POSSIS MEDICAL, INC.
9055 Evergreen Boulevard NW
Minneapolis, Minnesota 55433-8003
tel: 763.780.4555
fax: 763.780.7223
website: www.possis.com
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PROSPECTUS
POSSIS MEDICAL, INC.
1,912,859 Shares
Common Stock
This prospectus covers the sale of shares of the common stock, par value
$.40 per share, of Possis Medical, Inc., to be sold from time to time by the
selling shareholders named in this prospectus. The shares covered by this
prospectus consist of 1,594,049 shares of common stock, 318,810 shares of common
stock issuable upon the exercise of warrants and, in accordance with Rule 416
under the Securities Act of 1933, as amended, an indeterminate number of
additional shares as may be required to prevent dilution resulting from stock
splits, stock dividends or similar events. Possis Medical will not receive any
of the proceeds from the sale of the shares.
The common stock is traded on the Nasdaq National Market under the symbol
"POSS." On April 13, 2000, the last reported sale price of the common stock as
reported on the Nasdaq National Market was $10 7/16 per share.
_______________
See the section titled "Risk Factors" beginning on page 3 to read about
certain factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
_______________
POSSIS MEDICAL, INC.
9055 Evergreen Boulevard N.W.
Minneapolis, Minnesota 55433
(612) 780-4555
The date of this prospectus is April 14, 2000.
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TABLE OF CONTENTS
Risk Factors.............................................................3
Where You Can Find More Information......................................7
About Possis Medical, Inc................................................8
Selling Shareholders....................................................10
Plan of Distribution....................................................12
Experts.................................................................12
Legal Matters...........................................................12
<PAGE>
RISK FACTORS
An investment in our common stock involves a number of risks. You should
consider carefully the following risk factors, together with the other
information in this prospectus, before buying any shares. You also should be
aware that this prospectus contains forward-looking statements that are not
related to historical results. These forward-looking statements, such as
statements concerning our strategies, plans, objectives, expectations and
intentions, involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, the following risk factors.
We have a history of operating losses and a lack of profitable operations.
We incurred losses for fiscal years 1997, 1998 and 1999. As of January 31,
2000, we had accumulated a deficit of $55.1 million. We incurred an operating
loss of $9.6 million for the year ended July 31, 1997, an operating loss of
$12.5 million for the year ended July 31, 1998, and an operating loss of $12.5
million for the year ended July 31, 1999.
We do not expect to become profitable unless we achieve significant sales
in the United States. We must convince health care professionals, third-party
payors and the general public of the medical and economic benefits of the
AngioJet7 RheolyticJ Thrombectomy System. We cannot assure you that we will
succeed in marketing this product and achieve significant sales. Even if we
accomplish this goal, we cannot assure you that we will operate profitably on a
consistent basis.
There has been limited regulatory approval for our products, and our
products are subject to extensive governmental regulation.
Our products and manufacturing activities are subject to extensive and
rigorous federal and state regulation in the United States and various
regulatory requirements in other countries, including Japan. Current United
States Food and Drug Administration enforcement policy strictly prohibits the
marketing of approved medical devices for unapproved uses. Therefore, even if
our products receive regulatory approval, regulators may significantly limit the
uses for which our products may be marketed. In addition, the process of
obtaining and maintaining required regulatory approvals can be lengthy and
expensive, and the outcome of the process can be uncertain. Moreover, regulatory
approvals may be withdrawn if we fail to comply with regulatory standards or if
unforeseen problems arise following the initial marketing of a product.
Additionally, we are required to adhere to Quality System Regulations
relating to product design, development, manufacturing, servicing, testing and
documentation. Failure to comply with applicable Quality System Regulations or
other regulatory requirements may result in fines, delays or suspensions of
approvals, injunctions against further distribution of our products, seizures or
recalls of products, operating restrictions, criminal prosecutions or other
sanctions, in addition to adverse publicity. The adoption of new regulations or
changes in existing regulations could prevent us from obtaining, or affect the
timing of, future regulatory approvals and could adversely affect the marketing
of our existing products. We cannot assure you that we will be able to obtain
necessary regulatory approvals on a timely basis or at all. Delays in our
receipt of or failure to receive regulatory approvals, the loss of previously
received approvals or our failure to comply with regulatory requirements would
have a material adverse effect on our business, financial condition and results
of operations.
<PAGE>
Clinical and marketing acceptance of our products is uncertain.
Because our products are new to the market, they are still unfamiliar to
many members of the medical community. The AngioJet System has only recently
begun to be used for the removal of vascular, cardiovascular and intercranial
blood clots, known to the medical community as "thrombus." Market acceptance of
our AngioJet products will depend largely on our ability to demonstrate to the
medical community in general, and to interventionalists in particular, the
efficacy, relative safety and cost-effectiveness of treating cardiovascular
disease using our products, as well as on our ability to train physicians to
perform necessary procedures using our products. We cannot assure you that our
products will provide benefits considered adequate by providers of
cardiovascular and vascular treatments, or that enough providers will use our
products to ensure their commercial success. Moreover, even if our products
become generally accepted by the medical community, physicians trained to use
our products may not use them or may recommend a competitor=s products. We
cannot assure you that physicians will determine that our AngioJet products are
appropriate courses of treatment for their patients or acceptable alternatives
to other therapies. Even if they are accepted by the medical community, our
ability to successfully market our products before they receive FDA approval may
be limited by FDA regulations, guidelines or policies. Lack of clinical and
market acceptance and significant restrictions on our marketing program would
have a material adverse effect on our business, financial condition and results
of operations.
We depend on our AngioJet products.
We have focused our resources on the continued development and refinement
of our AngioJet System. If we fail to obtain necessary regulatory approvals, or
the medical community rejects the use of the AngioJet System for multiple
purposes, our business, financial condition and results of operations would be
materially and adversely affected.
The industry in which we compete is characterized by rapid technological
change and intense competition.
The medical products market is characterized by rapidly evolving technology
and intense competition. Our future success depends on our ability to keep pace
with advancing technology and competitive innovations. Potential competitors
have developed or are in the process of developing technologies that are, or in
the future may be, the basis for competitive products, some of which may
accomplish desired therapeutic effects through entirely different methods than
the products we are developing.
We believe our AngioJet System will face intense competition from a variety
of treatments for the removal of blood clots, including clot-dissolving
(thrombolytic) drug therapies, surgical intervention, balloon embolectomy,
mechanical and laser thrombectomy devices, ultrasound ablators, and other
thrombectomy devices based on waterjet systems that are currently being
developed by other companies.
Many of the companies developing competing devices have substantially
greater capital and substantially greater resources for and experience in
research and development, regulatory matters, manufacturing and marketing than
we have. These companies will be serious competitors for us and may succeed in
developing products that are more effective and/or less costly than the AngioJet
System. Furthermore, these companies may be more successful than we are in
manufacturing and marketing their products. Our competitors or others may
develop technologies, products or procedures that are more effective than any we
are developing or that may render our technology and products obsolete or
noncompetitive. The advent of new devices, procedures or new pharmaceutical
agents could hinder our ability to compete effectively and could have a material
adverse effect on our business, financial condition and results of operations.
<PAGE>
Our success will depend on our ability to maintain patents and other
proprietary rights.
Our success depends and will continue to depend in part on our ability to
maintain patent protection for our products and processes, to preserve our trade
secrets and to operate without infringing the proprietary rights of third
parties. We attempt to protect our technology by filing patent applications for
technology that we consider important to the development of our business, among
other measures described below. We currently hold five United States patents and
eighteen foreign patents related to the Perma-Flow Graft, and we have two
additional patent applications pending in the United States and one patent
application pending in foreign jurisdictions relating to the Perma-Flow Graft.
We currently hold five United States patents relating to the AngioJet System,
and we have thirteen United States and numerous foreign patent applications
pending relating to the AngioJet System. The European Patent Office has accepted
three of our AngioJet System patent applications. In connection with the
Perma-Seal Graft, we hold two United States patents, with three pending foreign
patent applications. Claims relating to medical technology patents involve
complex legal and factual questions. Therefore, their outcomes are highly
uncertain. We cannot assure you that our pending applications will result in
patents being issued to us or that either our new patents or our existing
patents will give us a competitive advantage. Moreover, our competitors may
design around any patents issued to us, third parties may receive patent
protection on their own waterjet devices, and others may hold or receive patents
containing claims that may cover products developed by us.
We require all our employees to execute non-disclosure agreements when they
join Possis Medical. These agreements generally provide that all confidential
information developed or made known to the employee by us during the course of
his or her employment with Possis Medical must be kept confidential and not
disclosed to third parties. We cannot assure you, however, that these
non-disclosure agreements and other safeguards will protect our proprietary
information and know-how, or that they will provide us adequate remedies in the
event of unauthorized use or disclosure of confidential information. We also
cannot assure you that others will be unable to develop such information
independently.
We also rely on unpatented proprietary technology and trade secrets that we
seek to protect in part through confidentiality agreements with employees and
other parties. We cannot assure you that the employees and other parties will
comply with these agreements, that we will have adequate remedies for any breach
or that we can meaningfully protect our rights to unpatented proprietary
technology in any other way. We also cannot assure you that others will be
unable independently to develop or otherwise acquire substantially equivalent
proprietary technology and trade secrets, or that they will keep the technology
secret. The disclosure of this type of information could have a material adverse
effect on our business, financial condition and results of operations.
The medical device industry has seen much litigation with respect to patent
and other intellectual property rights. Litigation may be necessary for us to
enforce our patents, to protect our trade secrets and know-how, to defend
against claimed infringement of others= rights or to determine the ownership,
scope or validity of the proprietary rights of Possis Medical and others.
However, litigation also could be extremely costly to us and could divert our
resources and efforts away from our products and day-to-day business matters. If
the litigation had an adverse outcome, it could subject us to substantial
liabilities to third parties, require us to seek licenses from third parties and
prevent us from manufacturing, selling or using our products. Any of these
results could have a material adverse effect on our business, financial
condition and results of operations.
Acceptance of our products and our profits may be limited by inadequate
third-party reimbursements.
Health care providers (such as hospitals and physicians) that purchase
medical devices like the AngioJet System for the treatment of patients generally
rely on third-party payors like Medicare, Medicaid and private insurance plans
to reimburse all or part of the costs associated with the health care services
they provide. In certain foreign markets, the pricing of and profits generated
by health care products are subject to government control. In some states,
Medicare and Medicaid payors reimburse hospitals for inpatient medical
procedures at a pre-determined rate based on diagnosis-related groups. If these
rates do not include, and third-party payors do not otherwise provide, adequate
reimbursement to health care providers for the cost of our products, our
products will not gain wide market acceptance and our financial results will
suffer.
The Health Care Financing Administration is the federal agency responsible
for administering the Medicare system. HCFA has prohibited Medicare from paying
for certain revolutionary (new) procedures that are still under investigation or
that are not deemed safe and effective for the condition being treated.
Therefore, even if a device has FDA approval, Medicare payors may deny
reimbursement if they conclude that the device is experimental or that it will
not improve the condition being treated.
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The market for our products also could be adversely affected by future
legislation to reform the nation=s health care system or by changes in industry
practices regarding reimbursement. We cannot assure you that the reimbursement
rates of third-party payors will allow us to price our products at levels
sufficient to realize an appropriate return on our investment in product
development.
We depend on key personnel.
We depend greatly on a limited number of key management and technical
personnel. Moreover, because of the highly technical nature of our business, our
ability to continue our technological developments and to market our
productsCand thereby develop a competitive edge in the marketplaceCdepends in
large part on our ability to attract and retain qualified technical and key
management personnel. Competition for qualified personnel is intense, and we
cannot assure you that we will be able to attract and retain the individuals we
need. The loss of key personnel, or our inability to hire or retain qualified
personnel, could have a material adverse effect on our business, financial
condition and results of operations.
We may be subject to product liability claims, for which insurance coverage
may be insufficient.
The manufacture and sale of our products may subject us to product
liability claims. The United States Supreme Court has held that, despite a
company's compliance with FDA regulations, it may not be shielded from
common-law negligent-design claims or manufacturing and labeling claims based on
state laws. Product liability insurance is expensive and in the future may not
be available on acceptable terms, if at all. We cannot assure you that the
coverage limits of our product liability insurance policies will be adequate if
a product liability claim is brought against us. A successful claim or series of
claims against us that exceeds our insurance coverage could have a material
adverse effect on our business, financial condition and results of operations.
Moreover, whether or not successful, product liability litigation would likely
divert the attention of our key personnel and could adversely affect our
reputation and the marketability of our technology and products. Consequently,
any product liability litigation could have a material adverse effect on our
business, financial condition and results of operations.
It is uncertain whether we will be able to obtain funding sufficient to
meet our future capital needs.
We anticipate that cash on hand, the interest expected to be earned on such
cash and expected revenues will be sufficient to finance our operations for at
least the next twelve to eighteen months. However, we cannot assure you that
additional capital will not be needed sooner. We anticipate that we may need to
raise additional funds in the future. We cannot assure you that additional
capital will be available to us or that it will be available on satisfactory
terms. Raising additional capital through equity financing may dilute the equity
interests of the shareholders of the company, and debt financing may involve
restrictive covenants. Failure to secure additional financing if and when needed
could have a material adverse effect on our business, financial condition and
results of operations.
The securities market is volatile, and our common stock price may fluctuate
widely.
The market price of our stock has in the past been subject to significant
fluctuations. Moreover, the markets for equity securities in general, and for
those of medical device manufacturers in particular, have been volatile in the
past, and the price of our common stock in the future could be subject to wide
fluctuations in response to quarterly variations in operating results, news and
product announcements, trading volume, general market trends and other factors.
We cannot assure you that our common stock will trade in the future at market
prices in excess of its current market price.
We have in place certain protections against takeover attempts.
Of the 100 million shares of capital stock authorized by our amended and
restated articles of incorporation, 79 million shares are undesignated. Our
board of directors may issue the undesignated shares on terms and with the
rights, preferences and designations determined by the board without shareholder
action. In addition, we have adopted a shareholder rights plan that provides for
the exercise of preferred share purchase rights when a person becomes the
beneficial owner of 15% or more of our outstanding common stock (subject to
certain exceptions). We also are subject to provisions of the Minnesota Business
Corporation Act that limit the voting rights of shares acquired in specified
types of acquisitions and that restrict specified types of business
combinations. The existence or issuance of "blank check" stock, the existence of
our shareholder rights plan and the effect of anti-takeover provisions under
Minnesota law, individually or in the aggregate, may discourage potential
takeover attempts and delay, defer or prevent a change in control. They also may
make the removal of management more difficult, which could deprive our
shareholders of opportunities to sell their shares at prices higher than
prevailing market prices.
<PAGE>
We depend on single-source suppliers.
We depend on single-source suppliers for some of the raw materials used in
the manufacture of our products. If we cannot obtain key raw materials from our
suppliers, we cannot assure you that the materials will be available from other
suppliers, that other suppliers will agree to supply the materials to us, or
that our use of the other suppliers would be approved by the FDA. Although we
believe our supply of raw materials currently is adequate for the needs of our
business, we cannot assure you that new sources of supply will be available when
needed. Any interruption in our supply of raw materials could have a material
adverse effect on our ability to manufacture our products until a new source of
supply is located and, therefore, could have a material adverse effect on our
business, financial condition and results of operations.
We have not paid dividends on our stock.
We have never paid cash dividends on our common stock. We currently intend
to retain all future earnings, if any, for use in our business and do not
anticipate paying cash dividends in the near future.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street N.W., Washington, D.C. 20549, or
at the SEC's public reference rooms in New York, N.Y. and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings also are available to the public from the SEC=s
website at http://www.sec.gov. You also may inspect reports, proxy statements
and other information concerning Possis Medical at the offices of the National
Association of Securities Dealers, 1735 K. Street N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" the information that we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC automatically will update and supersede this prospectus. We
incorporate by reference the following documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, until the selling shareholders sell
all of the shares:
x our annual report on Form 10-K for the fiscal year ended July 31, 1999;
x our quarterly reports on Form 10-Q for the quarters ended October 31,
1999 and January 31, 2000;
x our current report on Form 8-K filed on March 14, 2000; and
x the description of our common stock contained in any of our
registration statements filed under the Exchange Act, and any amendment
or report filed for the purpose of updating the description.
Upon written or oral request, we will provide a copy of these filings, at
no cost, to each person to whom a copy of this prospectus is delivered. You may
request a copy of these filings by writing or telephoning us at the following
address:
<PAGE>
Irving R. Colacci
Possis Medical, Inc.
9055 Evergreen Boulevard N.W.
Minneapolis, Minnesota 55433
(612) 780-4555
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling shareholders should
not make an offer of the shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
to this prospectus is accurate as of any date other than the date on the cover
page of this prospectus or any supplement.
ABOUT POSSIS MEDICAL, INC.
We develop, manufacture and market innovative medical products that assist
interventionalists and surgeons in treating cardiovascular or vascular diseases
or conditions requiring vascular intervention. Our primary product, the
AngioJet7 RheolyticJ Thrombectomy System, is marketed in the United States for
blood clot removal from dialysis access grafts and coronary arteries and
coronary bypass grafts. Two of our three FDA-approved productsCthe AngioJet7
System and the Perma-Seal7 Dialysis Access GraftCare in early stages of
commercialization in the United States, Europe, Japan and Canada.
Our objective is to become a leading supplier of innovative medical
products for the treatment of cardiovascular or vascular diseases or conditions.
We will pursue our strategy by seeking to demonstrate the safety and efficacy of
our products, developing relationships with leading clinicians, establishing
world-class manufacturing processes and commercializing our products rapidly. We
also intend to expand our product portfolio by applying our existing product
technology to additional cardiovascular or vascular treatment needs, by
developing new product technology and, in some cases, by using existing product
technology in non-vascular applications.
Our principal executive offices are located at 9055 Evergreen Boulevard
N.W., Minneapolis, Minnesota 55433, telephone number (612) 780-4555. For further
information concerning Possis Medical, see the section titled "Where You Can
Find More Information."
The AngioJet7 RheolyticJ Thrombectomy System
The development of blood clots in various parts of the vascular system is
common and is a leading cause of death. Our AngioJet System is designed to
remove blood clots from large-diameter and small-diameter blood vessels
throughout the body in a rapid, minimally invasive and cost-effective manner.
The AngioJet System delivers jets of pressurized saline solution through small
openings in the tip of a disposable catheter positioned near the blood clot,
breaking the clot into tiny particles that are propelled back through the
catheter out of the patient=s body and into a disposable collection bag. We
believe our AngioJet System is a novel approach to the removal of blood clots
from arteries, veins and grafts and offers advantages over thrombolytic
(clot-dissolving) drugs and other mechanical devices, the current primary
methods of treatment. In early stages of commercialization and in U.S. clinical
trials, the AngioJet System has demonstrated the ability to remove blood clots
within seconds to minutes without surgical intervention and without the risk of
uncontrolled bleeding.
A two-phase clinical trial involving the use of the AngioJet System to
remove blood clots from peripheral arteries and vascular grafts was completed in
March 1994. On December 6, 1996, we received FDA clearance to begin marketing
the AngioJet System in the United States with label claims for use in removing
blood clots from vascular access grafts used by patients on kidney dialysis.
Until March 1999, this was the only use for which the AngioJet System was
approved.
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In March 1996 we received FDA approval to initiate Phase 2 clinical testing
of our AngioJet System for use in removing blood clots from coronary arteries
and bypass grafts supplying blood to the heart muscle. In May 1998 the FDA
agreed to permit the disclosure of results of our major coronary clinical trial
in the United States, the VeGAS 2 Coronary Clinical Trial. These important
clinical results, involving approximately 350 patients, were presented in
October and November 1998 and showed the AngioJet System to be much faster than
urokinase, a clot-dissolving drug, removing blood clots in minutes rather than
the hours required by urokinase. Additionally, in most cases, the AngioJet
System also achieved more complete thrombus removal, caused fewer adverse events
and resulted in lower treatment costs than urokinase. Results of a 12-month
study presented in March 1999 also showed the AngioJet System to be more
cost-effective than urokinase.
In August 1998 we submitted additional information in support of our
existing 510(k) application to the FDA seeking clearance to expand label claims
to include use in peripheral arteries and bypass grafts in the United States.
This application is still pending with the FDA. We also filed a premarket
approval application with the FDA in September 1998 seeking U.S. marketing
approval of the AngioJet System for coronary artery and bypass graft blood clot
removal. We asked the FDA for broad labeling claims including AngioJet System
use in native coronary arteries and saphenous vein bypass grafts, in patients
experiencing angina (chest pain) and heart attack, and in patients
contraindicated for drug lysis therapy. On March 12, 1999, the FDA gave us
approval to market the AngioJet System for use in coronary arteries and coronary
bypass grafts, granting us all the usage indications we requested.
In April 1999, results of our Japanese Coronary AngioJet System clinical
trials were published in the American Journal of Cardiology. The trial results
demonstrated full restoration of blood flow in all 29 patients who received
AngioJet treatment for severe acute heart attacks in native coronary blood
vessels. Our Japanese distributor has submitted these results, together with
similar results obtained from treating 32 patients at Toho University in Japan,
to the Japanese Ministry of Health and Welfare during the summer of 1999 to
support our request for approval to market the AngioJet System in Japan for
coronary use.
In December 1997 we received approval to begin a clinical trial of the
AngioJet System for use in the treatment of stroke caused by blocked carotid
arteries, the main vessels supplying blood to the brain. Patient enrollment in
the trial began in August 1998, and the first patient was treated in January
1999. Five patients were enrolled in the study before it was closed down in late
1999 due to the FDA's approval of the cerebrovascular stroke clinical trial
described below. Strokes that occur in cerebrovascular circulation are more
common than those caused by blocked carotid arteries, and a larger U.S. clinical
trial is planned for investigating the use of the AngioJet System in treating
cerebrovascular strokes.
In September 1999 we submitted an investigational device exemption
application to the FDA asking for permission to begin a clinical trial of our
AngioJet System in treating cerebrovascular stroke. The FDA approved the
application in October 1999. Phase 1 of the trial will enroll up to 30 patients
for AngioJet System treatment at six hospitals. Completion of the Phase 1 trial
will lead to a Phase 2 trial to support FDA marketing approval for AngioJet
System use in treating ischemic stroke, which is caused by oxygen starvation of
the brain tissue. As of March 2000, we have hospital review board approval and
signed contracts at four of the six trial sites and expect to begin enrolling
ischemic stroke patients during the third quarter of fiscal 2000.
The Perma-Flow7 Coronary Bypass Graft
The Perma-Flow Coronary Bypass Graft is a synthetic graft designed for use
in coronary artery bypass surgery. Bypass surgery is performed to treat impaired
blood flow to portions of the heart. In bypass surgery, physicians generally use
patients' own vessels to complete the bypasses. However, sometimes patients= own
vessels are insufficient or inadequate for use in bypass surgery. Our Perma-Flow
Coronary Bypass Graft is intended to serve as a substitute for native blood
vessels in patients whose own vessels cannot be used in bypass surgery. We
believe the Perma-Flow Graft ultimately may be used as a substitute for native
saphenous veins, thus avoiding the trauma and expense associated with the
surgical harvesting of native veins. On May 4, 1998, we received a Humanitarian
Device Exemption from the FDA for U.S. marketing of the Perma-Flow Graft. We
have stopped enrollment in Phase 2 of a FDA clinical trial of the Perma-Flow
Graft and currently are seeking a strategic alliance with or sale to a third
party in order to maximize the value of our entire vascular graft portfolio to
our shareholders.
<PAGE>
The Perma-Seal7 Dialysis Access Graft
The Perma-Seal Dialysis Access Graft is a self-sealing synthetic graft used
as a point of vascular access in kidney dialysis patients. We believe the
Perma-Seal Graft offers advantages over currently used synthetic grafts because
of its needle-hole sealing capability. We believe this characteristic is
effective in sealing puncture sites in the grafts with minimal compression time
and bleeding when compared with other currently available graft products,
resulting in shortened dialysis sessions and reduced administrative time and
costs per patient. In addition, because of its ability to seal a needle puncture
without depending on tissue ingrowth, the Perma-Seal Graft provides an option
for patients who require dialysis immediately after implant. We filed a 510(k)
application for marketing authorization with the FDA in August 1994. In
September 1998, the FDA gave us approval to market the Perma-Seal Graft in the
United States. In December 1998 we entered into an exclusive worldwide supply
and distribution agreement for the Perma-Seal Graft with Horizon Medical
Products, Inc., a Georgia specialty medical device company focused on marketing
vascular products.
Other Developments
In December 1998, we submitted a 510(k) application to the FDA requesting
marketing clearance for three expanded ePTFE synthetic vascular grafts of
varying diameters and wall thicknesses. The ePTFE grafts are the most commonly
used synthetic grafts in peripheral vessel bypass procedures, including dialysis
access grafts. In February 1999, we received clearance from the FDA to market
the three expanded ePTFE grafts.
SELLING SHAREHOLDERS
We have agreed to register initially 1,912,859 shares for resale by the
selling shareholders. This number includes 1,594,049 shares of common stock
owned by the selling shareholders and 318,810 shares of common stock that may be
issued upon the exercise of warrants owned by the selling shareholders. This
number does not include an indeterminate number of additional shares that may be
registered and issued in accordance with Rule 416 under the Securities Act of
1933 to prevent dilution of the common stock resulting from stock splits, stock
dividends or other events.
The following table lists the selling shareholders and the number of shares
they beneficially own and may sell pursuant to this prospectus.
<PAGE>
<TABLE>
<CAPTION>
Name of Selling Number of Shares of Number of Shares of Maximum Number of Number of Shares of
Shareholder Common Stock Common Stock Subject Shares to Be Sold Common Stock
Beneficially Owned to Warrants Pursuant to this Beneficially Owned
Prior to the Beneficially Owned Prospectus(1)(2) After the Offering(1)
Offering Prior to the Offering
- - -------------------------- --------------------- ----------------------- -------------------- ----------------------
- - -------------------------- --------------------- ----------------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
The Anglo Irish Global 80,000 13,000 24,000 69,000
Equity Fund
Charles E. White II 33,599 3,220 19,319 17,500
Clarion Capital 15,940 3,188 19,128 0
Corporation
Clarion Partners, L.P. 12,625 2,525 15,150 0
Clarion Offshore Fund 4,910 982 5,892 0
Ltd.
Dennis Hanish 16,833 3,367 20,200 0
E. Michael Brown 67,888 3,578 21,466 50,000
Crimson Biomedical Fund, 38,257 7,651 45,908 0
L.P.
Geoffrey H. Galley 43,283 31,136 51,940 22,479
Ibrahim Arinc 213 43 256 0
John C. Bergmann 350,442 17,888 107,330 261,000
LBI Group Inc. 478,215 129,303 573,858 33,660
Lisa E. Wolf 1,063 213 1,276 0
Lynn L. Rogers 27,833 5,367 32,200 1,000
North American Growth 13,032 2,181 3,638 11,575
Investments Ltd.
Halifax Fund L.P. 212,540 42,508 255,048 0
Elkhorn Partners 162,316 2,683 16,099 148,900
Perkins Opportunity Fund 57,386 11,477 68,863 0
Roanoke Partners, L.P. 18,000 3,600 21,600 0
Cactus Partners 19,677 3,935 23,612 0
Special Situations 47,381 8,003 21,519 33,865
Cayman Fund, L.P.
Special Situations Fund 142,144 24,012 64,559 101,597
III, L.P.
The Tail Wind Fund Ltd. 371,945 136,446 446,334 62,057
W. Lincoln Mossop, Jr. 199,233 4,472 26,832 176,873
Wilson G. Saville, II 25,035 4,472 26,832 2,675
- - -------------------------- --------------------- ----------------------- -------------------- ----------------------
- - -------------------------- --------------------- ----------------------- -------------------- ----------------------
Total 2,439,790 465,250 1,912,859 992,181
</TABLE>
____________________
(1) Assumes the sale of all of the shares offered by this prospectus.
(2) Includes warrants to purchase a total of 318,810 shares of common stock.
<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholders. As
used in this prospectus, "selling shareholders" includes donees, pledgees and
transferees selling shares received from a named selling shareholder after the
date of this prospectus. The selling shareholders may offer and sell from time
to time all or a portion of their shares of common stock in one or more types of
transactions (which may include block transactions) on the Nasdaq National
Market, in privately negotiated transactions, through put or call options
transactions, through short sales, or through a combination of these methods of
sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such market prices or at negotiated prices.
Sales may be made to or through brokers or dealers who may receive compensation
in the form of discounts, concessions or commissions from the selling
shareholders or the purchasers of the shares. As of the date of this prospectus,
we are not aware of any agreement, arrangement or understanding between any
broker or dealer and any of the selling shareholders. The selling shareholders
also may resell all or a portion of their shares in open market transactions in
reliance upon Rule 144 of the Securities Act, provided they meet the criteria
and conform to the requirements of Rule 144. There is no assurance that the
selling shareholders will sell any or all of the shares they offer for sale.
The selling shareholders and any brokers or dealers who participate in the
sale of the shares may be deemed to be "underwriters" within the meaning of the
Securities Act. In that event, any commissions received by the brokers or
dealers and any profits realized by them on the resale of shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act. Because the selling shareholders may be deemed to be
"underwriters" within the meaning of the Securities Act, the selling
shareholders will be subject to the prospectus delivery requirements of the
Securities Act. We have informed the selling shareholders that their sales in
the market must comply with the requirements of the rules and regulations of the
Exchange Act.
We will pay all expenses associated with the registration of the shares,
and the selling shareholders will pay all their expenses other than specified
legal and due diligence expenses that will be reimbursed by us. Brokerage
commissions and similar selling expenses, if any, attributable to the sale of
the shares will be paid by the selling shareholders. We have agreed to indemnify
the selling shareholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated by reference in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
have been incorporated by reference, and are included in reliance upon reports
of such firm given upon its authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares offered in this prospectus has been passed upon
for us by Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota
55402.
