergers, consolidations or a sale of substantially all of our assets which might
be favorable from the standpoint of us or the other stockholders.
WE HAVE ADOPTED A STOCKHOLDER RIGHTS PLAN AND OTHER ARRANGEMENTS WHICH COULD
INHIBIT A CHANGE IN CONTROL AND PREVENT A STOCKHOLDER FROM RECEIVING A FAVORABLE
PRICE FOR HIS OR HER SHARES.
Our board of directors has adopted a stockholders rights plan providing for
discounted purchase rights to its stockholders upon specified acquisitions of
our common stock. The exercise of these rights is intended to inhibit specific
changes of control of our company. Our certificate of incorporation provides for
the issuance of shares of preferred stock in amounts, in series and with rights,
preferences and privileges as the board of directors determines. The issuance of
preferred stock could have the effect of making it more difficult for a party to
acquire control of our company. Also, we have entered into agreements with
Douglas Harrington, M.D., our Chief Executive Officer and President, and Kevin
O'Boyle, our Senior Vice President of Operations and Chief Financial Officer,
under which they could receive substantial payments in connection with a change
of control of our company. Each of these arrangements could have the effect of
preventing stockholders from disposing of their shares at a favorable price in
connection with an acquisition of our company.
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OUR BUSINESS COULD BE MATERIALLY ADVERSELY IMPACTED BY OUR OWN FAILURE, OR THAT
OF OUR SUPPLIERS OR THIRD PARTY PAYORS, TO CORRECT THE PROBLEMS WHICH COULD
ARISE AS A RESULT OF THE YEAR 2000 ISSUE.
We have made substantial efforts to assess and solve all so-called "Y2K"
issues in our business. Although we have not yet fixed all of the problems we
are aware of in our own operations, we believe that our biggest risk is the
failure of key suppliers or third party payors to fix their problems. Any
resulting interruption in the supply of important components of our products,
disruption of payment from third party payors or any unexpected problems in our
own operations could have a material adverse effect on our business.
WE HAVE NEVER PAID CASH DIVIDENDS ON OUR COMMON STOCK.
We currently intend to retain future earnings for use in our business and,
therefore, do not expect to declare or pay any cash or other dividends in the
foreseeable future.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements concerning our
operations, economic performance and financial condition, including, in
particular, our business strategy and means to implement the strategy, our
goals, the markets we intend to compete in and the likelihood of our success in
developing and expanding our business. These statements are based on a number of
assumptions and estimates which are inherently subject to significant risks and
uncertainties, many of which are beyond our control and reflect future business
conditions which are subject to change. A variety of factors, some of which are
set forth under "Risk Factors" in this prospectus, could cause actual results to
differ materially from those anticipated and reflected in our forward-looking
statements.
Consequently, all of the forward-looking statements made or incorporated by
reference in this prospectus are qualified by these cautionary statements, and
you are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis, judgment, belief or expectation
only as of the date of this prospectus. We undertake no obligation to publicly
revise these forward-looking statements to reflect events or circumstances that
arise after the date of this prospectus or to publicly release the results of
any revisions to the forward-looking statements that may be made to reflect
events or circumstances after the date of this prospectus. In addition to the
disclosure contained in this prospectus, you should carefully review any
disclosure of risks and uncertainties contained in other documents we file or
have filed from time to time with the Securities and Exchange Commission
according to the Securities Exchange Act of 1934, as amended.
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SELLING STOCKHOLDERS
We are registering all 1,775,000 shares covered by this prospectus on
behalf of the selling stockholders named in the table below. We issued all of
the shares to the selling stockholders in a private placement transaction. We
have registered the shares to permit the selling stockholders and their
pledgees, donees, transferees or other successors-in-interest that receive their
shares from a selling stockholder as a gift, partnership distribution or other
non-sale related transfer after the date of this prospectus to resell the shares
when they deem appropriate.
The following table sets forth the name of each of the selling
stockholders, the number of shares owned by each of the selling stockholders as
of September 24, 1999, the number of shares that may be offered under this
prospectus and the number of shares of our common stock owned by each of the
selling stockholders after this offering is completed. None of the selling
stockholders has had a material relationship with us within the past three years
other than as a result of the ownership of the shares or other securities of
ChromaVision. The number of shares in the column "Number of Shares Being
Offered" represent all of the shares that each selling stockholder may offer
under this prospectus. We do not know how long the selling stockholders will
hold the shares before selling them and we currently have no agreements,
arrangements or understandings with any of the selling stockholders regarding
the sale of any of the shares. The shares offered by this prospectus may be
offered from time to time by the selling stockholders named below.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
-------------------- SHARES BEING --------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
--------------------------- ------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Caduceus Capital Trust........................... 90,000 * 90,000 0 0
Caduceus Capital II L.P. ........................ 40,000 * 40,000 0 0
Closefire Ltd. .................................. 30,000 * 30,000 0 0
Coutts & Co. .................................... 2,582 * 2,582 0 0
Jayvee & Co. c/o the GBC CDN Growth Fund......... 257,000 1.3% 70,000 187,000 *
MAS Funds -- Small Cap Value Portfolio........... 242,060 1.2% 242,060 0 0
Merlin Biomed International Ltd. ................ 30,000 * 30,000 0 0
Merlin Biomed L.P. .............................. 40,000 * 40,000 0 0
MSDW SICAV Global Small Cap Equity Fund.......... 1,898 * 1,898 0 0
MSDW SICAV Small Cap Equity Fund................. 18,145 * 18,145 0 0
Narragansett..................................... 77,000 * 77,000 0 0
Narragansett Offshore Ltd. ...................... 23,000 * 23,000 0 0
Pharma/wHealth FLP............................... 55,000 * 55,000 0 0
Pogue Capital International Ltd. ................ 70,000 * 70,000 0 0
Putnam OTC & Emerging Growth Fund................ 492,900 2.5% 492,900 0 0
Putnam Variable Trust -- Putnam VT OTC & Emerging
Growth Trust................................... 7,100 * 7,100 0 0
Roybec & Co. .................................... 140,000 * 140,000 0 0
Roycan & Co. .................................... 117,500 * 60,000 57,500 *
Van Kampen American Value Fund................... 235,315 1.2% 235,315 0 0
Alan J. Weber.................................... 50,000 * 50,000 0 0
</TABLE>
- -------------------------
* Less than 1%
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by the
selling stockholders.
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BUSINESS
INDUSTRY OVERVIEW
A critical aspect in diagnosing many cancers, infectious diseases and
genetic disorders is the detection of abnormal cells or cells and organisms with
specific characteristics. This diagnosis is made during a microscopic
examination generally performed manually by a trained technologist or
pathologist on biological specimens taken from patients, also called manual
microscopy. Estimates place the number of diagnostic procedures performed in the
United States at over one billion per year. These procedures are performed in
approximately 14,200 clinical laboratories in the United States and numerous
clinical laboratories worldwide, as well as in hospitals, doctors' offices and
research laboratories. Diagnostic and biotechnology companies have responded to
the opportunities presented by this large market by developing a growing number
of highly specific and increasingly sensitive reagents, used to identify, often
in color, targeted cellular characteristics of biological specimens.
Manual microscopy works well for simple diagnoses and for cases where
disease is obvious. However, manual microscopy is highly laborious and
subjective, particularly when identifying "rare events" such as finding a few
cancer cells in a patient sample containing millions of cells. Among the factors
contributing to this subjectivity is the lack of a standardized methodology for
both the handling and the staining of the specimen. Once slides are prepared and
stained, current diagnostic testing relies on the human eye which, even with the
aid of a microscope, has limited ability to discriminate between slight color
variations associated with the staining process or to detect differences in the
form and structure of cells. As a result, examining cells under this method can
result in variations in reportable results, ranging from modest and probably
insignificant differences to cases of incorrect diagnoses. Healthcare providers
are increasingly seeking more efficient and more accurate methods of disease
diagnosis in order to improve patient care and eliminate unnecessary and costly
examinations and procedures.
CHROMAVISION'S ACIS
Product Description and Benefits
The ACIS is able to find specific types of diagnostic cells, count them and
determine the amount of critically relevant substances on or in the cells by
measuring color intensity at a level of discrimination far exceeding the
capabilities of manual microscopy. It then produces high resolution color
digital images of the targeted cells, creating a permanent visual archive of the
results for use in diagnosis or monitoring of numerous medical conditions. The
ACIS is designed to enable a laboratory technician to operate the system using
simple "point and click" commands to scan up to 100 patient samples with fully
automated, walk-away operation. The system automatically scans the slides,
initially at low magnification to identify targeted cells using color
characteristics. The ACIS then re-images the targeted cells at a higher power
and, using additional color criteria and pattern recognition software, confirms
the significance of the targeted cell. Unlike other existing technologies, the
end result of slide analysis on the ACIS is the automated location of abnormal
cells, quantification of those cells and an image of the abnormal cells
displayed on the computer monitor. The system stores the digital images of the
targeted cells for scoring and review by the technologist and pathologist at a
later time. Once the image is reviewed and accepted, the digital images serve as
a permanent record of the patient's sample and test results. The digital image
also can be sent electronically for remote review and consultation.
The visual aspect of the ACIS system has many advantages including enabling
the healthcare practitioner to see the actual intact cells containing the
diagnostic information needed to guide therapy, rather than just a numeric value
indicating size or quantity. In competing technologies,
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creation of this numeric value destroys the actual specimen being analyzed which
prevents further visual review of the specimen and can lead to false positive
and false negative results.
The increased sensitivity of the ACIS allows us to address tests that
require rare event detection, such as diagnostic tests for cancer and infectious
diseases. Newer therapeutic treatments require more accurate and objective
information to guide therapeutic options. It will no longer be enough to
interpret a test result as positive or negative. Physicians will need to know
how positive or negative a specific sample is, in order to arrive at an accurate
clinical decision. We believe that the ACIS will enable us to provide this
information accurately, objectively and quickly.
We offer our customers an entire testing system, including an intelligent,
automated microscope, specialized proprietary software, particular staining and
slide preparation techniques, training and service. The hardware of the ACIS
system includes a computer with a modem and monitor, a digital camera and an
Olympus microscope. Ancillary equipment may include a ChromaVision-supplied
cover slipper, auto-stainer, slide preparation equipment, hand held bar-code
reader, printer and reagents.
The ACIS is designed to identify many different stains and staining
characteristics of cells, thereby enabling the system to be used for a
significant number of clinical tests for conditions including cancer, infections
and genetic abnormalities. The ACIS system is designed to be easily adapted to
work with a significant number of existing FDA approved reagents and stains
allowing each new follow-on test for the ACIS to be developed with significant
savings in time and resources.
The ACIS technology has been designed to complement the skills of
pathologists by assisting them in generating more accurate, specific and
reproducible results and eliminating the subjectivity associated with current
manual methods. We expect that the ACIS will enable healthcare providers to
improve the accuracy and consistency of patient diagnoses, enhance overall
patient outcomes and lower healthcare costs.
Regulatory Status
On July 28, 1999, the FDA granted a broad 510(k) clearance for the use of
the ACIS to perform multiple tests using a staining method called
immunohistochemistry. Immunohistochemistry is widely used in the diagnosis or
monitoring of numerous medical conditions, including cancer and infectious
diseases. This method involves the use of antibodies and stains to create color
reactions enabling the identification of suspected tumor- or virus-producing
cells.
The master validation protocol approval process uses a prototype
application to demonstrate the method to be used for validation and indicates
how follow-on applications will be validated. Then, as new applications using
that method are developed, they are internally validated and documented at our
company according to FDA guidelines. This process of validation significantly
accelerates the development and commercialization of new applications as well as
dramatically decreases the time and cost associated with achieving regulatory
compliance.
Testing Menu
The FDA clearance of the ACIS for performing tests using a particular
staining method is expected to enable us to commercialize new tests quickly
without further FDA filings. We have developed five tests for the ACIS that are
scheduled for introduction during the second half of 1999. We are continuing to
develop a pipeline of new tests, some of which have already been successfully
evaluated in feasibility studies. The following is a description of the five
tests scheduled to be commercialized by the end of 1999.
- MICROMETASTASES IN BONE MARROW. This is a test for early detection of
cancer that involves finding minute quantities of cancer cells in bone
marrow. The presence of these cells, which
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have spread from the primary tumor, has been shown to be an early
indicator of cancer. Testing for small quantities of cancer cells also
can be used to monitor the progress of the disease and to provide
required information in connection with stem cell and bone marrow
transplants. This test takes advantage of the enhanced sensitivity of the
ACIS. Clinical trials with respect to this test have been completed, and
it is ready for commercial release.
- HER2/NEU. This is a test that measures excess quantities of the HER2/neu
protein, which is associated with more aggressive breast cancer, faster
disease progression and shorter overall survival. Candidates for the new
cancer drug Herceptin(R), which has recently been approved by the FDA and
developed and marketed by Genentech, Inc., are required to be tested for
overexpression of HER2/neu. Currently, the test is performed using manual
microscopy, and a pathologist or laboratory assigns a score to the result
in order to determine if Herceptin will be prescribed. This subjective
procedure produces a significant variation of results among individual
laboratories and pathologists. HER2/neu testing performed using the ACIS
in conjunction with the recently released HercepTest(TM) developed by
DAKO Corporation has achieved greater than 90% reproducibility and is
expected to substantially improve the standardization of test results. We
have a joint development and marketing agreement with DAKO Corporation
for a tissue-based testing system, which includes HercepTest. Clinical
trials with respect to this test have been completed, and it is ready for
commercial release.
- CYTOMEGALOVIRUS ANTIGENEMIA (CMV). This is a quantitative test for CMV,
an infectious disease that can cause blindness or death in newborns or
immune-compromised patients, such as AIDS or transplant patients.
Currently, our test is in clinical trials at the University of Texas MD
Anderson Cancer Center and the University of California at Los Angeles.
- ESTROGEN AND PROGESTERONE RECEPTORS (ER/PR). These are two tests which
are always performed concurrently on a patient specimen and are used to
determine the appropriate therapy and prognosis for breast cancer
patients by using proteins which bind specifically to estrogen and/or
progesterone. When present in breast and other cancers, ER and PR predict
response to hormonal therapy and prognosis. Currently, our ER/PR test is
in clinical trials at the University of Southern California.
- MICROMETASTASES IN TISSUE. This is a test similar to micrometastases in
bone marrow that also is used to detect early stage cancer. Currently,
our micrometastases in tissue test is in clinical trials at the
University of Vermont.
We believe that the ACIS has the potential to become a valuable tool in the
detection and treatment of a large number of additional diseases and medical
conditions.
CORPORATE STRATEGY
Our goal is to establish the ACIS as the preferred imaging platform for
diagnostic applications in the healthcare industry. To implement this strategy,
we intend to:
- take advantage of the flexibility of both the ACIS platform and the
nature of its FDA clearance to develop and commercialize numerous cancer
and infectious disease tests, including five tests scheduled for
introduction during the second half of 1999;
- continue to build a direct sales and marketing organization which will be
focused on educating the pathology community about the benefits of the
ACIS system;
- offer the ACIS to customers on a fee-per-use basis in which the fee is
based on the number of tests run on the system, thus avoiding capital
expenditure issues that can make generating sales difficult;
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- establish higher reimbursement levels for tests performed using the ACIS
under established incremental payment codes applicable to computerized
image analysis; and
- continue to collaborate with leaders in the pathology community to assist
us in developing new tests for the ACIS and enhance our marketing and
distribution capabilities.
There is considerable uncertainty as to whether these strategies can be
implemented successfully, and we cannot assure investors that we will be
successful in doing so.
COLLABORATIONS
We have and will continue to use collaborations to assist in further
developing our test menu and enhancing our marketing and distribution
capabilities. We collaborate with researchers at prestigious hospitals, centers
of excellence and major laboratories that assist with clinical studies.
Currently, eight of our tests are undergoing clinical trials at the following
institutions:
- Alfigen, the Genetics Institute
- Cambridge University
- Genzyme Genetics
- Mayo Clinic -- Rochester
- UCLA
- University of Pittsburgh
- University of Texas MD Anderson Cancer Center
- University of Vermont and State Agricultural College
- USC Kenneth Norris Cancer Center
We also enter into application-specific collaborations that will focus on
integrating reagents with the ChromaVision ACIS platform in a manner which
provides an entire testing system to the customer. We have entered into
agreements with two companies for the application of their tests on the ACIS.
In October 1998, we entered into an agreement to jointly develop, market
and sell a tissue-based system with DAKO Corporation. The introductory
application will be HercepTest, an FDA-cleared diagnostic that is used to
identify breast cancer patients likely to respond to the recently cleared drug
Herceptin developed by Genentech. DAKO has primary responsibility for account
management, reagents, autostainers and contract management, and we have primary
responsibility for providing our expertise with respect to the ACIS. In
addition, in October 1997, we entered into an exclusive, worldwide distribution
and development agreement with Sigma Diagnostics, Inc. for a potential screening
test for Down syndrome, known as Triple Plus(TM).
The development of new tests to be performed using the ACIS is important to
our success. In order to mitigate the risk that any one test will not be
successfully developed, we maintain a pipeline of tests in a prioritized cue so
that if any one test is not successfully developed, we can move other tests up
in priority. As an example of this, the clinical trials for Triple Plus have
taken longer than expected and some preliminary data indicate that the test may
not be as strong a predictor of Down syndrome as had been expected. While we are
still evaluating the data and the implications for the commercial release of the
test, we are concentrating more of our efforts on other tests that presently
show more promise.
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SALES AND MARKETING
The ACIS will be offered under an arrangement in which the customer pays
only on the basis of the number of tests performed. Because we will continue to
own the ACIS, there is no need for a large initial capital expenditure by any
clinical customer. Rather than selling the systems, our fee-per-use strategy
removes any capital equipment acquisition barrier to new system sales, shortens
our sell-cycle and yields very attractive margins over time. The customer will
be charged on a fee-per-use basis determined by the specific test being run. The
anticipated fee-per-use charges for the five tests scheduled for release in 1999
range from approximately $50 to $140, although those prices could change based
on a number of facts, including the amount of third-party reimbursements for the
tests. The customer will also be committed to minimum monthly payments for the
use of ACIS. Systems may be sold to research centers that do not offer tests
commercially and in foreign countries where the fee-per-use payment model is not
feasible because of the structure of the healthcare system.
As of July 31, 1999, our sales and marketing organization consisted of
seventeen people, including five direct sales people and four field service
specialists in the United States and five direct sales people and two field
service specialists in Europe. We have entered into an agreement with an
independent distributor to market the ACIS in Italy and are in discussions with
potential distributors for the Scandinavian and the Benelux countries. The
direct sales force is marketing the ACIS in the rest of Western Europe.
There is a high level of interest in micrometastases in Europe, and we have
entered into agreements with two prominent academicians: Ingo J. Diel, M.D.,
Associate Professor of Medicine at University Hospital at Heidelberg, and Klaus
Pantel, M.D., Ph.D., Associate Professor of Medicine and Head of the
Micrometastases Research Laboratory at the University of Munich Institute of
Immunology. Both of them will be studying the detection of micrometastases using
the ACIS and will be working with us to increase awareness and acceptance of the
ACIS technology within the medical and scientific communities in Europe.
Our customers include pathologists and clinical laboratories. Our targeted
customers can be classified into four groups:
- UNIVERSITY MEDICAL CENTERS. These medical centers include transplant and
oncology centers and research centers of excellence as well as AIDS
specialty, pre-natal specialty and women's hospitals.
- COMMERCIAL LABORATORIES. These laboratories which have a national
presence or specialized focus include Quest Diagnostics Incorporated,
Specialty Laboratories Inc., Impath Inc., BIS Laboratories and Laboratory
Corporation of America.
- PHARMACEUTICAL COMPANIES. These companies benefit by using the ACIS in
the drug development process. In addition, the ACIS may assist in
directing the treatment protocol for patients to pharmaceutical
companies' new therapeutics, such as the HercepTest and Herceptin.
- RESEARCH INSTITUTIONS. These institutions include the governmental
sanctioned groups such as The National Cancer Institute, The National
Institutes for Health and the Center for Disease Control as well as
cancer cooperative groups such as the American College of Obstetrics and
Gynecology.
ACIS systems have been placed in research settings and clinical trial sites
in the United States and in Europe. These placements have allowed us to assess
the performance of the system, customer training programs and technical service
capabilities.
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REIMBURSEMENT STRATEGY
Our reimbursement strategy is to pursue the use of specific existing
medical billing codes, known as CPT codes, that qualify for reimbursement to
hospital laboratories and to pathologists from Medicare and from private
carriers at rates incrementally above that for manual microscopy. These CPT
codes are established by the American Medical Association and each code is
associated with a specific medical service. The U.S. Healthcare Finance
Administration, known as HCFA, has established predetermined payment amounts for
the Medicare program based on these specific codes. Private insurers also use
the CPT codes to make decisions with regard to reimbursement. The codes that we
have identified relate specifically to the use of image analysis in the testing
process and are not available to providers who use only manual microscopy to
analyze patent specimens. A number of independent reimbursement consultants, the
reimbursement directors at a major U.S. cancer center and two national
independent laboratories, the American Medical Association CPT coding committee
and HCFA have reviewed the ACIS testing process and acknowledged that these
incremental codes should apply for the reimbursement of tests using the ACIS.
To date, we have only limited experience with reimbursement and, while we
have received assurances from experts that higher reimbursement will be
available for our tests, there remains significant uncertainty. Reimbursement at
these levels may not be achieved.
INTELLECTUAL PROPERTY
We file patent applications to protect technology, innovations and
improvements that we consider important to the development of our business. We
have filed ten patent applications with the U.S. Patent and Trademark Office
regarding specific aspects of the ChromaVision ACIS software technology. In July
1999, we were issued a notice of allowance on the method of "scoring" cells
performed by the ACIS. We also rely on trade secrets and proprietary know-how
that we seek to protect in part through confidentiality agreements with our
employees and consultants. Litigation may be necessary in order to enforce any
patents that are issued from these applications, to protect trade secrets or
know-how we own or to determine the enforceability, scope and validity of the
proprietary rights of others.
COMPETITION
Although the predominant method of cell-based diagnostics today is
traditional manual microscopic analysis performed by pathologists, there are
companies engaged in the development of cell-based diagnostic imaging systems
that could compete with the ACIS. Our company is often compared to companies
manufacturing automated microscope systems because the hardware components are
similar. Some of these companies use form-, structure-, size- or shape-based
detection together with color for cell identification, but these companies'
products do not discriminate among as many variations of the same color as the
ACIS. We believe that our proprietary color-based image analysis, the multi-use
potential of the ACIS, the significant speed and specificity of our tests and
ACIS' proprietary software distinguish our company from these other companies.
Additional sources of competition include alternative diagnostic testing
methods such as flow cytometry, polymerase chain reaction, referred to as PCR,
and fluorescent in-situ hybridization, referred to as FISH. Flow cytometry
involves separating individual cells in blood and analyzing them based on
results obtained by passing a beam of light through the cells at very high
speed. PCR involves rapidly replicating small quantities of genetic material to
permit analysis by detecting color or electrical charge. Both methods have the
disadvantages of destroying the patient sample in the process of analysis and
yielding a large number of false positive results. The pathologist has to draw
conclusions from data produced by the flow cytometry or PCR process, as opposed
to actually seeing the cells of interest. Flow cytometry has not proven to be
specific enough for applications such as
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micrometastases, which involves finding a very small number of cancer cells in a
large population of cells. FISH involves using fluorescent antibodies to tag
genetic material, either DNA or RNA, and analyzing the result by counting the
points of light. Because fluorescence emits a very weak signal, use of the FISH
method is very slow as compared to the ACIS, is tedious and requires substantial
pathologist time to both define areas of interest within the specimen and then
manually count the fluorescent signals emitted.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information as of August 1, 1999 regarding
our executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Douglas S. Harrington, M.D. ............ 46 Chief Executive Officer, President and Director
Kenneth D. Bauer, Ph.D. ................ 47 Vice President and Chief Science Officer
Kevin C. O'Boyle........................ 42 Senior Vice President of Operations and Chief
Financial Officer
Diethart Reichardt...................... 56 Vice President of International Business
Development and Operations
Michael G. Schneider.................... 48 Vice President of Manufacturing and Service
Patricia Sisson......................... 45 Senior Vice President of Marketing, Sales and
Strategic Planning
Jose de la Torre-Bueno, Ph.D. .......... 50 Vice President of Research and Development
John S. Scott, Ph.D. ................... 48 Chairman of the Board of Directors
Richard C.E. Morgan..................... 54 Director
Mary Lake Polan, M.D., Ph.D. ........... 55 Director
Charles A. Root......................... 66 Director
Thomas R. Testman....................... 62 Director
</TABLE>
Douglas S. Harrington, M.D. has been a Director of ChromaVision since 1996.
Dr. Harrington has served as ChromaVision's Chief Executive Officer since
December 1996 and President since December 1998. Prior to joining ChromaVision,
Dr. Harrington served as Chairman and President of Strategic Business Solutions,
Inc., a privately held company specializing in the commercialization of
biotechnology, and as a principal in Douglas S. Harrington and Associates, a
strategic consulting firm. From 1992 to 1995, Dr. Harrington served as President
of Nichols Institute, a publicly traded health care laboratory services
provider, now part of Quest Diagnostics, Inc., a publicly traded laboratory
services provider. Prior to 1992, Dr. Harrington held various management
positions within Nichols Institute including Vice President of Operations and
Medical Director. Dr. Harrington currently sits on the board of directors,
advisory boards, or scientific advisory boards of several other related health
care and medical device companies. Dr. Harrington also is Associate Professor of
Clinical and Anatomic Pathology at the University of Nebraska Medical Center and
has authored over 80 peer-reviewed publications. He received his Bachelor of
Arts degree with distinction and a medical degree from the University of
Colorado. Professional affiliation memberships include the American Medical
Association, the American Society of Clinical Pathology, the College of American
Pathologists and the International Academy of Pathology. Dr. Harrington is a
Director of Pacific Biometrics, Inc. and Merge Technologies, Inc.
Kenneth D. Bauer, Ph.D. has been Vice President and Chief Science Officer
since August 1997. From 1992 until he joined us, Dr. Bauer was Senior Scientist
in the Immunology Division and head of Cytometry for Genentech, Inc. a publicly
traded biotechnology company. Prior to Genentech, Bauer was Associate Professor
of Pathology at Northwestern University Medical School and Director of the
Quantitative Cytology Laboratory at the Northwestern Memorial Hospital in
Chicago, Illinois. He has authored more than 90 scientific publications and
served as Associate Editor of Cytometry for the Journal of the Society of
Analytical Cytology for ten years. Dr. Bauer has been a member of the scientific
advisory boards for several public companies and served on scientific review
sections for the National Institutes of Health, Department of Energy, and
National Aeronautics and Space Administration. He is currently an Adjunct
Professor of Pathology and Laboratory Medicine at the
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University of Pennsylvania School of Medicine and a subcommittee member of the
National Committee for Clinical Laboratory Standards.
Kevin C. O'Boyle has been Vice President and Chief Financial Officer of
ChromaVision since December 1996 and Senior Vice President of Operations since
January 1999. From 1990 to 1994, Mr. O'Boyle was the Chief Financial Officer and
from 1994 to 1996, he was Senior Vice President of Operations for Albert Fisher
North America, a publicly traded international food processor and distributor.
From 1984 to 1990, Mr. O'Boyle served as the Vice President and Controller of
American Cablesystems, a publicly traded cable television firm. He previously
held various accounting positions on the audit and tax staff with Pannell, Kerr
& Forster, a public accounting firm.
Diethart Reichardt has been Vice President of International Business
Development and Operations of ChromaVision since January 1998. Previously, Mr.
Reichardt spent more than twenty years with Allergan, Inc., a publicly traded
provider of therapeutic eye care. Mr. Reichardt held various senior management
positions including Corporate Vice President and head of the Global Optical,
Consumer and Over-the-Counter Division.
Michael G. Schneider has been Vice President of Manufacturing and Service
since June 1996. From 1995 to May 1996, Mr. Schneider was Vice President of
Manufacturing at Kodak Health Imaging Systems, Inc. From 1993 to 1995, Mr.
Schneider was Director of Worldwide Service at Kodak's Customer Service
Division. From 1990 to 1993, Mr. Schneider was Manager of Services Support at
Kodak's Health Science Division. Mr. Schneider has twenty-four years of
experience in manufacturing and service management.
Patricia Sisson has been Vice President of Marketing of ChromaVision since
December 1997 and Senior Vice President of Sales, Marketing and Strategic
Planning since January 1999. From 1995 to 1997, Ms. Sisson was Vice President of
Marketing at Quest Diagnostics, Inc. From 1986 to 1995, Ms. Sisson served as
Vice President of Marketing at Nichols Institute and Vice President of Marketing
and Sales for Nichols Institute Diagnostics, a reference laboratory. In
addition, Ms. Sisson spent more than a decade with Beckman Instruments, Inc. in
product and marketing management roles. Ms. Sisson is a licensed medical
technologist certified by the American Society of Clinical Pathology.
Jose de la Torre-Bueno, Ph.D. has been Vice President of Research and
Development since February 1999 and Senior Applications Engineer since July
1998. Prior to joining us, Dr. Torre-Bueno was engaged as a consultant to Tower
Technologies in Encinitas, California. In 1982, he founded American Innovision,
an image analysis company that configured complete application systems, designed
and built software and hardware. He acted as Owner, President, and VP of
Research and Development for American Innovision until its sale to Oncor
Instrument Systems in 1992. He remained with Oncor for three years after the
sale as Senior Scientist and Research and Development Manager. Dr. Torre-Bueno
has been an inventor on two issued patents and one pending patent, and has
assigned the rights for two additional inventions to ChromaVision.
John S. Scott, Ph.D. has been a Director of ChromaVision since 1996. Dr.
Scott is Chairman of the Board and Chief Executive Officer of XL Vision, Inc., a
technology and business incubator of highly differentiated, high-value imaging
technology businesses. Dr. Scott has been Chairman of ChromaVision's board since
March 1996. Prior to founding XL Vision, Inc., from 1991 until July 1993, Dr.
Scott was President of Lenzar Electro-Optics, Inc., a manufacturer of imaging
devices. Dr. Scott has a Ph.D. in both physics -- turbulence and particle
acceleration, associated space-borne instrumentation, plasma physics and
electro-optical sensor system development -- and astrophysics. He has designed
and developed scanners for a wide range of media types including intelligence
imagery, microfiche, microfilm, fingerprint cards, aerial photos, voter
registration cards, and medical x-rays.
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Richard C.E. Morgan has been a Director of ChromaVision since 1996. Mr.
Morgan is Managing Partner of Amphion Capital Management LLC, a private equity
and venture capital firm and the successor to Wolfensohn Partners, L.P. Mr.
Morgan served as Managing General Partner of Wolfensohn Partners, L.P. from 1986
to 1998. Mr. Morgan is also Chairman of Axcess, Inc., a public company that
manufactures and distributes RFID security systems, and chairman of Quidel
Corp., a manufacturer and distributor of rapid diagnostic tests. From 1990 to
1996, Mr. Morgan was the Chairman of MediSense, Inc., a manufacturer and
distributor of blood glucose biosensors. Mr. Morgan is also a Director of
Celgene Corp. and Indigo N.V.
Mary Lake Polan, M.D., Ph.D. has been a Director of ChromaVision since
1998. Dr. Polan is Professor and Chairman of the Gynecology and Obstetrics
Department at Stanford University. From 1985 to 1990, she served as Associate
Professor at Yale University School of Medicine. Dr. Polan also has held
professorial positions at Hunan Medical College in the People's Republic of
China and Pahlavi University in Shiraz, Iran. Dr. Polan has served on committees
of the Institute of Medicine, the National Institutes of Health, and the United
States Department of Health and Human Services. Dr. Polan is a Director of
American Home Products Corp. and Quidel Corp. and holds board positions at
numerous other medical corporations. Dr. Polan is currently Chair of the
Scientific Advisory Board on Women's Health and Hygiene at the Proctor & Gamble
Company.
Charles A. Root has been a Director of ChromaVision since 1996. Mr. Root
served as Executive Vice President of Safeguard Scientifics, Inc., a company
that develops and operates emerging growth information technology companies,
from 1986 until his retirement in 1998. Mr. Root is a Director of Tangram
Enterprise Solutions, Inc.
Thomas R. Testman has been a Director of ChromaVision since 1998. Mr.
Testman is a business consultant. Mr. Testman retired from his position as
Managing Partner with Ernst & Young, an international auditing, accounting and
consulting services firm in October 1992 after 30 years of continuous service.
During his tenure, he held the position of National Director of Management
Consulting Services, was Western Regional Director of Health Care Services, and
engaged in management consulting during various periods. During 1998, Mr.
Testman served as interim Chief Executive Officer for Techniclone Corporation, a
cancer drug developer, and in 1997 served as Interim Chief Executive Officer for
Covenant Care, Inc., a skilled nursing care company. He also formerly served as
a Director of Nichols Institute, a publicly held laboratory company that was
sold to Corning, Inc. in 1994. Mr. Testman is a Director of Techniclone
Corporation and Minimed, Inc. and serves as a Director of six privately held
health care companies.
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PLAN OF DISTRIBUTION
The selling stockholders may sell the shares from time to time. The selling
stockholders will act independently of us in making decisions regarding the
timing, manner and size of each sale. The sales may be made through the
automated quotation system of the Nasdaq National Market on the facilities of
any national exchanges on which the common stock is then traded or, at prices
and at terms then prevailing or at prices related to the then current market
price, or in privately negotiated transactions. The selling stockholders may
effect these transactions by selling the shares to or through broker-dealers.
The shares may be sold by one or more of, or a combination of, the following:
- a block trade in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction,
- purchases by a broker-dealer as principal and resale by a broker-dealer
for its account under this prospectus,
- an exchange distribution in accordance with the rules of an exchange,
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
- in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. If the plan of
distribution involves an arrangement with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, the amendment or supplement
will disclose:
- the name of each selling stockholder and of the participating
broker-dealer(s),
- the number of shares involved,
- the price at which the shares were sold,
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable,
- that a broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and
- other facts material to the transaction.
In addition, upon being notified by a selling stockholder that a donee or
pledgee intends to sell more than 500 shares, we will file a supplement to this
prospectus. In effecting sales, broker-dealers engaged by the selling
stockholders may arrange for other broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of the shares in
the course of hedging the positions they assume with selling stockholders. The
selling stockholders also may sell shares short and redeliver the shares to
close out short positions. The selling stockholders may enter into option or
other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer the shares under this prospectus. The selling stockholders also may
loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
loaned shares, or upon a default the broker-dealer may sell the pledged shares
under this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
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Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
selling stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933, as amended, in connection with
sales of the shares. Accordingly, any commission, discount or concession
received by them and any profit on the resale of the shares purchased by them
may be deemed to be underwriting discounts or commissions under the Securities
Act. Because selling stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. In
addition, any securities covered by this prospectus which qualify for sale under
Rule 144 promulgated under the Securities Act may be sold under Rule 144 rather
than under this prospectus. The selling stockholders have advised us that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in some
states the shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of the
distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of shares of our common stock by the
selling stockholders. We will make copies of this prospectus available to the
selling stockholders and have informed them of the need to deliver copies of
this prospectus to purchasers at or prior to the time of any sale of the shares.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The selling
stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against specific liabilities,
including liabilities arising under the Securities Act. The selling stockholders
have agreed to indemnify specific persons, including broker-dealers and agents,
against specific liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act.
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP, Los Angeles, California, will pass on the
validity of our common stock being registered.
EXPERTS
The balance sheets of ChromaVision Medical Systems, Inc. (a development
stage enterprise) as of December 31, 1997 and 1998, and the related statements
of operations, stockholders' equity (deficit) and cash flows of ChromaVision
Medical Systems, a development stage enterprise and a division of XL Vision,
Inc., for the period from January 1, 1996 through March 27, 1996, and
ChromaVision Medical Systems, Inc. for the period from March 28, 1996
(incorporation) through December 31, 1996, and for the years ended December 31,
1997 and 1998 and for the cumulative
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development stage from April 1, 1993 (inception) through December 31, 1998, have
been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You can inspect and
copy the Registration Statement on Form S-3 of which this prospectus is a part
(File No. 333-87969), as well as reports, proxy statements and other information
filed by us, at the public reference facilities maintained by the Securities and
Exchange Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Securities and Exchange
Commission: 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
You can obtain copies of this material from the Public Reference Room of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. You can call the Securities and Exchange Commission
at 1-800-732-0330 for information regarding the operations of its Public
Reference Room. The Securities and Exchange Commission also maintains a World
Wide Web site at http:\\www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants like our company that
file electronically.
The Securities and Exchange Commission allows this prospectus to
"incorporate by reference" other information that we file with the Commission,
which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is an important part
of this prospectus, and information that we file later with the Securities and
Exchange Commission will automatically update and replace this information. We
incorporate by reference the documents listed below and any future filings made
by us with the Securities and Exchange Commission under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 until we have sold all of the
securities that we have registered:
1. Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998, including information in our Proxy Statement in connection with
our 1999 Annual Meeting of Stockholders;
2. Our Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1999 and June 30, 1999;
3. Our Current Reports on Form 8-K filed on March 12, 1999 and July 2,
1999;
4. The description of our common stock contained in our Registration
Statement on Form 8-A filed June 19, 1997, and all amendments filed for the
purposes of updating that description.
The reports and other documents that we file after the date of this
prospectus will update and supersede the information in this prospectus.
If you make a request for this information in writing or by telephone, we
will provide you without charge, a copy of any or all of the information
incorporated by reference in the registration statement of which this prospectus
is a part. Requests for this information should be submitted in writing to:
ChromaVision Medical Systems, Inc., 33171 Paseo Cerveza, San Juan Capistrano,
California 92675, (888) 776-4276, Attn: President.
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<PAGE> 24
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND
SEEKING OFFERS TO BUY SHARES OF CHROMAVISION MEDICAL SYSTEMS, INC. COMMON STOCK
ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE
CHROMAVISION COMMON STOCK.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 3
Forward-Looking Statements.......... 8
Selling Stockholders................ 9
Use of Proceeds..................... 9
Business............................ 10
Management.......................... 17
Plan of Distribution................ 20
Legal Matters....................... 21
Experts............................. 21
Where You Can Find More
Information....................... 22
</TABLE>
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1,775,000 SHARES
[CHROMAVISION LOGO]
CHROMAVISION
MEDICAL SYSTEMS, INC.
COMMON STOCK
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PROSPECTUS
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OCTOBER 7, 1999
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